恒安国际(01044) - 2023 - 中期业绩

Financial Highlights The company reported a 9.0% revenue increase to RMB 12.2 billion in H1 2023, alongside a decline in gross margin and profitability H1 2023 Financial Highlights (Unaudited) | Metric | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,204,605 | 11,200,021 | 9.0% | | Core Business Revenue (Tissue, Feminine Care, Diapers) | 11,054,709 | 9,604,649 | 15.1% | | Gross Margin | 31.0% | 35.2% | -4.2 p.p. | | Operating Profit | 1,701,681 | 1,885,753 | (9.8%) | | Profit Attributable to Owners of the Company | 1,225,768 | 1,276,191 | (4.0%) | | Basic Earnings Per Share (RMB) | 1.055 | 1.098 | (4.0%) | Interim Financial Information This section provides detailed interim consolidated financial statements, including the income statement, balance sheet, cash flow statement, and explanatory notes Interim Condensed Consolidated Income Statement For the six months ended June 30, 2023, group revenue grew 9.0% to RMB 12.2 billion, but gross profit declined 3.9% to RMB 3.79 billion due to increased cost of sales, leading to a 9.8% decrease in operating profit and a 4.0% decrease in profit attributable to owners Summary of Interim Condensed Consolidated Income Statement | Item | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 12,204,605 | 11,200,021 | +9.0% | | Gross Profit | 3,788,550 | 3,942,191 | -3.9% | | Operating Profit | 1,701,681 | 1,885,753 | -9.8% | | Profit Before Income Tax | 1,541,482 | 1,795,900 | -14.2% | | Profit Attributable to Owners of the Company | 1,225,768 | 1,276,191 | -4.0% | Interim Condensed Consolidated Balance Sheet As of June 30, 2023, total assets increased 14.3% to RMB 48.4 billion, total liabilities rose 24.6% to RMB 28.12 billion primarily due to a significant increase in short-term borrowings, and total equity slightly increased 2.6% to RMB 20.28 billion Summary of Balance Sheet | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | 48,397,012 | 42,337,242 | +14.3% | | Current Assets | 34,798,104 | 28,108,522 | +23.8% | | Non-current Assets | 13,598,908 | 14,228,720 | -4.4% | | Total Liabilities | 28,116,975 | 22,561,505 | +24.6% | | Current Liabilities | 27,710,956 | 20,394,102 | +35.9% | | Non-current Liabilities | 406,019 | 2,167,403 | -81.3% | | Total Equity | 20,280,037 | 19,775,737 | +2.6% | Interim Condensed Consolidated Cash Flow Statement In H1 2023, net cash from operating activities decreased 8.7% to RMB 1.94 billion, net cash used in investing activities was RMB 2.71 billion (compared to net inflow last year), and net cash from financing activities was RMB 5.43 billion, resulting in a net increase in cash and cash equivalents of RMB 4.66 billion to RMB 10.79 billion Summary of Cash Flow Statement | Item | H1 2023 (RMB thousands) | H1 2022 (RMB thousands) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 1,938,954 | 2,124,023 | | Net Cash (Used in) / Generated from Investing Activities | (2,709,232) | 3,182,282 | | Net Cash Generated from Financing Activities | 5,431,320 | 3,169,399 | | Net Increase in Cash and Cash Equivalents | 4,661,042 | 8,475,704 | Notes to the Interim Condensed Consolidated Financial Information These notes detail the basis of preparation, accounting policies, segment information, revenue and expense breakdowns, and balance sheet items, highlighting that tissue products are the primary revenue source (58.7%), short-term borrowings significantly increased, and an interim dividend of RMB 0.70 per share is proposed Segment Information The group operates in four segments: feminine care, disposable diapers, tissue, and others; in H1 2023, tissue products were the largest revenue contributor at 58.7% (22.7% growth), feminine care accounted for 26.4% (2.9% growth), and disposable diapers 5.5% (5.0% growth), with feminine care generating the highest segment profit of RMB 1.15 billion H1 2023 Segment Revenue and Profit (RMB thousands) | Segment | Revenue | % of Total | Segment Profit | | :--- | :--- | :--- | :--- | | Feminine Care Products | 3,219,295 | 26.4% | 1,149,778 | | Disposable Diaper Products | 665,304 | 5.5% | 30,152 | | Tissue Products | 7,170,110 | 58.7% | 5,180 | | Others | 1,149,896 | 9.4% | 40,350 | Dividends The Board recommends an interim dividend of RMB 0.70 per share for the six months ended June 30, 2023, consistent with the prior year, totaling approximately RMB 813.49 million - The Board recommends an interim dividend of RMB 0.70 per share, consistent with H1 2022, with a total dividend amount of approximately RMB 813 million[60] Borrowings As of June 30, 2023, total group borrowings significantly