Financial Performance - The company achieved sales revenue of approximately RMB 258.8 million in 2023, a decrease of RMB 12.8 million (4.7%) compared to 2022, primarily due to rising raw material costs, market competition, and reduced consumer purchasing power[1] - Revenue decreased by 4.7% from RMB 271.6 million in 2022 to RMB 258.8 million in 2023, primarily due to weak consumer demand, rising raw material costs, and adjustments in the distribution network[20] - Gross profit decreased by 0.9% from RMB 74.8 million in 2022 to RMB 74.1 million in 2023, while gross profit margin increased from 27.5% to 28.6% due to effective cost control and lower raw material prices[23] - Loss attributable to owners of the company increased by 7.8% from RMB 486.3 million in 2022 to RMB 524.3 million in 2023[18] - Revenue for 2023 decreased by 4.7% to RMB258.8 million compared to RMB271.6 million in 2022[89] - Gross profit for 2023 decreased by 0.9% to RMB74.1 million compared to RMB74.8 million in 2022[89] - Loss attributable to ordinary equity holders increased by 7.8% to RMB524.3 million in 2023 from RMB486.3 million in 2022[89] - Revenue decreased by 4.7% from RMB271.6 million in 2022 to RMB258.8 million in 2023, primarily due to industry challenges, consumer uncertainty, and distribution network adjustments[143] - Gross profit decreased by 0.9% from RMB74.8 million in 2022 to RMB74.1 million in 2023, while gross profit margin increased from 27.5% to 28.6% due to cost control and lower raw material prices[157] - Loss attributable to ordinary equity holders increased by 7.8% from RMB486.3 million in 2022 to RMB524.3 million in 2023, reflecting higher net loss[160] - Net loss margin increased by 13.1% from 179.1% in 2022 to 202.6% in 2023, driven by the combined effect of revenue decline and increased expenses[161] - Pre-tax loss increased by 7.8% from RMB 486.3 million in 2022 to RMB 524.3 million in 2023[162] - Income tax expenses for both 2022 and 2023 were zero due to business losses[163] Product Revenue Breakdown - Revenue from soy sauce products increased by 9.5% from RMB 23.8 million in 2022 to RMB 26.3 million in 2023, driven by the "one heart with two wings" product strategy and new product development[28] - Revenue from cooking wine products decreased by 2.5% from RMB 176.2 million in 2022 to RMB 171.8 million in 2023, mainly due to adjustments in the distribution network and equipment upgrades[20] - Revenue from rice vinegar products decreased by 16.3% from RMB 17.8 million in 2022 to RMB 14.9 million in 2023, reflecting weak consumer demand and reduced purchasing power[30] - Revenue from other products decreased by 14.9% from RMB 53.8 million in 2022 to RMB 45.8 million in 2023, as the company focused on high-performing products and phased out underperforming ones[30] - Revenue from rice vinegar products decreased by 16.3% from RMB17.8 million in 2022 to RMB14.9 million in 2023, driven by declining sales of high-end products[144] - Revenue from cooking wine products decreased by 2.5% from RMB176.2 million in 2022 to RMB171.8 million in 2023, influenced by distribution network adjustments and equipment upgrades[155] - Revenue from other products decreased by 14.9% from RMB53.8 million in 2022 to RMB45.8 million in 2023, due to downsizing underperforming products[156] - Cooking wine products accounted for approximately 66.4% of the company's total revenue in 2023[128] - Soy sauce products generated approximately RMB26.3 million in sales revenue, representing 10.2% of total revenue in 2023[128] Cost and Expense Management - Cost of sales decreased by 6.1% from RMB 196.8 million in 2022 to RMB 184.7 million in 2023, primarily due to lower revenue and reduced prices of some raw materials[29] - Selling and distribution expenses increased from RMB74.7 million in 2022 to RMB95.2 million in 2023, with the percentage of revenue rising from 27.5% to 36.8%[31] - Administrative expenses increased by 6.1% from RMB44.4 million in 2022 to RMB47.1 million in 2023, driven by higher management salaries and R&D costs[145][159] - Sales and distribution expenses increased from RMB74.7 million in 2022 to RMB95.2 million in 2023, with the expense-to-revenue ratio rising from 27.5% to 36.8% due to higher marketing costs[146] - The company implemented quality improvement and cost control measures to expand economies of scale and reduce product