绿新生物科技(01084) - 2023 - 中期业绩

Performance Highlights Financial Performance Overview For the six months ended June 30, 2023, the Group's total revenue decreased year-on-year by 9.5% to RMB583 million, gross profit significantly declined by 45.7% to RMB106.1 million, and gross profit margin decreased from 30.3% to 18.2%, with profit for the period sharply decreasing by 76.0% to RMB25.1 million, and the Board decided not to declare an interim dividend 2023 first half Key Financial Metrics | Metric | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | RMB 582.9 million | RMB 644.2 million | -9.5% | | Gross Profit | RMB 106.1 million | RMB 195.4 million | -45.7% | | Gross Profit Margin | 18.2% | 30.3% | -12.1 percentage points | | Profit for the Period | RMB 25.1 million | RMB 104.5 million | -76.0% | | Net Profit Margin | 4.3% | 16.2% | -11.9 percentage points | - The Board did not recommend the payment of an interim dividend for the first half of 2023[45][122] Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2023, the company's revenue was RMB583 million, a year-on-year decrease of 9.5%, with gross profit significantly reduced by 45.7% to RMB106 million due to increased cost of sales, operating profit decreased by 64.5% to RMB52.94 million, and increased net finance costs ultimately led to a sharp decline in profit for the period by 76.0% to RMB25.12 million Interim Condensed Consolidated Statement of Profit or Loss | Item | For the six months ended June 30, 2023 (RMB thousand) | For the six months ended June 30, 2022 (RMB thousand, restated) | | :--- | :--- | :--- | | Revenue | 582,876 | 644,157 | | Cost of Sales | (476,733) | (448,736) | | Gross Profit | 106,143 | 195,421 | | Operating Profit | 52,938 | 149,061 | | Net Finance Costs | (19,434) | (11,235) | | Profit before Income Tax | 33,504 | 137,826 | | Income Tax Expense | (8,388) | (33,366) | | Profit for the Period | 25,116 | 104,460 | | Profit attributable to owners of the Company | 25,008 | 104,408 | | Basic Earnings Per Share (RMB) | 0.030 | 0.127 | Interim Condensed Consolidated Statement of Comprehensive Income Building on the profit for the period of RMB25.12 million, a loss of RMB3.61 million from currency translation differences resulted in a total comprehensive income of RMB21.5 million for the first half of 2023, a significant decrease of 78.0% compared to RMB97.89 million in the prior year Interim Condensed Consolidated Statement of Comprehensive Income | Item | For the six months ended June 30, 2023 (RMB thousand) | For the six months ended June 30, 2022 (RMB thousand, restated) | | :--- | :--- | :--- | | Profit for the Period | 25,116 | 104,460 | | Other Comprehensive Loss (Currency Translation Differences) | (3,613) | (6,575) | | Total Comprehensive Income for the Period | 21,503 | 97,885 | Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets were RMB1.819 billion, a 7.6% increase from the beginning of the year, primarily driven by a significant 18.0% increase in inventories to RMB1.07 billion, while total liabilities increased by 12.0% to RMB939 million mainly due to increased bank borrowings, and total equity slightly increased by 3.2% to RMB880 million Balance Sheet Key Items | Item (RMB thousand) | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Total Assets | 1,818,862 | 1,691,007 | | Non-current Assets | 531,591 | 537,716 | | Current Assets | 1,287,271 | 1,153,291 | | Of which: Inventories | 1,069,510 | 906,209 | | Total Liabilities | 939,098 | 838,797 | | Non-current Liabilities | 111,480 | 115,825 | | Current Liabilities | 827,618 | 722,972 | | Total Equity | 879,764 | 852,210 | Interim Condensed Consolidated Statement of Changes in Equity As of June 30, 2023, profit attributable to owners of the Company was RMB872 million, an increase from RMB845 million at the beginning of the year, with the change primarily resulting from profit for the period contribution of RMB25.01 million and equity-settled share-based payments of RMB3.8 million, partially offset by a loss of RMB4.16 million from currency translation differences - Opening equity was RMB852 million, total comprehensive income for the period was RMB21.5 million, and transactions with owners (including share issuance, share-based payments, etc.) resulted in a net increase of RMB6.05 million, bringing total equity to RMB880 million at period-end[131] Interim Condensed Consolidated Statement of Cash Flows In the first half of 2023, net cash outflow from operating activities was RMB46.75 million, primarily due to increased cash used in operations, net cash outflow from investing activities was RMB4.61 million, and net cash inflow from financing activities was RMB58.54 