China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Stock Code: 000055, 200055 Stock ID: Fangda Group, Fangda B
Announcement No. 2011-31
China Fangda Group Co., Ltd.
Preplan of Private Issuing of A Shares
(2011)
October 2011
China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Table of Contents
Company Statements ......................................................................................................................... 2
Special Prompts................................................................................................................................. 3
Definitions......................................................................................................................................... 4
Chapter I. Summary of the preplan ................................................................................................... 5
I. Company profiles....................................................................................................................... 5
II. Circumstance and purposes of this private issuing ................................................................... 5
III. Target subscribers and their relationship with the Company .................................................. 9
IV. Type of shares to be issued privately, price and pricing rules, amount of shares to issue,
trade limitation period, and arrangement for retained profit ......................................................... 9
V. Investment projects financed by the proceeds ........................................................................ 10
VI. Situation of related transactions ............................................................................................ 11
VII. Whether it will cause change in controlling power over the Company ............................... 11
VIII. Approvals from authorities obtained and to be obtained .................................................... 12
IX. Valid period of the resolutions on the private issuing ........................................................... 12
Chapter II. Feasibility report of the Board on usages of the proceeds ............................................ 12
I. Application plan of the proceeds ............................................................................................. 12
II. Profiles and prospects of the projects to be invested by the proceeds .................................... 12
III. Influences on the administration and financial situation ....................................................... 14
IV. Filing and approving issues involved .................................................................................... 14
Chapter III. Analyze of the Board on the influences on the Company............................................ 15
I. Influences of the issuing on the Company’s business, asset, the Articles of Association,
shareholder structure, senior management, and revenue structure .............................................. 15
II. Change of financial situation, profitability and cash flow situation after the issuing............. 15
III. Business and administrative relationship between the Company and the controlling
shareholder and its related parties, related transactions and horizontal competition .................. 15
IV. Whether there is any adoption of capital by the controlling shareholder or its related parties
upon completion of this issuing, or, whether the Company is providing guarantees to the
controlling shareholder or its related parties ............................................................................... 16
V. Influence of the issuing on the Company’s liability situation ................................................. 16
VI. Statement on risks related to the private issuing ................................................................... 16
China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Company Statements
The directors, and the Company acknowledge that there isn’t any false record,
misleading statement or significant omission carried in this announcement and will
take individual and joint responsibilities for the truthfulness, accuracy, and
completeness of the announcement.
Upon completion of this private issuing, the Company is responsible for the changes
in business operation and profitability; whereas the investors shall undertake the risks
caused by subscription of the shares issued privately this time.
This plan is a description on the private issuing made by the Board of Directors. Any
statements contrary to this article are false.
Investors shall inquire stock brokers, lawyers, professional accountants or other
professional consultants if have any doubt.
Descriptions in this plan are not suggesting substantial judgment, confirmation,
approval, or verification of the authorities on this private issuing. Issues carried in this
plan are subject to the approval or verification of the relative authorities.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Special Prompts
I. The Preplan of Private Issuing of A Shares (2011) of China Fangda Group Co., Ltd.
has been examined and passed at the 5th meeting of the 6th term of Board of the
Company, however it is subject to approval of the Shareholders’ Meeting.
II. Objects of this private issuing are those foundation management companies,
securities brokers, trust companies, financial companies, insurance investors, qualified
overseas institutional investors, other institutional investors, and natural persons
satisfying the conditions setout by CSRC, but totally not more than 10 investors.
Subscription will be in cash only. A single subscriber and its act-in-concert parties
shall not subscribe over 30% (include) of the total shares issued this time. If a
particular subscriber, along with his/her act-in-concert parties, is already holding the
Company’s shares, then the sum of existing shares and the newly subscribed shares
shall not greater than 30% (included) of the total amount of shares issued this time.
The amount of shares exceeding the limit will be invalid.
No target subscribers were decided up to present.
III. Fund raised from this private issuing will not more than RMB471.21 million,
which will be invested to energy-saving curtain wall production base in Chengdu and
Beijing, and construction of marketing network.
Proceed will not exceed the total investment of above projects. The short part will be
financed by the Company’s own sources.
