Financial and Business Data Summary Consolidated Income Statement Summary Operating revenue fell 2.7% to 20.89 billion yuan, but net profit rose 8.1% to 3.27 billion yuan, with basic EPS at 0.73 yuan 2016-2020 Consolidated Income Statement Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 20,891,454 | 21,478,831 | 17,872,818 | 14,773,644 | 11,284,193 | | Gross Profit | 6,964,665 | 7,271,722 | 5,923,471 | 4,412,403 | 2,476,001 | | Gross Profit Margin | 33.3% | 33.9% | 33.1% | 29.9% | 21.9% | | Operating Profit | 4,659,112 | 4,692,516 | 3,779,350 | 1,980,514 | 238,161 | | Net Profit / (Loss) | 3,274,390 | 3,028,382 | 2,168,847 | 546,470 | (978,861) | | Attributable to Equity Holders of the Company | 3,186,993 | 2,973,104 | 2,196,657 | 600,817 | (738,281) | | Basic Earnings / (Loss) Per Share (Yuan) | 0.73 | 0.68 | 0.62 | 0.18 | (0.22) | Consolidated Statement of Financial Position Summary Total assets grew to 27.68 billion yuan by 2020 year-end; total liabilities fell 17.1% to 11.80 billion yuan, improving the net capital-to-debt ratio to 13.9% 2016-2020 Consolidated Statement of Financial Position Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 27,677,443 | 26,827,805 | 26,072,713 | 25,089,959 | 25,920,156 | | Total Liabilities | 11,795,426 | 14,227,366 | 16,486,377 | 21,072,428 | 22,663,917 | | Equity Attributable to Equity Holders of the Company | 15,702,798 | 12,497,200 | 9,522,248 | 3,915,327 | 3,098,688 | | Net Capital-to-Debt Ratio | 13.9% | 27.6% | 42.6% | 76.4% | 81.9% | Consolidated Cash Flow Statement Summary Net operating cash inflow was 3.51 billion yuan in 2020, a decrease from prior year; investing and financing activities had net outflows of 1.33 billion yuan and 2.13 billion yuan 2016-2020 Consolidated Cash Flow Statement Summary | Metric (RMB in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | 3,507,072 | 4,166,604 | 2,180,478 | 1,865,912 | 978,342 | | Net Cash Used in Investing Activities | (1,325,379) | (1,520,899) | (849,094) | (577,489) | (418,809) | | Net Cash Used in Financing Activities | (2,132,673) | (2,600,085) | (348,529) | (1,253,495) | (509,959) | | Increase in Cash and Cash Equivalents | 49,020 | 45,620 | 982,855 | 34,928 | 49,574 | Key Business Data Summary Cement and clinker sales grew 7.8% and 6.0% respectively, but unit prices fell (cement 9.0%); concrete volume and price both dropped by 12.2% and 8.7% 2016-2020 Key Business Data | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cement Sales Volume (thousand tonnes) | 51,250 | 47,546 | 39,186 | 41,131 | 43,959 | | Clinker Sales Volume (thousand tonnes) | 8,699 | 8,205 | 9,953 | 9,232 | 10,544 | | Concrete (thousand cubic meters) | 2,812 | 3,204 | 2,882 | 3,420 | 2,680 | | Cement Average Selling Price (Yuan/tonne) | 330.7 | 363.6 | 337.2 | 276.3 | 199.0 | | Clinker Average Selling Price (Yuan/tonne) | 263.9 | 278.0 | 270.9 | 239.8 | 164.6 | | Concrete Average Selling Price (Yuan/cubic meter) | 454.6 | 497.8 | 459.1 | 349.8 | 252.8 | Company Overview Company Background and Business Layout China Shanshui Cement Group, a nationally supported large-scale enterprise listed in 2008, operates through Shandong Shanshui across over a dozen provinces, ranking 6th in production scale - The company is a nationally supported large-scale cement enterprise, operating through Shandong Shanshui across more than a dozen provinces, holding a leading industry position11 Shareholding Structure The company's diversified shareholding structure includes major shareholders like Tianrui Group, CSI, Asia Cement, and China National Building Material Group, fostering industrial synergy - The company's shareholding structure shows major shareholders include Tianrui Group (21.85%), CSI (19.47%), China National Building Material Group (12.94%), and Asia Cement (9.84%) among others13111 Production Facilities and Capacity By 2020 year-end, total cement capacity was 103 million tonnes and clinker 51.55 million tonnes, mainly in Shandong, Northeast, Shanxi, and Xinjiang, with Shandong