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Global Corn Group Limited — Interim / Quarterly Report 2009
Sep 17, 2009
50915_rns_2009-09-17_d44bf69b-3285-4452-be8f-86215d842383.pdf
Interim / Quarterly Report
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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.
GLOBAL SWEETENERS HOLDINGS LIMITED 大成糖業控股有限公司 *
(incorporated in the Cayman Islands with limited liability)
(Stock code: 03889)
INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS
ENDED 30 JUNE 2009
FINANCIAL HIGHLIGHTS
| Unaudited six months | Unaudited six months | ||
|---|---|---|---|
| ended 30 June | |||
| 2009 | 2008 | Change % | |
| Revenue (HK$’Mn) | 1,053 | 741 | 42.1 |
| Gross profit (HK$’Mn) | 93 | 165 | (43.7) |
| Profit before tax (HK$’Mn) | 11 | 151 | (92.4) |
| Net profit attributable to equity holders of the | |||
| Company (HK$’Mn) | 4 | 141 | (97.2) |
| Basic earnings per share (HK cents) | 0.38 | 13.5 | (97.2) |
| Interim dividend per share (HK cents) | Nil | Nil | N/A |
— 1 —
The board (“Board”) of directors (“Directors”) of Global Sweeteners Holdings Limited (the “Company”) is pleased to announce the unaudited consolidated interim results of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2009 (“the Period”).
These interim condensed consolidated financial statements have not been audited, but have been reviewed by the Company’s external auditors and the Company’s audit committee.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2009
| Notes REVENUE Sales of goods 5 Cost of sales Gross profit Other income 5 Negative goodwill Selling and distribution costs Administrative expenses Other expenses Finance costs 6 Share of profits of jointly controlled entities PROFIT BEFORE TAX 7 Tax 8 PROFIT FOR THE PERIOD OTHER COMPREHENSIVE INCOME Exchange difference on translation of financial statements of operations outside Hong Kong TOTAL COMPREHENSIVE INCOME FOR THE PERIOD PROFIT ATTRIBUTABLE TO: Equity holders of the Company Minority interests TOTAL COMPREHENSIVE INCOME ATTRIBUTALBE TO: Equity holders of the Company Minority interests EARNINGS PER SHARE — Basic 9 — Diluted 9 DIVIDEND PER SHARE 10 |
|
|---|---|
— 2 —
30 June 2009
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land premiums Deposits paid for acquisition of property, plant and equipment Goodwill Deferred tax assets Interests in jointly controlled entities 11 Total non-current assets CURRENT ASSETS Inventories Trade receivables 12 Prepayments, deposits and other receivables Due from the immediate holding company Due from fellow subsidiaries Due from jointly controlled entities Tax recoverable Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade payables 13 Other payables and accruals Interest-bearing bank and other borrowings Due to the ultimate holding company Due to fellow subsidiaries Due to a jointly controlled entity Tax payable Total current liabilities NET CURRENT ASSETS |
30 June 2009 (Unaudited) HK$’000 1,203,160 105,312 9,688 183,538 — 94,480 1,596,178 239,110 234,360 51,192 21,085 114,294 3,044 11,133 277,901 952,119 136,524 133,378 369,086 34,439 252,167 — 4,619 930,213 21,906 |
31 December 2008 (Restated) (Audited) HK$’000 1,243,713 110,266 5,176 183,538 987 91,634 1,635,314 241,356 237,986 59,293 21,085 45,456 2,460 11,133 423,113 1,041,882 65,069 99,508 341,573 168,538 139,753 86 9,873 824,400 217,482 |
|---|---|---|
— 3 —
| Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings Deferred tax liabilities Total non-current liabilities Net assets EQUITY Equity attributable to equity holders of the parent Share capital 14 Reserves Minority interests Total equity |
30 June 2009 (Unaudited) HK$’000 1,618,084 33,708 47,907 81,615 1,536,469 104,500 1,426,747 1,531,247 5,222 1,536,469 |
31 December 2008 (Restated) (Audited) HK$’000 1,852,796 280,899 46,373 327,272 1,525,524 104,500 1,421,024 1,525,524 — 1,525,524 |
|---|---|---|
— 4 —
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2009
1. CORPORATE INFORMATION AND GROUP REORGANISATION
The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2009 are authorised for issue in accordance with a resolution of the Directors passed on 17 September 2009.
The Company was incorporated in the Cayman Islands under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands as an exempted company with limited liability on 13 June 2006. The principal activity of the Company is investment holding. The Group is involved in the manufacture and sale of corn refined products and corn-based sweetener products. There were no changes in the nature of the Group’s principal activities during the Period.
