Market Overview - In the fiscal year 2022, 84.69% of the company's sales revenue was generated from the China market, with the US and Taiwan accounting for 9.97% and 1.70% respectively[256]. - The company has a diversified customer portfolio across more than 20 countries, mitigating risks associated with economic cycles[269]. - The company has a distribution network covering over 20 provinces in China and exports products to 20 countries and regions, including the United States, Mexico, and Australia[345]. - Approximately 18.78% of the company's revenues in 2021 were generated from international sales, highlighting reliance on favorable exchange rates for competitiveness[349]. - Economic cycles and construction activity significantly influence demand for the company's products, affecting overall performance[347]. Financial Performance - For the fiscal year ended September 30, 2022, revenues increased by approximately 76.37 million compared to 11.72 million[353]. - Gross profit decreased by approximately 11.14 million for the year ended September 30, 2022, with a gross profit margin of 14.91%[358]. - Net income for the fiscal year ended September 30, 2022, was approximately 0.61 million or 23.82% compared to the previous year[365]. - As of September 30, 2022, cash and cash equivalents were 15,350,197 in 2021[366]. Research and Development - The company has a high-quality research team with 29 engineers specializing in new product development and testing[285]. - The research and development team consists of 75 employees from technical and production departments, focusing on innovative products to meet evolving customer needs[301]. - The company invested 2,057,547 in 2021, reflecting an increase of approximately 13.2%[301]. - The company anticipates focusing on improving existing products and developing new technology in the coming years[388]. Quality Management - The company maintains a rigorous quality management system, achieving a product pass rate of 99.85%[270]. - The company operates under ISO9001 and ISO14001 quality management systems, ensuring high standards in manufacturing[345]. - The company emphasizes superior quality products and customer service, supported by a geographic manufacturing footprint and advanced logistics systems[281]. Legal and Regulatory Environment - The company has been involved in legal proceedings, including a settlement of RMB 631,791 related to a breach of contract case with Tangshan Sanyou Chemical Co., Ltd.[303]. - The company’s legal proceedings may involve uncertainties, and adverse results could impact financial performance[302]. - Foreign-invested enterprises in China can only pay dividends from retained earnings, with a requirement to set aside at least 10% of after-tax profits as statutory reserve funds until it reaches 50% of registered capital[313]. - The Foreign Investment Law, effective January 1, 2020, replaced three previous laws and introduced a pre-entry national treatment system for foreign investments, ensuring they receive treatment no less favorable than domestic investors[314]. Corporate Governance - The company has established five standing committees under the board, including the Audit Committee, Compensation Committee, and Nomination Committee, to enhance corporate governance[416]. - The Audit Committee is responsible for monitoring corporate financial reporting and external audits, ensuring transparency and accountability[420]. - The Compensation Committee reviews and makes recommendations regarding all forms of compensation for executive officers and directors[421]. - The Nomination Committee evaluates the performance of the Board and recommends candidates for election, ensuring compliance with regulatory requirements[422]. Employee and Labor Relations - The company has a total of 360 employees, with 35.3% in production, 20.8% in technical roles, and 17.5% in sales[286]. - 62.57% of employees are covered by the five statutory social benefits[435]. - 87.96% of employees are covered by Occupational Injury Insurance[435]. - The company has not experienced any work stoppages[435]. Innovation and Intellectual Property - The company has obtained 25 patents, all of which are owned by it, indicating a strong focus on innovation and intellectual property[336]. - The company holds a total of 4 invention patents and 20 utility patents, which protect new technical solutions and improvements, with utility patents having a protection term of 10 years under PRC laws[299]. - The company has registered multiple trademarks, with validity extending to 2029 and beyond, covering a range of metal products[292]. Supply Chain and Cost Management - The cost of steel coil represents over 50% of the total cost of sales, making fluctuations in steel prices critical to gross margins[346]. - The company has implemented supply chain and inventory management techniques to mitigate the effects of fluctuating inventory levels[347]. - For the year ended September 30, 2022, two suppliers accounted for 26.71% and 18.06% of the company's total purchases[263].
Huadi International Group(HUDI) - 2022 Q4 - Annual Report