山 東 晨 鳴 紙 業 集 團 股 份 有 限 公 司
SHANDONG CHENMING PAPER HOLDINGS LIMITED*
(A joint stock company incorporated in the People’s Republic of China with limited liability)
First Quarterly Report 2010
§1 IMPORTANT NOTICE
1.1 The board of directors (the “Board”), the supervisory committee (the “Supervisory
Committee”), directors (the “Directors”), supervisors (the “Supervisors”) and the senior
management (the “Senior Management”) of the Company warrant that this report does not
contain any false information, misleading statements or material omissions, and accept joint
and several responsibility for the truthfulness, accuracy and completeness of the contents of
this report. This report has been prepared in both Chinese and English. For any
discrepancies, the Chinese version shall prevail.
1.2 None of the Directors, Supervisors and Senior Management is unable to warrant the
truthfulness, accuracy and completeness of the contents of this report or hold any dissenting
views.
1.3 This quarterly report has been considered and approved by the second meeting of the sixth
session of the Board of the Company. All Directors attended this meeting.
1.4 The first quarterly financial report of the Company prepared in accordance with Accounting
Standards for Business Enterprises issued by the Ministry of Finance of the People’s
Republic of China (the “PRC”) by the Company and its subsidiaries (collectively referred to
as the “Group”) are unaudited.
1.5 Chen Hongguo, the person in charge of the Company, Wang Chunfang, the financial
controller of the Company, and Li Dong, head of accounting department (the person in
charge of accounting) hereby declare their assurance for the truthfulness and completeness
of the financial report contained in the quarterly report.2
§2 BASIC COMPANY INFORMATION
2.1 Major accounting data and financial indicators prepared in accordance with
Accounting Standards for Business Enterprises
Unit: RMB
At the end of
the current
reporting period
At the end of
last year
Increase/decrease
(%)
Total Assets (RMB) 29,647,238,365.47 28,213,084,875.02 5.08%
Equity attributable
to equity holders of
the Company
13,230,000,797.84 12,991,904,321.68 1.83%
Share capital (shares) 2,062,045,941.00 2,062,045,941.00 0
Net assets per share
attributable to equity
holders of the
Company (RMB per
share)
6.416 6.3 1.84%
The current
reporting period
The corresponding
period of last year
Increase/decrease
(%)
Total operating
revenue (RMB)
3,917,441,890.00 2,874,448,414.82 36.28%
Net profit attributable
to equity holders of
the Company (RMB)
238,099,243.24 7,846,215.38 2934.57%3
At the end of
the current
reporting period
At the end of
last year
Increase/decrease
(%)
Net cash flow
generated from
operating activities
(RMB)
656,022,760.24 -149,042,774.41 540.16%
Net cash flow per
share generated from
operating activities
(RMB per share)
0.32 -0.07 557.14%
Basic earnings per
share (RMB per
share)
0.12 0.0038 3057.89%
Diluted earnings per
share (RMB per
share)
N/A N/A N/A
Return on net assets
on weighted average
basis #%
1.82% 0.06% Increased by 1.76
percentage points
Return on net assets
on weighted average
basis after
extraordinary gains or
losses #%
1.57% -0.02% Increased by 1.59
percentage points
Unit: RMB
Extraordinary gains or losses items
From beginning of the
year to the end of the
reporting period
Gains or losses from disposal of non-current assets 281,749.99
Government grants received 40,101,348.47
Net gains or losses attributable to debt restructuring -272,462.50
Non-operating net gain or loss other than the above 936,010.36
Effect of extraordinary gains or losses on income tax -5,694,406.82
Effect of minority interests -3,076,083.31
Total 32,276,156.194
2.2 Total number of shareholders and the top ten shareholders of non-restricted shares at
the end of the reporting period
Unit: shares
Total number of shareholders at
the end of the reporting period
Total number of shareholders was 153,084, including
120,907 equity holders of A shares, 31,495 equity
holders of B shares and 682 equity holders of H
shares.
