China Risun Group Limited — Annual Report 2021

Mar 26, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

China Risun Group Limited 中國旭陽集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 1907)

ANNOUNCEMENT OF AUDITED ANNUAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2020

FINANCIAL HIGHLIGHTS

• Revenue for the year ended December 31, 2020 was RMB19,784.9 million, representing an increase of 5.0% year-on-year.

• Profit attributable to owners of the Company for the year ended December 31, 2020 was RMB1,700.0 million, representing an increase of 24.7% year-on-year.

• Basic earnings per share of the Company for the year ended December 31, 2020 was RMB0.42, representing an increase of 23.5% year-on-year.

• The Board proposed a final dividend of RMB10.5 cents per share, equivalent to approximately HK12.48 cents per share, with total dividend amount of approximately RMB429,450,000 or HK$510,432,000, subject to the shareholders’ approval on the final dividend at the annual general meeting for 2020.

The board (the “ Board ”) of directors (the “ Director(s) ”) of the China Risun Group Limited (the “ Company ”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (collectively referred to as the “ Group ”) for the year ended December 31, 2020 (the “ Reporting Period ”) together with the comparative audited consolidated figures for the year ended December 31, 2019.

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended December 31, 2020

Notes Revenue 4 Cost of sales and services Gross profit Other income Other gains and losses Impairment losses under expected credit model, net of reversal Selling and distribution expenses Administrative expenses Listing expenses Profit from operations Finance costs Share of results of associates Share of results of joint ventures Profit before taxation Income tax expense 5 Profit for the year Other comprehensive income Item that may be reclassified subsequently to profit or loss Exchange differences arising on translating foreign operations Other comprehensive income for the year Total comprehensive income for the year	2020 RMB’000 (Audited) 19,784,866 (16,561,423) 3,223,443 116,176 27,865 (1,005) (789,337) (441,186) – 2,135,956 (532,032) (4,688) 398,479 1,997,715 (296,812) 1,700,903 2,678 2,678 1,703,581	2019 RMB’000 (Audited) 18,842,038 (16,259,130) 2,582,908 161,520 104,970 5,978 (778,717) (381,599) (15,835) 1,679,225 (465,579) 25,734 439,999 1,679,379 (305,711) 1,373,668 8,310 8,310 1,381,978

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (Continued)

For the year ended December 31, 2020

Notes Profit for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year Owners of the Company Non-controlling interests Basic Earnings per share(RMB) 6 Diluted Earnings per share(RMB)	2020 RMB’000 (Audited) 1,700,041 862 1,700,903 1,702,719 862 1,703,581 0.42 N/A	2019 RMB’000 (Audited) 1,363,165 10,503
		1,373,668
		1,371,475 10,503
		1,381,978
		0.34
		0.34

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At December 31, 2020

Notes Non-current assets Property, plant and equipment Right-of-use assets Goodwill Intangible assets Interests in associates Interests in joint ventures Other long term receivables and prepayments 8 Financial assets at fair value through profit or loss (“FVTPL”) Deferred tax assets Current assets Inventories Income tax prepayments Other receivables 9 Trade and bills receivables measured at fair value through other comprehensive income (“FVTOCI”) 9 Amounts due from related parties Financial assets at FVTPL Restricted bank balances Cash and cash equivalents	2020 RMB’000 (Audited) 11,056,657 1,119,374 31,808 78,748 346,623 1,355,575 2,589,411 251,038 187,787 17,017,021 1,507,383 7,311 1,825,706 1,005,281 367,717 8,175 1,294,656 1,181,390 7,197,619	2019 RMB’000 (Audited) 9,751,346 1,144,603 31,808 75,914 351,311 1,230,431 1,588,154 222,105 202,242
		14,597,914
		963,679 28,015 1,600,527 699,479 167,653 10,525 1,073,747 1,059,857
		5,603,482

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

At December 31, 2020

Notes Current liabilities Financial liabilities at FVTPL Trade and other payables 10 Contract liabilities Income tax payable Bank and other loans Lease liabilities Amounts due to related parties Net current liabilities Total assets less current liabilities Non-current liabilities Bank and other loans Lease liabilities Deferred income Deferred tax liabilities Net assets Capital and reserves Share capital Reserves Total equity attributable to owners of the Company Non-controlling interests Total equity	2020 RMB’000 (Audited) 52,329 3,798,062 994,517 237,097 7,771,801 27,790 168,006 13,049,602 (5,851,983) 11,165,038 2,725,933 41,736 81,652 39,314 2,888,635 8,276,403 354,699 7,777,664 8,132,363 144,040 8,276,403	2019 RMB’000 (Audited) 1,866 3,051,228 938,950 249,305 7,290,471 19,885 338,066 11,889,771 (6,286,289) 8,311,625 1,369,167 26,184 80,021 36,151 1,511,523 6,800,102 354,699 6,336,705 6,691,404 108,698 6,800,102

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NOTES TO THE AUDITED CONSOLIDATED FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands on November 8, 2007 as an exempted company with limited liability under the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The shares of the Company have been successfully listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) on March 15, 2019. The address of the registered office and the principal place of business of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands and Room 2001, Sino Plaza, 255 Gloucester Road, Causeway Bay, Hong Kong respectively.

The ultimate holding company and immediate holding company of the Company is Texson Limited (“ Texson ”, the “ Ultimate Holding Company ”), a company incorporated in the British Virgin Islands (the “ BVI ”), and ultimately controlled by Mr. Yang Xuegang (the “ Ultimate Controlling Shareholder ”).

The Company’s operating subsidiaries are engaged in the production, sale and distribution of coke, coking chemicals and refined chemicals and relevant operation management services (the “ Core Business ”) in the People’s Republic of China (the “ PRC ” or “ China ”). The consolidated financial statements of the Group are presented in Renminbi (“ RMB ”), which is the same as the functional currency of the Company.

2. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL INFORMATION

At December 31, 2020, the Group had net current liabilities of RMB5,851,983,000. The Directors are of the opinion that, taking into consideration the availability of unutilized banking facilities of the Group amounting to RMB8,887,928,000 at the report date, of which RMB3,128,928,000 is unconditional, RMB4,212,000,000 is with conditions to be determined by certain banks and RMB1,547,000,000 is the outstanding portion of syndicated loans for special purpose of construction of certain production lines , and the assumption that approximately 55% of bank loans and other banking facilities at December 31, 2020 will be successfully renewed upon maturity, the Group has sufficient financial resources to meet its capital expenditure and working capital requirements when they fall due for the foreseeable future. Accordingly, the consolidated financial statements are prepared on a going concern basis.

