大成生化科技(00809) - 2024 - 中期业绩

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income Financial Performance of Continuing Operations For the six months ended June 30, 2024, the company's continuing operations saw significant revenue growth, but both loss before tax and loss for the period expanded, primarily due to other income and gains, finance costs, and derecognition of a subsidiary's gain Continuing Operations Profit or Loss Overview | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------- | :-------------- | :----------------------- | | Revenue | 898,541 | 468,806 | | Gross Profit (Loss) | 66,025 | (58,214) | | Other Income and Gains | 124,677 | 22,202 | | Gain on Derecognition of a Subsidiary | — | 588,747 | | Finance Costs | (124,231) | (340,778) | | Loss Before Tax | (157,743) | (60,290) | | Loss for the Period | (157,743) | (29,759) | Other Comprehensive (Loss) Income In the first half of 2024, the company recorded other comprehensive loss, mainly due to exchange differences on translation of financial statements of operations outside Hong Kong, a stark contrast to the comprehensive income in the same period last year Other Comprehensive (Loss) Income | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------------------------- | :-------------- | :----------------------- | | Exchange differences on translation of financial statements of operations outside Hong Kong | (229,443) | 402,327 | | Reclassification adjustment of exchange reserve upon derecognition of a subsidiary | — | (79,632) | | Revaluation surplus on properties, net | — | 95,475 | | Income tax effect | — | (23,869) | | Other comprehensive (loss) income for the period, net of tax | (229,443) | 394,301 | | Total comprehensive (loss) income for the period | (387,186) | 299,179 | Loss Attributable and Earnings Per Share Loss attributable to owners of the Company for the period was HK$157.7 million, an increase from the prior year, with basic and diluted loss per share at 1.8 HK Cents, primarily from continuing operations Loss Attributable and Earnings Per Share | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------------------------- | :-------------- | :----------------------- | | Loss attributable to: owners of the Company | (157,743) | (64,904) | | Loss attributable to: non-controlling interests | — | (30,218) | | (Loss) profit attributable to owners of the Company arising from: continuing operations | (157,743) | 459 | | (Loss) profit attributable to owners of the Company arising from: discontinued operations | — | (65,363) | | Basic and diluted (loss) earnings per share — continuing operations (HK Cents) | (1.8) | — | | Basic and diluted (loss) earnings per share — discontinued operations (HK Cents) | — | (0.7) | Condensed Consolidated Statement of Financial Position Asset and Liability Position As of June 30, 2024, the company's non-current assets slightly decreased, current assets reduced, but net current liabilities and net liabilities significantly improved, mainly due to debt restructuring and the issuance of convertible preference shares Asset and Liability Position Key Data | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | Non-current assets | 4,035,098 | 4,239,567 | | Current assets | 828,985 | 969,529 | | Current liabilities | 6,670,735 | 8,395,603 | | Net current liabilities | (5,841,750) | (7,426,074) | | Total assets less current liabilities | (1,806,652) | (3,186,507) | | Non-current liabilities | 890,665 | 850,399 | | Net liabilities | (2,697,317) | (4,036,906) | | Share capital | 890,741 | 890,741 | | Convertible preference shares | 1,726,775 | — | | Reserves | (5,314,833) | (4,927,647) | | Total deficit | (2,697,317) | (4,036,906) | Notes to the Condensed Consolidated Financial Statements 1. Company Information The Company is an investment holding company incorporated in the Cayman Islands, primarily engaged in the production and sale of corn refining products and corn-based biochemical products, with no significant change in business nature during the period - The Company is primarily engaged in the production and sale of corn refining products and corn-based biochemical products, with no significant change in the nature of its principal business during the period[8] 2. Basis of Preparation and Accounting Policies The condensed consolidated financial statements are prepared in accordance with HKAS 34 and on a going concern basis; despite facing losses and net liabilities, the company has taken measures including debt restructuring and financial support from the controlling shareholder to improve its financial position 2.1 Basis of Preparation The condensed consolidated financial statements are prepared