Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
HUBEI SANONDA CO., LTD.
SEMI-ANNUAL REPORT 2018
Adama Agricultural Solutions Ltd., one of the world's leading crop protection companies, and Hubei
Sanonda Co., Ltd. have combined, creating the only integrated, publicly traded Global-China crop protection
company.
At ADAMA, we strive to Create Simplicity in Agriculture - offering farmers effective products and services
that simplify their lives and help them grow. With one of the most comprehensive and diversified portfolios
of differentiated, quality products, our 6,600 strong team reaches farmers in over 100 countries, providing
them with solutions to control weeds, insects and disease, and improve their yields.
Please see key additional information and further details included in the Annex.
August 2018
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Section I Important Notice, Table of Contents and Definitions
The Company’s Board of Directors, Board of Supervisors, directors, supervisors and senior
managers confirm that the content of the Report is true, accurate and complete and contains no false
statement, misleading representation or material omissions, and assume joint and several legal
liability arising therefrom.
Chen Lichtenstein, the person in charge of the Company as well as its legal representative, and
Aviram Lahav, the person in charge of the accounting function (Chief Financial Officer), hereby
state and ensure the truthfulness, accuracy and completeness of the Financial Report.
All the Company’s directors attended the board meeting for the review of this Report.
The forward looking information described in this Report, such as future plans, development
strategy etc., does not constitute, in any manner whatsoever, a material commitment of the
Company to investors. Investors and other relevant people should be sufficiently mindful of
investment risks as well as the difference between plans, forecasts and commitments.
The Company has described its possible risks in “X Risks Facing the Company and
Countermeasures” under Section IV herein.
For the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares or
convert capital reserve into share capital.
This Report and its Abstract have been prepared in both Chinese and English. Should there be any
discrepancies between the two versions, the Chinese version shall prevail.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Table of Contents
Section I Important Notice, Table of Contents and Definitions ................................................... 2
Section II Corporate Profile and Financial Results ..................................................................... 5
Section III Business Profile ........................................................................................................... 8
Section IV Performance Discussion and Analysis ...................................................................... 10
Section V Significant Events ....................................................................................................... 26
Section VI Change in Shares and Shareholders......................................................................... 34
Section VII Preference Shares .................................................................................................... 40
Section VIII Directors, Supervisors and Senior Management .................................................. 41
Section IX Corporate Bonds ....................................................................................................... 42
Section X Financial Report ......................................................................................................... 43
Section XI Documents Available for Reference........................................................................ 158
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Definitions
Term Definition
Company, the Company Hubei Sanonda Co., Ltd.
Adama Agricultural Solutions Ltd., a wholly-owned subsidiary of the
Adama Solutions
Company, incorporated in Israel according to its laws
Board of Directors/Board The Board of Directors of the Company
Board of Supervisors The Board of Supervisors of the Company
Group, the Group The Company and its subsidiaries
CSRC China Securities Regulatory Commission
SZSE Shenzhen Stock Exchange
Reporting Period, this period January 1, 2018 - June 30, 2018
ChemChina China National Chemical Co., Ltd.
China National Agrochemical Co., Ltd., the controlling shareholder of the
CNAC
Company, a wholly-owned subsidiary of ChemChina
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Section II Corporate Profile and Financial Results
I Corporate Information
Stock name Sanonda A, Sanonda B Stock code 000553, 200553
Stock exchange Shenzhen Stock Exchange
Company name in Chinese 湖北沙隆达股份有限公司
Abbr. 沙隆达
Company name in English Hubei Sanonda Co., Ltd.
Abbr. SANONDA
Legal representative Chen Lichtenstein
II Contact Information
Board Secretary Securities Affairs Representative
Name Li Zhongxi Liang Jiqin
Address No. 93, Beijing East Road, Jingzhou, Hubei No. 93, Beijing East Road, Jingzhou, Hubei
Tel. 0716-8208632 0716-8208232
Fax 0716-8321099 0716-8321099
E-mail zhongxi.li@adama.com jiqin.liang@adama.com
III Other Information
1. Ways to Contact the Company
Indicate by tick mark whether any changes occurred to the registered address, office address and their postal codes,
website address and email address of the Company during the Reporting Period.
□ Applicable √ Not applicable
No changes occurred to the said information during the Reporting Period, which can be found in the 2017 Annual
Report.
2. Information Disclosure Media and Place where this Report is Kept
Indicate by tick mark whether any changes occurred to the information disclosure media and the place where this
Report is kept during the Reporting Period.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
□ Applicable √ Not applicable
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for
the publication of this Report and the location where this Report is kept did not change during the Reporting
Period. The said information can be found in the 2017 Annual Report.
IV Main Accounting Data and Financial Indexes
Indicate by tick mark whether the Company needs to retroactively adjust or restate any of its accounting data.
√Yes □ No
Reason for retrospective adjustment or restatement: Business combination under common control.
Same period of last year +/- (%)
Reporting Period
Before adjustment After adjustment After adjustment
Operating revenues (RMB’000) 13,026,258 1,465,703 12,770,064 2.01%
Net profit attributable to shareholders of the
Company (RMB’000) 2,362,781 169,191 1,316,994 79.41%
Net profit attributable to shareholders of the
Company excluding non-recurring profit and
loss (RMB’000) 790,296 167,054 167,054 373.08%
Net cash flow from operating activities
(RMB’000) 779,518 221,244 2,249,146 -65.34%
Basic EPS (RMB/share) 0.9658 0.2849 0.5624 71.73%
Diluted EPS (RMB/share) N/A N/A N/A
Weighted average return on net assets 11.65% 8.09% 7.62% 4.03%
End of Reporting End of last year +/- (%)
Period Before adjustment After adjustment After adjustment
39,685,756
Total assets (RMB’000) 41,577,798 39,613,922 4.77%
(Note 1)
Net assets attributable to shareholders of the 18,849,847
21,543,425 18,778,013 14.29%
Company (RMB’000) (Note 1)
Note 1:
The amounts specified are 2018 opening balance amounts rather than 2017 closing balance amounts. As of January 1, 2018, the
Company began to adopt the revised Accounting Standards for Business Enterprises (“ASBE”) regarding financial instruments and
revenue, promulgated by Ministry of Finance in 2017. According to the transitional requirements of relevant revised ASBEs, the
opening balances of total assets and net assets attributable to the shareholders of the Company have been adjusted. The total assets
and net assets attributable to the shareholders of the Company as at December 31, 2017 were RMB’000 39,613,922 and RMB’000
18,778,013, respectively.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
V Differences in Accounting Data under Domestic and Foreign Accounting Standards
1. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and
International Accounting Standards
□ Applicable √ Not applicable
No such differences for the Reporting Period.
2. Differences in Net Profit and Net Assets Disclosed in Financial Reports Prepared under Chinese and
Foreign Accounting Standards
□ Applicable √ Not applicable
No such differences for the Reporting Period.
3. Reason for accounting data differences under Chinese and Foreign Accounting Standards
□ Applicable √ Not applicable
VI Non-Recurring Profit/Loss
√ Applicable □ Not applicable
Unit: RMB’000
Item Reporting Period Note
Gains/losses on the disposal of non-current assets (including the Divestment in Europe and US,
1,997,170
offset part of asset impairment provisions) due to the Syngenta Transaction.
Government grants recognized through profit or loss (excluding
government grants closely related to business of the Company
10,787
and given at a fixed quota or amount in accordance with
government’s uniform standards)
Recovery or reversal of provision for bad debts which is assessed
13,249
individually during the years
Other non-operating income and expenses other than the above (787)
Less: Income tax effects 447,934
NCI (after tax) -
Total 1,572,485
Explanation of why the Company classified an item as non-recurring profit/loss according to the definition in the
Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public - Non-Recurring Profit and Loss, or reclassified any non-recurring profit/loss item given as an example in
the said explanatory announcement to recurrent profit/loss
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Section III Business Profile
I Main Business of the Company during the Reporting Period
Is the Company subject to any disclosure requirements for special industries?
No.
The Company is a corporation incorporated in the People's Republic of China.
The Group engages in the development, manufacturing and marketing of off-patent crop protection products, and
is one of the leading companies in the world in this field. The Group supplies solutions to farmers in
approximately 100 countries across the globe, through approximately 60 subsidiary companies throughout the
world.
The Group is the world’s leading off-patent crop protection solutions company (by sales), and is ranked sixth in
the world among all companies engaged in the field of crop protection. The Group's business model integrates
end-customer access, regulatory expertise, and global R&D and production capabilities, thereby providing the
Group with a significant competitive edge and allowing it to launch new and differentiated products that cater to
farmers’ needs in key markets worldwide.
Adama-Sanonda combination - The combination of Adama Solutions and the Company was successfully
completed, whereby on July 4, 2017, the entire share capital of Adama Solutions was transferred from CNAC to
the Company, in return for the issuance of new shares in the Company to CNAC and their registration for trade on
the SZSE which was completed on August 2, 2017 (together the “Combined Company”; the “Combination
Transaction”). Subsequently, the Company is consolidating Adama Solutions’ financial statements as of the third
quarter 2017.
The Group's primary operations are focused on Europe, North America, Latin America, Asia-Pacific and the India,
Middle-East and Africa region. In total, the Group sells its products in approximately 100 countries worldwide.
The Group is focused on the development, manufacturing and marketing of off-patent crop protection products
(which are mainly herbicides, fungicides and insecticides designed to protect agricultural and other crops), and
utilizes its expertise for the development and adaptation of similar products for non-agricultural purposes
(Consumer and Professional Solutions).
In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operates in several
other non-agricultural areas, none of which, individually, is material for the Group. These activities include
primarily, (a) the manufacture and marketing of dietary supplements, food colors, texture and flavor enhancers,
and food fortification ingredients; (b) fragrance products for the perfume, cosmetics, body care and detergents
industries; (c) the manufacture of industrial products and (d) other non-material activities.
Trends, events and key developments in the Group's macro-economic environment may have a material impact on
its business results and development. The effects of these factors may differ depending on geographic region and
different products of the Group. Since the Group maintains a broad product portfolio and since it is active in many
geographic regions, the aggregate effect of these factors in any given year and the course thereof is not uniform
and may sometimes even be mitigated by counterbalancing influences. The activities and results of the Group is
further subject to, and affected by, certain global, localized and other factors, such as demographic changes;
economic growth and rising standards of living; agricultural commodity prices; significant fluctuations in raw
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
material costs and global energy prices; development of new crop protection technologies; patent expiry and
growth in volumes of off-patent products; the agricultural market and severe weather conditions; regulatory
changes; government policies; world ports and monetary policy and the financial market.
Please see key additional information and further details included in the Annex.
II Significant Changes in Main Assets
1. Significant Changes in Main Assets
Main assets Explanations regarding significant change
Stock rights/Equity assets No significant changes
Fixed assets No significant changes
Intangible assets Portfolio of products acquired from Syngenta.
Construction in progress / On-going
No significant changes
construction projects
Trade receivables Seasonal increase
Financial assets at fair value through Additional investment
profit or loss
Derivative financial assets Revaluation of derivatives
Bills receivable Mainly endorsed to suppliers
Prepayments Mainly due to payment timing
Other receivables Mainly decrease in subordinated note in respect of securitization transaction
Assets held for sale Divestment transaction completed
2. Main Assets Overseas
√ Applicable □ Not applicable
Control Proportion of
Specific Scale of the measures to P/L of the overseas Significant
Operation
contents of Reason assets Location guarantee assets assets out of impairment
mode
the assets (RMB’000) safety of the (RMB’000) the net assets risk?
assets (%)
Equity Acquired
investment in through major Israel and Crop Corporate
18,097,813 2,114,843 84% No
Adama assets globally Protection Governance
Solutions restructuring.
Other
See item I above regarding the completion of the Combination Transaction in July 2017.
explanations
III Core Competitiveness Analysis
Is the Company subject to any disclosure requirements for special industries?
No.
No significant changes occurred to the core competitiveness of the Company in the Reporting Period.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Section IV Performance Discussion and Analysis
I Overview
Please see key additional information and further details included in the Annex.
Financial Highlights
Revenues. The increase in revenues was driven by robust volume growth. Especially strong performance was
recorded in the Americas, China and the India, Middle East and Africa region. In Europe, revenues over the
half-year grew slightly, with a recovery in the second quarter after a delayed start to the season in the first
quarter. In addition to the volume growth, improved demand conditions facilitated a stronger pricing
environment, allowing the passing on of some of the impact of the constrained supply and higher procurement
costs.
Gross profit. The increase in gross profit reflects the strong volume growth of a better product mix, as well as
higher prices, which were partially offset by the increased procurement costs of raw materials and
intermediates.
