正大企业国际(03839) - 2024 - 中期财报

Management Discussion and Analysis GROUP RESULTS In H1 2024, Group revenue grew 30.4% to $108 million, but gross margin declined to 16.7% due to lower-margin trade, resulting in a 3.2% decrease in profit attributable to shareholders to $1.96 million, with no interim dividend Key Financial Indicators for H1 2024 | Metric | H1 2024 (USD) | H1 2023 (USD) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 107.98 million | 82.81 million | +30.4% | | Overall Gross Margin | 16.7% | 20.0% | -3.3pp | | Profit Attributable to Shareholders | 1.96 million | 2.03 million | -3.2% | | Basic and Diluted EPS | 0.8 US cents | 0.8 US cents | 0% | - The Board resolved not to declare an interim dividend for the six months ended June 30, 2024[5] BUSINESS REVIEW The Group's business is divided into Biochemical and Industrial segments; Biochemical is the sole revenue source undergoing strategic transformation, while Industrial, through JVs and associates, saw engineering machinery profits decline significantly due to intense competition Biochemical Biochemical revenue grew 30.4% to $108 million in H1 2024, with a strategic shift from CTC to animal health products, increasing their revenue share from 52% to 67%, and despite lower gross margins from light-asset trading, the segment's overall contribution improved Biochemical Business Revenue Structure Change | Product Category | H1 2024 Revenue Share (%) | H1 2023 Revenue Share (%) | | :--- | :--- | :--- | | Chlortetracycline Products (CTC) | 33% | 48% | | Animal Health Chemical Products | 67% | 52% | - The overall gross margin decreased from 20.0% in H1 2023 to 16.7% in H1 2024 due to the expansion of lower-margin light-asset trading business[8] Industrial Industrial business operates through JV ECI Metro and associate Zhanjiang Deli; ECI Metro's profit share plummeted from $2.61 million to $0.11 million due to weak engineering machinery market and intense competition, while Zhanjiang Deli's automotive parts business remained stable with $1.16 million profit share - Profit share from joint venture ECI Metro (Caterpillar machinery sales) significantly decreased from $2.61 million in H1 2023 to $0.11 million in H1 2024, primarily due to intense market competition leading to lower sales of excavators, generators, and parts[9] - Profit share from associate Zhanjiang Deli (automotive parts manufacturing) remained stable at $1.16 million (H1 2023: $1.04 million)[10] OUTLOOK The Group maintains a cautious outlook for the remainder of 2024, as the biochemical business faces uncertainties in farming market recovery and global economic dynamics, while the industrial business anticipates low fixed asset investment growth and intense competition - The company maintains a cautious outlook for H2 2024 performance, primarily due to market recovery uncertainties in the biochemical business and low investment growth and intense competition in the industrial business[13] LIQUIDITY AND FINANCIAL RESOURCES As of June 30, 2024, the Group's financial position is robust, with total assets increasing to $384 million, net debt-to-equity ratio improving from 0.16 to 0.11, all borrowings denominated in RMB, and $42 million in cash and cash equivalents Financial Position Overview | Metric | June 30, 2024 (USD) | December 31, 2023 (USD) | | :--- | :--- | :--- | | Total Assets | 384 million | 377.4 million | | Net Debt | 28 million | 40.6 million | | Net Debt-to-Equity Ratio | 0.11 | 0.16 | | Cash and Cash Equivalents | 42 million | 37.6 million | - As of June 30, 2024, $20.7 million (26.5%) of the Group's total borrowings of $78.2 million were secured, collateralized by property, plant, equipment, and land lease prepayments with a net book value of $29.2 million[16] Report on Review of Interim Financial Report Auditor's Conclusion Independent auditor KPMG reviewed the interim financial report under Hong Kong Review Engagements Standards, noting the scope is less than an audit, thus no audit opinion is expressed; based on the review, no matters were found suggesting non-compliance with IAS 34 - Based on KPMG's review, they found no matters leading them to believe that the interim financial report for the six months ended June 30, 2024, was not prepared in all material respects in accordance with International Accounting Standard 34, Interim Financial Reporting[35] Consolidated Statement of Comprehensive Income Income Statement Summary In H1 2024, revenue was $108 million, up 30.4%, with gross profit at $17.99 million and gross margin at 16.7%; despite revenue growth, profit for the period was $2.73 million, and profit attributable to parent company shareholders decreased 3.2% to $1.96 million due to increased expenses and reduced JV profit share Consolidated Statement of Comprehensive Income (Unit: Thousand USD) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 107,979 | 82,810 | | Gross Profit | 17,989 | 16,531 | | Profit Before Tax | 3,557 | 2,705 | | Profit for the Period | 2,733 | 2,281 | | Profit Attributable to Shareholders of the Company | 1,963 | 2,027 | | Profit Attributable to Non-controlling Interests | 770 | 254 | | Basic and Diluted EPS (US cents) | 0.80 | 0.80 | | Total Comprehensive Income for the Period | (1,731) | (8,000) | Consolidated Statement of Financial Position Financial Position Summary As of June 30, 2024, the Group's total assets reached $384 million, a slight increase from year-end 2023, with total liabilities at $134 million, indicating a stable financial position, and total equity at $250 million, including $226 million attributable to parent company shareholders Consolidated Statement of Financial Position (Unit: Thousand USD) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Non-current Assets | 223,516 | 222,341 | | Total Current Assets | 160,501 | 155,033 | | Total Assets | 384,017 | 