叶氏化工集团(00408) - 2023 - 中期业绩

Financial Highlights The Group's H1 2023 performance saw a 12% turnover decrease to HKD 1.567 billion, an 85% drop in profit attributable to shareholders, but improved gross margin and a significantly reduced gearing ratio Financial and Business Summary For the six months ended June 30, 2023, the Group's turnover decreased by 12% to HKD 1.567 billion, while sales volume increased by 7%, gross profit margin improved by 2.8 percentage points, and profit attributable to shareholders significantly decreased by 85% to HKD 16.3 million Key Financial Indicators for H1 2023 | Indicator | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Turnover | HKD 1,566,874,000 | HKD 1,770,874,000 | -12% | | Sales Volume | 143,000 tonnes | 134,000 tonnes | +7% | | Profit Attributable to Company Shareholders^ | HKD 16,260,000 | HKD 108,313,000 | -85% | | Earnings Per Share^ | 2.9 HK cents | 19.1 HK cents | -85% | | Interim Dividend Per Share | 2.0 HK cents | 10.0 HK cents | -80% | | Gearing Ratio* | 0.1% | 46.6% | -46.5 percentage points | - Despite the decline in sales, the Group's core business improved cost efficiency, leading to a 2.8 percentage point year-on-year increase in gross profit margin to 23.9%[110][31] - The Group's overall financial position remains strong, with the gearing ratio significantly reduced to 0.1% at period-end, benefiting from proceeds from the disposal of a 51% effective interest in the solvent business[110][71][46] Management Discussion and Analysis The Group navigated a challenging H1 2023 with strategic shifts, including a new acetic acid plant, core business optimization, and M&A exploration, while improving core continuing operations profitability Chairman's Report: Review and Outlook The Chairman highlighted a challenging H1 2023 due to global interest rate hikes, weak domestic recovery, and RMB depreciation, while outlining future strategies focused on new acetic acid plant construction, core business optimization, and strategic investments - During the reporting period, the operating environment was challenging due to multiple adverse factors including weak global economy, insufficient domestic consumer confidence, and RMB depreciation of 3.75% (resulting in HKD 23 million exchange loss)[112] - Due to the disposal of a 51% effective interest in the solvent business, the Group's business structure underwent significant changes, with related performance reported as an associate of continuing operations[119][15] - Future development strategies include: - New Product Construction: Accelerating the construction of a new acetic acid plant, expected to commence production by mid-2025[120] - Core Business Optimization: Allocating more resources to restructure and optimize core businesses[15] - Strategic Investment: Seeking M&A targets and direct investments in high-quality SMEs CEO's Report The CEO's report details the Group's turnaround in core continuing operations despite external challenges and reduced profit from the solvent business, driven by product mix improvements, cost reductions, and new business initiatives Overall Performance Overview for H1 | Indicator | Amount | Year-on-year Change | | :--- | :--- | :--- | | Turnover | HKD 1.567 billion | -12% | | Gross Profit Margin | 23.9% | +2.8 percentage points | | Operating Profit from Core Continuing Operations | HKD 1.9 million | Turnaround to profit | | Profit Attributable to Shareholders | HKD 16.3 million | -85% | - The Group formed a new senior leadership team in H1 2023, integrating members with business operations and investment development backgrounds to strategize for future growth[17] Coatings Business The coatings business achieved a turnaround to profitability despite a 12% sales decline, driven by a 5.2 percentage point gross margin improvement through cost control and a higher-margin product mix Coatings Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 780 million | HKD 880 million (-12%) | | Gross Profit Margin | 28.1% | 22.9% (+5.2pp) | | Operating Profit/(Loss) | HKD 15.6 million | (HKD 26.5 million) | - In terms of business expansion, domestic architectural coatings retail stores exceeded 2,600, and the brand became an official supporter of China Women's National Football Team to enhance brand image[115] Ink Business The ink business experienced an 18% sales decline