in accordance with Appendix D2 of the Listing Rules of The Stock Exchange of Hong Kong Limited and HKAS 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants - The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix D2 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[9] 2.2 Going Concern Despite the Group's continuing losses and net liabilities, the Board considers the going concern basis appropriate for financial statement preparation, citing debt restructuring, controlling shareholder support, improved operating cash flow, and convertible preference share issuance - The Group recorded a loss of approximately HK$157.7 million for the period, and net current liabilities of approximately HK$5.84 billion and net liabilities of approximately HK$2.70 billion as of June 30, 2024[10] - The Company has transferred a total of RMB1.58 billion to Agribusiness Development Fund (ADF) for full repayment of the transferred loans, fulfilling all repayment obligations under the debt restructuring agreement[11] - The Group has obtained a confirmation letter from its controlling shareholder, ADF, confirming its continued financial support to the Group on a going concern basis for 24 months from the date of the confirmation letter[14] - The net proceeds of approximately HK$1.72 billion from the convertible preference shares subscription were fully utilized in January 2024 to repay the transferred loans, significantly improving the Group's financial position[16] 2.3 Changes in Accounting Policies and Disclosures The accounting policies adopted in the condensed consolidated financial statements for the period are consistent with the prior year, with no significant impact on accounting policies or reported amounts from new/revised HKFRSs - The Group's accounting policies and the amounts reported for the current and prior years have not been significantly affected by the adoption of new/revised Hong Kong Financial Reporting Standards[18] 3. Operating Segment Information The Group has four reportable operating segments: Upstream Products, Amino Acids, Corn Sweeteners, and Biochemical Alcohol; Amino Acids segment revenue grew significantly, while Upstream Products segment loss narrowed, and both Corn Sweeteners and Biochemical Alcohol segments had no sales, with regional revenues in China and Asia, Americas, and other regions showing substantial growth - The Group has four reportable operating segments: Upstream Products, Amino Acids, Corn Sweeteners, and Biochemical Alcohol[19] - The disposed Dacheng Sugar Group was re-presented as a discontinued operation in the prior period's condensed consolidated financial statements, but the corn sweetener business operated by Dihao Company remains classified under continuing operations[20] Segment Revenue and Results (First Half 2024) | Segment | Revenue (HK$ Thousand) | Segment Results (HK$ Thousand) | | :----------- | :------------ | :---------------- | | Upstream Products | 140,093 | (83,780) | | Amino Acids | 758,448 | (26,583) | | Corn Sweeteners | — | (18,274) | | Biochemical Alcohol | — | (4,018) | | Total | 898,541 | (132,655) | Revenue Information by Customer Location | Region | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :------------------- | :-------------- | :----------------------- | | China | 591,521 | 398,521 | | Asia, Americas and Other Regions | 307,020 | 70,285 | | Total | 898,541 | 468,806 | 4. Revenue, Other Income and Gains Revenue from continuing operations significantly increased to HK$898.5 million for the period, with other income and gains also rising substantially, primarily driven by government grants and fair value gains on financial assets Revenue, Other Income and Gains | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------- | :-------------- | :----------------------- | | Sales of goods | 898,541 | 468,806 | | Other income and gains | 124,677 | 22,202 | | Of which: Government grants | 67,391 | — | | Of which: Fair value gains on financial assets at fair value through profit or loss | 28,154 | — | 5. Finance Costs Finance costs for the period significantly decreased to HK$124.2 million, mainly due to a substantial reduction in interest on bank and other borrowings Finance Costs Details | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------- | :-------------- | :----------------------- | | Interest on bank and other borrowings | 28,860 | 223,824 | | Interest on financial guarantee provided by ADF | 9,511 | 9,731 | | Interest on trade payables | 32,533 | 54,215 | | Imputed interest on convertible bonds | 53,318 | 53,000 | | Interest on lease liabilities | 9 | 8 | | Total | 124,231 | 340,778 | 6. Loss Before Tax from Continuing