中国三江化工(02198) - 2021 - 中期财报

Management Discussion and Analysis Overall Business Review H1 2021 revenue grew 26.4% from higher product prices, but gross margin fell 5.9% to 10.8% as raw material costs outpaced product price increases, impacting net profit and EPS - China's petrochemical industry faced market challenges due to the COVID-19 pandemic[7] H1 2021 Key Financial Indicators | Indicator | H1 2021 | H1 2020 | Change | H1 2021 Average Selling Price Increases for Main Products | Product | Average Selling Price Increase | - Gross profit margin declined primarily because raw material price increases (ethylene by 55.4% and propylene by 40.9%) outpaced product price increases (ethylene oxide by 7.9%, ethylene glycol by 29.7%, and polypropylene by 16.9%)[8] - Methanol price increase (31.2%) was significantly lower than ethylene and propylene, partially offsetting the adverse impact of their price hikes[8] Business Development and Future Outlook The company is advancing two new production facilities, an ethylene oxide/ethylene glycol plant and a naphtha/ethane/propane-to-ethylene/propylene plant, expected to operate in Q1 and Q4 2022 respectively, aiming to boost capacity, revenue, and long-term gross margin while managing COVID-19 impacts - Construction of the sixth phase ethylene oxide/ethylene glycol production facility is nearing completion, expected to commence commercial operation in Q1 2022, potentially doubling market share in East China and increasing 2022 revenue by over 50%[10] - The naphtha/ethane/propane-to-ethylene/propylene production facility is expected to be completed in Q3 2022 and commence commercial operation in Q4 2022, aiming to mitigate raw material price volatility and improve long-term gross profit margin by adjusting feedstock ratios (from 20%-10%-70% to 70%-30%)[11] - Total capital expenditure for the two new facilities is estimated at approximately RMB 6.5 billion, with the gearing ratio projected to peak at 42.0% by the end of 2021 (compared to 39.4% as of June 30, 2021)[12] - The company has implemented stringent measures to address the COVID-19 pandemic, successfully maintaining normal operations and high production facility utilization rates[12] Financial Review This section details H1 2021 revenue, sales volume, average selling price, and gross profit margin across business lines, showing overall revenue growth of 26.4% driven by polypropylene, but declining sales volumes for ethylene oxide and ethylene glycol due to maintenance, and a general decline in gross profit margins for most products due to rising raw material costs, with some improvements in MTBE/C4 and crude pentene H1 2021 Revenue, Sales Volume, Average Selling Price, and Gross Profit Margin by Business Segment | Business Category | H1 2021 Revenue (RMB thousand) | % of Revenue | H1 2020 Revenue (RMB thousand) | % of Revenue | Revenue Change (+/-) | H1 2021 Sales Volume (metric tons) | H1 2020 Sales Volume (metric tons) | Sales Volume Change (+/-) | H1 2021 Average Selling Price (RMB) | H1 2020 Average Selling Price (RMB) | Average Selling Price Change (+/-) | H1 2021 Gross Margin (%) | H1 2020 Gross Margin (%) | Gross Margin Change (+/-) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue (RMB thousand) | | | | | | | | | | | | | | | | Ethylene Oxide | 1,273,399 | 27% | 1,208,059 | 32% | 5.4% | 190,212 | 201,335 | -5.5% | 6,695 | 6,000 | 11.6% | 13.1% | 22.0% | -8.9% | | Ethylene Glycol | 496,310 | 10% | 404,658 | 11% | 22.6% | 108,690 | 115,899 | -6.2% | 4,566 | 3,491 | 30.8% | 0.2% | 0.3% | -0.1% | | Polypropylene | 2,002,023 | 42% | 1,333,638 | 35% | 50.1% | 273,937 | 204,893 | 33.7% | 7,308 | 6,509 | 12.3% | 10.0% | 18.1% | -8.1% | | Surfactants | 416,876 | 9% | 378,603 | 10% | 10.1% | 52,648 | 52,592 | 0.1% | 7,918 | 7,199 | 10.0% | 10.5% | 27.5% | -17.0% | | MTBE/C4 | 219,540 | 5% | 163,172 | 4% | 34.5% | 45,254 | 46,156 | -2.0% | 4,851 | 3,535 | 37.2% | 11.9% | -12.9% | 24.8% | | Crude Pentene | 176,661 | 4% | 143,396 | 4% | 23.2% | 43,225 | 43,842 | -1.4% | 4,087 | 3,271 | 24.9% | 0.6% | -9.6% | 10.2% | | Polypropylene Processing Services | 13,291 | 0% | 23,418 | 1% | -43.2% | 23,772 | 40,510 | -41.3% | 559 | 578 | -3.3% | 64.8% | 55.0% | 9.8% | | Surfactant Processing Services | 21,021 | 0% | 20,836 | 0% | 0.9% | 70,342 | 71,760 | -2.0% | 229 | 290 | -21.0% | 66.9% | 69.7% | -2.8% | | Others | 157,476 | 3% | 102,520 | 3% | 53.6% | | | | | | | | | | | Total | 4,776,597 | 100% | 3,778,300 | 100% | 26.4% | | | | | | | | | | - Ethylene oxide revenue increased by 5.4%, primarily due to an 11.6% rise in average selling price, despite a 5.5% decrease in production volume due to scheduled maintenance[17] - Ethylene glycol revenue increased by 22.6%, mainly driven by a 30.8% increase in average selling price, with production volume decreasing by 6.2% due to ethylene oxide facility maintenance[18] - Polypropylene revenue grew by 50.1%, primarily due to a 12.3% increase in average selling price and higher production volume (no planned maintenance in 2021)[19] - Overall gross profit margin decreased by 5.9%, mainly because raw material price increases (ethylene by 55.4% and propylene by 40.9%) outpaced product price increases, with lower methanol price increases partially offsetting the adverse impact[20] Unaudited Consolidated Results Condensed Consolidated Statement of Financial Position As of June 