Shareholdings of the top ten shareholders of non-restricted outstanding shares
Name of shareholder (full name)
Number of
non-restricted
outstanding shares held
at the end of the period Class of shares
HKSCC Nominees Limited 390,006,000 H share
China Construction Bank
— 鵬華價值優勢股票型證券投資基金
38,031,345 A share
NIHK-CUSTOMERS’ SEGREGATEDD
ACCOUNT
30,421,008 B share
PLATINUM ASIA FUND 28,760,276 B share
KEYWISE GREATER CHINA
OPPORTUNITIES MASTER FUND
19,557,609 B share
Bank of China
— 華夏行業精選股票型證券投資基金
（LOF）
19,514,046 A share
BILL & MELINDA GATES FOUNDATION
TRUST
19,495,444 A share
Industrial and Commercial Bank of China
— 諾安股票證券投資基金
16,259,170 A share
Bank of China
— 易方達深證100 交易型開放式證券投
資基金
15,321,040 A share
BBH BOS S/A FIDELITY FD
— CHINA FOCUS FD
15,189,926 B share5
§3 SIGNIFICANT EVENTS
3.1 Details of and reasons for significant changes in major accounting statement items and
financial indicators of the Company
.. Applicable Not Applicable
Unit: RMB
Balance sheet items
Items 31 March 2010 31 December 2009 Increase/decrease
Other current assets 135,701,063.89 90,756,205.60 49.52%
Bills payable 351,214,277.59 544,532,508.19 -35.50%
Interests payable 22,023,249.99 5,050,000.00 336.10%
Short-term debentures
payable
1,503,172,083.33 0 100%
Other non-current liabilities 2,290,341,489.83 1,189,484,415.60 92.55%
Income statement items
Items 31 March 2010 31 March 2009 Increase/decrease
Operating revenue 3,917,441,890.00 2,874,448,414.82 36.28%
Selling expenses 206,922,027.74 145,167,431.90 42.54%
Loss on impairment of assets 16,074,481.93 -133,662,338.10 112.03%
Investment income -1,672,580.37 -3,932,216.58 57.46%
Operating profit 280,266,177.20 -5,176,752.36 5513.94%
Non-operating income 45,633,132.91 19,421,985.71 134.96%
Total profit 323,087,823.52 10,541,936.70 2964.79%
Income tax 59,383,482.51 5,153,688.42 1052.25%
Net profit 263,704,341.01 5,388,248.28 4794.06%
Of which: Net profit
attributable to equity holders
of the Company 238,099,243.24 7,846,215.38 2934.57%
Minority interests 25,605,097.77 -2,457,967.10 1141.72%6
Cash flow statement items
Items
The current
reporting period
The corresponding
period of last year
Increase(+)/
decrease(-)
Net cash flows generated from
operating activities 656,022,760.24 -149,042,774.41 540.16%
Net cash flows generated from
investment activities -519,414,420.50 -174,294,857.25 -198.01%
Net cash flows generated from
financing activities 665,825,205.59 1,418,958,100.96 -53.08%
Changes were mainly due to:
1. Other current assets increased by 49.52% mainly due to an increase in non-credited VAT
and income tax payment.
2. Bills payable decreased by 35.5% mainly due to the expiry of the payment of the bills
payable as at the end of the previous period.
3. Interests payable increased by 336.1% mainly due to appropriation of the interests of the
medium term bills issued by the Company.
4. Short-term debentures payable increased mainly due to the issuance of short-term
debentures of RMB1.5 billion during the period.
5. Other non-current liabilities increased by 92.55% mainly due to the new issuance of
medium-term notes of RMB1.1 billion by the Company during the period.
6. Operating revenue increased by 36.28% over the corresponding period of last year mainly
due to the greater sales volume during the period as compared to the corresponding period
of last year as a result of better economic conditions and the great increase in the selling
price.
7. Selling expenses increased by 42.54% over the corresponding period of last year mainly due
to higher transportation costs resulting from an increase in sales and an oil price rise.
8. Loss on impairment of assets increased by 112.03% over the corresponding period of last
year mainly due to reversal of the allowance for inventories in 2008 during the
corresponding period of last year.7
9. Investment income increased by 57.46% over the corresponding period of last year mainly
due to a decrease in the losses of associates.
10. Operating profit, total profit, income tax, net profit, net profit attributable to equity holders
of the Company and minority interests increased by 5513.94%, 2964.79%, 1052.25%,
4794.06%, 2934.57% and 1141.72% respectively over the corresponding period of last year
mainly due to the significant increase in the sales volume and the selling price during the
period as a result of the factors such as better economic conditions, and the significant
change of the above items was also caused by the greater gross profit margin of the
products.
11. Non-operating income increased by 134.96% over the corresponding period of last year
mainly because more government grants received in the period were recognized in profit or
loss.
12. Net cash flows generating from operating activities increased by 540.16% over the
corresponding period of last year mainly due to a significant increase in sales volume, sales
revenue and profit during the period over the corresponding period of last year.
13. Net cash flows generating from investment activities decreased by 198.01% over the
corresponding period of last year mainly due to the investments in the copperplate paper
project with annual production capacity of 800,000-tonne and the tissue paper project with
annual production capacity of 98,000-tonne of 壽光美倫紙業有限責任公司 (Shouguang
Meilun Paper Co., Ltd.), a subsidiary of the Company, the Zhanjiang pulp project and the
high-end culture paper project during the reporting period.
14. Net cash flows generating from financing activities decreased by 53.08% over the
corresponding period of last year mainly due to more repayments made during the period
over the corresponding period of last year.