increased to RMB 23.86 billion from RMB 17.03 billion at year-end 2022, with short-term borrowings (including super short-term commercial papers) accounting for the majority at RMB 23.66 billion, and the average annual borrowing interest rate was approximately 3.31% Borrowing Structure (RMB thousands) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Long-term Borrowings | 201,251 | 2,001,334 | | Short-term Borrowings | 23,658,741 | 15,028,618 | | Total | 23,859,992 | 17,029,952 | - In H1 2023, the company issued four tranches of super short-term commercial papers totaling RMB 5 billion, with interest rates ranging from 2.39% to 2.40%[75] Business Overview and Management Discussion This section provides an overview of the group's business performance, segment-specific results, e-commerce developments, financial position, corporate social responsibility initiatives, and future strategic outlook Overall Business Review In H1 2023, overall group revenue grew 9.0%, with core business revenue (tissue, feminine care, diapers) up 15.1%; however, gross margin declined to 31.0% due to high-cost raw material inventory, while e-commerce sales increased by approximately 30% to nearly 29.0% of total sales, and profit attributable to owners decreased 4.0% to RMB 1.23 billion - The group's three core businesses (tissue, feminine care, and diapers) maintained strong revenue growth in H1, increasing by approximately 15.1% year-on-year[97] - E-commerce sales (including Retail Link and New Channels) further increased to nearly 29.0% of total sales, growing by approximately 30.0% year-on-year[97] - Overall gross margin declined to approximately 31.0% (35.2% in the prior year) due to high-cost wood pulp inventory, but is expected to improve in H2[98] Segment Business Performance All core businesses recorded sales growth, with tissue products revenue significantly up 22.7% but under gross margin pressure, feminine care revenue up 2.9% with declining gross margin due to raw material costs, and diaper products revenue rebounding with 5.0% growth, driven by strong adult diaper sales and improved gross margin Feminine Care Business Feminine care sales revenue increased 2.9% year-on-year to RMB 3.22 billion, driven by product upgrades and new channel expansion despite intense market competition, with "Pants-style" products growing over 76.0%, though gross margin decreased 3.5 percentage points to 61.8% due to rising raw material prices Feminine Care Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 3,219,295 | 3,128,524 | | Growth Rate | +2.9% | - | | Gross Margin | 61.8% | 65.3% | - "Pants-style" series products showed significant growth potential, increasing by over 76.0% year-on-year during the period[100] Tissue Business Tissue business sales revenue significantly increased 22.7% to RMB 7.17 billion, driven by stable pricing and omni-channel sales, with high-end "Cloud Soft" series sales growing over 40%; however, gross margin declined to 17.7% due to high-cost wood pulp inventory but is expected to improve in H2, and e-commerce channel sales grew over 40% Tissue Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 7,170,110 | 5,842,612 | | Growth Rate | +22.7% | - | | Gross Margin | 17.7% | 23.1% | - Sales of the high-end "Cloud Soft" series recorded over 40.0% growth, accounting for over 12.0% of total tissue sales[101] - Tissue business sales through e-commerce channels grew over 40.0%, representing approximately 33.3% of tissue sales[101] Diaper Business Diaper business sales rebounded with a 5.0% year-on-year increase to RMB 665 million, driven by nearly 19.1% growth in high-end "Q • MO" products (over 35% of sales) and strong adult diaper sales (nearly 45.1% increase), leading to an improved gross margin of 36.0% due to a higher proportion of high-margin products Diaper Business Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB thousands) | 665,304 | 633,513 | | Growth Rate | +5.0% | - | | Gross Margin | 36.0% | 35.3% | - Sales of high-end "Q • MO" products increased by approximately 19.1% year-on-year, with their proportion rising to over 35.0%[103] - Adult diaper business recorded an increase of approximately 45.1%, accounting for about 29.2% of the segment[103] Other Revenue and Household Products Business Other revenue decreased 27.9% year-on-year to RMB 1.15 billion, primarily due to a significant 34.7% decline in raw material trading business revenue, while household products revenue also fell 26.1%, and sales of medical-related products significantly decreased due to reduced demand post-pandemic - Other revenue decreased