30, 2021, total non-current assets grew to RMB 9,381,025 thousand, driven by increases in property, plant, and equipment, while total current assets also rose, but a significant increase in total current liabilities led to an expanded net current liability, with both net assets and total equity showing slight growth Condensed Consolidated Statement of Financial Position Summary (RMB thousand) | Indicator | June 30, 2021 | December 31, 2020 | Change | - Total non-current assets increased by 16.1% to RMB 9,381,025 thousand, primarily due to an increase in property, plant, and equipment[24] - Net current liabilities expanded from RMB (2,084,395) thousand to RMB (2,848,910) thousand, reflecting a faster growth in current liabilities than current assets[24] - Net assets and total equity both showed a slight increase, from RMB 4,791,691 thousand to RMB 4,840,478 thousand[27] Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2021, the company's revenue increased by 26.4% to RMB 4,776,597 thousand, but a greater increase in cost of sales led to an 18.3% decrease in gross profit, with profit before tax and profit for the period both declining, and profit attributable to owners of the parent decreasing by 12.3%, resulting in basic earnings per share of RMB 27.85 cents, down 11.9% year-on-year Condensed Consolidated Statement of Profit or Loss Summary (RMB thousand) | Indicator | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change | - Revenue increased by 26.4% year-on-year to RMB 4,776,597 thousand[30] - Gross profit decreased by 18.3% year-on-year to RMB 517,149 thousand, primarily due to a greater increase in cost of sales than revenue[30] - Profit attributable to owners of the parent decreased by 12.3% year-on-year to RMB 327,621 thousand[30] - Basic earnings per share were RMB 27.85 cents, a year-on-year decrease of 11.9%[30] Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2021, the company's profit for the period was RMB 350,521 thousand, a decrease compared to RMB 380,991 thousand in the same period of 2020, with no other comprehensive income for the period, making total comprehensive income for the period consistent with profit for the period, and total comprehensive income attributable to owners of the parent was RMB 327,621 thousand Condensed Consolidated Statement of Comprehensive Income Summary (RMB thousand) | Indicator | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change | - Profit for the period was RMB 350,521 thousand, a year-on-year decrease of 8.0%[33] - There was no other comprehensive income for the period, thus total comprehensive income for the period was the same as profit for the period[33] - Total comprehensive income attributable to owners of the parent was RMB 327,621 thousand, a year-on-year decrease of 12.3%[33] Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2021, net cash flow from operating activities significantly increased to RMB 1,055,768 thousand, while net cash outflow from investing activities decreased, and net cash inflow from financing activities significantly declined, resulting in a net decrease of RMB 90,001 thousand in cash and cash equivalents for the period, with an ending balance of RMB 683,061 thousand Condensed Consolidated Statement of Cash Flows Summary (RMB thousand) | Indicator | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change | - Net cash flow from operating activities significantly increased by 212.4% year-on-year to RMB 1,055,768 thousand[36] - Net cash outflow from investing activities decreased by 41.1% to RMB (1,523,221) thousand[36] - Net cash inflow from financing activities significantly decreased by 82.7% to RMB 377,452 thousand[36] - Cash and cash equivalents at the end of the period amounted to RMB 683,061 thousand, a decrease of RMB 90,001 thousand from the beginning of the period[36] Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2021, equity attributable to owners of the parent increased from RMB 4,712,687 thousand at the beginning of the period to RMB 4,738,574 thousand, primarily due to profit for the period, partially offset by dividends paid and appropriations to safety production reserves, with non-controlling interests also increasing Condensed Consolidated Statement of Changes in Equity Summary (RMB thousand) | Indicator | June 30, 2021 | January 1, 2020 | - Equity attributable to owners of the parent increased from RMB 4,712,687 thousand as of January 1, 2021, to RMB 4,738,574 thousand as of June 30, 2021[38] - Profit for the period contributed RMB 327,621 thousand, but a final dividend of RMB 297,402 thousand for 2020 was paid[38] - Non-controlling interests increased from RMB 79,004 thousand to RMB 101,904 thousand[38] Notes to the Condensed Consolidated Financial Statements 1 Company Information The company, incorporated in the Cayman Islands in 2009, primarily engages in the production and supply of ethylene oxide, ethylene glycol, polypropylene, MTBE, and surfactants in China, also offering related processing services and other chemical products with broad industry applications - The company was incorporated as a limited liability company in the Cayman Islands on January 30, 2009[42] - The Group primarily engages in the production and supply of ethylene oxide, ethylene glycol, polypropylene, MTBE, and surfactants in China[43] - The Group also provides polypropylene, MTBE, and