Amendments to IFRSs that are mandatorily effective for the current year

In the current year, the Group has applied the Amendments to References to the Conceptual Framework in IFRS Standards and the following amendments issued by the International Accounting Standards Board (“IASB”) for the first time, which are mandatorily effective for the annual period beginning on or after January 1, 2020 for the preparation of the consolidated financial statements:

Amendments to IAS 1 and IAS 8 Definition of Material Amendments to IFRS 3 Definition of a Business Amendments to IFRS 9, IAS 39 and Interest Rate Benchmark Reform IFRS 7

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3. APPLICATION OF AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRSs”)

Amendments to IFRSs that are mandatorily effective for the current year (Continued)

The application of the Amendments to References to the Conceptual Framework in IFRS Standards and the amendments to IFRSs in the current year has had no material impact on the Group’s financial positions and performance for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

New and amendments to IFRSs in issue but not yet effective

The Group has not early applied the following new and amendments to IFRSs that have been issued but are not yet effective:

IFRS 17	Insurance Contracts and the related Amendments1
Amendment to IFRS 16	Covid-19-Related Rent Concessions4
Amendments to IFRS 3	Reference to the Conceptual Framework2
Amendments to IFRS 9, IAS 39,	Interest Rate Benchmark Reform – Phase25
IFRS 7, IFRS 4 and IFRS 16
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor
	and its Associate or Joint Venture3
Amendments to IAS 1	Classification of Liabilities as Current or Non-current1
Amendments to IAS 1 and	Disclosure of Accounting Policies1
IFRS Practice Statement 2
Amendments to IAS 8	Definition of Accounting Estimates1
Amendments to IAS 16	Property, Plant and Equipment - Proceeds before
	Intended Use2
Amendments to IAS 37	Onerous Contracts – Cost of Fulfilling a Contract2
Amendments to IFRSs	Annual Improvements to IFRSs Standards 2018-20202

• 1 Effective for annual periods beginning on or after January 1, 2023 2 Effective for annual periods beginning on or after January 1, 2022

• 3 Effective for annual periods beginning on or after a date to be determined.

• 4 Effective for annual periods beginning on or after June 1, 2020

• 5 Effective for annual periods beginning on or after January 1, 2021

Except for the new and amendments to IFRSs mentioned below, the Directors anticipate that the application of all other new and amendments to IFRSs will have no material impact on the consolidated financial statements in the foreseeable future.

Amendments to IAS 16 Property Plant and Equipment-proceeds before Intended Use

The amendments specify that the costs of any item that were produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management (such as samples produced when testing whether the relevant property, plant and equipment is functioning properly) and the proceeds from selling such items should be recognized and measured in the profit or loss in accordance with applicable standards. The cost of the items are measured in accordance with IAS 2 Inventories.

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3. APPLICATION OF AMENDMENTS TO IFRSs (CONTINUED)

Amendments to IFRSs that are mandatorily effective for the current year (Continued)

Amendments to IAS 16 Property Plant and Equipment-proceeds before Intended Use (Continued)

The Group’s existing accounting policy is to account for sale proceeds on samples produced during testing as reduction of cost of the relevant property, plant and equipment. Upon application of the amendments, such sale proceeds and the related costs will be included in profit and loss with corresponding adjustments to the cost of property, plant and equipment. During the year ended December 31, 2020, sale proceeds and related costs included in property, plant and equipment amounted to RMB24,435,000 and RMB21,804,000 respectively.

4. REVENUE AND SEGMENT INFORMATION

During the Reporting Period, the Group’s revenue represents the amount received and receivable from the sales of goods to external customers arising from the coke and coking chemicals, refined chemicals, trading and operation management services. Except for the provision of operation management services, which was recognized over time, the revenue of the remaining operations is recognized at a point in time when the customers obtain control of the goods delivered or management services provided.

All sales/trading are for period of one year or less. As permitted under IFRS 15 Revenue from Contracts with Customers, the transaction price allocated to these unsatisfied contracts is not disclosed.

Information reported to the executive directors, being the chief operating decision maker (the “ CODM ”) for the purpose of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided.

Specifically, the Group’s reportable segments under IFRS 8 Operation Segments are as follows:

• Coke and coking chemicals manufacturing segment: the production and sale of coke and a series of coking chemicals from externally sourced coking coals processed at the Group’s coking facilities;

• Refined chemicals manufacturing segment: the purchase of coking chemicals from the Group’s coke and coking chemicals manufacturing segment and third parties, and processing such coking chemicals into refined chemical products at the Group’s refined chemicals facilities, as well as marketing and selling such refined chemicals;

• Operation management segment: the operation management service provided to the thirdparty plants, and the sale of coke, coking chemicals and refined chemicals produced by these plants under the management service agreements and commissioned processing contracts; and

• Trading segment: the sourcing of coke, coking chemicals and refined chemicals from third parties and the marketing, sale and distribution of such coal chemicals.

The accounting policies of the reportable segments are the same as the Group’s accounting policies.

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4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

The following is an analysis of the Group’s results, assets and liabilities by reportable segments:

Year ended/as at December 31, 2020 (Audited)

Revenue from contracts with external customers Sale of coke and coking chemicals Sale of refined chemicals Trading Management services Inter-segment revenue Reportable segment revenue Reportable segment result Unallocated head office and corporate expenses Consolidated profit before taxation Reportable segment assets (including interests in associates and joint ventures) Reportable segment liabilities Other information: Additions to non-current segment assets during the year Share of results of associates Share of results of joint ventures Depreciation and amortization for the year	Coke and Coking Chemicals Manufacturing RMB’000 8,715,621 – – – 8,715,621 822,912 9,538,533 1,932,528 9,466,094 5,867,401 898,716 658 398,479 312,394	Refined Chemicals Manufacturing RMB’000 – 5,845,621 – – 5,845,621 201,498 6,047,119 (20,178) 9,182,620 6,315,371 1,178,314 (5,346) – 396,571	Operation Management RMB’000 20,484 420,912 – 159,452 600,848 – 600,848 131,696 809,763 125,133 – – – 20,130	Trading RMB’000 – – 4,622,776 – 4,622,776 – 4,622,776 62,979 3,383,078 3,272,583 20,235 – – 7,923	Total RMB’000 8,736,105 6,266,533 4,622,776 159,452 19,784,866 1,024,410 20,809,276 2,107,025 (109,310) 1,997,715 22,841,555 15,580,488 2,097,265 (4,688) 398,479 737,018

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4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

Year ended/as at December 31, 2019 (Audited)

Revenue from contracts with external customers Sale of coke and coking chemicals Sale of refined chemicals Trading Management services Inter-segment revenue Reportable segment revenue Reportable segment result Listing expenses Unallocated head office and corporate expenses Consolidated profit before taxation Reportable segment assets (including interests in associates and joint ventures) Reportable segment liabilities Other information: Additions to non-current segment assets during the year Share of results of associates Share of result of joint ventures Depreciation and amortization for the year	Coke and Coking Chemicals Manufacturing RMB’000 8,621,458 – – – 8,621,458 972,635 9,594,093 1,103,589 8,135,053 6,100,641 564,977 (3,879) 439,999 292,242	Refined Chemicals Manufacturing RMB’000 – 7,155,664 – – 7,155,664 161,089 7,316,753 527,552 8,352,039 5,242,520 659,819 29,613 – 385,259	Operation management RMB’000 424,128 531,582 – 77,657 1,033,367 6,947 1,040,314 144,157 779,125 93,182 60,391 – – 15,098	Trading RMB’000 – – 2,031,549 – 2,031,549 – 2,031,549 6,872 2,163,167 1,933,655 11,861 – – 7,805	Total RMB’000 9,045,586 7,687,246 2,031,549 77,657 18,842,038 1,140,671 19,982,709 1,782,170 (15,835) (86,956) 1,679,379 19,429,384 13,369,998 1,297,048 25,734 439,999 700,404

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4. REVENUE AND SEGMENT INFORMATION (CONTINUED)

Reconciliations of reportable segment revenue, results, assets and liabilities.

