兆新股份(002256) - 2019 Q4 - 年度财报

Important Notes, Table of Contents, and Definitions The company faces a delisting risk warning, multiple operational risks, and plans no dividend distribution for 2019 - The company warns that its stock will be subject to a delisting risk warning following the 2019 annual report disclosure due to two consecutive years of audited net losses[5] - The company faces operational risks including economic uncertainties, policy changes, technological substitution, price fluctuations, and liquidity constraints[5] - The company does not plan to distribute cash dividends, issue bonus shares, or capitalize reserves for the 2019 fiscal year[7] Company Profile and Key Financial Indicators The company's performance declined significantly in 2019, with shrinking revenue and assets, and widening net losses Key Accounting Data and Financial Indicators The company's 2019 performance saw a sharp decline in revenue and a significant increase in net loss, reflecting overall operational and financial pressure | Indicator | 2019 | 2018 (Restated) | YoY Change | 2017 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue (Yuan) | 431,282,903.18 | 603,628,902.58 | -28.55% | 646,897,719.44 | | Net Profit Attributable to Shareholders (Yuan) | -307,304,815.77 | -207,601,528.90 | -48.03% | 140,119,759.16 | | Net Profit Attributable to Shareholders (Non-recurring items deducted) (Yuan) | -317,062,527.40 | -203,183,493.95 | -56.05% | 113,871,502.20 | | Net Cash Flow from Operating Activities (Yuan) | 102,893,689.13 | 186,380,475.00 | -44.79% | 174,510,832.52 | | Basic Earnings Per Share (Yuan/Share) | -0.16 | -0.11 | -45.45% | 0.07 | | Weighted Average Return on Equity | -17.50% | -10.05% | -7.45% | 6.27% | | Total Assets (Yuan) | 2,717,201,477.66 | 3,085,516,665.49 | -11.94% | 3,845,301,006.05 | | Net Assets Attributable to Shareholders (Yuan) | 1,616,174,341.35 | 1,915,745,271.94 | -15.64% | 2,264,527,691.00 | Key Quarterly Financial Indicators The company incurred a substantial loss in the fourth quarter of 2019, which was the primary contributor to the full-year deficit | Indicator (Yuan) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 84,886,775.92 | 121,820,838.10 | 121,811,667.72 | 102,763,621.44 | | Net Profit Attributable to Shareholders | -25,892,105.15 | 4,081,746.11 | -7,818,248.36 | -277,676,208.37 | | Net Cash Flow from Operating Activities | -1,948,131.58 | 53,830,708.20 | 64,118,718.83 | -13,107,606.32 | Non-recurring Gains and Losses The company's non-recurring items in 2019 totaled 9.76 million Yuan, mainly from government subsidies, having a limited impact on the substantial annual loss | Item (Yuan) | 2019 Amount | 2018 Amount | 2017 Amount | | :--- | :--- | :--- | :--- | | Gain/Loss on Disposal of Non-current Assets | 2,706,012.71 | -4,132,758.65 | -3,454,945.07 | | Government Grants Recognized in Current Profit/Loss | 10,924,944.66 | 11,623,964.49 | 20,860,524.60 | | Other Non-operating Income and Expenses | -1,312,337.29 | -403,063.46 | 300,951.90 | | Total | 9,757,711.63 | -4,418,034.95 | 26,248,256.96 | Company Business Summary The company operates in new energy, fine chemicals, and biodegradable materials, with a core focus on the new energy sector Main Business The company's main business covers new energy, fine chemicals, and biodegradable materials, with new energy being the core segment - The company's business is divided into three main categories: new energy, fine chemicals, and biodegradable materials[29] - The new energy business is subdivided into: - Solar photovoltaic power generation: Owns and is constructing photovoltaic power stations with a total capacity of 262.5MW - Deep processing of lithium salt products: Holds a stake in Shanghai Zhongli, with an annual production capacity of 8,000 tons of battery-grade lithium salt products - Lithium extraction from salt lakes: Holds a stake in Jintai Potash Fertilizer, which owns the Balunmahai Salt Lake resources - Energy storage: Subsidiary Beijing Baineng is engaged in the zinc-bromine energy storage battery business - New energy vehicle charging stations: Invests in and operates through a stake in Zhaowei New Energy[29][30][31][32] - The fine chemicals business operates on a model of in-house R&D and authorized contract manufacturing, with products including eco-friendly functional coatings and green household products[33][36] - The biodegradable materials business follows an integrated model of R&D, production, and sales, with products primarily exported to the US, Canada, and Russia[34][37][38] Major Changes in Key Assets During the reporting period, equity assets decreased significantly by 216 million Yuan due to fair value changes and impairment losses | Key Asset | Description of Major Change | | :--- | :--- | | Equity Assets | Ended the period at 515 million Yuan, a decrease of 216 million Yuan from the beginning, mainly due to fair value changes in other non-current financial assets and impairment of long-term equity investments | | Fixed Assets | Ended the period at 1.40 billion Yuan, a decrease of 77 million