surfactant processing services, and produces and supplies other chemical products such as C4, crude pentene, and industrial gases[43] 2.1 Basis of Presentation and Preparation The Group's unaudited condensed consolidated interim financial statements are prepared in accordance with HKAS 34 and should be read with the 2020 annual financial statements, presented in RMB under the historical cost convention and reviewed by the audit committee; despite net current liabilities, the Board believes the Group can continue as a going concern due to sufficient operating cash inflows and financing capabilities - The unaudited condensed consolidated interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting[44] - The statements are presented in RMB and have been reviewed by the company's audit committee[44] - Despite net current liabilities of approximately RMB 2,848,910,000 as of June 30, 2021, the Board prepared the financial statements on a going concern basis, believing the Group has sufficient funds to meet its debt obligations and capital expenditures[45] 2.2 Changes in Accounting Policies and Disclosures This period saw the initial adoption of revised HKFRSs, including Phase 2 amendments related to interest rate benchmark reform and an extension of COVID-19-related rent concessions, which provide practical expedients for financial reporting impacts when alternative risk-free rates replace existing benchmarks and extend the lessee's practical expedient for rent concessions by 12 months, with no significant impact on the Group's financial position or performance - Phase 2 amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4, and HKFRS 16 regarding interest rate benchmark reform were adopted for the first time this period[47] - The interest rate benchmark reform amendments provide practical expedients, allowing the update of effective interest rates without adjusting the carrying amount of financial assets and liabilities under specific conditions, and permitting changes to hedge designations[47] - Amendments to HKFRS 16 extend the practical expedient for lessees regarding COVID-19-related rent concessions by 12 months[51] - The aforementioned amendments had no impact on the Group's financial position or performance[48][51] 3 Segment Information The Group's management views the company as a single reportable operating segment, not segmented by products and services, with all external revenue and non-current assets originating from mainland China; H1 2021 revenue from sales of goods was RMB 4,732,682 thousand, and from rendering of services was RMB 34,312 thousand - The Group has only one reportable operating segment, with management monitoring overall operating results[52] H1 2021 Revenue by Product and Service Category (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Sales of goods | 4,732,682 | 3,729,209 | | Rendering of services | 34,312 | 44,254 | | Others | 9,603 | 4,837 | | Total | 4,776,597 | 3,778,300 | - All of the Group's external revenue and non-current assets are derived from within mainland China[54] 4 Revenue, Other Income and Gains, and Other Expenses This section details the company's H1 2021 revenue, other income and gains, and other expenses, where revenue represents the net invoiced value of goods sold, other income and gains primarily include interest/investment income, sales of petroleum and chemical products, and government grants, and other expenses mainly comprise cost of sales for trading petroleum and chemical products and impairment provisions for inventories - Revenue represents the net invoiced value of goods sold, after deducting value-added tax and government surcharges, as well as provisions for returns and trade discounts[57] H1 2021 Other Income and Gains Analysis (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Interest/investment income | 68,699 | 83,967 | | Sales of petroleum and chemical products | 84,261 | 69,640 | | Government grants | 14,133 | 39,290 | | Other rental income | 4,101 | 1,930 | | Net foreign exchange loss | 15,436 | — | | Others | 3,831 | 2,092 | | Total | 190,461 | 196,919 | H1 2021 Other Expenses Analysis (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Impairment provision for inventories — silver (as part of catalyst) | 180 | 14,244 | | Cost of sales for trading petroleum and chemical products | 73,532 | 61,376 | | Net foreign exchange loss | — | 10,027 | | Investment loss from fair value changes of derivative financial instruments | — | 38,083 | | Others | 142 | 1,280 | | Total | 73,854 | 125,010 | - Government grants primarily refer to incentives provided by local governments for the Group's operations in Jiaxing City, Zhejiang Province, China[60] 5 Finance Costs For the six months ended June 30, 2021, the Group's total finance costs increased to RMB 75,218 thousand from RMB 70,499 thousand in the prior year, with interest on bank borrowings accounting for the vast majority at RMB 75,062 thousand H1 2021 Finance Costs Analysis (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Interest on bank borrowings | 75,062 | 70,239 | | Interest on lease liabilities | 156 | 260 | | Total | 75,218 | 70,499 | - Finance costs increased by 6.7% year-on-year to RMB 75,218 thousand[63] 6 Profit Before Tax The Group's profit before tax is stated after deducting various costs and expenses, including cost of inventories sold of RMB 4,247,807 