The Company is a subsidiary of Global Corn Bio-chem Technology Company Limited (the “immediate holding company” or “Global Corn Bio-chem”), a company incorporated in the British Virgin Islands. In the opinion of the Directors, the ultimate holding company is Global Bio-chem Technology Group Company Limited (the “ultimate holding company”), a company incorporated in the Cayman Islands whose shares are also listed on the main board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
Basis of preparation
The interim condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing Securities on the Stock Exchange and the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed financial statements are the same as those used in the annual financial statements for the year ended 31 December 2008, except for the change of accounting policy used to account for the Group’s interests in jointly controlled entities as detailed in note 3 below and the adoption of the following Hong Kong Financial Reporting Standards (“HKFRSs”) mandatory for annual periods beginning on or after 1 January 2009.
| HKFRSs (Amendments) | Improvements to HKFRSs |
|---|---|
| HKAS 1 (Revised) | Presentation of Financial Statements |
| HKFRS 2 (Amendments) | Vesting Conditions and Cancellations |
| HKFRS 7 (Amendments) | Improving Disclosure about Financial Instruments |
| HKFRS 8 | Operating Segments |
| HKAS 23 (Revised) | Borrowing Costs |
| HKAS 32 and HKAS 1 | Puttable Financial Instruments and Obligations Arising on |
| (Amendments) | Liquidation |
| HKAS 1 & HKAS 27 | Cost of an Investment in a Subsidiary, Jointly Controlled Entity or |
| (Amendments) | an Associate |
— 5 —
HK(IFRIC) — Int 9 & HKAS39 Embedded Derivatives (Amendments) HK(IFRIC) — Int 13 Customer Loyalty Programmes HK(IFRIC) — Int 15 Agreements for the Construction of Real Estate HK(IFRIC) — Int 16 Hedges of a Net Investment in a Foreign Operations
As a result of the adoption of HKAS 1 (Revised), details of changes in equity during the Period arising from transactions with equity shareholders in their capacity as such have been presented separately from all other income and expenses in a revised consolidated statement of changes in equity. All other items of income and expense are recognised as part of profit or loss for the Period, or otherwise in the other comprehensive income. Entities may present the components of profit or loss either as part of a single statement of comprehensive income or in a separate income statement. The Group has elected to present the components of profit or loss in a single consolidated statement of comprehensive income. Corresponding amounts have been restated to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total income and expense or net assets for any period presented.
HKFRS 8 requires segment disclosure to be based on the way that the Group’s chief operating decision maker regards and manages the Group, with the amounts reported for each reportable segment being the measures reported to the Group’s chief operating decision maker for the purposes of assessing segment performance and making decisions about operating matters. The adoption of HKFRS 8 did not result in significant changes in the Group’s segment information to be presented, as segment information are previously presented in a manner consistent with the basis used for internal reporting purpose.
The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in the interim condensed consolidated financial statements:
| HKFRSs (Amendments) | Improvements to HKFRSs issued in 2009 1 |
|||
|---|---|---|---|---|
| HKFRSs (Amendments) | Amendments to HKFRS 5 as part of Improvement to HKFRSs issued | |||
| in 2009 2 |
||||
| HKAS 27 (Revised 2008) | Consolidated and Separate Financial Statements | 2 | ||
| HKAS 39 (Amendment) | Eligible Hedged Items 2 |
|||
| HKFRS 1 (Amendment) | First-time Adoption of Hong Kong Financial Reporting Standard | 3 | ||
| HKFRS 2 (Amendment) | Group Cash-settled Share-based Payment Transactions | 3 | ||
| HKFRS 3 (Revised 2008) | Business Combinations 2 |
|||
| HK(IFRIC) — Int 17 | Distribution of Non-cash Assets to Owners 2 |
|||
| HK(IFRIC) — Int 18 | Transfer of Assets from Customers 4 |
1 The amendments that are effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate
- 2 Effective for annual periods beginning on or after 1 July 2009
3 Effective for annual periods beginning on or after 1 January 2010
4 Effective for transfer on or after 1 July 2009
The Directors anticipate that the application of these standards or interpretations will have no material impact on the results and the financial position of the Group.
— 6 —
3. CHANGES OF ACCOUNTING POLICY
During the Period, the Directors elected to change the accounting policy used to account for the Group’s jointly controlled entities from proportionate consolidation to equity method because the Directors considered that the adoption of equity method would save cost for the preparation of these financial statements but would still provide useful financial information about the economic activity of the Group to the readers. The effect of this change did not result in any impact on the profit and the equity attributable to equity shareholders of the Company in the periods prior to the change.
The financial condition as at 31 December 2008 and the results of operation for the six months ended 30 June 2008 previously reported by the Group have been restated to apply the equity method for the interests in jointly controlled entities, as set out below:
| Effect of | |||
|---|---|---|---|
| accounting | |||
| for interests | |||
| in jointly | |||
| The Group, | controlled | ||
| as previously | entities under | The Group, | |
| reported | equity method | as restated | |
| HK$’000 | HK$’000 | HK$’000 | |
| Items of condensed consolidated statement of | |||
| comprehensive income for the six months ended | |||
| 30 June 2008 | |||
| Turnover | 809,925 | (69,259) | 740,666 |
| Gross profit | 175,770 | (10,304) | 165,466 |
| Share of profits of jointly controlled entities | — | 5,057 | 5,057 |
| Profit before taxation | 152,049 | (715) | 151,334 |
| Profit for the period | 141,166 | — | 141,166 |
| Profit attributable to equity shareholders | |||
| of the Company | 141,166 | — | 141,166 |
| Items of condensed consolidated statement of | |||
| financial position as at 31 December 2008 | |||
| Non-current assets | 1,604,471 | 30,843 | 1,635,314 |
| Interests in jointly controlled entities | — | 91,634 | 91,634 |
| Current assets | 1,099,529 | (57,647) | 1,041,882 |
| Current liabilities | 830,793 | (6,393) | 824,400 |
| Net current assets | 268,736 | (51,254) | 217,482 |
| Non-current liabilities | 347,683 | (20,411) | 327,272 |
| Net assets | 1,525,524 | — | 1,525,524 |
| Total equity attributable to equity | |||
| shareholders of the Company | 1,525,524 | — | 1,525,524 |
| Total equity | 1,525,524 | — | 1,525,524 |
— 7 —
4. SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their products and has two reportable operating segments as follows:
-
(i) the corn refined products segment comprises the manufacture and sale of corn starch, gluten meal, corn oil and other corn refined products; and
-
(ii) the corn based sweetener products segment comprises the manufacture and sale of glucose syrup, maltose syrup, high fructose corn syrup, crystallised glucose, maltodextrin and sorbitol.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. These reportable segments are the basis on which the Group reports its segment information and no operating segments have been aggregated to form the above reportable operating segments. Intersegment revenue are eliminated on consolidation. Intersegment sales and transactions are charged at prevailing market prices.