and turned to a loss due to slower-than-expected food packaging industry recovery and intensified market competition, prompting a strategic shift to new product lines like electronic circuit board ink Ink Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 550 million | HKD 676 million (-18%) | | Operating Profit/(Loss) | (HKD 4 million) | HKD 17.8 million | - Future plans include developing new product lines, with a strategic partnership formed in July 2023 with a Hubei enterprise to invest in electronic circuit board ink business[27] Lubricants Business The lubricants business showed strong performance with a 12% sales increase and a return to profitability, driven by sales network expansion, new dealer development, and OEM collaborations, capitalizing on the large traditional automotive market Lubricants Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Sales Revenue | HKD 190 million | HKD 172 million (+12%) | | Gross Profit Margin | 20.8% | 20.2% (+0.6pp) | | Operating Profit/(Loss) | HKD 5.7 million | (HKD 2.9 million) | - Business strategies include deepening focus on automotive and diesel engine lubricants, developing new dealers nationwide, and engaging in OEM collaborations with other brands[82] Property Business The property segment's turnover increased by 4% from Shanghai R&D building rentals, but a fair value decrease of HKD 5.2 million for the Hong Kong Wan Chai office resulted in an operating loss of HKD 1.4 million Property Business Performance | Indicator | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Turnover | HKD 5.6 million | HKD 5.4 million (+4%) | | Operating Profit/(Loss) | (HKD 1.4 million) | HKD 2.2 million | Other Businesses and Outlook The Group is transforming towards "environmentalization," "terminalization," and "service-oriented" models, investing USD 85 million in upstream acetic acid and expanding the "Da Mai Car Care" brand, while cautiously optimistic for H2 market recovery - The Group invested in upstream acetic acid business by subscribing to USD 85 million in preferred shares, partnering with PAG[29] - The automotive aftermarket brand "Da Mai Car Care" has expanded its store network to 122 stores, covering six provinces and serving over 467,000 vehicles[29] Liquidity and Financial Resources The Group's financial position significantly improved, with the gearing ratio dramatically reduced to 0.1% and operating cash flow turning positive, primarily due to proceeds from the solvent business disposal - The gearing ratio (net bank borrowings as a percentage of shareholders' equity) significantly decreased from 46.6% in the prior period to 0.1%[46][14] Financial Position Summary (as of June 30, 2023) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Bank Borrowings | HKD 1.244 billion | HKD 2.180 billion | | Cash and Bank Balances | HKD 1.240 billion | HKD 1.088 billion | | Net Bank Borrowings | HKD 4.012 million | HKD 1.092 billion | - Net cash inflow from operating activities was HKD 51.76 million, compared to a net outflow of HKD 31.34 million in the prior period[39][7] - Proceeds from the solvent business disposal were partly used to repay loans, subscribe to USD 85 million in preferred shares, and acquire a minority interest in the ink business, with the remainder for dividends and future investments[41] Human Resources As of June 30, 2023, the Group had 2,837 employees, predominantly in mainland China, with a focus on human resource development through training, job rotation, education subsidies, and competitive compensation to attract and retain talent - As of June 30, 2023, the Group had a total of 2,837 employees, with 2,764 from mainland China[44] - The Group offers competitive compensation and benefits, including base salary and performance-linked bonuses, with regular reviews of remuneration policies[53] Condensed Consolidated Financial Statements The Group's H1 2023 financial statements show a 12% turnover decrease, stable gross profit, and a significant drop in net profit due to the prior period's discontinued operations, but a turnaround to profitability for continuing operations Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group's H1 2023 turnover was HKD 1.567 billion, with gross profit stable at HKD 375 million, and net profit significantly decreased to HKD 8.9 million due to prior period discontinued operations, while