thousand, depreciation of property, plant and equipment of RMB 244,499 thousand, depreciation of right-of-use assets of RMB 8,387 thousand, and amortisation of intangible assets of RMB 13,839 thousand for the six months ended June 30, 2021 H1 2021 Profit Before Tax Deductions (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Cost of inventories sold | 4,247,807 | 3,204,908 | | Cost of services rendered | 11,641 | 20,395 | | Depreciation of property, plant and equipment | 244,499 | 272,397 | | Depreciation of right-of-use assets | 8,387 | 5,855 | | Amortisation of intangible assets | 13,839 | 14,699 | 7 Income Tax Expense For the six months ended June 30, 2021, the Group's total income tax expense significantly decreased to RMB 39,168 thousand from RMB 79,048 thousand in the prior year, mainly due to reduced current period expenditure; the company is exempt from income tax in the Cayman Islands, subject to a 16.5% profits tax rate in Hong Kong, and its mainland China subsidiaries generally face a 25% corporate income tax rate, with some entities enjoying a preferential 15% rate H1 2021 Income Tax Expense Analysis (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Current period expense | 39,914 | 80,596 | | Deferred | (746) | (1,548) | | Total tax expense for the period | 39,168 | 79,048 | - Income tax expense decreased by 50.5% year-on-year to RMB 39,168 thousand[66] - The company is not subject to income tax in the Cayman Islands, and the Hong Kong profits tax rate is 16.5%[67] - The applicable corporate income tax rate for mainland China subsidiaries is generally 25%, with some entities enjoying a preferential tax rate of 15%[69] 8 Earnings Per Share Attributable to Owners of the Parent For the six months ended June 30, 2021, profit attributable to ordinary equity holders of the parent was RMB 327,621 thousand, with both basic and diluted earnings per share at RMB 27.85 cents, a decrease from RMB 31.61 cents in the prior year, calculated based on the weighted average number of ordinary shares outstanding during the period H1 2021 Earnings Per Share Calculation Basis (RMB thousand/thousand shares) | Indicator | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Profit attributable to ordinary equity holders of the parent | 327,621 | 373,660 | | Weighted average number of ordinary shares outstanding during the period | 1,176,236 | 1,181,931 | | Dilutive effect — share award scheme | — | — | | Basic and diluted earnings per share | 27.85 cents | 31.61 cents | - Both basic and diluted earnings per share were RMB 27.85 cents, representing a year-on-year decrease of 11.9%[71] 9 Dividends The Board has declared an interim dividend of HK 12.5 cents per share for the six months ended June 30, 2021, totaling RMB 123,793 thousand, consistent with the prior year, and additionally, a final dividend of HK 30.0 cents per share for the 2020 financial year, totaling RMB 297,402 thousand, was approved and paid during the period H1 2021 Dividend Declaration and Payment (RMB thousand) | Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Proposed interim dividend (HK 12.5 cents per share) | 123,793 | 133,594 | | Final dividend paid for 2020 (HK 30.0 cents per share) | 297,402 | 218,508 | | Final dividend paid for 2019 (HK 20.0 cents per share) | — | 218,508 | - The Board declared an interim dividend of HK 12.5 cents per share, consistent with the same period last year[74] - A final dividend of HK 30.0 cents per share for the 2020 financial year, totaling RMB 297,402 thousand, was paid during the period[75] 10 Financial Assets at Fair Value Through Profit or Loss The Group holds investments in wealth management products issued by certain mainland Chinese banks, which are mandatorily classified as financial assets at fair value through profit or loss because their contractual cash flows are not solely payments of principal and interest - The Group holds investments in wealth management products issued by certain mainland Chinese banks[76] - These investments are mandatorily classified as financial assets at fair value through profit or loss because their contractual cash flows are not solely payments of principal and interest[76] 11 Inventories As of June 30, 2021, the Group's total inventories amounted to RMB 809,423 thousand, a decrease from RMB 948,500 thousand as of December 31, 2020, with raw materials constituting the largest portion at RMB 708,463 thousand and finished goods at RMB 100,960 thousand Inventory Composition (RMB thousand) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Raw materials | 708,463 | 863,161 | | Finished goods | 100,960 | 85,339 | | Total | 809,423 | 948,500 | - Total inventories decreased by 14.6% year-on-year to RMB 809,423 thousand[77] 12 Trade and Bills Receivables As of June 30, 2021, the Group's total trade and bills receivables significantly increased to RMB 393,354 thousand from RMB 249,056 thousand as of December 31, 2020, with bills receivables being the largest component; credit terms generally range from 15 to 30 days, extending up to three months, and the Group strictly monitors outstanding receivables and regularly reviews overdue balances Trade and Bills Receivables Composition (RMB thousand) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Trade receivables | 56,384 | 52,157 | | Bills receivables | 347,853 | 207,937 | | Impairment | (10,883) | (11,038) | | Total | 393,354 | 249,056 | - Total trade and bills receivables increased by 57.9% year-on-year to RMB 393,354 thousand[79] - Credit terms generally range from 15 to 30 days, with some customers extending up to three months, and bills receivables mature within six months[79] Trade Receivables Ageing Analysis (RMB thousand) | Ageing | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | 1 to 30 days | 41,537 | 40,593 | | 31 to 60 days | 11 | 905 | | 61 to 90 days | 1,521 | 367 | | 91 to 360 days | 3,251 | 475 | | Over 360 days | 10,064 | 9,817 | 13 Cash and Cash Equivalents and Pledged Deposits As of June 30, 2021, the Group's cash and cash equivalents totaled RMB 683,061 thousand, with pledged deposits amounting to RMB 1,227,000 thousand, primarily for bills payable and bank loan collateral; time deposits earn interest at relevant short-term rates, and all deposits are held with reputable banks Cash and Cash Equivalents and Pledged Deposits (RMB thousand) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and bank balances | 683,061 | 775,849 | | Time deposits | 1,227,000 | 767,338 | | Total | 1,910,061 | 1,543,187 | | Less: Pledged time deposits | | | | Pledged for bills payable | 1,002,000 | 298,736 | | Pledged for bank loans | 225,000 | 468,602 | | Total pledged time deposits | 1,227,000 | 767,338 | | Cash and cash equivalents | 683,061 | 775,849 | - Total pledged deposits increased from RMB 767,338 thousand to RMB 1,227,000 thousand, primarily for bills payable collateral[82] - Bank cash earns interest at floating rates, and pledged short-term time deposits have maturity periods consistent with the related pledged bills payable, letters of credit, and bank loans[82] 14 Trade and Bills Payables As of June 30, 2021, the Group's total trade and bills payables significantly increased to RMB 1,615,646 thousand from RMB 961,017 thousand as of December 31, 2020, with a notable rise in bills payable; trade payables are interest-free with an average credit period of three months, and all bills payable mature within one year Trade and Bills Payables Composition (RMB thousand) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Trade payables | 635,266 | 474,233 | | Bills payables | 980,380 | 486,784 | | Total | 1,615,646 | 961,017 | - Total trade and bills payables increased by 68.1% year-on-year to RMB 1,615,646 thousand[84] Trade and Bills Payables Ageing Analysis (RMB thousand) | Ageing | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Within 3 months | 1,103,143 | 708,540 | | 3 to 6 months | 504,683 | 242,400 | | 6 to 12 months | 5,103 | 6,973 | | 12 to 24 months | 2,159 | 1,783 | | 24 to 36 months | 6 | 782 | | Over 36 months | 552 | 539 | | Total | 1,615,646 | 961,017 | - Trade payables are interest-free with an average credit period of three months, and all bills payable mature within one year[84] 15 Interest-Bearing Bank Borrowings As of June 30, 2021, the Group's total interest-bearing bank borrowings increased to RMB 4,955,512 thousand from December 31, 2020, with RMB 3,303,512 thousand repayable within one year; borrowings are secured by various assets including leasehold land, property, plant and equipment, financial assets, and pledged deposits, and are guaranteed by related parties, with the company also entering into a RMB 3,160,000 thousand syndicated loan agreement for a new ethylene oxide/ethylene glycol production facility Interest-Bearing Bank Borrowings Analysis (RMB thousand) | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Current | | | | Bank loans — secured | 250,000 | 100,000 | | Bank loans — unsecured | 969,511 | 1,599,591 | | Discounted bills receivables | 473,000 | 879,301 | | Discounted letters of credit | 1,301,001 | 456,987 | | Total current | 3,303,512 | 3,035,889 | | Non-current | | | | Bank loans — secured | 1,652,000 | 1,162,000 | | Total non-current | 1,652,000 | 1,162,000 | | Total | 4,955,512 | 4,197,889 | | Analysis of bank loans repayable | | | | Within one year | 3,303,512 | 3,035,889 | | In the third to fifth year | 872,000 | — | | Over five years | 780,000 | 1,162,000 | - Total interest-bearing bank borrowings increased from RMB 4,197,889 thousand to RMB 4,955,512 thousand[87] - Borrowings are secured by leasehold land, property, plant and equipment, financial assets at fair value through profit or loss, and pledged deposits, among others[89] - Some borrowings are guaranteed by Lotte Chemical Corporation and related company Hangzhou Haoming Investment Co, Ltd[89] - The Group has entered into a syndicated loan agreement for RMB 3,160,000 thousand to construct additional ethylene oxide/ethylene glycol production facilities, of which RMB 1,652,000 thousand has been drawn down[90] 16 Amounts Due from Related Parties As of June 30, 2021, the Group's total amounts due from related parties were RMB 570,142 thousand, primarily from Zhejiang Meifu Petrochemical Co, Ltd, and these amounts are unsecured, interest-free, and repayable on demand Amounts Due from Related Parties (RMB thousand) | Related Party | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Sure Capital Holdings Limited | 1 | 1 | | Zhejiang Meifu Petrochemical Co, Ltd | 569,721 | 593,713 | | Zhejiang Jiahua Import and Export Co, Ltd | 376 | 320 | | Jiaxing Hangzhou Bay Petrochemical Logistics Co, Ltd | 44 | 100 | | Total | 570,142 | 595,138 | - Total amounts due from related parties