ST康美(600518) - 2020 Q4 - 年度财报

Important Notice Audit Report Opinion The auditor issued a disclaimer of opinion on the 2020 financial report due to major internal control deficiencies - Lixin Certified Public Accountants (Special General Partnership) issued a disclaimer of opinion on the company's 2020 annual financial report[3] - The basis for the disclaimer of opinion primarily includes six aspects[4][5][6]: - Major deficiencies in internal control over financial reporting: Inability to obtain complete, accurate, and reliable financial data - Going concern: Significant doubts about the company's ability to continue as a going concern due to huge losses in 2020, negative net assets, and a large amount of overdue debt - Related-party fund appropriation: The recoverability of 8.481 billion yuan appropriated by the former actual controller could not be confirmed - Construction in progress: Lack of complete financial data for 2.858 billion yuan in construction projects, preventing confirmation of their accuracy and completeness - Inventory impairment and revenue recognition for medical devices: Inability to obtain sufficient evidence regarding the adequacy of inventory write-downs and the accuracy of related accounts receivable and operating revenue - Pending litigation: Multiple pending lawsuits whose completeness of disclosure and impact on the financial statements could not be determined Section 1 Definitions Section 2 Company Profile and Key Financial Indicators Company Information This section provides basic corporate information, including name, stock code, legal representative, and contact details | Item | Information | | :--- | :--- | | Company Name (Chinese) | 康美药业股份有限公司 | | Company Abbreviation (Chinese) | ST 康美 | | Stock Exchange | Shanghai Stock Exchange | | Stock Code | 600518 | | Legal Representative | Ma Xinggu | Key Accounting Data and Financial Indicators for the Last Three Years The company's financial condition deteriorated sharply in 2020, with significant declines in revenue and net assets 2020 Key Accounting Data | Key Accounting Data | 2020 | 2019 | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue (Yuan) | 5,412,007,961.66 | 11,445,545,810.05 | -52.72% | | Net Profit Attributable to Shareholders (Yuan) | -27,735,943,422.59 | -4,660,675,038.43 | -495.11% | | Net Cash Flow from Operating Activities (Yuan) | 1,031,392,101.60 | 2,882,044,986.08 | -64.21% | | Net Assets Attributable to Shareholders (Yuan) | -7,185,809,518.69 | 20,515,274,013.61 | -135.03% | | Total Assets (Yuan) | 36,212,979,977.45 | 64,586,228,755.01 | -43.93% | 2020 Key Financial Indicators | Key Financial Indicators | 2020 | 2019 | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (Yuan/Share) | -5.6158 | -0.9896 | -467.48% | | Weighted Average Return on Equity (%) | -416.16% | -21.20% | Decrease of 394.96 percentage points | - The net profit attributable to shareholders in the fourth quarter of 2020 was -25.364 billion yuan, which was the main source of the full-year loss[24] Section 3 Business Overview Main Business, Operating Model, and Industry Overview The company operates an integrated Traditional Chinese Medicine (TCM) industry chain centered on decoction pieces - The company's core business is TCM decoction pieces, implementing an integrated industry chain model covering upstream cultivation, midstream production and logistics, and downstream multi-channel marketing networks[29] - Sales models are diversified, including direct sales to hospitals, commercial wholesale, smart pharmacies, chain pharmacy distribution, e-commerce, and direct selling[30][31] - The company is a leader in the TCM decoction piece industry, with 11 production bases capable of producing over 1,000 types and 20,000 specifications of products, and participates in setting multiple national and provincial standards[33] Core Competitiveness Analysis Core competitiveness stems from its integrated industry chain, extensive network, and technological advantages - Full industry chain advantage: The business system covers upstream cultivation, midstream production and market operations, and downstream multi-channel marketing networks, providing a prominent resource advantage[37] - Network advantage: Deep cooperation with over 2,000 medical institutions and approximately 200,000 chain pharmacies nationwide, complemented by the Kangmei TCM bulk trading platform and multiple offline TCM markets, forming a comprehensive sales system[38] - Technological advantage: Supported by over 20 national and provincial R&D platforms, the company holds more than 610 intellectual property rights and participates in setting multiple national and provincial standards, recognized as a National Technology Innovation Demonstration Enterprise[39][40] Section 4 Management Discussion and Analysis Management Discussion and Analysis The company faced declining sales and debt risks in 2020, leading to a trusteeship arrangement - The company continued its strategy of "focusing on core business, developing industry, streamlining operations, and strengthening fundamentals," but sales revenue declined sharply due to multiple adverse factors[41] - Based on the principle of prudence, the company made large impairment provisions for goodwill, accounts receivable, fixed assets, construction in progress, and inventories, which was a primary reason for the huge loss[41] - To mitigate debt risks, Jieyang Yilin Pharmaceutical Investment Co, Ltd was introduced as a trustee to advance risk resolution and maintain stable production and operations[41] - The company plans to accelerate the resolution of legacy issues in its medical device business and recover funds by