costs[128] Strategic Initiatives and Product Development - The company plans to expand its condiment product portfolio, focusing on cooking wine, soy sauce, rice vinegar, and fermented bean curd, to meet growing customer demand and develop sales channels[2] - The company aims to further develop the horizontal and vertical condiment industry chain, positioning itself as a diversified condiment manufacturer with cooking wine as the leading product[2] - The company is upgrading and innovating production processes, standardizing systems, and optimizing workflows to enhance production efficiency and reduce costs[1] - The company has invested in new production line equipment to improve labor efficiency and strengthen its core competitiveness in the market[1] - The company established a R&D team with external technical professionals and collaborated with universities to enhance product quality and innovate brewing technology[86] - The company successfully developed and launched several new products, improving the technology of soy sauce and soybean paste production lines[86] - The company reconstructed and upgraded production equipment, optimized processes, and purchased new production line equipment to enhance efficiency and reduce costs[95] - The company aims to develop a diversified condiment product structure, focusing on expanding its horizontal and vertical condiment industry chain[97] - The company expanded and developed new products such as hot pot base and oyster sauce under its "grand brand, big single product, national product, and wide-ranged product" strategy[85] - The company remains committed to natural, healthy, and nutritious products, adhering to food safety regulations and integrating food technology with production practices[76][83] - The company focused on developing high-end cooking wine products with good value for money to compensate for other product categories[128] Financial Position and Liabilities - Gearing ratio increased from 273.8% in 2022 to 328.1% in 2023, reflecting higher net debt relative to total equity[18][19] - Total borrowings increased from RMB2,211.6 million in 2022 to RMB2,808.5 million in 2023[61] - Cash and cash equivalents increased to RMB10.1 million as of 31 December 2023, up from RMB9.8 million in 2022[63][67] - Interest-bearing bank and other borrowings totaled RMB2,808.5 million as of 31 December 2023, compared to RMB2,211.6 million in 2022[63][67] - The gearing ratio of the Group was 328.1% as of 31 December 2023, representing a 19.8% increase over 2022[70][80] - Capital commitment as of 31 December 2023 amounted to RMB19.7 million, up from RMB14.8 million in 2022[71] - Inventories with a carrying amount of RMB487.3 million, property, plant and equipment with a carrying amount of RMB189.3 million, and leasehold land with a carrying amount of RMB47.0 million were pledged to secure general banking facilities[73] - Total assets decreased to RMB 1,113,188 thousand in 2023 from RMB 1,123,077 thousand in 2022, a decrease of approximately 0.9%[102] - Total liabilities increased to RMB 3,446,730 thousand in 2023 from RMB 2,931,240 thousand in 2022, an increase of approximately 17.6%[102] - Total deficit increased to RMB 2,333,542 thousand in 2023 from RMB 1,808,163 thousand in 2022, an increase of approximately 29.1%[102] Market Strategy and Distribution - The company expanded its distribution network to fourth and fifth-tier cities across 30 provinces, autonomous regions, and municipalities[128] - The company classified distributors into core and non-core categories in 2023, focusing resources on terminal construction and market development to cultivate all distributors into core distributors[164][165] - The company launched a 2.5L Lao Heng He Huadiao Wine promotion in collaboration with East Buy Holding Limited and multiple influencers to build presence on the Douyin platform[107] - The Group's market strategy in 2023 included a full-scale upgrade of brand and product positioning, logo image, marketing slogans, and product packaging[85] Risk Management and Internal Controls - The company faces risks from significant increases in production costs, including agricultural and sideline product prices, packaging costs, and labor costs[130] - The company faces risks from changes in consumer education, awareness, and habits in the consumption of cooking wine products[130] - The