Financial Performance - In 2022, the Group recorded a loss, although it was less substantial than the previous year's loss due to significant impairment losses recognized in 2021[15]. - The Group's revenue decreased by HK$331.2 million in 2022, representing a fall of 43.8% from HK$755.6 million in 2021 to HK$424.4 million in 2022[32]. - The Group's revenue continued to decline in the second half of 2022 compared to the same period in 2021 due to low demand and sluggish consumption sentiment in Mainland China[12]. - The average selling price and sales volume decreased due to weak demand in Mainland China, leading to a revenue drop of 41.0% in the first half of 2022 compared to the same period in 2021[26]. - The Group recorded a gross profit of HK$7.4 million in 2022, a significant recovery from a gross loss of HK$371.5 million in 2021, with the gross profit margin changing from 49.2% to 1.7%[34]. - The net loss for the year was HK$192.7 million in 2022, a decrease in loss by HK$230.1 million compared to a loss of HK$422.8 million in 2021, with the net loss margin falling from 56.0% to 45.4%[40]. - The cost of sales decreased from HK$1,127.1 million in 2021 to HK$417.0 million in 2022, a decline of 41.0% after excluding a one-off impairment cost[33]. Business Environment - The business environment for the corrugated packaging industry is expected to remain challenging due to rising interest rates, geopolitical tensions, and a global economic slowdown[21]. - The Group anticipates a challenging business environment for the corrugated packaging industry due to rising interest rates, geopolitical tensions, and global economic slowdown[23]. Financial Position - The Group maintains a healthy financial position with a net cash position, where total bank balances and cash exceed total bank borrowings[15]. - The Group's bank balances and cash were HK$110.8 million as of December 31, 2022, down from HK$246.7 million at the end of 2021[41]. - Unsecured bank borrowings decreased from HK$226.9 million at December 31, 2021, to HK$98.1 million at December 31, 2022, with a net cash level of HK$12.7 million[42]. - As of December 31, 2022, the Group's net current assets were HK$85.7 million, down from HK$225.0 million in 2021, and the current ratio decreased from 1.8 to 1.7[43][46]. - The Group's total bank borrowings to equity ratio was 10.2% as of December 31, 2022, down from 18.2% in 2021, indicating improved financial leverage[46]. - The Group's net cash position was HK$12.7 million as of December 31, 2022, compared to HK$19.8 million in 2021[46]. - The Group's financial costs decreased from HK$8.4 million in 2021 to HK$6.2 million in 2022 due to lower borrowing levels[45]. Operational Developments - The Group is currently working on transitioning from coal-fuel boilers to gas-fuel boilers, with production expected to resume in the second half of 2023[14]. - A pulp production line is being installed at a leased facility in the Philippines to mitigate rising costs under a vertically integrated operating model[20]. - The Group is installing a pulp production line in the Philippines to mitigate rising cost pressures through vertical integration[23]. - The Group aims to complete the annual inspection procedures for the boilers license and resume upstream production in 2023, while continuing the installation of large-scale pulp production lines in the Philippines to mitigate rising costs[50][53]. - The Group is actively communicating with local government to expedite the annual inspection procedures for licenses related to its operations[14]. Human Resources - The Group employed approximately 360 full-time staff as of December 31, 2022, a decrease from 805 in 2021[51][54]. - As of December 31, 2022, the Group had a total of 88 female staff out of 360 employees, representing 24.4% of the workforce[193]. Corporate Governance - The company has adopted the principles and code provisions of the Corporate Governance Code as the basis of its corporate governance practices[124]. - The Board is composed of five Directors, including two Executive Directors and three Independent Non-executive Directors[133]. - The company has established a corporate governance framework and policies based on the Corporate Governance Code to enhance oversight on business conduct[125]. - Throughout the year ended December 31, 2022, the company complied with all code provisions of the Corporate Governance Code, except for provisions C.2.1, D.3.3, and E.1.2[126]. - The company has implemented a Code of Conduct for Directors' dealings in the company's securities, adhering to the Model Code for Securities Transactions[130]. - The Company has an effective mechanism to ensure independent views are available to the Board, with the Nomination Committee assessing the independence of all independent non-executive directors annually[140]. - The Independent Non-executive Directors are appointed for a specific term of around two years, subject to renewal after the expiry of the current term[149]. - The Company organized two in-house briefings on updates on Listing Rules for all Directors during the year ended December 31, 2022[163]. - All Independent Non-executive Directors provided written annual confirmation of their independence in accordance with the guidelines set out in the Listing Rules[144]. - The Board is collectively responsible for promoting the success of the Company by directing and supervising its affairs[151]. - Directors are encouraged to participate in continuous professional development to refresh their knowledge and skills[162]. - The Company provides induction training for newly appointed Directors to ensure understanding of the business and their responsibilities[161]. Tax Matters - The Group has lodged appeals against tax decisions and plans to object to the Tax Matter Notice, with no final court decision as of the report date[61]. - The Group has not made provisions for value-added tax and other taxes, disclosing them as contingent liabilities due to ongoing appeals[62]. - The management believes it is probable that the relevant tax bureau will accept the objections, resulting in no provision for corporate income tax being made[63]. - The Audit Committee agrees with management's position that no provision should be made until a final court decision is reached[64]. - The Company expects the Audit Qualification to be removed by the end of 2023 based on the PRC legal advisor's experience[67]. - The auditor cannot confirm the removal of the Audit Qualification for the financial year ending December 31, 2023, due to lack of a concrete timeline[69]. - The Company has obtained confirmation from a principal bank to provide sufficient financial support if required to cover tax payments or penalties[70]. - Enhanced internal control measures will be implemented at both the entity and activity levels to address the tax issues[79]. - The management asserts that the irregular VAT Invoices were obtained due to inadvertence, with no intention to evade tax[78]. - The Board believes there was no fraud or dishonesty involved in the tax deductions made by the management[81]. - Green Forest Paper is required to make approximately RMB182.8 million in tax payments, including late fees, following a court ruling[89]. - The company has the right to appeal the court's decision within 15 days, and plans to do so[89]. - A principal bank has confirmed financial support for the company to ensure solvency in case of an unfavorable appeal outcome[90]. - The company filed an administrative proceeding against the tax bureau regarding a tax penalty decision, with a court hearing scheduled for April 25, 2023[91]. - Green Forest Paper applied for a tax payment guarantee on February 28, 2023, which was accepted by the tax bureau on March 23, 2023[92]. Board Diversity - The Company aims to appoint at least one female director by December 31, 2024, as part of its Board Diversity Policy[193]. - The company recognizes the importance of Board diversity as a competitive advantage and is committed to improving it[193]. - The Nomination Committee will review the board's structure and diversity annually, considering factors such as gender, age, and professional qualifications[197]. - The board diversity policy is deemed effective for the year ending December 31, 2022[196]. - The Director Nomination Policy includes criteria such as character, qualifications, and potential contributions to ensure a balanced board[200]. - The Nomination Committee will regularly assess the diversity profile of the board and progress towards diversity objectives[197]. - The company emphasizes the importance of board diversity for maintaining competitive advantage[195]. - The board is committed to improving diversity and will continue to seek opportunities to increase the proportion of female members[195].
合丰集团(02320) - 2022 - 年度财报