GITI TIRE CORP(SH:600182)2021-04-22 16:00Financial Performance - The net profit of GITI Tire's parent company for 2020 was CNY 79.50 million, with a legal reserve of CNY 7.95 million, resulting in a distributable profit of CNY 262.71 million by the end of 2020[6]. - A cash dividend of CNY 0.55 per 10 shares will be distributed to shareholders, totaling CNY 18.70 million, with the remaining distributable profit carried forward to future years[6]. - The company reported a significant increase in total distributable profits, which rose from CNY 218.01 million at the beginning of the year to CNY 262.71 million by year-end[6]. - The company's operating revenue for 2020 was ¥2,803,047,211.18, a decrease of 8.70% compared to ¥3,070,118,188.23 in 2019[23]. - Net profit attributable to shareholders was ¥59,636,247.45, down 31.35% from ¥86,865,756.40 in the previous year[23]. - Basic earnings per share decreased by 31.35% to ¥0.1754 from ¥0.2555 in 2019[24]. - The weighted average return on equity fell to 6.02%, a decrease of 3.20 percentage points from 9.22% in 2019[24]. - Cash flow from operating activities increased by 59.54% to ¥395,214,216.10, compared to ¥247,726,639.86 in 2019[23]. - Total assets at the end of 2020 were ¥2,951,795,566.60, a decrease of 2.80% from ¥3,036,740,635.60 in 2019[23]. - The company’s net assets attributable to shareholders increased by 3.37% to ¥1,006,618,897.65 from ¥973,842,650.20 in 2019[23]. - The company’s cash and cash equivalents increased by 44.88% to ¥334 million compared to ¥231 million at the beginning of the year[33]. - The company’s short-term borrowings decreased by 100% to ¥0 from ¥50 million in the previous year[33]. - The company achieved operating revenue of 2.803 billion RMB in 2020, a decrease of 8.70% year-on-year[41]. - Operating costs were 2.213 billion RMB, down 11.28% compared to the previous year[41]. - Net profit for the year was 125 million RMB, reflecting a decline of 30.87% year-on-year[41]. - The gross profit margin for the main business was 20.44%, an increase of 2.13 percentage points from the previous year[45]. - Domestic sales revenue was approximately 1.552 billion RMB, with a gross margin of 15.77%[45]. - International sales revenue reached about 1.224 billion RMB, with a gross margin of 26.35%[45]. - The company produced 1.212 million tires and sold 1.214 million tires, with a production decrease of 11.55% year-on-year[46]. - Research and development expenses increased by 144.71% to 19.5 million RMB[42]. - The company reported a significant reduction in short-term borrowings, down to zero from 49,531,020.00 yuan, indicating improved liquidity[56]. - The company’s tax expenses decreased by 0.21 billion yuan due to a reduction in pre-tax profits[51]. - In 2020, the company's net profit was approximately 59.64 million, with a net profit margin of 31.36%, compared to 86.87 million and 30.92% in 2019[90]. Audit and Internal Control - GITI Tire's financial statements were audited by Yongtuo Accounting Firm, which issued a qualified opinion, indicating some concerns that need to be addressed[5]. - GITI Tire's internal control audit received a negative opinion, highlighting potential weaknesses in financial governance[9]. - The audit report includes a qualified opinion due to the lack of sufficient and appropriate audit evidence regarding the unapproved related party transactions, which are significant to the company[164]. - Key audit matters include the completeness of disclosures related to related party relationships and transactions, which are significant due to the number and amount of transactions involved[165]. - The audit firm emphasizes the importance of assessing risks of material misstatement due to fraud or error in the financial statements[171]. - The audit procedures included evaluating and testing the internal controls related to identifying and disclosing related party transactions[166]. - The internal control self-assessment report indicates that there were significant deficiencies in internal control related to daily related party transactions, which were not approved by the shareholders' meeting[158]. - The internal control audit report issued by Yongtuo Accounting Firm states that the company did not maintain effective internal control over financial reporting as of December 31, 2020, due to the aforementioned deficiencies[159]. - The company has disclosed its internal control audit report and the board's special explanation regarding the audit findings[158]. Market and Industry Outlook - The tire market is expected to stabilize and maintain steady growth due to improved economic conditions and government consumption promotion policies[32]. - The overall market for tires faced a downturn due to the COVID-19 pandemic, with global tire sales revenue experiencing a substantial decline[58]. - The company anticipates a challenging business environment due to the impact of global economic conditions and domestic market dynamics on tire demand[82]. - The domestic tire manufacturing industry is experiencing intensified competition due to economic pressures and stricter environmental regulations, leading to a potential industry consolidation[83]. - The tire industry is experiencing increased concentration due to the exit of smaller players, driven by overcapacity and environmental policy impacts[60]. - The company is facing challenges from international trade protectionism, including anti-dumping measures in various countries[60]. Related Party Transactions - The total amount of related party transactions in 2020 was RMB 37.71 billion, compared to an expected total of RMB 46.56 billion, indicating a completion rate of approximately 81%[104]. - The company engaged in procurement of raw materials and other goods from related parties, with actual transactions amounting to RMB 9.22 billion against a planned maximum of RMB 13 billion[104]. - Sales of goods to related parties reached RMB 27.23 billion, which was below the expected maximum of RMB 32 billion[104]. - The company provided labor services to related parties, with actual transactions totaling RMB 0.14 billion against a maximum expected of RMB 0.20 billion[104]. - The company plans to continue related party transactions as they are deemed necessary for operations, despite