嘉瑞国际(00822) - 2024 - 中期财报

Corporate Information Core Corporate Information This section provides fundamental information about Kary International Holdings Limited, including board and committee members, registered office, principal place of business, auditor, and principal bankers, noting personnel changes during the reporting period - Changes in the company's board and committee members include the retirement of Independent Non-executive Director Mr. Luk Tung on May 31, 2024, and the appointment of Mr. Tang Koon Yiu on the same day, along with the appointment of Chief Financial Officer Mr. Yu Wai Chun on January 3, 2024[4] - The company's principal bankers include The Hongkong and Shanghai Banking Limited, Standard Chartered Bank (Hong Kong) Limited, and Bank of China (Hong Kong) Limited, with RSM Hong Kong as the auditor[6] Key Information for Shareholders Key Information for Shareholders This section provides core transaction information for shareholders, including the announcement date of the 2024 interim results, stock code, board lot size, and investor relations contact details Key Shareholder Information | Item | Content | | :--- | :--- | | 2024 Interim Results Announcement Date | August 26, 2024 | | Stock Code | 822 | | Board Lot Size | 2,000 shares | Condensed Consolidated Financial Statements Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2024, the Group's revenue increased by 15.5% year-on-year to HKD 614 million, but gross profit decreased by 17.9% to HKD 84.72 million due to a significant rise in cost of sales, with operating loss expanding to HKD 44.07 million and loss for the period expanding to HKD 53.10 million, while loss attributable to owners of the company was HKD 50.10 million, and basic loss per share was HKD 5.61 cents Key Profit or Loss Indicators for H1 2024 (HKD thousands) | Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 614,102 | 531,611 | +15.5% | | Gross Profit | 84,721 | 103,136 | -17.9% | | Operating Loss | (44,066) | (21,346) | +106.4% | | Loss for the Period | (53,095) | (22,762) | +133.3% | | Loss Attributable to Owners of the Company | (50,097) | (21,703) | +130.8% | - Basic loss per share expanded from HKD 2.43 cents in the prior period to HKD 5.61 cents[11] Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were HKD 1.797 billion, a slight increase from the end of 2023, while net current assets decreased to HKD 374 million, primarily due to a significant increase in bank borrowings within current liabilities, and total equity decreased to HKD 1.190 billion Key Financial Position Indicators (HKD thousands) | Indicator | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Non-current Assets | 877,026 | 883,316 | -0.7% | | Current Assets | 919,968 | 837,175 | +9.9% | | Total Assets | 1,796,994 | 1,720,491 | +4.4% | | Current Liabilities | 545,850 | 398,871 | +36.9% | | Non-current Liabilities | 60,774 | 67,023 | -9.3% | | Total Liabilities | 606,624 | 465,894 | +30.2% | | Total Equity | 1,190,370 | 1,254,597 | -5.1% | - Bank borrowings within current liabilities significantly increased from HKD 63.33 million to HKD 199 million, which is the primary reason for the rise in total current liabilities[13] Condensed Consolidated Statement of Cash Flows In the first half of 2024, cash flow from operating activities turned negative, with a net outflow of HKD 15.65 million, compared to a net inflow of HKD 106 million in the prior period, while cash flow from financing activities turned into a net inflow of HKD 129 million, mainly from new bank loans, and the cash and cash equivalents balance at period-end was HKD 251 million Key Cash Flow Indicators (HKD thousands) | Indicator | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | (15,654) | 106,258 | Turned from positive to negative | | Net Cash Used in Investing Activities | (55,865) | (48,565) | Increased expenditure | | Net Cash from/(Used in) Financing Activities | 129,168 | (38,382) | Turned from negative to positive | | Cash and Cash Equivalents at End of Period | 251,147 | 259,694 | -3.3% | Notes to the Condensed Consolidated Financial Statements The notes to the financial statements detail key information such as the company's accounting policies, business segment performance, revenue composition, related party transactions, and share capital structure, highlighting that plastic and magnesium alloy businesses were the main drivers of revenue growth, though the plastic business incurred losses due to higher initial costs at the Mexico plant, and also disclosing no interim dividend was declared for