holding 56.7% of cement capacity Cement and Clinker Capacity by Operating Region (as of December 31, 2020) | Operating Region | Cement Capacity (thousand tonnes) | Clinker Capacity (thousand tonnes) | | :--- | :--- | :--- | | Shandong Region | 58,485 | 26,208 | | Shanxi Operating Region | 14,399 | 8,640 | | Northeast Operating Region | 26,600 | 15,104 | | Xinjiang Operating Region | 3,680 | 1,600 | | Total | 103,164 | 51,552 | Management Discussion and Analysis Operating Environment and Industry Overview Despite COVID-19, China's economy grew 2.3% in 2020, supporting cement demand; the industry saw 1.6% output growth and 183.3 billion yuan profit, a slight 2.1% decline - China's GDP grew 2.3% year-on-year in 2020, with fixed asset investment increasing by 2.9%, providing demand support for the cement industry30 - The cement industry's full-year output reached 2.38 billion tonnes, a year-on-year increase of 1.6%; industry profit was 183.3 billion yuan, a year-on-year decrease of 2.1%, demonstrating strong resilience30 Company Business Review Operating revenue fell 2.7% to 20.89 billion yuan due to lower prices, but net profit grew 8.1% to 3.27 billion yuan from increased sales and cost efficiency, with total cost of sales at 66.7% of revenue - During the reporting period, the company's cement sales volume increased by 7.8% year-on-year, clinker sales volume increased by 6.0%, but concrete sales volume decreased by 12.2%32 - The main reasons for profit growth were increased sales volume and cost reduction and efficiency improvement measures, with profit attributable to shareholders of the company increasing by 7.2% year-on-year46 Business Analysis Cement remains the core revenue source at 80.6%; despite sales growth for cement (7.8%) and clinker (6.0%), unit prices fell (9.0% and 5.1%), causing overall revenue decline with regional variations 2020 Product Revenue Analysis | Product | Sales Amount (RMB in thousands) | Proportion | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Cement | 16,847,525 | 80.6% | -2.0% | | Clinker | 2,282,506 | 10.9% | 0.7% | | Concrete | 1,270,932 | 6.1% | -19.5% | | Other | 490,491 | 2.4% | 9.3% | | Total | 20,891,454 | 100% | -2.7% | 2020 Sales Amount Analysis by Operating Region | Operating Region | Sales Amount (RMB in thousands) | Proportion | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Shandong Region | 13,512,053 | 64.7% | -6.7% | | Northeast Operating Region | 4,362,344 | 20.9% | 12.8% | | Shanxi Operating Region | 2,527,008 | 12.1% | 3.1% | | Xinjiang Operating Region | 490,049 | 2.3% | -27.7% | | Total | 20,891,454 | 100% | -2.7% | Profitability Analysis Despite revenue and gross profit declines of 2.7% and 4.2%, effective cost control kept operating profit flat, leading to 8.1% net profit growth, with cost of sales at 66.7% of revenue Major Profit and Loss Item Changes | Metric (RMB in thousands) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 20,891,454 | 21,478,831 | -2.7% | | Gross Profit | 6,964,665 | 7,271,722 | -4.2% | | Operating Profit | 4,659,112 | 4,692,516 | -0.7% | | Profit for the Year | 3,274,390 | 3,028,382 | 8.1% | | Profit Attributable to Shareholders of the Company | 3,186,993 | 2,973,104 | 7.2% | - Average coal purchase price decreased by approximately 7.9% year-on-year, from 657.6 yuan/tonne to 605.4 yuan/tonne49 - Due to the impact of the COVID-19 pandemic, government fiscal measures such as social security exemptions led to a decrease in labor costs, and maintenance costs also decreased, partially offsetting increases in other costs49 Financial Review Financial position improved in 2020: period expenses fell from 12.5% to 11.4%, total liabilities decreased 17.1%, and net capital-to-debt ratio dropped from 27.6% to 13.9%, with 2.19 billion yuan reduction in borrowings Period Expenses Total period expenses as a percentage of sales revenue decreased by 1.1 percentage points to 11.4% in 2020, driven by lower administrative and finance expenses from reduced wages, professional