Operating expenses. The increase in Sales and Marketing expenses resulted primarily from an increase in
sales-related personnel marketing and product development teams in growing geographies and an increase in
other variable expenses as a result of the increase in sales volumes. The increase in R&D, General and
Administrative expenses resulted primarily from increased spend on strategic research and development
projects. In addition to these factors, part of the increase in total operating expenses stemmed from the impact
of the strengthening of most currencies against the US dollar, mainly in the first quarter.
Financial expenses and investment income. The increase in financial expenses and investment income in the
half-year period was primarily due to the adoption of a new accounting standard which classifies part of
interest income on sales as revenue, partially offset by foreign exchange income related to balance sheet
positions.
Tax expenses. The higher tax expenses stem from increased profits accrued at the Group’s selling entities
worldwide, as well as the non-cash impact of the devaluation of the Brazilian Real, which resulted in a lower
value of local currency-denominated tax assets. Notably, the comparatively low tax expenses recorded in the
first half of last year reflected a benefit from the utilization of tax loss carryforwards in the first quarter of 2017.
Working capital. Higher working capital served to accommodate the higher sales growth momentum.
Inventories were higher due to significant product preparation in advance of the season in the southern
hemisphere, as well as the higher procurement costs. Receivables were higher due to the strong sales growth,
partially offset by an increase in payables.
Cash Flow. Notwithstanding the stronger growth momentum requiring increased inventories in advance of
the season, due to the continued implementation of advanced supply chain alignment, the Group maintains its
inventory days at their historically low levels. Additionally, continued tight control of credit allowed the
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
receivable days of the Group to be at record best mid-year levels. This working capital discipline facilitated
the generation of strong operating cash flow, while accommodating the significant sales growth.
Additions to assets includes investments in product registrations and other intangible and fixed assets,
including the transfer of products in Europe from Syngenta in the first quarter of 2018. Proceeds from disposal
of assets includes the divestment of certain products in Europe in the first quarter of 2018 in connection with
the approval of the European Commission for ChemChina’s acquisition of Syngenta, while in 2017 similarly
includes one-time proceeds resulting from the sale of non-core assets.
Leverage: The significantly reduced balance sheet net debt at the end of June puts the Group’s net
debt/EBITDA ratio at 0.7x, compared to 1.2x at the same time last year.
II Analysis of Main Business
See details on the relevant contents of “I. Overview” of “Performance Discussion and Analysis”.
Year-on-year changes of main financial data:
Unit: RMB’000
Reporting Period/ Same period of last year/
+/-% Reason for change
Closing Balance Opening Balance
Financial assets at fair Additional investment
value through profit or 32,693 23,000 42.14%
loss
Derivative financial Revaluation of derivatives
940,225 455,153 106.57%
assets
Mainly endorsed to
Bills receivable 88,285 180,030 (50.96%)
suppliers
Accounts receivables 6,614,644 5,085,911 30.06% Mainly due to seasonality
Mainly due to payment
Prepayments 286,942 202,111 41.97%
timing
Mainly decrease in
subordinated note in
Other receivables 707,725 1,029,557 (31.26%)
respect of securitization
transaction
Divestment transaction
Assets held for sale - 403,297 (100%)
completed
Mainly purchase of
Intangible assets 5,895,824 4,036,588 46.06% intangible from Syngenta
AG
Repayment of short term
Short term loans 384,482 2,280,912 (83.14%)
loans
Derivative financial Revaluation of derivatives
1,209,687 789,050 53.31%
liabilities
Bills payable 144,991 311,557 (53.46%) Cheques paid
Mainly due to increase in
corporate income tax due
Taxes payable 595,224 431,275 38.01%
to increase in taxable
profit
Dividend payables 154,383 250 61,653.20% Dividend to shareholders
Mainly increase in
liability in respect of
Other payables 1,991,600 1,375,993 44.74%
securitization transaction
and liabilities for
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Reporting Period/ Same period of last year/
+/-% Reason for change
Closing Balance Opening Balance
discounts
Mainly due to repayment
Long-term loans 320,382 514,320 (37.71%)
of loans
Decrease in provision in
Provision 113,041 163,913 (31.04%)
respect of contingencies
Mainly due to utilization
of losses carry forward
Deferred tax liability 471,942 224,613 110.11%
due to gain from disposal
of intangible assets.
Mainly due to revaluation
Other comprehensive of hedge transactions and
401,339 (104,080) (485.61%)
income translation effect of
foreign operations
Additions to safety
Special reserves 14,259 9,349 52.52%
production cost
Retained earnings 5,500,544 3,307,924 66.28% Mainly net profit
Mainly exchange rate
Financing Expense 330,018 911,916 (63.81%)
differences
Mainly due to gain from
disposal of intangible
assets and devaluation of
Income tax expenses 727,264 142,257 411.23% the Brazilian Real which
resulted in a decrease in
the local tax assets
reduced
Operating income 13,026,258 12,770,064 2.01%
Cost of goods sales 8,571,417 8,179,694 4.79%
Selling and Distribution 2,223,934 2,122,890
4.76%
expenses
General and 637,129 559,398
13.90%
administrative expenses
Includes mainly an
increase in working
capital, due to an increase
in inventory due to
Net cash flows from
779,518 2,249,146 (65.34%) significant product
operating activities
preparation in advance of
the season in the southern
hemisphere, as well as the
higher procurement costs.
Reduction in net
Net cash flows used in investment due to
(264,623) (484,293) (45%)
investing activities proceeds from disposal of
intangible assets.
Net cash flows used in
(2,356,158) (966,091) 144% Cash repayment of loans
financing activities
Net increase (decrease)
See explanations above
in cash and cash (1,842,878) 703,907 (361.81%)
regarding cash flow
equivalents
Major changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Breakdown of main business:
Unit: RMB’000
YoY YoY YoY
Operating Cost of goods
Gross margin (%) increase/decrease increase/decrease increase/decrease
revenues sold
of the operating of the cost of of the gross
revenues goods sold margin
Classified by industries
Industry of
manufacturing chemical
13,026,258 8,571,417 34.20% 2.01% 4.79% -2.95%
raw materials and
chemical products
Classified by products
Agro 12,132,725 7,899,306 34.89% 2.29% 5.22% -2.66%
Classified by regions
-- -- -- -- -- -- --
III Analysis of Non-Core Business
√ Applicable □ Not applicable
Unit:RMB’000
Proportion in total
Amount Reasons Whether sustained
profit
Investment income 147,053 5% -- No
Gain/loss from change
-243,376 -8% -- No
of Fair Value
Impairment of asset 43,880 1% -- No
Divestment in Europe due to
Non-operating income 1,997,170 64.63% No
the Syngenta Transaction
Non-operating loss 29,004 0.94% -- No
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB’000
End of same period of last
End of Reporting Period
year
Change in
As a As a Reason for significant change
percentage
percentage of percentage of
Amount Amount (%)
total assets total assets
(%) (%)
Cash at bank and
6,049,530 14.55% 4,544,474 12.09% 2.46% no significant change
on hand
Accounts
6,614,644 15.91% 6,436,524 17.12% -1.21% no significant change
receivable
Inventories 8,274,820 19.90% 7,344,645 19.53% 0.37% no significant change
Investment
4,251 0.01% 4,565 0.01% 0.00% no significant change
properties
Long term equity
119251 0.29 0.27% 0.02% no significant change
investment
Fixed assets 6,150,140 14.79% 6,480,834 17.24% -2.45% no significant change
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
End of same period of last
End of Reporting Period
year
Change in
As a As a Reason for significant change
percentage
percentage of percentage of
Amount Amount (%)
total assets total assets
(%) (%)
Construction in
871,046 2.09% 587,248 1.56% 0.53% no significant change
progress
Intangible assets 5,895,824 14.18% 4,349,139 11.57% 2.61% no significant change
Goodwill 3,939,153 9.47% 3,987,019 10.60% -1.13% no significant change
Deferred tax
623,619 1.50% 708,345 1.88% -0.38% no significant change
assets
Short term loans 384,482 0.92% 537,567 1.43% -0.51% no significant change
Accounts
4,221,331 10.15% 3,745,730 9.96% 0.19% no significant change
payables
Employee
766,690 1.84% 986,126 2.62% -0.78% no significant change
benefits payable
Long-term loans 320,382 0.77% 492,644 1.31% -0.54% no significant change
Debentures
7,548,581 18.16% 8,026,553 21.35% -3.19% no significant change
payable
2. Assets and Liabilities Measured at Fair Value
√ Applicable □ Not applicable
Unit: RMB’000
Profit/loss on
Cumulative fair Impairment
fair value Purchased in Sold in the
Opening value changes provided in the Closing
Item changes in the the Reporting Reporting
balance charged to Reporting balance
Reporting Period Period
equity Period
Period
Financial assets
Financial assets
measured at fair
value through
profit or loss 23,000 -2,877 -309 - 64,969 -52,090 32,693
(excluding
derivative
financial assets)
Derivative
financial assets
455,153 43,621 335,385 - - 128,503 962,662
(including long
term)
Other equity
91,090 - -64 - - - 91,154
investments
Total financial
569,243 40,744 335,012 - 64,969 76,413 1,086,509
assets
Other
Total of above 569,307 40,744 335,012 - 64,969 76,413 1,086,509
Financial
789,050 431,600 - - - - 1,220,650
liabilities
Significant changes in the measurement attributes of the main assets in the Reporting Period
□ Yes √ No
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
3. Restricted Asset Rights as of End of the Reporting Period
At the end of this Reporting Period, restricted assets included RMB 28.150 million - restricted cash, most of
which is as guarantee for bank acceptance bills ; RMB 6.134 million - fixed assets, as mortgage for loans; and
RMB 130.128 million - other non-current assets, mainly as guarantee for asset securitization and law suits.
V Investments Made
1. Overall Condition of the Total Investments Made
√Applicable □ Not applicable
Investment during the Reporting Investment during the Same Period +/-% YoY
Period (RMB’000) Last Year (RMB’000)
27,502,683 0 +100%
2. Significant Equity Investments Made in the Reporting Period
□ Applicable √ Not applicable
3. Significant Non-Equity Investments Ongoing in the Reporting Period
□ Applicable √ Not applicable
4. Financial Investments
(1) Securities Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
(2) Investments in Derivative Financial Instruments
√ Applicable □ Not applicable Unit: RMB’000
The party that Relation Related Type Initial Starting date Expiring Investment Amount Amount sold Impairment Investment Percentage of Gain/loss
operates the with the party investment date amount at purchased during the accrued (if amount at end investment amount during the
investment Company transaction amount beginning of the during the reporting any) of the period divided by net asset reporting
or not? period reporting period at end of the period period
period
Banks No No Option 52,274 24/04/2018 24/12/2018 52,274 6,409,987 -1,228,530 No 5,233,731 24.31% -3,711
Banks No No Forwards 15,911,923 03/04/2018 30/10/2018 15,911,923 21,092,696 -24,582,737 No 12,421,882 50.70% -367,360
Total 15,964,197 -- -- 15,964,197 27,502,683 -25,811,267 17,655,613 82.01% -371,071
Source of fund for the investment Internal
Litigation-related situations (if applicable) N/A
Date of disclosure of Board approval (if any) December 30, 2017
N/A
Date of disclosure of Shareholders’ approval (if any)
The aforesaid refers to short term hedging currency transactions made with banks.
The Group’s transactions are not traded in the market. The transactions are between the applicable company in the Group and the applicable bank until the
expiration date of the transaction, therefore no market risk is involved.
Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements.
As to operational risk, the Group is working with approved software for all transactions.
No legal risk is involved.
Risk and control analysis for the reporting period
The controls taken in order to further reduce said risks are:
(including but not limited to market risk, liquidity The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' Financial Statements
Committee of the Board, which specifies, inter alia, the hedging policy, the persons that have the authorization to deal with hedging, the tools, ranges
risk, credit risk, operational risk, legal risk, etc.) etc. The only subsidiary that has hedging positions in the Group in the period was Adama Solutions and its subsidiaries.
The relevant subsidiaries apply local SOX audits that audit the working process and the controls of the hedging transactions, in addition to the
quarterly audit.
The controllers of the relevant subsidiaries are involved and monitor the hedging accounting treatment.
Every 2-3 years the internal audit of the relevant subsidiaries department is auditing the entire procedure.
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Hubei Sanonda Co., Ltd. Semi-Annual Report 2018
Market price or fair value change of investments The aforesaid refers to short term hedging currency transactions made by the relevant subsidiary with banks.
during the reporting period. Segregation of duties as follows:
Specific methodology and assumptions should be For the fair value evaluation, the relevant subsidiary is using external experts. The relevant subsidiary hedges currencies only; the relevant transactions are
disclosed in the analysis of fair value of the simple (options and forwards) for up to 1.5 years. Therefore, the valuation is straightforward, and the exchange rates are provided by the accounting department
investments of the relevant subsidiary and all other parameters are provided by the external experts.