Operations Loss before tax from continuing operations for the period was HK$157.7 million, an increase from the prior year, with employee benefit expenses rising and changes in cost of inventories sold, depreciation, and other items Loss Before Tax Components | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | | :--------------- | :-------------- | :----------------------- | | Employee benefit expenses | 69,090 | 64,544 | | Cost of inventories sold | 832,516 | 527,020 | | Depreciation | 135,415 | 135,640 | | Gain on derecognition of a subsidiary | — | (588,747) | | Impairment loss on property, plant and equipment | — | 16,568 | - In June 2023, Harbin Dacheng was liquidated due to insolvency, leading the Group to derecognize its assets and liabilities and recognize a one-off gain of approximately HK$588.7 million[29] 7. Income Tax Credit The company had no income tax credit for the period, primarily due to no taxable profits in Hong Kong and Chinese subsidiaries' tax losses or estimated taxable profits being fully absorbed by prior year losses - No provision for Hong Kong profits tax was made for the current period and the six months ended June 30, 2023, as the Group did not generate any taxable profits in Hong Kong[30] - No China corporate income tax was provided for the current period and the six months ended June 30, 2023, as all the Group's subsidiaries in China either incurred tax losses or their estimated taxable profits were fully absorbed by tax losses generated in prior years[30] 8. (Loss) Earnings Per Share Basic and diluted loss per share for the period was 1.8 HK Cents, primarily from continuing operations, representing an expanded loss compared to the prior year (Loss) Earnings Per Share | Indicator | 2024 (HK Cents) | 2023 (HK Cents) (Restated) | | :--------------- | :------------ | :----------------------- | | Continuing operations | (1.8) | — | | Discontinued operations | — | (0.7) | | Total | (1.8) | (0.7) | - Basic and diluted (loss) earnings per share for the current period and the six months ended June 30, 2023, are equal, as the assumed conversion of convertible bonds and convertible preference shares had an anti-dilutive effect[32] 9. Dividends The Board does not recommend the payment of any dividend for the period, consistent with the prior year - The Board does not recommend the payment of any dividend for the current period (six months ended June 30, 2023: nil)[33] 10. Property, Plant and Equipment As of June 30, 2024, the total value of property, plant and equipment was HK$3.60 billion, a decrease from the end of 2023, mainly due to depreciation and exchange adjustments Property, Plant and Equipment Movement | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | At January 1 | 3,823,699 | 4,706,470 | | Depreciation | (127,208) | (283,020) | | Exchange adjustments | (94,344) | (151,377) | | At June 30/December 31 | 3,602,147 | 3,823,699 | 11. Trade Receivables As of June 30, 2024, net trade receivables were HK$78.8 million, a significant decrease from the end of 2023; the company maintains strict control over receivables but faces credit concentration risk Trade Receivables | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | Trade receivables | 406,431 | 480,900 | | Loss allowance | (327,630) | (340,686) | | Net Value | 78,801 | 140,214 | - The Group has credit concentration risk, with trade receivables from its largest customer and five largest customers accounting for 14.9% and 24.6% of the total, respectively[36] Ageing Analysis of Trade Receivables | Ageing | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :----------- | :--------------------- | :---------------------- | | Within 1 month | 43,029 | 97,765 | | 1 to 2 months | 8,347 | 22,097 | | 2 to 3 months | 2,471 | 13,822 | | 3 to 6 months | 7,411 | 578 | | Over 6 months | 17,543 | 5,952 | | Total | 78,801 | 140,214 | 12. Prepayments, Deposits and Other Receivables As of June 30, 2024, total prepayments, deposits, and other receivables amounted to HK$337.1 million, a slight decrease from the end of 2023 Prepayments, Deposits and Other Receivables | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | Prepayments | 49,439 | 65,145 | | Deposits and other receivables | 59,223 | 44,480 | | China VAT and other tax receivables | 101,434 | 123,770 | | Receivables from disposal of assets | 127,009 | 129,801 | | Total | 337,105 | 363,196 | 13. Trade Payables As of June 30, 2024, total trade payables increased to HK$1.06 billion, primarily due to increased amounts payable to ADF Group Trade Payables | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | To third parties | 606,304 | 636,924 | | To ADF Group | 451,942 | 267,246 | | Total | 1,058,246 | 904,170 | - Trade payables to ADF Group are unsecured and bear interest at an annual rate of 6.5% to 7.8% after the credit period expires[39] Ageing Analysis of Trade Payables | Ageing | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :----------- | :--------------------- | :---------------------- | | Within 1 month | 227,481 | 76,963 | | 1 to 2 months | 28,572 | 4,091 | | 2 to 3 months | 9,640 | 239 | | Over 3 months | 792,553 | 822,877 | | Total | 1,058,246 | 904,170 | 14. Share Capital / Convertible Preference Shares As of June 30, 2024, the total nominal value of the company's issued share capital was approximately HK$2.62 billion, including newly issued convertible preference shares of HK$1.73 billion Share Capital Composition | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | Ordinary shares | 890,741 | 890,741 | | Convertible preference shares | 1,726,775 | — | | Total | 2,617,516 | 890,741 | - As of June 30, 2024, the total nominal value of the Company's issued shares was approximately HK$2.62 billion, comprising approximately HK$890.7 million in ordinary shares and approximately HK$1.73 billion in convertible preference shares[40] Management Discussion and Analysis Business Review The Group primarily produces and sells corn refining products, amino acids, corn sweeteners, and biochemical alcohol; despite global economic challenges, the Group significantly improved amino acid business revenue and gross profit through increased capacity, high-value product launches, and cost-saving measures, while sweetener and biochemical alcohol businesses remain suspended - The Group's product prices are influenced by raw material costs, market supply and demand, and product specifications[42] - The global economy faces uncertainties, and China's economic recovery remains challenging, with the operating environment expected to be difficult[42] - Global corn production is at historically high levels, with international corn prices falling to 397 US cents per bushel by the end of June 2024[42] - Domestic corn prices fell to approximately RMB2,464 per metric ton by the end of June 2024; the Group will closely monitor market conditions and resume upstream production facilities at Xinglongshan plant when appropriate[43] - The amino acid market is driven by the recovery of the hog farming industry, leading to increased demand and an overall upward trend in amino acid product prices[43] - Changchun Dahe launched various high-margin new amino acid products and maintained sufficient cash flow to support capacity expansion, leading to significant improvements in the amino acid segment's revenue and gross profit[43] - Sweetener production facilities have been suspended since the first quarter of 2020, and biochemical alcohol business production has been suspended since the last quarter of 2022[43][50] - The Group will develop new product portfolios, enhance production technology to reduce costs, and explore cooperation opportunities with enterprises in different industries[44] Implementation of Corporate Governance Code The Group has implemented internal control measures, including preparing a corporate governance and disclosure compliance checklist and providing monthly training to directors, to ensure compliance with the disclosure requirements of the Corporate Governance Code set out in Appendix C1 of the Listing Rules - The Company has prepared a corporate governance and disclosure compliance checklist and provides monthly training to directors to ensure compliance with the disclosure requirements of the Corporate Governance Code set out in Appendix C1 of the Listing Rules[45] Financial Performance Revenue from continuing operations significantly grew by 91.7% to HK$898.5 million for the period, with gross profit turning from loss to profit at HK$66.0 million, and a gross profit margin of 7.3%; the amino acid business performed strongly, export sales increased significantly, other income and gains rose substantially, and finance costs decreased significantly due to debt restructuring Continuing Operations For the period, consolidated revenue from continuing operations significantly increased by 91.7% to HK$898.5 million, with gross profit turning from loss to profit at HK$66.0 million and a gross profit margin of 7.3%, primarily due to increased amino acid capacity, high-value product launches, lower corn procurement prices, and reduced production costs Continuing Operations Key Financial Indicators | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) (Restated) | Change Rate | | :--------------- | :-------------- | :----------------------- | :----- | | Consolidated Revenue | 898,500 | 468,800 | +91.7% | | Gross Profit (Loss) | 66,000 | (58,200) | Turned to profit | | Gross Profit (Loss) Margin | 7.3% | (12.4%) | Improved | - A 18.0% decrease in average corn procurement price and an 18.6% decrease in average unit total production cost, coupled with stable market prices for lysine products, led to a significant improvement in gross profit[46] Upstream Products Upstream product sales increased to HK$140.1 million, but a gross loss of HK$5.8 million was still recorded, with a gross loss margin of 4.1%, narrowing from the prior year, due to the unfavorable market sentiment in the corn refining industry Upstream Products Sales and Gross Loss | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :----------- | :-------------- | :-------------- | | Sales | 140,100 | 90,300 | | Gross Loss | (5,800) | (7,900) | | Gross Loss Margin | 4.1% | 8.7% | - All corn starch produced by the Group is for internal use, with no external sales of corn starch during the current and prior periods[47] - Sales of other corn refining products increased by approximately 96.3% to approximately 53,000 metric tons[47] Amino Acids Amino acid segment revenue significantly grew by 100.4% to HK$758.4 million, with gross profit turning from loss to profit at HK$71.8 million and a gross profit margin of 9.5%, driven by increased capacity utilization, high-value product launches, lower corn prices, and upgraded production processes Amino Acids Sales and Gross Profit | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :----------- | :-------------- | :-------------- | | Sales | 758,400 | 378,500 | | Gross Profit (Loss) | 71,800 | (50,300) | | Gross Profit (Loss) Margin | 9.5% | 13.3% | - Amino acid segment sales volume was 123,000 metric tons, a significant increase from 65,000 metric tons in the prior period[48] - The outlook for the amino acid segment is expected to remain relatively stable in the second half of 2024, and the Group will advance renovation projects to further reduce production costs[48] Corn Sweeteners Due to the disposal of Dacheng Sugar and the suspension of sweetener production facilities at Xinglongshan plant since the first quarter of 2020, no sales were recorded in the sweetener segment for the current and prior periods - Following the completion of Dacheng Sugar's disposal, its financial results for the prior period have been re-presented as discontinued operations[49] - The Group's sweetener production facilities at Xinglongshan plant have been suspended since the first quarter of 2020, resulting in no sales recorded for the current period and 2023[49] Biochemical Alcohol Due to the persistently challenging operating environment, the Group suspended production since the last quarter of 2022, resulting in no sales of biochemical alcohol products for the current and prior periods - Due to the persistently challenging operating environment for biochemical alcohol, the Group has suspended production since the last quarter of 2022 to minimize financial risks and safeguard financial resources[50] Export Sales Export sales for the period were approximately HK$307.0 million, a significant increase of 336.7% from the prior year, primarily comprising amino acids and other corn refining products, accounting for approximately 34.2% of total revenue Export Sales and Proportion | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :--------------- | :-------------- | :-------------- | | Export sales | 307,000 | 70,300 | | Percentage of total revenue | 34.2% | 10.6% | - Export sales primarily consisted of amino acids and other corn refining products, with approximately 37,000 metric tons of amino acids and 7,000 metric tons of other corn refining products exported[51] Other Income and Gains, Operating Expenses, Finance Costs and Income Tax Credit Other income and gains for the period significantly increased by 461.7% to HK$124.7 million, mainly due to government grants and fair value gains on financial assets; sales and distribution costs rose with sales volume, administrative expenses slightly decreased, and other expenses significantly reduced; finance costs substantially decreased by 63.6% due to debt restructuring, with no income tax credit or expense for the period Other Income and Expense Changes | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | Change Rate | | :--------------- | :-------------- | :-------------- | :----- | | Other income and gains | 124,700 | 22,200 | +461.7% | | Sales and distribution costs | 44,100 | 22,500 | +96.0% | | Administrative expenses | 127,700 | 130,200 | -1.9% | | Other expenses | 52,400 | 119,500 | -56.2% | | Finance costs | 124,200 | 340,800 | -63.6% | - The increase in other income and