fees, and interest Period Expenses Analysis | Expense Type | 2020 Amount (RMB in thousands) | Proportion of Sales Revenue | 2019 Amount (RMB in thousands) | Proportion of Sales Revenue | Change in Proportion | | :--- | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 681,168 | 3.3% | 672,945 | 3.1% | +0.2 percentage points | | Administrative Expenses | 1,358,311 | 6.5% | 1,500,670 | 7.0% | -0.5 percentage points | | Finance Expenses | 347,110 | 1.7% | 509,770 | 2.4% | -0.7 percentage points | | Total | 2,386,589 | 11.4% | 2,683,385 | 12.5% | -1.1 percentage points | Statement of Financial Position Analysis By 2020 year-end, total assets grew 3.2% to 27.68 billion yuan, total liabilities fell 17.1% to 11.80 billion yuan, and equity attributable to shareholders increased 25.7% to 15.70 billion yuan, optimizing financial structure Major Statement of Financial Position Item Changes | Item (RMB in thousands) | December 31, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Total Assets | 27,677,443 | 26,827,805 | 3.2% | | Total Liabilities | 11,795,426 | 14,227,366 | -17.1% | | Equity Attributable to Equity Holders of the Company | 15,702,798 | 12,497,200 | 25.7% | | Net Capital-to-Debt Ratio | 13.9% | 27.6% | -13.7 percentage points | Loans and Borrowings Total borrowings decreased by 2.19 billion yuan to 3.97 billion yuan by 2020 year-end, a 35.5% reduction, with short-term borrowings at 69.0%, reflecting active debt structure optimization - Total borrowings decreased from 6.16 billion yuan to 3.97 billion yuan, a year-on-year decrease of 35.5%54 Capital Expenditures Capital expenditures were approximately 1.52 billion yuan, focused on intelligent production, mine reserves, and production line upgrades; authorized and contracted capital commitments increased 135.7% to 766 million yuan, signaling increased future investment - Capital expenditures were approximately 1.52 billion yuan, mainly for intelligent production, mine reserves, and production line technological upgrades56 Capital Commitments (RMB in thousands) | Item | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Authorized and Contracted | 765,849 | 324,888 | | Authorized but Not Contracted | 1,268,803 | 334,698 | | Total | 2,034,652 | 659,586 | Cash Flow Analysis Net operating cash inflow decreased 15.8% to 3.51 billion yuan due to delayed sales; investing cash outflow was 1.33 billion yuan (12.9% decrease); financing cash outflow was 2.13 billion yuan (18.0% decrease) from loan and bond repayments Net Cash Flow Analysis (RMB in thousands) | Item | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,507,072 | 4,166,604 | | Net Cash Used in Investing Activities | (1,325,379) | (1,520,899) | | Net Cash Used in Financing Activities | (2,132,673) | (2,600,085) | | Net Change in Cash and Cash Equivalents | 49,020 | 45,620 | 2021 Outlook For 2021, cement demand is expected to plateau (-2%~0%), with supply constrained by environmental policies; infrastructure supports demand, but real estate faces pressure, maintaining stable prices and profitability Operating Environment Outlook For 2021, cement demand is expected to plateau (-2%~0%); infrastructure investment offers strong support, but new real estate starts face downward pressure, with environmental policies compressing supply - Expected cement demand growth for 2021 is -2% to 0%, showing a pattern of higher in the first half and lower in the second half68 - The supply side will continue to be compressed by environmental policies (peak shifting production, carbon peaking, power restrictions), which helps resolve overcapacity70 Company Business Outlook In 2021, the company will focus on high-quality development through 'cement+' industrial chain extension, resource reserves, intelligent construction, quality, cost, price stability, market expansion, and brand building - Deepen the implementation of the industrial chain extension strategy, accelerate the development of the 'cement+' model, and strategically deploy in green building