Comprehensive Income Statement
The Group’s revenue for 4QFY17 decreased slightly by 1.6% from RMB 537.5 million in 4QFY16 to RMB 528.9
million in 4QFY17 due mainly to the decrease in sales volume of our corn refining segment partially offset by the
increase in selling prices of our corn refining products. The revenue for FY17 increased by 6.1% year-on-year
(“y-o-y”) from RMB 1.9 billion to RMB 2.0 billion, this was mainly due to the increase in sales volume of our corn
refining segment, which was partially offset by the decrease in the average selling price. The strict
environmental regulation has resulted in the weak demand and stiff competition in the corn sweetener industry.
For 4QFY17, sales volume for our corn refining segment decreased by 1.3% from 271K (“K”=1,000) tonnes to
268K tonnes period-on-period (“p-o-p”). This p-o-p decrease was mainly attributable to the decrease in the
sales volume of corn starch by 100.0%. For FY17, sales volume for our corn refining segment increased from
944K tonnes to 1,042K tonnes or by about 10.4% y-o-y. This y-o-y increase was mainly attributable to the
increases in the sales volumes of corn sweeteners and by-products of about 8.8% and 15.5% respectively,
partially offset by the decrease in the sales volume of corn starch of about 9.5%.
For 4QFY17, the weighted average selling price of the Group’s corn refining products increased by 2.5% p-o-p.
This increase was attributable to the increase in price of corn sweeteners of about 6.4%, partially offset by the decrease in price of by-products by 16.6%. For FY17, the weighted average selling price of the Group’s cornrefining products decreased by 0.9% y-o-y. This decrease was attributable to the decreases in prices of corn
sweeteners, corn starch and by-products of about 0.6%, 1.0% and 3.5% respectively.
The Group’s export revenue in FY17 decreased by 1.8% as compared to FY16. The export revenue as a
percentage of total revenue decreased from 3.4% in FY16 to 3.1% in FY17.
Gross profit and gross profit margin
For 4QFY17, gross profit decreased by 2.7% p-o-p to RMB 64.7 million, and the gross profit margin decreased
from 12.4% in 4QFY16 to 12.2%. Group revenue decreased by 1.6%, while the cost of sales for the
corresponding period decreased by 1.4%. These were due mainly to the increase in corn price of about 1.1%
Gross profit for FY17 decreased by 1.5% y-o-y to RMB 209.1 million. Group revenue increased by 6.1% y-o-y,
while the cost of sales increased by 7.0%. Gross profit margin decreased from 11.1% in FY16 to 10.3% in FY17.
This was mainly due to the decrease in selling price of our corn refining segment y-o-y.
The Group has stopped the production of animal feed products since 1QFY16.
The Group’s others segment including our Hongzhou subsidiary made a gross profit of RMB 2.3 million in FY17
compared with RMB 1.3 million in FY16.
Other operating income
Other operating income decreased by RMB 7.2 million from RMB 103.7 million in FY16 to RMB 96.5 million in
FY17, due largely to the decrease in government grant and subsidies, which was partially offset by the reversal
of impairment of property, plant and equipment of our Shandong subsidiary in May 2017 and the increase in
insurance claim compensation for the losses incurred due to a fire at our Liaoning subsidiary.
- Selling and distribution expenses
Selling and distribution expenses increased by 28.6% or RMB 29.2 million from RMB 102.2 million in FY16 to
RMB 131.5 million in FY17. This was mainly attributable to the increase in transportation costs.
- Administrative expenses
The Group’s administrative expenses increased by 1.4% from RMB 107.6 million in FY16 to RMB 109.1 million
in FY17. This was mainly due to the increase in staff costs (including salary, social insurance payment and other
welfare), partially offset by the decrease in depreciation charge and other manufacturing overheads charged to
operating expenses as a result of production halts of certain products, and the decrease in allowance for
doubtful trade receivables.
- Other operating expenses
Other operating expenses increased by RMB 8.8 million from RMB 36.9 million in FY16 to RMB 45.6 million in
FY17. This was due mainly to the losses of about RMB 7.3 million resulting from a fire at our Liaoning
subsidiary and the impairment of property, plant and equipment of our Sichuan subsidiary of about RMB 34.0
million, which was partially offset by the decrease in the loss on disposal of plant and equipment of about RMB
25.2 million and the decrease in the relocation expenses of about RMB 6.2 million both mainly resulting from
the relocation of our Shandong subsidiary completed by end of FY16.
The Group’s finance costs increased by 3.5% from RMB 50.5 million in FY16 to RMB 52.3 million in FY17
mainly attributable to the increase in interest costs.