Revenue Reportable segment revenue Elimination of inter-segment revenue Consolidated revenue Results Reportable segment results Listing expenses Unallocated head office and corporate expenses Profit before taxation Assets Reportable segment assets Unallocated head office and corporate assets Consolidated total assets Liabilities Reportable segment liabilities Unallocated head office and corporate liabilities Consolidated total liabilities

Year ended/as at December 31 2020 2019 RMB’000 RMB’000 20,809,276 19,982,709 (1,024,410) (1,140,671) 19,784,866 18,842,038 2,107,025 1,782,170 – (15,835) (109,310) (86,956) 1,997,715 1,679,379 22,841,555 19,429,384 1,373,085 772,012 24,214,640 20,201,396 15,580,488 13,369,998 357,749 31,296 15,938,237 13,401,294

Geographic information

Substantially of the Group’s revenue and profit were derived from the PRC sales and all principal assets employed by the Group are located in the PRC during the reporting period.

Major customers

No individual customer had transactions exceeding 10% of the Group’s turnover for each reporting periods.

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5. INCOME TAX EXPENSE

Current tax PRC income tax for the year Land appreciation tax Deferred tax charge	Year ended December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 279,194 265,424 – (18,005) 17,618 58,292 296,812 305,711	Year ended December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 279,194 265,424 – (18,005) 17,618 58,292 296,812 305,711
		305,711

6. EARNINGS PER SHARE

Basic earnings per share for the year ended December 31, 2020 and basic and diluted earnings per share for the year ended December 31, 2019 are calculated by dividing the profit attributable to the owners of the Company by the weighted average number of ordinary shares issued.

The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders of the Company is based on the following data:

Earnings Profit attributable to the owners of the Company (RMB’000) Number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares: – over-allotment options Weighted average number of ordinary shares for the purpose of diluted earnings per share	Year ended December 31 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 1,700,041 1,363,165 4,090,000,000 3,947,068,493 – 115,711 4,090,000,000 3,947,184,204	Year ended December 31 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 1,700,041 1,363,165 4,090,000,000 3,947,068,493 – 115,711 4,090,000,000 3,947,184,204
		3,947,184,204

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7. DIVIDENDS

Dividends recognised as distribution during the year: 2020 Interim, paid – HK$2.92 cents per share 2019 Final, paid – HK$4.19 cents per share 2018 Final, paid – HK$17.44 cents per share 2019 Interim, paid – HK$6.89 cents per share	Year ended December 31 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 105,522 – 156,238 – 626,588 – 252,762 261,760 879,350	Year ended December 31 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 105,522 – 156,238 – 626,588 – 252,762 261,760 879,350
		879,350

Subsequent to the end of the Reporting Period, the proposed final dividend in respect of the year ended at December 31 2020 of RMB10.5 cents per ordinary share with total amount of RMB429,450,000 has been proposed by the Directors and is subject to approval by the shareholders in the forthcoming annual general meeting.

8. OTHER LONG TERM RECEIVABLES AND PREPAYMENTS

Prepayments for property, plant and equipment Loan receivables Deposits for right-of-use assets Deposits for operation management services (note a) Deposits and prepayments for proposed acquisition of subsidiaries (note b) Others Less: Allowance for credit losses	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 395,690 211,920 368,367 – 50,000 – 675,000 675,000 1,088,000 675,000 30,175 30,467 (17,821) (4,233) 2,589,411 1,588,154	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 395,690 211,920 368,367 – 50,000 – 675,000 675,000 1,088,000 675,000 30,175 30,467 (17,821) (4,233) 2,589,411 1,588,154
		1,588,154

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8. OTHER LONG TERM RECEIVABLES AND PREPAYMENTS (CONTINUED)

Note:

• a. Since July 2019, the Group has been entrusted under an operation management agreement by a local restructuring investor (the “ Lead Restructuring Investor ”) together with an insolvency administrator to provide operations management services for six companies undergoing insolvency and restructuring proceedings (the “ Target Companies ”) to ensure their continuous production and operation. The Group paid a deposit of RMB675,000,000 for the said services. Subsequently, a restructuring investor (the “ Joint Restructuring Investor ”) acquired the Target Companies through its 100% owned investing vehicle, Wuhu Shunri Xinze Equity Investment Partnership (LP) (“ Shunri Xinze ”), and was assigned as the joint restructuring investor by the Lead Restructuring Investor.

On September 12, 2019, the Group entered into a framework agreement with the Joint Restructuring Investor for the proposed acquisition of the Target Companies and deposited RMB675,000,000 to secure preferential negotiation right over the proposed acquisition for one year. Meanwhile, the Group, the Joint Restructuring Investor, the Lead Restructuring Investor and the Target Companies entered into a new entrusted operations management agreement, pursuant to which the Group continues to provide entrusted operation management services for the Target Companies according to the decisions made by the Joint Restructuring Investor. The deposits for operation management services was transferred to the Joint Restructuring Investor by the Lead Restructuring Investor.

On October 16, 2020, Risun Group Limited (“ Risun Chemicals ”, formerly known as Risun Chemicals Limited), an indirect wholly-owned subsidiary of the Company, entered into an interests transfer agreement with the Joint Restructuring Investor and the general partner of Shunri Xinze (the “ GP ”) and Shunri Xinze, pursuant to which Risun Chemicals will acquire the entire equity interests in Shunri Xinze (the “ Acquisition ”). The total consideration of the Acquisition is RMB4.91 billion , of which, RMB1.35 billion will be settled by the deposits for operation management services and deposits for proposed acquisition of subsidiaries, and the remaining is payable by Risun Chemicals in installments, with the last installment to be paid on or before September 15, 2024. On December 23,2020, the Group paid RMB413,000,000 to GP by cash.

The Acquisition was completed on January 15, 2021.

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9. OTHER RECEIVABLES/TRADE AND BILLS RECEIVABLES MEASURED AT FVTOCI

Trade receivables measured at FVTOCI Bills receivables measured at FVTOCI Trade and bills receivables measured at FVTOCI Prepayments for raw materials Other deposits, prepayments and other receivables Loan receivables Receivables for relocation compensation Receivables on behalf of third parties as a trading agency Deductible input Value Added Tax and prepaid other taxes and charges Less: impairment Other receivables	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 541,495 381,893 463,786 317,586 1,005,281 699,479 1,153,479 677,109 94,178 63,152 34,000 365,000 139,091 272,087 230,506 213,872 197,179 58,654 (22,727) (49,347) 1,825,706 1,600,527	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 541,495 381,893 463,786 317,586 1,005,281 699,479 1,153,479 677,109 94,178 63,152 34,000 365,000 139,091 272,087 230,506 213,872 197,179 58,654 (22,727) (49,347) 1,825,706 1,600,527
		699,479
		677,109 63,152 365,000 272,087 213,872 58,654 (49,347)
		1,600,527

As at 1 January 2019, trade and bill receivables from contracts with customers amounted to RMB3,179,295,000.

The customers usually settle the sales by cash or bills. The credit period granted to the customers who settle in cash is usually no more than 30 days, interest free with no collateral. Aging of trade receivables based on invoice dates, which approximated the respective revenue recognition dates, are as follows:

Within one month 1 to 3 months 3 to 6 months 6 to 12 months	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 399,913 364,889 120,931 4,890 2,611 2,792 18,040 9,322 541,495 381,893	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 399,913 364,889 120,931 4,890 2,611 2,792 18,040 9,322 541,495 381,893
		381,893

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10. TRADE AND OTHER PAYABLES

Trade payables Payables to be settled by the endorsed bills receivable Bills payable Payables on behalf of third parties as a trading agency Payables for construction in progress Other tax payables Other payables and accruals Analyzed for reporting purposes as: Current liabilities	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 892,193 1,249,686 177,325 159,808 549,513 458,236 883,222 357,546 794,695 469,739 181,119 89,954 319,995 266,259 3,798,062 3,051,228	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 892,193 1,249,686 177,325 159,808 549,513 458,236 883,222 357,546 794,695 469,739 181,119 89,954 319,995 266,259 3,798,062 3,051,228
		3,051,228

All trade and other payables are due within one year. The average credit period on purchases of goods is 30 to 90 days.

