2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
Stock code: 000488, 200488 Stock abbreviation: Chenming Paper Chenming B Announcement No.:2021-032
2020 Annual Report Summary of
Shandong Chenming Paper Holdings Limited
I. IMPORTANT NOTICE
This annual report summary is extracted from the text of the annual report. For the full understanding of the operating results,
financial position and plan for further development, investors should carefully read the text of the annual report published on the
media as designated by the CSRC.
All directors have attended the board meeting to review this annual report in person.
Notice of non-standard auditor’s opinion
□ Applicable √ Not applicable
A proposed profit distribution plan on ordinary shares or a proposed plan on conversion of capital reserves into share capital for
the reporting period was considered and passed by the Board
√ Applicable □ Not applicable
Whether there is an increase of share capital from reserves
□ Yes √ No
The proposed profit distribution plan on ordinary shares of the Company was considered and passed by the Board: based on the
total ordinary share capital of 2,984,208,200 shares as at the end of 2020, a cash dividend of RMB1.85 (tax inclusive) per 10 shares
will be distributed to all shareholders. No bonus shares will be issued and there is no increase of share capital from reserves. A cash
dividend of RMB552,078,517.00will be distributed to ordinary shareholders. If the total share capital of the Company changes before
the date of the equity registration for the implementation of the equity distribution, it is proposed to maintain the same total
distribution and adjust the distribution ratio per share accordingly.
A proposed profit distribution plan on preference shares for the reporting period was considered and approved by the Board
√ Applicable □ Not applicable
In accordance with the requirements of the Articles of Association and the Prospectus of Non-public Issuance of Preference
Shares, based on the simulated ordinary shares converted from the second and third tranches of the Preference Shares using a
conversion ratio of 1 share valued at RMB3.82 as at the end of 2020 of 589,005,236 shares, a cash dividend of RMB1.85 (tax
inclusive) per 10 simulated ordinary shares converted from the Preference Shares will be distributed to holders of the second and
third tranches of the Preference Shares. A variable cash dividend of RMB108,965,968.66 will be distributed to holders of the second
and third tranches of the Preference Shares. In other words, a cash dividend of RMB4.84 (tax inclusive) per Preference Share with a
nominal value of RMB100 each will be distributed to holders of the second and third tranches of the Preference Shares. If the total
share capital of the Company changes before the date of the equity registration for the implementation of the equity distribution, it is
proposed to maintain the same total distribution and adjust the distribution ratio per share accordingly.
Profit distribution for preference shares during the reporting period
Whether it is in
compliance with Whether it
Distributed Whether it was an
Dividend the conditions and Way of dividend participates in
Date of Distribution amount (RMB) accumulated
Ratio the relevant payment distribution of
(tax inclusive) dividend
procedures of remaining profit
distribution
17 March 2020 4.36% 98,100,000.00 Yes Cash No Yes
17 August 2020 5.17% 51,700,000.00 Yes Cash No Yes
18 August 2020 3.837246% 172,676,073.42 Yes Cash No Yes
21 September 2020 5.17% 64,625,000.00 Yes Cash No Yes
II. BASIC INFORMATION ABOUT THE COMPANY
1. Company profile
晨鸣纸业 000488
晨鸣B 200488
Stock abbreviation Stock code
晨鸣优01 140003
晨鸣优02 140004
1
2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
晨鸣优03 140005
Stock exchange on which the shares
Shenzhen Stock Exchange
are listed
Stock abbreviation CHENMING PAPER Stock code 01812
Stock exchange on which the shares
The Stock Exchange of Hong Kong Limited
are listed
Contact persons and contact
Secretary to the Board Hong Kong Company Secretary
methods
Name Yuan Xikun Chu Hon Leung
No. 2199 East Nongsheng Road, Shouguang City, 22nd Floor, World Wide House, Central,
Correspondence address
Shandong Province Hong Kong
Telephone (86)-0536-2158008 +852-21629600
Facsimile (86)-0536-2158977 +852-25010028
Email address chenmmingpaper@163.com liamchu@li-partners.com
2 Overview of principle activities or products during the reporting period
(I) Principal activities of the Company during the reporting period
The Company is a large conglomerate principally engaged in pulp production and paper making with synergistic development in
finance, forestry, logistics and construction materials. Its key indicators in respect of business and economic efficiency have been in a
leading position in the industry in China for over 20 consecutive years. The Company has been on the Fortune 500 China list for 11
years. The Company focuses on its principal activities, i.e. pulp production and paper making. The machine-made paper business is
the major source of revenue and profit of the Company. During the reporting period, there was no significant change in the principal
activities of the Company.