million, mainly from new borrowings, with cash and cash equivalents at period-end at RMB46.62 million, an increase of RMB7.18 million from the beginning of the period Cash Flow Statement Summary | Item (RMB thousand) | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (46,747) | (36,984) | | Net Cash Used in Investing Activities | (4,614) | (33,331) | | Net Cash Generated from Financing Activities | 58,536 | 28,154 | | Net Increase/(Decrease) in Cash and Cash Equivalents | 7,175 | (42,161) | | Cash and Cash Equivalents at Beginning of Period | 37,675 | 109,421 | | Cash and Cash Equivalents at End of Period | 46,620 | 70,269 | Notes to the Financial Statements Note 3: Change in Presentation Currency Effective January 1, 2023, the Group's financial statements' presentation currency changed from HKD to RMB to more appropriately reflect its primary business activities conducted in China, and this change has been applied retrospectively with all comparative figures restated - Considering the Group's primary operations (production and sales) are conducted in China and the functional currency of its Chinese subsidiaries is RMB, the Directors believe changing the presentation currency to RMB more appropriately reflects the Group's transactions[75][142] Note 7: Revenue and Segment Information Group revenue primarily derived from sales of carrageenan and agar, accounting for 61.4% and 24.0% of total revenue respectively, while geographically, China market sales contribution increased from 39.6% in the prior year to 50.6%, and Europe market share decreased from 36.3% to 24.7%, reflecting a trend of declining overseas demand and domestic market growth Revenue by Product Segment (RMB thousand) | Product Segment | H1 2023 Revenue | H1 2022 Revenue | | :--- | :--- | :--- | | Agar Sales | 140,173 | 149,346 | | Carrageenan Sales | 357,720 | 423,021 | | Konjac Product Sales | 24,785 | 27,535 | | Compound Product Sales | 60,172 | 38,822 | | Others | 26 | 5,433 | | Total | 582,876 | 644,157 | Revenue by Region (RMB thousand) | Region | H1 2023 Revenue | H1 2022 Revenue | | :--- | :--- | :--- | | China | 294,712 | 255,097 | | Europe | 144,121 | 233,594 | | Asia (excluding China) | 103,515 | 99,859 | | South America | 26,480 | 35,370 | | North America | 12,470 | 18,551 | | Others | 1,578 | 1,686 | | Total | 582,876 | 644,157 | Note 10: Earnings Per Share Due to a significant decrease in profit for the period, basic earnings per share for the first half of 2023 was RMB0.030, a 76.4% decrease compared to RMB0.127 in the prior year, with diluted earnings per share also decreasing from RMB0.126 to RMB0.030 Earnings Per Share Calculation | Item | H1 2023 | H1 2022 (restated) | | :--- | :--- | :--- | | Profit attributable to owners of the Company (RMB thousand) | 25,008 | 104,408 | | Weighted Average Number of Ordinary Shares (Basic) | 825,649,956 | 821,414,933 | | Basic Earnings Per Share (RMB) | 0.030 | 0.127 | | Weighted Average Number of Ordinary Shares (Diluted) | 829,385,376 | 828,804,934 | | Diluted Earnings Per Share (RMB) | 0.030 | 0.126 | Note 16: Equity-settled Share-based Payments For the six months ended June 30, 2023, the Group recognized a total equity-settled share-based payments expense of RMB3.801 million, including RMB0.608 million for the Share Option Scheme and RMB3.193 million for the Share Award Scheme, with 4.432 million share options exercised and 0.86 million award shares vested during the period Equity-settled Share-based Payments Expense (RMB thousand) | Scheme Type | H1 2023 | H1 2022 (restated) | | :--- | :--- | :--- | | Share Option Scheme | 608 | 881 | | Share Award Scheme | 3,193 | — | | Total | 3,801 | 881 | 16(a) Share Option Scheme For the first half of 2023, 4.432 million share options were exercised, reducing outstanding share options to 4.432 million at period-end, with these options granted in 2018 at an exercise price of HKD0.01 and a 5-year vesting period, and approximately RMB1.212 million of unamortized fair value will be expensed in future periods Outstanding Share Options Movement | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | As of January 1 | 8,864,000 | 13,296,000 | | Exercised during the period | (4,432,000) | (4,432,000) | | As of June 30 | 4,432,000 | 8,864,000 | 16(b) Share Award Scheme For the first half of 2023, 0.86 million award shares were exercised (vested), reducing outstanding award shares to 3.44 million at period-end, with 4.3 million shares granted under this scheme in 2022 with a 5-year vesting period, and approximately RMB8.999 million of unamortized fair value will be expensed in future periods Outstanding Award Shares Movement | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | As of January 1 | 4,300,000 | — | | Granted during the period | — | 4,300,000 | | Exercised during the period | (860,000) | — | | At period-end | 3,440,000 | 4,300,000 | Note 17: Trade and Other Payables As of June 30, 2023, total Trade and other payables amounted to RMB228 million, a 9.5% increase from RMB208 million at the beginning of the year, of which trade payables increased by 27.0% to RMB175 million, with aging primarily within 90 days Trade and Other Payables Composition (RMB thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Trade Payables | 174,899 | 137,763 | | Contract Liabilities - Customer Advances | 14,912 | 22,793 | | Others | 37,799 | 47,342 | | Total | 227,610 | 207,838 | Note 18: Bank Borrowings and Lease Liabilities As of June 30, 2023, the Group's total bank borrowings increased to RMB674 million, a 16.2% increase from the beginning of the year, with the weighted average effective interest rate rising from 4.46% to 5.64%, and part of the borrowings are secured by land use rights and buildings valued at RMB111 million and personally guaranteed by two Directors Bank Borrowings and Lease Liabilities (RMB thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Total Bank Borrowings | 673,919 | 579,884 | | Total Lease Liabilities | 3,682 | 4,455 | | Total Borrowings | 677,601 | 584,339 | - As of June 30, 2023, total bank borrowings amounted to RMB674 million, with a weighted average effective interest rate of 5.64% (2022: 4.46%)[19][67] - The Group's bank borrowings are personally guaranteed by Directors Mr. Chen Jincang and Mr. Guo Dongxu, with a guaranteed amount of RMB218 million as of June 30, 2023[21] Note 21: Related Party Transactions The Group's related party transactions primarily involve key management personnel compensation and Directors providing personal guarantees for bank borrowings, with key management personnel compensation for the first half of 2023 approximately RMB5.592 million, a year-on-year increase of 10.1%, and no amounts were due to related parties at period-end - Two Directors provided personal guarantees for the Group's bank borrowings, as detailed in Note 18[31] - For the six months ended June 30, 2023, key management personnel compensation was approximately RMB5.592 million, an increase from RMB5.078 million in the same period last year[33] Management Discussion and Analysis Business Review In the first half of 2023, the Group's business was impacted by the dual impact of cyclical reduction in overseas customer demand and rising raw material costs, as overseas customers reduced demand due to adjusting safety stock levels and a slowing European economy, while high-priced seaweed purchased in 2022 increased inventory costs, leading to a significant decline in carrageenan product gross profit margin, and rising interest rates and RMB depreciation further compressed operating profit - Total revenue decreased by 9.5% to RMB583 million, primarily due to reduced demand from overseas customers, especially a 38.3% decline in European market sales[39][40] - Net profit significantly decreased to RMB25.1 million, mainly attributable to a 37.7% reduction in total overseas sales and a 12.1 percentage points decline in gross profit margin to 18.2%[39] - Sales structure shifted, with China market sales increasing from 39.6% to 50.6% of total revenue, while overseas market share decreased from 60.4% to 49.4%[40] Product Technology and Business Outlook The Group continued investment in product technology R&D to enhance product value-add and profitability, with compound products, as high-margin products, showing revenue growth of 55.0% in the first half, demonstrating R&D effectiveness, and looking ahead, management anticipates global demand for hydrocolloid products to recover with price adjustments and customer inventory replenishment, is optimistic about the stable performance of the Chinese market and continued growth of compound products, and the Group will continue to advance the diversified layout of its Indonesian factory to reduce costs - The Group enhanced its high-value-added product portfolio, including compound products, instant agar, and deep-processed carrageenan, through continuous R&D investment to improve profitability[42] - Revenue from compound products increased by 55.0% year-on-year, demonstrating the success of R&D efforts in meeting evolving customer demands[42] - Management anticipates global demand to recover as carrageenan product prices adjust and customer inventories replenish, while Indonesian subsidiary Hongxin will continue investing to enhance cost competitiveness[44] Financial Review Current period financial performance significantly