中国飞鹤(06186) - 2019 - 年度财报

Company Information This report provides fundamental company information for China Feihe Limited, including details on board members, committee chairs, company secretary, auditor, registered office, and principal place of business - This report provides fundamental company information for China Feihe Limited, including details on board members, committee chairs, company secretary, auditor, registered office, and principal place of business[3] Five-Year Financial Summary This section presents a five-year overview of the company's financial performance, including key income statement and balance sheet figures Past Five Fiscal Years' Performance Summary (RMB thousands) | As of December 31 | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 13,721,509 | 10,391,917 | 5,887,260 | 3,724,381 | 3,615,391 | | Gross Profit | 9,609,591 | 7,019,090 | 3,790,460 | 2,033,960 | 1,999,867 | | Profit Before Tax | 5,682,676 | 3,188,571 | 1,651,061 | 594,947 | 644,860 | | Profit for the Year | 3,934,577 | 2,242,254 | 1,160,226 | 406,152 | 381,634 | Past Five Fiscal Years' Assets and Liabilities Summary (RMB thousands) | As of December 31 | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | 23,003,749 | 11,857,435 | 7,013,558 | 4,694,947 | 4,679,126 | | Total Liabilities | (9,974,171) | (6,069,951) | (3,428,545) | (2,318,007) | (2,695,025) | | Total Equity | 13,029,578 | 5,787,484 | 3,585,013 | 2,376,940 | 1,984,101 | Chairman's Report The Chairman's report highlights the company's strategic direction and overall performance, emphasizing key achievements and future outlook 2019 Review In 2019, the company achieved significant year-over-year growth in revenue, gross profit, and net profit amidst intensifying industry competition, consolidating its market position through innovation, quality control, brand building, channel integration, and service enhancements, particularly in ultra-high-end and high-end products 2019 Financial Performance Summary (RMB millions) | Metric | 2019 | 2018 | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Revenue | 13,721.5 | 10,391.9 | 32.0% | | Gross Profit | 9,609.6 | 7,019.1 | 36.9% | | Net Profit | 3,934.6 | 2,242.3 | 75.5% | - The company achieved significant business results in five key areas: R&D innovation, quality control, brand building, channel integration, and service innovation[9][10][11][12] Future Outlook The company will continue to focus on its core infant formula business, leveraging R&D to drive innovation, strengthen control over functional raw materials, and build a smart dairy ecosystem aligned with digitalization trends, aiming to be the most trusted infant nutrition expert - Future strategic priorities include focusing on core business, leading with R&D, and driving smart transformation[13] Management Discussion and Analysis This section provides an in-depth analysis of the company's operations, financial performance, and market environment Industry Overview Despite a slowdown in growth due to declining birth rates, China's infant formula market is projected to continue expanding, driven by consumption upgrades, increased demand for premium products, favorable policies, and growing consumer confidence in domestic brands - Key drivers for China's infant formula market include increased consumer confidence, a premiumization trend, policy support, and a low breastfeeding rate[14][15] Business Overview The company offers a diverse dairy product portfolio, primarily infant formula, and expanded into nutritional supplements via Vitamin World USA, leveraging an extensive offline distributor network and growing e-commerce presence while continuously expanding production capacity and innovating marketing strategies - As of the end of 2019, the company had an extensive sales network, primarily through over 1,800 offline clients covering more than 109,000 retail points, with offline sales accounting for 91.3% of total dairy product revenue[17] - The company operates six production facilities with a combined designed annual capacity of 126,800 tons, with ongoing expansion and new construction to meet growing demand[18] - The acquisition of Vitamin World USA in early 2018 expanded the company into nutritional supplements, operating over 120 specialty stores across the US with RMB 578 million in annual revenue by the end of 2019, representing 4.2% of the Group's total revenue[20] Operating Results and Analysis In 2019, the company's total revenue grew by 32.0% to RMB 13.72 billion, primarily driven by a 41.4% increase in high-end infant formula sales, while gross margin improved to 70.0% and net profit surged by 75.5% to RMB 3.93 billion 2019 Consolidated Income Statement Summary (RMB thousands) | Metric | 2019 | 2018 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 13,721,509 | 10,391,917 | 32.0% | | Gross Profit | 9,609,591 | 7,019,090 | 36.9% | | Selling and Distribution Expenses | (3,847,985) | (3,661,314) | 5.1% | | Administrative Expenses | (913,226) | (580,289) | 57.4% | | Profit Before Tax | 5,682,676 | 3,188,571 | 78.2% | | Profit for the Year | 3,934,577 | 2,242,254 | 75.5% | Revenue Breakdown by Product Category (RMB thousands) | Product Category | 2019 Revenue | % of Total | 2018 Revenue | % of Total | Year-on-Year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | High-end Infant Formula | 9,411,461 | 68.6% | 6,657,636 | 64.1% | 41.4% | | Regular Infant Formula | 3,126,654 | 22.8% | 2,541,562 | 24.4% | 23.0% | | Other Dairy Products | 605,169 | 4.4% | 550,383 | 5.3% | 10.0% | | Nutritional Supplements | 578,225 | 4.2% | 642,336 | 6.2% | (10.0)% | | Total Revenue | 13,721,509 | 100.0% | 10,391,917 | 100.0% | 32.0% | Gross Profit and Gross Margin by Product Category | Product Category | 2019 Gross Profit (thousands RMB) | Gross Margin | 2018 Gross Profit (thousands RMB) | Gross Margin | | :--- | :--- | :--- | :--- | :--- | | High-end Infant Formula | 7,141,009 | 75.9% | 5,091,127 | 76.5% | | Regular Infant Formula | 1,939,586 | 62.0% | 1,593,051 | 62.7% | | Other Dairy Products | 210,240 | 34.7% | 104,275 | 18.9% | | Nutritional Supplements | 318,756 | 55.1% | 230,637 | 35.9% | | Total | 9,609,591 | 70.0% | 7,019,090 | 67.5% | Liquidity and Capital Resources The company primarily funds operations through operating cash flow, bank borrowings, and IPO proceeds, holding RMB 7.38 billion in cash and equivalents and RMB 5.39 billion in structured deposits by year-end 2019, with a healthy capital structure reflected by an improved debt-to-asset ratio and a significant increase in net cash from operating activities - As of December 31, 2019, the Group held RMB 7.378 billion in cash and cash equivalents and RMB 5.390 billion in structured deposits[35][36] Cash Flow Summary (RMB millions) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 5,180.5 | 3,121.2 | | Net Cash Used in Investing Activities | (5,514.9) | (3,272.4) | | Net Cash from/(used in) Financing Activities | 4,123.0 | (509.0) | - The Group's debt-to-asset ratio improved from -0.65 at the end of 2018 to -0.49 at the end of 2019, indicating a healthy capital structure[38] Subsequent Events The COVID-19 pandemic, which emerged at the end of 2019, did not significantly negatively impact the company's core operations in Q1 2020, as it swiftly implemented measures to ensure raw material supply, production, and logistics, while shifting marketing activities online, projecting a revenue growth of no less than 30% for Q1 2020 - To address the pandemic, the company implemented several measures including donating RMB 100 million and RMB 100 million worth of nutritional products, maintaining continuous factory production with over 40% year-on-year increase in finished product output in Jan-Feb 2020, stabilizing the supply chain with over 40% year-on-year increase in raw milk consumption, ensuring smooth logistics with 98% product delivery rate in February 2020, and transitioning to online marketing with nearly 90,000 online live broadcasts covering over 2.1 million participants by March 15[45][46][47][48][49] - Despite the pandemic's impact, the company anticipates Q1 2020 revenue growth of no less than 30%, indicating no significant adverse effect[50] Directors and Senior Management This section provides biographical details of the company's board members and senior management, including their positions, responsibilities, industry experience, educational backgrounds, and honors Biographies of Directors and Senior Management This section details the personal biographies of the company's board members and senior management, including executive, non-executive, and independent non-executive directors, as well as joint company secretaries, covering their age, position, responsibilities, industry experience, education, and honors - The Board of Directors comprises 12 members, including 6 executive directors, 2 non-executive directors, and 4 independent non-executive directors, meeting listing rule requirements for independent non-executive director numbers and professional qualifications[51][132] - Mr. Leng Youbin serves as Executive Director, Chairman, and Chief Executive Officer, responsible for the Group's overall development strategy and business plans[51][52] Directors' Report The Directors' Report covers the company's business review, dividend policy, use of IPO proceeds, key customer and supplier information, and major risks and uncertainties Business Review and Dividends This section reviews the company's core business activities, primarily the production and sale of infant formula and nutritional supplements, and outlines its dividend policy to distribute no less than 30% of annual net profit, with a proposed final dividend for 2019 of HKD 0.1943 per share, representing approximately 40% of 2019 profit - The company's primary business involves the production and sale of high-end and regular infant formula, diversified into the retail healthcare sector through the acquisition of Vitamin World[66] - The