The Group’s revenue is derived from customers based in the mainland of the People’s Republic of China (“Mainland China”) and in countries other than Mainland China. The geographical information is another basis on which the Group reports its segment information.
(a) Business units information
| Corn based sweetener | |||||||
|---|---|---|---|---|---|---|---|
| Corn refined products | products | Eliminations | Consolidated | ||||
| Six months | ended 30 June | ||||||
| 2009 | 2008 | 2009 2008 |
2009 | 2008 | 2009 2008 |
||
| (Restated) | (Restated) | ||||||
| (Unaudited) (Unaudited) (Unaudited) (Unaudited) |
(Unaudited) (Unaudited) |
(Unaudited) (Unaudited) |
|||||
| HK$’000 | HK$’000 | HK$’000 HK$’000 |
HK$’000 | HK$’000 | HK$’000 HK$’000 |
||
| Segment revenue: | |||||||
| Sales to external customers | 415,562 | — | 637,226 740,666 |
— | — | 1,052,788 740,666 |
|
| Intersegment sales | 86,931 | — | — — |
(86,931) | — | — — |
|
| Total revenue | 502,493 | — | 637,226 740,666 |
(86,931) | — | 1,052,788 740,666 |
|
| Segment results | 6,024 | — | 26,529 158,903 |
— | — | 32,553 158,903 |
|
| Unallocated revenue | 7,744 19,085 |
||||||
| Unallocated expenses | (11,889) (13,140) |
||||||
| Finance costs | (16,969) (13,514) |
||||||
| Profit before tax | 11,439 151,334 |
||||||
| Tax | (7,442) (10,168) |
||||||
| Profit for the period | 3,997 141,166 |
— 8 —
(b) Geographical information
| Countries other than | Countries other than | |||||
|---|---|---|---|---|---|---|
| Mainland | China | Mainland China | Consolidated | |||
| Six months ended 30 June | ||||||
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |
| (Restated) | (Restated) | (Restated) | ||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |
| HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | |
| Segment revenue: | ||||||
| Sales to external customers | 991,657 | 708,716 | 61,131 | 31,950 | 1,052,788 | 740,666 |
5. REVENUE AND OTHER INCOME
Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold, after allowances for returns and trade discounts.
An analysis of other income is as follows:
| Bank interest income Sales of scrap and raw materials Exchange gains Others |
Six months ended 30 June 2009 2008 (Restated) (Unaudited) (Unaudited) HK$’000 HK$’000 503 5,876 3,908 1,420 (539) 6,578 1,033 154 4,905 14,028 |
|---|---|
6. FINANCE COSTS
| Six months ended | 30 June | |
|---|---|---|
| 2009 | 2008 | |
| (Restated) | ||
| (Unaudited) | (Unaudited) | |
| HK$’000 | HK$’000 | |
| Interest on bank loans: | ||
| Wholly repayable within five years | 16,969 | 13,513 |
— 9 —
7. PROFIT BEFORE TAX
The Group’s profit from operating activities is arrived at after charging:
| Six months ended | 30 June | ||
|---|---|---|---|
| 2009 | 2008 | ||
| (Restated) | |||
| Note | (Unaudited) | (Unaudited) | |
| HK$’000 | HK$’000 | ||
| Raw materials and consumables used | 766,005 | 493,542 | |
| Depreciation | 43,109 | 20,647 | |
| Amortisation of prepaid land premiums | 4,954 | 630 | |
| Negative goodwill | — | 24,036 | |
| Write back of trade receivable | 12 | (5) | (1,597) |
| Employee benefits expense | 15,681 | 8,241 |
8. TAX
| Provisions for the Period: Hong Kong profits tax PRC corporate income tax Tax charge for the Period |
Six months ended 30 June 2009 2008 (Restated) (Unaudited) (Unaudited) HK$’000 HK$’000 — — 7,442 10,168 7,442 10,168 |
|---|---|
No provision for Hong Kong profits tax has been made as the Group did not generate any assessable profits arising in Hong Kong during the Period. Hong Kong profits tax was provided in the prior period at the rate of 16.5% on the estimated assessable profits arising in Hong Kong during that period.
The statutory tax rate for all subsidiaries in Mainland China is 25% for the six months ended 30 June 2009. During the prior period, the statutory tax rate was 25%, except for one subsidiary, which was granted Technological Advanced Enterprise status and entitled to a lower applicable tax rate of 15% according to Article 75 of the Detailed Rules and Regulation for the Implementation of the Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises.
