Hengtong(SH:600226)2020-07-17 16:00Financial Performance - The company reported a net profit attributable to shareholders of the parent company of -672,992,723.05 yuan for the year 2019, with a net profit of -542,994,243.33 yuan for the parent company[6]. - The company proposed not to distribute profits for the year 2019 and not to increase capital reserves into share capital[6]. - The company reported an accumulated undistributed profit of -39,195,210 yuan at the end of 2019[6]. - The company's operating revenue for 2019 was RMB 805,256,358.25, a decrease of 18.00% compared to RMB 982,064,939.24 in 2018[27]. - The net profit attributable to shareholders for 2019 was a loss of RMB 672,992,723.05, representing a decline of 574.88% from a profit of RMB 141,719,552.61 in 2018[27]. - The basic earnings per share for 2019 was -0.22 RMB, a decrease of 540.00% compared to 0.05 RMB in 2018[28]. - The total assets at the end of 2019 were RMB 4,159,059,189.32, down 17.95% from RMB 5,068,902,850.12 at the end of 2018[27]. - The net assets attributable to shareholders decreased by 18.24% to RMB 3,546,130,674.44 at the end of 2019 from RMB 4,337,402,756.71 at the end of 2018[27]. - The company reported a net cash flow from operating activities of -102,419,843.91 RMB in 2019, an improvement from -176,120,333.71 RMB in 2018[27]. - The weighted average return on equity for 2019 was -17.10%, a decrease of 20.42 percentage points from 3.32% in 2018[28]. Audit and Compliance - The company received a non-standard audit opinion from Tianjian Accounting Firm regarding its 2019 financial statements[11]. - The company’s internal control effectiveness was deemed ineffective by the auditor, leading to a negative opinion on internal controls[11]. - The company has not fulfilled the decision-making procedures for providing guarantees, which may involve violations of regulations[11]. Borrowings and Financial Obligations - The company borrowed 12 million yuan from Deqing Shenghua Microfinance Co., Ltd. in June 2019, with a monthly interest rate of 2%[10]. - The company confirmed that 24 million yuan of borrowings were directly paid to third parties as requested by the controlling shareholder, resulting in related party fund occupation[10]. - The company recorded a bad debt provision of 101.99 million yuan for receivables and 18 million yuan for prepayments during the reporting period[92]. Revenue and Market Trends - The company’s revenue from the gaming sector is part of a broader strategy that includes game development, agency distribution, and IP cooperation, aiming for a comprehensive industry chain model[41]. - The Chinese gaming market generated revenue exceeding ¥310 billion in 2019, with a growth rate of 10.6%, while the mobile gaming sector alone accounted for ¥158.11 billion, representing 68.5% of the total market[41]. - The actual sales of independently developed games in the overseas market amounted to 82.52 billion yuan in 2019, representing a year-on-year increase of 21.0%[44]. - The company aims to leverage its strengths in game development and distribution to adapt to market changes and ensure sustainable profitability[41]. Industry Challenges and Regulatory Environment - The chemical industry is facing stricter regulations due to the revised Food Safety Law and Environmental Protection Law, which require higher standards for pesticide and veterinary drug production[100]. - The implementation of the Environmental Protection Tax Law has increased the environmental costs for pesticide companies, with specific tax amounts based on pollution equivalents[103]. - The Chinese pesticide industry is encouraged to consolidate through mergers and acquisitions to enhance competitiveness and reduce the number of companies in the market[100]. - The Ministry of Agriculture has initiated a reduction action plan for the use of veterinary antibiotics, aiming for a "zero growth" in usage over three years[103]. Strategic Initiatives - The company’s strategic focus includes market expansion and new product development, although specific details were not disclosed in the conference call[30]. - The company plans to address the decline in revenue by focusing on market expansion and new product development strategies[72]. - The company aims to focus on the production and sales of environmentally friendly pesticide formulations in response to increasing regulatory pressures[110]. Shareholder and Management Commitments - The company has committed to maintaining the independence of its management and financial operations, ensuring no overlap with other enterprises controlled by the major shareholder[178]. - The major shareholder has pledged to avoid any business activities that may compete with the company, ensuring no conflicts arise in the future[181]. - The company has established a commitment to provide accurate and complete information during significant asset restructuring, ensuring transparency in all transactions[181]. - The company will ensure the independence of its operations, including personnel, assets, and organizational structure, to protect the interests of public shareholders[189].