Financial Performance - The Group recorded a slight profit for the full year of 2020, rebounding from a loss in the first half due to a significant drop in domestic demand and raw material shortages [15]. - Revenue fell substantially in the first half of 2020 compared to the first half of 2019, but increased sharply in the second half as the Chinese economy recovered [13]. - In 2020, the Group recorded a revenue decrease of HK$153.7 million, representing a fall of 12.9% from HK$1,194.1 million in 2019 to HK$1,040.4 million in 2020 [33]. - The average selling price and sales volume rebounded in the second half of 2020, with revenue rising by 120.7% compared to the first half of 2020 and by 19.9% compared to the second half of 2019 [27]. - The gross profit increased from HK$115.3 million in 2019 to HK$127.9 million in 2020, representing an increase of 10.9%, with gross profit margin rising from 9.7% to 12.3% [34]. - Profit for the year was HK$1.4 million in 2020, compared to a loss of HK$7.9 million in 2019, representing an increase of profit by HK$9.3 million [41]. - The Group's main raw materials costs were slightly lower in 2020 compared to 2019, despite an increase in finance costs due to higher borrowing levels [29]. Cash and Liquidity - The Group's balance sheet ended 2020 with a net cash position, with total bank balances and cash exceeding total bank borrowings [15]. - As of December 31, 2020, the Group's bank balances and cash were HK$291.5 million, with over 80% held in Renminbi [42]. - As of December 31, 2020, the Group's bank borrowings increased from HK$216.9 million in 2019 to HK$282.6 million in 2020, with a net cash level of HK$8.9 million compared to HK$75.4 million in 2019 [43][47]. - The Group's net current assets rose to HK$265.8 million in 2020 from HK$186.6 million in 2019, resulting in a current ratio of 1.7, up from 1.5 in the previous year [44][47]. Production and Operations - The Group's corrugated packaging business primarily relies on domestic sales in China, which faced challenges due to the pandemic and government restrictions on waste paper imports [12]. - A new production line for converting waste paper into pulp was officially started in the second half of 2020 to secure raw materials for production [19]. - The Group plans to lease a new facility for a larger pulp line, expected to start trial operations at the end of 2021, to meet production needs and comply with import regulations [20]. - The Group plans to install a new large-scale pulp production line in the Philippines, expected to commence trial production by the end of 2021, to meet raw material needs and comply with import regulations [24]. - The Group aims to improve production processes and reduce wastage while controlling costs to mitigate rising operating expenses [22]. - The Group's focus remains on enhancing production efficiency, increasing sales volume, and reducing raw material and energy wastage to improve overall earnings [50][52]. Economic Outlook - The outlook for 2021 indicates that the Chinese economy will face pressure from the Sino-US trade war, but the Group remains optimistic about government policies supporting economic growth [21]. - The Group anticipates a global economic recovery in 2021, driven by mass vaccinations, which is expected to boost demand for corrugated packaging in China [50][52]. Corporate Governance - The Company has adopted the principles and code provisions of the Corporate Governance Code as the basis of its corporate governance practices [83]. - The Company has established a corporate governance framework and policies based on the Corporate Governance Code to enhance oversight on business conduct [84]. - The Company has complied with all code provisions of the Corporate Governance Code for the year ended December 31, 2020, except for provisions A.2.1, B.1.2, and C.3.3 [85]. - The Company has adopted a code of conduct regarding Directors' dealings in the Company's securities, which is no less exacting than the Model Code [86]. - All Directors have confirmed compliance with the Model Code and the Code of Conduct throughout the year ended December 31, 2020 [87]. - The Company has established written guidelines for employees regarding securities transactions, which are no less exacting than the Model Code [92]. - The Company has a senior management team with extensive experience in the corrugated packaging industry, including Mr. Tsui Yung Wai as General Manager [75]. - The Board currently comprises six Directors, consisting of three Executive Directors and three Independent Non-executive Directors [94]. - The Board consists of at least three Independent Non-executive Directors, representing one-third of the Board, with one possessing appropriate professional qualifications or financial management expertise [101]. Risk Management - The Company has developed various risk management procedures and guidelines for key business processes, including financial reporting and project management [173]. - Internal control assessments are conducted regularly across all divisions to identify risks impacting the business [174]. - The management has reported to the Board on the effectiveness of the risk management and internal control systems for the year ended December 31, 2020 [175]. - The Internal Audit Department is responsible for reviewing the adequacy and effectiveness of the risk management and internal control systems [176]. - The Company has implemented effective risk management and internal control systems, covering financial, operational, and compliance controls for the year ended December 31, 2020 [177]. Shareholder Engagement - The Company engages with shareholders through various communication channels to safeguard their interests and rights [189]. - Shareholders holding at least one-tenth of the paid-up capital can requisition an extraordinary general meeting for specified business transactions [193]. - The Company will reimburse reasonable expenses incurred by requisitionists if the Board fails to convene a requested extraordinary general meeting within 21 days [193]. - Detailed procedures for shareholders to propose a person for election as a Director are available on the Company's website [195].
合丰集团(02320) - 2020 - 年度财报