377,374 | | Total Current Liabilities | 109,388 | 100,088 | | Total Non-current Liabilities | 24,342 | 25,268 | | Total Liabilities | 133,730 | 125,356 | | Net Assets | 250,287 | 252,018 | | Equity Attributable to Shareholders of the Company | 226,435 | 228,430 | | Total Equity | 250,287 | 252,018 | Consolidated Statement of Changes in Equity Changes in Equity Summary For the six months ended June 30, 2024, equity attributable to company shareholders decreased from $228 million to $226 million, primarily due to a loss recorded in other comprehensive income from foreign exchange fluctuations, which offset the period's profit of $1.96 million Changes in Equity Attributable to Shareholders (H1 2024, Unit: Thousand USD) | Item | Amount | | :--- | :--- | | Balance as at January 1, 2024 | 228,430 | | Profit for the Period | 1,963 | | Other Comprehensive Income for the Period | (3,958) | | Balance as at June 30, 2024 | 226,435 | Condensed Consolidated Statement of Cash Flows Cash Flow Summary In H1 2024, net cash from operating activities significantly improved to $9.52 million from a net outflow of $3.15 million last year, while net cash used in investing activities was $6.82 million, and net cash from financing activities was $1.89 million, increasing period-end cash and cash equivalents to $41.96 million Condensed Consolidated Statement of Cash Flows (Unit: Thousand USD) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash Flows from Operating Activities | 9,515 | (3,152) | | Net Cash Flows Used in Investing Activities | (6,816) | (2,656) | | Net Cash Flows from Financing Activities | 1,890 | 11,912 | | Net Increase in Cash and Cash Equivalents | 4,589 | 6,104 | | Cash and Cash Equivalents at Beginning of Period | 37,606 | 30,859 | | Cash and Cash Equivalents at End of Period | 41,960 | 36,222 | Notes to Interim Financial Report 4. OPERATING SEGMENT INFORMATION The Group operates in Biochemical and Industrial segments; Biochemical is the sole revenue source with $108 million in H1 2024 and segment results of $4.95 million, while Industrial, despite no external revenue, contributed $0.3 million in results through JVs and associates, significantly down from $2.85 million last year Segment Results (H1 2024, Unit: Thousand USD) | Segment | Segment Revenue | Segment Results (including share of JV/Associate profits) | | :--- | :--- | :--- | | Biochemical Business | 107,979 | 4,954 | | Industrial Business | - | 302 | | Total | 107,979 | 5,256 | - Geographically, Mainland China is the Group's primary market, contributing $74.07 million in revenue, representing 68.6% of total revenue, a significant increase from $45.09 million in the prior year[70] 11. EARNINGS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY In H1 2024, profit attributable to shareholders for basic EPS calculation was $1.963 million, resulting in a basic EPS of 0.80 US cents based on 253,329,087 weighted average shares, consistent with the prior year, and diluted EPS equals basic EPS due to no potential dilutive ordinary shares Earnings Per Share Calculation | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Profit Attributable to Shareholders (Thousand USD) | 1,963 | 2,027 | | Weighted Average Number of Shares (Shares) | 253,329,087 | 253,329,087 | | Basic EPS (US cents) | 0.80 | 0.80 | 17. RELATED PARTY TRANSACTIONS In H1 2024, the Group engaged in significant related party transactions, notably sales of goods to High Orient Enterprises Limited and its associates, including Charoen Pokphand International, which surged to $46.84 million from $19.83 million last year, with total trade receivables from related companies amounting to $38.99 million at period-end - Sales to High Orient Enterprises Limited and its associates, including Charoen Pokphand International, increased from $19.83 million in H1 2023 to $46.84 million in H1 2024, representing the Group's most significant related party transaction[105] - As of June 30, 2024, total trade receivables from related companies amounted to $38.987 million[109] Other Information Shareholder and Dividend Information The Board resolved not to declare an interim dividend for 2024; as of June 30, 2024, major shareholders Charoen Pokphand Group and Charoen Pokphand Foods Public Company Limited collectively held 53.07% equity interest, while ITOCHU Corporation held 25.00% - The Board resolved not to declare an interim dividend for the six months ended June 30, 2024[111] Major Shareholder Holdings (Long Position) | Shareholder Name | Holding Percentage (%) | | :--- | :--- | | Charoen Pokphand Group Company Limited | 53.07% | | Charoen Pokphand Foods Public Company Limited | 53.07% | | ITOCHU Corporation | 25.00% | Corporate Governance The company is committed to high corporate governance standards, confirming compliance with Appendix C1 of the Listing Rules' Corporate Governance Code in H1 2024, and has adopted a securities dealing code based on standard practices, which all directors confirmed adherence to - The Board believes that the company has applied and complied with the Corporate Governance Code provisions in the Listing Rules for the six months ended June 30, 2024[125] - The company's interim financial report is unaudited but has been reviewed by KPMG and the company's Audit Committee[131] Corporate Information Key Management and Committees The company is chaired by Mr. Thanakorn Seriburi, with an executive team including CEOs Mr. Li Shaoqing for Biochemical and Mr. Li Shaozhu for Industrial, and established committees like Audit, Remuneration, Nomination, and Corporate Governance, all chaired by independent non-executive directors - Mr. Thanakorn Seriburi serves as the company's Chairman; key management includes two Chief Executive Officers: Mr. Li Shaoqing for the Biochemical business and Mr. Li Shaozhu for the Industrial business[134]