company faces risks from increased market expansion costs and sales expenses compared to expectations[130] - The company faces risks from new products potentially not being recognized by the market in the short term[130] - The company's risk management and internal control systems aim to manage, rather than eliminate, risks of not achieving business objectives, providing reasonable but not absolute assurance[186] - The Board is responsible for maintaining an effective risk management and internal control system, with clear responsibilities, procedures, and high transparency[197] - The Company has established a policy for handling inside information to ensure timely public disclosure and confidentiality before full disclosure[197] Corporate Governance and Committees - The Audit Committee held four meetings in 2023, with all members attending either in person or via teleconference[176] - The Nomination Committee, established in 2013, consists of three members and is responsible for reviewing the Board's structure and composition annually[178][179] - The Audit Committee recommended the re-appointment of Grant Thornton as the external auditor for the financial year ending December 31, 2024, subject to shareholder approval[182] - The Nomination Committee held one meeting in 2023 to review and consider the diversity, structure, size, and composition of the Board, as well as the independence of independent non-executive Directors, and made relevant recommendations to the Board[191] - The remuneration paid or payable to the Company's external auditors, Grant Thornton Hong Kong Limited, for audit services in 2023 was RMB 2,040,000[194] - Shareholders have the right to attend and vote at general meetings, and all resolutions will be voted on, with results published on the Company's and Stock Exchange's websites[199] Food Safety and Quality Control - The company strengthened its food safety control system, implemented a digital traceability system, and established emergency response plans for food safety incidents[93] - The company strengthened its food safety technology protection capability by deepening integration and collaboration between industry, academia, and research facilities[111] - The company upgraded its experimental equipment and made sustained technological breakthroughs to enhance technical support[111] - The company built a whole-process digital food safety traceability system to implement code control of each product[111] - The company formulated emergency plans and disposal plans for food safety accidents to improve and enhance the quality system[111] Investor Relations and Shareholder Communication - The company actively implemented investor relations measures in 2023 and will continue to ensure effective shareholder communication and transparency[167] - The Board is responsible for presenting a balanced and clear assessment of the Group's performance and prospects, with management providing all relevant information to the Board[187] Other Financial Metrics - Other income and gains decreased by 85.5% from RMB 20.7 million in 2022 to RMB 3.0 million in 2023, mainly due to the absence of compensation income and reduced government subsidies[22] - Financing costs decreased by 4.4% from RMB203.9 million in 2022 to RMB194.9 million in 2023 due to the full amortization of finance lease interest expenses[32] - Loss before income tax increased by 7.8% from RMB486.3 million in 2022 to RMB524.3 million in 2023[34] - Net loss attributable to ordinary equity holders increased by 7.8% from RMB486.3 million in 2022 to RMB524.3 million in 2023[35] - Loss per share increased from RMB0.84 in 2022 to RMB0.91 in 2023[36] - Net loss ratio increased from 179.1% in 2022 to 202.6% in 2023, a rise of 13.1%[37] - Other income and gains decreased by 85.5% from RMB20.7 million in 2022 to RMB3.0 million in 2023[40] - Trade receivables increased slightly from RMB20.5 million in 2022 to RMB20.8 million in 2023, with turnover days increasing from 32 to 33 days[49] - Inventories decreased from RMB646.7 million in 2022 to RMB645.9 million in 2023, with base wine inventory decreasing from RMB534.7 million to RMB465.3 million[50][51] - Trade receivables increased from RMB 20.5 million as of December 31, 2022, to RMB 20.8 million as of December 31, 2023, with turnover days increasing from 32 days to 33 days[165]
老恒和酿造(02226) - 2023 - 年度财报