by approximately 27.9% year-on-year, primarily due to a significant decline of approximately 34.7% in raw material trading business revenue to approximately RMB 580 million[105] E-commerce and New Retail Channels The group's e-commerce and new retail channels maintained strong momentum in H1 2023, with sales revenue growing over 30.0% to more than RMB 3.5 billion, increasing their contribution to overall group sales to approximately 29.0%, and new retail channels now contribute over 30%, 20%, and 50% to tissue, feminine care, and diaper sales, respectively E-commerce Channel Performance | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue (RMB) | Over approximately 3.5 billion | Approximately 2.7 billion | | Growth Rate | Over 30.0% | - | | % of Total Group Sales | Approximately 29.0% | 24.2% | Financial Position Analysis The group's financial position remains robust, with sales and administrative expenses increasing 19.8% due to higher online marketing investment, and operating exchange losses from RMB depreciation narrowed significantly to approximately RMB 182 million, maintaining a net cash position with a net debt-to-equity ratio of negative 23.9% Liquidity, Financial Resources and Bank Borrowings As of June 30, 2023, the group held approximately RMB 28.65 billion in cash and bank deposits, with the debt-to-equity ratio increasing to 119.1% from 87.2% at year-end, and a net debt-to-equity ratio of negative 23.9% indicating a net cash position, while RMB 5 billion in super short-term commercial papers were issued during the period Financial Ratios | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Debt-to-Equity Ratio | 119.1% | 87.2% | | Net Debt-to-Equity Ratio | -23.9% | -23.2% | - From February to May 2023, the group completed the issuance of four tranches of super short-term commercial papers totaling RMB 5 billion, with coupon rates ranging from 2.39% to 2.4%[113] Corporate Social Responsibility The group continues to advance sustainable development, improving its FTSE Russell ESG rating to 3.1 and being included in S&P Global's "Sustainability Yearbook 2023 (China Edition)," actively fulfilling social responsibilities across innovation, philanthropy, low-carbon environmental protection, employee development, and health and safety - The group's FTSE Russell ESG rating improved to 3.1 points, leading to its inclusion in the FTSE4Good Index[117] - The group joined the Green Recycled Plastic Supply Chain Joint Working Group (GRPG) as Vice Chairman to promote plastic source reduction, and all six of its paper manufacturing companies obtained FSC/CoC certification[120] Future Outlook Looking ahead to H2, the group anticipates improved gross margins for tissue products due to falling wood pulp prices, and will continue its core strategies of "focusing on main business," "enhancing brand," and "long-termism," concentrating on tissue, feminine care, and diaper businesses, while further elevating brand image, accelerating product premiumization, and planning capacity expansion in Fujian, Xiaogan, and Hunan to solidify market leadership - The positive impact of declining wood pulp prices is expected to be reflected in tissue business costs in H2, leading to an improvement in gross margin[125] - The group will continue to implement three core strategies: "Focusing on Main Business," "Enhancing Brand," and "Long-termism"[125] - Plans are underway to expand production capacity in regions including Fujian, Xiaogan, Hunan, and Yunfu, Guangdong, with some new capacity expected to commence operations in H2 2023[126] Other Company Information This section provides details on the interim dividend declaration and updates regarding the company's corporate governance practices Interim Dividend and Closure of Register of Members The Board announced an interim dividend of RMB 0.70 per share, consistent with the prior year, payable on October 12, 2023, to shareholders on record as of September 22, 2023 - An interim dividend of RMB 0.70 per share has been declared, consistent with H1 2022[127] Corporate Governance The group is committed to high corporate governance standards, complying with all applicable Code on Corporate Governance provisions during the period, except for two independent non-executive directors' absence from the AGM and one executive director's inadvertent purchase of company shares during a blackout period, violating the Model Code - Executive Director Mr. Xu Qingliu inadvertently purchased 100,000 company shares on March 22, 2023, during a director dealing blackout period, violating the Model Code[130]