1. Business overview
The Company has committed itself to implementing a pulp and paper integration strategy. It takes the lead in laying out the
entire industrial chain, with 6 production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and other places, with an annual pulp
and paper production capacity of more than 11 million tonnes. It is the only large-scale pulp and paper integrated company in China
that achieves a balance between pulp and paper production. The Company implements an innovation-driven strategy and has
introduced world-leading pulp production and paper making technology and equipment. Its product series include high-end offset
paper, white paper board, coated paper, light weight coated paper, household paper, electrostatic copy paper and thermal paper, with
each major product ranking among the highest in terms of market share in China.
The Company focuses on product and technology research and development, has scientific research institutions including the
national enterprise technology centre, the post-doctoral working station, the state certified CNAS pulp and paper testing centre,
Shandong Pulp and Paper Making Laboratory as well as the Guangdong Pulp and Paper Production Technology Research Center and
has obtained 303 national patents including 25 patents for invention, with 7 products selected as national new products. The Company
has obtained 15 science and technology progress awards above the provincial level and undertaken five national science and technology
projects and 63 provincial technological innovation projects. The Company has pioneered to obtain the ISO9001 quality certification,
ISO14001 environmental protection certification and FSC-COC certification among its industry peers.
2. Major products
Culture paper
Major brands: BIYUNTIAN, CLOUDY MIRROR, and CLOUDY LEOPARD all-wood
pulp offset paper; “CLOUDY LION” and “CLOUDY CRANE” offset paper; and
“CEDAR” and “GREEN PINE” light weight paper.
Range of application: Printing publications, textbooks, magazines, covers, illustrations,
notebooks, test papers, teaching materials, reference books, etc.
Coated paper
Major brands: “SNOW SHARK” and “EAGLE” one-sided coated paper; “SNOW
SHARK”, “EAGLE”, “RABBIT” and “SNOW SWALLOW” doublesided coated paper,
and “EAGLE”, “RABBIT” and “SNOW SWALLOW” matte coated paper.
Range of application: High quality printing, such as high-grade picture albums, picture,
magazines and so on. Promotional materials such as interior pages of high-end books, wall
calendars, posters and so on. Upscale tobacco package paper, adhesive sticker, shopping
bags, slipcases, envelopes, gift wrapping and so on.
White cardboard
Major brands: White cardboard and ivory cardboard of ZITAN series and POPLAR
series, super high bulk cardboard, Chenming cigarette cardboard, fluid inclusion cardboard,
and base paper for mugs.
Range of application: High-end gift boxes, cosmetics boxes, tags, shopping bags, publicity
pamphlets, high-end postcards; cigarette package printing of medium and high quality; milk 2
package, beverage package, disposable paper cups, milk tea cups, and noodle bowls.
2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
Industrial paper
Major brands: High-grade yellow antisticking base paper, ordinary yellow/white
anti-sticking base paper, bill base paper, cast coated base paper, PE paper, stripping base
paper, and white kraft paper
Range of application: Anti-stick base paper is mainly used for producing the paper base
of stripping paper or anti-sticking base paper. Cast coated base paper is suitable for
producing adhesive paper or playcard compound paper after coating.
Light weight coated paper
Major brands: Jinzhou high-grade light weight coated paper and refined light weight
coated paper
Range of application: Printing advertisements, high-end publications, magazine inner
pages, and picture albums; suitable for highspeed sheetfed press or high-speed rotary speed
press.
Electrostatic copy paper
Major brands: GOLDEN MINGYANG and GOLDEN CHENMING copy paper,
BOYA and BIYUNTIAN copy paper, MINGYANG, LUCKY CLOUDS, BOYANG,
and SHANYIN copy paper, and GONGHAO, and TIANJIAN copy paper
Range of application: Printing and copying business documents, training materials, and
writing.
Household paper
Major brands: Toilet paper, facial tissue, pocket tissue, napkin, paper towels,
“XINGZHILIAN”, “FOREST LOVE”, and “BEIYING”
Range of application: Daily toilet supplies; used in restaurants and other catering industries,
and used in public toilets in hotels, guesthouses, and office buildings, and also suitable for
home and other environment.
(II) The situation of the industry where the Company operated and its position in the industry during the reporting
period
The paper making industry is one of the basic industries of the national economy. The paper making industry has the typical
characteristics of large-scale industrial production, such as continuous and efficient operation, and significant economies of scale.