3.2 The progress of significant events and analysis of their impact and solutions
Applicable .. Not Applicable
3.3 Performance of undertakings by the Company, shareholders and de facto controller
Applicable .. Not Applicable8
3.4 Warning on the potential loss in accumulated net profit for the period from the
beginning of the year to the end of the next reporting period or any material change in
accumulated net profit from the corresponding period of last year and analysis of the
reasons thereof
Applicable .. Not Applicable
3.5 Other significant events that require explanation
3.5.1 Investment in securities
Applicable .. Not Applicable
3.5.2 Table setting out reception activities including investigation and research,
communication and interviews during the reporting period
Time of
reception
Place of
reception
Manner of
reception Visitor
Main topics of
discussion and
information provided
19 January 2010 Shouguang,
Shandong
On-site
research and
investigatio
n
CSC International
Holdings Ltd.
Shanghai
Representative
Office
Matters including recent
development of the
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
27 January 2010 Shouguang,
Shandong
On-site
research and
investigatio
n
Penghua Fund Matters including recent
development of the
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
2 February 2010 Shouguang,
Shandong
On-site
research and
investigatio
n
Over 10 securities
research institutes
such as Sinolink
Securities
Matters including recent
development of the
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
8 March 2010 Shouguang,
Shandong
On-site
research and
Macquarie
Securities
Matters including recent
development of the9
investigatio
n
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
17 March 2010 Shouguang,
Shandong
On-site
research and
investigatio
n
Poyry Forest
Industry Consulting
Matters including recent
development of the
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
31 March 2010 Shouguang,
Shandong
On-site
research and
investigatio
n
The investment
bank of Morgan
Stanley
Matters including recent
development of the
industry and
development trend in
the future, production
and operation of the
Company, as well as
strategic development
3.5.3 Explanation on other significant events
Applicable .. Not Applicable10
3.6 Investment in dervatives
.. Applicable Not Applicable
Risk analysis of positions in derivatives
during the reporting period and explanation
on risk control measures (including but not
limited to market risk, liquidity risk, credit
risk, operation risk, legal risk etc.)
The Company held two transactions in future
pooling foreign exchange portfolio products
amounting to USD150 million during the
reporting period. The Company made
forward exchange settlement contracts in
China and Chenming (HK) Limited made
forward exchange sale contracts in Hong
Kong. The product transactions were handled
by the Shouguang branch of China
Construction Bank Corporation and the Hong
Kong branch of China Construction Bank
Corporation at the same time. The currency
risk was jointly locked up by the Company
and Chenming (HK) Limited. The risk in the
products had been assessed by the related
departments of the Company and the risk was
under control.
Change in market price or fair value of
derivatives invested during the reporting
period, where specific methods and relevant
assumptions and parameters used shall be
disclosed in the analysis of the fair value of
derivatives
Based on the exchange rate on 31 March
2010 as confirmed by China Construction
Bank, the Company recognized the change in
the fair value of the derivatives in the
reporting period. There was on change in fair
value during the reporting period.
Explanation on any significant changes in the
Company’s accounting policies and specific
accounting principles on derivatives between
the reporting period and the last reporting
period
The investment in derivatives was
subsequently measured at fair value by the
Company. The gain or loss on change in fair
value was recognized through profit or loss
for the current period.11
Specific opinions of independent directors,
the sponsor or financial advisor on the
investment in derivatives and risk control of
the Company
The future polling foreign exchange portfolio
products held by the Company in the prior
year subsisted during the reporting period. In
the opinion of the Audit Committee of the
Board and the independent Directors of the
Company, the future pooling foreign
exchange portfolio products of the Company
were operated in accordance with the “Rules
on the Administration of Financial
Derivatives＂ (《關於金融衍生品管理辦
法》) of Shenzhen Stock Exchange and in
strict compliance with the “internal
management policy for future pooling
foreign exchange portfolio products＂ (《遠
期結售匯內控管理制度》) established by the
Company. The currency risk of the
transactions was jointly locked up by the
Company and Chenming (HK) Limited and
the transaction risk was under control. The
pricing of the transactions were objective and
fair at arm’s length, thus safeguarding the
interest of the shareholders of the Company.
3.6.1 Positions in investment in derivatives at the end of the reporting period
.. Applicable Not Applicable
Unit: RMB
Type of contract
Opening
contract amount
Closing contract
amount
Gain or loss in
the reporting
period
Closing contract
amount as a
percentage of
the net assets of
the Company as
at the end of the
reporting period
(%)
Buy USD50.00
million
(328,900,000.00) (328,900,000.00) — -2.49%
Buy USD100.00
million
(669,900,000.00) (669,900,000.00) — -5.06%
Sell USD50.00
million
332,200,000.00 332,200,000.00 — 2.51%
Sell USD100.00 676,400,000.00 676,400,000.00 — 5.11%12
million
Total 9,800,000.00 9,800,000.00 — 0.07%