previous shareholder meeting rejections[104]. - The company has strengthened the management of related party transactions to minimize potential impacts on business independence[107]. - The audit confirmed that the related party transactions for the year 2020 adhered to fair trading and market principles, with no detrimental effects on the company or shareholders[199]. - The audit verified that the procurement amount disclosed in the annual financial report matched the recorded data[191]. - The audit found no significant price differences between related party procurement and third-party prices for raw materials and fixed assets[192]. - Related party sales transactions in 2020 were conducted in accordance with the company's related party transaction system and were approved through internal management processes[196]. Corporate Governance and Management - The company has a strong R&D capability recognized as a national-level technology center, which is crucial for maintaining product quality and market competitiveness[94]. - The company has established a performance-based salary system that aligns employee compensation with business performance, ensuring internal equity and market competitiveness[146]. - The company is focusing on developing a learning-oriented team to meet future demands through comprehensive training programs[148]. - The company has established three career development paths for employees, focusing on management, professional, and operational roles[147]. - The company has a high-level management performance evaluation mechanism that ties compensation to business performance[157]. - The company plans to strengthen management of related transactions and ensure compliance with reporting and approval procedures[152]. - The company has not faced any penalties from securities regulatory agencies in the past three years[144]. - The company has not granted any stock incentives to directors and senior management during the reporting period[141]. - The total remuneration for all directors, supervisors, and senior management during the reporting period amounted to 3.1363 million yuan[143]. - Independent directors receive quarterly allowances, while senior management's basic salary is paid monthly with performance bonuses issued after annual assessments[143]. Environmental Compliance - The company has passed the annual supervision audit certification for ISO14001 environmental management system and ISO45001 occupational health and safety management system[117]. - The company operates two 65-ton coal-fired boilers, with SO2 emissions measured at 166.12 mg/m3, significantly below the standard limit of 400 mg/m3[116]. - The actual total SO2 emissions from the boilers were 90.37 tons, compared to the approved total of 331.8 tons[116]. - The company’s wastewater treatment facilities include online monitoring for COD and ammonia nitrogen, ensuring compliance with environmental standards[121]. - The company has implemented a combination of pre-treatment and UV photocatalysis for the treatment of process waste gas, with facilities operating normally[119]. - The company’s production wastewater primarily comes from equipment cooling and domestic sewage, with no exceedance of discharge standards reported[118]. - The company has established an emergency response plan for environmental incidents, revised in July 2020 and filed with local environmental authorities[123]. - The company has maintained stable operation of pollution control facilities, with regular monitoring and compliance with national environmental regulations[121]. Shareholder Information - The largest shareholder, Giti Tire (China) Investment Co., Ltd., holds 151,070,000 shares, representing 44.43% of the total shares[132]. - Li Lujun, a significant shareholder, increased his holdings by 1,239,771 shares, bringing his total to 5,000,025 shares, which is 1.47% of the total[132]. - The company has no strategic investors or general legal entities becoming top 10 shareholders during the reporting period[134]. - The controlling shareholder is Giti Tire (China) Investment Co., Ltd., which focuses on investments in tires and related industries, including new product and technology development[134]. - The actual controller of the company includes Lin Meifeng, Lin Zhenwei, and Chen Yingyi, all of whom hold executive positions within Giti Group[135]. - There are no changes in the controlling shareholder or actual controller during the reporting period[137]. - The company has no other legal entities holding more than 10% of shares[139]. - There are no restrictions on share reduction during the reporting period[138]. - The company has a total of 5,200,000 shares held by Heilongjiang International Trust Investment Co., which accounts for 1.53% of the total shares[132]. - The company has a total of 2,000,000 shares held by China Cinda Asset Management Co., which accounts for 0.59% of the total shares[132]. Strategic Initiatives - The company plans to continue its market expansion and product development strategies, although specific numerical targets were not disclosed in the report[8]. - The company is focusing on expanding its domestic sales and adjusting product structures to mitigate the impact of declining sales[39]. - The company aims to enhance its market share by adjusting sales prices and product structure in response to increased domestic competition and export challenges[82]. - The company recognizes the need for increased research and development investment to meet rising consumer demands for safety, energy efficiency, and environmental sustainability in tire products[79]. - The company is committed to improving production efficiency and controlling costs to navigate the complex operating environment influenced by fluctuating raw material prices[85]. - The company is undergoing a transformation to enhance core competitiveness through product structure adjustment and smart manufacturing improvements[60]. - The company plans to gradually reduce related party transactions starting in 2021, shifting from purchasing through related parties to direct procurement[96]. - The company has identified a gap in product technology and brand positioning compared to global tire manufacturers, which it aims to address through innovation[78].