IV. Amount of A shares issued privately this time will not be more than 99.6 million
shares (include), The pricing ex-date will be the day when the announcement of
resolutions of the 5th meeting of the 6th term of Board (October 29, 2011). The price
will not lower than 90% of the average price in 20 days prior to the pricing ex-date,
namely not lower than RMB4.73 per share. In case ex-dividend or ex-interest events
happened during the period from pricing ex-day to issuing day, such as dividend
distribution, bonus shares, or capitalizing of common reserves, the price shall be
adjusted correspondingly. The Shareholders’ Meeting authorizes the Board to finalize
the price upon approval of China Securities Regulatory Commission and consulting to
the organizational investors by the issuer and the sponsor, amount of issuing will be
then decided.
V. This plan of private issuing of A shares is subject to the examination of the
shareholders’ meeting and submit to CSRC for approval.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Definitions
The following terms are defined to the meanings in the right, except for specified
otherwise.
The Company, Company,
Refers to China Fangda Group Co., Ltd.
Fangda Group
Shenzhen Fangda Decoration Engineering Co.,
Fangda Decoration Refers to
Ltd.
this time of issuing, the The action of issuing A-shares privately performed by
Refers to
private issuing China Fangda Group Co., Ltd. in 2011
The Preplan of Private Issuing of A Shares
This plan Refers to
(2011) of China Fangda Group Co., Ltd.
The announcement day of the resolutions of the
Pricing Ex-date Refers to
Board meeting regarding this private issuing
CSRC Refers to China Securities Regulatory Commission
SSE Refers to Shenzhen Stock Exchange
RMB Refers to RMB Yuan
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Chapter I. Summary of the preplan
I. Company profiles
Name in Chinese: 方大集团股份有限公司
In English: CHINA FANGDA GROUP CO., LTD.
Stock Listed in: Shenzhen Stock Exchange
Stock ID: Fangda Group, Fangda B
Stock code: 000055,200055
Registered capital: RMB756909905.00
Legal representative: Mr. Xiong Jianming
Date of incorporation: April 20, 1994
Registered address: Fangda Building, Kejinan 12th Avenue, High-tech Zone,
Shenzhen, PR China.
Secretary of the Board: Zhou Zhigang
Address: Fangda Town, Xili Longjing, Nanshan District, Shenzhen
Post code: 518055
Contact number: 0755-26788571-6622
Fax: 0755-26788353
Email: fd@fangda.com
Website address: www.fangda.com
II. Circumstance and purposes of this private issuing
The national government is currently promoting energy saving, clean production and
sustainable development, especially in construction area and developing of new
energy. A number of national policies were produced to support the development in
these areas.
The Company has engaged mainly in three of the government-facilitated industries –
curtain wall & materials, railroad equipments, and LED lighting products.
The Company’s curtain wall & material business is mainly the production of
energy-saving curtain wall materials, and also energy-saving doors and windows, and
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
auto-clean nano aluminum plates.
As the first producer of energy saving curtain wall products, the Company is also the
first listed company of this industry. In its 20 years of history, the Company has
accomplished hundreds of large projects in and outside the country. The Company has
been awarded multiple “Top 50 Curtain Wall Producer in China”, and “Luban Award
for Construction Projects” – the highest award in the country, for three times, and
dozens of provincial and ministry awards. “Fangda” brand has gain high reputation in
the industry with strong competition.
With its over 100 patents, the Company has been holding leading technology
advantages in the curtain wall industry. We participated in producing of industrial
standard and national standard and are now holding nine industrial records in the
country. Through years of development, the Company has become the pioneer and
leader of energy saving curtain wall industry.
To satisfy the blooming market demand on curtain wall products, the Company is
planning to build production bases in North and West areas of China, which are going
to be financed by this private issuing of shares. Meanwhile, the Company is going to
use part of the proceeds to construct a national-wide marketing network for purpose of
enhancing reputation and popularity of the Company’s products, and to provide a
strong support to rapid and continuous growth.