As of 1 January 2008, the Enterprise Income Tax Law of the People’s Republic of China (the “EITL”) became effective. According to the EITL, enterprises that previously enjoy the preferential policies of low tax rates shall be gradually transitioned to enjoy the statutory tax rate within 5 years after the implementation of the EITL. Among them, the enterprises that enjoy the enterprise income tax rate of 15% shall be subject to the enterprise income tax rate of 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012.
— 10 —
All of the Group’s subsidiaries operating in Mainland China are exempted from PRC corporate income tax for two years starting from the first profitable year of their operations and are entitled to a 50% relief from the PRC corporate income tax for the following three years.
During the current period, tax on the assessable profit of one (2008: none) PRC subsidiary had been calculated at 50% of the applicable prevailing tax rate in the PRC.
No provision for income tax has been made for one of the Group’s PRC subsidiaries (2008: two) as they remain exempt from income tax for their first two profitable years of their operations.
The remaining PRC subsidiaries of the Group have not made any provision for income tax as they did not generate any assessable profits for the current and prior periods.
Tax recoverable represents excess of tax payments over estimated tax liabilities by certain group companies.
9. EARNINGS PER SHARE
The basic earnings per share for the period ended 30 June 2009 is calculated based on the consolidated profit for the period attributable to ordinary equity holders of the parent of approximately HK$3,997,000 (2008: HK$141,166,000) and the weighted average number of ordinary shares in issue during the Period of 1,045,000,000 (2008: 1,045,000,000).
The calculation of diluted earnings per share amounts is based on the profit for the Period attributable to ordinary equity holders of the Company. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares, as used in the basic earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise of all dilutive potential ordinary shares into ordinary shares.
As the exercise price of the share options was higher than the average market price of the Company’s ordinary shares during the period ended 30 June 2009, no shares were assumed to have been issued on the deemed exercise of the Company’s outstanding share options during the period ended 30 June 2009. Therefore, the diluted earnings per share amount was equal to the basic earnings per share amount for the period ended 30 June 2009.
No diluted earnings per share was presented for the six months ended 30 June 2008 as there were no dilutive potential ordinary shares in existence for the six months ended 30 June 2008.
10. DIVIDEND
The Directors do not recommend the payment of any interim dividend for the six months ended 30 June 2009 (six months ended 30 June 2008: nil).
— 11 —
11. INTERESTS IN JOINTLY CONTROLLED ENTITIES
| Share of net assets Loan to a jointly-controlled entity |
30 June 2009 (Unaudited) HK$’000 54,480 40,000 94,480 |
31 December 2008 (Restated) (Audited) HK$’000 51,634 40,000 |
|---|---|---|
| 91,634 |
The long term loan of HK$40 million to a jointly controlled entity represents a quasi-equity loan which is stated at cost less impairment. The long term loan of HK$40 million was unsecured, interest-free and will be repayable in 2101 or upon the liquidation, winding-up or dissolution of the jointly controlled entity, whenever is earlier.
Particulars of the jointly controlled entities are as follows:
| Place of | Percentage of | Percentage of | ||||
|---|---|---|---|---|---|---|
| Nominal value | incorporation/ | Voting power | ||||
| of paid up share/ | Registration and | Ownership | and profit | |||
| Name | registered capital | operations | interest | sharing | Principal activities | |
| Global Bio-chem-Cargill | HK$1,000 | Hong Kong | 50 | 50 | Investment holding | |
| (Holdings) Limited | ||||||
| GBT-Cargill High Fructose | US$3,000,000 | Mainland China | 50 | 50 | Manufacture and sale of | |
| (Shanghai) Co., Ltd.* | high fructose corn syrup |
- Wholly-foreign-owned enterprise
All of the above investments in jointly controlled entities are indirectly held by the Company.
— 12 —
The following table illustrates the summarised financial information of the Group’s jointly controlled entities:
| Share of the jointly controlled entities’ assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Share of the jointly controlled entities’ results: Revenue Other income Total expenses Tax Profit after tax 12. TRADE RECEIVABLES Trade receivables Impairment Total |
30 June 31 December 2009 2008 (Unaudited) (Audited) HK$’000 HK$’000 61,520 57,647 19,993 20,791 (5,970) (6,393) (21,063) (20,411) 54,480 51,634 Six months ended 30 June 2009 2008 (Unaudited) (Unaudited) HK$’000 HK$’000 34,991 69,259 289 1,014 35,280 70,273 (31,936) (64,501) (505) (715) 2,839 5,057 30 June 31 December 2009 2008 (Restated) (Unaudited) (Audited) HK$’000 HK$’000 234,360 237,991 — (5) 234,360 237,986 |
|---|---|
— 13 —
The Group normally allows credit terms of 90 days to established customers. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. Trade receivables are non-interest-bearing. Significant concentrations of risk exist where the Group has material exposures to trade receivables from one customer located in Mainland China which accounted for 10% of the total trade receivables as at 30 June 2009 (2008: 23%).