Yuan from the beginning, primarily due to depreciation for the period | | Intangible Assets | Ended the period at 56 million Yuan, a decrease of 3.26 million Yuan from the beginning, primarily due to amortization for the period | Core Competitiveness Analysis The company's core competitiveness lies in technological innovation, brand recognition, market reach, management, and cost advantages - The company's core competencies include: - Technological Innovation: Possesses a municipal-level enterprise technology center, 40 authorized patents (including 25 invention patents), and participates in setting national and industry standards - Brand Advantage: Holds honors such as "China Well-known Trademark" and "Guangdong Famous Trademark" - Market Advantage: Has established a nationwide marketing and supply network with global reach - Management Advantage: Possesses extensive management experience and is certified under ISO9001, ISO14001, and other systems - Cost Advantage: Achieves lower overall costs through economies of scale, enhancing bargaining power in raw material procurement[47][48][49][50][51][52][53] Discussion and Analysis of Operations The company's 2019 operations were under pressure due to factory relocation and financing difficulties, leading to a significant decline in revenue and profit Overview In 2019, the company's operating revenue and net profit declined significantly due to factory relocation, financing challenges, and underperforming investments | Indicator | 2019 Amount | YoY Change | | :--- | :--- | :--- | | Total Operating Revenue | 431 million Yuan | -28.55% | | Net Profit Attributable to Shareholders | -307 million Yuan | -48.03% | Main Business Analysis The fine chemicals segment's revenue decline was the primary driver of the overall revenue drop, while photovoltaic power generation became the largest revenue source 2019 Operating Revenue Composition (by Industry) | Industry Segment | 2019 Amount (Yuan) | % of Operating Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Fine Chemicals | 183,029,004.99 | 42.44% | -37.18% | | New Materials | 36,803,404.40 | 8.53% | 21.34% | | Photovoltaic Power Generation | 211,450,493.79 | 49.03% | -8.76% | | Photovoltaic Power Equipment | 0.00 | 0.00% | -100.00% | 2019 Gross Margin by Major Industry | Industry Segment | Operating Revenue (Yuan) | Operating Cost (Yuan) | Gross Margin | YoY Change in Gross Margin | | :--- | :--- | :--- | :--- | :--- | | Fine Chemicals | 183,029,004.99 | 135,843,483.35 | 25.78% | -1.63% | | Photovoltaic Power Generation | 211,450,493.79 | 95,720,998.42 | 54.73% | -4.47% | - Production and sales volumes in the fine chemicals industry dropped significantly, mainly due to factory relocation and a shift to a commissioned processing model[64] - Due to factory relocation, the production model for the fine chemicals business temporarily shifted from self-production to authorized contract manufacturing[70] Investment Analysis Several fundraising projects were altered or terminated due to market changes, with a large portion of the proceeds reallocated to supplement working capital - The company raised 1.521 billion Yuan from a private placement in 2015; as of the report date, 95.97% of the funds (1.46 billion Yuan) had their intended use changed[91][92] - Multiple original investment projects were significantly altered or terminated due to factors like new photovoltaic policies, falling lithium salt prices, and financing difficulties[97][98][104][105] Future Outlook The company plans to focus on the upstream electric vehicle industry chain while managing risks from economic conditions, policy changes, and liquidity constraints - Future Strategy: Maintain stable growth in traditional businesses while focusing on lithium extraction from salt lakes and deep processing of lithium salt products for the upstream electric vehicle industry chain[119] - 2020 Business Plan: - Photovoltaics: Optimize operations and maintenance of existing power stations to improve efficiency - Lithium Battery Materials: Prudently advance lithium resource development and processing - Fine Chemicals: Upgrade traditional business lines, focusing on high-value-added daily chemical and cosmetic aerosol products - Biodegradable Materials: Expand market share in disposable tableware and film bag products - New Business: Explore investment, trade, and leasing opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area[120][121][117] - Key Risks: - Policy Changes: Reductions in photovoltaic feed-in tariffs and adjustments in lithium battery industry policies may adversely affect earnings - Technological Substitution: Risk of being replaced by new technologies or materials in the photovoltaic and lithium battery sectors - Price Volatility: Fluctuations in the market prices of raw materials, lithium salt products, and potash fertilizer may impact performance - Liquidity Risk: Persistent financing pressures may exacerbate capital constraints[123][124][125][126][127] Important Matters The company faced significant issues including unfulfilled performance commitments, a "qualified opinion" audit report, and major accounting error corrections Performance of Commitments Affiliated companies failed to meet their 2019 performance commitments due to market price drops and financing issues Performance Commitment Completion Status | Promisor | Forecast Period | Forecasted Performance (10,000 Yuan) | Actual Performance (10,000 Yuan) | Reason for Shortfall | | :--- | :--- | :--- | :--- | :--- | | Shanghai Zhongli Industrial Co, Ltd | 2019 | 9,375 | -1,261.69 | Sharp decline in lithium carbonate prices; financing difficulties limiting production capacity | | Qinghai Jintai Potash Fertilizer Co, Ltd | 2019 | 25,000 | 2,456.16 | Sharp decline in lithium carbonate and lithium chloride prices; financing difficulties delaying capacity expansion | Explanation of "Non-standard Audit Report" The auditor issued a qualified opinion with a material uncertainty related to going concern, citing an irregular transaction and consecutive losses - Qualified Opinion Matter: A 34.75 million Yuan accounts receivable factoring transaction in 2017 was deemed to lack commercial substance, and the auditor could not obtain sufficient evidence on its recoverability[142] - Material Uncertainty Related to Going Concern: - The company incurred net losses for two consecutive years in 2018 and 2019 - Major operating assets are subject to restricted rights - Weak financing capacity and overdue borrowings[143] Major Accounting Error Corrections The company retrospectively restated prior-period financial statements to correct significant accounting errors related to impairment, revenue recognition, and a factoring transaction - Key accounting error corrections involved: 1. Recognizing additional impairment for a suspended photovoltaic power project 2. Reversing previously recognized national subsidy revenue for a photovoltaic project that did not receive subsidy approval 3. Adjusting for a 2017 accounts receivable factoring transaction that lacked commercial substance[156] Impact of Accounting Error Corrections on 2018 Financial Statements | Statement Item | Before Adjustment (Yuan) | After Adjustment (Yuan) | Adjustment Amount (Yuan) | | :--- | :--- | :--- | :--- | | Retained Earnings | -19,471,814.75 | -37,040,981.60 | -17,569,166.85 | | Asset Impairment Loss | 225,760,046.66 | 229,864,435.02 | 4,104,388.36 | | Construction in Progress | 35,860,729.24 | 30,213,329.24 | -5,647,400.00 | | Accounts Receivable | 356,189,164.78 | 376,699,721.80 | 20,510,557.02 | Major Related-Party Transactions No major related-party transactions related to daily operations, asset acquisitions, or sales occurred during the reporting period - The company did not engage in any material related-party transactions related to daily operations, asset or equity acquisitions/disposals, joint investments, or other significant related-party dealings during the reporting period[169][170][171][173] Changes in Share Capital and Shareholders The company's share structure changed due to the release of restricted shares, while the controlling shareholder faces high risk with nearly all shares pledged and frozen Changes in Share Capital The company's total share capital remained unchanged, but the proportion of unrestricted shares increased as restricted shares were released | Share Type | Quantity Before Change | Quantity After Change | Post-Change Ratio | | :--- | :--- | :--- | :--- | | I. Restricted Shares | 633,040,131 | 487,154,600 | 25.88% | | II. Unrestricted Shares | 1,249,371,741 | 1,395,257,272 | 74.12% | | III. Total Shares | 1,882,411,872 | 1,882,411,872 | 100.00% | Shareholders and Actual Controller The controlling shareholder's shares are almost entirely pledged and frozen, posing a significant control risk, while a major shareholder has entered bankruptcy proceedings Top Five Shareholders | Shareholder Name | Shareholder Type | Shareholding Ratio | Number of Shares | Pledge/Freeze Status | | :--- | :--- | :--- | :--- | :--- | | Chen Yongdi | Domestic Natural Person | 26.26% | 494,406,779 | Pledged: 494M, Frozen: 494M | | Shenzhen Caihong Venture Capital Group Co, Ltd | Domestic Non-state-owned Legal Entity | 13.79% | 259,504,859 | Pledged: 172M, Frozen: 260M | | Shenzhen Huitong Zhengyuan Equity Investment Fund | Domestic Non-state-owned Legal Entity | 6.45% | 121,427,844 | Pledged: 121M | | Shenzhen Baoxin Financial Services Co, Ltd | Domestic Non-state-owned Legal Entity | 5.00% | 94,120,845 | None | | CR SZITIC Trust Co, Ltd - Guanghuataifeng No.1 | Other | 1.33% | 25,066,744 | None | - The controlling shareholder, Mr. Chen Yongdi, has 99.92% of his shares pledged and 100% judicially frozen[166][204] - Caihong Group, a shareholder with over 5% ownership, has entered bankruptcy proceedings[193] Directors, Supervisors, Senior Management, and Employees The company experienced frequent high-level management changes, indicating instability, while its workforce is primarily composed of production staff Changes in Directors, Supervisors, and Senior Management The company experienced frequent turnover in its senior management team, including