materials industries such as aggregates, ready-mix concrete, and prefabricated buildings72 - Accelerate the promotion of intelligent construction, applying big data and smart manufacturing across the entire industrial chain to enhance management levels74 - Firmly implement normalized peak shifting production, adjust marketing strategies, and strive for new historical highs in economic benefits and cement sales volume77 Directors' Report Major Investments Major ongoing projects, including grate cooler renovation and new grinding lines, involved over 450 million yuan investment, aiming to enhance production efficiency and environmental standards Major Investment Projects During Reporting Period | No. | Project Name | Investment During Reporting Period (RMB in thousands) | | :--- | :--- | :--- | | 1 | Grate cooler renovation projects for eleven companies | 230,662 | | 2 | Changle Shanshui 1 million tonnes/year cement grinding production line | 79,602 | | 3 | Shanghe Branch 1 million tonnes/year cement grinding production line | 42,280 | | 4 | Liaoning Gongyuan 5000 line raw meal tube mill to roller press project | 30,881 | | 5 | Anqiu Shanshui 1 million tonnes/year cement grinding production line | 21,143 | Major Controlled Subsidiaries The top five profit-contributing subsidiaries are all in Shandong, with Pingyin Shanshui leading with 362.44 million yuan net profit, underscoring the region's core role in Group profitability Top 5 Subsidiaries by Profit | Company Name | Sales Amount (RMB in thousands) | Operating Profit (RMB in thousands) | Net Profit (RMB in thousands) | | :--- | :--- | :--- | :--- | | Pingyin Shanshui | 1,018,218 | 446,813 | 362,437 | | Linqu Shanshui | 914,016 | 391,021 | 280,691 | | Yantai Shanshui | 788,986 | 304,620 | 236,313 | | Anqiu Shanshui | 762,462 | 329,778 | 250,184 | | Zibo Shanshui | 911,454 | 371,361 | 256,883 | Final Dividend Due to an ongoing winding-up petition in the Cayman Islands and complexities in obtaining a recognition order for dividend distribution, the Board decided against recommending a 2020 final dividend - Due to the winding-up petition in the Cayman Islands, the Board does not recommend a final dividend for 202084 Share Capital and Major Shareholders Major Shareholders' Holdings By 2020 year-end, the company's shareholding was concentrated, with Tianrui Group (21.85%), CSI (19.47%), and China National Building Material Group (12.94%) as major shareholders, reflecting industrial capital influence Major Shareholders' Holdings (as of December 31, 2020) | Shareholder Name | Nature of Interest | Percentage of Shareholding | | :--- | :--- | :--- | | Tianrui Group Co., Ltd. | Interest of a corporation controlled by a substantial shareholder | 21.85% | | China Shanshui Investment Company Limited | Beneficial owner | 19.47% | | China National Building Material Co., Ltd. | Interest of a corporation controlled by a substantial shareholder | 12.94% | | Cithara Global Multi-Strategy SP | Beneficial owner | 11.10% | | Asia Cement Corporation | Interest of a corporation controlled by a substantial shareholder | 9.84% | Share Option Scheme 115.6 million unexercised share options (2.66% of issued capital) were granted in 2011 and 2015 at HKD 7.90 and HKD 3.68; 2015 options are currently unenforceable due to legal disputes - As of the end of the reporting period, a total of 115,600,000 share options remained unexercised, accounting for 2.66% of the issued share capital122 - Share options granted in early 2015 were put on hold due to an injunction application filed by CSI and are currently unenforceable120 Directors, Senior Management, and Employees Biographies of Directors and Senior Management The Board and senior management comprise experienced professionals; Executive Directors Mr. Chang Zhangli and Ms. Wu Lingling hold key roles at China National Building Material Group and Asia Cement, while Independent Non-executive Directors provide accounting and legal expertise - Mr. Chang Zhangli, Chairman of the