The following is an aging analysis of trade payables based on the invoice date at the end of each of the reporting period:

Within 3 months 3 to 6 months 6 to 12 months 1–2 years 2–3 years More than 3 years	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 744,673 928,177 69,487 109,434 29,672 111,619 15,040 62,155 14,339 18,103 18,982 20,198 892,193 1,249,686	As at December 31, 2020 2019 RMB’000 RMB’000 (Audited) (Audited) 744,673 928,177 69,487 109,434 29,672 111,619 15,040 62,155 14,339 18,103 18,982 20,198 892,193 1,249,686
		1,249,686

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MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

We are an integrated coke, coking chemical and refined chemical producer and supplier in China. The Group maintains as the world’s largest independent producer and supplier of coke by processing volume in 2020, according to Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., (“ Frost & Sullivan ”) an independent global consulting firm. Other than the largest independent coke processing volume in the world, we held leading positions in a number of refined chemical sectors in China or globally in 2020. According to Frost & Sullivan, the Group was the largest producer of industrialnaphthalene-based phthalic anhydride and coke-oven-gas-based methanol by volume in China in 2020. The Group was also the largest coking crude benzene processor and the second largest coal tar processor by volume globally in 2020.

If 2019 was a year with rapid development in the history of Risun, then 2020 was a year mixed with different challenges and achievements to Risun and also the whole world.

Our expansion was by way of provision of operation management service, merger and acquisition, establishment of joint ventures, and other means, leveraging our development experience from the production bases in Xingtai and Dingzhou of Hebei Province. In 2020, we had eight production bases, located in Hebei Xingtai, Hebei Dingzhou, Hebei Tangshan, Hebei Cangzhou, Inner Mongolia Huhehaote, Shandong Dongming, Shandong Yuncheng and Liaoning Lingyuan. The main philosophy of our expansion is to enhance our annual processing volume in coke and refined chemicals industry and also deeper our production of the by-products of coke into other high potential refined chemicals. By doing so, we can develop a longer and deeper production chain from coke. In the long run, we can maintain our leading position of coke and refined chemicals industry and create values to our shareholders.

Our annual coke processing capacity increased from approximately 8.77 million tons in 2019 to approximately 11.13 million tons in 2020, while our annual coking chemicals processing capacity increased from approximately 3.55 million tons in 2019 to approximately 3.68 million tons in 2020. Our major coking and refined chemicals included coking crude benzene, industrial naphthalene phthalic anhydride, coke oven gas methanol, coal tar and caprolactam.

In January 2020, we continued our operation management service business by entering the operation management agreement with a coke producer with production capacity of 1,300,000 tons of coke and coking chemicals in Jiangxi.

In March 2020, we entered into a strategic cooperation framework agreement with the People’s Government of Dingzhou City, Hebei Province, China on a project in relation to the production, storage and transportation of hydrogen and the construction and operation of hydrogen refueling stations. The production base has commenced trial production since July 2020, and in December 2020, we incorporated a new subsidiary in Dingzhou, which will be the vehicle to carry out the operation of hydrogen refueling stations.

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In November 2020, Huhhot Risun China Gas Energy Limited, a joint venture of the Group, signed another hydrogen project framework agreement with the People’s Government of Qingshuihe County, Huhhot. Similar to the project in Dingzhou, we are responsible for hydrogen energy production, hydrogen energy transportation and construction of hydrogen refueling stations in Qingshuihe. In March 2021, a 500 kg per day hydrogen refueling stations project in the production base in Xingtai of Hebei Province was included in the list of major projects for the hydrogen energy industry in Hebei Province in 2021 (the second batch), ( 河北省 2021 年氫能產業重點謀 劃推進專案清單（第二批 )), this was the third hydrogen energy project since Hebei Dingzhou and Inner Mongolia Huhehaote of the Group.

Currently, we manufacture coke oven gas with a production capacity of approximately 2,420 million cubic meters per annum, for internal use in our production base and external sales, while the production capacity of purified hydrogen production capacity was approximately 1,230 million cubic meters per annum.

In October 2020, our Tangshan Production Base, the first pure ethylene processing into styrene production facility in Hebei Province, China, commenced production of styrene with an annual production of 300,000 tons, and our pure ethylene processing technology is an advanced technology development within China.

In October 2020, we entered into an interests transfer agreement with China Cinda Asset Management Co., Ltd., Cinda Capital Management Co., Ltd. and Wuhu Shunri Xinze Equity Investment Partnership (LP) (“ Shunri Xinze ”), where we will acquire all LP Interests and GP Interests in Shunri Xinze in stages. In January 2021, Shunri Xinze together with the six chemicals enterprises became subsidiaries of the Company since then.

In November 2020, we entered into the Joint Venture Agreement with Pingxiang Mining Industry Group Co., Ltd. ( 萍鄉礦業集團股份有限公司 ) and Hunan Wujo Light Industry and Chemicals Group Co., Ltd. ( 湖南五江輕化集團有限公 司 ), to jointly establish two joint ventures, being Pingxiang Risun Energy Co., Ltd. ( 萍鄉旭陽能源有限公司 ) (investing in the construction of the coking project), and Pingxiang Anyuan Glass Co., Ltd. ( 萍鄉安源玻璃有限公司 ) (investing in the construction of the glass project) by means of capital contribution.

In March 2021, we entered into a 5-year integrated sales and marketing agreement with an independent third party engaging in the production of coke and chemical products in Shanxi Province, China. We receive sales service fees at a rate of RMB40 per ton by sourcing and selling the coke products from the independent third party to our customers. More importantly, this allows us to expand our coke operation management services into Shanxi Province, which is currently the largest province in China in terms of coke output.

Considering the operating results in 2020 and our future development needs, and in order to share our results with shareholders, the Board recommended a final dividend of RMB10.5 cents per share, equivalent to approximately HK12.48 cents per share, with a total amount RMB429,450,000 or HK$510,432,000 for the year ended December 31, 2020. For the year ended December 31, 2020, the total amount of interim and final dividend was RMB535.0 million, representing no less than 30% of the net profit of the Group.

– 18 –

DEVELOPMENT STRATEGIES

Risun was founded in 1995 and up to 2020, we have a 25-years history of development, where we take advantage of our leading position, experience and technology in coke industry to drastically expand our four key business segments through the following development strategies. The Group aims to strengthen the global leading position as an integrated producer and supplier of coke, coking chemicals and refined chemicals.

• (i) expansion of business operation and production capacity;

• (ii) exploration of market opportunities to provide operation management services;

• (iii) development and reinforcement of long-term business relationships with the major customers and suppliers;

• (iv) expansion of domestic and international trading business;

• (v) improvement of our energy-efficiency, environmental protection and operation safety standards; and

• (vi) improvement of our core competitive strengths through automation and information technologies.