(I) Circumstances of the private issuing
1. Government policy
As described in the “Summary of the 12th five-year-plan of PRC”, the government
attaches great importance to construction of a energy-saving and environment-friendly
economy in the whole country. Green building and construction are promoted in the
construction industry, and the newest construction process, material, and information
technologies will be applied to improve the whole industry.
“Instructive opinions on sustainable development of curtain wall industry”
(Zhong-zhuang-xie [2007]005) pointed out the direction of safe, energy saving, water
saving, material saving, land saving, green and intelligent for the development of
curtain wall industry.
In August 2010, the Ministry of Housing and Civil Construction issued the “Notice on
enhancing energy-saving constructions in government buildings and large scale public
facilities”, in which the target was set to reduce the energy consuming by 5% basing
on the standard of 2009. In August 2011, the Ministry of Housing and Civil
Construction issued the “12th five-year-plan of construction industry” and required
the energy consuming to be reduced by 10% in the construction process.
The “Action Plan of Green and Energy-saving Construction” is about to be released
by National Development and Reformation Committee and Ministry of Housing and
Civil Construction. The Plan will facilitate energy-saving reconstruction of 570
million square meters, and new energy-saving construction of 1.1 billion square
meters during the period of the 12th five-year-plan. Green construction standard will
be a requirement for large public constructions over 20 thousand square meters, such
as airports, railway stations, hotels, and shopping malls, since 2014. According to the
national orientation, energy-saving curtain wall is going to be the overall direction of
the curtain wall industry.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
2. Industrial circumstances
Since 1983, China has gradually become the largest manufacturer and consumer of
curtain wall products in the world. At present the country is in a period of accelerated
industrialization and urbanization along with high tense and scale of energy
consuming. Economic growth featured high investment, high consuming, and high
pollution has been making the situation more and more worse.
The recent survey of the Ministry of Construction and Bureau of Construction
Material shows that the construction energy consuming has reached up above 40% of
the total consuming. The construction scale is growing by 20% year on year in the
whole country with newly completed area of over 2 billion square meters per annual,
90% of them are high energy-consuming buildings. All through the country, 95% of
the existing 40 billion square meters are high energy-consuming constructions. The
energy consuming per square meter of China is 2-3 times of the advanced countries. It
is predicted that another 30 billion square meters of building will be constructed up to
2020. The problem of construction energy saving is becoming more and more severe.
In 2005, the Ministry of Housing and Construction issued the “Instruction on
developing of energy and land saving civil and public constructions”, which set the
target to reduce energy consuming by 65% with new constructions in large cities in
North China and the costal area up to year 2020, and reconstruction of existing
building shall be mostly completed.
At present, curtain walls (including light roofs) in the whole country are totaled to
over 200 million square meters with 90% of them not energy-saving. According to the
reconstruction plan of the national government, they will be replaced in all before
2020. The recent survey of the Ministry of Construction and Bureau of Construction
Material shows that along with the new construction of 2 billion square meters per
annual, the whole demand on energy-saving curtain wall will be increasing by 10
million square meters per annual. This is illustrating a giant market on energy-saving
curtain wall products in coming years.
Up to present, there are 210 grade-I curtain wall engineering enterprises, and 246
grade-I curtain wall designing enterprises in the whole country, 122 of them hold both
qualifications. The whole industry is composed of over 4000 production enterprises
and 1000 supporting enterprises. However few of them hold the technologies of
energy-saving curtain wall production of their own.
3. Company background: advantages in market loyalty and technology
Fangda Decoration Co., Ltd. – the fully-owned subsidiary, is the operator of the
Company’s curtain wall business. It was one of the first curtain wall enterprises who
was granted curtain wall engineering and designing qualification band I, and was
appointed the national supported enterprise in this area. It led and participated in
making of multiple national and industrial standard such as “Energy Saving Standard
for Public Constructions”, and is holding over 100 patent technologies leading the
whole industry of curtain wall. It is the first enterprise in the whole country which has
its own technologies in designing, manufacturing, and integrating of energy-saving
curtain wall products.
