叶氏化工集团(00408) - 2024 - 中期财报

Management Discussion and Analysis Highlights The Group achieved significant profit growth in the first half of 2024, with profit attributable to equity holders surging by 109% to HKD 34.06 million year-on-year, and earnings per share increasing by 107% | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 1.557 billion | ▼ 0.6% | | Profit attributable to equity holders | HKD 34.06 million | ▲ 109% | | Earnings per share | HKD 0.06 | ▲ 107% | | Sales volume | 136 thousand tonnes | ▼ 5% | | Interim dividend | HKD 0.03 | ▲ 50% | | Gearing ratio | 18.3% | ▲ 18.2 percentage points | Chairman's Statement – Review and Outlook The Chairman's report highlights a challenging operating environment in H1 2024 due to China's economic transformation, geopolitical factors, and a weak property market, particularly impacting the architectural coatings business - The operating environment during the review period was more challenging than anticipated, influenced by Western suppression of China, a slower pace of China's growth model transformation, geopolitical tensions, and the absence of an interest rate cut cycle[5][7] - The architectural coatings segment faced severe adverse effects on sales and gross profit margin due to an unprecedented and intense price war among peers[5][7] | Financial Indicator | Amount | YoY Change | | :--- | :--- | :--- | | Sales revenue | HKD 1.56 billion | ▼ 0.6% | | Profit attributable to equity holders | HKD 34 million | ▲ 109% | - The Group's financial position remains sound with a low gearing ratio of 18.3%, and an interim dividend of HKD 0.03 per share was declared, alongside the first attempt at share repurchases in the market[9][10] - Looking ahead, the Group will focus more on improving and developing its core businesses, actively pursuing mergers and acquisitions and investments in related fine chemical sectors, leveraging its accumulated experience and capital strength[11][12] Report of the Chief Executive Officer Despite a sluggish macroeconomic environment, the Group achieved profit growth in H1 2024 through effective cost and expense control, with profit attributable to equity holders reaching HKD 34 million, a 109% year-on-year increase | Key Performance Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 1.56 billion | ▼ 0.6% | | Total sales volume | 136 thousand tonnes | ▼ 5% | | Gross profit margin | 23.1% | ▼ 0.8 percentage points | | Profit attributable to equity holders | HKD 34 million | ▲ 109% | | Gearing ratio | 18.3% | - | - The solvents associate (Qianxin Chemical) achieved stable growth, contributing HKD 49.4 million in profit to the Group[17][23] - Management is confident in the company's long-term development, repurchasing 2.3 million shares in July 2024 to enhance long-term shareholder value[15] Coatings Business The coatings business faced significant challenges, with sales volume declining by 10%, revenue falling by 6% to HKD 731 million, and gross profit margin decreasing by 2.6 percentage points to 25.5%, resulting in a segment loss of HKD 10.1 million | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Sales volume (tonnes) | 98 thousand tonnes | ▼ 10% | | Revenue | HKD 731 million | ▼ 6% | | Gross profit margin | 25.5% | ▼ 2.6 percentage points | | Segment results | Loss HKD 10.1 million | - | - The architectural coatings business was severely impacted by the sluggish Chinese property market, reduced new projects, and decreased consumer renovation willingness, while industrial coatings and resins achieved stable growth due to technological advancements[18] Inks Business The inks business performed strongly, turning a loss into profit through effective sales strategies and strict cost control, with revenue increasing by 16% to HKD 645 million and gross profit margin rising by 2.6 percentage points to 20%, achieving a segment profit of HKD 31.2 million | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 645 million | ▲ 16% | | Gross profit margin | 20% | ▲ 2.6 percentage points | | Segment results | Profit HKD 31.2 million | Turned loss into profit | - The business successfully captured major clients and expanded market share in the food packaging sector, while also developing specialty ink products for electronic products, flooring, and home appliances[22] Lubricants Business The lubricants business saw revenue decline by 11% to HKD 173 million, but improved its product portfolio by focusing on mid-to-high-end products, increasing gross profit margin by 2.8 percentage points to 23.6%, and leveraging OEM business to absorb fixed costs, ultimately achieving a profit of HKD 6.9 million and maintaining profitability | Indicator | H1 