company's dividend policy aims to distribute no less than 30% of annual net profit, with the Board proposing a final dividend of HKD 0.1943 per share for 2019, totaling approximately 40% of the year's profit[69][70] Use of Net Proceeds The company raised approximately HKD 6.555 billion in net proceeds from its global offering on November 13, 2019, with about HKD 257.7 million utilized by year-end 2019 primarily for offshore debt repayment, Vitamin World USA business expansion, and working capital, with remaining funds to be used as stated in the prospectus Use of Net Proceeds from Global Offering (As of December 31, 2019) (HKD millions) | Purpose | Amount Utilized (HKD millions) | | :--- | :--- | | Repayment of offshore debt | 175.1 | | Business expansion of Vitamin World USA | 39.2 | | Working capital and general corporate purposes | 43.4 | | Total | 257.7 | Major Customers and Suppliers As of year-end 2019, the company exhibited relatively high supplier concentration, with the top five suppliers accounting for 43.8% of total purchases and the largest supplier at 21.0%, while its customer base was more diversified, with the top five customers contributing 7.6% of total revenue and the largest customer only 2.9% - The top five suppliers accounted for 43.8% of total purchases, with the largest supplier representing 21.0%[77] - The top five customers accounted for 7.6% of total revenue, with the largest customer representing 2.9%[77] Pre-IPO Share Option Scheme The company adopted a Pre-IPO Share Option Scheme on October 14, 2019, to incentivize and retain key talent, with a maximum of 190,190,704 options granted to Dasheng Limited at an exercise price of USD 0.1416 per share, representing 2.13% of issued shares, of which 43% vested by year-end 2019 - The company granted 190,190,704 share options to Dasheng Limited on October 14, 2019, with an exercise price of USD 0.1416 per share, representing approximately 2.13% of issued shares at the end of the reporting period[101][106][107] - Of the options granted to Dasheng Limited, 43% vested and became exercisable by December 31, 2019, with the remaining 57% to vest upon achieving 2020 fiscal year performance targets[107] Principal Risks and Uncertainties The company faces key financial risks, including interest rate, credit, and foreign exchange risks, as well as business risks such as negative publicity from product quality issues, product contamination or defects, operational disruptions or raw material price volatility, failure to adapt to changing consumer preferences, and challenges associated with overseas expansion - Financial risks primarily include interest rate risk, credit risk, and foreign exchange risk (involving USD, HKD, and CAD loans and investments in Canada)[116][117][118] - Business risks encompass publicity risk from product quality issues, product risk of contamination or defects, operational risk from complex production and raw material dependency/price volatility, competition risk from rapidly changing consumer preferences, and expansion risk related to overseas operations[119][120][121][122][123] Corporate Governance Report This report details the company's commitment to high corporate governance standards, outlining the board's structure, the combined roles of Chairman and CEO, and the functions of its audit, remuneration, and nomination committees Board of Directors and Committees The company is committed to maintaining high corporate governance standards, with a diverse 12-member Board of Directors, where the Chairman and CEO roles are combined in Mr. Leng Youbin for efficient decision-making, and established audit, remuneration, and nomination committees comply with listing rules to oversee specific matters - The Board of Directors consists of 12 members, including 6 executive directors, 2 non-executive directors, and 4 independent non-executive directors, meeting listing rule requirements for independent non-executive director numbers and professional qualifications[130][132] - The roles of Chairman and Chief Executive Officer are combined in Mr. Leng Youbin, a deviation from the Corporate Governance Code's recommendation, which the Board believes facilitates strong leadership and efficient strategic execution[128][131] - The company has established an Audit Committee, Remuneration Committee, and Nomination Committee, with clearly defined terms of reference and primary responsibilities[137][138][139][140] Risk Management and Internal Control The Board holds ultimate responsibility for the Group's risk management and internal control systems, reviewing their effectiveness annually, with the Audit Committee assisting in oversight, and an independent internal audit department ensuring the systems address significant financial, compliance, and operational risks - The Board affirms its responsibility for risk management and internal control systems, reviewing their effectiveness annually, with the Audit Committee assisting in oversight[146] - The company