金达控股(00528) - 2023 - 中期业绩

Interim Results Highlights Key Financial Performance The company's revenue, profit, and basic EPS declined for the six months ended June 30, 2023, impacted by weak export demand, soaring raw material costs, and exchange rate fluctuations | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | -14.2% | | Gross Margin | 18.8% | 19.4% | -0.6 percentage points | | Profit for the Period | 67,500 | 84,439 | -20.1% | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | -18.1% | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | -15.4% | - The decrease in revenue was primarily due to weak demand in export markets, especially the EU region, leading to a reduction in flax yarn sales, but partially offset by an increase in the average selling price of flax yarn, new product launches, and the appreciation of the USD against RMB[2] - Gross margin slightly decreased by 0.6 percentage points to 18.8%, mainly due to soaring raw material costs, despite increased flax yarn selling prices, capacity release from the Ethiopia plant, and the appreciation of the USD against RMB[2] Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2023, the Group's revenue and various profit metrics decreased year-on-year, mainly due to increased cost of sales, reduced other income and gains, and changes in selling and administrative expenses | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | | Cost of Sales | (666,775) | (770,976) | | Gross Profit | 154,701 | 186,082 | | Other Income and Gains | 13,100 | 37,842 | | Selling and Distribution Expenses | (13,957) | (23,210) | | Administrative Expenses | (49,361) | (60,087) | | Finance Costs | (15,326) | (17,624) | | Profit Before Tax | 88,484 | 117,005 | | Profit for the Period | 67,500 | 84,439 | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2023, the Group's total comprehensive income for the period was RMB 66,880 thousand, a decrease from RMB 82,912 thousand in the prior year, mainly due to reduced profit and exchange differences on translating foreign operations | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | | :--- | :--- | :--- | | Profit for the Period | 67,500 | 84,439 | | Exchange Differences on Translating Foreign Operations | (620) | (1,527) | | Total Comprehensive Income for the Period | 66,880 | 82,912 | | Attributable to Owners of the Parent | 66,929 | 80,967 | | Attributable to Non-controlling Interests | (49) | 1,945 | Interim Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets, net current assets, and total equity increased compared to December 31, 2022, but cash and cash equivalents significantly decreased, while inventories and trade and bills payables increased | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Total Non-current Assets | 1,166,797 | 1,167,881 | | Total Current Assets | 1,921,975 | 1,737,041 | | Inventories | 1,042,867 | 685,180 | | Cash and Cash Equivalents | 168,180 | 467,469 | | Total Current Liabilities | 1,488,434 | 1,319,707 | | Trade and Bills Payables | 433,421 | 367,096 | | Net Current Assets | 433,541 | 417,334 | | Total Assets Less Current Liabilities | 1,600,338 | 1,585,215 | | Total Equity | 1,504,247 | 1,487,990 | - Total current assets increased, primarily due to a significant increase in inventories from RMB 685,180 thousand to RMB 1,042,867 thousand[5] - Cash and cash equivalents decreased significantly from RMB 467,469 thousand to RMB 168,180 thousand[5] Notes to the Interim Condensed Consolidated Financial Statements Company and Group Information Jinda Holdings Limited was incorporated in the Cayman Islands in 2006 and listed on the Hong Kong Stock Exchange, with the Group primarily engaged in the production and sale of flax yarn - The Company was incorporated in the Cayman Islands on July 21, 2006, and listed on the Hong Kong Stock Exchange on December 12, 2006[8] - The Group is principally engaged in the production and sale of flax yarn[40] Basis of Preparation and Accounting Policies The interim condensed consolidated financial statements are prepared in accordance with IAS 34 and incorporate new and revised IFRSs for the first time, with minimal impact on the Group's financial position or performance - The interim condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting"[41] - New and revised International Financial Reporting Standards, including amendments to IAS 1, IAS 8, and IAS 12, were adopted for the first time during this period[10][21][42] - The amendments to IAS 12 (International Tax Reform – Pillar Two Model Rules) have no impact on the Group as it does not fall within their scope[47] Basis of Preparation The interim condensed consolidated financial statements are prepared in accordance with IAS 34 "Interim Financial Reporting" and should be read in conjunction with the Group's annual financial statements for the year ended December 31, 2022 - The interim condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting"[41] - These interim condensed consolidated financial statements should