The paper making industry is also vitally interrelated with people’s daily life. Not only is the paper making industry the provider of
basic goods and materials, but it also makes a lot of important materials related to packaging, construction, chemical industry,
electronics, energy, transportation, national security and other fields. The paper making industry plays an irreplaceable role in the
national economy. Affected by the supply-side reform, the development of paper making industry has evolved from an extensive
form to an intensive form. The increase in the societal demands, the publishing of environmental protection policies, the continuous
advances in technology and the changes in the supply of resources have resulted in an accelerating reduction of the production
capacity of low-end products, the increasing concentration ratio of the industry and an improving industrial pattern.
Affected by the outbreak of COVID-19 in 2020, the ever-changing pattern of trade and other factors, the global economy
slumped, and the external environment became complicated and difficult. In the face of difficulties, the control and prevention of
COVID-19 and every aspect of economic and societal development were carried out efficiently on a national level. All
decision-making and deployment were implemented with a determined attitude. The resumption of work and production were
progressing steadily. The overall national economy was looking up, and the prices of paper products and the upstream pulp rose
steadily. The implementation of the ban on plastics, the ban on importing waste and other policies brought a new scope for
development to the paper making industry. Safety, stability and economic efficiency became a new issue in the industry. The major
development trend of the paper making industry consisted of the further expansion of the industrial chain of paper making and the
integration of pulp and paper.
As a leading player in the paper making industry of China, the Company has implemented the strategy of innovative operation,
quickened its pace in growth driver replacement and led the way in full industry chain operation, and has emerged as the only paper
making enterprise in China to achieve capacity balance between pulp production and paper making. Currently, the Company has the
annual pulp and paper production capacity of over 11 million tonnes, tops the industry in its paper product variety and ranks among
the best in China in terms of the market share of its major products. In 2020, the Company was once again listed in Top 500
Enterprises in China with the highest rank among paper making enterprises, which demonstrated the strength in the Company’s
development as it continued to lead the growth of the industry.
3. Major accounting data and financial indicators
(1) Major accounting data and financial indicators for the latest three years
Retrospective adjustment to or restatement of the accounting data for prior years by the Company
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
□ Yes √ No
Unit: RMB
Increase/decrease
for the year as
2020 2019 2018
compared to the
prior year
Revenue 30,736,517,996.90 30,395,434,073.35 1.12% 28,875,756,163.56
Net profit attributable to shareholders of the
1,712,029,078.52 1,656,566,584.88 3.35% 2,509,828,858.47
Company
Net profit after extraordinary gains or losses
1,119,103,808.75 702,329,086.29 59.34% 1,953,699,849.75
attributable to shareholders of the Company
Net cash flows from operating activities 11,259,802,676.28 12,232,707,222.94 -7.95% 14,099,701,887.04
Basic earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Diluted earnings per share (RMB per share) 0.36 0.33 9.09% 0.51
Increased by 0.27
Rate of return on weighted average net assets 5.84% 5.57% 8.51%
percentage point
Increase/decrease
as at the end of the
As at the end of As at the end of
year compared to As at the end of 2018
2020 2019
the end of the prior
year
Total assets 91,575,457,828.62 97,958,909,935.15 -6.52% 105,318,734,827.82
Net assets attributable to shareholders of the
24,276,968,789.00 25,169,743,863.75 -3.55% 25,048,731,454.79
Company
Data specification: The net profit attributable to shareholders of the Company does not exclude the effect of the interest payment
deferred and accumulated to subsequent periods for Perpetual Bonds under other equity instruments and the effect of the dividends
on Preference Shares under other equity instruments that have been considered and approved for distribution. When calculating
financial indicators such as earnings per share and rate of return on weighted average net assets, the interest on Perpetual Bonds of
RMB171,776,438.36, the dividends on Preference Shares of RMB387,101,073.42 declared to be distributed and the cash dividends
of RMB116,679,908.80 attributable to the shareholders of restricted shares expected to be unlocked in the future among the
dividends distributed during the reporting period are deducted.