Explanation for any significant changes in accounting
policies and principles, compared with last reporting N/A
period
The derivative investments carried by the Company are for hedging and avoiding the risk of market fluctuations. The investments respond to the Company’s
Independent Directors’ opinion on the investment in
routine business demands and are in accordance with the relevant laws and regulations. Additionally, the Company has adopted Currency Risk Hedging Policy to
derivative financial instruments and related risk
strengthen the risk management and control which benefit the Company’s ability to protect against market risk. The derivative investments do not harm the
controls
interests of the Company and its shareholders.
17
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
□ Applicable √ Not applicable
No such cases in the Reporting Period.
The Company successfully concluded and executed the transfer and divestment process relating to ChemChina’s
acquisition of Syngenta mentioned in Item VI in Section IV (Performance Discussion and Analysis) of the 2017
Annual Report (the “Syngenta Transaction”), with effective integration of the product portfolio transferred from
Syngenta as well as the simultaneous transition of divested products, ensuring continuity of supply, maintenance
of quality and minimal disruption to customers.
2. Sale of Major Equity Interests
□ Applicable √ Not applicable
VII Main Controlled and Joint Stock Companies
√ Applicable □ Not applicable
List of the stock-participating companies influencing over 10% of the net profits on the major subsidiaries and the
Company
Unit: RMB’000
Name Type Registered Total Operating Operating
Main services Net assets Net profit
capital assets revenues profit
Development,
manufacturing and
marketing of agrochemicals,
Adama intermediate
Subsidiary 720,085 33,891,178 14,823,296 11,783,305 2,926,319 2,235,906
Solutions materials for other
industries, food additives
and synthetic aromatic
products, mainly for export
Subsidiaries acquired or disposed during the Reporting Period
□ Applicable √ Not applicable
VIII Structured Entities Controlled by the Company
□ Applicable √ Not applicable
18
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
IX Performance Forecast for January-September 2018
Warning of possible loss or considerable YoY change in the accumulative net profit made during the
period-beginning to the end of the next reporting period, as well as the reasons:
□ Applicable √ Not applicable
X Risks Facing the Company and Countermeasures
The Group believes that it is exposed to several major risk factors, resulting from its economic environment, the
industry and the Group's unique characteristics, as follows (the order below does not indicate priority):
Exchange rate fluctuations
Although the Company reports its consolidated financial statements in RMB, the Company’s material subsidiary
Adama Solution reports its consolidated financial statements in US dollars, which is its functional currency, while
its operations, sales and purchases of raw materials are carried out in various currencies. Therefore, fluctuations in
exchange rates impact the Company’s results. In the Company's assessment, the Group's most significant
exposures are to the Euro, the Israeli Shekel and the Brazilian Real. The Company has lesser exposures to other
currencies. The strengthening of the US dollar against other currencies in which the Company operates reduces
the amount of the sales reported in dollar terms, and vice versa.
On an annual perspective, approximately 33% of Adama Solutions' sales are to the European market and therefore
the impact of long-term trends on the Euro may affect the Company's results and profitability.
Measuring currency exposure from foreign currency exchange rate fluctuations against assets, including inventory
of finished products in countries of sale, liabilities and cash flow denominated in foreign currencies are done
constantly. High volatility of the exchange rates of these currencies could increase the costs of transactions to
hedge against currency exposure, thereby increasing the Company's financing costs.
Adama Solutions uses commonly accepted financial instruments to hedge most of its substantial net balance sheet
exposure to any particular currency. Nonetheless, since as part of these operations Adama Solutions hedges
against most of its balance sheet exposure and against only part of its economic exposure, exchange rate volatility
might impact Adama Solutions’ results and profitability. Adama Solutions has hedged most of its balance sheet
exposure for the first six months of 2018 as it is on the date of publication of this report
In addition, as the Company’s product sales depend directly on the cyclical nature of the agricultural seasons,
therefore the Company’s income and its exposure to the various currencies is not evenly distributed over the year.
Countries in the northern hemisphere have similar agricultural seasons and therefore, in these countries, the
highest sales are usually during the first half of the calendar year. During this period, the Company is most
exposed to the Euro, the Polish Zloty and the British Pound. In the southern hemisphere, the seasons are opposite
and most of the local sales are carried out during the second half of the year. During these months, most of the
Company's exposure pertains to the Brazilian Real. The Company has more sales in markets in the northern
hemisphere and therefore, the Company's sales volume during the first half of the year is higher than the sales
volume during the second half of the year.
Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuations
The main portion of the debentures issued by Adama Solutions, material subsidiary of the Company, is linked to
the Israel Consumer Price Index (CPI) and therefore an increase in the CPI might lead to a significant increase in
its financing expenses. As of the date of approval of the financial statements, Adama Solutions hedged most of its
exposure to this risk on an ongoing basis, through CPI hedging transactions.
Adama Solutions is exposed to changes in the US dollar LIBOR interest rate as Adama Solutions has
19
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
dollar-denominated liabilities, which bear variable LIBOR interest. Adama Solutions prepares a quarterly
summary of its exposure to changes in the LIBOR interest rate and periodically examines hedging the variable
interest rate by converting it to a fixed rate. As of the date of approval of the financial statements, Adama
Solutions has not carried out hedging for such exposure, since US dollar interest rates have been relatively stable.
Business operations in emerging markets
The Group conducts business – mainly product sales and raw material procurement – inter alia, in emerging
markets such as Latin America (particularly in Brazil, the largest country market in which the Group operates),
Eastern Europe, South East Asia and Africa. The Group's activity in emerging markets is exposed to risks typical
of those markets, including: political and regulatory instability; volatile exchange rates; economic and fiscal
instability and frequent revisions of economic legislation; relatively high inflation and interest rates; terrorism or
war; restrictions on import and trade; differing business cultures; uncertainty as to the ability to enforce
contractual and intellectual property rights; foreign currency controls; governmental price controls; restrictions on
the withdrawal of money from the country; barter deals and potential entry of international competitors and
accelerated consolidation by large-scale competitors in these markets. Developments in these regions may have a
significant effect on the Group's operations. Distress to the economies of these markets could impair the ability of
the Group's customers to purchase its products or the ability to market them at international market prices, as well
as harm the Group's ability to collect customer debts, in a way that could have a significant adverse effect on the
Group's operating results.
The Group’s operations in multiple regions allows for the diversification of such risks and for the reduction of its
dependency on particular economies. In addition, changes in registration requirements or customers' preferences
in developed countries, which may limit the use of raw materials purchased from emerging economies, may
require redeployment by the Group's procurement organization, which might negatively affect its profitability for
a certain period.
Operating in a competitive market
The crop protection industry is highly competitive. Currently, approximately 60% of the industry's global market
is shared by four leading Originator Companies, which are based in Europe or North America, these being
DowDuPont, Bayer (now including Monsanto), BASF and Syngenta, which develop, manufacture and market
both patent-protected as well as off-patent products. The Group competes with the original products with the aim
of maintaining and increasing its market share.
The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term,
on price and profit margins, so as to protect their market share. Loss of market share or inability to acquire
additional market share from the Originator Companies can affect the Group's position in the market and
adversely affect its financial results. For details regarding the Group’s competitive advantages see section III -
subsection III of the 2017 annual report of the Company.
Similarly, the Group also competes in the more decentralized off-patent market, with other off-patent companies
and smaller-scale Originator Companies, which have significantly grown in number in recent years and are
materially changing the face of the crop protection products industry, the majority of whom have not yet deployed
global distribution networks, and are only active locally. These companies price their products aggressively and at
times have lower profit margins than the Group, which may harm the Group's sales and product prices. The
Group's ability to maintain its revenues and profitability from a specific product in the long term is affected by the
number of companies producing and selling comparable off-patent products and the time of their entrance to the
relevant market.
Any delay in developing or obtaining registrations for products and/or delayed penetration into markets and/or
growth of competitors that focus on off-patent active ingredients (whether by the expansion of their product
portfolio, granting registrations to other manufacturers (including manufacturers in China and India) to operate in
additional markets, transforming their distribution network to a global scale or increasing the competition for
20
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
distribution access), and/or difficulty in purchasing low cost raw materials, may harm the Group’s sales in this
sector, affect its global position and lead to price erosion.
Decline in scope of agricultural activities; exceptional changes in weather conditions
The scope of agricultural activities may be negatively affected by many exogenous factors, such as extreme
weather conditions, natural disasters, a significant decrease in agricultural commodity prices, government policies
and the economic condition of farmers. A decline in the scope of agricultural activities would cause a decline in
the demand for the Group’s products, erosion of its prices and collection difficulties, which may have a significant
adverse effect on the Group's results. Extreme weather conditions as well as damages caused by nature have an
impact on the demand for the Group's products. The Group believes that, should a number of such bad seasons
occur in succession, without favorable seasons in the interim, its results may sustain significant harm.
Environmental, health and safety legislation, standards, regulation and exposure
Many aspects of the Group's operations are strictly regulated, including in relation to production and trading, and
particularly in relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, their
ingredients and byproducts, some of which are considered hazardous. The Group's activities involve hazardous
materials. Defective storage or handling of hazardous materials may cause harm to human life or to the
environment in which the Group operates. The regulatory requirements regarding the environment, health and
safety could, inter alia, include soil and groundwater clean-up requirements; as well as restrictions on the volume
and type of emissions the Group is permitted to release into the air, water and soil.
The regulatory requirements applicable to the Group vary from product to product and from market to market, and
tend to become stricter with time. In recent years, both government authorities and environmental protection
organizations have been applying increasing pressure, including through investigations and indictments as well as
increasingly stricter legislative proposals and class action suits related to companies and products that may
potentially pollute the environment. Compliance with the foregoing legislative and regulatory requirements and
protection against such legal actions requires the Group to spend considerable financial resources (both in terms of
substantial ongoing costs and in terms of material one-time investments) as well as human resources in order to
meet mandatory environmental standards. In some instances, this may result in delaying the introduction of
products into new markets or in adverse effects on the Group’s profitability. In addition, the toughening, material
alteration or revocation of environmental licenses or permits, or their stipulations, or the inability to obtain such
licenses and permits, may significantly affect the Group's ability to operate its production facilities, which in turn
may have a material adverse effect on the financial and business results of the Group. The Group may be required
to bear significant civil liability (including due to class actions) or criminal liability (including high penalties
and/or high compensation payments and/or costs of environmental monitoring and rehabilitation), resulting from
violation of environmental, health and safety regulations, while some of the existing legislation may impose
obligations on the Group for strict liability, regardless of proof of negligence or malice.
While the Group invests material sums in adapting its facilities and in constructing special facilities in accordance
with environmental requirements, it is currently unable to assess with any certainty whether these investments
(current and future) and their outcomes may satisfy or meet future requirements, should these be significantly
increased or adjusted. In addition, the Group is unable to predict with any certainty the extent of future costs and
investments it may incur so as to meet the requirements of the environmental authorities in Israel or in other
countries in which it operates since, inter alia, the Group is unable to estimate the extent of potential pollutions,
their length, the extent of the measures required to be taken by the Group in handling them, the division of
responsibility among other parties and the amounts recoverable from third parties.
Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposure
to hazardous materials, which are predominantly covered under the Group’s insurance policies.
21
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Legislative, standard and regulatory changes in product registration
The majority of the substances and products marketed by the Group require registration at various stages of their
development, production, import, utilization and marketing, and are also subject to strict regulatory supervision by
the regulatory authorities in each country. Compliance with the registration requirements, that vary from country
to country and which are becoming more stringent with time, involves significant time and costs and rigorous
compliance with individual registration requirements for each product. Noncompliance with these regulatory
requirements might materially adversely affect the scope of the Group’s expenses, cost structure and profit
margins, as well as penetration of its products in the relevant market, and may even lead to suspension of sales of
the relevant product, and recall of those products already sold, or to legal action. Moreover, to the extent new
regulatory requirements are imposed on existing registered products (requiring additional investment or leading to
the existing registration's revocation) and/or the Group is required to compensate another company for its use of
the latter's product registration data, these might amount to significant sums, considerably increasing the Group's
costs and adversely affecting its results and reputation.
Additionally, the Group believes that, in countries where it maintains a competitive advantage, any toughening of
registration requirements may actually increase this advantage, since this will make it difficult for its competitors
to penetrate the same market, whereas in countries in which the Group possesses a small market share, if any,
such toughening may make further penetration of the Group's products into that market more difficult.
Product liability
Product and producer liability present a risk factor to the Group. Regardless of their prospects or actual results,
product liability lawsuits might involve considerable costs as well as tarnish the Group's reputation, thus
impacting its profits. The Group has third-party and defective product liability insurance cover. However, there is
no certainty that the scope of insurance cover is sufficient. Any future product liability lawsuit or series of
lawsuits could materially affect the Group’s operations and results, should the Group lose the lawsuit or should its
insurance cover not suffice or apply in a particular instance. In addition, while currently the Group has not
encountered any difficulty renewing such insurance policy, it is possible that it will encounter future difficulties in
renewing an insurance policy for third party liability and defective products on terms acceptable to the Group.