were RMB 570,142 thousand, primarily from Zhejiang Meifu Petrochemical Co, Ltd[93] - Balances due from related parties are unsecured, interest-free, and repayable on demand[95] 17 Amounts Due to Related Parties As of June 30, 2021, the Group's total amounts due to related parties significantly increased to RMB 130,263 thousand from December 31, 2020, primarily owed to Zhejiang Jiahua Energy Chemical Co, Ltd and Haoxin Development Limited, and these amounts are also unsecured, interest-free, and repayable on demand Amounts Due to Related Parties (RMB thousand) | Related Party | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Zhejiang Jiahua Energy Chemical Co, Ltd | 90,002 | 47,997 | | Zhejiang Zhapu Meifu Terminal Storage Co, Ltd | 9,319 | 8,454 | | Jiaxing Hangzhou Bay Petrochemical Logistics Co, Ltd | 3,281 | 4,010 | | Haoxin Development Limited | 20,128 | 2,209 | | Zhejiang Jiahua Group Co, Ltd | 78 | 711 | | Jiaxing Xinggang Heat Network Co, Ltd | 670 | 388 | | Zhejiang Haoxing Energy Saving Technology Co, Ltd | 3,010 | 1,136 | | Jiaxing Port Area Gangan Industrial Equipment Installation Co, Ltd | 3,176 | 1,567 | | Zhejiang Jiafu New Material Technology Co, Ltd | 525 | 300 | | Jiaxing Zhapu Construction Investment Co, Ltd | 63 | 63 | | Jiaxing Jianghao Ecological Agriculture Co, Ltd | 11 | 140 | | Total | 130,263 | 67,203 | - Total amounts due to related parties increased by 93.8% year-on-year to RMB 130,263 thousand[96] - Balances due to related parties are unsecured, interest-free, and repayable on demand[97] Other Information Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and its Associated Corporations As of June 30, 2021, Ms Han Jianhong and Ms Guan Siyi held approximately 44.22% interest in the company's shares, primarily through trust and corporate interests, while Mr Rao Huatao and Ms Chen Xian held minor personal interests; additionally, Ms Han and Ms Guan held approximately 42.56% interest in associated corporation Sure Capital Directors' Interests in the Company's Shares (June 30, 2021) | Director Name | Personal Interest | Family Interest (Number of Shares) | Trust/Corporate Interest (Number of Shares) | Total (Number of Shares) | Approximate % of Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | :--- | | Han Jianhong | — | 19,738,000 | 506,451,000 | 526,189,000 | 44.22% | | Rao Huatao | 225,000 | — | — | 225,000 | 0.02% | | Guan Siyi | — | 19,738,000 | 506,451,000 | 526,189,000 | 44.22% | | Chen Xian | 1,631,000 | — | — | 1,631,000 | 0.14% | - Ms Han Jianhong's and Ms Guan Siyi's interests are primarily held through Sure Capital Holdings Limited, which is wholly owned by Yihao Development Limited and held by Yihao Trust[98][104] Directors' Interests in Shares of Associated Corporations of the Company (June 30, 2021) | Director Name | Name of Associated Corporation | Personal Interest | Family Interest (Number of Shares) | Trust/Corporate Interest (Number of Shares) | Total (Number of Shares) | Approximate % of Issued Share Capital | | :--- | :--- | :--- | :--- | :--- | :--- | | Ms Han | Sure Capital | — | — | 506,451,000 | 42.56% | | Ms Guan | Sure Capital | — | — | 506,451,000 | 42.56% | Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares of the Company As of June 30, 2021, Vistra Trust (Singapore) Pte Ltd, Yihao Development Limited, and Sure Capital Holdings Limited were all listed as substantial shareholders, each holding 506,451,000 shares, representing approximately 42.56% of the issued share capital, with all these interests held through trusts and controlled corporations Substantial Shareholders' Interests in the Company's Shares (June 30, 2021) | Shareholder Name | Capacity | Number of Shares | Approximate % of Issued Share Capital | | :--- | :--- | :--- | :--- | | Vistra Trust (Singapore) Pte. Ltd | Trustee | 506,451,000 | 42.56% | | Yihao Development Limited | Interest of controlled corporation | 506,451,000 | 42.56% | | Sure Capital | Interest of controlled corporation | 506,451,000 | 42.56% | - Vistra Trust (Singapore) Pte Ltd, Yihao Development Limited, and Sure Capital Holdings Limited all hold the same number of shares, with identical sources of interest, all held through Yihao Trust[106] Changes in Directors' Information As of the report date, Ms Guan Siyi and Ms Chen Xian were appointed as executive directors, effective August 26, 2021, with no other significant changes to directors' information since the date of the last annual report - Ms Guan Siyi and Ms Chen Xian were appointed as executive directors, effective August 26, 2021[109] - Apart from the aforementioned changes, there have been no other significant changes to directors' information since the date of the last annual report for the year ended December 31, 2020[109] Capital Commitments As of June 30, 2021, the Group's capital commitments amounted to approximately RMB 4,309.9 million, primarily for the construction of additional production capacity, purchase of plant and machinery, and regular maintenance and upkeep - As of June 30, 2021, the Group's capital commitments amounted to approximately RMB 4,309.9 million[110] - Capital commitments are primarily related to the purchase of plant and machinery for additional production capacity and regular maintenance and upkeep[110] Contingent Liabilities As of June 30, 2021, the Group had no significant contingent liabilities that were