In 20 years, the Company has won multiple awards including “Top 10 of Curtain Wall
Industry”, “Top 50 of Curtain Wall Industry”; “Luban Award for Construction
Project” for 3 times; “Zhan Tianyou Construction Award” once; “Shenzhen Jinpeng
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Award for Decoration Industry” 10 times; “Shanghai Baiyulan Award for
Construction Project” once, “Jiangsu Purple Gold Cup for Construction Decoration”
once, “Xiamen Bailu Award for Best Construction and Decoration Engineering” once,
and “Chongqing Bayu Best Engineering Project” once.
Against its market advantage, the Company has accomplished a number of projects
including: Ministry of Foreign Affairs Building, Beijing Yingke Center, CPA China
Training Center, Shanghai Central Plaza, Shanghai Ganghui Plaza, Shanghai Jinlin
Haixin Building, Shanghai Huaxia Finance Plaza, Shanghai International Shopping
Mall, China Union-pay Shanghai Information Center, Nanjing International Expo
Center, Nanjing Middle Court Documentation Building, Nanjing China Life Insurance
Plaza, Nanjing Galaxy Building, Nanjing Quanfeng Head Quarter, Guangzhou
Jianlibao Building, Guangzhou Building, Guangdong Public Security Command
Center, Guangzhou Heyin Plaza, Guangzhou Zhongtai International Plaza,
Guangzhou Huapu Plaza, Guangzhou Tianhe Town East Tower, Guangdong Olympic
Center, Shenzhen News Center, Shenzhen Wuzhou Guest House, Mongolia Ulan
Bator Shangri-La Hotel, Huhhot Shangri-La Hotel, Ningbo Shangri-La Hotel,
Shenzhen High-tech Expo Center, Shenzhen City Plaza, Shenzhen International
Conference & Exhibition Center, Shenzhen New World Business Center, Zhengzhou
Xuedian International Airport, Sanya International Airport, Shenzhen Bao’an
International Airport, Lanzhou Zhongchuan International Airport, Chengdu Shuangliu
International Airport, Hunan News Building, Dalian International Trade Center,
Chongqing Times Plaza, Chongqing Didu Plaza, Nanchang Honggu Building,
Nanchang Crown Plaza, Guangxi Liuzhou Wenchang Building, Wuhan New World
Center, Nanning International Conference & Exhibition Center, Xi’an Europe Asia
Economic Forum Building, Macao Science Museum, Australia Melbourne Media
Plaza, Xiamen Cross Channel Center, Beijing Olympic Bicycle Center, the Main
Stadium of the 26th World University Games Shenzhen, and Shangri-La Hotel
Mongolia.
The Company has achieved a number of No.1s in the field of energy-saving curtain
wall in the whole country, they are: the first air-exchange energy-saving curtain wall –
Beijing National Accounting Institution; the first photo-electronic curtain wall project
– Shenzhen Fangda Building; the first national demonstrative project of energy saving
– Olympic Center of Tsinghua University; the first color energy-saving curtain wall
project – Shenzhen News Building; the first super skyscraper resident building –
Hangzhou City Xinyu curtain wall project; the first 1000Ph high performance water
resistance curtain wall – Shenzhen Hongshuxi’an window project; largest of the world
multi-layer class structure curtain wall – Shenzhen New World Business Center;
largest of the world LED curtain wall project – Shanghai City Bank; the first new type
heat resistance door and window system – Tsinghua University super low energy
consuming demonstration project; the first new polycarbonate roof system – the main
stadium of the 26th UNIVERSIAD Shenzhen .
(II) Purpose of the private issuing
1. Seize the opportunities of market growth, accelerate national-wide strategic
distribution
Energy-saving curtain wall is an industry facilitated by the national government. It has
been growing constantly and expecting a merit future. At present, the Company is
holding advanced positions in terms of technologies, manpower, and market
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
reputation, which formed a strong competition power. Sales of curtain wall projects
has been increasing by 29.80%, 33.10%, and 18.03% respectively in 2008, 2009 and
2010. Products have been adopted all over the country.
However the Company has also been facing problems in transportation costs for the
production bases are mostly located in Southern China. The marketing efforts in some
active markets are limited. Therefore the Company is planning to raise finance and
invest to build production bases to enhance the market share in the whole country.
