Financial Performance - The Group's overall sales volume remained stable in 2019, but average selling prices declined, leading to a decrease in revenue[18]. - The Group recorded a loss for the year due to insufficient waste paper for production and less reduction in recurring expenses, despite a decline in raw material prices[18]. - The Group recorded a revenue decrease of HK$229.8 million in 2019, representing a fall of 16.1% from HK$1,423.9 million in 2018 to HK$1,194.1 million in 2019[30]. - Gross profit declined from HK$200.2 million in 2018 to HK$115.3 million in 2019, representing a 42.4% decrease, with gross profit margin falling from 14.1% to 9.7%[31]. - The Group recorded a loss of HK$7.9 million in 2019, compared to a profit of HK$30.5 million in 2018, representing a decrease of HK$38.4 million[37]. - The company recorded a loss of HK$7.9 million for the year ended December 31, 2019, a decrease of HK$38.4 million compared to a profit of HK$30.5 million in 2018, resulting in a profit margin drop from 2.1% to -0.7%[42]. Financial Position - The Group maintained a healthy financial position with total bank balances and cash exceeding total bank borrowings at the end of 2019[18]. - As of December 31, 2019, the Group's bank balances and cash were HK$292.3 million, an increase from HK$219.4 million in 2018[38]. - The Group's net cash level was HK$75.4 million, calculated as total bank balances and cash less total bank borrowings[39]. - The Group's current ratio decreased to 1.50 from 1.64 in 2018, with net current assets at HK$186.6 million[39]. - The company’s current assets net value and current ratio were HK$186.6 million and 1.50, respectively, down from HK$262.8 million and 1.64 in 2018[43]. Production and Operations - A new production site in Southeast Asia is under construction to convert waste paper into pulp, expected to start production in mid-2020, to meet Chinese government import requirements[19]. - The Group plans to improve production processes and reduce wastage to alleviate rising operating costs and provide high-quality products[21]. - The Group plans to relocate part of its production process overseas to ensure sufficient raw materials for corrugated paper production, with new facilities expected to start operations by mid-2020[23]. - The company plans to install new production facilities in Southeast Asia to convert waste paper into pulp, aiming to reduce production costs and increase sales volume[46]. - The company aims to improve production efficiency and reduce raw material wastage and energy use to offset rising costs and enhance profitability[46]. Market Conditions - The Chinese corrugated packaging industry faced a decline in production volume and sales due to a 30-40% reduction in waste paper imports in 2019[12]. - The Group anticipates that the Chinese economy will remain under pressure from the Sino-US trade war and the novel coronavirus in the first half of 2020[20]. - The Renminbi exchange rates in 2019 were significantly lower than in 2018, negatively impacting the corrugated packaging industry[14]. - Average selling prices fell, leading to a 28.7% decline in downstream revenue, while upstream revenue rose by 3.6% despite lower prices[26]. - The average price of the main raw material, waste paper, fell by approximately 20% compared to 2018 levels[27]. Corporate Governance - The Group's management is committed to maintaining high corporate governance standards to safeguard shareholder interests and enhance corporate value[84]. - The Company has adopted the principles and code provisions of the Corporate Governance Code as the basis of its corporate governance practices[85]. - The Board believes that throughout the year ended December 31, 2019, the Company has complied with all code provisions except for specific provisions A.2.1, B.1.2, and C.3.3[87]. - The Company has established a corporate governance framework and policies based on the CG Code to enhance oversight on business conduct[86]. - The Company has adopted its own code of conduct regarding Directors' dealings in the Company's securities, aligning with the Model Code for Securities Transactions[88]. Board and Management - The Company has a senior management team with extensive experience in the corrugated packaging industry, enhancing operational efficiency[78]. - The Group's executive team includes members with over 35 years of experience in the corrugated packaging industry, contributing to strategic planning and business development[65]. - The Board consists of six Directors, including three Executive Directors and three Independent Non-executive Directors[97]. - The Company has received written annual confirmation from each Independent Non-executive Director regarding their independence, in accordance with the independence guidelines[105]. - The Independent Non-executive Directors are appointed for a specific term of around two years, subject to renewal after the expiry of the current term[106]. Risk Management - The Board reviewed the effectiveness of risk management and internal control systems for the year ended December 31, 2019, and deemed them effective and adequate[181]. - The Company has established various risk management procedures and guidelines across key business processes, including project management and financial reporting[171]. - The management reported to the Audit Committee and the Board on the effectiveness of risk management and internal control systems for the year ended December 31, 2019[173]. - All divisions conduct regular internal control assessments to identify risks impacting business operations, regulatory compliance, and information security[172]. - The Company has a disclosure policy to guide Directors and management in handling confidential information and monitoring disclosures[182]. Shareholder Engagement - The Company engages with shareholders through various communication channels to safeguard their interests and rights[191]. - Shareholders have the right to propose matters for discussion at general meetings, requiring at least 10% of the paid-up capital to call for an extraordinary general meeting[195]. - The company will publish detailed procedures for shareholders to propose candidates for election as Directors on its website[198]. - Shareholders can submit written inquiries to the Board, but verbal or anonymous inquiries will not be addressed[199]. - The company has established communication channels to engage with shareholders and ensure their rights are protected[194].
合丰集团(02320) - 2019 - 年度财报