JIANGNAN CHEMICAL(002226)2019-03-25 16:00Business Overview and Strategy - The company's main business changed from a single civil explosive business to a dual main business of civil explosives and new energy through a major asset restructuring in 2018[21] - The company has developed into a diversified listed company with dual-core driving forces in civil explosive and new energy businesses[40] - The company plans to optimize its business system and continue to focus on civil explosives while advancing the development of new energy power generation using big data, cloud computing, and AI to create smart wind farms[139] - In 2019, the company aims to adjust production capacity planning, integrate Anhui regional market resources, and extend the industrial chain to create new profit growth points[139] - The company completed a major asset restructuring with Dun'an New Energy, establishing a dual-core business model in both civil explosives and new energy sectors[137] Financial Performance - Revenue for 2018 reached 2,885,254,151.74 yuan, a 27.15% increase compared to the adjusted 2017 revenue of 2,269,152,672.43 yuan[23] - Net profit attributable to shareholders in 2018 was 219,431,949.50 yuan, up 10.49% from the adjusted 2017 figure of 198,593,536.22 yuan[23] - Operating cash flow for 2018 was 753,401,050.24 yuan, an 11.78% increase from the adjusted 2017 figure of 673,984,588.10 yuan[25] - Total assets at the end of 2018 were 12,041,188,603.40 yuan, a slight decrease of 2.96% compared to the adjusted 2017 figure of 12,408,776,649.93 yuan[25] - Q4 2018 revenue was 853,874,291.42 yuan, the highest among all quarters[29] - Q2 2018 net profit attributable to shareholders was 97,341,181.62 yuan, the highest among all quarters[29] - Non-recurring gains and losses in 2018 totaled 17,579,290.92 yuan, a significant decrease from 40,953,121.93 yuan in 2017[36] - Government subsidies received in 2018 amounted to 8,275,599.17 yuan, down from 16,540,475.36 yuan in 2017[33] - The company's weighted average return on equity (ROE) for 2018 was 3.95%, up 0.37 percentage points from the adjusted 2017 figure of 3.58%[25] - Basic earnings per share for 2018 were 0.1757 yuan, a 10.50% increase from the adjusted 2017 figure of 0.1590 yuan[25] - The company achieved a record high revenue of 2,885,254,151.74 yuan in 2018, a year-on-year increase of 27.15%[54] - The company's net profit attributable to shareholders was 219,431,949.50 yuan, a year-on-year increase of 10.49%, with earnings per share of 0.1757 yuan, up 10.50% year-on-year[54] - Total assets at the end of the reporting period were 12,041,188,603.40 yuan, a decrease of 2.96% compared to the beginning of the year, while shareholders' equity was 5,585,924,925.87 yuan, an increase of 0.63%[54] - Net profit for the year was 274,177,711.89 yuan, while operating cash flow was 753,401,050.24 yuan, a 174.79% increase, influenced by non-cash expenses such as asset impairment and depreciation[84] - Asset impairment losses amounted to 135,061,001.94 yuan, accounting for 42.99% of total profit, with bad debt losses being sustainable while other impairments like goodwill are not[85] Civil Explosives Business - The company's civil explosive business is mainly engaged in the R&D, production, and sales of industrial explosives, industrial detonators, and industrial fuses, as well as providing engineering blasting services[40] - Civil explosive industry revenue reached 2,164,322,986.70 yuan, up 30.86% year-on-year, while new energy industry revenue was 720,931,165.04 yuan, up 17.14% year-on-year[51] - The company's industrial explosive capacity utilization rate was 77.44%, and blasting business revenue reached 717,877,994.99 yuan, a year-on-year increase of 82.25%[51] - Revenue from the civil explosive industry accounted for 74.30% of total revenue, while wind power industry revenue accounted for 24.74%[56] - Civil explosive products revenue reached 1,203,072,287.25 yuan, with a year-on-year increase of 12.79%[60] - Blasting service revenue reached 717,877,994.99 yuan, with a year-on-year increase of 82.25%[60] - Industrial explosive production capacity is 248,500 tons, with a utilization rate of 77.44%[60] - The company has 7 hazardous goods transportation companies, with