Apart from the above development strategies, there are nine competitive advantageous abilities that we believe we possess and can allow us to deploy and execute the development strategies effectively in order to enhance our leadership in coke and coking chemicals industry:

1. Scale advantageous ability

We are the world’s largest independent coke producer and supplier of coke by processing volume and enjoying economies of scale which enabled us to become more competitive in terms of costs, product quality and customer relationships among the eight production bases in China.

2. Vertically integrated advantageous ability

Our vertically integrated business model helps improving our production efficiency and achieving synergies through centralized and unified management and reducing exposure to market volatility and price fluctuations.

– 19 –

3. Production base advantageous ability

All of our production bases are located in industrial parks approved by PRC governmental authorities. Our production bases are located near most of our major customers and suppliers and transportation infrastructure, such as national railway networks, major highways, expressways and ports, which provide us with multiple transportation options.

4. Cost control advantageous ability

We actively control our expenditures in cost of sales and services, selling and distribution expenses, administrative expenses, finance costs and income tax expenses. We have formulated a comprehensive and mature coal preparation and blending computer system based on our IT infrastructure and experience so as to widen the price spread between our products and our raw materials.

5. Centralized sale and marketing advantageous ability

We are market-oriented and all the products are sold under the brand “RISUN” via the centralized sale and marketing system operated by the Group. We maintain low levels of finished product inventories and adopt a “zero inventory” policy and strive to achieve minimal inventory of our coke products. We produce based on the periodical production plans which are adjusted regularly pursuant to our customers’ demands.

6. Innovation advantageous ability

Our research and technology personnel focuses on the innovation of production and energy and resource efficiency to improve our manufacturing processes and reduce the environmental impact of our production processes. We also commit to improving product added value and extending the industrial chain.

7. Automation and information technologies advantageous ability

Our production bases are highly automated and we established a centralized system connecting our Manufacturing Execution System (MES), Enterprise Resource Planning (ERP) systems and the BeiDou Navigation Satellite System. We also use the mobile internet, cloud computing, internet of things, big data and intelligent manufacturing technologies in our operations.

8. Environmental safety advantageous ability

We have adopted a number of measures and practices to reduce the environmental impact of our operations, such as preventing soil pollution, water pollution and air pollution in order to minimize the negative impact on the environment.

– 20 –

Another key of our environmental measures is our resource recovery and reutilization. During our coking process, we recover and re-utilize valuable coking by-products, from which we manufacture our refined chemical products. With our vertically integrated business model, we also re-utilize the heat from our production processes and re-use wastewater and other fluids after appropriate treatment.

9. Risk mitigation advantageous ability

We monitor the business operations of our customers, including but not limited to their inventory levels, production output and sales volumes, via our onsite customer service personnel. This enables us to promptly understand the downstream demand for our products, adjust our production plans and mitigate the risks associated with price fluctuations and changes in demand for our products.

BUSINESS REVIEW

The Group recognised four business segments described as follow. During the year ended December 31, 2020 and up to the date of this announcement, we entered into four (2019: four) new operation management agreement and capital injection agreements with independent third parties in Jiangxi Province, Shangdong Province and Shanxi Province respectively.

• 1) Coke and coking chemicals manufacturing: the production and sale of coke and a series of coking chemicals from externally sourced coking coals processed at the Group’s coking facilities;

• 2) Refined chemicals manufacturing: the processing of coking chemicals, sourced from the Group’s coke and coking chemicals manufacturing segment and third parties, into refined chemical products at the Group’s refined chemicals facilities, as well as marketing and sale of such refined chemicals;

• 3) Operation management: the operation management service provided to the third-party plants, and the sale of coke, coking chemicals and refined chemicals produced by these plants under the management service agreements and commissioned processing contracts; and

• 4) Trading: the sourcing of coke, coking chemicals and refined chemicals from third parties and the marketing, sale and distribution of such coal chemicals.

– 21 –

Apart from the nine abilities mentioned before, the reason that we are the leading global coke and refined chemical producer and supplier is the sophisticated planning ahead the industry. Since our history started in 1995, we formulate and execute a FiveYear Plan for every five years. We completed the fifth Five-Year Plan from 2016 to 2020 and are now formulating the sixth Five-Year Plan from 2021 to 2025. The major aim of the sixth Five-Year Plan is to achieve a total processing volume of coke to 30 million tonnes per annum by 2025 through different ways to increase our market share of coke and refined chemicals in China, ranging from setting up subsidiaries and/ or joint ventures, acquisition of existing coke enterprises and operation management services to other coke enterprises.

In November 2020, we formed two joint ventures with Pingxiang Mining Industry Group Co., Ltd. and Hunan Wujo Light Industry and Chemicals Group Co., Ltd., namely Pingxiang Risun Energy Co., Ltd., and Pingxiang Anyuan Glass Co., Ltd. which will invest in the 3.6 million tonnes/year coking project (1.8 million tonnes/year for phase 1 and 1.8 million tonnes/year for phase 2) and the 1,200 tonnes/day float glass and further processed glass project, respectively, located in Xiangdong Industrial Park in Pingxiang City, Jiangxi Province, the PRC.

Apart from the above, we continued the development of our business through operation management services. A brief description of four operation management and merger and acquisition projects are as follows:

• Hongyu Project: Operation management services to a production capacity of 1,300,000 tons per annum of coke and coking chemicals in Jiangxi Province;

• Cinda Project: Completed the acquisition of production capacity of approximately 980,000 tons per annum of coke and approximately 500,000 tons per annum of refined chemicals in Shandong Province;

• Pingxiang Project: Setting up joint ventures with production capacity of 3,600,000 tonnes per annum of coke and coking chemicals in Jiangxi Province; and

• Shanxi Project: Operation management services to a production capacity of 1,200,000 tons per annum of coke and coking chemicals in Shanxi Province.

The above development strategies are deployed based on our competitive advantages through integrated business model and are designed to diversify the risks of having most of our operation bases in Hebei Province, China.

– 22 –

We foresee that the requirement of environmental protection in terms of will be stricter in China. China is promoting the approach of “Carbon Neutral” by 2060, which means the achievement of net zero carbon emissions in the future. In doing so, renewable energy or more advanced environmental friendly production is going under replacement of traditional production. We view this approach as an opportunity to Risun, because other coke enterprises’ existing coke production capacity will be phased out under the latest environmental protection measures promulgated by the government authorities in China. The selling price of coke will continue to bound back like happened in second half of 2020 due to the reduction of coke supply.

On the other hand, we will continue to expand our coke production capacity by constructing new coke facilities, just like what we carried out in 2019 and 2020. Please refer to “Business Prospects” in this announcement for details.

EVENTS AFTER THE REPORTING PERIOD

The following significant event took place subsequent to December 31, 2020:

The Group completed the acquisition of Shunri Xinze on January 15, 2021. Details of the acquisition are set out in the Group’s circular dated December 8, 2020. The acquisition is conducive to the future business expansion of the Group in the coke and refined chemicals market.

BUSINESS PROSPECTS

Looking forward to our next Five-Year Plan from 2021 to 2025, the Group will make use of different ways of operation management, merger and acquisition together with the setup of joint ventures with well-known geographical large enterprises to increase our market share in coke production and processing volume and refined chemicals.

Coke

The coke industry was under the supply-demand reform in 2020, which will continue in 2021. The reform is to eliminate the coke production capacity from high-polluted coke enterprises. Coking furnaces of 4.3 meters or below in China had ceased operation since December 2020, the demand of coke will be supplemented by the other existing coke production capacity from other coke enterprises.