(2) Key financial indicators by quarter
Unit: RMB
First quarter Second quarter Third quarter Fourth quarter
Revenue 6,085,376,805.28 7,514,428,960.58 8,473,304,915.35 8,663,407,315.69
Net profit attributable to shareholders of the Company 202,790,856.25 313,535,847.23 560,227,575.14 635,474,799.90
Net profit after extraordinary gains or losses
143,993,251.71 -76,111,135.48 463,336,879.91 587,884,812.61
attributable to shareholders of the Company
Net cash flows from operating activities 655,581,522.20 1,671,452,262.48 4,941,816,336.88 3,990,952,554.72
Whether the above financial indicators or their aggregated amounts have any material difference with the respective financial
indicators as disclosed in the quarterly report or interim report by the Company
□ Yes √ No
4. Share capital and shareholders
(1) Table of the number of ordinary shareholders and holders of preference shares with restored voting right and
the shareholdings of Top 10 shareholders
Unit: share
119,948 of Total number
113,916, of which Total number of Total number of
which 98,300 of ordinary
Total number 94,363 were holders of holders of
were holders of shareholders
of ordinary holders of A preference preference shares
A shares, as at the end
shareholders as shares, 19,210 shares with with restored voting
21,290 were of the month 0 0
at the end of were holders of B restored voting right as at the end of
holders of B prior to the
the reporting shares and 343 right as at the the month prior to
shares and 358 publication
period were holders of H end of the the disclosure date
were holders of date of this
shares reporting period of the annual report
H shares annual report
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
Shareholdings of top 10 shareholders
Number Share pledged or
Percenta
of locked-up
ge of Number of
Name of shareholders Nature of shareholders restricte
sharehol shares held
d shares Status of Number
ding shares
held
CHENMING HOLDINGS COMPANY State-owned legal
15.32% 457,322,919 Pledged 238,470,000
LIMITED person
HKSCC NOMINEES LIMITED Overseas legal person 12.51% 373,359,125
CHENMING HOLDINGS (HONG KONG)
Overseas legal person 12.20% 364,131,563
LIMITED
CENTRAL HUIJIN ASSET MANAGEMENT State-owned legal
2.02% 60,206,850
LTD. person
HONG KONG SECURITIES CLEARING
Overseas legal person 1.14% 34,168,330
COMPANY LIMITED
28,310,0
Chen Hongguo Domestic nature person 1.04% 31,080,044
33
NATIONAL SOCIAL SECURITY FUND 418 Others 0.63% 18,840,000
Domestic
NINGBO ASIA PAPER TUBE CARTON CO.,
non-state-owned legal 0.62% 18,400,000
LTD.
person
VANGUARD TOTAL INTERNATIONAL
Overseas legal person 0.50% 14,771,945
STOCK INDEX FUND
VANGUARD EMERGING MARKETS STOCK
Overseas legal person 0.44% 13,121,946
INDEX FUND
A shareholder, Chenming Holdings (Hong Kong) Limited, which is an overseas
legal person, and a wholly-owned subsidiary of a shareholder, Shouguang
Chenming Holdings Company Limited, a state-owned legal person, is a person
acting in concert under the Measures for the Administration of Disclosure of
Related party relationship or acting in concert Shareholder Equity Changes of Listed Companies. A shareholder, Chen
among the above shareholders Hongguo, is the legal representative, chairman and general manager of Chenming
Holdings Company Limited. Save for the above, it is not aware that any other
shareholders of tradable shares mentioned above are persons acting in concert. It
is also not aware that any other shareholders of tradable shares mentioned above
are related to each other.
Chenming Holdings Company Limited held 457,322,919 RMB ordinary shares,
of which 379,522,919 shares were held through ordinary account and 77,800,000
shares were held through credit guarantee security account.
Securities margin trading of shareholders, if any
Ningbo Asia Paper Tube Carton Co., Ltd. held 18,400,000 RMB ordinary shares,
of which 0 share was held through ordinary account and 18,400,000 shares were
held through credit guarantee security account.
(2) Table of the total number of holders of preference shares of the Company and the shareholdings of Top 10
holders of preference shares
√ Applicable □ Not applicable
Unit: share
Total number of holders of preference Total number of holders of preference shares
shares as at the end of the reporting 8 as at the end of the month prior to the 8
period publication date of this annual report
Shareholdings of top 10 holders of preference shares
Share pledged or
Percentage Number of locked-up
Nature of Number of
Name of shareholders of preference
shareholders shares held Status of
shareholding shares held Number
shares
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
Domestic
BEIJING YIBEN ZHONGXING
non-state-owned 27.78% 12,500,000 12,500,000 Pledged 12,500,000
INVESTMENT MANAGEMENT CO., LTD.