the period - The Group primarily engages in the manufacturing and sale of zinc, magnesium, and aluminum alloy and plastic products, also involved in automotive components, smart home, and other sectors[19] - The Board resolved not to declare an interim dividend for the six months ended June 30, 2024[64][65] - In April 2024, the Group acquired the remaining equity interest in Huizhou Gongxiang Intelligent Casting Industry Light Alloy Innovation Center Co., Ltd., an associate, making it a wholly-owned subsidiary[81][82] 5. Segment Information By business segment, plastic and magnesium alloy businesses saw significant revenue growth, while aluminum and zinc alloy revenues declined, with the plastic business, despite the fastest revenue growth, recording a segment loss of HKD 26.56 million primarily due to initial costs at the new Mexico plant, while the magnesium alloy business achieved profitability Revenue by Business Segment (HKD thousands) | Business Segment | H1 2024 Revenue | H1 2023 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Zinc Alloy | 30,188 | 36,007 | -16.2% | | Magnesium Alloy | 199,916 | 159,106 | +25.6% | | Aluminum Alloy | 96,666 | 117,548 | -17.8% | | Plastic | 268,981 | 190,213 | +41.4% | | Automotive Powertrain Systems | 15,198 | 21,794 | -30.3% | | Lighting Products | 2,983 | 6,597 | -54.8% | 6. Revenue From a product type perspective, die-casting products and plastic products are the Group's primary revenue sources, contributing HKD 307 million and HKD 235 million respectively, with most revenue (HKD 543 million) recognized at a point in time Revenue by Product Type (HKD thousands) | Product Type | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Die-casting Products | 306,633 | 300,682 | +2.0% | | Plastic Products | 234,670 | 168,471 | +39.3% | | Molds | 31,898 | 32,353 | -1.4% | | Others | 40,901 | 30,105 | +35.9% | Management Discussion and Analysis (A) FINANCIAL REVIEW In the first half of 2024, the Group's revenue increased by 15.5% to HKD 614 million year-on-year, driven by brand customers' inventory replenishment and anticipated interest rate cuts, however, gross profit margin decreased from 19.4% to 13.8%, and gross profit fell by 17.9%, due to a low-margin sales strategy, product mix changes, and higher initial costs at the Mexico plant, ultimately expanding net loss attributable to owners of the company to HKD 50.10 million - Revenue growth is primarily attributed to channel inventory replenishment and increased new customer orders, with strong performance particularly in the plastic and magnesium alloy businesses[99] - The main reasons for the decline in gross profit include: 1) a low-margin sales pricing strategy; 2) changes in product mix; and 3) the Mexico plant still being in its initial stage with higher production costs[99] (B) BUSINESS REVIEW Business segment performance varied, with the plastic business seeing a 41.4% revenue increase due to its "China + Mexico" strategy but incurring temporary losses from high initial costs in Mexico, while the magnesium alloy business grew 25.6% benefiting from AI cooling demand, whereas aluminum and zinc alloy businesses declined by 17.8% and 16.2% respectively due to product substitution and decreased demand for home goods - Plastic Business: Revenue increased by 41.4% to HKD 269 million, benefiting from the "China + Mexico" dual-location manufacturing strategy, but the Mexico plant's initial high costs led to a segment loss[102][104] - Magnesium Alloy Business: Revenue increased by 25.6% to HKD 200 million, primarily driven by the growing demand for high thermal conductivity magnesium alloy heat dissipation materials due to AI popularization[103][105] - Aluminum Alloy Business: Revenue decreased by 17.8% to HKD 96.67 million, affected by the substitution effect of increased magnesium alloy application in new energy vehicles[106][110] - Zinc Alloy Business: Revenue decreased by 16.2% to HKD 30.19 million, due to a significant reduction in demand from the home goods market[107][111] (C) PROSPECTS The Group maintains a cautiously optimistic outlook for the second half of 2024, anticipating a rebound in consumer electronics demand during the holiday season, and will continue to advance its "Four New" strategies: expanding into new businesses like "low-altitude economy," developing new materials such as flame-retardant and ultra-high thermal conductivity magnesium alloys, optimizing the "China + Mexico" layout to explore new markets, and seeking new opportunities in 3D printing and the hydrogen economy - New