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中粮家佳康(01610) - 2024 - 中期财报
COFCO JOYCOMECOFCO JOYCOME(HK:01610)2024-09-20 08:36

Corporate Information The report provides basic company information including directors, committee members, legal advisors, principal bankers, share registrars, and main office addresses - The report provides basic company information including directors, committee members, legal advisors, principal bankers, share registrars, and main office addresses45 Management Discussion and Analysis I. COMPANY PROFILE COFCO Joycome is COFCO Group's meat business platform, covering the entire industry chain from feed production to meat imports, offering high-quality products Company Introduction The company, COFCO Group's meat business platform, listed on HKEX in 2016, is a leading integrated meat enterprise in China - The company's business covers a complete industry chain from feed production to meat product sales and imports, with its brands 'Joycome' and 'Wanweike' having high recognition in major first-tier cities in China79 Segments Introduction The company operates four segments: hog farming, fresh pork, processed meat, and meat imports, with modern production bases strategically located nationwide - The company's business segments include: - Hog Farming: Modern farming bases and supporting feed mills in Jilin, Inner Mongolia, and other regions - Fresh Pork: Four slaughtering and processing bases and two cutting centers, primarily featuring the 'Joycome' brand of chilled fresh pork - Processed Meat Products: Two processing bases in Jiangsu and Guangdong, primarily featuring 'Wanweike' and 'Joycome' brands - Meat Imports: Imports pork, beef, poultry, lamb, and their by-products for domestic distribution81112 II. MARKET OVERVIEW In H1 2024, China's hog market saw easing oversupply and rising prices from May, with consumption recovering and demand for quality food increasing - Hog supply decreased, prices rebounded: National hog slaughter volume decreased by 3.1% year-on-year in H1, and sow inventory decreased by 8% from its peak; hog prices increased by 22.4% by end of June compared to end of 202314 - Consumption market recovered, quality demand increased: Total retail sales of consumer goods increased by 4% year-on-year in H1, and catering revenue increased by 7.9%; consumers increasingly prefer high-quality, standardized branded packaged pork14 - Pork import volume significantly decreased, beef import maintained growth: Pork import volume decreased by 45.3% year-on-year in H1, while beef import volume increased by 17.0% year-on-year16 III. RESULTS OF OPERATION In H1 2024, the company recorded a net loss due to Q1's low hog prices, but Q2 saw price recovery, with fresh pork losses narrowing and processed meat and import businesses strengthening - During the reporting period, the company recorded a net loss of RMB 389 million before fair value adjustments of biological assets, primarily due to overall losses in the hog farming business1820 Hog production business The company actively builds new capacity in Jilin, enhancing refined management through technology and advancing genetic breeding to improve herd performance - The company piloted the installation of digital intelligence equipment in new projects to explore smart farming and enhance refined management21 - The company increased the number of genetic chip tests and accelerated herd rotation, significantly increasing the proportion of high-performance breeding pigs2223 Fresh pork business The fresh pork business expanded brand influence by optimizing capacity, accelerating R&D, and increasing promotion, narrowing losses by RMB 16.06 million year-on-year - The Beijing Pinggu cutting center commenced operations in August 2024, aiming to respond more efficiently to demand in the North China market26 - In H1, fresh pork sales reached 120,100 tons, with flaxseed pork sales growing over 100% year-on-year, and the segment's loss narrowed by RMB 16.06 million year-on-year26 - The company strengthened the 'Joycome' brand's sports gene and healthy image through sports marketing activities, including renewing its partnership with the National Sports General Administration Training Bureau and sponsoring marathons2831 Meat import business and processed meat product business Despite falling domestic beef prices, the company achieved counter-cyclical profitability by optimizing market analysis and internal synergy, significantly improving both meat import and processed meat businesses Meat import and processed meat product business profitability (H1 2024) | Business Segment | Profit (RMB million) | Year-on-Year