2. Reinforce of marketing network, lift up customer loyalty
Financed by the private issuing of shares, the Company will devote to construct a
national-wide marketing platform to enhance marketing force and provide products
and services to the customers more timely and efficiently, to lift up customer
satisfaction and lay a sound foundation for rapid and constant growth.
3. Refine financial structure and lift risk-resistance power
Through well application of the proceeds, the Company’s capital will be reinforced,
the capital structure will be improved in its stability and risk-resistance power.
4. Improve administrative structure and management level
This private issuing of shares will introduce new investors to the Company, which
will further improve the legal structure and standard operation.
III. Target subscribers and their relationship with the Company
The objects of this issuing will be the security investment fund manager, security
broker, trust investment company, financial company, insurance organization investor,
overseas investment organization and other organization investors and natural person
complying with the regulations of China Securities Regulatory Commission. Number
of subscribers shall not more than 10 and subscription shall be in cash.
No particular subscribers have been decided for this private issuing, therefore it’s
impossible to tell the relationships with the Company. This will be disclosed in the
Report of Share Issuing released upon completion of the private issuing.
IV. Type of shares to be issued privately, price and pricing rules,
amount of shares to issue, trade limitation period, and arrangement
for retained profit
(I) Type of shares to be issued
Shares to be issued will be common shares in Renminbi (A-shares) with face value of
RMB1.00
(II) Pricing policy and the issuing price
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
The pricing ex-date will be the day when the announcement of resolutions of the 5th
meeting of the 6th term of Board (October 29, 2011). The price will not lower than
90% of the average price in 20 days prior to the ex-day, namely not lower than
RMB4.73 per share. The price will be finalized upon approval of China Securities
Regulatory Commission and consulting to the institutional investors by the issuer and
the sponsor. In case ex-dividend or ex-interest events happened during the period from
pricing determine day to issuing day, such as dividend distribution, bonus shares, or
capitalizing of common reserves, the price shall be adjusted correspondingly.
The Shareholders’ Meeting authorizes the Board to finalize the price upon approval of
China Securities Regulatory Commission and consulting to the organizational
investors by the issuer and the sponsor, amount of issuing will be then decided.
The average price in 20 days prior to the ex-day = Total value of share trading in 20
days prior to the ex-day ÷total amount of shares traded in 20 days prior to the ex-day.
(III) Amount of shares to be issued
The amount of A shares to be issued will not greater than RMB99.6 million shares
(included). Each subscriber, along with his/her act-in-concert parties, shall not
subscribe more than 30% (included) of the total amount of shares issued this time. If a
particular subscriber, along with his/her act-in-concert parties, is already holding the
Company’s shares, then the sum of existing shares and the newly subscribed shares
shall not greater than 30% (included) of the total amount of shares issued this time.
The amount of shares exceeding the limit will be regarded as invalid.
In case ex-dividend or ex-interest events happened during the period from pricing
determine day to issuing day, such as dividend distribution, bonus shares, or
capitalizing of common reserves, the above amount shall be adjusted correspondingly.
Under the above conditions, it is proposed to the Shareholders’ Meeting to authorize
the Board to finalize the amount according to the practical situation and negotiation
with the sponsor (main dealer).
(IV) Arrangement of trade-limitation period
Shares subscribed by particular subscribers at this private issuing are not allowed to
be transferred in 12 months since the closing day of this private issuing.
(V) Arrangement for retained profits before the private issuing
Upon accomplishing of the issuing, the new shareholders will share the retained profit
of the current year and accumulated from previous years along with the existing
shareholders.
V. Investment projects financed by the proceeds
Fund raised from this private issuing will not more than RMB471.21 million, after
covering of the issuing expenses, the fund will be invested to energy-saving curtain
wall production base in Chengdu and Beijing, and construction of marketing network.