Successful market penetration and product diversification
The Group’s growth and profit margins are affected, inter alia, by the extent of its success in developing
differentiated products and obtaining registrations for them, so as to enable it to gain market share at the expense
of its competitors. Usually, being the first to launch a certain off-patent product affords the Group continuing
advantage, even after other competitors penetrate the same market. Thus, the Group's revenues and profit margins
from a certain product could be materially affected by its ability to launch such product ahead of the launch of a
comparable product by its competitors.
Should new products fail to meet registration requirements in the different countries or should it take a long period
of time to obtain such registrations, the Group's ability to successfully introduce a new product to the market in
question in the future would be affected, since entry into the market prior to other competitors is important for
successful market penetration. Furthermore, successful market penetration involves, inter alia, product
diversification in order to suit each market's changing needs. Therefore, if the Group fails to adapt its product mix
by developing new products and obtaining the required regulatory approvals, its future ability to penetrate that
market and to maintain its existing market share could be affected. Failure to introduce new products to given
markets and meet Group objectives (given the considerable time and resources invested in their development and
registration) might affect the sales of the product in question in the relevant market, the Group’s results and
margins.
Intellectual property rights of the Group and of third parties
The Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patents of an
22
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Originator Company or other third parties, or to develop products that do not otherwise infringe intellectual
property rights in a manner that may involve significant legal and other costs. Originator Companies tend to
vigorously defend their products and may attempt to delay the launch of competing off-patent products by
registering patents on slightly different versions of products for which the original patent protection is about to
expire or has expired, with the aim of competing against the off-patent versions of the original product. The
Originator Companies may also change the branding and marketing method of their products. Such actions may
increase the Group's costs and the risk it entails, and harm or even prevent its ability to launch new products.
The Group is also exposed to legal claims that its products or production processes infringe on third-party
intellectual property rights. Such claims may involve time, costs, substantial damages and management resources,
impair the value of the Group's brands and its sales and adversely affect its results. As of the date of approval of
the financial statements, such lawsuits that were concluded involved non-material amounts.
Furthermore, the Group protects its brands and trade secrets with patents, trademarks and other methods of
intellectual property protection, however these protective means may not be sufficient for safeguarding its
intellectual property. Any unlawful or other unauthorized use of the Group's intellectual property rights could
adversely affect the value of its intellectual property and goodwill. In addition, the Group may be required to take
legal action involving financial costs and resources to safeguard its intellectual property rights.
Fluctuations in raw material inputs and prices, and in costs of goods sold
Significant percentage of the cost of the Groups’ sales derives from raw material costs. Hence, significant
increases or decreases in raw material costs affect the cost of goods sold, which is generally seen a number of
months following such cost fluctuation. Most of the Group's raw materials are distant derivatives of oil prices, and
therefore extreme increases or decreases in oil prices may affect the costs of raw materials, even if only partially
or indirectly.
To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-term
purchase contracts for key raw materials, wherever possible. Similarly, the Group acts to adjust its sales prices, if
possible, to reflect the changes in the costs of raw materials.
As of the date of approval of the financial statements, the Group has not engaged in any hedging transactions
against increases in oil prices and other raw material costs.
Exposure due to recent developments in the genetically modified seeds market
Any further significant development in the market of genetically modified seeds for agricultural crops, including
as a result of regulatory changes in certain countries currently prohibiting the use of genetically modified seeds,
and/or any significant increases in the sales of genetically modified seeds or crop protection products of which
genetically modified crops are designed to be tolerant, such as Glyphosate and/or other existing or new crop
protection products that are developed (substituting traditional products), will affect demand for crop protection
products, requiring the Group to respond by adapting its product portfolio to the new demand structure.
Consequently, to the extent that the Group fails to adapt its product mix accordingly, this may reduce demand for
its products, erode their sales price and necessarily affect the Group’s results and market share.
Operational risks
The Group’s operations, including its manufacturing activities, rely, inter alia, on computer systems. The Group
continually invests in upgrading and protecting these systems. Any unexpected failure of these systems, as well as
the integration of new systems, could involve substantial costs and adversely affect the Group's operations until
completion of the repair or integration. The potential occurrence of a substantial failure that cannot be repaired
within a reasonable time frame may also affect the Group's operations and its results. Currently, the Group has a
property and loss-of-profit insurance policy.
23
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Raw material supply and/or shipping and port services disruptions
Lack of raw materials or other inputs utilized in the manufacture of Group products may prevent the Group from
supplying its products or significantly increase production costs. Moreover, the Group imports raw materials to its
production facilities in Israel and/or outside Israel, from where it exports the products to its subsidiaries around
the world for formulation and/or commercialization purposes. Disruptions in the supply of raw materials from
regular suppliers may adversely affect operations until an alternative supplier is engaged. If any of the Group's
suppliers are unable to supply raw materials for a prolonged period, including due to ongoing disruptions and/or
prolonged strikes and/or infrastructure defects in the operating of a relevant port, and the Group is unable to
engage with an alternative supplier at similar terms and in accordance with product registration requirements, this
may adversely affect the Group's results, significantly affect its ability to obtain raw materials in general, or obtain
them at reasonable prices, as well as limit its ability to supply products and/or meet customer supply deadlines.
These might negatively affect the Group, its finances and operating results. In order to reduce this risk, it is the
Group's practice to occasionally adjust the volume of its product inventories and at times utilize air freight.
Failed mergers and acquisitions; difficulties in integrating acquired operations
The Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed, in a
calculated manner, to expand its product portfolio and deepen its presence in certain geographical markets.
Growth through mergers and acquisitions requires assimilation of acquired operations and their effective
integration in the Group, including realization of certain forecasts, profitability, market conditions and
competition.
Failure to successfully implement the above and/or non-realization of the said forecasts may result in not
achieving the additional value forecasted, losing customers, exposure to unexpected liabilities, reduced value of
the intangible assets included in the merger or acquisition as well as the loss of professional and skilled human
resources.
Production concentration in limited plants
A large portion of the Group’s production operations is concentrated in a small number of locations. Natural
disasters, hostilities, labor disputes, substantial operational malfunction or any other material damage might
significantly affect Group operations, as a result of the difficulty, the time and investment required for relocating
the production operation or any other activity.
International taxation
Most of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individual companies
are assessed in accordance with the tax laws effective in each respective location. The Group’s effective tax rate
could be significantly affected by different classification or attribution of the profits arising from the share of
value earned of the companies in the Group in the various countries, as will be recognized in each tax jurisdiction;
changes in the characteristics (including regarding the location of control and management) of these companies;
changes in the breakdown of the Group's profits into regions where differing tax rates apply; changes in statutory
tax rates and other legislative changes; changes in assessment of the Group's deferred tax assets or deferred tax
liabilities; changes in determining the areas in which the Group is taxed; and potential changes in the Group's
organizational structure.
Changes in tax regulations and the manner of their implementation, including with regard to the implementation
of BEPS (Base Erosion and Profit Shifting), may lead to a substantial increase in the Group's applicable tax rates
and have a material adverse effect on its financial state, results and cash flows.
The Group’s Financial Statements do not include a material provision for exposure for international taxation, as
stated above, based on professional counsel it has received.
24
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Risks arising from the Group’s debt
The Group finances its business operations by means of its own equity and loans from external sources (primarily
debentures issued by Adama Solutions and bank credit). The Group's main source for servicing the debt and its
operating expenses is by means of the profits from the Group companies’ operations. Restrictions applying to the
Group companies regarding distribution of dividends to the Group, or the tax rate applicable on these dividends,
may affect the Group's ability to finance its operations and service its debt.
In addition, the Group's funding agreements and documents require it to meet certain Financial Covenants. Failure
to meet these covenants due to an exogenous event or non-materialization of Group forecasts, and insofar as the
financing parties refuse to extend or update these Financial Covenants as per the Group’s capabilities, may lead
the financing parties to demand the immediate payment of these liabilities (or part thereof).
Exposure to customer credit risks
The Group’s sales to customers usually involve customer credit as is customary in each market. A portion of these
credit lines are insured, while the remainder is exposed to risk, particularly during economic slowdowns in the
relevant markets. The Group’s aggregate credit, however, is diversified among many customers in multiple
countries, mitigating this risk. In addition, in certain regions, particularly in South America, credit days are
particularly long (compared to those extended to customers in regions such as Europe), and on occasion, inter alia,
owing to agricultural seasons or economic downturns in those countries, the Group may encounter difficulties in
collection of customer debts, with the collection period being extended over several years.
Generally, such issues arise more often in developing countries where the Group is less familiar with its customers,
the collaterals are of doubtful value and the insurance cover of these customers is likely to be limited. Credit
default by any of the customers may negatively impact the Group's cash flow and financial results.
The Group’s working capital and cash flow needs
Similar to other companies operating in the crop protection industry, the Group has substantial cash flow and
working capital requirements in the ordinary course of operations. In view of the Group's growth and considering
its primary growth regions, the Group’s broad product portfolio and its investments in manufacturing
infrastructures, the Group has significant financing and investment needs. The Group acts continually to improve
the state and management of its working capital. While currently the Group is in compliance with all its financial
covenants, significant deterioration of its operating results may in the future lead it to fail to comply with its
financial covenants and fail to meet its financial needs. As a result, the Group's ability to meet its goals and
growth plans, and its ability to meet its financial obligations, may be harmed.
25
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section V Significant Events
I Annual and Special Meetings of Shareholders Convened during the Reporting Period
1. Meetings of Shareholders Convened during the Reporting Period
Investor Index to disclosed
Meeting Type Convened date Disclosure date
participation ratio information
Announcement of the
1st Interim
Shareholders Meeting
in 2018
1st Interim
Interim Shareholders (Announcement
Shareholders 74.06% March 19, 2018 March 20, 2018
Meeting Number:2018-11).
Meeting in 2018
Disclosed at the
website CNINFO
www.cninfo.com.cn
Announcement of the
Annual Shareholders
Meeting
2017 Annual (Announcement
Annual Shareholders
Shareholders 82.09% June 28, 2018 June 29, 2018 Number:2018-35).
Meeting
Meeting Disclosed at the
website CNINFO
www.cninfo.com.cn
2. Special Meetings of Shareholders Convened at Request of Preference Shareholders with Resumed Voting
Rights
□ Applicable √ Not applicable
II Proposal for Profit Distribution and Converting Capital Reserve into Share Capital for the
Reporting Period
□ Applicable √ Not applicable
For the Reporting Period, the Company does not plan to distribute cash dividends or bonus shares or convert
capital reserve into share capital.
III Commitments completed by the Company, the shareholders, the actual controllers, the
purchasers, or the other related parties during the reporting period and those which should
be completed but failed during the reporting period
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
IV Engagement and Disengagement of CPA Firm
Has the semi-annual financial report been audited?
□Yes √ No
This Semi-Annual Report is unaudited.
V Explanations Given by Board of Directors and Board of Supervisors Regarding “Modified
Auditor’s Report” Issued by CPA Firm for the Reporting Period
□ Applicable √ Not applicable
VI Explanations Given by Board of Directors Regarding “Modified Auditor’s Report” Issued
for Last Year
□ Applicable √ Not applicable
VII Bankruptcy and Restructuring
□ Applicable √ Not applicable
No such cases in the Reporting Period.
VIII Litigation and Arbitration Matters
Significant litigations or arbitrations:
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Other litigations or arbitrations:
□ Applicable √ Not applicable
No substantial litigation or arbitrations in the Reporting Period.
IX Punishments and Rectifications
□ Applicable √ Not applicable
No such cases in the Reporting Period.
X Integrity of the Company, its controlling shareholders and actual controller
□ Applicable √ Not applicable
XI Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures for
Employees
□ Applicable √ Not applicable
27
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
To the date of the Report, the Company does not have stock incentive plans, ESOP or other staff incentives. It
shall be noted, that the Company’s subsidiary approved in December 2017 and granted long-term cash rewards to
executive officers and employees, which is based on the performance of the Company's shares (phantom cash
incentives).
XII Significant Related Transactions
1. Related Transactions Relevant to Routine Operations
□Applicable √ Not applicable
(1) There are no significant related-party transactions during the reporting period.
(2) Item XII of Section X “Financial Statements” has set out the related parties and the related-party transactions
of the Company.
2. Related Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable √ Not applicable
The Company was not involved in any related-party transactions arising from asset acquisition or sale during the
Reporting Period.
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable √ Not applicable
The Company was not involved in any significant related-party transaction with joint investments during the
Reporting Period.