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | HKD 173 million | ▼ 11% | | Gross profit margin | 23.6% | ▲ 2.8 percentage points | | Segment results | Profit HKD 6.9 million | Maintained profitability | Solvents Associate The Group's 24% owned solvents associate, Qianxin Chemical, performed exceptionally, with sales volume growing by 24% to 776 thousand tonnes, contributing HKD 49.4 million to the Group - The solvents associate (Qianxin Chemical) sales volume increased by 24% to 776 thousand tonnes, contributing HKD 49.4 million to the Group[23] - The new 600 thousand tonnes acetic acid and 600 thousand tonnes acetate solvent plant project in Hubei is progressing well, targeting production in H2 2025 to enhance vertical integration and gross profit margin[23] Liquidity and Financial Resources As of June 30, 2024, the Group's financial position is robust, with a low gearing ratio of 18.3% and net bank borrowings of HKD 693 million - The gearing ratio (net bank borrowings to equity attributable to equity holders) increased to 18.3% from 0.1% in the prior year, primarily due to special dividend payments in H2 2023 and business development investments, but remains at a low level[28] | Financial Position (June 30, 2024) | Amount (HKD) | | :--- | :--- | | Total bank borrowings | 1.186 billion | | Cash and bank balances | 494 million | | Net bank borrowings | 693 million | - The Group has total bank facilities of HKD 2.616 billion from 18 banks, with 53% denominated in HKD and 47% in RMB, ensuring ample liquidity[34] - The Group will continue to increase RMB loans to benefit from lower interest costs in mainland China and mitigate exchange rate fluctuation risks, with 47% of total loans being medium-to-long-term and 35% fixed-rate to hedge interest rate risk[31][33][34] Human Resources As of June 30, 2024, the Group had 2,308 employees, with the vast majority (2,240) located in mainland China | Region | Number of Employees | | :--- | :--- | | Mainland China | 2,240 | | Hong Kong | 58 | | Other Countries | 10 | | Total | 2,308 | Other Information and Corporate Governance Significant Investments As of June 30, 2024, the Group held two significant investments: preferred shares in PAGAC Heisenberg Holding I Limited (fair value HKD 653 million) and an interest in associate Qianxin Chemical (carrying amount HKD 1.222 billion) - Holds preferred shares in PAGAC Heisenberg Holding I Limited with a fair value of approximately HKD 653 million, representing 10.8% of the Group's total assets, and recognized approximately HKD 11.5 million in dividend income during the period[57][58] - Holds an interest in the solvents business associate (Qianxin Chemical) with a carrying amount of approximately HKD 1.222 billion, representing 20.2% of the Group's total assets, with a share of associate's results of approximately HKD 49.4 million and dividend income of approximately HKD 33.4 million received during the period[60] Corporate Governance During the reporting period, the company complied with all code provisions of the HKEX Corporate Governance Code - The company complied with the code provisions of the Corporate Governance Code for the six months ended June 30, 2024[60] - The Audit Committee, comprising three independent non-executive directors, reviewed the unaudited interim financial report, which was also reviewed by external auditor Deloitte[61] Shareholder and Director Information This section discloses the interests of directors, chief executives, and substantial shareholders in the company's shares Directors' and Chief Executives' Interests in Shares, Underlying Shares and Debentures As of June 30, 2024, Chairman Mr. Yip Chi Shing held or was deemed to hold approximately 34.65% of the company's shares | Director Name | Capacity | Total Shares Held | Percentage of Issued Share Capital | | :--- | :--- | :--- | :--- | | Mr. Yip Chi Shing | Chairman | 197,000,532 | 34.65% | | Mr. Yip Tsz Hin | Director | 40,200,000 | 7.07% | | Mr. Yip Kwan | Director | 26,869,000 | 4.73% | Share Options The company adopted a new share option scheme on June 6, 2022, with no options granted, exercised, or cancelled during the review period - No share options were granted, exercised, or cancelled under the 2022 Share Option Scheme during the review period[46] Substantial Shareholder The report did not disclose other substantial shareholder interests or short positions requiring registration under Section 336 of the Securities and Futures Ordinance, apart from those of directors and chief executives - Apart from the interests of directors and chief executives already disclosed, no other person has notified the Company of their interests or short