Details are as the following:
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Projected investment Projected
Investment
No. Items from the finance raised construction
RMB0’000
(RMB0’000) period
Energy-saving
curtain wall
1 26,544 23,651 24 months
production base in
Chengdu
Energy-saving
curtain wall
2 18,765 17,428 24 months
production base in
Beijing
Construction of
3 6,042 6,042 24 months
marketing network
Total 51,351 47,121
The practical proceeds will not exceed the total needs of the above projects, the short
part will be covered by the Company’s own finance. Under the condition of not
making any change in the above projects, the Board will adjust the order and amount
of investment according to practical needs. The Company will carry forward the
above projects with bank loans or the Company’s own capital according to the need of
project progress before the capital raised in this issuing of shares is inputted. Upon
available of the raised capital, the loans and capital invested previously will be
substituted.
VI. Situation of related transactions
This private issuing of shares doesn’t constitute related transaction.
VII. Whether it will cause change in controlling power over the
Company
As of September 30, 2011, Mr. Xiong Jianming – the substantial holder of the
Company was holding, directly and indirectly, 99,038,236 shares of the Company,
account for 13.08% of the total capital shares. Each subscriber, along with his/her
act-in-concert parties, shall not subscribe more than 30% (included) of the total
amount of shares issued this time. If a particular subscriber, along with his/her
act-in-concert parties, is already holding the Company’s shares, then the sum of
existing shares and the newly subscribed shares shall not greater than 30% (included)
of the total amount of shares issued this time. Therefore it will not cause change in
controlling power over the Company.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
VIII. Approvals from authorities obtained and to be obtained
This plan of private issuing has been approved at the 5th meeting of the 6th term of
Board on October 27, 2011. It still need to be approved by the Shareholders’ Meeting
of the Company and also by CSRC.
IX. Valid period of the resolutions on the private issuing
The resolution will be effective for 12 months since it was approved by the
Shareholders’ Meeting.
Chapter II. Feasibility report of the Board on usages of the proceeds
I. Application plan of the proceeds
Please see Chapter I – V. Investment projects financed by the proceeds
II. Profiles and prospects of the projects to be invested by the
proceeds
(I) Profiles of the projects
1. Energy-saving curtain wall production base in Chengdu
(1) Description of the project
Construction of new workshops and supporting facilities, purchasing of curtain wall
processing and testing equipment. It will form annual output of 800 thousand square
meters of energy-saving curtain wall.
(2) Location and operator of the project
The project will be located in Chengdu City.
The Company is about to setup a fully-owned subsidiary in Chengdu to be the leading
operator of the project.
(3) Budget
The project is budgeted with total investment of RMB265.44 million, including
RMB166.51 million in construction financed by the proceeds; RMB98.93 million as
working capital, RMB70 million financed by the proceeds and the rest of RMB28.93
million will be financed by the Company’s own finance.
(4) Economic efficiency test
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
As result of the test, the project will contribute RMB800 million of sales volume per
annum with internal income ratio (after tax) of 27.10%. The static payback period
(after tax) will be 3.97 years (construction period not included).
2. Energy-saving curtain wall production base in Beijing
(1) Description of the project
Construction of new workshops and supporting facilities, purchasing of curtain wall
processing and testing equipment. It will form annual output of 500 thousand square
meters of energy-saving curtain wall.
(2) Location and operator of the project
This project will be located in Beijing.
The Company is about to setup a fully-owned subsidiary in Beijing to be the leading
operator of the project.
(3) Budget
The project is budgeted with total investment of RMB187.65 million, including
RMB124.28 million in construction financed by the proceeds; RMB963.37 million as
working capital, RMB50 million financed by the proceeds, and the rest of RMB13.37
million will be financed by the Company’s own finance.
(4) Economic efficiency test
As result of the test, the project will contribute RMB500 million of sales volume per
annum with internal income ratio (after tax) of 22.14%. The static payback period
(after tax) will be 4.43 years (construction period not included).
3. Marketing network construction project
(1) Description of the project
The project will setup or enlarge the marketing centers in 10 cities in the country with
business ranges covering South, Northeast, North, East, and Southwest of China.
(2) Location and operator of the project
The 10 marketing centers will be located in Shenzhen (the headquarter), Beijing,
Shanghai, Guangzhou, Chongqing, Chengdu, Tianjin, Shenyang, Xiamen, and Sanya.
Fangda Decoration Co., Ltd. – one of the fully-owned subsidiaries of the Company,
will be the operating entity of this project.