An aged analysis of the trade receivables as at the balance sheet date, based on the date of recognition of the sale, is as follows:
| Within 1 month 1 — 2 months 2 — 3 months Over 3 months Total |
30 June 2009 (Unaudited) HK$’000 86,563 57,092 38,400 52,305 234,360 |
31 December 2008 (Restated) (Audited) HK$’000 103,103 67,303 34,133 33,447 237,986 |
|---|---|---|
The movements in provision for impairment of trade receivables are as follows:
| At 1 January 2009/1 January 2008 Impairment losses reversed Exchange realignment At 30 June 2009/31 December 2008 |
2009 (Unaudited) HK$’000 5 (5) — — |
2008 (Restated) (Audited) HK$’000 1,585 (1,705) 125 5 |
|---|---|---|
The aged analysis of the trade receivables that are not considered to be impaired is as follows:
| Neither past due nor impaired Less than 1 month past due 1 to 3 months past due Over 3 months past due Total |
30 June 2009 (Unaudited) HK$’000 182,055 21,421 24,541 6,343 234,360 |
31 December 2008 (Restated) (Audited) HK$’000 204,539 16,227 7,257 9,963 237,986 |
|---|---|---|
— 14 —
Receivables that were neither past due nor impaired relate to a large number of diversified customers for whom there was no recent history of default.
Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the Directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances.
13. TRADE PAYABLES
The Group normally obtains credit terms ranging 30 to 90 days from its suppliers, which are normally settled on a cash basis. The carrying amounts of trade payables approximate to their fair values.
An aged analysis of the trade payables as at the balance sheet date, based on the invoice date, is as follows:
| Within 1 month 1 — 2 months 2 — 3 months Over 3 months Total |
30 June 2009 (Unaudited) HK$’000 14,779 99,327 17,160 5,258 136,524 |
31 December 2008 (Restated) (Audited) HK$’000 50,087 4,892 1,815 8,275 65,069 |
|---|---|---|
14. SHARE CAPITAL
The following is a summary of the authorised share capital and the movements in the issued share capital of the Company:
| Authorised: 100,000,000,000 (31 December 2008: 100,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 1,045,000,000 (31 December 2008: 1,045,000,000) ordinary shares of HK$0.10 each |
30 June 2009 (Unaudited) HK$’000 10,000,000 104,500 |
31 December 2008 (Audited) HK$’000 10,000,000 104,500 |
|---|---|---|
— 15 —
MANAGEMENT DISCUSSION AND ANALYSIS
The Group is principally engaged in the production and sale of corn refined products and corn sweeteners, categorised into upstream and downstream products. The Group’s upstream products include corn starch, gluten meal, corn oil and other corn refined products. Corn starch is then refined downstream to produce various corn sweeteners which are classified into three categories: corn syrup (glucose syrup and maltose syrup), corn syrup solid (crystallised glucose and maltodextrin) and sugar alcohol (sorbitol).
BUSINESS ENVIRONMENT
The selling prices of the Group’s products are affected by the prices of its raw materials (principally corn kernels and corn starch), the demand and supply of each of the products and their respective substitutes in the market and the variety of product specifications.
The operating environment since the second half of 2008 was very challenging with the outbreak of melamine-tainted food incidents in China and the global financial tsunami. It imposed pressure on the selling prices and quantity of products sold by the Group. Such situation carried on till the first quarter of 2009. As a result, the production volume during the Period decreased by 7.3% as compared to the corresponding period in 2008. This significantly increased the unit production cost of corn sweeteners by 8.2% while the average selling prices decreased by 5.8%. As a result, the gross profit margin of corn sweeteners dropped by 12.3% to 10.0% (2008: 22.3%).
During the Period, the average price of corn kernels remained flat while the average selling price of corn starch decreased by 6.4% as compared to the corresponding period last year. The situation exacerbated when the average selling price of corn starch reached the bottom at HK$1,960 per metric ton (“MT”) in the first quarter of 2009. Consequently, the profitability of the upstream products was put under pressure. On the other hand, the quantity sold for corn sweeteners during the Period also dropped by 9.8% as compared to the corresponding period last year in response to the poor market sentiment.
FINANCIAL PERFORMANCE
The Group’s consolidated revenue for the Period increased by approximately 42.1% to approximately HK$1,053 million (2008: HK$741 million) as compared to the corresponding period in 2008. Such increase was mainly attributable to the contribution from the upstream corn refinery which the Group acquired in September 2008. However, the gross profit for the Period dropped by 43.7% to approximately HK$93 million (2008: HK$165 million), which were caused by the decrease of average selling price and increase in unit production cost of the products. As a result, the Group’s net profit for the Period decreased by approximately HK$137 million or approximately 97.2% to approximately HK$4 million (2008: HK$141 million).
— 16 —
Upstream products
(Sales amount: HK$416 million (2008: Nil)) (Gross profit: HK$29 million (2008: Nil))
On 24 September 2008, the Group completed the acquisition of Jinzhou Yuancheng Bio-chem Technology Co., Ltd. (“Jinzhou Yuancheng”), a corn refinery principally engaged in the manufacture and sale of corn starch and other corn refined products, from the subsidiaries of Global Bio-chem Technology Group Company Limited (“GBT” and together with its subsidiaries other than the members comprising the Group and the Company’s jointly controlled entities, “GBT Group”).
During the Period, the sales volume of corn starch and other corn refined products were approximately 135,000 MT (2008: Nil) and 72,000 MT (2008: Nil) respectively. Internal consumption of corn starch was approximately 36,000 MT (2008: Nil), which was used as raw material for the production in Jinzhou and Shanghai production sites.