legal person
BANK OF COMMUNICATIONS
INTERNATIONAL TRUST CO., LTD. – Others 22.44% 10,100,000 10,100,000
HUILI NO.167 SINGLE CAPITAL TRUST
BANK OF COMMUNICATIONS
INTERNATIONAL TRUST CO., LTD. – Others 14.22% 6,400,000 6,400,000
HUILI NO.136 SINGLE CAPITAL TRUST
QILU BANK CO., LTD. - QILU BANK
QUANXIN WEALTH MANAGEMENT Others 13.33% 6,000,000 6,000,000
PRODUCT SERIES
Domestic
SHANGHAI SHIJIE BUSINESS
non-state-owned 9.20% 4,140,100 4,140,100
CONSULTING CO., LTD.
legal person
Domestic
HENGFENG BANK CO., LTD. non-state-owned 8.89% 4,000,000 4,000,000
legal person
LEAD CAPITAL MANAGEMENT CO., LTD.
– LEAD CAPITAL – LI DE YING NO. 2 Others 2.62% 1,179,900 1,179,900
ASSET MANAGEMENT PLAN
LEAD CAPITAL MANAGEMENT CO.,
LTD.- LEAD CAPITAL – LI DE YING NO. 1 Others 1.51% 680,000 680,000
ASSET MANAGEMENT PLAN
The above holders of Preference Shares, “BANK OF COMMUNICATIONS
INTERNATIONAL TRUST CO., LTD. – HUILI NO.167 SINGLE CAPITAL
TRUST” and “BANK OF COMMUNICATIONS INTERNATIONAL TRUST
CO., LTD. – HUILI NO.136 SINGLE CAPITAL TRUST”, and “LEAD
CAPITAL MANAGEMENT CO., LTD.－LEAD CAPITAL－LI DE YING NO.1
Description of related party relationship or
ASSET MANAGEMENT PLAN” and “LEAD CAPITAL MANAGEMENT CO.,
acting in concert among the above shareholders
LTD. － LEAD CAPITAL － LI DE YING NO.2 ASSET MANAGEMENT
PLAN”, are persons acting in concert. Save for the above, it is not aware that
whether the remaining holders of Preference Shares are persons acting in concert.
It is also not aware that the top ten holders of Preference Shares and the above
ordinary shareholders are related to each other.
(3) A block diagram disclosure of the ownership and control relationship between the Company and its
controller
State-owned Assets Supervision and
Administration Bureau of Shouguang City
100%
Shandong Shouguang Jinxin Investment
Holdings Limited
45.21%
Chenming Holdings Company Limited
100%
Chenming Holdings (Hong 15.32%
Kong) Limited
12.20%
Shandong Chenming Paper Holdings
Limited
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
5. Corporate bonds
Are there any corporate bonds offered to the public by the Company and listed on stock exchanges which do not become due as at the
date of approval of this annual report or overdue but not fully settled?
Yes
(1) Basic information on corporate bonds
Outstanding amount
Bond Bond Interest
Name of bond Issue date Maturity date of the bonds
abbreviation code rate
(RMB’0,000)
The First Tranche of Corporate Bonds
of Shandong Chenming Paper 17 Chenming
112570 17 August 2017 21 August 2022 9,000 7.28%
Holdings Limited Publicly Issued to Bond 01
Qualified Investors in 2017
The First Tranche of Corporate Bonds
of Shandong Chenming Paper 18 Chenming
112641 29 March 2018 2 April 2023 35,000 7.60%
Holdings Limited Publicly Issued to Bond 01
Qualified Investors in 2018
(2) Updated rating and change of rating of corporate bonds
On May 26, 2020 China Chengxin International Credit Rating Co., Ltd. (China Chengxin International) issued the “Follow-up
Rating Report” (2020) with Respect to the First Tranche of Corporate Bonds Publicly Issued to Qualified Investors in 2017”. The
credit rating of the company’s “17 Chenming Bond 01” is AA+, and the main credit rating of the company is AA+, and the rating
outlook is stable. For details, please refer to the company’s announcement dated 28 May 2020 on Juchao Information Network.
On 26 May 2020, China Chengxin International issued the “Follow-up Rating Report” (2020) with Respect to the First Tranche
of Corporate Bonds Publicly Issued to Qualified Investors in 2018”, which assessed the Company’s “18 Chenming Bond 01” credit
rating as AA+. The main credit rating of the Company is AA+, and the rating outlook is stable. For details, please refer to the
announcement of the Company dated 28 May 2020 on Juchao Information Network.