Board, also serves as Deputy General Manager of China National Building Material Group and a director of several listed companies, with nearly 30 years of experience in listed company management128 - Ms. Wu Lingling, Executive Director, is the CFO and Executive Vice General Manager of Asia Cement Corporation, with over 30 years of experience in international financial accounting129 Human Resources As of 2020 year-end, the Group had 18,409 employees, providing competitive remuneration and welfare plans compliant with Chinese laws, including retirement, medical, unemployment, and housing provident fund - As of December 31, 2020, the Group had a total of 18,409 employees142 Corporate Governance Report Corporate Governance Structure The company largely complied with the Corporate Governance Code, but deviated by combining Chairman and CEO roles under Mr. Chang Zhangli for efficiency, and the Chairman did not meet separately with Independent Non-executive Directors - The company did not separate the roles of Chairman and Chief Executive Officer, with Mr. Chang Zhangli holding both, deviating from Corporate Governance Code provision A.2.1144 - During the reporting period, the Chairman did not hold meetings with Independent Non-executive Directors without the presence of other directors, deviating from Code provision A.2.7145 Board Committees The company established Audit, Remuneration, Nomination, and Executive Committees; Audit and Remuneration Committees comprise three Independent Non-executive Directors, while Nomination has two Executive and three Independent Non-executive Directors, all fulfilling oversight duties - The Audit Committee is composed of three Independent Non-executive Directors and held 5 meetings during the reporting period159160 - The Remuneration Committee is composed of three Independent Non-executive Directors and held 4 meetings during the reporting period161162 - The Nomination Committee is composed of five directors (including three Independent Non-executive Directors) and held 1 meeting during the reporting period163164 Risk Management and Internal Control The Board is responsible for the Group's risk management and internal control systems, covering eight key areas, and deemed them effective and adequate after annual review with the Audit Committee and management - The Group has established a relatively sound internal control system, covering eight main aspects including production, finance, procurement, and sales170171172 - The Board has conducted an annual review of the risk management and internal control systems for the reporting period and deemed them effective and adequate173 Significant Matters Major Litigation in Cayman Islands The company faces significant legal risk from an ongoing winding-up petition in the Cayman Islands filed by Tianrui (International) Holding, with China National Building Material Group and Asia Cement as respondents, creating operational uncertainty - Shareholder Tianrui (International) Holding Company Limited filed a petition with the Grand Court of the Cayman Islands for the winding-up of the company185 - Tianrui also issued a writ of summons seeking a declaration to revoke certain convertible bonds issued by the company in 2018 and their subsequent conversion187 - The Grand Court has ordered China National Building Material Group and Asia Cement to be joined as respondents to the winding-up petition188 Major Litigation in Hong Kong The company filed lawsuits in Hong Kong against former directors for alleged breach of fiduciary duties and misconduct, and against Tianrui International for alleged conspiracy to gain control, with protracted trials scheduled for 2021 - The company filed lawsuits against former directors Zhang Caiqu and Zhang Bin, among others, claiming damages arising from their alleged misconduct190 - The company filed lawsuits against Tianrui International, Tianrui Group, and others, alleging conspiracy through illegal means with the intent to harm the plaintiff to gain control197 