The unfavourable operating environment since the second half of 2008 kept the selling prices of corn refined products low in the first quarter of 2009, especially for the price of corn starch which hit the lowest at HK$1,960 per MT. However, the market started to pick up since the end of March and the price of corn starch gradually recovered to HK$2,340 per MT by the end of June. As a result, the upstream business recorded gross profit margins of approximately 8.0% (2008: Nil) and 5.2% (2008: Nil) for the sales of corn starch and other corn refined products respectively during the Period.
Corn syrup
(Sales amount: HK$361 million (2008: HK$392 million)) (Gross profit: HK$34 million (2008: HK$84 million))
During the Period, the sales volume of glucose syrup decreased by approximately 22.5% while maltose syrup increased by 19.5% as compared to the corresponding period last year.
Internal consumption of glucose syrup for downstream production increased to approximately 193,000 MT (2008: 168,000 MT) or by approximately 14.9% during the Period. As a result, the sales volume of glucose syrup decreased by 22.5% to approximately 90,000 MT (2008: 116,000 MT). Consequently, the revenue of glucose syrup dropped by 19.9% to approximately HK$174 million (2008: HK$218 million). The revenue of maltose syrup for the Period, however, grew by approximately 7.0% to approximately HK$187 million (2008: HK$175 million) with increased sales volume by 19.5%.
Due to the decrease in selling prices and increase in unit production cost, the gross profit margins of glucose syrup and maltose syrup declined from approximately 22.1% and 20.4% to 11.8% and 7.4% respectively.
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During the Period, the Group sold approximately 48,000 MT (2008: 3,700 MT) of glucose syrup to the GBT Group.
Corn syrup solid
(Sales amount: HK$257 million (2008: HK$303 million)) (Gross profit: HK$27 million (2008: HK$70 million))
The revenue of corn syrup solid decreased by approximately 15.1% during the Period as a result of the decrease in selling price and sales volume. Selling prices of crystallised glucose and maltodextrin dropped by 6.7% and 7.2% respectively; while the sales volume decreased by 11.0% and 3.2% respectively. Consequently, the revenue of crystallised glucose and maltodextrin decreased by approximately 17.0% and 10.1% respectively to approximately HK$184 million (2008: HK$221 million) and HK$73 million (2008: HK$81 million) respectively.
With the decrease in sales volume by 9.5% to approximately 151,000 MT (2008: 167,000 MT), the gross profit of corn syrup solid reduced substantially by 61.8%. During the Period, crystallised glucose and maltodextrin recorded gross profit of approximately HK$21 million (2008: HK$59 million) and HK$6 million (2008: HK$11 million) with gross profit margins of 11.3% (2008: 26.4%) and 8.1% (2008: 14.0%) respectively. The decline of gross profit margins was mainly due to the decrease in selling price and increase in unit production cost.
During the Period, the Group sold approximately 111,000 MT (2008: 116,500 MT) of crystallised glucose to the GBT Group.
Sugar alcohol
(Sales amount: HK$19 million (2008: HK$46 million)) (Gross profit: HK$3 million (2008: HK$12 million))
The revenue of sugar alcohol decreased by 58.3% to approximately HK$19 million (2008: HK$46 million) while the gross profit decreased by 74.8% to approximately HK$3 million (2008: HK$12 million). Due to the poor market sentiment of sorbitol, part of the production line was used for the production of crystallised glucose. As a result, sales volume of sorbitol decreased to approximately 6,000 MT (2008: 15,000 MT) during the Period. With lower selling price and higher unit production cost, the gross profit margin decreased to 15.8% (2008: 26.1%).
During the Period, the Group sold approximately 6,000 MT (2008: 6,600 MT) of sorbitol to GBT Group.
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Export sales
During the Period, the Group exported approximately 22,000 MT (2008: Nil) of upstream corn refined products and 9,000 MT (2008: 10,000 MT) of corn sweeteners; their export sales amounted to approximately HK$35 million (2008: Nil) and HK$26 million (2008: HK$36 million) respectively.
Operating expenses and income tax
Due to the increase in sales volume and number of headcounts of the Group, the operating expenses (other than finance costs) increased by 65.9%. The ratio of such operating expenses to turnover increased to 6.9% (2008: 5.9%), resulting mainly from the increase in selling expenses of approximately HK$20 million and administrative expenses of approximately HK$7 million due to the acquisition of Jinzhou Yuancheng in September 2008.
Finance costs of the Group increased to approximately HK$17 million (2008: HK$14 million) for the Period due to the increase in PRC bank borrowings with higher interest rate which amounted to approximately HK$225 million as a result of the acquisition of Jinzhou Yuancheng.
The income tax rate for each of the subsidiaries remained the same during the Period. However, due to the operating loss of Jinzhou Yuancheng and a newly operated subsidiary amounted to approximately HK$13 million, and certain subsidiaries which tax concession period have expired and were then subject to 25% of corporate profit tax, the overall effective tax rate of the Group increased to approximately 65.1% (2008: 7.0%).
Performance of joint ventures
As at 30 June 2009, the Group has one joint venture project with Cargill Inc. which is principally engaged in the manufacture and sale of high fructose corn syrup (“HFCS”). During the Period, share of profits of jointly controlled entities amounted to approximately HK$3 million (2008: HK$5 million).