Income tax expense
The decrease in income tax expense was due to the decrease in net profit generated from our Shaanxi
subsidiary. In addition, certain loss-making subsidiaries did not recognise deferred tax assets due to the
uncertainty of their future taxable profits. Therefore, the effective tax rate in FY17 was higher than the statutory
Total comprehensive income
The Group’s total comprehensive income decreased by 341.5% from a profit of RMB 13.9 million in FY16 to a
net loss of RMB 33.5 million in FY17, this was mainly due to the decrease in other operating income and the
increase in operating expenses
Statement of Financial Position
(i) Current assets
Current assets decreased by RMB 177.2 million from RMB 779.5 million as at 31 December 2016 to RMB 602.3
million as at 31 December 2017, due mainly to the decrease in trade receivables of RMB 7.1 million, the
decrease in other receivables, deposits and prepayments (including the amount owing by related parties) of
RMB 72.8 million (due mainly to the full collection of the compensation for relocation of our Shandong subsidiary
owed by the local government), and the decrease in cash and cash equivalents of RMB 110.9 million, which
were partially offset by the increase in inventories of RMB 12.9 million. Trade receivable turnover days
decreased slightly from 35 days in FY16 to 32 days in FY17. Inventory turnover days was lower at 36 days in
FY17 as compared with 40 days for FY16.
(ii) Non-current assets
The decrease in non-current assets of RMB 17.6 million was mainly due to the depreciation of RMB 85.1 million
and the disposal of plant and equipment of RMB 25.9 million, which were partially offset by the decrease in
impairment of property, plant and equipment of RMB 33.4 million and the capital expenditure of RMB 60.0
(iii) Current liabilities
Current liabilities decreased by RMB 102.6 million from RMB 670.7 million as at 31 December 2016 to RMB
568.1 million as at 31 December 2017, due mainly to the decrease in short-term interest-bearing loans and
borrowings of RMB 110.0 million (as at 31 December 2017, the pledged cash deposits decreased by RMB 48.7
million to RMB 97.3 million as compared to 31 December 2016), and the decrease in other payables and
accruals of RMB 4.9 million, partially offset by the increase in trade payables of RMB 13.2 million. Trade
payable turnover days was higher at 48 days compared with 47 days for FY16.
The Group’s debt equity ratio was 8.46 times as at 31 December 2017 compared with 7.20 times as at 31
December 2016, and the net debt equity ratio was 6.47 times as at 31 December 2017 (31 December 2016:
4.96 times). This was mainly due to the decrease of RMB 39.4 million or 29.2% in total equity resulting from the net loss in FY17 and the payment of dividend in May 2017, and the decrease of RMB 163.0 million or 16.8% in
total interest-bearing loans and borrowings.
(iv) Non-current liabilities
Non-current liabilities decreased by RMB 52.8 million due mainly to the decrease of RMB 53.0 million in
long-term interest-bearing loans.
(v) Shareholders' equity
As at 31 December 2017, shareholders’ equity was lower than that as at 31 December 2016 mainly due to the
net loss of RMB 33.5 million in FY17 and payment of dividend of RMB 5.9 million in May 2017.
For FY17, the Group experienced net operating cash inflow of RMB 135.7 million. This comprised operating
profit before changes in working capital of RMB 64.2 million adjusted for decrease in working capital of RMB
73.2 million and income taxes paid of RMB 1.6 million.
The decrease in working capital was mainly the result of:
i) a decrease in trade receivables of RMB 5.2 million,
ii) a decrease in other receivables, deposits and prepayments (including the amount owing by related parties)
of RMB 72.8 million,
iii) an increase in trade payables of RMB 13.2 million,
which were offset by
iv) an increase in inventory of RMB 13.3 million, and
v) a decrease in other payables and accruals of RMB 4.9 million.
Net cash used in investing activities amounted to RMB 25.5 million in FY17. This was mainly due to the
construction of property, plant and equipment in our Shandong subsidiary; the upgrading and reconstruction of
our production line in our Henan subsidiary, Shaanxi subsidiary and Sichuan subsidiary in order to meet the
stricter environmental requirements implemented by the central government; and the purchase of packaging
containers for our finished products. These cash outflows were partially mitigated by the cash inflows arising
from proceeds from the disposal of plant and equipment of RMB 25.9 million, proceeds from government grants
for low-energy environmental protection equipment of RMB 6.1 million, and the interest income of RMB 2.5
Net cash used in financing activities was RMB 172.4 million, mainly due to the net decrease in total bank loans
of RMB 172.9 million and payment of interest expense and dividend of RMB 52.3 million and RMB 5.9 million
respectively. These cash outflows were partially offset by the decrease in pledged cash deposits of RMB 48.7
million, and the increase in interest-bearing loans from a Director of RMB 9.9 million.