We expand our coke production/processing capacity by different ways, such as merger and acquisition of existing coke enterprises, setting up joint venture with other coke/ steel enterprise or operation managing existing coke enterprises. Through our business expansion, we believe that our market share will increase from currently 1.7% to a high single-digit percentage or even a double-digit percentage in China in the next five years.

– 23 –

In addition to our domestical expansion plan within China, we are also exploring opportunities overseas in order to leverage the risk of environmental protection policies in China and the expansion by setting up coking production/processing capacity in other countries.

Refined chemicals

We will also enhance the production capacity of refined chemicals facilities. Apart from the commencement of annual production capacity of 300,000 tons of styrene in 2020, we are now expanding the production capacity of caprolactam in Hebei and Shandong Province, since caprolactam is one of the potential refined chemicals with positive business prospect in China.

Hydrogen

We are committed to speed up the construction progress of the hydrogen development projects, strive to build Hebei Dingzhou and Inner Mongolia Hohhot into hydrogen energy demonstration cities and eventually become the hydrogen energy output bases in Northern China with the support of continuous research and development and technology innovation.

COVID-19

As the control measures over COVID-19 in China remains effective, we expect that the China economy will resume a steady growth in 2021 , which the Group’s operation and production will benefit from.

DEVELOPMENT, PERFORMANCE AND STATUS OF THE BUSINESS OF THE GROUP

The following table sets forth the Group’s financial ratios as at the dates and for the years indicated:

	As of and for the year	ended
	December 31,
	2020	2019
Gross profit margin(1)	16.3%	13.7%
Net profit margin(2)	8.6%	7.3%
EBITDA margin(3)	16.5%	15.1%
Return on equity(4)	20.9%	20.4%
Gearing ratio(5)	1.3	1.3

– 24 –

Notes:

• (1) Calculated by dividing gross profit by revenue for the year.

• (2) Calculated by dividing profit by revenue for the year.

• (3) Calculated by dividing EBITDA by revenue for the year.

• (4) Calculated by dividing profit attributable to owners for the year by equity attributable to owners as of the end of the year.

• (5) Calculated by dividing total interest-bearing borrowings by total equity as of the end of the year.

FINANCIAL REVIEW

The following table sets forth our total revenue and gross profit by business segment (excluding our inter-segment revenue):

		For the year ended December 31, 2020 (Audited)	For the year ended December 31, 2020 (Audited)	For the year ended December 31, 2020 (Audited)
	Coke and
	coking	Refined
	chemicals	chemicals	Operation
	manufacturing	manufacturing	management	Trading	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total revenue	8,715,621	5,845,621	600,848	4,622,776	19,784,866
Gross profit	2,460,463	387,403	156,358	219,219	3,223,443
		For the year ended December 31, 2019 (Audited)
	Coke and
	coking	Refined
	chemicals	chemicals	Operation
	manufacturing	manufacturing	management	Trading	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Total revenue	8,621,458	7,155,664	1,033,367	2,031,549	18,842,038
Gross profit	1,402,085	838,239	179,886	162,698	2,582,908

– 25 –

The following discussion addresses the principal trends that have affected the Group’s results of operations during the Reporting Period.

(a) Revenue

The revenue increased by approximately RMB942.9 million, or 5.0%, to approximately RMB19,784.9 million for the year ended December 31, 2020, from approximately RMB18,842.0 million for the year ended December 31, 2019, primarily due to increased revenues from the coke and coking chemical manufacturing business and trading business.

Revenue from the coke and coking chemical business increased by 1.1% from RMB8,621.5 million for the year ended December 31, 2019 to RMB8,715.6 million for the year ended December 31, 2020 primarily as a result of the slight increase of sale volume of the coke from 4.93 million tons to 4.98 million tons, and offset by slight decrease in the average selling price from RMB 1,708.4 per ton to RMB 1,698.3 per ton.

Revenue from the refined chemical business decreased by 18.3% from RMB7,155.7 million for the year ended December 31, 2019 to RMB5,845.6 million for the year ended December 31, 2020, primarily due to a decrease in selling price of most refined chemical products caused by the outbreak of COVID-19 and the decrease in international crude oil price, affecting the demand for refined chemical products of the Group.

Revenue from the operation management business decreased by 41.9% from RMB1,033.4 million for the year ended December 31, 2019 to RMB600.8 million for the year ended December 31, 2020, primarily due to the decrease in revenue in connection with the expiry of our operation management services with a thirdparty coke producer in May 2019.

Revenue from the trading business increased by 127.6% from RMB2,031.5 million for the year ended December 31, 2019 to RMB4,622.8 million for the year ended December 31, 2020, primarily due to the increase in trading volume of coking coal and coke.

– 26 –

(b) Cost of sales

Cost of sales increased from RMB16,259.1 million for the year ended December 31, 2019 to RMB16,561.4 million for the year ended December 31, 2020 primarily due to the increase of trading business.

Cost of sales from the coke and coking chemical business decreased by 13.4% from RMB7,219.4 million for the year ended December 31, 2019 to RMB6,255.2 million for the year ended December 31, 2020, primarily due to the decrease of coking coal price.

Cost of sales from the refined chemical business decreased by 13.6% from RMB6,317.4 million for the year ended December 31, 2019 to RMB5,458.2 million for the year ended December 31, 2020, primarily due to the decrease in the price of chemical raw material.

Cost of sales from the operation management business decreased by 47.9% from RMB853.5 million for the year ended December 31, 2019 to RMB444.5 million for the year ended December 31, 2020, primarily due to the expiration of the management services to a third-party coke producer.

Cost of sales from the trading business increased by 135.6% from RMB1,868.9 million for the year ended December 31, 2019 to RMB4,403.6 million for the year ended December 31, 2020, primarily due to the increase in trading volume of coking coal and coke.

(c) Gross profit and gross profit margin

The Group’s total gross profit increased by approximately RMB640.5 million, or 24.8%, to approximately RMB3,223.4 million for the year ended December 31, 2020, from approximately RMB2,582.9 million for the year ended December 31, 2019. Gross profit margin increased to 16.3% for the year ended December 31, 2020, from 13.7% for the year ended December 31, 2019.

Gross profit from the coke and coking chemical business increased by 75.5% from RMB1,402.1 million for the year ended December 31, 2019 to RMB2,460.5 million for the year ended December 31, 2020. Gross profit margin for the coke and coking chemical business increased from 16.3% for the year ended December 31, 2019 to 28.2% for the year ended December 31, 2020, primarily because the decrease in the coking coal price.

– 27 –

Gross profit from the refined chemical business decreased by 53.8% from RMB838.2 million for the year ended December 31, 2019 to RMB387.4 million for the year ended December 31, 2020. Gross profit margin for the refined chemical business decreased from 11.7% for the year ended December 31, 2019 to 6.6% for the year ended December 31, 2020.

Gross profit from the operation management decreased by 13.1% from RMB179.9 million for the year ended December 31, 2019 to RMB156.4 million for the year ended December 31, 2020. Gross profit margin for the operation management increased from 17.4% for the year ended December 31, 2019 to 26.0% for the year ended December 31, 2020, primarily due to the expiration of the management services to a third-party coke producer.

Gross profit from the trading business increased by 34.7% from RMB162.7 million for the year ended December 31, 2019 to RMB219.2 million for the year ended December 31, 2020. Gross profit margin for the trading business decreased from 8.0% for the year ended December 31, 2019 to 4.7% for the year ended December 31, 2020 because the increase in trading volume of coking coal and coke.