On 3 July 2020, China Chengxin International issued the “Announcement on Putting Shandong Chenming Paper Group Co.,
Ltd. Main Body and Related Debt Credit Ratings on the Watch List for Possible Downgrades”, and decided to set the company’s
AA+ main credit rating and the AA+ credit ratings of “17 Chenming Bond 01” and “18 Chenming Bond 01” are included on the
watch list for possible downgrade. For details, please refer to the announcement of the Company dated 9 July 2020 on Juchao
Information Network.
On 30 December 2020, China Chengxin International issued the “Announcement on Removing the Credit Rating of Shandong
Chenming Paper Group Co., Ltd. and Related Debts from the Watch List of Possible Downgrades and Adjusting the Rating Outlook
to Negative” and decided to maintain it The company’s subject credit rating is AA+, and the credit ratings of “17 Chenming Bond
01” and “18 Chenming Bond 01” are maintained at AA+. The credit ratings of the above entities and related debts are removed from
the watch list for possible downgrade, and the rating outlook is adjusted to negative. For details, please refer to the announcement of
the Company dated 31 December 2020 on Juchao Information Network.
(3) Major accounting data and financial indicators of the Company over the past two years as at the end of the
reporting period
Unit: RMB’0,000
Item 2020 2019 Year-on-year increase/decrease in percentage
Gearing ratio 71.83% 73.11% -1.28%
Proportion of EBITDA to total debts 12.22% 11.32% 0.90%
Interest coverage ratio 1.96 1.70 15.29%
III. DISCUSSION AND ANALYSIS OF OPERATIONS
1. Overview of operations during the reporting period
In 2020, the unexpected COVID-19 epidemic posed unprecedented shock to the global economy and increased the downward
pressure of the economy. Under the leadership of the Central Committee of the Communist Party of China, China adhered to the
general principle of seeking progress while maintaining stability, carried out epidemic prevention and control and promoted
economic development in a coordinated manner. With the continuous implementation of the “six stability” and “six guarantees”
tasks, domestic economy embraced steady resuscitation, and China became the only country among the world’s major economies
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
that achieved positive growth. As one of the important basic raw material industries in China, the output and total profit of the paper
making and paper product industry exhibited a trend of “turning a negative into a positive, accelerating quarter by quarter”. Reeled
from the epidemic in the first quarter during this reporting period, the paper making industry was confronted with problems such as
insufficient raw materials, delays in production resumption and return to work, difficulties in logistics and delivery, decline in foreign
trade, and insufficient market demand. According to the National Bureau of Statistics, the output of machine-made paper and paper
board in China decreased by 12.4% year on year, the total profit of industrial enterprises above designated size in the paper making
and paper product industry fell by 5.5% year on year. Since entering the second quarter, with the gradual strengthening of epidemic
prevention and control achievements, enterprises resumed work and production in an orderly manner. Thanks to the combined effects
of favourable policies such as the “ban on importing waste” and a stricter ban on plastics, market demand gradually picked up, which
stimulated a price rise of pulp and machine-made paper and improved prosperity of the paper making industry. The major indicators
changed from negative to positive and recorded growth against the overall downtrend. According to the data from the National
Bureau of Statistics, from January to December 2020, the national output of machine-made paper and paper board was 127,006,300
tonnes, a record high since the founding of the People’s Republic of China.
The Company seized opportunities during crisis and sought stability in changes. During the reporting period, the Company, as a
leading player in the paper making industry in China, took strict control over the epidemic during the critical period of epidemic
prevention and control, carried out production resumption and return to work in an orderly manner, and stabilised production and
product quality. As the prevention and control of the epidemic bore fruits, market demand increased with a higher pulp price. The
Company’s major types of paper saw a price rise. The advantages of the pulp and paper integration became more apparent with
further enhanced profitability and successful fulfilment of various mission goals.