gains was primarily due to a one-off government grant of approximately HK$67.4 million received by Changchun Dahe and fair value gains of HK$28.2 million on financial assets at fair value through profit or loss[51] - The rise in sales and distribution costs was mainly due to increased sales volume of amino acids and other corn refining products[52] - The decrease in administrative expenses was primarily due to reduced professional fees[53] - The reduction in other expenses was mainly due to decreased expenses related to the temporary suspension of the Group's Changchun Dahe production facilities during the period[54] - No income tax expense or deferred tax credit was recorded for the period, as tax losses were absorbed[56] Discontinued Operations Following the completion of Dacheng Sugar's disposal, its financial results for the prior period have been re-presented as discontinued operations, recording a loss of approximately HK$65.4 million - Following the completion of Dacheng Sugar's disposal, its financial results for the prior period, used for comparative purposes, have been presented as discontinued operations in the Group's condensed consolidated financial statements for the prior period[57] - For the six months ended June 30, 2023, the Group's discontinued operations recorded a loss of approximately HK$65.4 million[57] Net Loss Attributable to the Company from Continuing Operations Despite significant improvement in gross profit, the net loss from continuing operations for the period was approximately HK$157.7 million, with EBITDA of approximately HK$101.9 million, due to the absence of the one-off gain from derecognition of Harbin Dacheng in the prior year Net Loss and EBITDA from Continuing Operations | Indicator | 2024 (HK$ Thousand) | 2023 (HK$ Thousand) | | :--------------- | :-------------- | :-------------- | | Net Loss | 157,700 | 29,800 | | EBITDA | 101,900 | 416,100 | - The Group will focus on property expropriation to settle debts and increase financial resources, streamline production processes, promote renovation projects to reduce costs, and introduce industry participants to resume production at Xinglongshan plant to enhance operational efficiency and strengthen working capital[58] Capital Structure, Financial Resources and Liquidity The Group's capital structure includes debt, convertible bonds, and equity reserves; as of June 30, 2024, net borrowings and gearing ratio significantly improved due to debt restructuring and convertible preference share issuance; current ratio and quick ratio remained stable, trade receivables turnover days decreased, while trade payables and inventory turnover days increased Capital Structure The Group's capital structure comprises debt (interest-bearing bank and other borrowings), convertible bonds, and equity reserves attributable to owners of the Company, which the Board regularly reviews to optimize the capital structure - The Group's capital structure comprises debt (primarily interest-bearing bank and other borrowings), convertible bonds, and equity reserves attributable to owners of the Company (including issued ordinary shares, convertible preference shares, and various reserves)[59] Net Borrowings Position As of June 30, 2024, the Group's total interest-bearing bank and other borrowings decreased by approximately HK$1.78 billion to HK$1.82 billion, and net borrowings decreased by approximately HK$1.76 billion to HK$1.75 billion, primarily due to debt restructuring arrangements Net Borrowings Position | Indicator | June 30, 2024 (HK$ Thousand) | December 31, 2023 (HK$ Thousand) | | :--------------- | :--------------------- | :---------------------- | | Total interest-bearing bank and other borrowings | 1,820,000 | 3,598,400 | | Cash and bank balances and pledged bank deposits | 66,300 | 88,400 | | Net borrowings | 1,753,700 | 3,510,000 | - The decrease in total borrowings was mainly due to the completion of debt restructuring arrangements on January 4, 2024, through the settlement of transferred loans of approximately HK$1.74 billion[60] Structure of Interest-Bearing Bank and Other Borrowings As of June 30, 2024, approximately HK$1.82 billion of the Group's interest-bearing bank and other borrowings were all denominated in RMB and repayable in full within one year or on demand, with approximately HK$55.1 million bearing fixed interest rates - As of June 30, 2024, the Group's interest-bearing bank and other borrowings of approximately HK$1.82 billion were all denominated in RMB and repayable in full within one year or on demand[61] - Approximately HK$55.1 million of interest-bearing bank and other borrowings bore fixed interest rates ranging from 6.5% to 