Major Litigation in China Core subsidiary Shandong Shanshui has 101 unresolved litigation cases in mainland China, with 54 as defendant, involving approximately 443 million yuan in claims, primarily for labor, sales, and equity disputes - Shandong Shanshui has 101 unresolved litigation cases, with 54 as defendant, involving claims of approximately 443 million yuan199200 Independent Auditor's Report Audit Opinion The auditor issued a standard unqualified opinion on the 2020 consolidated financial statements, affirming they fairly reflect the Group's financial position, performance, and cash flows, prepared in accordance with relevant accounting standards - The auditor believes that the consolidated financial statements fairly and accurately reflect the Group's consolidated financial position as of December 31, 2020, and its consolidated financial performance and consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards206 Key Audit Matters Three key audit matters were identified, involving significant management judgment: 1) impairment assessment of property, plant and equipment, right-of-use assets, and intangible assets; 2) expected credit losses for receivables; and 3) valuation of convertible bonds - Key Audit Matter One: Impairment assessment of property, plant and equipment, right-of-use assets, and intangible assets, due to significant judgments involved regarding future cash flows and discount rates209 - Key Audit Matter Two: Assessment of loss allowance for expected credit losses on trade and bills receivables and other receivables, due to high estimation uncertainty involved210 - Key Audit Matter Three: Valuation of convertible bonds, as the determination of the fair value of their derivative component involves complex parameters and significant management judgment211 Consolidated Financial Statements Consolidated Income Statement The detailed consolidated income statement shows 2020 operating revenue of 20.89 billion yuan, profit before tax of 4.33 billion yuan, and annual net profit of 3.27 billion yuan, demonstrating profit growth despite revenue decline through cost control 2020 Consolidated Income Statement | Item (RMB in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Operating Revenue | 20,891,454 | 21,478,831 | | Gross Profit | 6,964,665 | 7,271,722 | | Operating Income | 4,659,112 | 4,692,516 | | Profit Before Tax | 4,333,590 | 4,225,988 | | Profit for the Year | 3,274,390 | 3,028,382 | | Equity Attributable to Shareholders of the Company | 3,186,993 | 2,973,104 | | Basic Earnings Per Share (Yuan) | 0.73 | 0.68 | Consolidated Statement of Financial Position By 2020 year-end, total assets were 27.68 billion yuan (non-current: 20.50 billion yuan), total liabilities 11.80 billion yuan (current: 9.84 billion yuan), and net assets 15.88 billion yuan, reflecting a robust financial structure 2020 Consolidated Statement of Financial Position | Item (RMB in thousands) | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Non-current Assets | 20,499,061 | 20,610,663 | | Current Assets | 7,178,382 | 6,217,142 | | Total Assets | 27,677,443 | 26,827,805 | | Current Liabilities | 9,839,495 | 11,181,736 | | Non-current Liabilities | 1,955,931 | 3,045,630 | | Total Liabilities | 11,795,426 | 14,227,366 | | Net Assets | 15,882,017 | 12,600,439 | Consolidated Cash Flow Statement Net operating cash inflow was 3.51 billion yuan in 2020, driven by 4.33 billion yuan profit before tax; investing activities used 1.33 billion yuan for fixed assets, and financing activities used 2.13 billion yuan for loan and bond repayments 2020 Consolidated Cash Flow Statement | Item (RMB in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 3,507,072 | 4,166,604 | | Net Cash Used in Investing Activities | (1,325,379) | (1,520,899) | | Net Cash Used in Financing Activities | (2,132,673) | (2,600,085) | | Net Change in Cash and Cash Equivalents | 49,020 | 45,620 | | Cash and Cash Equivalents at Year-end | 1,401,233 | 1,364,054 |
山水水泥(00691) - 2020 - 年度财报