(3) Budget
The project is budgeted for investment of RMB60.42 million, which will be financed
totally by the proceeds.
(4) Economic efficiency test
To support the production bases as the outlets of curtain wall products.
(II) Prospects of the projects invested by the proceeds
Upon completion of the three projects, the Company’s energy-saving products will be
further enhanced in terms of specialization and scaled economy, which will reinforce
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
the core competition power of the Company and contributes higher profitability to the
Company.
III. Influences on the administration and financial situation
(I) Influences on the administration practice
1. The proposed projects are complying with the national industrial strategies and the
Company’s development as well, and is expecting a merit market expectation and
profitability. Upon completion of the projects, the Company’s competition power will
be increased, its leading position will be reinforced, and profitability will be further
lifted up. Application of the proceeds is reasonable and feasible and meeting with the
benefit of all shareholders.
2. This private issuing of new shares will introduce new investors to the Company,
which will further refine the administration structure and promote the Company
toward standard and higher level of operation.
(II) Influences on financial situation
The following calculating is basing on RMB471.21 million of proceeds, and on
consolidated basis.
1. Lift the scales of total asset and net asset, increase risk-resistance power
Upon the basis of consolidated balance sheet dated September 30, 2011, the
Company’s total asset will be increased from RMB2,043,166,700 up to
RMB2,514,376,700, the net asset will be increased from RMB1,062,361,400 up to
RMB1,533,571,400. Along with the releasing of profitability from the newly
constructed projects, the Company’s total asset and net asset scale will be further
increased, and the risk-resistance power as well.
2. Increase revenue and profitability
Upon completion of the above investment and projects, it will increase the
productivity of energy saving curtain wall by 1.3 million square meters per annum.
This will bring the Company a new revenue of RMB1.3 billion (tax included) basing
on the prices in first half 2010. The Company will gain further scale of economy and
reduce outsourced manufacturing, and increase the gross profit rate as well as the
whole profitability.
IV. Filing and approving issues involved
Procedures such as land using rights, environment protection, and project
documentation will be undertaken according to the regulations.
The proposed projects are complying with the national industrial strategies and the
Company’s development as well, and is expecting a merit market expectation and
profitability. Upon completion of the projects, the Company’s competition power will
be increased, its leading position will be reinforced, and profitability will be further
lifted up. This plan of private issuing of new shares is necessary and feasible.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
Chapter III. Analyze of the Board on the influences on the Company
I. Influences of the issuing on the Company’s business, asset, the
Articles of Association, shareholder structure, senior management,
and revenue structure
No rearrangement for company’s business and asset after this issuing.
After this offering, company constitution has no adjustment except for the adjustment
of registered capital and capital stock.
After this issuing, the shareholding structure will change. Up to 99.6 million current
shares will be increased; however the controlling shareholder will not change for the
Company has limited the maximum amount of shares subscribed by a single investor.
After this offering, senior management personnel will not change.
No change will happen to the main businesses of the Company, the portion of sales
income from energy-saving curtain wall products will increase by a certain amount
though.
II. Change of financial situation, profitability and cash flow
situation after the issuing
Upon available of the proceeds, the total asset and net asset will increase, liability on
asset ratio will decrease, thus the capital structure will be optimized.
Upon completion of the issuing, the cash flow from financing activities will increase;
after launching of investment in above projects, the cash outflow by investment
activities will increase; Upon completion of the invested projects, the net cash inflow
from business operation will be increased.
The proceeds from the issuing of shares will benefit to improve the cash flow
situation and reduce capital costs.
III. Business and administrative relationship between the Company
and the controlling shareholder and its related parties, related
transactions and horizontal competition
The controlling shareholder and its related parties are completely separated from the
Company in business and administration. They undertake their own liabilities and
risks individually. No related transactions or competition in same field exist.
No change will be caused by the issuing on the business, administration, related
transactions and competition situation between the Company and the controlling
shareholder and its related parties.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
IV. Whether there is any adoption of capital by the controlling
shareholder or its related parties upon completion of this issuing, or,
whether the Company is providing guarantees to the controlling
shareholder or its related parties
There won’t be any adoption of capital by the controlling shareholder or its related
parties upon completion of this issuing, nor the Company is providing guarantees to
the controlling shareholder or its related parties.