a total transportation capacity of over 30,000 tons of explosives[63] - Civil explosive product sales volume reached 203,315.61 tons, with a year-on-year increase of 11.22%[66] - Civil explosive product production volume reached 202,805.6 tons, with a year-on-year increase of 11.22%[66] - Civil explosive product inventory decreased by 17.73% year-on-year to 2,367.24 tons[66] - Raw material costs for hazardous goods production increased by 19.18% to 507,052,275.50 yuan, accounting for 30.08% of operating costs[68] - Labor costs for hazardous goods production rose by 5.63% to 53,331,145.62 yuan, representing 3.16% of operating costs[68] - Manufacturing expenses for hazardous goods production grew by 16.74% to 64,835,167.66 yuan, making up 3.85% of operating costs[68] - The company added 14 new blasting and blasting integration projects worth over ten million yuan in 2018, including four new mine general contracting contracts[47] - The company added 14 blasting and integrated blasting projects worth over 10 million yuan during the reporting period[51] New Energy Business - The company's new energy business, through its wholly-owned subsidiary DunAn New Energy, focuses on wind power and photovoltaic power generation project development, construction, and operation[40] - DunAn New Energy had a cumulative grid-connected installed capacity of 960 MW by the end of 2018[44] - Dunan New Energy's cumulative grid-connected installed capacity reached 960 MW by the end of 2018, including 900 MW of wind power and 60 MW of photovoltaic power, with an increase of 100 MW in wind power capacity compared to the previous year[51] - Dunan New Energy's settled electricity volume in 2018 was 1.536 billion kWh, a year-on-year increase of 20.91%[51] - Wind power generation revenue reached 636,058,446.89 yuan, with a year-on-year increase of 22.56%[60] - The company has established a comprehensive industrial layout for wind and solar resource exploration, construction, and operation, with nearly 200 wind measurement towers and multiple solar measurement devices[44] - In 2018, the national wind curtailment situation improved, and the company plans to increase power marketing efforts in 2019 to enhance settlement power and reduce wind curtailment rates[142] - The company aims to reduce unplanned downtime and maintenance costs for power generation equipment, ensuring optimal performance and health of the units to achieve the highest power generation efficiency[142] - In 2019, the company plans to promote benchmark wind and photovoltaic power stations, standardize production management, and enhance equipment operation, maintenance, and repair standards[142] - The company will focus on reducing wind and photovoltaic power station non-scheduled outages and major component damage through technical supervision and special inspections[142] - The company will conduct efficiency improvement and technical upgrades for wind turbines and photovoltaic systems based on evaluation and identification results[142] Risks and Challenges - The company faces risks including safety risks, market development risks, short-term liquidity issues of the controlling shareholder, and risks related to major asset restructuring transactions[5] - The company faces safety risks due to the inherent characteristics of explosive products and is committed to improving safety management and employee safety awareness[142] - The company is exposed to industry development risks, including the need to adapt to market changes and policy shifts in both the explosive and renewable energy sectors[142] - Market expansion risks include potential slowdowns in national infrastructure construction and stricter mineral resource investment policies, which could affect demand for the company's explosive products[142] - The company's controlling shareholder, DunAn Holdings, faced short-term liquidity issues in May 2018, which are being addressed with support from local governments and financial institutions[145] - The company is exposed to raw material price fluctuation risks, particularly due to the rising cost of ammonium nitrate, a key raw material for its explosive products[145] Subsidiaries and Acquisitions - The subsidiary Anhui Jiangnan Blasting Engineering