Businesses: Secured orders from a leading domestic aircraft manufacturer, entering the "low-altitude economy" supply chain, and collaborating with industry leaders to develop lightweight magnesium alloy electronic control and drive products[115][118] - New Materials: Successfully developed magnesium alloy materials meeting US FAA flame retardant standards for aircraft components, while the thermal conductivity of new-generation ultra-high thermal conductivity magnesium alloys has increased from 110W/(m·K) to 140W/(m·K) to meet AI computing heat dissipation demands[122][125] - New Markets: Utilizing the "China + Mexico" dual-base layout to serve global customers, reduce geopolitical risks and logistics costs, and committed to optimizing the long-term profitability of the Mexico plant[128][130] - New Opportunities: Actively seeking opportunities in Southeast Asia and the Middle East, and exploring emerging fields such as 3D custom printing, smart electronics, and the hydrogen economy[129][131] Liquidity and Financial Resources The Group adopts a prudent financial management policy, holding bank and cash balances of approximately HKD 253 million as of June 30, 2024, with total interest-bearing borrowings of approximately HKD 201 million, and a current ratio of 1.7, down from 2.1 at the end of last year, while the net gearing ratio is not applicable as cash and deposits exceed total borrowings Liquidity and Capital Structure (HKD thousands) | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Bank and Cash Balances | 252,985 | 196,319 | | Total Interest-bearing Borrowings | 201,180 | 64,518 | | Net Cash | 51,805 | 131,801 | | Net Current Assets | 374,118 | 438,304 | | Current Ratio | 1.7 | 2.1 | (I) HUMAN RESOURCES As of June 30, 2024, the Group had approximately 4,430 full-time employees, a decrease from 4,762 at the end of 2023, viewing employees as core assets and providing competitive compensation, benefits, and training opportunities, along with a share option scheme to incentivize staff - As of June 30, 2024, the Group had approximately 4,430 full-time employees[141] Other Information Directors' and Chief Executives' Interests This section discloses the interests of the company's directors and chief executives in the shares, underlying shares, and debentures of the company and its associated corporations as of June 30, 2024, with Chairman Mr. Lee Yuen Fat holding approximately 63.55% of the company's interests through controlled companies and a discretionary trust, and some executive directors also holding share options - Chairman Mr. Lee Yuen Fat holds 440 million shares (49.23%) through his wholly-owned company Precisefull Limited and is deemed to have an interest in an additional 128 million shares (14.32%) as the founder of the YF Lee Family Trust[146][147] - Executive Directors Mr. Lee Yuen Fat, Mr. Wong Wing Chuen, and Ms. Chan So Wah each hold 2,000,000 share options[148] Share Option Scheme The company adopted a share option scheme in 2017, with 40,210,000 share options granted in 2022 remaining unexercised as of June 30, 2024, at an exercise price of HKD 0.39 and a weighted average remaining contractual life of 3.34 years, with these options vesting in two tranches on October 31, 2023, and October 31, 2024 Details of Unexercised Share Options | Grant Date | Exercise Price (HKD) | Number Unexercised (June 30, 2024) | Number Exercisable (June 30, 2024) | | :--- | :--- | :--- | :--- | | October 31, 2022 | 0.39 | 40,210,000 | 20,105,000 | - All share options granted on October 31, 2022, vested in two tranches: 50% on October 31, 2023, and the remaining 50% on October 31, 2024[167] Corporate Governance The company has established an Audit Committee, Nomination Committee, Remuneration Committee, and Risk Management Committee to ensure a high level of corporate governance, with committee memberships adjusted during the reporting period due to director changes, and the company has adopted and all directors have confirmed compliance with the standard code for directors' securities transactions - The memberships of the Audit Committee, Nomination Committee, and Remuneration Committee all changed on May 31, 2024, due to the retirement of Mr. Luk Tung and the appointment of Mr. Tang Koon Yiu[173][176][179] - The Risk Management Committee is chaired by Chief Executive Officer Mr. Chu Wai Man, with Chief Financial Officer Mr. Yu Wai Chun added as a new member on August 26, 2024[182] - The Audit Committee has reviewed the unaudited condensed consolidated financial statements for the current period[187]