Comprehensive Income Statement
The Group’s revenue decreased by 18.5% from RMB 600.3 million in 3QFY18 to RMB 489.4 million in 3QFY19,
while revenue for the nine-month period (“9MFY19”) decreased by 10.7% year-on-year (“y-o-y”) from RMB 1.7
billion to RMB 1.5 billion. This was mainly due to decreases in sales volume of our corn refining segment.
For 3QFY19, sales volume for the corn refining segment decreased from 293K (“K”=1,000) tonnes to 226K
tonnes or about 23.1% y-o-y. This decrease was attributable to the decreases in the sales volumes of corn
sweeteners and by-products of about 21.9% and 26.2% respectively. For 9MFY19, sales volume for the corn
refining segment decreased from 800K tonnes to 709K tonnes or by about 11.4% y-o-y. This decrease was
attributable to the decreases in the sales volumes of corn sweeteners and by-products of about 11.9% and
For 3QFY19, the weighted average selling price of the Group’s corn refining products increased by 6.0% y-o-y.
The increase was mainly attributable to the increases in average selling prices of corn sweeteners and
by-products by 4.6% and 13.4% respectively. The weighted average selling price of the Group’s corn refining
products for 9MFY19 increased by 0.8% y-o-y. This increase was attributable to the increases in average
selling prices of corn sweeteners and by-products by about 0.6% and 3.7% respectively.
The Group’s export revenue in 9MFY19 increased by 24.6% as compared to 9MFY18, while the export revenue
as a percentage of total revenue increased from 3.3% in 9MFY18 to 4.7% in 9MFY19. The sales to the export market remained insignificant because of uncompetitive pricing due to the Group’s higher production cost.
Gross profit and gross profit margin
Gross profit for 3QFY19 decreased significantly by 17.3% or RMB 8.5 million y-o-y, and the gross profit margin
increased by 0.2 percentage points from 8.2% in 3QFY18 to 8.4%. Revenue decreased by 18.5% y-o-y, while
the cost of sales for the corresponding period decreased by 18.6%. This was mainly due to the higher average
selling price of our corn refining products.
Gross profit for 9MFY19 decreased significantly by 31.5% or about RMB 51.4 million y-o-y mainly attributable to
the decrease in gross profit of our corn refining segment. Group revenue for 9MFY19 decreased by 10.7% y-o-y,
while the cost of sales for the corresponding period decreased by 8.5%. Group gross profit margin decreased
by 2.3 percentage points y-o-y to 7.5%.
The others segment including our Hongzhou subsidiary made a gross profit of RMB 1.5 million in 9MFY19,
compared with RMB 1.4 million in 9MFY18.
Other operating income
Other operating income decreased by 23.5% from RMB 21.1 million in 9MFY18 to RMB 16.1 million in 9MFY19
due mainly to the decrease in gain on sale of consumables and waste materials by RMB 3.7 million and the
decrease in government grants and subsidies.
- Selling and distribution expenses
Selling and distribution expenses decreased by 12.5% from RMB 95.0 million in 9MFY18 to RMB 83.1 million in
9MFY19. This is mainly attributable to the decrease in transportation costs and staff costs.
- Administrative expenses
The Group’s administrative expenses increased by 4.2% from RMB 68.4 million in 9MFY18 to RMB 71.3 million
in 9MFY19. This was mainly due to staff retrenchment compensation by the Group’s Sichuan subsidiary, and
the increase in office supplies, which were partially offset by the reversal of allowance for doubtful trade
- Other operating expenses
Other operating expenses decreased by RMB 2.3 million from RMB 4.3 million in 9MFY18 to RMB 2.1 million in
9MFY19. This was due mainly to the decrease in employee compensation for work-related injury.
The Group’s finance costs decreased by 5.9% or about RMB 2.0 million from RMB 33.8 million in 9MFY18 to
RMB 31.8 million in 9MFY19. This was attributable to the decrease in interest costs arising from decrease in
average bank loans.
The increase in income tax expense was due to withholding and payment of last year's income tax incurred by
the Shandong subsidiary and Henan subsidiary. In addition, certain loss-making subsidiaries did not recognise
deferred tax assets due to the uncertainty of their future taxable profits. Therefore, there is a difference between
the effective tax rate in 9MFY19 and the statutory tax rate.
Total comprehensive loss
The Group’s total comprehensive loss increased by 241.6% or about RMB 48.5 million y-o-y from RMB 20.1
million in 9MFY18 to RMB 68.6 million in 9MFY19 due mainly to the decrease of RMB 51.4 million in gross profit,
the decrease in other operating income, and the increase in income tax expenses, partially offset by the
decreases in operating expenses and finance costs.