Co., Ltd. reported a net profit of 21,847,830.86 yuan[121] - Anhui Jiangnan Jingsheng New Materials Co., Ltd. reported a net loss of RMB 28.33 million, with total assets of RMB 40 million and revenue of RMB 5.56 million[124] - Anhui Ningguo Jiangnan Oil Phase Materials Co., Ltd. achieved a net profit of RMB 1.77 million, with total assets of RMB 2 million and revenue of RMB 21.18 million[124] - Xinjiang Tianhe Chemical Co., Ltd. recorded a net profit of RMB 94.65 million, with total assets of RMB 52.57 million and revenue of RMB 826.56 million[124] - Sichuan Nanbu Yongsheng Chemical Co., Ltd. reported a net profit of RMB 16.31 million, with total assets of RMB 25 million and revenue of RMB 311.30 million[127] - Fujian Zhangzhou Jiuyijiu Chemical Co., Ltd. achieved a net profit of RMB 18.04 million, with total assets of RMB 20 million and revenue of RMB 96.81 million[127] - Anhui Xiangke Chemical Co., Ltd. recorded a net profit of RMB 15.54 million, with total assets of RMB 21.36 million and revenue of RMB 560.39 million[127] - Sichuan Yutai Special Engineering Technology Co., Ltd. reported a net profit of RMB 5.87 million, with total assets of RMB 81 million and revenue of RMB 86.30 million[130] - Nanjing Ligong Technology Chemical Co., Ltd. achieved a net profit of RMB 2.66 million, with total assets of RMB 66.67 million and revenue of RMB 162.44 million[130] - Zhejiang Dunan New Energy Development Co., Ltd. recorded a net profit of RMB 173.91 million, with total assets of RMB 788.42 million and revenue of RMB 7.25 billion[133] - Ningguo Jiangnan Transportation Co., Ltd. reported a net loss of RMB 45,857.50, with total assets of RMB 1 million and revenue of RMB 3.45 million[133] - The subsidiary Xinjiang Jiangnan Yitai Building Materials Co., Ltd. reported sales of 112,697,407.26 yuan, with a net loss of 3,017,787.07 yuan[136] - Company acquired 100% equity of Zhejiang Dunan New Energy Development Co., Ltd. for 337,702,698 shares[71] - Established new subsidiaries with investments totaling 10,900,000.00 yuan[71] - Acquired 51% equity in multiple companies with total investments of 31,657,400.00 yuan[71] - Company acquired 100% equity of Zhejiang Dun'an New Energy Development Co., Ltd. by issuing 337,702,698 shares to Dun'an Holding Group Co., Ltd. in January 2018[199] - Company invested 1,000,000.00 yuan to establish a wholly-owned subsidiary, Ningguo Jiangnan Transportation Co., Ltd., in February 2018[199] - Company invested 9,000,000.00 yuan to establish a wholly-owned subsidiary, Xinjiang Jiangnan Yitai Building Materials Co., Ltd., in November 2018[199] - Subsidiary Fujian Zhangzhou Jiuyijiu Chemical Co., Ltd.'s subsidiary Xiamen Xiongan Explosive Materials Co., Ltd. was deregistered and no longer included in the consolidated scope in July 2018[199] - Subsidiary Hubei Shuaili Chemical Co., Ltd.'s subsidiary Chongyang Shuaili Building Materials Co., Ltd. was deregistered and no longer included in the consolidated scope in October 2018[199] - Subsidiary Henan Huatong Chemical Co., Ltd. acquired 51% equity of Xinyang Anshun Blasting Engineering Co., Ltd. for 2,550,000.00 yuan, included in the consolidated scope from January 1, 2018[199] - Subsidiary Anhui Xiangke Chemical Co., Ltd.'s subsidiary Anhui Jiangnan Limin Blasting Engineering Co., Ltd. acquired 51% equity of Shitai Qiupu Blasting Engineering Co., Ltd. for 4,437,000.00 yuan, included in the consolidated scope from August 1, 2018[199] - Subsidiary Xinjiang Tianhe Chemical Co., Ltd.'s subsidiary Xinjiang Tianhe Civil Explosives Management Co., Ltd. acquired 51% equity of Changji Civil Explosives Sales Co., Ltd. for 6,310,400.00 yuan, included in the consolidated scope from October 31, 2018[199] - Subsidiary Anhui Xiangke Chemical Co., Ltd.'s subsidiary Anhui Xiangke Chemical Chizhou Co., Ltd. acquired 51% equity of Anhui Hongtai Mining Construction Co., Ltd. for 18,360,000.00 yuan, included in the consolidated scope from December 31, 2018[199] Dividends and Shareholder Returns - The company plans not to distribute cash dividends, issue bonus shares, or convert capital reserve into share capital[6] - The company did not distribute cash dividends in 2018, with a cash dividend amount of 0.00 yuan, accounting for 0.00% of the net profit