declined, with revenue decreasing by 9.5% but cost of sales, however, increasing by 6.2%, leading to a sharp decline in gross profit by 45.7% and a 12.1 percentage point decrease in gross profit margin, and various expenses (selling, administrative, finance) all increased to varying degrees, further eroding profit, ultimately leading to profit attributable to owners of the Company significantly decreasing by 76.0% year-on-year Revenue Analysis Total revenue for the first half was RMB583 million, a year-on-year decrease of 9.5%, and except for compound product sales growth of 55.0%, revenue from major product lines such as agar, carrageenan, and konjac all declined, with the decrease in revenue primarily due to reduced demand from overseas customers as a result of adjusting safety stock levels and a slowing European economy Revenue Movement by Product Line | Product | YoY Change | | :--- | :--- | | Agar | -6.1% | | Carrageenan | -15.4% | | Konjac | -10.0% | | Compound Products | +55.0% | Cost and Gross Profit Analysis Cost of sales for the first half was RMB477 million, a year-on-year increase of 6.2%, primarily due to the use of high-priced seaweed raw materials purchased in 2022, which increased average inventory costs, and rising costs while selling prices peaked led to a sharp decline in gross profit by 45.7% to RMB106 million, with gross profit margin decreasing from 30.3% to 18.2%, and gross profit margins for all product lines declined - The decline in gross profit margin was primarily due to increased average inventory costs from higher-priced seaweed raw materials purchased in 2022, while final product selling prices had reached their recent peak, creating a 'scissors gap'[50] Expenses and Finance Costs Analysis All expenses increased, with selling and distribution expenses increasing by 32.8% due to the resumption of business activities post-pandemic, administrative expenses slightly increasing by 2.7% due to rising labor costs, and net finance costs significantly increasing by 73.0% to RMB19.43 million, primarily due to a significant rise in USD and HKD loan interest rates and an increase in the average outstanding balance of bank borrowings - Selling and distribution expenses increased by 32.8%, mainly due to higher costs for exhibition participation and overseas customer travel[51] - Finance costs increased by 74.5%, primarily due to a significant rise in USD and HKD loan interest rates and an increase in the average outstanding balance of bank borrowings[54] Liquidity and Financial Resources As of June 30, 2023, the Group's financial position remained stable but leverage increased, with current ratio decreasing from 1.60 to 1.55 and gearing ratio increasing from 39.1% to 41.9%, total bank borrowings amounted to RMB674 million, and the weighted average interest rate increased from 4.46% to 5.64%, and the Group adopted a prudent treasury policy with major receipts and payments denominated in RMB and USD to achieve natural hedging Key Financial Ratios | Ratio | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Current Ratio | 1.55 | 1.60 | | Gearing Ratio | 41.9% | 39.1% | - As of June 30, 2023, total bank borrowings amounted to RMB674 million, with a weighted average effective interest rate of 5.64% (2022: 4.46%)[65][67] - The Group pledged buildings and land use rights with a carrying amount of RMB111 million as collateral for borrowings[69] Corporate Governance The Company complied with most provisions of the Corporate Governance Code but with two deviations: firstly, the roles of Chairman and Chief Executive Officer are held concurrently by Mr. Chen Jincang; secondly, former Non-executive Director Mr. Guo Songsen improperly traded company shares during blackout periods and without prior notification to the Company as required, violating the Model Code, and the Company has taken measures to strengthen internal training and monitoring to prevent similar incidents from recurring - The roles of Chairman and Chief Executive Officer are held by Mr. Chen Jincang, which the Board believes benefits Group management, with the Board's relatively high independence providing a balance of power[97] - Former Non-executive Director Mr. Guo Songsen repeatedly traded company shares during blackout periods in 2022 and 2023 without prior notification to the Company, violating the Model Code. The Company has reminded all Directors to comply with the rules and arranged training by legal advisors[102][106] - The Audit Committee reviewed the unaudited interim results and financial statements for the period. PricewaterhouseCoopers, the independent auditor, reviewed the condensed consolidated interim financial statements[93][99]