4. Credits and Liabilities with Related Parties
√ Applicable □ Not applicable
Whether exist non-operating credits and liabilities with related parties or not?
□ Yes √ No
The Company was not involved in any non-operating credit and liability with related parties in the Reporting
Period.
5. Other significant related-party transactions
√Applicable □Not applicable
The 2017 Annual Shareholders Meeting approved the expected related-party transactions in the ordinary business
course of the Company in 2018. Please refer to Item XII of Section X “Financial Statements” for details of the
related-party transactions in the ordinary business course.
The website to disclose the interim announcements on significant related-party transactions:
28
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Disclosure date of the interim Website to disclose the interim
Name of the interim announcement
announcement announcement
Announcement on Expected Related-Party Transactions in
June 8, 2018 www.cninfo.com.cn
the Ordinary Course of Business in 2018
XIII. Utilization of the Company’s capital by the controlling shareholder or its related parties
for non-operating purposes
□ Applicable √ Not applicable
The Company was not involved in the non-operating utilization of funds by the controlling shareholder and other
related parties during the Reporting Period.
XIV. Significant Contracts and Execution
1. Entrustment, Contracting and Leasing
(1) Entrustment
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √ Not applicable
No such cases in the Reporting Period.
(3) Leasing
□Applicable√ Not applicable
No significant leasing in the Reporting Period.
2. Significant Guarantees
□Applicable √Not applicable
The Company did not provide any significant guarantee during the reporting period.
3. Other Significant Contracts
□ Applicable √ Not applicable
No such cases in the Reporting Period.
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Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
XV. Social Responsibilities
1. Information on the Environmental Situation
Is the Company listed as key polluting entities by environmental protection agencies?
Yes
Main
Number
pollutants Layout of Total
Company Way of of Pollution standards Total amount Exceeding
and emission Concentration amount
name emission emission applied emitted/discharged limit
special points approved
points
pollutants
Comprehensive
Standard on
Centralized
Discharge of Waste
Sanonda COD Continuous 1 discharge Within limit 137.85 391.3 No
Water
point
(GB8978-1996) ，
COD<100mg/L
Comprehensive
Standard on
Centralized Discharge of Waste
Ammonia
Sanonda Continuous 1 discharge Within limit Water 13.91 50 No
nitrogen
point (GB8978-1996),
Ammonia
nitrogen<15mg/L
Standard on Air
Pollution of Power
Power
Sanonda NOx Continuous 1 Within limit Plant 205.91 564.7 No
plant
（GB13223-2011）
NOx <200mg/m3
Standard on Air
Pollution of Power
Power
Sanonda SO2 Continuous 1 Within limit Plant 171.12 380 No
plant
（GB13223-2011）
SO2<200mg/m3
Standard on Air
Pollution of Power
Fume and Power Plant
Sanonda Continuous 1 Within limit 25.3 80 No
dust plant （GB13223-2011）
Fume and
dust<30mg/m3
30
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
(1) Development and Operation of Environmental Facilities
① Development and Operation of Waste Water Facilities
The Company has a waste water treatment facility whose capacity is designed at 12,400 tons per day. The waste
water facility is running well and COD (chemical oxygen demand) and ammonia nitrogen concentration after
treatment meet the standards.
② Development and Operation of Waste Gas Facilities
The treatment facility for the Company’s coal-based power plant is running well. SO2, NOx and dust in the waist
gas after treatment meet the standards.
③ The Company discloses production and pollution information according the Interim Measures on
Environmental Information Disclosure and transfers information of main waste water and air pollutants to the
provincial information platform on a daily basis.
(2) EIA of construction projects and other environmental administrative permits
No.
(3) Contingency plan of environmental accidents
The contingency plan is developed with a purpose of implementing a precautionary approach for environmental
safety, ensuring quick response to potential environmental emergencies and carrying out rescue in a
well-organized way according to pre-made rescue plan.
① Composition of the command team
② Emergency response
㈠ Alarm and Telecommunication
㈡ Field Rescue
③ Relief and Rescue of Environmental Pollution Accidents
㈠ Pollutants and Main Sources
㈡ Cause Analysis of Environmental Pollution
㈢ Relief and Rescue Measures
㈣ Handling and Precautionary Measures of Environmental Pollution Accidents
④ Supporting Measures
㈠ Supply support
㈡ System support
⑤ Training and Exercises
(4) Environment self-monitoring plan
The Company developed the 2018 Environment Self-Monitoring Plan according to relevant government
requirements, to enhance environmental management, understand emissions and discharge of pollutants of the
Company, evaluate their impact on the surrounding environment, enhance management of pollutants discharge
and emissions in the process of production, be subject to supervision of environmental agencies and provide basis
to pollution prevention and control.
① Monitored Indicators
Waste water: COD, NH3-N, PH, SS, BOD (Biochemical Oxygen Demand), Petroleum, TP, Volatile Phenol.
31
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Air Pollutant: SO2, NOX, Dust.
Noise: Noise by site border
② Frequency
Boiler emission and waste water discharged from the centralized point: continuous auto monitoring
Manual sampling: SS, BOD, Petroleum, TP, Volatile Phenol, once a month.
Noise: once a quarter.
(5) Other environmental information that should be disclosed
No.
(6) Other related information on environmental protection
No.
2. Perform the social responsibility of targeted poverty alleviation
(1) Targeted Poverty Alleviation Planning
The Company actively implements targeted poverty alleviation according to relevant instructions from Jingzhou
Leading Group on Poverty Alleviation.
(2) Half-year Overview
During the reporting period, the employees of the Company visited 20 households below the poverty line in
Sanzhou village and gave 300 RMB to each family.
(3) Performance of Targeted Poverty Alleviation
Measurement
Indicator Number/Progress
unit
I. General condition —— ——
Of which: 1. Capital RMB'0,000 0.6
II. Itemized investment —— ——
1. Out of poverty by industrial development —— ——
Of which: 1.1 type of industrial development out of poverty ——
1.2 number of industrial development out of poverty Unit
1.3 investment amount of industrial development out of
RMB'0,000
poverty
1.4 the number of people out of poverty who were helped to
Number
establish card for archives
2. Out of poverty by transferring employment —— ——
32
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Measurement
Indicator Number/Progress
unit
3. Out of poverty by relocating —— ——
4. Out of poverty by education —— ——
5. Out of poverty by improving health —— ——
6. Out of poverty by protecting ecological environment —— ——
7. Subsidy for the poorest —— ——
8. Social poverty alleviation RMB'0,000 0.6
9. Other items —— ——
III. Received awards(contents and rank) —— ——
(4) Follow-up Plan
The Company will continue to steadily promote poverty alleviation with one-on-one subject following
instructions of Jingzhou disciplinary Committee and Leading Group on Poverty Alleviation.
XVI. Other Significant Events
□ Applicable √ Not applicable
Note that the Company completed the non-public offering to raise matching funds. The listing date of
newly-issued shares is January 17, 2018. For details, please see the announcements disclosed on the website of
www.cninfo.com.cn on July 7, 2017 and January 16, 2018.
XVII. Significant Events of Subsidiaries
□ Applicable √ Not applicable
Please refer to the Syngenta Transaction, mentioned in Section IV 6. above.
33
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section VI Share Changes and Shareholders’ Profile
I. Changes in shares
1. Changes in shares
Unit: share
Before this change Increase/decrease (+, -) After the change
Capitalizat
ion of
Issuance of Bonus
Amount Proportion public Other Subtotal Amount Proportion
new shares share
reserve
fund
I. Shares subject to
trading
1,930,596,116 82.44% 104,697,982 -5,344 104,692,638 2,035,288,754 83.19%
Moratorium
(Restricted Shares)
1. State’s shares -- -- -- -- -- -- -- -- --
2. State-owned
legal person’s 1,930,570,241 82.44% 67,114,092 67,114,092 1,997,684,333 81.65%
shares
3. Shares held by
other domestic 25,875 0.00% 37,583,890 -5,344 37,578,546 37,604,421 1.54%
investors
Among which:
(1) Shares held by
37,583,890 37,583,890 37,583,890 1.54%
domestic legal
person;
(2) Shares held by
domestic natural 25,875 0.00% -5,344 -5,344 20,531 0.00%
person
II. Shares not subject
411,259,484 17.56% 5,344 5,344 411,264,828 16.81%
to trading moratorium
Ordinary shares
244,210,143 10.43% 5,344 5,344 244,215,487 9.98%
denominated in RMB
Domestically listed
167,049,341 7.13% 167,049,341 6.83%
foreign shares
III. Total of shares 2,341,855,600 100.00% 104,697,982 104,697,982 2,446,553,582 100.00%
34
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Reasons for changes in share
√ Applicable □ Not applicable
The listing date of the newly-issued 104,697,982 shares in the non-public offering under which the Company
raised is January 17, 2018. The total amount of the shares of the Company listed is 2,446,553,582.
Approval of share changes
√ Applicable □ Not applicable
On September 13, 2016, the Company held the 15th meeting of the 7th session of the BOD, on which proposals
related to share issuance for assets purchase and supporting funds raising and connected transactions, and proposal
on the buyback and cancellation of B shares from Adama Celsius B.V. were approved.
On January 9, 2017, the Company held the 17th meeting of the 7th session of the BOD, on which the Report (draft)
on the share issuance to purchase assets, the raising of supporting funds and the connected transactions was
considered and adopted.
On February 24, 2017, the Company held the 18th meeting of the 7th session of the BOD, on which the proposals
on the Plan and the Report (draft & revision) on the share issuance to purchase assets, the raising of supporting
funds and the connected transactions were considered and adopted.
On March 27, 2017, the Company held the first interim shareholders meeting of 2017, on which the proposal on
the Report (draft & revision) on the share issuance to purchase assets, the raising of supporting funds and the
connected transactions, and the proposal on the buyback and cancellation of the B shares were considered and
adopted.
On May 12, 2017, the Company held the 7th interim meeting of the 7th session of the BOD, on which the
proposals on the Plan and the Report (draft & revision) on the share issuance to purchase assets, the raising of
supporting funds and the connected transactions were considered and adopted.
On July 3, 2017, the Company received the Approval on Issuing Shares by Hubei Sanonda Co., Ltd. to China
National Agrochemical Corporation for Acquiring Assets and Raising Supporting Funds (CSRC license No.
[2017]1096).
The registered status for the change in shares
√Applicable □ Not applicable
The Shenzhen Branch of China Securities Depository and Clearing Corporation Limited accepted the registration
application of the issuance of shares to certain investors on January 4, 2018, and issued an Acceptance
Confirmation Letter on Share Registration Application. The Company has completed the registration of the
additional 104,697,982 shares issued for private placement.
Influence of share changes towards financial indexes in the latest year and latest period such as basic EPS and
diluted EPS, and net assets per share belonging to shareholder with ordinary share
□ Applicable √ Not applicable
Other contents that the Company thinks necessary or is asked by securities regulators to be disclosed
□ Applicable √ Not applicable
35
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
2. Changes in Restricted Shares
√ Applicable □ Not applicable
Restricted
Restricted
shares Restricted shares
shares at the Restricted shares
released increased during Reason for
Shareholder beginning of at the end of the Released date
during the the reporting restricting
the reporting reporting period
reporting period
period
period
China Structural Reform Committed not to
0 0 33,557,046 33,557,046 Jan 16, 2019
Fund Co., Ltd. trade
Industrial Bank Co., Ltd, Committed not to Jan 16, 2019
Mixed Securities trade
0 0 4,026,800 4,026,800
Investment Fund, Xingquan
New Vision Investment
Industrial Bank Co., Ltd, Committed not to Jan 16, 2019
Mixed Securities trade
Investment Fund, 0 0 8,053,736 8,053,736
Aegon-Industrial Trend
Investment (LOF)
CCB Principal-ICBC-Avic Committed not to Jan 16, 2019
Trust, Trust Plan of Pooled trade
Funds of CCB Principal
0 0 12,885,906 12,885,906
Private Placement
Investment, Tianqi (2016)
No. 293 of Avic Trust
Caitong Fund Xiangyun Committed not to Jan 16, 2019
No.2 Asset Management 0 0 536,912 536,912 trade
Plan
Caitong Fund Fuchun Committed not to Jan 16, 2019
Chuangyi Private trade
0 4,697,986 4,697,986
Placement No.3 Asset
Management Plan
Penghua Fund-CCB-China Committed not to Jan 16, 2019
Life Insurance, Private trade
Placement Portfolio of
Penghua Fund Management 0 0 4,697,990 4,697,990
Co., Ltd Entrusted by China
Life Insurance (Group)
Company
Penghua Fund-Pingan Committed not to Jan 16, 2019
Bank—Huarun Shenguotou 0 0 2,684,560 2,684,560 trade
Trust-Huren Single Trust
China Cinda Asset Committed not to Jan 16, 2019
0 0 33,557,046 33,557,046
Management Co., Ltd. trade
Locked shares for 25% release on
Liu Zhiming 21,375 5,344 0 16,031 former senior the first trading
executive day of every year
Total 21,375 5,344 104,697,982 104,714,013 -- --
36
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
II. Issuance and Listing of Securities
The listing date of the newly-issued 104,697,982 shares in the non-public offering under which the Company
raised is January 17, 2018. The total amount of the shares of the Company listed is 2,446,553,582.