not provided for in the financial statements - As of June 30, 2021, the Group had no significant contingent liabilities that were not provided for in the financial statements[111] Employees and Remuneration Policy As of June 30, 2021, the Group employed a total of 1,006 full-time employees, with employee benefits including housing subsidies, bonuses, and social security contributions; the Remuneration Committee annually reviews remuneration packages, and executive directors receive emoluments in the form of salaries, bonuses, and other allowances - As of June 30, 2021, the Group employed a total of 1,006 full-time employees[112] - Employee benefits include housing subsidies, shift allowances, bonuses, allowances, medical examinations, staff accommodation, social security contributions, housing provident fund contributions, and a share award scheme[112] - The Remuneration Committee reviews remuneration packages annually or as needed, and executive directors receive emoluments in the form of salaries, bonuses, and other allowances[112] Liquidity and Financial Resources The Group's gearing ratio was 39.4% as of June 30, 2021, a slight increase from 38.1% as of December 31, 2020, but still well below the 66.7% guideline ceiling; inventory turnover days, trade and bills receivables turnover days remained low, and trade and bills payables turnover days remained at a similar level - The Group's gearing ratio (total interest-bearing borrowings to total assets) was 39.4% as of June 30, 2021, compared to 38.1% as of December 31, 2020[113] - Management believes this ratio is a better measure than total interest-bearing borrowings to total equity, given the rapid expansion of multiple production facilities in the coming years[113] Turnover Days Indicators | Indicator | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Inventory turnover days | 37.8 days | 49.6 days | | Trade and bills receivables turnover days | 12.3 days | 17.9 days | | Trade and bills payables turnover days | 55.4 days | 51.4 days | Interim Dividend The Board has declared an interim dividend of HK 12.5 cents per share for the six months ended June 30, 2021, payable on September 24, 2021, to shareholders on the register of members as of September 17, 2021 - The Board has declared an interim dividend of HK 12.5 cents per share for the six months ended June 30, 2021[115] - The interim dividend will be paid on September 24, 2021, to shareholders on the register of members as of September 17, 2021[115] Closure of Register of Members To determine eligible shareholders for the interim dividend, the company will suspend its share transfer registration from September 16 to September 17, 2021, inclusive, with all transfer documents required to be lodged by 4:30 p.m. on September 15, 2021, with the share registrar - The company will suspend its share transfer registration from September 16 to September 17, 2021 (both days inclusive)[118] - To be eligible for the interim dividend, all transfer documents, accompanied by the relevant share certificates, must be lodged with Tricor Investor Services Limited by 4:30 p.m. on September 15, 2021[118] Corporate Governance The company has adopted the Corporate Governance Code as set out in Appendix 14 of the HKEX Listing Rules and confirms its compliance with all code provisions for the six months ended June 30, 2021, up to the date of this report - The company has adopted the code provisions of the Corporate Governance Code and Corporate Governance Report as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[119] - The Board believes that the company has complied with all code provisions of the Corporate Governance Code for the six months ended June 30, 2021, up to the date of this report[119] Standard of Dealings in Securities by Directors The company has adopted the Model Code set out in Appendix 10 of the Listing Rules as the standard for directors and senior management to deal in securities, and all directors confirm their compliance with the Model Code throughout the review period - The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules[120] - All directors confirm their compliance with the Model Code throughout the six months ended June 30, 2021, up to the date of this report[120] Audit Committee The Audit Committee, comprising three independent non-executive directors with Shen Kaijun as Chairman, is responsible for reviewing and overseeing financial reporting processes and internal control systems, and has reviewed the Group's interim results for the six months ended June 30, 2021 - The Audit Committee comprises three independent non-executive directors: Shen Kaijun (Chairman), Kong Liang, and Pei Yu[121] - Its primary responsibilities include reviewing and overseeing the Group's financial reporting processes and internal control systems, nominating and monitoring external auditors, and providing advice and recommendations to the Board[121] - The Audit Committee has reviewed the Group's interim results for the six months ended June 30, 2021[121] Remuneration Committee The Remuneration Committee, composed of Pei Yu (Chairman), Han Jianhong, and Kong Liang, is tasked with evaluating the performance of directors and senior management, making recommendations on their remuneration, and assessing the share award scheme - The Remuneration Committee comprises three members: Pei Yu (Chairman, Independent