continuing operations achieved HKD 16.26 million in profit attributable to shareholders Condensed Consolidated Statement of Profit or Loss (HKD thousands) | Indicator | H1 2023 (Unaudited) | H1 2022 (Unaudited and Restated) | | :--- | :--- | :--- | | Turnover | 1,566,874 | 1,770,874 | | Gross Profit | 375,022 | 373,445 | | Profit (Loss) Before Tax | 10,072 | (57,134) | | Profit for the Period | 8,895 | 164,355 | | Attributable to | | | | Profit Attributable to Company Shareholders | 16,260 | 108,313 | | - From continuing operations | 16,260 | (62,047) | | - From discontinued operations | – | 170,360 | | Earnings Per Share | | | | Basic and Diluted (from continuing and discontinued operations) | 2.9 HK cents | 19.1 HK cents | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets decreased to HKD 6.545 billion, total liabilities significantly reduced to HKD 2.748 billion due to loan repayments, and equity attributable to shareholders decreased to HKD 3.825 billion Condensed Consolidated Statement of Financial Position Summary (HKD thousands) | Indicator | June 30, 2023 (Unaudited) | December 31, 2022 (Restated) | | :--- | :--- | :--- | | Non-current assets | 3,547,166 | 3,038,893 | | Current assets | 2,998,152 | 4,972,608 | | Total assets | 6,545,318 | 8,011,501 | | Current liabilities | 2,682,059 | 3,144,534 | | Non-current liabilities | 66,152 | 408,054 | | Total liabilities | 2,748,211 | 3,552,588 | | Equity attributable to company shareholders | 3,824,927 | 4,406,955 | | Total equity | 3,797,107 | 4,458,913 | Condensed Consolidated Statement of Cash Flows The Group generated net cash inflow of HKD 51.76 million from operating activities and HKD 969 million from investing activities, while financing activities resulted in a net outflow of HKD 978 million, with period-end cash and cash equivalents at HKD 1.112 billion Condensed Consolidated Statement of Cash Flows Summary (HKD thousands) | Indicator | H1 2023 (Unaudited) | H1 2022 (Unaudited) | | :--- | :--- | :--- | | Net cash generated from operating activities | 51,761 | (31,337) | | Net cash generated from investing activities | 969,321 | (122,336) | | Net cash used in financing activities | (977,723) | 104,804 | | Net increase (decrease) in cash and cash equivalents | 43,359 | (48,869) | | Cash and cash equivalents at beginning of period | 1,088,116 | 758,317 | | Cash and cash equivalents at end of period | 1,111,688 | 686,864 | Notes to the Condensed Consolidated Financial Statements These notes detail the basis of preparation, significant accounting policies, and specific financial information for various segments, income, taxation, dividends, discontinued operations, earnings per share, and receivables/payables Basis of Preparation and Significant Accounting Policies This condensed consolidated financial report is prepared under HKAS 34, with accounting policies consistent with the prior year's annual report, and includes the first application of HKAS 12 amendments on deferred tax, which had no impact on EPS - The financial report is prepared in accordance with HKAS 34 "Interim Financial Reporting"[11] - The Group first applied amendments to HKAS 12 "Deferred Tax related to Assets and Liabilities arising from a Single Transaction" and retrospectively restated comparative figures[83][84][90] Impact of Accounting Policy Changes on Statement of Financial Position as of December 31, 2022 (HKD thousands) | Item | Before adjustment | Adjustment | After adjustment (restated) | | :--- | :--- | :--- | :--- | | Deferred tax assets | 6,812 | 515 | 7,327 | | Deferred tax liabilities | (23,615) | – | (23,615) | | Equity attributable to company shareholders | 4,406,572 | 383 | 4,406,955 | Turnover and Segment Information The Group's turnover primarily originates from mainland China (96.8%), with coatings and inks as major revenue sources, and coatings and lubricants businesses achieving operating profits while ink business recorded a loss Turnover by Geographical Region (HKD thousands) | Region | H1 2023 | H1 2022 | | :--- | :--- | :--- | | China | 1,516,604 | 1,711,603 | | Hong Kong | 33,894 | 30,899 | | Overseas | 16,376 | 28,372 | | Total | 1,566,874 | 1,770,874 | Segment Results by Business Segment (H1 2023, HKD thousands) | Business Segment | External Sales | Segment Results (Operating Profit/Loss) | | :--- | :--- | :--- | | Coatings | 775,063 | 15,596 | | Ink | 553,880 | (4,012) | | Lubricants | 193,761 | 5,726 | | Property | 5,419 | (1,391) | | Others | 38,751 | (14,012) | | Total Reportable Segments | 1,566,874 | 1,895 | Other Income and Other Gains and Losses The Group recorded HKD 48.2 million in other income, mainly from interest, but also HKD 17.65 million in other losses, primarily due to a HKD 22.94 million net exchange loss from foreign currency balances and transactions - Other income primarily included interest income of HKD 29.91 million, a significant increase from HKD 3.08 million in the prior period[146] - Other losses primarily stemmed from a net exchange loss of HKD 22.94 million, compared to a net exchange gain of HKD 4.39 million in the prior period[152] Taxation The Group's H1 2023 tax expense was HKD 1.18 million, significantly lower than the prior period, with Chinese subsidiaries benefiting from preferential tax rates and no profits tax provision in Hong Kong Composition of Tax Expense (HKD thousands) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Current tax | 4,565 | 9,371 | | Over-provision in prior years | (4,999) | – | | Deferred tax expense | 1,611 | 1,981 | | Total tax expense | 1,177 | 11,352 | - Certain of the Group's subsidiaries operating in China enjoy a preferential income tax rate of 15%[156] Dividends The Board declared an interim dividend of HKD 0.02 per share for H1 2023, totaling HKD 11.37 million, a significant decrease from the prior period, in addition to HKD 455 million in final and special dividends paid for year-end 2022 Dividend Distribution | Dividend Type | Amount Per Share | Total Amount (Approx.) | | :--- | :--- | :--- | | 2023 Interim Dividend | 2 HK cents | HKD 11.37 million | | 2022 Interim Dividend | 10 HK cents | HKD 56.85 million | | 2022 Final and Special Dividends (Paid during the period) | 80 HK cents | HKD 455 million | Discontinued Operations The Group completed the disposal of a 51% effective interest in the solvent business at year-end 2022, leading to its presentation as discontinued operations, which significantly impacted the current period's overall net profit compared to H1 2022's HKD 233 million contribution - Completed the disposal of a 51% effective interest in Qianxin Chemical Development Group, engaged in manufacturing and trading monomer solvents and related products, in 2022[159] - In H1 2022, the discontinued solvent business recorded turnover of HKD 5.946 billion and net profit of HKD 233 million[161] Earnings Per Share Basic and diluted earnings per share from continuing operations were HKD 0.029, calculated based on HKD 16.26 million net profit and 568 million weighted average shares, a turnaround from a HKD 0.109 loss per share in the prior period Earnings Per Share Calculation | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Profit (Loss) used for calculation (HKD thousands) | 16,260 | (62,047) | | Weighted average number of shares (thousands) | 568,484 | 568,484 | | Basic and diluted earnings (loss) per share | 2.9 HK cents | (10.9) HK cents | Trade and Other Receivables and Prepayments At period-end, net trade receivables were HKD 1.257 billion, largely stable, with approximately 75% within three months, while other receivables and prepayments significantly decreased due to the recovery of HKD 2.04 billion from the Qianxin Chemical disposal Trade Receivables Ageing Analysis (HKD thousands) | Ageing | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0 to 3 months | 706,879 | 580,917 | | 4 to 6 months | 175,068 | 216,299 | | Over 6 months | 59,798 | 76,414 | | Total | 941,745 | 873,630 | - Other receivables and prepayments significantly decreased from HKD 2.214 billion to HKD 134 million, primarily due to the recovery of HKD 2.04 billion in receivables from the disposal of Qianxin Chemical Development Group during the period[3][169] Trade and Other Payables and Accruals At period-end, total trade and other payables and accruals were HKD 935 million, a decrease from year-end 2022, with trade payables at HKD 676 million and approximately 77% due within three months Trade Payables Ageing Analysis (HKD thousands) | Ageing | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0 to 3 months | 522,257 | 538,853 | | 4 to 6 months | 148,981 | 147,991 | | Over 6 months | 5,186 | 2,285 | | Total | 676,424 | 689,129 |