Net profit attributable to shareholders
As a result of the decrease in overall gross profit and the increase in selling and distribution costs, the net profit attributable to shareholders for the Period decreased by approximately 97.2% to approximately HK$4 million (2008: HK$141 million).
FINANCIAL RESOURCES AND LIQUIDITY
Net borrowing position
The Group had net borrowings of approximately of HK$125 million (31 December 2008: HK$199 million) as at 30 June 2009.
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Structure of interest bearing borrowings
As at 30 June 2009, the Group’s bank borrowings amounted to approximately HK$403 million (31 December 2008: HK$622 million), all of which were denominated in Renminbi (31 December 2008: 67.9%). The average interest rate during the Period remained at the similar level of approximately 6% (2008: 6%) per annum.
The percentage of interest bearing borrowings wholly repayable within one year and in the second to the fifth years were approximately 91.6% (31 December 2008: 54.9%) and 8.4% (31 December 2008: 45.1%) respectively. The change in repayment pattern was mainly resulted from the re-classification of certain long-term loans during the Period.
Turnover days, liquidity ratios and gearing ratios
Credit terms, normally 90 days, are granted to customers, depending on their credit worthiness and business relationships. As at 30 June 2009, out of the amounts due from fellow subsidiaries, approximately HK$72 million (31 December 2008: HK$23 million) represented the trade nature portion was taken into consideration in the calculation of trade receivables turnover days. During the Period, the trade receivables turnover days decreased slightly to approximately 51 days (31 December 2008: 56 days). Meanwhile, the outstanding balances of approximately HK$100 million as at 30 June 2009 arising from the purchase transactions with the GBT Group were classified as amounts due to fellow subsidiaries. Such balances were considered as trade payables for the calculation of trade payables turnover days. During the Period, trade payables turnover days increased to approximately 45 days (31 December 2008: 22 days) as part of the cash flow management.
The inventory turnover days had decreased from approximately 62 days for the year ended 31 December 2008 to approximately 45 days for the period ended 30 June 2009 owing to more stringent inventory control adopted.
The current ratio and the quick ratio as at 30 June 2009 decreased to approximately 1.02 (31 December 2008: 1.26) and 0.77 (31 December 2008: 0.97) respectively. Gearing ratios in terms of (i) bank borrowings to total assets, (ii) bank borrowings to equity and (iii) net debts (i.e. net balance between bank borrowings and cash and cash equivalents) to equity were approximately 15.8% (31 December 2008: 23.3%), 26.2% (31 December 2008: 40.8%) and 8.1% (31 December 2008: 13.1%) respectively. The gearing ratio improved as bank borrowings reduced during the Period. Interest coverage (i.e. EBITDA over finance costs) dropped to approximately 4.4 times (2008: 13.8 times) mainly due to the substantial decline of net profit for the Period.
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FOREIGN EXCHANGE EXPOSURE
Although most of the operations were carried out in the PRC in which transactions were denominated in Renminbi, the Directors consider that there is no material unfavourable exposure to foreign exchange fluctuation and there will be sufficient cash resources denominated in Hong Kong dollars for future dividends. During the Period, the Group did not use any financial instrument for hedging purposes and the Group did not have any hedging instrument outstanding as at 30 June 2009.
FUTURE PLANS AND PROSPECTS
It is the Group’s mission to become one of the leading corn sweeteners manufacturers in Asia and a major player in global market. To achieve this objective, the Group will strive to enlarge its market share and diversify its product mix, as well as enhance its capability in developing high value-added products and new applications through in-house research and development and through strategic business alliances with prominent international market leaders.
As one of the largest corn sweetener producers in the PRC in terms of production capacity and production output, the Directors believe that it is of utmost importance for the Group to maintain its leading position in the market by expanding its production capacity, and at the same time, expanding its sales network.
Expansion of production capacity
The Group has commenced the construction of a crystallised glucose production line (with sorbitol production capability after modification conducted) in Changchun (the “Changchun Facility”) in the second half of 2008 and is expected to be completed by the end of the third quarter of 2009. The new production line will add 40,000 metric tonnes per annum (“mtpa”) to either the Group’s crystallised glucose capacity to 240,000 mtpa or sorbitol capacity to 100,000 mtpa.
Substantial portion of the above expected capital expenditures for the Changchun Facility has been incurred prior to its commencement of commercial production while the remaining amounts are expected to be settled within one year from the commencement date. The expansion plan of the Group in Changchun has been principally financed by the internal resources of the Group and the Directors are of the view that the existing technology know-how of the Group is sufficient for such expansion.
On 6 March 2009, the Company announced that, in light of the market condition and slowdown of the world economy, the Directors have resolved to change the intended use of the unutilised net proceeds of HK$331 million raised from the initial public offering of the Company’s share in September 2007 to general working capital of the Company and/or repayment of bank borrowings. The Directors were of the view that such arrangement would reduce the finance cost of the Group and increase the Group’s flexibility in financial management. Accordingly, the projects set out in the section headed “Future plans and use of proceeds” of the prospectus of the Company dated 10
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September 2007 (the “Prospectus”) has been postponed in view of the current market condition. The Company will continue to observe the market movements and review from time to time the need and feasibility and the timetable of capacity expansion. These expansion plans will be funded by the Group’s internal resources and bank borrowings. The Board is examining different alternatives in the capital market to further strengthen the Group’s financial position, including listing in overseas stock markets.