positions in the Company's shares requiring registration under Section 336 of the Securities and Futures Ordinance[48][49] Other Disclosures The Board resolved to declare an interim dividend of HKD 0.03 per share, payable on October 9, 2024 - The Board resolved to declare an interim dividend of HKD 0.03 per share (H1 2023: HKD 0.02 per share), payable on October 9, 2024[52][53] - During the review period, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[54] Condensed Consolidated Financial Statements Report on Review of Condensed Consolidated Financial Statements Deloitte Touche Tohmatsu, the auditor, reviewed the Group's condensed consolidated financial statements for the six months ended June 30, 2024, concluding no material non-compliance with HKAS 34 - Auditor Deloitte reviewed this condensed consolidated financial report and concluded that it was prepared in all material respects in accordance with Hong Kong Accounting Standard 34[65][69][71] Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group reported revenue of HKD 1.557 billion, a slight year-on-year decrease, but profit attributable to equity holders surged by 109% to HKD 34.06 million | Item (HKD thousand) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 1,557,365 | 1,566,874 | | Gross profit | 359,244 | 375,022 | | Share of results of an associate | 49,449 | 32,145 | | Profit before tax | 39,337 | 10,072 | | Profit for the period | 33,551 | 8,895 | | Profit attributable to equity holders of the Company | 34,057 | 16,260 | Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were HKD 6.049 billion, total liabilities HKD 2.233 billion, and equity attributable to equity holders was HKD 3.793 billion | Item (HKD thousand) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Non-current assets | 3,727,335 | 3,765,519 | | Of which: Interests in an associate | 1,222,419 | 1,241,342 | | Current assets | 2,321,384 | 2,653,508 | | Total assets | 6,048,719 | 6,419,027 | | Current liabilities | 1,798,331 | 1,967,212 | | Non-current liabilities | 434,297 | 536,713 | | Total liabilities | 2,232,628 | 2,503,925 | | Equity attributable to equity holders of the Company | 3,792,695 | 3,926,349 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, total equity attributable to company shareholders decreased from HKD 3.926 billion at the beginning of the year to HKD 3.793 billion - Equity attributable to equity holders decreased from HKD 3.926 billion at the beginning of the year to HKD 3.793 billion at the end of the period[76] - Key factors contributing to the decrease in equity include total comprehensive expense for the period of HKD 76.85 million (comprising profit for the period of HKD 34.06 million and other comprehensive expense of HKD 111 million) and dividends paid of HKD 56.85 million[76] Condensed Consolidated Statement of Cash Flows In H1 2024, the Group recorded a net cash outflow of HKD 91.08 million from operating activities, a net cash inflow of HKD 172.09 million from investing activities, and a net cash outflow of HKD 253.24 million from financing activities | Item (HKD thousand) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (91,075) | 51,761 | | Net cash generated from investing activities | 172,089 | 969,321 | | Net cash used in financing activities | (253,242) | (977,723) | | Net (decrease) increase in cash and cash equivalents | (172,228) | 43,359 | | Cash and cash equivalents at beginning of period | 616,093 | 1,088,116 | | Cash and cash equivalents at end of period | 431,177 | 1,111,688 | Notes to the Condensed Consolidated Financial Statements The notes detail the basis of preparation, significant accounting policies, and disclosures for revenue, segment information, other income, taxation, dividends, acquisitions and disposals, related party transactions, and fair value of financial instruments - Segment results show a loss of HKD 10.08 million for the coatings business, a profit of HKD 31.17 million for the inks business, and a profit of HKD 6.95 million for the lubricants business[95] - In January 2024, the Group converted a RMB 31.37 million loan to Hubei Huima into a 59.91% equity stake, completing the acquisition and recognizing HKD 3.98 million in goodwill[141][142][143] - In January 2024, the Group disposed of a 61% equity stake in Hebei Damai and its subsidiaries to non-controlling shareholders for a cash consideration of RMB 1, resulting in a loss of HKD 1.04 million on the transaction[147][148][149] - The Group engages in transactions with related parties, including rental payments to a company controlled by Director Mr. Yip Chi Shing, and goods procurement and consulting service transactions with an associate[161][162]