(d) Other gains and losses

The Group’s other gains and losses consist primarily of fair value gain/(loss) on future contracts, derivative financial instruments-swaps and listed equity securities, loss on foreign exchange and gain on disposal of property, plant and equipment and right-of-use assets. The Group had other gains of RMB27.9 million for the year ended December 31, 2020, compared to other gains of RMB105.0 million for the year ended December 31, 2019. The change is primarily due to (i) a fair value loss on derivative financial instruments-swaps 69.7 million for the year ended December 31,2020, and (ii) impairment losses of property, plant and equipment (mainly the dimethyl ether production facilities).

(e) Selling and distribution expenses

Selling and distribution expenses increased by RMB10.6 million or 1.4% from RMB778.7 million for the year ended December 31, 2019 to RMB789.3 million for the year ended December 31, 2020, primarily due to the increase in the transportation expenses.

– 28 –

(f) Administrative expenses

Administrative expenses increased by approximately RMB59.6 million or 15.6% from approximately RMB381.6 million for the year ended December 31, 2019 to approximately RMB441.2 million for the year ended December 31, 2020, primarily due to increase in research and development expense and staff cost.

(g) Finance costs

Finance cost primarily consist of interest expenses on bank loans, other loans and finance expenses on discount of bills receivables. The Group’s finance cost increased by RMB66.4 million or 14.3% from RMB465.6 million for the year ended December 31, 2019 to RMB532.0 million for the year ended December 31, 2020. The increase was mainly due to an increase in interest on bank and other loans.

(h) Share of results of associates

Share of results of associates decreased by 118.3% from RMB25.7 million for the year ended December 31, 2019 to share of loss from associates of RMB4.7 million for the year ended December 31, 2020, primarily due to the share of losses from Cabot Risun Chemical (Xingtai) Co., Ltd.

(i) Share of results of joint ventures

Share of results of joint ventures decreased by RMB41.5 million or 9.4% from RMB440.0 million for the year ended December 31, 2019 to RMB398.5 million for the year ended December 31, 2020, primarily due to a decrease in the shared profit of Hebei China Coal Risun Energy Limited.

(j) Profit before taxation

As a result of the foregoing factors, the profit before taxation increased by approximately RMB318.3 million or 19.0% from approximately RMB1,679.4 million for the year ended December 31, 2019 to approximately RMB1,997.7 million for the year ended December 31, 2020.

(k) Income tax expense

The Group incurred income tax expense of approximately RMB296.8 million for the year ended December 31, 2020 and approximately RMB305.7 million for the year ended December 31, 2019 respectively at effective tax rates of 14.9% and 18.2%. The decrease in income tax expense is mainly due to the High and New Technology Enterprise tax concession of Hebei Risun Energy.

– 29 –

(l) Profit for the year

For the year ended December 31, 2020, the Group recorded a net profit of approximately RMB1,700.9 million, representing an increase of approximately 23.8% as compared to the net profit of approximately RMB1,373.7 million for the year ended December 31, 2019.

At December 31, 2020, the Group had net current liabilities of RMB5,851,983,000. The directors of the Company (the “Directors”) are of the opinion that, taking into consideration the availability of unutilized banking facilities of the Group amounting to RMB8,887,928,000 at the report date, of which RMB3,128,928,000 is unconditional, RMB4,212,000,000 is with conditions to be determined by a bank, and RMB1,547,000,000 is the outstanding portion of syndicated loans for special purpose of construction of certain production lines, and the assumption that approximately 55% of bank loans and other banking facilities at December 31, 2020 will be successfully renewed upon maturity, the Group has sufficient financial resources to meet its capital expenditure and working capital requirements when they fall due for the foreseeable future. Accordingly, the consolidated financial statements are prepared on a going concern basis.

The Group’s primary uses of cash are operating costs, capital expenditures and repayment of debts in the PRC. The Group has funded the investments and operations principally with cash from operations and debt financing from banks and other financial institutions. We manage our liquidity, working capital and funding of capital expenditures by monitoring our cash flows and predicting our cash flows. The Group believes that the liquidity requirements will be satisfied through a combination of cash flows generated from the operating activities, bank loans and other borrowings. Any significant decrease in the demand for, or pricing of, the products and services, or a significant decrease in the availability of bank loans, may adversely impact the liquidity. As at December 31, 2020, cash and cash equivalents held by the Group were mainly cash in the banks and on hand denominated in RMB and deposits denominated in RMB that are readily convertible into cash.

– 30 –

The following table sets forth the cash flows for the years indicated:

	As of and for the year ended	As of and for the year ended
	December 31,
	2020	2019
	RMB in millions	RMB in millions
Net cash generated from operating activities	1,141.5	876.7
Net cash used in investing activities	(2,194.9)	(197.7)
Net cash from (used) in financing activities	1,177.9	(378.7)
Net increase in cash and cash equivalents	124.5	300.4
Cash and cash equivalents at the end of the year	1,181.4	1,059.9

(a) Net cash generated from operating activities

For the year ended December 31, 2020, our net cash generated from operating activities was approximately RMB1,141.5 million and was more than our net cash generated from operating activities for the year ended December 31, 2019 of approximately RMB876.7 million, primarily due to the increase of profit.

(b) Net cash used in investing activities

For the year ended December 31, 2020, our net cash used in investing activities was increased from approximately RMB197.7 million for the year ended December 31, 2019 to approximately RMB2,194.9 million primarily due to the decrease of withdrawal of restricted bank deposits.

(c) Net cash generated from (used in) financing activities

For the year ended December 31, 2020, our net cash generated from financing activities was approximately RMB1,177.9 million while our net cash used in financing activities was approximately RMB378.7 million for the year ended December 31, 2019. The variance was primarily due to the decrease of dividend paid to shareholders and the immediate holding company.

The Group expects to fund its capital expenditure commitments principally by bank and other loans and cash generated from the business operations.

– 31 –

INDEBTEDNESS

(a) Borrowings

The following table sets forth the bank borrowings as of the dates indicated:

				As of December 31,	As of December 31,	As of December 31,
				2020		2019
			RMB in millions		RMB in millions
Bank loan, secured				3,550.3		3,146.8
Bank loan, unsecured				3,648.9		2,981.5
Other loans, secured				1,146.3		1,090.3
Other loans, unsecured				273.7		337.1
Discounted bills financing				1,878.5		1,103.9
Total				10,497.7		8,659.6
		As of December 31,
	2020				2019
	RMB in million		%	RMB in million		%
Fixed rate bank and other
borrowings	7,295.4	2.99%~12.00%		5,302.8		1.50%~12.00%
Floating rate bank and
other borrowings	3,202.3	2.89%~11.4%		3,356.8		3.51%~11.7%
Total	10,497.7			8,659.6

The total borrowings increased by approximately RMB1,838.1 million, or 21.2%, to approximately RMB10,497.7 million as of December 31, 2020 from RMB8,659.6 million as of December 31, 2019, primarily due to the decrease in discounted bills financing, partially offset by the increase in bank and other loan.