√ Applicable □Not applicable
Name of Issue Date of Index of disclosure Disclosure
Date Number of
stock and Issue price (or Number of termination date
of permitted listed
derivative date interest issue of the
listing transactions
securities rate) transaction
Stock
Sanonda A Jan RMB14.9 104,697,982 Jan 104,697,982 -- Announcement of Jan 16,
4, per share 17, Sanonada on 2018
2018 2018 Implementation of
MAR project and
Listing of New
Shares
www.cninfo.com.cn
Description of the issue of securities in the reporting period
During the reporting period, the Company issued 104,697,982 shares to investors as a part of the material assets
restructuring project. The listing date for such shares is Jan 17, 2018. Such shares shall be prohibited from transfer
in whatever form within 12 months after date of listing.
III. Total Number of Shareholders and Their Shareholdings
Unit: share
48,361 Total number of preferred
Total number of common shareholders (the number of ordinary A share shareholders that had resumed their
shareholders is 32,348; 0
at the end of the Reporting Period the number of B share shareholders is voting right at the end of the
16,013) Reporting Period (if any)
Shareholding of common shareholders holding more than 5% shares or the top 10 shareholders
Increase / Pledged or
Number of
decrease of frozen shares
Holding Number of shares held
Nature of Number of shares
Name of shareholder percentage restricted not subject to
shareholder shares held during
(%) shares held trading Status Number
Reporting
moratorium
Period
China National Agrochemical State-owned
74.02% 1,810,883,039 - 1,810,883,039 0 - -
Co., Ltd. legal person
37
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Jingzhou Sanonda Holding Co., State-owned
4.89% 119,687,202 - 119,687,202 0 - -
Ltd. legal person
China Cinda Asset Management State-owned
1.37% 33,557,046 33,557,046 33,557,046 0 - -
Co., Ltd. legal person
China Structural Reform Fund State-owned
1.37% 33,557,046 33,557,046 33,557,046 0 - -
Co., Ltd. legal person
CCB Principal-ICBC-Avic
Trust, Trust Plan of Pooled
Funds of CCB Principal Private Others 0.53% 12,885,906 12,885,906 12,885,906 0 - -
Placement Investment, Tianqi
(2016) No. 293 of Avic Trust
Portfolio No.118 of National
Others 0.39% 9,504,717 500,000 0 9,504,717 - -
Social Security Fund
Industrial Bank Co., Ltd, Mixed
Securities Investment Fund,
Others 0.33% 8,053,736 8,053,736 8,053,736 0 - -
Aegon-Industrial Trend
Investment (LOF)
Portfolio No.412 of National
Others 0.20% 4,878,812 4,878,812 0 4,878,812
Social Security Fund
GUOTAI JUNAN
Foreign
SECURITIES(HONGKONG) 0.20% 4,838,647 312,402 0 4,838,647 - -
legal person
LIMITED
Penghua Fund-CCB-China Life
Insurance, Private Placement
Portfolio of Penghua Fund
Others 0.19% 4,697,990 4,697,990 4,697,990 0 - -
Management Co., Ltd Entrusted
by China Life Insurance
(Group) Company
Strategic investors or the general legal person
due to the placement of new shares become Not applicable
the top 10 shareholders (if any) (note 3)
Jingzhou Sanonda Holdings Co., Ltd. and CNAC are related parties, and are
acting-in-concert parties as prescribed in the Administrative Methods for Acquisition
Explanation on associated relationship or/and of Listed Companies. Sanonda Holding is a wholly-controlled subsidiary of CNAC. It
persons is unknown whether the other shareholders are related parties or acting-in-concert
parties as prescribed in the Administrative Methods for Acquisition of Listed
Companies.
Particulars about shares held by top 10 common shareholders not subject to trading moratorium
Number of shares held not subject to trading Type of share
Name of shareholder
moratorium at the end of the Period Type of share Number
Portfolio No.118 of National Social Security
9,504,717 RMB ordinary share 9,504,717
Fund
Portfolio No.412 of National Social Security
4,878,812 RMB ordinary share 4,878,812
Fund
GUOTAI JUNAN Domestically listed
4,838,647 4,838,647
SECURITIES(HONGKONG) LIMITED foreign share
Qichun County State-owned Assets
4,169,266 RMB ordinary share 4,169,266
Administration
Portfolio No.503 of National Social Security
2,999,750 RMB ordinary share 2,999,750
Fund
38
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Agricultural Bank of China Limited - CSI
2,973,962 RMB ordinary share 2,973,962
500 Exchange Traded Fund
Wu Feng 2,646,437 RMB ordinary share 2,646,437
Aegon-Industrial Fund – Industrial Bank
– Aegon-Industrial – Asset Management
2,637,517 RMB ordinary share 2,637,517
Plan for Stock Dividend of Specified
Customers
Domestically listed
Xie Qingjun 2,500,000 2,500,000
foreign share
Aegon-Industrial Fund – Agricultural Bank
of China – China Pacific Life Insurance –
2,493,609 RMB ordinary share 2,493,609
Entrusted Investment by Private Placement
Strategic Product (Assured Amount Bonus)
Explanation on associated relationship among
the top ten shareholders of tradable share not
Qichun County Administration of State-Owned Assets held shares of the Company on
subject to trading moratorium, as well as
behalf of the government. It is unknown whether the other shareholders are related
among the top ten shareholders of tradable
parties or acting-in-concert parties as prescribed in the Administrative Methods for
share not subject to trading moratorium and
Acquisition of Listed Companies
top ten shareholders, or explanation on
acting-in-concert
Particular about shareholder participate in the Shareholder Wu Feng held 775,726 shares of the Company through a credit collateral
securities lending and borrowing business (if securities trading account and held 1,870,711 shares of the Company through a
any) (note 4) common securities account, who thus held 2,646,437 shares of the Company in total.
Did any top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the
Company carry out a promissory buy-back in the Reporting Period?
□ Yes √ No
The top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the
Company had not carried out any agreed buy-back in the Reporting Period.
IV. Change of the Controlling Shareholder or the Actual Controller
Change of the controlling shareholder in the Reporting Period
□ Applicable √ Not applicable
There was no change of the controlling shareholder of the Company in the Reporting Period.
Change of the actual controller in the Reporting Period
□ Applicable √ Not applicable
There was no change of the actual controller of the Company in the Reporting Period.
39
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section VII Preference Shares
□ Applicable √ Not applicable
No preference shares in the Reporting Period.
40
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section VIII Directors, Supervisors and Senior Management
I Changes in Shareholdings of Directors, Supervisors and Senior Management
□ Applicable √ Not applicable
No such cases in the Reporting Period. For details, see Annual Report 2017.
II Changes in Directors, Supervisors and Senior Management
√ Applicable □ Not applicable
Name Office title Type of change Date Reason
Fu Liping Supervisor Demission March 19, 2018 Expiration of the term of office
Ding Shaojun Supervisor Demission March 19, 2018 Expiration of the term of office
Dong Chunji Supervisor Demission March 19, 2018 Expiration of the term of office
Xu Yan Supervisor Demission March 19, 2018 Expiration of the term of office
Li Dejun Supervisor In Office March 19, 2018 Nominated by the Board of Supervisors
Guo Zhi Supervisor In Office March 19, 2018 Nominated by the Board of Supervisors
On July 25, 2018, the Board of Directors of the Company received a notice from director Ren Jianxin informing the
Company of his resignation due to his retirement. On July 26, 2018, the 6th meeting of the 8th session of the Board of
Directors approved the nomination of Mr. Ning Gaoning to be a director of the Board of Director as proposed by
CNAC.
41
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section IX Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the
approval date of this Report or were due but could not be redeemed in full?
No
42
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
Section X Financial Report
I. Audit report
Was the half-year report audited?
□ Yes √ No
The half-year report was not audited.
II. Financial Statements
Notes to the financial statements are presented in RMB’000.
43
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Balance Sheet
Notes June 30, 2018 January 1, 2018
Current assets
Cash at bank and on hand V.1 6,049,530 7,868,858
Financial assets at fair value through profit or loss V.2 32,693 23,000
Derivative financial assets V.3 940,225 455,153
Bills receivables V.4 88,285 180,030
Accounts receivable V.5 6,614,644 5,085,911
Prepayments V.6 286,942 202,111
Other receivables V.7 707,725 1,029,557
Inventories V.8 8,274,820 7,488,238
Assets held for sale V.9 - 403,297
Non-current assets due within one year V.19 46 46
Other current assets V.10 548,960 614,925
Total current assets 23,543,870 23,351,126
Non-current assets
Long-term receivables V.11 146,399 192,968
Long-term equity investments V.12 119,251 102,383
Other equity investments V.13 91,154 91,090
Investment properties 4,251 4,408
Fixed assets V.14 6,150,140 6,141,490
Construction in progress V.15 871,046 803,421
Intangible assets V.16 5,895,824 4,036,588
Goodwill V.17 3,939,153 3,890,097
Deferred tax assets V.18 623,619 870,518
Other non-current assets V.19 193,091 201,667
Total non-current assets 18,033,928 16,334,630
Total assets 41,577,798 39,685,756
The notes on pages 13 to 115 form part of these financial statements.
44
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Balance Sheet (continued)
Notes June 30, 2018 January 1, 2018
Current liabilities
Short-term loans V.20 384,482 2,280,912
Derivative financial liabilities V.21 1,209,687 789,050
Bills payable V.22 144,991 311,557
Accounts payable V.23 4,221,331 3,906,481
Advances from customers V.24 169,950 226,711
Employee benefits payable V.25 766,690 995,637
Taxes payable V.26 595,224 431,275
Interest payable V.27 43,245 46,491
Dividends payable V.41 154,383 250
Other payables V.28 1,991,600 1,375,993
Non-current liabilities due within one year V.29 487,951 448,504
Other current liabilities V.30 528,978 482,583
Total current liabilities 10,698,512 11,295,444
Non-current liabilities
Long-term loans V.31 320,382 514,320
Debentures payable V.32 7,548,581 7,777,410
Long-term payables 23,490 24,203
Long-term employee benefits payable V.33 631,479 610,714
Provisions V.34 113,041 163,913
Deferred income V.35 44,212 -
Deferred tax liabilities V.18 471,942 224,613
Other non-current liabilities V.36 182,734 225,292
Total non-current liabilities 9,335,861 9,540,465
Total liabilities 20,034,373 20,835,909
Shareholders' capital
Share capital V.37 2,446,554 2,446,554
Capital reserve V.38 12,972,906 12,982,277
Other comprehensive income V.39 401,339 (104,080)
Special reserve 14,259 9,349
Surplus reserve V.40 207,823 207,823
Retained earnings V.41 5,500,544 3,307,924
Total shareholders’ equity 21,543,425 18,849,847
Total liabilities and shareholders’ equity 41,577,798 39,685,756
Chen Lichtenstein Aviram Lahav
Legal representative Chief of accounting work & Chief of
accounting organ
These financial statements were approved by the Board of Directors of the Company on August 27, 2018.