In 2020, the Company produced 5.77 million tonnes machine-made paper with sales of 5.61 million tonnes, representing a
year-on-year increase of 15.17% and 6.86% respectively. The Company recorded revenue of RMB30,737 million, representing a
year-on-year increase of 1.12%. Total profit and net profit attributable to equity holders of the Company amounted to RMB2,172
million and RMB1,712 million respectively, representing a year-on-year increase of 6.04% and 3.35%. Total asset of the Company
amounted to RMB97,959 million. The operation and management results were mainly reflected in the following aspects:
(i) Achieving objectives of production capacity and efficiency, strategic optimisation and upgrading
In recent years, the Company continued to focus on the development of the principal business of pulping and paper making. It
successively invested in the 500,000-tonne cultural paper renovation project of Shouguang headquarters, the 510,000-tonne high-end
cultural paper project of Shouguang Meilun, the 1 million-tonne chemical pulp project of Shouguang Meilun and 600,000-tonne of
chemical wood pulp project of Huanggang Chenming. The Company’s pulp and paper production capacity reached more than 11
million tonnes, becoming the only pulping and paper making enterprise in China with a balanced pulp and paper production capacity.
During the reporting period, as the pulp price continued to rise, the Company’s advantages of low costs became prominent. New
projects achieved the objectives of production capacity and efficiency and recorded year-on-year growth of total profit.
(ii) Satisfying performance brought by innovative sales
In 2020, the COVID-19 epidemic brought a severe impact on sales work. In face of challenges, all sales personnel actively
strengthened marketing and promotion, assessed the current situation, seized the opportunity generated by improved market
sentiment and continued to increase prices, so as to achieve increases in both production and sales. The sales volume of
machine-made paper was 5.61 million tonnes, representing an increase of 360,000 tonnes over last year. Firstly, we strengthened
channel development and customer management. As a result, the number of contracted customers increased significantly, and the
market construction has been steadily improved. Secondly, we gave full play to the advantages of the production base layout and
increased sales at close distances. Thirdly, we improved credit management, increased prepayments and strictly control business
risks. Fourthly, we insisted on structural adjustments, actively developed new products, increased sales of products with greater profit
margin, and strengthened competitive advantages.
(iii) Significant effects of supply chain management
During the reporting period, the management of the supply chain management centre was improved. The centre strove for
favourable policies, and the direct procurement from sources was taken to a higher level. The highlights of our unparalleled results
are as follows: 1. the amount of funds used was lowered by improving plan management, regulating and sharing materials and selling
on consignment. 2. National policies were researched on and strived for. The Company was approved as “The Experimental Unit for
the Regulatory Reform of the Processing Trade of Enterprise Groups”. The Company and relevant import and export trade
companies were approved to enjoy the tax payment guarantee policies provided by the Finance Company of Chenming, leading to a
lower cost of customs clearance and quicker clearance than ever before. 3. The management of suppliers was further improved. We
explored new sources vigorously. Its cooperation with customers, the stability of the supply of raw materials and the quality of raw
materials were taken to a higher level.
(iv) Improving financial management and capital structure
During the reporting period, even though being confronted with harsh economic conditions, the Company improved its financial
management steadily. Various measures were adopted to optimise our debt and capital structure, leading to a better financial
conditions. 1. By enhancing capital management, lowering the balance of bonds and reducing our debt and lease in a sustained way,
the Company withdrew capital with a net value of RMB3,600 billion. Risks were under effective control, and financial security was
ensured. 2. Promoting setting up a financial information system and a capital management platform, realising a comprehensive
improvement of the overall arrangement, standardisation and financial management of the Group’s financial business. 3. The policies
benefiting enterprises, the scientific tax planning, improved analysis on the trend of exchange rates and other measures resulted in a
lower cost of funds and a better financial position.
(v) Improving production management and exploring our potentials for a higher efficiency
During the reporting period, our production system adhered to the guiding principles and goals of the Company. Our production
management was enhanced. Our production was sped up for a high production volume. We also explored our potentials for a higher
efficiency. The Company produce 5.77 million tonne machine-made paper in 2020, representing a year-on-year increase of 0.76
million tonnes. 1. We carried out standard practice vigorously to ensure that our paper making machines can operate in best
conditions, aiming to increase production and efficiency. 2. Upholding the operation philosophy of “pulp and paper integration”.
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
Maximising the production of self-produced pulp by increasing the production of paper making machines. 3. Producing products
with high added value by adjusting product mix. Optimising the proportion of pulp to other materials to lower production costs. Our
volume of production is determined on sales, and our production is arranged scientifically. We manage our inventory vigorously.
Measures in relation to saving water and reducing pollutants discharges were adopted. The purpose of all of these actions is to
explore our potentials and increase efficiency.