V. Influence of the issuing on the Company’s liability situation
As of September 30, 2011, the liability on asset ratio was 44.05% on consolidated
basis. Basing on the liabilities and assets in the Balance Sheet on September 30, 2011,
and provided the proceed from this private issuing was RMB471.21 million, upon
completion of this private issuing, the liability on asset rate will be reduced from
44.05% down to 35.8%, which is on an appropriate level. Thus this private issuing of
shares will benefit the improving of capital cost situation, reduce financial cost
pressure, and increasing of stability and risk-resistance of business operation.
VI. Statement on risks related to the private issuing
(I) Market competitions
Up to present, there are 210 grade-I curtain wall engineering enterprises, and 246
grade-I curtain wall designing enterprises in the whole country, 122 of them hold both
qualifications. Among them there are a number of companies has great power in
designing, engineering, and management. Along with the growth of the whole
industry in designing and engineering quality, and introducing of new technologies,
the levels of standardizing, scale of economy, and production will be increasing
constantly. Meanwhile, along with the accelerating of international market exploring,
the Company will face severe competition with international manufacturers such as
Parmasteelisa. Therefore the Company is exposure to certain risks brought by market
competition.
(II) Administration risks
1. Risk from weak internal control
Curtain wall business has the nature of wide distribution with multiple construction
sites. The Company’s curtain wall projects scatter in main cities all over the country.
This brings great difficulties to administration approach. The Company has
established the internal controlling system covering all operation units from the
headquarter to each project team, though the curtain wall projects have complicated
operation flows and varies greatly one from another. It is crucial to have effective
control over the quality, progress, safety, and capital operation of all the projects.
There is risk of administrative failure in individual projects, which may cause
impairment on the business.
2. Risks from rapid expanding of business and capital scale
Along with the completion of private issuing, and launching of expanding projects,
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
the Company’s assets, business, and personnel will be enlarged significantly in scales.
This will make the administrative structure more complicated and bring pressure to
marketing and administration aspects. If the Company failed to upgrade its
administrative and internal control system, or cannot recruit qualified and sufficient
administrative or technical workforce, it will cause risks in expanding of business
scale.
(III) Technical risks
The whole curtain wall industry is nowadays developing toward energy-saving,
environment friendly, safe, fashion, human oriented, intelligent, and customized.
Although the Company is holding the leading position in technical developing with a
number of exclusive technologies and patents in the country, we still lack of
experiences in large scale applications comparing with the leaders of the world.
Introducing of state-of-art technologies from international competitors will bring great
challenges to the products of the Company.
(IV) Risks from fluctuation of raw materials
Cost of raw materials account for great portions in the production costs. Aluminum,
glass, and steel – the main materials of the Company’s production, are under great
influence of international future market and fluctuate significantly. If the prices
increased significantly in future, whereas the Company was not able to release the
pressure through technical innovation or administrative approach, it could make
negative influence on the business performances.
(V) Risks from account receivables turning to bad debts
Although the Company has been providing bad debt provisions on account receivable
according to the Accounting Standard, there still will be risks caused by problems of
client credit.
(VI) Risks from project progress and quality
Whether designing and engineering are carried out strictly according to the standards
and functional requirements could make instant influence on the progress and quality
of project construction.
(VII) Risks of fluctuating share market
This private issuing will influence the business operation and financial situation of the
Company. Change in fundamental layer may influence the price of the Company’s
shares. On the other hand, change of macro situation and industrial prospects,
adjustment of national policies, movement of investors’ prospects, will all make
influences on the market price of the Company’s shares.
(VIII) Risk of approval by authorities
The private share issuing is subject to approval of the Shareholders’ Meeting as well
as CSRC. There is certain uncertainty in approving procedure and date of approval.
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China Fangda Group Co., Ltd. Preplan of Private Issuing of A shares (2011)
China Fangda Group Co., Ltd.
The Board of Directors
October 29, 2011
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