be read in conjunction with the Group's annual financial statements for the year ended December 31, 2022[20] Changes in Accounting Policies and Disclosures The Group adopted amendments to IAS 1, IAS 8, and IAS 12 effective January 1, 2023, which have minimal quantitative impact on the interim condensed consolidated financial information, primarily affecting accounting policy disclosures or being inapplicable to the Group - Amendments to IAS 1 require disclosure of material accounting policy information, expected to impact accounting policy disclosures in the annual consolidated financial statements but with no impact on interim condensed consolidated financial information[23] - Amendments to IAS 8 clarify the distinction between changes in accounting estimates and changes in accounting policies, with no impact on the Group's financial position or performance[45] - Amendments to IAS 12 narrow the scope of the initial recognition exemption, requiring recognition of deferred tax assets and liabilities related to leases, but with no significant impact on the retained earnings balance as of January 1, 2022[24][46] Operating Segments The Group primarily engages in the production and sale of flax yarn, organized as a single business unit, with geographical data showing mainland China as the main location for non-current assets, and revenue distributed across mainland China, EU, and non-EU regions - The Group is organized into a single business unit, primarily comprising the production and sale of flax yarn, hence no segment analysis is presented[48] Geographical Information The Group's revenue is sourced from mainland China, the EU, and non-EU regions, with increased revenue from mainland China and decreased revenue from EU and non-EU regions, while non-current assets are primarily located in mainland China and Ethiopia Revenue by Customer Location | Region | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Mainland China | 344,603 | 312,827 | | European Union | 240,230 | 339,165 | | Non-European Union | 236,643 | 305,066 | | Total | 821,476 | 957,058 | Non-current Assets by Asset Location | Region | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Mainland China | 799,890 | 790,849 | | Ethiopia | 356,869 | 368,559 | | Total | 1,156,759 | 1,159,408 | Information about Major Customers For the six months ended June 30, 2023, the Group had no sales to a single customer accounting for 10% or more of total revenue - For the six months ended June 30, 2023, there were no sales to a single customer accounting for 10% or more of the Group's total revenue[52] Revenue, Other Income and Gains The Group's revenue primarily derives from the sale of flax yarn, hemp yarn, and waste, recognized at a point in time, while other income and gains, mainly net exchange gains, government grants, and bank interest income, significantly decreased year-on-year - Revenue refers to the sales value of flax yarn, hemp yarn, and waste, net of sales tax and any sales discounts and returns[53] Revenue Analysis | Type of Goods or Services | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Sales of Flax Yarn, Hemp Yarn and Waste | 802,256 | 929,011 | | Other Services | 19,220 | 28,047 | | Total Revenue | 821,476 | 957,058 | | Timing of Revenue Recognition: | | | | Goods Transferred at a Point in Time | 802,256 | 929,011 | | Services Provided Over Time | 19,220 | 28,047 | Other Income and Gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Net Exchange Gains | 4,223 | 28,238 | | Gain on Disposal of Items of Property, Plant and Equipment | 1,982 | – | | Government Grants | 2,889 | 8,117 | | Bank Interest Income | 1,958 | 529 | | Others | 2,048 | 958 | | Total | 13,100 | 37,842 | Finance Costs For the six months ended June 30, 2023, the Group's total finance costs were RMB 15,326 thousand, a decrease from RMB 17,624 thousand in the prior year, primarily due to lower average loan balances | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Interest on Bank Loans | 16,235 | 20,751 | | Interest on Lease Liabilities | 196 | 363 | | Total Interest Expense on Financial Liabilities Not at Fair Value Through Profit or Loss | 16,431 | 21,114 | | Less: Interest Capitalized | (1,105) | (3,490) | | Total Finance Costs | 15,326 | 17,624 | - The lower total finance costs were mainly due to a lower average loan balance during the review period compared to the same period last year[84] Profit Before Tax For the six months ended June 30, 2023, the Group's profit before tax was RMB 88,484 thousand, a decrease from RMB 117,005 thousand in the prior year, primarily due to reduced cost of inventories sold, service costs, R&D expenses, and employee benefit expenses, as well as a significant decline in net exchange gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Cost of Inventories Sold | 647,555 | 742,929 | | Cost of Services | 19,220 | 28,047 | | Depreciation | 50,869 | 51,420 | | Research and Development Expenses | 12,656 | 15,699 | | Employee Benefit Expenses | 80,261 | 97,418 | | Net Exchange Gains | (4,223) | (28,238) | | Fair Value Loss on Derivative Financial Instruments | – | 4,875 | | Impairment (Reversal) / Provision for Inventories | (3,296) | 2,884 | | Impairment Provision for Trade and Bills Receivables | 74 | 3,841 | | Finance Costs | 15,326 | 17,624 | | Bank Interest Income | (1,958) | (529) | Income Tax Expense For the six months ended June 30, 2023, the Group's income tax expense was RMB 20,984 thousand, a decrease from RMB 32,566 thousand in the prior year, with the effective tax rate falling from 27.8% to 23.7%, reflecting varying tax policies across regions, such as a 15% preferential rate for high-tech enterprises in mainland China and a 5-year profit tax exemption in Ethiopia | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Current Period Expense | 23,511 | 22,533 | | Deferred | (2,527) | 10,033 | | Total Tax Expense for the Period | 20,984 | 32,566 | - The effective tax rates for the review period and the prior year were approximately 23.7% and 27.8%, respectively[112] - Zhejiang Jinda in mainland China enjoys a 15% preferential tax rate as a high-tech enterprise, while the Ethiopia plant benefits from a 5-year profit tax exemption[58][59] Dividends The Board of Directors resolved not to declare any interim dividend for the six months ended June 30, 2023 - The Board of Directors resolved not to declare any interim dividend for the six months ended June 30, 2023 (six months ended June 30, 2022: nil)[89] Earnings Per Share For the six months ended June 30, 2023, the Group's basic and diluted earnings per share were both RMB 0.11, a decrease from RMB 0.13 in the prior year, primarily due to reduced profit attributable to owners of the parent | Metric | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Profit Attributable to Ordinary Equity Holders of the Parent Used for Basic EPS Calculation | 67,549 | 82,494 | | Weighted Average Number of Ordinary Shares in Issue for Basic EPS Calculation (thousand shares) | 616,447 | 616,447 | | Basic Earnings Per Share | RMB 0.11 | RMB 0.13 | | Diluted Earnings Per Share | RMB 0.11 | RMB 0.13 | - Diluted earnings per share are calculated based on the profit attributable to ordinary equity holders of the parent for the reporting period, considering the dilutive effect of potential ordinary shares, but no share awards met vesting conditions during this period[61][62] Trade and Other Receivables As of June 30, 2023, the Group's total trade and bills receivables increased to RMB 440,733 thousand from December 31, 2022, with customers generally granted credit terms of 30 to 150 days, and the Group maintaining a credit control department to manage risks | Item | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Trade Receivables | 335,142 | 273,073 | | Bills Receivables | 105,991 | 153,520 | | Impairment | (400) | (326) | | Total | 440,733 | 426,267 | Ageing Analysis of Trade Receivables | Ageing | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Within 1 Month | 186,069 | 148,389 | | 1 to 2 Months | 62,215 | 49,438 | | 2 to 3 Months | 63,823 | 37,250 | | Over 3 Months | 22,635 | 37,670 | | Total | 334,742 | 272,747 | - Customers are generally granted credit terms of 30 to 150 days, and the Group maintains a credit control department to minimize credit risk[36] Trade and Other Payables As of June 30, 2023, the Group's total trade and bills payables increased to RMB 433,421 thousand from December 31, 2022, with these balances being unsecured, non-interest-bearing, and having a credit period of 90 days | Ageing | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Due within 1 Month or on Demand | 55,170 | 65,609 | | Due after 1 Month but within 3 Months | 343,251 | 252,383 | | Over 3 Months | 35,000 | 49,104 | | Total | 433,421 | 367,096 | - The above balances are unsecured and non-interest-bearing, with a credit period of 90 days[95] Events After the Reporting Period The Group did not undertake any significant post-reporting period events after June 30, 2023 - The Group did not undertake any significant post-reporting period events after June 30, 2023[96] Management Discussion and Analysis Business Review The Group faced global economic challenges during the review period, leading to a decline in revenue, but partially offset negative impacts through product innovation and market expansion efforts; raw material costs soared, yet the Group remains optimistic about the flax textile industry's future, continuing investments in Ethiopia and the hemp yarn market while advancing weaving and fabric projects - Revenue decreased by 14.2% to RMB 821,476 thousand during the review period, primarily due to a 31.2% reduction in flax yarn sales from weak export market demand, but partially offset by increased average selling prices and the appreciation of the USD against RMB[98] - The average procurement unit price for flax fiber, a key raw material, soared by approximately 64.3% to RMB 44,658 per ton, mainly due to supply shortages caused