clearing inventory through various channels, while gradually adjusting and streamlining its health food business[55][56] Key Operating Activities During the Reporting Period Operating performance severely declined in 2020, driven by massive asset impairments and resulting in insolvency Key Changes in Income Statement and Cash Flow Statement | Item | Current Period (Yuan) | Prior Period (Yuan) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 5,412,007,961.66 | 11,445,545,810.05 | -52.72% | | Operating Cost | 5,198,273,863.90 | 9,935,094,405.05 | -47.68% | | Net Cash Flow from Operating Activities | 1,031,392,101.60 | 2,882,044,986.08 | -64.21% | Explanation of Significant Profit Changes from Non-Core Business | Item | Current Period (Yuan) | Prior Period (Yuan) | Change (%) | Explanation | | :--- | :--- | :--- | :--- | :--- | | Credit Impairment Loss | -1,058,088,831.85 | -180,861,935.00 | 485.03% | Increase in impairment provisions for receivables | | Asset Impairment Loss | -21,948,546,728.16 | -1,126,038,320.40 | 1,849.18% | Y-o-Y increase in asset impairment provisions | Key Changes in Assets and Liabilities | Item | Current Period-End (Yuan) | Prior Period-End (Yuan) | Change (%) | Explanation | | :--- | :--- | :--- | :--- | :--- | | Inventories | 9,040,162,905.83 | 31,408,236,688.25 | -71.22% | Provision for inventory write-downs | | Goodwill | 36,909,405.61 | 81,196,574.37 | -54.54% | Provision for goodwill impairment | | Short-term Borrowings | 2,314,766,721.42 | 12,811,329,365.98 | -81.93% | Reclassification of extended short-term borrowings to long-term borrowings | | Long-term Borrowings | 10,043,909,260.71 | 2,088,752,629.63 | 380.86% | Reclassification of extended short-term borrowings to long-term borrowings | Discussion and Analysis of Future Development The company plans to focus on core businesses while facing significant risks, including a delisting warning - The company's development strategy is to "focus on advantageous industries, strengthen large-scale commerce, revitalize potential industries, and clear out marginal businesses," concentrating resources on core TCM operations while divesting non-core assets[107] - The 2021 operating plan focuses on the upstream TCM industry chain to enhance the competitiveness of key products, strengthen midstream and downstream commercial distribution, revitalize the TCM trading market, and vigorously clear out non-core businesses[109] - The company faces significant risks, including[115][116]: - Policy risks: Ongoing impacts from healthcare reform, volume-based procurement, and medical insurance cost controls - Market competition risks: Intensifying competition in the TCM decoction piece industry - Litigation risks: Facing a special representative action for securities misrepresentation, which could lead to substantial compensation - Delisting risks: A delisting risk warning (*ST) will be implemented due to negative net assets at the end of 2020; the company's stock faces termination of listing if the bankruptcy reorganization application fails Section 5 Significant Events Profit Distribution and Commitment Fulfillment No profit distribution is planned due to significant losses, and the former controller's repayment commitment is at risk - Due to a net profit attributable to shareholders of -27.736 billion yuan in 2020, the company proposes no profit distribution and no capitalization of capital reserves[120] - The former actual controller, Ma Xingtian, committed to repaying the entire 8.481 billion yuan of non-operating appropriated funds and interest by the end of 2022, but fulfillment is highly uncertain as he has been subjected to compulsory measures and has transferred control[125] Fund Misappropriation and Non-Standard Audit Opinion The controlling shareholder misappropriated funds, and the board accepted the auditor's disclaimer of opinion - At the beginning of the reporting period, the balance of non-operating funds appropriated by the controlling shareholder and its affiliates was 9.481 billion yuan; after a repayment of 1 billion yuan during the period, the ending balance was 8.481 billion yuan, with full repayment uncertain[126][127] - The company's Board of Directors accepted the "disclaimer of opinion" audit report issued by the auditor and will take measures to protect shareholder interests[128] Delisting Risk, Bankruptcy Reorganization, and Major Litigation The company faces severe delisting risk due to negative net assets, a bankruptcy petition, and major litigation - The company's stock will be subject to a delisting risk warning (*ST) after the annual report disclosure due to negative net assets at the end of 2020[116] - A creditor has applied to the court for the company's bankruptcy reorganization; if the reorganization fails and the company is declared bankrupt, its stock will face termination of listing[133][134] - In May 2020, the company received an "Administrative Penalty Decision" and a "Market Ban Decision" from the China Securities Regulatory Commission for alleged violations of information disclosure laws and regulations[137] Section 6 Changes in Common Stock and Shareholder Information Shareholders and Actual Controller During the period, the company's controlling shareholder changed, resulting in no actual controller - As of the end of the reporting period, the total number of common shareholders was 154,066[171] - During the reporting period, the company's controlling shareholder changed from Kangmei Industrial Investment Holding Co, Ltd to Jieyang Yilin Pharmaceutical Investment Co, Ltd, and the company now has no actual controller[177][178] - The change of control was achieved by Kangmei Industrial