In the long run, the Directors intend to establish new production facilities in the existing locations of the Group’s production facilities and other locations in the PRC with an ultimate goal to increase its production capacity and market share. It is currently expected that the construction of these new production facilities will be undertaken by new subsidiaries of the Company or joint ventures with third parties.
Retail market
During the year of 2008, the Group expanded its business to the retail market and some of the Group’s consumable sweetener products, were launched and sold under the Group’s own brand “ Life Essentials ” on retail basis. Marketing expenses of approximately HK$754,000 (2008: Nil) were incurred during the Period. It is expected that such marketing expenses for 2009 will be around HK$1 million. During the Period, the Group also started launching other food related products into its retail business for product diversification. A joint venture has been set up for launching high end beef products to customers via supermarket chains in the PRC. During the first half of 2009, the Group has invested approximately HK$8 million in this joint venture. This new business is expected to have profit contribution by the end of 2009.
USE OF PROCEEDS FROM THE COMPANY’S INITIAL PUBLIC OFFERING
Net proceeds of approximately HK$657 million were raised from the initial public offering of the Company’s shares in September 2007. As at 31 December 2008, the Group had utilised a total of approximately HK$119 million of the proceeds for the construction of a new glucose production plant in Jinzhou, approximately HK$22 million for the construction of an additional crystallised glucose production line in Changchun and approximately HK$135 million had been utilised to repay bank borrowings. Other than that, the Group had also utilised a total of approximately HK$50 million of the proceeds for working capital in Hong Kong. The remaining proceeds were placed on short term deposits with licensed banks in Hong Kong. As announced by the Company on 6 March 2009, in order to better utilise the cash flow and to minimise unnecessary interest expenses of the Group, the Board resolved to reallocate about HK$331 million of the net proceeds from the initial public offering of the Company originally designated for construction of new production facilities in Changchun and for the acquisition and/or construction of HFCS production facilities to general working capital of the Group and/or repayment of bank borrowings. The Board is of the opinion that such arrangement of the unutilised proceeds will reduce the finance cost of the Group and increase the Company’s flexibility in its financial management.
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NUMBER AND REMUNERATION OF EMPLOYEES
As at 30 June 2009, the Group has approximately 1,110 full time employees in Hong Kong and the PRC. The Group emphasises the importance of human resources to its success, therefore qualified and experienced personnel are recruited for enhancing production capability and development of new products. Remuneration is maintained at competitive levels with discretionary bonuses payable on a merit basis and in line with industrial practice. Other staff benefits provided by the Group include mandatory provident fund, insurance schemes and performance related commission.
DISCLOSURE OF ADDITIONAL INFORMATION
INTERIM DIVIDEND
The Board has resolved not to recommend the payment of an interim dividend in respect of the Period.
PURCHASES, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the Period.
COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES AND MODEL CODE
The Company is committed to ensuring high standards of corporate governance in the interests of shareholders and devotes considerable effort to identifying and formalising the best practices.
In the opinion of the Directors, the Company has complied throughout the Period with the Code on Corporate Governance Practices (the “Code”) as set out in Appendix 14 to the Listing Rules.
In compliance with the Code, the Company has set up an audit committee and a remuneration committee of the Board. The Board considers the determination of the appointment and approval of Directors to be the Board’s collective decision and thus does not intend to adopt the recommended best practice of the Code to set up a nomination committee.
AUDIT COMMITTEE
The Audit Committee of the Company (the “Audit Committee”) was established in accordance with the requirements of the Code for the purposes of reviewing and providing supervision over the Group’s financial reporting process and internal controls with written terms of reference in compliance with the code provisions of the Code. The Audit Committee comprises three independent non-executive Directors. The chairman of the Audit Committee is Mr. Chan Yuk Tong. The other members of the Audit Committee are Mr. Ho Lic Ki and Mr. Gao Yunchun.
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The Audit Committee meets regularly with the Company’s senior management and the Company’s auditors to review the Company’s financial reporting process, the effectiveness of internal controls, audit process and risk management.
The interim results of the Group for the Period have not been audited, but they have been reviewed by the Company’s auditors, Ernst & Young. The interim results have also been reviewed by the Audit Committee.
PUBLICATION OF INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORT
This announcement is published on the website of Hong Kong Exchanges and Clearing Limited at www.hkex.com.hk under “Latest Listed Company Information” and on the website of the Company at www.global-sweeteners.com under “Investor Relations”.
The Interim Report 2009 of the Company will be dispatched to the shareholders of the Company and available for viewing on the website of Hong Kong Exchanges and Clearing Limited at www.hkex.com.hk under “Latest Listed Company Information” and on the website of the Company at www.global-sweeteners.com under “Investor Relations” in due course.
On behalf of the Board Global Sweeteners Holdings Limited Kong Zhanpeng Chairman
Hong Kong, 17 September 2009
As at the date of this announcement, the Board comprises four executive directors, namely, Mr. Kong Zhanpeng, Mr. Zhang Fazheng , Ms. Wang Guifeng, and Mr. Zhang Fusheng and three independent non-executive directors, namely Mr. Chan Yuk Tong, Mr. Gao Yunchun and Mr. Ho Lic Ki.
- for identification purposes only
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