attributable to ordinary shareholders[150] - In 2017, the company distributed cash dividends of 81,183,809.85 yuan, accounting for 40.88% of the net profit attributable to ordinary shareholders[150] - In 2016, the company distributed cash dividends of 50,120,344.56 yuan, accounting for 56.76% of the net profit attributable to ordinary shareholders[150] - The company plans not to distribute cash dividends, issue bonus shares, or convert capital reserve into share capital for the current reporting period[153] - The company's undistributed profits will be mainly used to meet daily operational and investment needs, ensuring normal production and stable development[150] Corporate Governance and Commitments - The company's actual controller and related parties have made commitments regarding share lock-up and performance compensation, with some commitments still in progress[154][157][160] - The company's performance compensation commitment for 2017-2020 includes a cumulative net profit of not less than 636.71 million yuan after deducting non-recurring gains and losses[157][160] - The company's actual controller has committed to avoid competition and regulate related transactions, with the commitment still in progress[160] - Dunan Holdings and Dunan Chemical commit to avoiding new businesses in China that may compete with Jiangnan Chemical[163] - Dunan Holdings and Dunan Chemical ensure that any unavoidable related-party transactions with Jiangnan Chemical will be conducted at fair market prices[163] - Dunan Holdings and Dunan Chemical guarantee the independence of Jiangnan Chemical's personnel, assets, and financial operations[169][172][175] - Dunan Holdings and Dunan Chemical promise not to interfere with Jiangnan Chemical's business activities or decision-making processes[178] - Dunan Holdings and Dunan Chemical commit to maintaining Jiangnan Chemical's independent corporate governance structure[181] - Dunan Holdings and Dunan Chemical pledge to avoid any form of competition with Jiangnan Chemical in their business operations[181] - Dunan Holdings and Dunan Chemical will compensate Jiangnan Chemical for any losses if their commitments are proven false or violated[184] Financial Reporting and Auditing - The company's financial report is audited by Tianjian Certified Public Accountants (Special General Partnership)[22] - The company's sponsor institution is Xiangcai Securities Co., Ltd., with a continuous supervision period until December 31, 2017, and continued supervision of raised funds in 2018[22] - The company's financial advisor is Huatai United Securities Co., Ltd., with a continuous supervision period until December 31, 2019[22] - The company's annual report is available at the China Securities Regulatory Commission's designated website: http://www.cninfo.com.cn[18] - The company adjusted its financial statements for 2017 due to changes in accounting policies, with accounts receivable and notes combined into a new category totaling RMB 1,130.616 million[195] - Research and development expenses were separately reported for the first time, amounting to RMB 38.001 million in 2018[195] - The company implemented new financial instrument standards starting January 1, 2019, affecting financial reporting[194] - The company's fixed assets remained stable at RMB 5,582.517 million in 2018[195] - The company's construction in progress increased slightly to RMB 667.017 million in 2018[195] - The company's long-term payables increased to RMB 504.321 million in 2018[195] - The company's management expenses decreased to RMB 323.327 million in 2018, with R&D expenses separated[195] - Company changed its audit firm from Ruihua Certified Public Accountants to Tianjian Certified Public Accountants for the 2018 fiscal year, with an audit fee of 1.5 million yuan[199] Cash Flow and Investments - Operating cash flow increased by 11.78% to 753,401,050.24 yuan, driven by a 18.69% increase in cash inflows and a 21.43% increase in cash outflows[81] - Investment cash flow decreased by 245.08% to -650,651,514.33 yuan, primarily due to increased fixed asset investments and the absence of recovered financial product investments compared to the previous year[81] - Financing cash flow decreased significantly to -695,753,