Growth | | :--- | :--- | :--- | | Meat Import | 28.21 | 19.9% | | Processed Meat | 21.68 | 197.2% | IV. FINANCIAL REVIEW In H1 2024, group revenue decreased by 21.4% to RMB 4.571 billion, resulting in a net loss of RMB 389 million before fair value adjustments, compared to a net profit of RMB 168 million last year Overall Performance Group revenue decreased in H1 2024 due to lower hog slaughter volume and reduced meat imports, leading to a shift from profit to loss Key Financial Indicators H1 2024 | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Operating Revenue | 4.571 billion yuan | 5.818 billion yuan | | Net Profit/Loss (before fair value adjustment of biological assets) | Net loss 389 million yuan | Net profit 168 million yuan | Revenue and Gross Profit Margin In H1 2024, group operating revenue decreased by 21.4% to RMB 4.571 billion due to lower hog slaughter and reduced meat imports, resulting in a -3.5% gross margin before fair value adjustments - Revenue decreased by 21.4% to RMB 4.571 billion, mainly attributed to lower hog slaughter volume year-on-year and proactive reduction in meat import business33 - Adjusted gross margin was -3.5%, a 10.0 percentage point decrease year-on-year, primarily due to the hog farming business33 Expenses and Costs The company reduced sales, administrative, and finance costs by improving operational efficiency and capital turnover, while other income and losses decreased due to prior period exchange gains - Total sales and distribution expenses and administrative expenses were RMB 380 million, a year-on-year decrease of RMB 28.79 million, primarily due to improved operational efficiency33 - Finance costs were RMB 61 million, a year-on-year decrease of RMB 10.51 million, mainly due to accelerated capital turnover33 Capital Resources and Liquidity The company maintains a prudent financial policy, ensuring liquidity through diversified financing and centralized fund management, with cash balances decreasing but ample unused bank facilities Liquidity and Cash Flow Status | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and Bank Balances | 507 million yuan | 1.169 billion yuan | | Current Ratio | 0.91 | 0.82 | | Unused Bank Facilities | 12.927 billion yuan | - | - Cash used in operating activities was RMB 650 million in H1 2024, compared to cash generated of RMB 977 million in the prior year4142 Capital Structure As of June 30, 2024, the group's interest-bearing bank borrowings and related party loans increased, raising the net debt-to-equity ratio from 37.6% to 50.0% Capital Structure Changes | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Interest-bearing Bank Borrowings | 2.928 billion yuan | 4.041 billion yuan | | Loans from Related Parties | 2.327 billion yuan | 606 million yuan | | Net Debt | 4.749 billion yuan | 3.477 billion yuan | | Net Debt to Equity Ratio | 50.0% | 37.6% | Capital Expenditure & Commitments In H1 2024, group capital expenditure increased to RMB 523 million for farming facilities and the Beijing cutting center, with capital commitments significantly rising to RMB 1.095 billion Capital Expenditure and Commitments | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Capital Expenditure | 523 million yuan | 419 million yuan | | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Capital Commitments | 1.095 billion yuan | 346 million yuan | Biological Assets As of June 30, 2024, the fair value of biological assets significantly increased to RMB 3.073 billion from RMB 2.202 billion, with fair value adjustments contributing a net gain of RMB 638 million to profit - The carrying value of biological assets increased from RMB 2.202 billion at the end of 2023 to RMB 3.073 billion as of June 30, 202449 - The net impact of fair value adjustments of biological assets on profit for the period was a gain of RMB 638 million, compared to a loss of RMB 654 million in the prior year5153 V. HUMAN RESOURCES As of June 30, 2024, the group's employee count was 9,800, a slight decrease, with H1 total remuneration of approximately RMB 659 million, largely flat Human Resources Overview | Indicator | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Number of Employees | 9,800 | 10,029 | | Total Remuneration (H1) | Approx. 659 million yuan | Approx. 