by low harvests[71] - The Group continues to invest in its Ethiopia plant, expecting cost savings and benefits from the EU's "Everything But Arms (EBA)" initiative, while actively entering the hemp yarn market and advancing weaving and fabric factory construction[74][101][103] Economic Outlook Despite the end of the COVID-19 pandemic, geopolitical tensions persist, with many countries anticipating low single-digit economic growth or contraction in 2023 - The COVID-19 pandemic has ended, but geopolitical tensions between different countries persist, with many developed and developing countries forecasting low single-digit economic growth or even contraction in 2023[68] Revenue and Sales Strategy The Group's revenue decreased by 14.2% during the review period, mainly due to weak export market demand, though domestic sales grew by 10.2%, as the Group implements an international sales strategy and continues to expand its domestic market presence Revenue by Sales Region | Region | 2023 (RMB '000) | 2022 (RMB '000) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | China | 344,603 | 312,827 | +10.2% | | European Union | 240,230 | 339,165 | -29.2% | | Non-European Union | 236,643 | 305,066 | -22.4% | | Total Revenue | 821,476 | 957,058 | -14.2% | - During the review period, 7,275 tons of flax yarn were sold, a 31.2% decrease compared to 10,572 tons in the prior year[98] - The Group implements an international sales strategy, with a sales network spanning approximately 20 countries and regions globally, and continues to expand its domestic market[98] Raw Material Procurement The Group primarily imports flax fiber from Europe, with procurement volume decreasing by 13.4% during the review period, but the average procurement unit price soaring by 64.3% due to supply shortages; the Group will closely monitor international markets and prudently formulate procurement plans - The Group's main raw material for flax yarn, flax fiber, is primarily imported from quality suppliers in France, Belgium, and the Netherlands[71] - Approximately 19,419 tons of raw materials were procured during the review period, a decrease of about 13.4% year-on-year, with the average procurement unit price soaring by approximately 64.3% to RMB 44,658 per ton due to supply shortages from low harvests[71] Production Capacity The Group operates five production bases with a total annual capacity of 27,000 tons, where Chinese plants utilize approximately 80%-90% of capacity, and the Ethiopia plant operates at around 60% utilization, which is continuously improving Production Bases and Capacity | No. | Plant | Location | Country | Annual Capacity (tons) | Utilization/Status | | :--- | :--- | :--- | :--- | :--- | :--- | | 1 | Haiyan Phase I Plant | Zhejiang | China | 7,000 | Approx. 90% | | 2 | Rugao Plant | Jiangsu | China | 6,000 | Approx. 90% | | 3 | Haiyan Phase II Plant | Zhejiang | China | 5,000 | Approx. 80% | | 4 | Qinggang Plant | Heilongjiang | China | 4,000 | Approx. 90% | | 5 | Ethiopia | Adama | Ethiopia | 5,000 | Approx. 60% | - The Ethiopia factory operated normally during the review period, with continuously improving production capacity[102] Ethiopia Investment The Group's investment in Ethiopia aims to save land, labor, energy costs, and tax expenses, while benefiting from the EU's "Everything But Arms (EBA)" initiative for Least Developed Countries - The Ethiopia investment helps the Group save on land costs, labor costs, energy costs, and tax expenses[74] - This investment allows the Group to benefit from the EU's "Everything But Arms (EBA)" initiative for Least Developed Countries, granting duty-free and quota-free access to all products manufactured in LDCs entering EU countries[74] Weaving and Fabric Project & Hemp Yarn The Group is expanding into flax weaving and fabric business, with trial production expected at its China factory in Q4 2023, while also producing 194 tons of multi-specification hemp yarn and anticipating strong growth in the hemp yarn market - The weaving and fabric factory in China is still under construction, with trial production expected to begin in Q4 2023, aiming to broaden flax application areas[103] - A total of 194 tons of multi-specification hemp yarn were produced during the review period, and the Group believes the hemp yarn market will grow rapidly in the coming years, benefiting from China's national policy promoting hemp cultivation and textile use in Heilongjiang province[101] Financial Review The Group experienced declines in revenue, gross profit, and profit for the period during the review period; revenue decreased due to weak export market demand, gross margin slightly fell due to soaring raw material costs, while other income and gains, selling and distribution expenses, administrative expenses, and finance costs all decreased, with a corresponding reduction in income tax expense | Metric | Six Months Ended June 30, 2023 (RMB '000) | Six Months Ended June 30, 2022 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 