(vi) Strict corporate management producing initial success
In 2020, the Company’s management centre improved its basic management to conform to a series of requirements, and a
certain amount of effect was produced. The details are as follows:
1. Improving and streamlining our institutions and enhancing our implementation. The Group’s overall management institutions
were streamlined to make them simple and easy to use. We have developed 160 new procedures, and the number of existing
procedures is over 1,200. Certain parts of these procedures are monitored by a mechanically controlled early warning system, leading
to a higher operational efficiency. We obeyed our rules and regulations in a stricter manner. Problems were solved immediately once
they were discovered. Weekly examinations and appraisals were conducted on essential works, improving the quality of our works
effectively.
2. Improving our incentive mechanism and strengthening our team building. Our check-up system was organised
comprehensively, and our medium-term and long-term incentive mechanism was improved. The 2020 Restricted A Shares Incentive
Plan was implemented, thus, members of our team were motivated effectively. Everyone’s enthusiasm was aroused by taking up a
job through competition among cadres, appraising through democratic discussion, choosing excellent employees and other activities.
We improved the quality of our training and trained our own talents by building an online learning platform and an operational
classroom and conducting training with special topic.
2. Significant change in the principal activities during the reporting period
□ Yes √ No
3. Products accounting for over 10% of revenue or operating profit of the Company
√ Applicable □ Not applicable
Unit: RMB
Increase/decreas Increase/decreas
Increase/decreas e of operating e of gross profit
e of revenue as profit as margin as
Gross profit compared to the
Product name Revenue Operating costs compared to the compared to the
margin corresponding corresponding corresponding
period of the period of the period of the
prior year prior year prior year
White paper board 7,900,414,595.22 2,135,920,806.88 27.04% 14.35% 148.10% 14.57%
Duplex press paper 6,880,399,009.21 1,222,137,129.77 17.76% -10.98% -28.91% -4.48%
Coated paper 4,134,523,188.76 880,888,276.54 21.31% 9.39% -2.59% -2.62%
Electrostatic paper 4,052,403,877.82 855,939,083.41 21.12% 23.92% 0.29% -4.98%
Anti-sticking raw paper 1,118,932,774.91 250,184,646.81 22.36% -9.66% -28.55% -5.91%
Financial leasing 935,121,026.20 807,500,930.78 86.35% -48.49% -52.37% -7.04%
4. Whether any seasonal or cyclical characteristic of operations gives rise to concern
□ Yes √ No
5. Description of significant change in revenue, operating costs and total net profit attributable to ordinary
shareholders of the Company during the reporting period as compared to the prior reporting period
□ Applicable √ Not applicable
6. To be delisted
□ Applicable √ Not applicable
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2020 Annual Report Summary of Shandong Chenming Paper Holdings Limited
7. Events relating to financial reporting
(1) Description of changes in accounting policies, accounting estimates and accounting methods as compared to
the financial report for the prior year
√ Applicable □ Not applicable
The Company has been implementing the Accounting Standard for Business Enterprises No. 13 promulgated by the Ministry of
Finance since 1 January 2020, for which the prospective application method is applied.
(2) Reason for retrospective restatement to correct major accounting errors during the reporting period
□ Applicable √ Not applicable
No retrospective restatement was made to correct major accounting errors during the reporting period.
(3) Reason for changes in scope of the consolidated financial statements as compared to the financial report for
the prior year
√ Applicable □ Not applicable
During the reporting period, the scope of consolidation had 8 newly established subsidiaries, namely Chenming (Overseas) Co.,
Ltd., Chenming (Singapore) Co., Ltd., Qingdao Chenming Import and Export Trade Co., Ltd., Hainan Chenming Technology Co.,
Ltd., Hubei Changjiang Chenming Huanggang Equity Investment Fund Partnership (Limited Partnership), Hubei Huanggang
Chenming Equity Investment Fund Management Co., Ltd., Shandong Dingkun Asset Management Partnership (Limited Partnership)
and Huanggang Chenming Paper Technology Co., Ltd. During the reporting period, a subsidiary was acquired not within the
definition of business, namely Shanghai Herui Investment Co., Ltd., and a subsidiary, Kunshan Tuoan Plastic Products Co., Ltd. was
acquired by the Group.
During the reporting period, 3 companies were reduced from the scope of consolidation. A subsidiary, Shandong Chenming
Paper Group (Fuyu) Sales Co., Ltd. was absorbed into the Group. The Company disposed of 100% equity interest in Qingdao
Chenming International Logistics Co., Ltd. and 100% equity interest in Shouguang Chenming Industrial Logistics Co., Ltd. Such
companies were excluded from the scope of consolidation.
The Board of Shandong Chenming Paper Holdings Limited
25 March 2021
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