45
Hubei Sanonda Co., Ltd. SemiAnnual Report 2018
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Balance Sheet
Notes June 30, 2018 January 1, 2018
Current assets
Cash at bank and on hand XIV.1 1,789,722 1,868,603
Bills receivable 45,079 146,525
Accounts receivable XIV.2 942,706 850,034
Prepayments 14,238 24,019
Other receivables 2,535 1,140
Inventories 163,155 177,402
Other current assets 566 1,406
Total current assets 2,958,001 3,069,129
Non-current assets
Long-term equity investments XIV.3 15,939,826 15,939,826
Other equity investments 80,119 80,119
Investment properties 4,251 4,408
Fixed assets 1,199,768 1,262,330
Construction in progress 127,228 81,993
Intangible assets 206,517 183,920
Deferred tax assets 31,831 26,892
Other non-current assets 12,934 11,000
Total non-current assets 17,602,474 17,590,488
Total assets 20,560,475 20,659,617
Current liabilities
Short-term loans 20,000 70,000
Bills payable 105,000 23,000
Accounts payable 238,400 234,615
Advances from customers 10,699 63,904
Employee benefits payable 28,881 30,491
Taxes payable 54,879 19,301
Interest payable 257 105
Dividends payable 154,383 250
Other payables 139,541 482,503
Non-current liabilities due within one year 152,000 126,590
Total current liabilities 904,040 1,050,759
Non-current liabilities
Long-term loans - 72,000
Long-term employee benefits payable 90,443 93,025
Provisions 15,671 15,671
Other non-current liabilities 171,770 171,770
Total non-current liabilities 277,884 352,466
Total liabilities 1,181,924 1,403,225
Shareholders’ equity
Share capital V.37 2,446,554 2,446,554
Capital reserve 15,413,663 15,423,034
Other comprehensive income 50,230 50,621
Special reserve 13,711 10,040
Surplus reserve 207,823 207,823
Retained earnings 1,246,570 1,118,320
Total shareholders’ equity 19,378,551 19,256,392
Total liabilities and shareholders’ equity 20,560,475 20,659,617
46
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Income Statement
Six months ended June 30
Notes 2018 2017
Restated
I. Total operating income 13,026,258 12,770,064
Including: Operating income V.42 13,026,258 12,770,064
Less: Total operating costs 11,857,951 11,862,383
Including: Cost of sales V.42 8,571,417 8,179,694
Taxes and surcharges V.43 51,573 41,229
Selling and Distribution expenses V.44 2,223,934 2,122,890
General and administrative expenses V.45 637,129 559,398
Financial expenses, net V.46 330,018 911,916
Impairment losses, net V.47 43,880 47,256
Add: Gains (loss) from changes in fair value V.48 (243,376) 222,276
Investment income, net V.49 147,053 269,449
Including: Income from investment
in associates and joint ventures 12,758 2,086
Gain from disposal of assets V.50 1,997,170 57,758
II. Operating profit 3,069,154 1,457,164
Add: Non-operating income 29,004 10,348
Less: Non-operating expenses V.51 8,113 8,261
III. Total profit 3,090,045 1,459,251
Less: Income tax expense V.52 727,264 142,257
IV. Net profit 2,362,781 1,316,994
(1) Classified by nature of operations
(1.1). Continuing operations 2,362,781 1,316,994
(2) Classified by ownership
(2.1). Shareholders of the Company 2,362,781 1,316,994
V. Other comprehensive income, net of tax V.39 505,419 (586,015)
Other comprehensive income, net of tax
attributable to shareholders of the Company 505,419 (586,015)
(1) Items that will not be reclassified to profit or loss: 11,106 (6,457)
(1.1) Re-measurement of defined benefit plan liability 11,106 (6,457)
(2) Items that were or will be reclassified to profit or loss: 494,313 (579,558)
(2.1) Effective portion of gains or loss of cash flow hedge 293,473 (353,198)
(2.2) Translation differences of foreign financial statements 200,840 (226,360)
VI. Total comprehensive income for the year attributable to: 2,868,200 730,979
Shareholders of the Company 2,868,200 730,979
VII. Earnings per share
(1) Basic earnings per share (Yuan/share) XIII(2) 0.9658 0.5624
(2) Diluted earnings per share (Yuan/share) N/A N/A
47
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Income Statement
Six months ended June 30
Notes 2018 2017
I. Operating income XIV.4 1,666,573 1,442,065
Less: Operating cost XIV.4 1,169,757 1,120,773
Taxes and surcharges 21,211 8,566
Selling and Distribution expenses 69,533 42,425
General and administrative expenses 88,107 54,470
Financial expenses (income), net (20,437) 12,192
Impairment losses 3,978 8,051
Add: Loss from changes in fair value, net - (206)
Investment income (loss) - -
Including: Income (expense) from investment
in associates and joint ventures - -
Loss from disposal of assets - (410)
II. Operating Profit 334,424 194,972
Add: Non-operating income 975 3,271
Less: Non-operating expenses 123 667
III. Total profit 335,276 197,576
Less: Income tax expense 52,893 49,763
IV. Net profit 282,383 147,813
Continuing operations 282,383 147,813
Discontinued operations - -
V. Other comprehensive income, net of tax (391) -
(1) Item that will not be reclassified to profit or loss (391)
(1.1) Re-measurement of defined benefit plan liability (391) -
(2) Item that may be reclassified to profit or loss - -
VI. Total comprehensive income for the year 281,992 147,813
48
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Cash Flow Statement
Six months ended June 30
Notes 2018 2017
Restated
I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 11,967,687 12,106,889
Refund of taxes and surcharges 15,282 27,392
Cash received relating to other operating activities V.54(1) 260,796 571,398
Sub-total of cash inflows from operating activities 12,243,765 12,705,679
Cash paid for goods and services 8,171,959 7,407,112
Cash paid to and on behalf of employees 1,720,446 1,498,465
Payments of taxes and surcharges 216,103 188,899
Cash paid relating to other operating activities V.54(2) 1,355,739 1,362,057
Sub-total of cash outflows from operating activities 11,464,247 10,456,533
Net cash flows from operating activities V.55(1)(a) 779,518 2,249,146
II. Cash flows from investing activities:
Cash received from disposal of investments 9,792 20,544
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 2,412,977 93,522
Net cash received from disposal of subsidiaries or other business
units - 100,139
Cash received relating to other investing activities V.54(3) 57 31,767
Sub-total of cash inflows from investing activities 2,422,826 245,972
Cash paid to acquire fixed assets, intangible assets and
other long-term assets 2,678,117 723,024
Net cash paid to acquire subsidiaries or other business units 9,332 -
Cash paid relating to acquisition of investments - 7,241
Sub-total of cash outflows from investing activities 2,687,449 730,265
Net cash flows used in investing activities (264,623) (484,293)
III. Cash flows from financing activities:
Cash received from loans - 105,000
Cash received from other financing activities V.54(4) - 7,800
Sub-total of cash inflows from financing activities - 112,800
Cash repayments of loans 2,048,383 624,679
Cash payment for dividends, profit distributions and interest 276,486 347,392
Including: Dividends paid to non-controlling interest 16,028 32,509
Cash paid relating to other financing activities V.54(5) 31,289 106,820
Sub-total of cash outflows from financing activities 2,356,158 1,078,891
Net cash flows used in financing activities (2,356,158) (966,091)
IV. Effects of foreign exchange rate changes on cash and cash
equivalents (1,615) (94,855)
V. Net increase (decrease) in cash and cash equivalent V.55(1)(b) (1,842,878) 703,907
Add: Cash and cash equivalents at the beginning of the period 7,864,258 3,833,747
VI. Cash and cash equivalents at the end of the period V.55(2) 6,021,380 4,537,654
49
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Cash Flow Statement
Six months ended June 30
Notes 2018 2017
I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 1,289,145 597,839
Refund of taxes and surcharges 166 2,884
Cash received relating to other operating activities XIV.5(1) 15,192 3,487
Sub-total of cash inflows from operating activities 1,304,503 604,210
Cash paid for goods and services 587,656 448,790
Cash paid to and on behalf of employees 91,839 93,886
Payments of taxes and surcharges 57,171 42,282
Cash paid relating to other operating activities XIV.5(2) 86,182 60,775
Sub-total of cash outflows from operating activities XIV.6 822,848 645,733
Net cash flows from (used in) operating activities 481,655 (41,523)
II. Cash flows from investing activities:
Cash paid to acquire fixed assets, intangible assets and other long-term 48,465 50,423
assets
Sub-total of cash outflows from investing activities 48,465 50,423
Net cash flows used in investing activities (48,465) (50,423)
III.Cash flows from financing activities:
Cash received from loans - 55,000
Cash received relating to other financing activities XIV.5(3) - 7,800
Sub-total of cash inflows from financing activities - 62,800
Cash repayments of loans 96,590 52,500
Cash payment for dividends, profit distributions or interest 4,767 8,498
Cash paid relating to other financing activities XIV.5(4) 424,313 106,820
Sub-total of cash outflows from financing activities 525,670 167,818
Net cash used in financing activities (525,670) (105,018)
IV. Effects of foreign exchange rate changes on cash and cash (9,951) (15)
equivalents
V. Net increase (decrease) in cash and cash equivalents (102,431) (196,979)
Add: Cash and cash equivalents at the beginning of the period XIV.6 1,864,003 249,740
VI. Cash and cash equivalents at the end of the period XIV.6 1,761,572 52,761
50
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Statement of Changes in Shareholders’ Equity
For the six months ended June 30, 2018
Attributable to shareholders of the Company
Other
Capital comprehensive Special Surplus Retained
Share capital reserve income reserve reserve earnings Total
I. Balance at December 31, 2017 2,446,554 12,982,277 (154,701) 9,349 207,823 3,286,711 18,778,013
Add: Changes in accounting
policies* - - 50,621 - - 21,213 71,834
II. Balance at January 1, 2018 2,446,554 12,982,277 (104,080) 9,349 207,823 3,307,924 18,849,847
III. Changes in equity for the period - (9,371) 505,419 4,910 - 2,192,620 2,693,578
1. Total comprehensive income - - 505,419 - - 2,362,781 2,868,200
2. Owner’s contributions and reduction - (9,371) - - - - (9,371)
2.1 Others (9,371) - - - - (9,371)
3. Appropriation of profits - - - - - (170,161) (170,161)
3.1 Dividend to Shareholders - - - (154,133) (154,133)
3.2 Distribution to non-controlling
interest - - - - - (16,028) (16,028)
4. Special reserve - - - 4,910 - - 4,910
4.1 Transfer to special reserve - - - 6,644 - - 6,644
4.2 Amount utilized - - - (1,734) - - (1,734)
IV. Balance at June 30, 2018 2,446,554 12,972,906 401,339 14,259 207,823 5,500,544 21,543,425
*See Note III 30(1).
51
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Statement of Changes in Shareholders’ Equity
For the six months ended June 30, 2017
Attributable to shareholders of the Company
Other
Capital Treasury comprehensive Special Surplus Retained
Share capital reserve shares income reserve reserve earnings Total
I. Balance at December 31, 2016 593,923 263,064 - - 19,862 190,699 937,510 2,005,058
Add: Business combination under
common control - 13,397,765 (359,431) 1,027,107 - - 847,295 14,912,736
II. Balance at January 1, 2017 593,923 13,660,829 (359,431) 1,027,107 19,862 190,699 1,784,805 16,917,794
III. Changes in equity for the period (Restated) - - - (586,015) 1,058 - 1,284,485 699,528
1. Total comprehensive income - - - (586,015) - - 1,316,994 730,979
2. Appropriation of profits - - - - - - (32,509) (32,509)
2.1 Dividend to non-controlling interest - - - - - - (32,509) (32,509)
3. Special reserve - - - - 1,058 - - 1,058
3.1 Transfer to special reserve - - - - 4,180 - - 4,180
3.2 Amount utilized - - - - (3,122) - - (3,122)
III. Balance at June 30, 2017 593,923 13,660,829 (359,431) 441,092 20,920 190,699 3,069,290 17,617,322
52
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Statement of Changes in Shareholders’ Equity
For the six months ended June 30, 2018
Attributable to shareholders of the Company
Other
comprehe
Share Capital nsive Special Surplus Retained
capital reserve income reserve reserve earnings Total
I. Balance at December 31, 2017 2,446,554 15,423,034 - 10,040 207,823 1,110,649 19,198,100
Add: Changes in accounting policies* - - 50,621 - - 7,671 58,292
II. Balance at January 1, 2018 2,446,554 15,423,034 50,621 10,040 207,823 1,118,320 19,256,392
III. Changes in equity for the period - (9,371) (391) 3,671 - 128,250 122,159
1. Total comprehensive income - - (391) - - 282,383 281,992
2. Owner’s contributions and reduction - (9,371) - - - - (9,371)
2.1 Others - (9,371) - - - - (9,371)
3. Appropriation of profits - - - - - (154,133) (154,133)
3.1 Dividend to Shareholders - - - - - (154,133) (154,133)
4. Special reserve - - - 3,671 - - 3,671
4.1 Transfer to special reserve - - - 5,215 - - 5,215
4.2 Amount utilized - - - (1,544) - - (1,544)
IV. Balance at June 30, 2018 2,446,554 15,413,663 50,230 13,711 207,823 1,246,570 19,378,551
*Please refer to Note III 30(1).
For the six months ended June 30, 2017
Attributable to shareholders of the Company
Share Capital Special Surplus Retained
capital reserve reserve reserve earnings Total
I. Balance at January 1, 2017 593,923 263,800 14,893 190,699 956,529 2,019,844
II. Changes in equity for the period - - 1,058 - 147,813 148,871
1. Total comprehensive income - - - - 147,813 147,813
2. Special reserve - - 1,058 - - 1,058
2.1 Transfer to special reserve - - 4,180 - - 4,180
2.2 Amount utilized - - (3,122) - - (3,122)
III. Balance at June 30, 2017 593,923 263,800 15,951 190,699 1,104,342 2,168,715
53
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
I BASIC CORPORATE INFORMATION
Hubei Sanonda CO., Ltd (the “Company”) is a company limited by shares established in China with its head office located in Hubei
Jingzhou.