821,476 | 957,058 | -14.2% | | Gross Profit | 154,701 | 186,082 | -16.9% | | Gross Margin | 18.8% | 19.4% | -0.6 percentage points | | Other Income and Gains | 13,100 | 37,842 | -65.3% | | Selling and Distribution Expenses | 13,957 | 23,210 | -39.9% | | Administrative Expenses | 49,361 | 60,087 | -17.9% | | Total Finance Costs | 15,326 | 17,624 | -13.0% | | Profit for the Period | 67,500 | 84,439 | -20.1% | | Profit Attributable to Owners of the Parent | 67,549 | 82,494 | -18.1% | | Income Tax Expense | 20,984 | 32,566 | -35.5% | Revenue Revenue decreased by 14.2% to RMB 821,476 thousand during the review period, primarily due to weak export market demand leading to reduced flax yarn sales, but partially offset by increased average selling prices and the appreciation of the USD against RMB; domestic sales grew by 10.2%, while export sales to EU and non-EU regions fell by 29.2% and 22.4% respectively Revenue Breakdown by Sales Region | Region | 2023 (RMB '000) | % of Total Revenue | 2022 (RMB '000) | % of Total Revenue | Year-on-Year Revenue Change (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | China | 344,603 | 41.9% | 312,827 | 32.7% | 31,776 | +10.2% | | European Union | 240,230 | 29.3% | 339,165 | 35.4% | (98,935) | -29.2% | | Non-European Union | 236,643 | 28.8% | 305,066 | 31.9% | (68,423) | -22.4% | | Total Revenue | 821,476 | 100.0% | 957,058 | 100.0% | (135,582) | -14.2% | - The decrease in revenue was mainly due to weak demand in export markets, especially the EU region, caused by the COVID-19 pandemic and geopolitical tensions during the review period, leading to a reduction in flax yarn sales[76] Gross Profit and Gross Margin Gross profit decreased by 16.9% to RMB 154,701 thousand during the review period, and gross margin declined by 0.6 percentage points to 18.8%, primarily due to soaring raw material costs, despite increased flax yarn selling prices, capacity release from the Ethiopia plant, and the appreciation of the USD against RMB - The Group's gross profit decreased by approximately 16.9% to approximately RMB 154,701 thousand during the review period[106] - Gross margin decreased by approximately 0.6 percentage points to approximately 18.8%, mainly due to soaring raw material costs during the review period[106] Other Income and Gains Other income and gains during the review period, primarily comprising government grants, interest income, and net exchange gains, significantly decreased year-on-year, mainly due to reduced government grants and lower net exchange gains Other Income and Gains | Item | 2023 (RMB '000) | 2022 (RMB '000) | | :--- | :--- | :--- | | Government Grants and Subsidies | 2,889 | 8,117 | | Bank Interest Income | 1,958 | 529 | | Net Exchange Gains | 4,223 | 28,238 | | Total | 13,100 | 37,842 | - Net exchange gains were mainly attributable to the appreciation of the USD against RMB during the review period, as all overseas invoices are denominated in USD[139] - Government grants and subsidies decreased because the Chinese government provided more subsidies in the prior year to curb the COVID-19 pandemic[139] Selling and Distribution Expenses Selling and distribution expenses were approximately RMB 13,957 thousand during the review period, a 39.9% decrease from the prior year, with the percentage of total revenue declining, mainly due to reduced sales commissions payable - The Group's selling and distribution expenses were approximately RMB 13,957 thousand during the review period, a decrease of approximately 39.9% compared to the prior year[140] - The decrease in selling expenses as a percentage of revenue was mainly due to reduced sales commissions payable, as commissions are only paid for certain export sales and not for domestic sales in China[140] Administrative Expenses Administrative expenses were approximately RMB 49,361 thousand during the review period, a 17.9% decrease from the prior year, primarily due to reduced staff costs, R&D expenses, and bad debt provisions - The Group's administrative expenses were approximately RMB 49,361 thousand during the review period, a decrease of approximately 17.9% compared to the prior year[81] - The decrease in administrative expenses was mainly due to a RMB 3.0 million reduction in staff costs, a RMB 3.0 million reduction in R&D expenses, and a RMB 3.8 million reduction in bad debt provisions[81] Other Expenses Other expenses were approximately RMB 673 thousand during the review period, a significant decrease from the prior year, primarily due to the absence of fair value losses on derivative instruments and losses on asset disposals in the current period - The Group's other expenses were approximately RMB 673 thousand during the review period, a significant decrease from approximately RMB 5,998 thousand in the prior year[109] - During the review period, there were no fair value losses on derivative instruments (prior year: RMB 4,875 thousand) and no losses on asset disposals (prior year: approximately RMB 621 