7.8% per annum, with the remainder bearing floating interest rates[61] Convertible Bonds The conversion price of the convertible bonds issued by the Company in 2015 was adjusted to HK$0.21 per share, and the maturity date was extended twice to September 30, 2025; as of June 30, 2024, the convertible bonds were split into a liability component of approximately HK$854.6 million and an equity component of approximately HK$104.7 million - The conversion price of the convertible bonds has been adjusted to HK$0.21 per share, with a maximum of 5,172,759,833 shares convertible[62] - The maturity date of the convertible bonds has been extended twice, most recently to September 30, 2025[62][63] - As of June 30, 2024, the convertible bonds were split into a liability component of approximately HK$854.6 million and an equity component of approximately HK$104.7 million[63] Convertible Preference Shares To raise funds for debt restructuring, the Company completed the issuance of convertible preference shares on January 4, 2024, with net proceeds of approximately HK$1.72 billion used to repay loans; holders of convertible preference shares are entitled to non-cumulative preferential distributions and can convert them into shares 12 months after the issue date - The Company entered into convertible preference share subscription agreements with Jilin Yuanheng and Jilin Liheng on November 30, 2023, at a subscription price of HK$0.10 per share[64] - Holders of convertible preference shares are entitled to receive non-cumulative preferential distributions at an annual rate not exceeding 5%, and can convert them into fully paid shares at any time 12 months after the issue date[64][65] - The net proceeds of approximately HK$1.72 billion from the convertible preference shares subscription were fully utilized in January 2024 to repay the transferred loans[65] Turnover Days, Liquidity Ratios and Gearing Ratio For the period, trade receivables turnover days decreased to 16 days, trade payables turnover days increased to 215 days, and inventory turnover days increased to 66 days; current ratio and quick ratio remained at 0.1; net liabilities and gearing ratio significantly improved after debt restructuring Turnover Days and Liquidity Indicators | Indicator | June 30, 2024 | December 31, 2023 | | :--------------- | :------------ | :------------- | | Trade receivables turnover days | 16 days | 19 days | | Trade payables turnover days | 215 days | 144 days | | Inventory turnover days | 66 days | 20 days | | Current ratio | 0.1 | 0.1 | | Quick ratio | 0.1 | 0.1 | | Net liabilities | HK$2.70 billion | HK$4.04 billion | | Gearing ratio | 55.0% | 84.5% | - The increase in trade payables turnover days was mainly due to an increase in raw material quantities to meet sales growth[66] - The increase in inventory turnover days was mainly due to the Group maximizing its operational capacity and maintaining sufficient inventory to meet sales orders[66] Foreign Exchange Risk Most of the Group's operations are in China, with transactions settled in RMB and export sales in USD; management believes there is no significant adverse foreign currency risk in the short term and does not currently intend to hedge, but will continue to review - Most of the Group's operations are conducted in China, with transactions settled in RMB, and export sales settled in USD, accounting for approximately 34.2% of revenue for the period[67] - The Company's management believes there is no significant adverse foreign currency risk in the short term and does not currently intend to hedge its RMB foreign exchange fluctuation risk[67] Supplementary Information for the Period Energy Management Contract Changchun Dahe and Modern Agriculture Fund previously entered into an energy management contract for a boiler facility renovation project, but due to adjustments in coal consumption targets, the contract was terminated on August 19, 2024; the Group will redesign the plan and continue negotiations to complete the adjusted renovation project - Changchun Dahe and Jilin Province Modern Agriculture Industry Fund Co, Ltd previously entered into an energy management contract to implement Changchun Dahe's renovation project through an energy contract management model[68] - The contract originally planned for Modern Agriculture Fund to invest, construct, maintain, and manage boiler facilities, and receive net energy savings at a ratio of 20% and 80% during a 6-year energy efficiency sharing period[68] - Due to the need to scale down the renovation project to comply with coal consumption targets, the initial energy management contract was terminated on August 19, 2024[69] - The Group's management