– 32 –

Most of the borrowings are denominated in RMB, the borrowings denominated in currencies other than the functional currencies of respective entities are set out below:

USD EUR Total	As of December 31, 2020 2019 RMB in millions RMB in millions 757.3 1,424.7 – 117.0 757.3 1,541.7	As of December 31, 2020 2019 RMB in millions RMB in millions 757.3 1,424.7 – 117.0 757.3 1,541.7
		1,541.7

(b) Lease liabilities/obligations under finance leases

The Group had the following total future minimum lease payments under several lease arrangements as of the dates indicated:

Within one year After 1 year but within 2 years After 2 years but within 5 years After 5 years Total	As of December 31, 2020 2019 RMB in millions RMB in millions 27.8 19.9 12.7 20.8 24.5 5.4 4.5 – 69.5 46.1	As of December 31, 2020 2019 RMB in millions RMB in millions 27.8 19.9 12.7 20.8 24.5 5.4 4.5 – 69.5 46.1
		46.1

– 33 –

FUTURE PLANS AND USE OF PROCEEDS

The shares of the Company were listed on March 15, 2019 (the “ Listing Date ”) on the Stock Exchange. The Company issued 600,000,000 Shares on the Listing Date, and issued additional 90,000,000 Shares on April 11, 2019 pursuant to the exercise of the over-allotment option, at the Offer Price of HK$2.8 per Share. The total issuance size and gross proceeds amounted to approximately HK$1,932 million.

During the Reporting Period, the net proceeds from the listing had been applied as follows:

Debt repayments Investment plans Environmental protection plans and system upgrade Working capital Total	Proposed use of net proceeds (HK$ million) 745.6 559.2 372.8 186.4 1,864	Actual use of net proceeds during the Reporting Period (HK$ million) 745.6 559.2 299.3 186.4 1,790.5	Unused net proceeds as at December 31, 2020 Estimated timetable (HK$ million) – – 73.5 December 2021 – 73.5

PURCHASE, SALE AND REDEMPTION OF THE LISTED SECURITIES OF THE COMPANY

During the year ended December 31, 2020, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities of the Company.

CORPORATE GOVERNANCE

The Company is committed to high standards of corporate governance for purposes of enhancing the value for shareholders and protecting their interests. The Company has adopted provisions of the Corporate Governance Code as set out in Appendix 14 to the Listing Rules (the “ Corporate Governance Code ”). The Company has established and optimized the corporate governance structure in accordance with the Listing Rules and the Corporate Governance Code and has set up a series of corporate governance systems. During the Reporting Period, the Company has been observing all mandatory provisions of the code as stipulated in the Corporate Governance Code except the provisions under paragraph A.2.1.

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In accordance with paragraph A.2.1 of the Corporate Governance Code, the roles of the chairman and chief executive officer should be separated and should not be held by the same person. Mr. Yang Xuegang is the chairman and chief executive officer of the Company. With extensive experience in the coke, coking chemicals and refined chemicals industries, Mr. Yang is responsible for the overall management and business development, the operations of the subsidiaries of the Company and their corresponding production facilities and human resources of the Group, and has been instrumental to the Group’s growth and business expansion since its establishment in 1995. The Board considers that vesting the roles of chairman and chief executive officer in the same person has the benefit of ensuring consistent leadership within the Group and enables more effective and efficient overall strategic planning for and communication with the Group. The balance of power and authority is ensured by the operation of the senior management and the Board, which comprises experienced and high caliber individuals. The Board currently comprises of six executive Directors (including Mr. Yang) and three independent non-executive Directors and therefore has a strong independence element in its composition.

The Board will examine and review, from time to time, the Company’s corporate governance practices and operations in order to meet the relevant provisions under the Listing Rules and Corporate Governance Code to protect the shareholders’ interests. Further information about the corporate governance practices of the Company will be set out in the annual report of the Company for the year ended December 31, 2020.

C O M P L I A N C E W I T H T H E M O D E L C O D E F O R S E C U R I T I E S TRANSACTIONS BY DIRECTORS

Since the Listing, the Board has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 of the Listing Rules as its model code for securities transactions by the Directors.

Upon specific enquiry conducted by the Company, all the Directors have confirmed that during the Reporting Period, they have been fully complying the Model Code.

The Company’s employees, who are likely to be in possession of unpublished inside information of the Company, are subject to the Model Code. No incident of non-compliance of the Model Code by the employees during the Reporting Period was noted by the Company during the Reporting Period and as at the date of this announcement.

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SCOPE OF WORK OF MESSRS. DELOITTE TOUCHE TOHMATSU

The figures in respect of the consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income and the related notes thereto for the year ended December 31, 2020 as set out in this preliminary announcement have been agreed by the Company’s auditor, Messrs. Deloitte Touche Tohmatsu, to the amounts set out in the audited consolidated financial statements for the year. The work performed by Messrs. Deloitte Touche Tohmatsu in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by Messrs. Deloitte Touche Tohmatsu on this preliminary announcement.

REVIEW OF AUDITED ANNUAL RESULTS

The Audit Committee has reviewed the audited consolidated financial statements of the Group for the year ended December 31, 2020, and discussed with the management of the Group regarding the accounting principles and practices adopted by the Group, together with the internal controls and financial reporting matters.

The Audit Committee was established with written terms of reference in compliance with Appendix 14 to the Listing Rules. The Audit Committee is delegated by the Board to be responsible for reviewing and monitoring the financial reporting, risk management and internal control systems of the Company, and assist the Board to fulfill its responsibility over the audit of the Group.

The Audit Committee comprises Mr. Yu Kwok Kuen Harry, Mr. Kang Woon and Mr. Wang Yinping, who are independent non-executive Directors.

FINAL DIVIDEND

The Board recommends the distribution of a final dividend of total amount of RMB429,450,000 or HK$510,432,000 (dividend amount of each ordinary share is RMB10.5 cents, equivalent to approximately HK12.48 cents per share) for the year ended December 31, 2020 to all shareholders. The ratio of final dividend distribution for the year was based on the various factors such as business performance in 2020 and the business prospect in future, provided that it shall be no less than 30% of our annual distributable earnings for 2020. The final dividend is subject to the shareholders’ approval at the forthcoming annual general meeting for 2020 (the “ AGM ”) of the Company and the audited results of the Group for the year ended December 31, 2020. The expected final dividend payment date will be on or before June 30, 2021.

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THE AGM AND CLOSURE OF REGISTER OF MEMBERS

AGM is scheduled to be held on May 24, 2021, the notice of which will be published and dispatched to the shareholders as soon as practicable in accordance with the Company’s Articles of Association and the Listing Rules. The register of members of the Company will be closed from May 17, 2021 to May 24, 2021 (both days inclusive), during which period no transfer of shares of the Company will be effected, for the purpose of ascertaining the shareholders’ entitlement to attend and vote at the AGM. In order to be eligible to attend and vote at the AGM, all transfer of shares accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong, no later than 4:30 p.m. (Hong Kong time) on May 14, 2021.

PUBLICATION OF AUDITED ANNUAL RESULTS AND ANNUAL REPORTS ON THE WEBSITES OF THE COMPANY AND THE STOCK EXCHANGE

This announcement is published on the respective website of the Company at www. risun.com and the Stock Exchange at www.hkexnews.hk. The annual report of the Company for the year ended December 31, 2020 will be despatched to the shareholders of the Company and will also be made available on the above websites in accordance with the Listing Rules in due course.

By order of the Board of China Risun Group Limited Yang Xuegang Chairman

Hong Kong, March 26, 2021

As at the date of this announcement, the executive Directors are Mr. Yang Xuegang, Mr. Zhang Yingwei, Mr. Han Qinliang, Mr. Wang Fengshan, Mr. Wang Nianping and Mr. Yang Lu, and the independent non-executive Directors are Mr. Kang Woon, Mr. Yu Kwok Kuen Harry and Mr. Wang Yinping.

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