unconditionally and irrevocably delegating the voting rights corresponding to its 29.90% shareholding to Yilin Investment[259] Section 7 Preferred Stock Information Preferred Stock Dividend Distribution No preferred stock dividends were distributed for two consecutive years, restoring voting rights to preferred shareholders - Due to the huge loss in 2020, the Board of Directors proposed not to distribute preferred stock dividends; dividends have not been paid for two consecutive years (2019 and 2020)[185][186] - According to the Articles of Association, the voting rights of preferred shareholders will be restored as dividends have not been paid for two consecutive fiscal years[188] Section 8 Directors, Supervisors, Senior Management, and Employees Changes and Penalties of Directors, Supervisors, and Senior Management The period saw significant management changes and regulatory penalties, including lifetime market bans for former executives - The company's directors, supervisors, and senior management underwent significant changes, with several key executives including former Chairman Ma Xingtian and former Vice Chairman Xu Dongjin resigning, and a new management team being elected[214][215] - In May 2020, the company and several then-serving directors, supervisors, and senior managers received administrative penalties from the CSRC, with lifetime securities market bans imposed on Ma Xingtian, Xu Dongjin, and Qiu Xiwei, and 10-year bans on Zhuang Yiqing, Wen Shaosheng, and Ma Huanzhou[216][218] Section 9 Corporate Governance Internal Control The company acknowledged major deficiencies in its financial reporting internal controls, confirmed by an adverse audit opinion - The company acknowledged that there are major deficiencies in its internal control over financial reporting[234] - The accounting firm issued an adverse opinion on the company's internal control for the year 2020[235] Section 10 Corporate Bonds Corporate Bond Basics and Risks The company's credit rating was severely downgraded to C, reflecting extreme challenges in debt repayment capabilities - In 2020, China Chengxin Securities Rating downgraded the company's corporate credit rating from BBB all the way down to C, and the ratings for "15 Kangmei Bond," "18 Kangmei 01," and "18 Kangmei 04" were downgraded to C or CC[241] Key Financial Indicators for the Last 2 Years | Key Indicator | 2020 | 2019 | Reason for Change | | :--- | :--- | :--- | :--- | | EBITDA (Yuan) | -24,754,454,293.78 | 3,320,604,837.01 | Significant decrease in profit | | Asset-Liability Ratio (%) | 119.49% | 68.03% | Large impairment provisions | | Interest Coverage Ratio | -11.75 | 1.12 | Decrease in profit | | Interest Payment Ratio (%) | 56.26% | 93.33% | Tight cash flow pressure | Section 11 Financial Report Audit Report The auditor issued a disclaimer of opinion due to six major issues preventing the acquisition of sufficient audit evidence - The auditor was unable to express an opinion on the financial statements because they could not obtain sufficient and appropriate audit evidence to serve as a basis for an opinion[251] - The basis for the disclaimer of opinion included: major deficiencies in internal control, going concern issues, related-party fund appropriation, matters related to construction projects, issues with medical device inventory impairment and revenue recognition, and pending litigation[252][253][254][255][256][258] Financial Statements Financial statements reveal severe insolvency, with liabilities far exceeding assets and massive net losses for 2020 Consolidated Balance Sheet Summary (As of December 31, 2020) | Item | Amount (Yuan) | | :--- | :--- | | Total Assets | 36,212,979,977.45 | | Total Liabilities | 43,272,140,531.45 | | Equity Attributable to Parent Company Owners | -7,185,809,518.69 | Consolidated Income Statement Summary (For the Year 2020) | Item | Amount (Yuan) | | :--- | :--- | | Total Operating Revenue | 5,412,007,961.66 | | Operating Profit | -27,141,841,720.45 | | Net Profit Attributable to Parent Company Shareholders | -27,735,943,422.59 | | Asset Impairment Loss | -21,948,546,728.16 | | Credit Impairment Loss | -1,058,088,831.85 | Notes to the Financial Statements Notes detail significant uncertainties in going concern, massive inventory write-downs, and extensive litigation risks - At the end of 2020, the company's net profit attributable to the parent was -27.736 billion yuan, net assets were -7.186 billion yuan, total interest-bearing debt was 33.03 billion yuan (including 4.539 billion yuan in overdue debt), indicating significant uncertainty about its ability to continue as a going concern[297] - The carrying amount of inventories at year-end was 30.111 billion yuan, with a write-down provision of 21.071 billion yuan, resulting in a net book value of 9.04 billion yuan; this included 19.65 billion yuan in impairment for TCM materials and 0.67 billion yuan for medical devices[453][456][458][459] - The original book value of goodwill was 0.276 billion yuan, with accumulated impairment provisions of 0.239 billion yuan, including 44.287 million yuan newly provisioned in the current period[497][498][502] - As of year-end, the total book value of assets with restricted ownership or use was 6.321 billion yuan, primarily consisting of inventories, fixed assets, intangible assets, and investment properties used as collateral[611] - The company disclosed significant contingent liabilities, including lawsuits related to medium-term notes and corporate bonds, as well as 272 pending lawsuits as of March 30, 2021, with a total amount involved of 2.368 billion yuan[673][674][675] Section 12 List of Documents for Inspection