671 million yuan | VI. SIGNIFICANT RISKS AND UNCERTAINTIES The group faces significant risks including price fluctuations, epidemics, food safety, and production safety, addressed by established internal controls and emergency plans Price Risks Price risk refers to losses from increased costs or reduced revenue due to fluctuations in raw material procurement and product sales prices - The company faces price risks from fluctuations in raw material procurement prices and product sales prices55 Epidemic Risks Epidemics like African Swine Fever pose major threats to the livestock industry, potentially causing mortality and efficiency loss, which the group addresses with comprehensive biosecurity controls - To address epidemic risks, the group has established various systems, including 'Biosecurity Control Procedures' and 'Major Animal Epidemic Emergency Plans,' and formed an African Swine Fever prevention and control team to enhance professional response capabilities5758 Food Safety & Production Risks The company faces risks of product recalls and property losses from food safety and production accidents, addressed by established management regulations and emergency plans - The group strengthens full-process management and risk control through regulations such as 'Food Safety Management Regulations' and 'Production Safety Management Regulations' to prevent food safety and production safety risks59606162 VII. OUTLOOK For H2 2024, the company will focus on five core tasks: operations, management, layout, risk prevention, and team building, emphasizing efficiency, cost reduction, and smart farming - Key strategic priorities for H2 include: - Operations: Improve slaughter volume and farming efficiency, comprehensively reduce costs, and optimize futures hedging strategies - Management: Build an epidemic prevention system, enhance refined management, and narrow inter-farm disparities - Layout: Accelerate core business expansion, fully introduce smart farming technology in new projects - Risk: Build a production safety system, implement food safety requirements, and develop sustainable models - Team: Improve talent development system and optimize incentive measures63 Corporate Governance Highlights and Other Information Interests and Short Positions As of June 30, 2024, no disclosable interests or short positions were held by directors or chief executives, while COFCO Group and its subsidiaries held approximately 40.30% of total issued shares - As of June 30, 2024, directors and chief executives had no disclosable share interests64 - Major shareholder COFCO Group, through its subsidiaries, collectively held 1,846,681,782 shares, representing 40.30% of the total issued shares of the company6869 Corporate Governance and Compliance The company maintains high corporate governance standards, complying with the Code, except for a temporary deviation on Chairman/CEO role separation, rectified on April 15, 2024 - For the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of its listed securities71 - The company temporarily deviated from Code Provision C.2.1 (separation of Chairman and CEO roles), but since April 15, 2024, Dr. Gao Xiang serves as Chairman and Dr. Zhang Nan as General Manager, with roles held by different individuals73 Board and Director Information Subsequent to the reporting period, Board changes occurred, including Mr. Shi Bo's resignation, Mr. Chen Zhigang's appointment as Non-executive Director, and committee membership adjustments - Changes to the Board since the date of the 2023 annual report include Mr. Shi Bo's resignation, Mr. Chen Zhigang's appointment as Non-executive Director, and adjustments to certain committee memberships76 Review of Interim Report and Dividend The group's unaudited interim financial information for H1 2024 was reviewed by the Audit Committee and BDO Limited, with the Board resolving not to declare an interim dividend - The Board resolved not to declare an interim dividend for the six months ended June 30, 2024, consistent with the prior year78 Report on Review of Condensed Consolidated Financial Statements Auditor's Conclusion The auditor, BDO Limited, reviewed the condensed consolidated financial statements, concluding that they were prepared in all material respects in accordance with HKAS 34 - The auditor's conclusion is that, based on their review, nothing has come to their attention that causes them to believe the condensed consolidated financial statements are not prepared, in all material respects, in accordance with HKAS 348485 Condensed Consolidated Interim Financial Information Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For H1 2024, the group recorded revenue of RMB 4.571 billion (-21.4% YoY), a net loss of RMB 389 million before fair value adjustments, but a profit of RMB 249 million after adjustments H1 2024 Statement of Profit or Loss Key Data (RMB thousand) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 4,570,820 | 5,818,410 | | Gross (Loss)/Profit | (56,751) | 603,169 | | Profit/(Loss) Before Tax | 251,214 | (487,592) | | Profit/(Loss) for the Period | 249,296 | (485,232) | | Profit/(Loss) Attributable to Owners of the Company | 251,445 | (469,646) | | Basic Earnings/(Loss) Per Share | RMB 0.0549 | RMB (0.1099) | Condensed Consolidated Statement of Financial Position As of June 30, 2024, total assets were RMB 17.039 billion, liabilities RMB 7.549 billion, and net assets RMB 9.491 billion, with net current liabilities narrowing from RMB 1.135 billion to RMB 564 million Statement of Financial Position Key Data (RMB thousand) | Item | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Non-current Assets | 11,588,104 | 11,109,373 | | Current Assets | 5,450,974 | 5,120,959 | | Current Liabilities | 6,014,571 | 6,256,381 | | Non-current Liabilities | 1,533,916 | 727,768 | | Net Assets | 9,490,591 | 9,246,183 | Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, total equity attributable to owners increased to RMB 9.379 billion from RMB 9.132 billion at end of 2023, primarily due to RMB 247 million in comprehensive income - Equity attributable to owners of the company increased from RMB 9.132 billion at the end of 2023 to RMB 9.379 billion as of June 30, 2024101 - The increase in equity was primarily due to total comprehensive income of RMB 244 million recorded for the period, which included a profit for the period of RMB 249 million101 Condensed Consolidated Statement of Cash Flows In H1 2024, the group reported net cash outflows from operating (RMB 650 million) and investing (RMB 520 million) activities, a net cash inflow from financing (RMB 507 million), and a net decrease in cash of RMB 663 million Cash Flow Statement Key Data (RMB thousand) | Item | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Cash From/(Used In) Operating Activities | (650,401) | 976,669 | | Net Cash Used In Investing Activities | (519,574) | (335,377) | | Net Cash From/(Used In) Financing Activities | 507,382 | (1,192,692) | | Net Decrease in Cash and Cash Equivalents | (662,593) | (551,400) | Notes to the Condensed Consolidated Financial Statements The notes detail the financial statements' basis, accounting policies, and breakdowns of revenue, segments, profit/loss, balance sheet items, related party transactions, and fair value measurements Note 4 Segment Information In H1 2024, hog farming was the primary loss source (RMB 375 million), while fresh pork loss narrowed to RMB 27.63 million, and processed meat and meat import segments achieved profits H1 2024 Segment Performance (RMB thousand) | Segment | H1 2024 Segment Performance | H1 2023 Segment Performance | | :--- | :--- | :--- | | Hog Farming | (375,158) | 183,885 | | Fresh Pork | (27,633) | (43,697) | | Processed Meat | 21,675 | 7,294 | | Meat Import | 28,208 | 23,519 | Note 13 Biological Assets The fair value of biological assets increased from RMB 2.202 billion to RMB 3.073 billion by June 30, with Level 3 fair value measurement relying on unobservable inputs like market prices - The carrying value of biological assets increased from RMB 2.202 billion at the beginning of the year to RMB 3.073 billion at the end of the period156 - Fair value measurement is Level 3, with valuation primarily relying on market price estimates for piglets and fattening pigs, and replacement cost estimates for breeding pigs158164 Note 20 Bank Borrowings and Loans from Related Companies The group obtained RMB 2.976 billion in new bank loans and repaid RMB 4.101 billion, while current loans from related companies increased to RMB 2.223 billion, providing significant financial support - Loans from related companies classified as current liabilities significantly increased from RMB 503 million at the beginning of the year to RMB 2.223 billion at the end of the period190192 Note 23 Related Party Transactions The group engages in frequent related party transactions with COFCO Group, including goods purchases (RMB 518 million), sales, fund deposits/loans, and interest income/expenses Major Transactions with COFCO Group and its Subsidiaries (H1 2024, RMB thousand) | Transaction Type | Amount | | :--- | :--- | | Purchase of Goods | 518,015 | | Sale of Goods | 29,621 | | Interest Expense | 14,803 | | Interest Income | 3,572 | - As of June 30, 2024, the group had deposits of RMB 308 million with related party COFCO Finance203 Glossary This section defines specific terms used in the report, such as 'Board', 'COFCO', and 'the Group', to ensure consistent reader understanding - This section defines specific terms used in the report, such as 'Board', 'COFCO', 'COFCO Hong Kong', and 'the Group', to ensure consistent reader understanding223224225