thousand)[109] Finance Costs Total finance costs were approximately RMB 15,326 thousand during the review period, a 13.0% decrease from the prior year, primarily due to lower average loan balances, with both net interest on borrowings and interest on lease liabilities declining - Total finance costs for the review period were approximately RMB 15,326 thousand, a decrease of approximately 13.0% compared to the prior year[84] - The lower total finance costs were mainly due to a lower average loan balance during the review period compared to the same period last year[84] - Net interest on borrowings was approximately RMB 15,130 thousand, and interest on lease liabilities was approximately RMB 196 thousand, both decreasing from the prior year[110][111] Profit for the Period The Group recorded a profit of approximately RMB 67,500 thousand during the review period, a 20.1% decrease from the prior year - The Group recorded a profit of approximately RMB 67,500 thousand during the review period, a decrease of approximately 20.1% compared to the prior year[145] Profit Attributable to Owners of the Parent Profit attributable to owners of the parent was approximately RMB 67,549 thousand during the review period, an 18.1% decrease from the prior year - During the review period, the Group recorded a profit attributable to owners of the parent of approximately RMB 67,549 thousand, a decrease of approximately 18.1% compared to the prior year[114] Non-controlling Interests Non-controlling interests of approximately RMB 49 thousand represent the share of losses attributable to non-controlling interests in certain subsidiaries of the Group during the review period - Non-controlling interests of approximately RMB 49 thousand represent the share of losses attributable to non-controlling interests in certain subsidiaries of the Group during the review period (six months ended June 30, 2022: share of profit of RMB 1,945 thousand)[146] Liquidity and Financial Resources As of June 30, 2023, the Group's cash and cash equivalents significantly decreased, and the current ratio slightly declined, but net current assets increased; the total capital-to-debt ratio rose to 56.0%, and the Board believes existing financial resources are adequate, considering various financing options | Metric | June 30, 2023 (RMB '000) | December 31, 2022 (RMB '000) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 168,180 | 467,469 | | Net Current Assets | 433,541 | 417,334 | | Current Ratio | 129.1% | 131.6% | | Total Equity | 1,504,247 | 1,487,990 | | Total Borrowings | 843,029 | 752,903 | | Total Capital-to-Debt Ratio | 56.0% | 50.6% | - The Group's cash and cash equivalents are primarily denominated in RMB, USD, EUR, HKD, and Ethiopian Birr, while borrowings are mainly denominated in RMB and EUR[150] - The Board believes the Group's existing financial resources are relatively adequate, and should additional funds be required, the Group may consider all possible financing options[117] Capital Commitments As of June 30, 2023, the Group's outstanding contractual capital commitments for the purchase of property, plant, and equipment not provided for in the interim condensed consolidated financial statements were approximately RMB 172,371 thousand, a decrease from the end of last year - As of June 30, 2023, the Group's outstanding contractual capital commitments for the purchase of property, plant, and equipment not provided for in the interim condensed consolidated financial statements were approximately RMB 172,371 thousand (December 31, 2022: approximately RMB 208,855 thousand)[150] - As of June 30, 2023, the Group had no authorized but not contracted capital commitments[150] Contingent Liabilities As of June 30, 2023, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had no significant contingent liabilities[120] Pledge of Assets As of June 30, 2023, the Group pledged property, plant, and equipment with a carrying amount of approximately RMB 286,967 thousand and inventories of approximately RMB 40,000 thousand to secure current interest-bearing bank loans of RMB 220,000 thousand - Current interest-bearing bank loans of RMB 220,000 thousand are secured by certain property, plant, and equipment with a carrying amount of approximately RMB 286,967 thousand and inventories of approximately RMB 40,000 thousand[120] Major Acquisitions and Disposals During the review period, the Group did not undertake any major acquisitions or disposals of subsidiaries, associates, or joint ventures - During the review period, the Group did not undertake any major acquisitions or disposals of subsidiaries, associates, or joint ventures[121] Material Investments Held During the review period, the Group did not hold any material investments - The Group did not hold any material investments during the review period[122] Future Plans for Material Investments or Capital Assets Aside from maintenance of existing factory projects and vertical expansion into weaving and fabric business, the directors confirm