will strive to redesign the renovation project plan and continue negotiations with various financial institutions and local governments[69] Material Events After the Reporting Period Except for the termination agreement of the energy management contract, no other material events affecting the Group have occurred from the end of the reporting period up to the date of this announcement - Except for the termination agreement, no other material events affecting the Group have occurred from the end of the reporting period up to the date of this announcement[70] Future Plans and Prospects The Group will maintain market position through internal R&D, diversify product range, and enhance high-value product development capabilities; in the short term, it will consolidate the lysine business for stable cash flow and plans to renovate boiler facilities in the second half of 2024; long-term plans include introducing industry players to resume production at Xinglongshan plant and optimizing capital expenditure decisions - The Group will strive to maintain its market position through internal research and development, diversify its product range, and enhance its capabilities in developing high-value products and new applications[71] - In the short term, the Group will continue to cooperate with distributors to consolidate stable production of lysine products, which is expected to generate stable and healthy cash flow[71] - Renovation of Changchun Dahe's boiler facilities is expected to commence in the second half of 2024 to further reduce production costs[71] - In the long term, the Group will endeavor to introduce industry participants to facilitate the resumption of production at Xinglongshan plant to enhance operational efficiency and strengthen working capital[71] Number of Employees and Remuneration As of June 30, 2024, the Group employed approximately 2,600 full-time employees, a decrease from the prior year; the Group values human resource management, offering competitive compensation, benefits, and career development opportunities, with employee benefit expenses of approximately HK$69.6 million for the period Number of Employees and Benefit Expenses | Indicator | June 30, 2024 | June 30, 2023 | | :--------------- | :------------ | :------------- | | Number of full-time employees | 2,600 | 3,100 | | Employee benefit expenses (HK$ Thousand) | 69,600 | 65,200 | - The Group focuses on the selection and recruitment of new employees, on-the-job training, and evaluation and rewarding of employees, and is committed to maintaining competitive compensation, benefits, and career development opportunities[72] Interim Dividends The Board does not recommend the payment of any dividend for the period, consistent with the prior year - The Board does not recommend the payment of any dividend for the current period (six months ended June 30, 2023: nil)[73] Purchase, Sale or Redemption of the Company's Listed Securities During the period, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities - During the period, neither the Company nor any of its subsidiaries purchased, redeemed, or sold any of the Company's listed securities[74] Compliance with Corporate Governance Code and Model Code The Board confirms that the Company has complied with all code provisions of the Corporate Governance Code throughout the period, and all Directors have complied with the Model Code and the Company's code of conduct - The Board believes that the Company has complied with all code provisions set out in Part 2 of the Corporate Governance Code throughout the period[75] - All Directors have confirmed to the Company that they have complied with the required standards set out in the Model Code and the Company's code of conduct throughout the period[75] Audit Committee and Review of Interim Financial Information The Audit Committee has reviewed the Group's interim results for the period and this announcement, and discussed accounting principles and policies with management, with no disagreements - The Audit Committee has reviewed the Group's interim results for the period and this announcement, and has discussed the accounting principles and policies adopted by the Group with the Company's management, with no disagreements[76] Full Details of Financial Information The Company's interim report will be published in due course on the HKEX website and the "Investor Relations" section of the Company's website, and will be dispatched to shareholders - The Company's interim report will be published in due course on the HKEX website (www.hkexnews.hk) and in the "Investor Relations" section of the Company's website (www.globalbiochem.com)[77](index=77&type=chunk)