the departure of the Chairman, General Manager, and Board Secretary - Several key executives departed, including: - Former Chairman Zhang Wen resigned on March 13, 2020 - Former General Manager Zhang Wen was dismissed on April 12, 2020 - Former Vice Chairman Zhai Jianfeng resigned on April 8, 2020 - Former Board Secretary Jin Hongying was dismissed on April 7, 2020 - Former Supervisor Wang Yun resigned on December 31, 2019[220] Employee Situation As of the end of the reporting period, the company had 474 employees, with production personnel constituting the largest group Employee Professional Composition | Professional Category | Number of People | | :--- | :--- | | Production Personnel | 270 | | Sales Personnel | 58 | | Technical Personnel | 56 | | Finance Personnel | 17 | | Administrative Personnel | 73 | | Total | 474 | Corporate Governance The company's internal controls have major deficiencies in both financial and non-financial reporting, leading to an adverse opinion from auditors Internal Control Evaluation Report The company's internal controls have major financial and non-financial deficiencies, resulting in an adverse opinion on their effectiveness from the auditor - The auditor issued an adverse opinion on the effectiveness of the company's internal control over financial reporting[261] - Major deficiencies in internal control over financial reporting include: 1. Factoring business lacking commercial substance: A transaction was conducted to reduce bad debt provisions, with funds effectively originating from the company itself 2. Design flaws in financing approval processes: Multiple short-term borrowings from non-financial institutions and individuals were not approved by the board of directors[251][252][253][254][261] - Deficiencies in internal control over non-financial reporting include: 1. Irregular guarantees for the controlling shareholder: A 20 million Yuan deposit was pledged as a guarantee for the controlling shareholder without proper approval 2. Non-compliant management of insider information registration 3. Deficiencies in records management internal controls: Important archival materials were improperly destroyed[255][256] Financial Report The company's financial statements received a qualified audit opinion due to concerns about asset recoverability and significant uncertainty about its ability to continue as a going concern Audit Report The auditor issued a qualified opinion on the 2019 financial statements, citing issues with an accounts receivable's recoverability and a material uncertainty related to going concern - Audit Opinion Type: Qualified opinion[266] - Basis for Qualified Opinion: Inability to obtain sufficient and appropriate audit evidence regarding the recoverability of an accounts receivable related to a 2017 factoring transaction that lacked commercial substance[267] - Material Uncertainty Related to Going Concern: The report highlights that consecutive losses in 2018 and 2019, restricted major operating assets, weak financing capacity, and overdue borrowings indicate a material uncertainty exists that may cast significant doubt on the company's ability to continue as a going concern[268] Financial Statements Financial statements reveal a deteriorating financial position, with declining assets and equity, widening losses, and strained cash flows Consolidated Balance Sheet Highlights (Unit: Yuan) | Item | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Assets | 2,717,201,477.66 | 3,085,516,665.49 | | Total Liabilities | 1,076,597,712.23 | 1,143,110,550.81 | | Equity Attributable to Parent Company Owners | 1,616,174,341.35 | 1,915,745,271.94 | Consolidated Income Statement Highlights (Unit: Yuan) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Total Operating Revenue | 431,282,903.18 | 603,628,902.58 | | Operating Profit | -299,607,332.51 | -217,260,239.49 | | Net Profit | -309,536,234.43 | -221,947,408.41 | | Net Profit Attributable to Parent Company Owners | -307,304,815.77 | -207,601,528.90 | Consolidated Cash Flow Statement Highlights (Unit: Yuan) | Item | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 102,893,689.13 | 186,380,475.00 | | Net Cash Flow from Investing Activities | 6,157,396.25 | -234,865,363.70 | | Net Cash Flow from Financing Activities | -130,820,171.55 | -590,993,606.63 | | Net Increase in Cash and Cash Equivalents | -21,769,086.17 | -639,478,495.33 | Events After the Balance Sheet Date Subsequent to the reporting period, the company experienced multiple financing defaults, further intensifying its liquidity crisis - The company defaulted on its 650 million Yuan financing with Dongguan Trust, and the total outstanding debt of 553 million Yuan has been transferred and is subject to collection[687][688] - Two loans from Shenzhen Koens Industrial Co, Ltd, totaling 85 million Yuan, are overdue, leading to legal action and enforcement proceedings[689][690][691] - Subsidiary Xinyu Deyou defaulted on lease payments to Guangxi Financial Leasing, and the company, as guarantor, is required to fulfill its guarantee obligations[691][692]