has established a risk management system, including measures such as forming an Audit Committee, adopting various policies to comply with listing rules, and providing anti-corruption training[147] - The internal audit department is responsible for independent reviews of the risk management and internal control systems, reporting to the Audit Committee, and the Board considers the existing systems adequate and effective[147][148] Independent Auditor's Report This report presents the independent auditor's opinion on the company's financial statements and highlights key audit matters Auditor's Opinion and Key Audit Matters Ernst & Young, the auditor, issued an unmodified opinion on the company's 2019 consolidated financial statements, deeming them to fairly represent the Group's financial position and performance, with key audit matters identified as the impairment assessment of trade receivables and the determination of inventory write-downs to net realizable value, both involving significant management judgment and estimation - The auditor issued an unmodified opinion, stating that the consolidated financial statements fairly represent the Group's financial position in accordance with International Financial Reporting Standards (IFRS)[159] - Key audit matters include impairment of trade receivables, which involves significant judgment and estimation in assessing expected credit losses, and write-down of inventories to net realizable value, which requires significant management assumptions and estimates[161][162][163] Consolidated Financial Statements This section presents the company's comprehensive financial statements, including the consolidated income statement, balance sheet, and cash flow statement, along with detailed notes Consolidated Statement of Profit or Loss For 2019, the company achieved RMB 13.72 billion in revenue, a 32.0% year-on-year increase; gross profit of RMB 9.61 billion, up 36.9%; and profit for the year attributable to owners of the parent of RMB 3.93 billion, a 75.5% increase, with basic and diluted earnings per share both at RMB 0.48 Consolidated Statement of Profit or Loss Key Data (RMB thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 13,721,509 | 10,391,917 | | Gross Profit | 9,609,591 | 7,019,090 | | Profit Before Tax | 5,682,676 | 3,188,571 | | Profit for the Year Attributable to Owners of the Parent | 3,934,577 | 2,242,254 | | Basic Earnings Per Share (RMB) | 0.48 | 0.28 | Consolidated Statement of Financial Position As of December 31, 2019, the company's total assets significantly increased by 94.0% to RMB 23.00 billion from RMB 11.86 billion in the prior year, with total liabilities at RMB 9.97 billion and total equity at RMB 13.03 billion, up 125.1%, driven by strong profitability and IPO proceeds Consolidated Statement of Financial Position Summary (RMB thousands) | Metric | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Non-current Assets | 5,715,172 | 4,562,710 | | Total Current Assets | 17,288,577 | 7,294,725 | | Total Assets | 23,003,749 | 11,857,435 | | Total Current Liabilities | 7,438,500 | 4,860,234 | | Total Non-current Liabilities | 2,535,671 | 1,209,717 | | Total Liabilities | 9,974,171 | 6,069,951 | | Net Assets (Total Equity) | 13,029,578 | 5,787,484 | Consolidated Statement of Cash Flows In 2019, net cash from operating activities surged by 66.0% to RMB 5.18 billion, indicating strong core business cash generation, while net cash used in investing activities was RMB 5.51 billion, primarily for structured deposits and property, plant, and equipment, and net cash from financing activities was RMB 4.12 billion, mainly from new borrowings and share issuance, partially offset by dividend payments and loan repayments, resulting in cash and cash equivalents of RMB 4.67 billion at year-end Consolidated Statement of Cash Flows Summary (RMB thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | 5,180,535 | 3,121,196 | | Net Cash Used in Investing Activities | (5,514,896) | (3,272,449) | | Net Cash from/(used in) Financing Activities | 4,123,021 | (509,032) | | Net Increase/(Decrease) in Cash and Cash Equivalents | 3,788,660 | (660,285) | | Cash and Cash Equivalents at Year-End | 4,666,585 | 895,854 | Notes to the Financial Statements This section provides detailed explanations and supplementary information for the consolidated financial statements, covering the company's general information, basis of preparation, significant accounting policies, critical accounting judgments and estimates, and detailed breakdowns of revenue, assets, liabilities, equity, related party transactions, and financial instrument risks - The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS)[182] - The notes provide detailed disclosures on revenue breakdown by region and product category, composition of various expenses, directors' emoluments, dividend policy, share option scheme, detailed asset and liability information, and financial risk management policies[244][255][259][269][321]