Statement of Financial Position
(i) Current assets
Current assets decreased by RMB 165.3 million from RMB 626.7 million as at 31 December 2018 to RMB
461.4 million as at 30 September 2019, due mainly to the decrease in inventories of RMB 106.8 million, the
decrease in trade receivables of RMB 27.0 million, and the decrease in cash and cash equivalents of RMB 34.7
million, which were partially offset by the increase in other receivables, deposits and prepayments of RMB 3.1
million. Trade receivable turnover days increased slightly from 29 days in FY18 to 31 days in 9MFY19.
Inventory turnover days was lower at 36 days in 9MFY19 as compared with 39 days for FY18.
(ii) Non-current assets
The decrease in non-current assets of RMB 38.8 million was mainly due to the depreciation of RMB 46.9 million
and the disposal of plant and equipment of RMB 7.2 million, which were partially offset by the capital
expenditure of RMB 15.2 million.
(iii) Current liabilities
Current liabilities decreased by RMB 73.6 million from RMB 602.2 million as at 31 December 2018 to RMB
528.6 million as at 30 September 2019, due mainly to the decrease in trade payables of RMB 78.5 million and
the decrease in other payables and accruals of RMB 15.6 million, which were partially offset by the increase in
short-term bank loans of RMB 4.3 million, the increase in borrowings from a related party of RMB 14.0 million
and the increase in amount owing to related parties of RMB 1.9 million. Trade payable turnover days in 9MFY19
was higher at 53 days, compared with 50 days for FY18.
The Group’s debt equity ratio was negative 11.5 times as at 30 September 2019 compared with 159.3 times as
at 31 December 2018, and the net debt equity ratio was negative 9.4 times as at 30 September 2019 (31
December 2018: 125.4 times). This was mainly due to the decrease of RMB 68.6 million in total equity resulting
from the net loss in 9MFY19 and the decrease of RMB 39.9 million in total bank loans and other borrowings.
WORKING CAPITAL AND BANK BORROWINGS AS AT 30 SEPTEMBER 2019
The management will take active steps to manage the Group’s working capital position. As at 30 September
2019, the Group has approximately RMB 44.34 million in short-term bank loans to be repaid by end of 4QFY19.
The repayment of loans that are due by end of 4QFY19 shall be funded through the operating cash flow, in
addition to the new bank borrowings for which the management is in discussion with bankers as well as
interest-free borrowings from related parties.
In addition, a director has procured and extended corporate and personal guarantees amounting to RMB473
million to secure bank loans granted to the Group.
(iv) Non-current liabilities
Non-current liabilities decreased by RMB 62.0 million due to the decrease in long-term bank loans of RMB 58.4
million (as at 30 September 2019, the long-term bank loan of our Sichuan subsidiary was reclassified as
short-term loan due to the low possibility of renewal after repayment) and the decrease in deferred income of
RMB 3.8 million (mainly due to the amortization of government grants).
(v) Shareholders' equity
As at 30 September 2019, shareholders’ equity was lower than that as at 31 December 2018 mainly due to the
net loss of RMB 68.6 million incurred in 9MFY19.
For 9MFY19, the Group generated net operating cash inflow of RMB 43.6 million. This comprised operating
profit before changes in working capital of RMB 9.4 million adjusted for decrease in working capital of RMB 42.2
million and the income tax paid of RMB 8.0 million.
The changes in working capital were mainly the result of:
i) a decrease in inventory of RMB 108.6 million;
ii) a decrease in trade receivables of RMB 28.3 million; and
iii) an increase in amount owing to related parties of RMB 1.9 million,
which were partially offset by
iv) a decrease in trade payables of RMB 78.5 million;
v) a decrease in other payables and accruals of RMB 15.6 million; and
vi) an increase in other receivables, deposits and prepayments of RMB 2.5 million.
Net cash used in investing activities amounted to RMB 6.7 million in 9MFY19. This was mainly due to the
equipment upgrading expenditure and purchase of packaging containers for finished products. These cash
outflows were partially offset by the cash inflows arising from proceeds from the disposal of plant and
equipment of RMB 7.3 million and the interest income of RMB 1.2 million.
Net cash outflow used in financing activities was RMB 71.6 million, mainly due to the net decrease in total bank
loans of RMB 54.1 million and payment of interest expense of RMB 31.7 million. These cash outflows were
partially offset by the increase in interest-free loans from a related party of RMB 14.2 million.