Non-executive Director), Han Jianhong (Chairman of the Board and Executive Director), and Kong Liang (Independent Non-executive Director)[122] - Its primary responsibilities include evaluating the performance of directors and senior management and making recommendations on their remuneration packages, as well as assessing the company's share award scheme[122] Nomination Committee The Nomination Committee, consisting of Han Jianhong (Chairman), Shen Kaijun, and Ms Pei Yu, is responsible for considering and recommending Board members and regularly reviewing the Board's structure, size, and composition - The Nomination Committee comprises three members: Han Jianhong (Chairman, Chairman of the Board and Executive Director), Shen Kaijun (Independent Non-executive Director), and Pei Yu (Independent Non-executive Director)[123] - Its primary responsibilities include considering and recommending suitable and qualified individuals for Board membership, and regularly reviewing the Board's structure, size, and composition[123] Purchase, Sale or Redemption of Listed Securities For the six months ended June 30, 2021, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the review period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[125] Publication of Interim Report on HKEX and Company Website The company's interim report for the six months ended June 30, 2021, will be dispatched to shareholders in due course and simultaneously published on the HKEX website (www.hkex.com.hk) and the company's website (www.chinasanjiang.com) - The company's interim report for the six months ended June 30, 2021, will be dispatched to shareholders[126] - The interim report will be published on the HKEX website (www.hkex.com.hk) and the company's website (www.chinasanjiang.com)[126](index=126&type=chunk) Company Information Board of Directors The company's Board of Directors comprises executive directors Han Jianhong (Chairman), Rao Huatao, Guan Siyi, and Chen Xian, along with independent non-executive directors Shen Kaijun, Pei Yu, and Kong Liang - Executive Directors include Han Jianhong (Chairman), Rao Huatao, Guan Siyi (appointed August 26, 2021), and Chen Xian (appointed August 26, 2021)[129] - Independent Non-executive Directors include Shen Kaijun, Pei Yu, and Kong Liang[129] Company Secretary The company's Company Secretary is Ip Ngai Hang (a Hong Kong practicing accountant) - The Company Secretary is Ip Ngai Hang (a Hong Kong practicing accountant)[129] Stock Listing Information The company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited under stock code 2198 - Shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited, stock code 2198[129] Auditor The company's auditor is Ernst & Young, located at 18th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong - The auditor is Ernst & Young, located at 18th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong[129] Legal Adviser The company's Hong Kong legal adviser is Withers, located at 30th Floor, United Centre, 95 Queensway, Hong Kong - The Hong Kong legal adviser is Withers, located at 30th Floor, United Centre, 95 Queensway, Hong Kong[129] Principal Place of Business and Headquarters The company's principal place of business and headquarters in China is located at Pinghai Road, Jiaxing Port Area, Zhejiang Province, China, and its principal place of business in Hong Kong is Unit 1702, Infinitus Plaza, 199 Des Voeux Road Central, Sheung Wan, Hong Kong - China Principal Place of Business and Headquarters: Pinghai Road, Jiaxing Port Area, Zhejiang Province, China[129] - Hong Kong Principal Place of Business: Unit 1702, Infinitus Plaza, 199 Des Voeux Road Central, Sheung Wan, Hong Kong[129] Registered Office The company's registered office is located at Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman, KY1-1111, Cayman Islands - Registered Office: Cricket Square, Hutchins Drive P.O. Box 2681 Grand Cayman, KY1-1111 Cayman Islands[129] Share Registrar and Transfer Office The company's principal share registrar and transfer office in the Cayman Islands is Butterfield Fulcrum Group (Cayman) Limited, and its Hong Kong share registrar and transfer office is Tricor Investor Services Limited - Cayman Islands Principal Share Registrar and Transfer Office: Butterfield Fulcrum Group (Cayman) Limited[129] - Hong Kong Share Registrar and Transfer Office: Tricor Investor Services Limited, located at 54th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong[129] Principal Banks The company's principal banks in Hong Kong include Bank of Communications Co, Ltd Hong Kong Branch and Deutsche Bank AG Hong Kong Branch, while in China, they include Agricultural Bank of China, Bank of Communications, Industrial and Commercial Bank of China, Bank of China, China CITIC Bank, and China Construction Bank - Hong Kong Principal Banks: Bank of Communications Co, Ltd Hong Kong Branch, Deutsche Bank AG Hong Kong Branch[129] - China Principal Banks: Agricultural Bank of China Pinghu Zhapu Sub-branch, Bank of Communications Pinghu City Sub-branch, Industrial and Commercial Bank of China Pinghu City Sub-branch, Bank of China Pinghu City Sub-branch, China CITIC Bank Jiaxing Branch, China Construction Bank Pinghu Zhapu Sub-branch[129] Company Website The company's official website is www.chinasanjiang.com - Company Website: www.chinasanjiang.com[129](index=129&type=chunk)