there are currently no plans to acquire any material investments or capital assets - Aside from various maintenance and upkeep of existing factory projects and vertical expansion into the weaving and fabric business, the directors confirm that as of the date of this announcement, there are currently no plans to acquire any material investments or capital assets[123] Foreign Currency Risk The Group's transactions are primarily denominated in RMB, USD, EUR, HKD, and Ethiopian Birr; the Group regularly monitors and manages exchange rate fluctuations and may use credit facilities to enter into foreign currency forward contracts and derivative financial instruments - The Group's transactions are primarily denominated in RMB, USD, EUR, HKD, and Ethiopian Birr[124] - The Group regularly monitors and properly manages exchange rate fluctuations between these currencies and may use credit facilities to enter into certain foreign currency forward contracts and derivative financial instruments when necessary[124] Remuneration Policy and Employees The Group's remuneration policy is set by the Board with reference to qualifications, experience, responsibilities, contributions, and market levels; as of June 30, 2023, the Group employed 3,842 employees, with total staff costs of approximately RMB 80,261 thousand, and has adopted share option and share award schemes to incentivize staff - The Group's employee remuneration policy is formulated by the Board with reference to each employee's qualifications, experience, responsibilities, contributions to the Group, and prevailing market remuneration levels for similar positions[126] - As of June 30, 2023, the Group employed a total of 3,842 employees (June 30, 2022: 4,342 employees), with total staff costs incurred during the review period amounting to approximately RMB 80,261 thousand[154] - The Group has also adopted a share option scheme and a share award scheme to provide incentives and rewards to directors and other employees who have contributed to the Group's business success[155] Principal Risks and Uncertainties The Group faces principal risks including demand for flax yarn, trade protectionism, raw material supply stability, exchange rate fluctuations, execution risks of the Ethiopia expansion project, and production disruptions caused by pandemics - The Group faces principal risks and uncertainties including demand for flax yarn, trade protectionism in certain countries and potential punitive tariffs on Chinese-made products, stability of raw material supply, depreciation of the USD against RMB, execution risks of the new expansion project in Ethiopia, and pandemic outbreaks leading to production disruptions[129] - The Sino-US trade conflict is expected to continue for the foreseeable future[130] Prospects and Plans The Group's Ethiopia factory has commenced operations, contributing additional capacity; the Group will continue to promote the CELC Masters of Linen Code of Conduct to foster sustainable development in the flax industry and actively advance the cultivation of fiber hemp planting bases in China, aiming for large-scale production within three years - The Group's factory in Ethiopia has commenced operations and will contribute additional production capacity to the Group[158] - The Group will continue to promote the CELC Masters of Linen Code of Conduct to foster sustainable development in the flax industry[159][171] - The Group is actively promoting the cultivation of fiber hemp planting bases in China, striving to achieve large-scale production of fiber hemp spinning within three years to meet market demand[131] Other Information Corporate Strategy and Long-Term Business Model The Group's primary objective is to enhance long-term shareholder returns through a global production layout, sustainable development, technological innovation, independent intellectual property, product brand marketing, and excellent management, aspiring to become one of the world's largest flax yarn manufacturers - The Group's primary objective is to enhance long-term total shareholder returns, with a strategy to build a solid financial foundation and deliver sustained returns[173] - To achieve this goal, the Company implements a strategy of globalized production layout, commits to sustainable development and technological innovation, develops independent intellectual property, engages in product brand marketing, and pursues management excellence[173] Purchase, Sale or Redemption of the Company’s Listed Securities Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the review period - Neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the review period[160] Interim Dividends The Board of Directors resolved not to recommend the declaration of any interim dividend for the six months ended June 30, 2023 - The Board of Directors resolved not to recommend the declaration of any interim dividend for the six months ended June 30, 2023 (June 30, 2022: nil)[134] Share Option Scheme The Company adopted a share option scheme on May 30, 2016, to provide incentives and rewards to directors, employees, consultants, and others who have contributed to the Group's business success; no share options have been granted under the scheme since its adoption - The Company adopted a share option scheme on May 30, 2016, to provide incentives and rewards to any director, employee, consultant, client, supplier, agent, business partner, or advisor/contractor of the Group who has contributed to its business success[162] - Since the adoption of the scheme on May 30, 2016, no share options have been granted under the scheme[162] Share Award Scheme The Company adopted a share award scheme on August 26, 2016, to incentivize, recognize, and reward eligible persons and align award holders' interests with shareholders'; award shares will be funded by market purchases, held in trust by a trustee, and no shares were granted during the review period, with approximately 2.1% of issued shares held by the trustee for future grants as of June 30, 2023 - The Company adopted a share award scheme on August 26, 2016, with the purpose of incentivizing, recognizing, and rewarding eligible persons for their contributions to the Group, attracting and retaining personnel, and aligning the interests of award holders with those of shareholders[163] - Awards will be funded by shares purchased in the market at prevailing market prices, and no new shares will be allotted and issued under the share award scheme[136] - During the review period, no shares were granted under the share award scheme; as of June 30, 2023, a total of 13,230,750 shares were held by the trustee for future grants, representing approximately 2.1% of the Company's issued shares as of June 30, 2023[137] Events After the Reporting Period There were no significant post-reporting period events requiring disclosure by the Group after June 30, 2023, and up to the date of this announcement - There were no significant post-reporting period events requiring disclosure by the Group after June 30, 2023, and up to the date of this announcement[178] Standard of Securities Dealings by Directors The Company has established a code of conduct for directors' securities dealings, with terms no less exacting than the Model Code in Appendix 10 of the Listing Rules; all directors confirmed compliance with the relevant code during the review period and up to the date of this announcement - The Company has established its own code of conduct for directors' securities dealings, with terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[183] - Following specific inquiries with all directors, all directors confirmed that they have complied with the required standards set out in the Model Code and the Company's code of conduct regarding directors' securities dealings during the review period and up to the date of this announcement[183] Compliance with Corporate Governance Code The Company is committed to establishing good corporate governance practices and believes it has complied with the Code Provisions in Part 2 throughout the review period, except for the non-segregation of duties between the Chairman and Chief Executive Officer; the Board believes the existing structure fosters strong and stable leadership - The Company is committed to establishing good corporate governance practices and procedures to be a transparent and accountable organization, open and responsible to shareholders[179] - The Company has complied with the Code Provisions set out in Part 2 of the Code throughout the review period, except for Code Provision C.2.1 (segregation of duties between the Chairman and Chief Executive Officer)[179] - The Board believes that, based on the nature and scale of the Group's business and Mr. Ren Weiming's extensive industry experience, the existing structure contributes to strong and stable leadership, enabling the Company to operate effectively[179] Audit Committee and Review of Interim Results The Company has established an Audit Committee, comprising three independent non-executive directors, chaired by Mr. Liu Yingjie; the Audit Committee has reviewed the Group's interim results for the review period with no disagreements - The Company has established an Audit Committee, comprising three independent non-executive directors: Mr. Liu Yingjie, Mr. Yan Jianmiao, and Mr. Luo Guangxin[180] - Mr. Liu Yingjie serves as the Chairman of the Audit Committee and possesses appropriate professional qualifications and experience in accounting matters[180] - The Group's interim results for the review period have been reviewed by the Audit Committee, with no disagreements[180] Acknowledgements The Company's Chairman extends gratitude to the directors for their valuable advice and guidance, and to all Group employees for their diligent work and loyal service - The Company's Chairman extends gratitude to the directors for their valuable advice and guidance, and to all Group employees for their diligent work and loyal service[181]