During July 2017 a major assets restructuring was successfully completed, with the acquisition of Adama Agricultural Solutions Ltd
(hereinafter: "Solutions"), a wholly-owned subsidiary of China National Agrochemical Corporation Limited (hereinafter: "CNAC").
On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company, in return for the issuance of
1,810,883,039 new shares of the Company to CNAC and their registration for trade on the Shenzhen Stock Exchange (which was
completed on August 2, 2017).
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the Company. The
combination was considered as a business combination under common control.
The Company's parent company is CNAC, and the ultimate holding company is China National Chemical Corporation (hereinafter -
“ChemChina”).
On December 2017, a non-publicly offered 104,697,982 ordinary shares (A-share) at nominal value of RMB 1 per share to the specific
investors. On December 27th, 2017, the Company received proceeds of 1,531,920 thousand RMB, net of the issuing cost of 28,080
thousand RMB. The listing date of the newly-issued 104,697,982 shares was January 17, 2018.
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engaged in development,
manufacturing and marketing of agrochemicals, intermediate materials for other industries, food additives and synthetic aromatic
products, mainly for export. For information about the subsidiaries of the Company, refer to Note VII.
The Company’s and consolidated financial statements had been approved by the Board of Directors of the Company on August 27, 2018.
Details of the scope of consolidated financial statements are set out in Note VII "Interest in other entities", whereas the changes of the
scope of consolidation are set out in Note VI "Changes of the scope of consolidation".
54
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
II BASIS OF PREPARATION
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance (the "MoF"). In addition,
the Group has disclosed relevant financial information in these financial statements in accordance with Information Disclosure and
Presentation Rules for Companies Offering Securities to the Public No. 15－General Provisions on Financial Reporting (revised by
China Securities Regulatory Commission (hereinafter "CSRC”) in 2014).
2. Accrual basis and measurement principle
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which are measured at fair value,
deferred tax assets and liabilities, assets and liabilities relating to employee benefits, provisions and investments in associated companies
and joint ventures, the Group adopts the historical cost as the principle of measurement in the financial statements. Where assets are
impaired, provisions for asset impairment are made in accordance with relevant requirements.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equivalents or fair value of the
consideration paid. Liabilities shall be measured at the actual amount of cash or assets received, or the contractual amount in a present
obligation, or the prospective amount of cash or cash equivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing market participants
in an arm’s length transaction at the measurement date. Fair value measured and disclosed in the financial statements are determined on
this basis whether it is observable or estimated by valuation techniques.
The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fair value input is observable and
significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable,
either directly or indirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Group has performed an assessment of the going concern for the following 12 month from 30 June 2018 and have not identified any
significant doubtful matter or event on the going concern, as such the financial statement have been prepared on the going concern basis.
55
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance
These financial statements are in compliance with the Accounting Standards for Business Enterprises to truly and completely reflect
consolidated and the Company's financial position as at 30 June 2018 and consolidated and the Company's operating results and cash
flows for the six months then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash or cash equivalents as a normal
operating cycle. The operating cycle for the company is 12 months.
4. Reporting currency
The Company and its domestic subsidiaries choose Renminbi (hereinafter "RMB") as their functional currency. Functional currencies of
overseas subsidiaries are determined on the basis of the principal economic environment in which the overseas subsidiaries operate. The
functional currency of the overseas subsidiaries is mainly the United States Dollar (hereinafter "USD"). The presentation currency of
these financial statements is Renminbi.
5. Business combinations
(1) Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of the combining enterprises
are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. Assets and
liabilities obtained shall be measured at their respective carrying amounts as recorded by the combining entities at the date of the
combination. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for
the combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb the difference, any
excess shall be adjusted against retained earnings. Costs that are directly attributable to the combination are charged to profit or loss in
the period in which they are incurred.
During July 2017 a major assets restructuring was successfully completed, with the acquisition of Solutions, a wholly-owned subsidiary
of CNAC. On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company, in return for the issuance of
1,810,883,039 new shares of the Company to CNAC and their registration for trade on the Shenzhen Stock Exchange which was
completed on August 2, 2017.
56
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
5. Business combination (cont’d)
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the Company. The
combination was considered as a business combination under common control. Therefore, the comparative financial information for the
six month ended June 30, 2017 was restated so that the profit or loss, cash flow and equity movement, notes and additional information,
includes the information of the consolidated information, in accordance with the Accounting Standards for Business Enterprises.
(2) Business combinations not involving enterprises under common control and goodwill.
A business combination not involving enterprises under common control is a business combination in which all of the combining
enterprises are not ultimately controlled by the same party or parties before and after the combination.
The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed and equity instruments issued by
the acquirer for the purpose of achieving the control rights over the acquiree.
The intermediary costs such as audit, legal services and assessment consulting costs and other related management costs that are directly
attributable to the combination by the acquirer are charged to profit or loss in the period in which they are incurred. Direct capital
issuance costs incurred in respect of equity instruments or liabilities issued pursuant to the business combination should be charged to the
respect equity instruments or liabilities upon initial recognition of the underlying equity instruments or liabilities.
The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business combination, that meet the
recognition criteria shall be measured at fair value at the acquisition date. Where the cost of combination exceeds the acquirer’s interest
in the fair value of the acquiree’s identifiable net assets, the difference is treated as an asset and recognized as goodwill, which is
measured at cost on initial recognition. Where the cost of combination is less than the acquirer’s interest in the fair value of the
acquiree’s identifiable net assets, the remaining difference is recognized immediately in profit or loss for the current year.
The goodwill raised because of the business combination should be separately disclosed in the consolidated financial statement and
measured by the initial amount less any accumulative impairment provision.
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Control is achieved when the
Company has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the
ability to use its power to affect its returns.
For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the date when control is lost)
are included in consolidated income statement and consolidated statement of cash flows.
57
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
6. Basis for preparation of consolidated financial statements (cont’d)
For a subsidiary acquired through a business combination not involving enterprises under common control, the operating results and cash
flows from the acquisition date (the date when control is obtained) are included in consolidated income statement and consolidated
statement of cash flows.
For a subsidiary acquired through a business combination involving enterprises under common control, it will be fully consolidated into
consolidated financial statements from the date on which the subsidiary was ultimately under common control by the same party or
parties.
The significant accounting policies and accounting years adopted by the subsidiaries are determined based on the uniform accounting
policies and accounting years set out by the Company. For those subsidiaries acquired through business combinations not involving
enterprises under common control, the identifiable assets and liabilities recorded in the financial statements of the acquired subsidiaries
should be adjusted based on the fair value determined at the acquisition date.
All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controlling interests and presented as
"non-controlling interests" in the shareholders’ equity in consolidated balance sheet. The portion of net profits or losses of subsidiaries
for the period attributable to non-controlling interests is presented as "non-controlling interests" in consolidated income statement below
the "net profit" line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated
income statement below the total comprehensive income line item.
When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling
shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess amount is still allocated against
non-controlling interests.Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result in the
loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company's interests and
non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. The difference between the amount
by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is adjusted to capital reserve
under owners' equity. If the capital reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings.
Other comprehensive income attributed to the non-controlling interest is reattributed to the shareholders of the company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or other financial instrument is recognized
as a liability at the present value of the exercise price. The Group’s share of a subsidiary’s profits includes the share of the holders of the
non-controlling interests to which the Group issued a put option.
58
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
6. Basis for preparation of consolidated financial statements (cont’d)
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any retained interest is
re-measured at its fair value at the date when control is lost. The difference between (i) the aggregate of the consideration received on
disposal and the fair value of any retained interest and (ii) the share of the former subsidiary's net assets cumulatively calculated from the
acquisition date according to the original proportion of ownership interest is recognized as investment income in the period in which
control is lost. Other comprehensive income associated with the disposed subsidiary is reclassified to investment income in the period in
which control is lost.
7. Classification and accounting methods of joint arrangement
Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreed sharing of control over an
economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous
consent of the parties sharing control (the ventures).
The Group makes the classification of the joint arrangements according to the rights and obligations in the joint arrangements to either
joint operations or joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the
joint arrangement. Joint ventures are accounted for using the equity method.
8. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the Group's short-term, highly
liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value.
9. Translation of transactions and financial statements denominated in foreign currencies
(1) Transactions denominated in foreign currencies
On initial recognition, foreign currency transactions are translated into functional currency using the spot exchange rate prevailing at the
date of transaction.
At the balance sheet date, foreign currency monetary items are translated into functional currency using the spot exchange rates at the
balance sheet date. Exchange differences arising from the differences between the spot exchange rates prevailing at the balance sheet date
and those on initial recognition or at the previous balance sheet date are recognized in profit or loss for the period, except that (i)
exchange differences related to a specific-purpose borrowing denominated in foreign currency that qualify for capitalization are
capitalized as part of the cost of the qualifying asset during the capitalization period. (ii) exchange differences related to hedging
instruments for the purpose of hedging against foreign currency risks are accounted for using hedge accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency monetary items which in substance
forms part of the net investment in the foreign operations, exchange differences arising from the changes of foreign currency should be
recorded as other comprehensive income, and will be reclassified to profit or loss upon disposal of the foreign operations.
59
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies (cont’d)
(1) Transactions denominated in foreign currencies (cont’d)
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional currency at the spot
exchange rates on the dates of the transactions and the amounts in functional currency remain unchanged.
(2) Translation of financial statements denominated in foreign currency
For the purpose of preparing consolidated financial statements, financial statements of a foreign operation are translated from the foreign
currency into RMB using the following method: assets and liabilities on the balance sheet are translated at the spot exchange rate
prevailing at the balance sheet date; shareholders' equity items except for retained earnings are translated at the spot exchange rates at the
dates on which such items arose; all items in the income statement as well as items reflecting the distribution of profits are translated at
average rate or at the spot exchange rates on the dates of the transactions; the opening balance of retained earnings is the translated
closing balance of the previous year's retained earnings; the closing balance of retained earnings is calculated and presented on the basis
of each translated income statement and profit distribution item. The difference between the translated assets and the aggregate of
liabilities and shareholders' equity items is recorded as other comprehensive income. Cash Flows arising from transaction in foreign
currency and the cash flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, the effect of
exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and present separately in the statement “effect
of foreign exchange rate changes on the cash and cash equivalents".
The opening balances and the comparative figures of prior year are presented at the translated amounts in the prior year's financial
statements.
On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a foreign operation due to disposal
of certain equity interest in it or other reasons, the Group transfers the accumulated translation differences, which are attributable to the
owners' equity of the Company and presented under other comprehensive income to profit or loss in the period in which the disposal
occurs.
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the proportionate share of
accumulated translation differences are re-attributed to non-controlling interests and are not recognized in profit and loss. For partial
disposals of equity interest in foreign operations which are associates or joint ventures, the proportionate share of the accumulated
translation differences are reclassified to profit or loss.
60
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments
The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument. At
initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset
or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the
financial asset or financial liability. At initial recognition, an entity shall measure trade receivables at their transaction price if the trade
receivables do not contain a significant financing component.
10.1 Classification and measurement of financial assets
After initial recognition, an entity shall measure a financial asset at: (a) amortised cost; (b) fair value through other comprehensive
income (“FVTOCI”); or (c) fair value through profit or loss (“FVTPL”).
10.1.1 Financial assets at amortised cost
A financial asset is measured at amortised cost if both of the following conditions are met:
(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;
and (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost, using effective interest method. Gains or losses upon impairment and
derecognition are recignised in profit or loss.
10.1.1.1 Effective interest method and amortised cost
Effective interest method represents the method for calculating the amortized costs and interest income or expense of each period in
accordance with the effective interest rate of financial assets or financial liabilities (inclusive of a set of financial assets or financial
liabilities). Effective interest rate represents the rate that discounts the future cash flow over the expected subsisting period or shorter
period, if appropriate, of the financial asset or financial liability to the current carrying value of such financial asset or financial liability.
When calculating the effective interest rate, the Group will consider the anticipated future cash flow (not considering the future credit
loss) on the basis of all contract clauses of financial assets or financial liabilities, as well as consider all kinds of charges, transaction fees
and discount or premium paid forming an integral part of the effective interest rate paid or received between both parties of financial
asset or financial liability contract.
61
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.1 Classification and measurement of financial assets (cont’d)
10.1.2 Financial assets at FVTPL
Financial assets at FVTPL are either those that are classified as financial assets at FVTPL or designated as financial assets at FVTPL.
A financial asset is measured at FVTPL unless it is measured at amortised cost or at FVTOCI.
The Group may, at initial recognition, irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or
significantly reduces a measurement or recognition inconsistency (sometimes referred to as an ‘accounting mismatch’) that would
otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
A gain or loss on a financial asset that is measured at FVTPL is recognised in profit or loss unless it is part of a hedging relationship.
Dividends are recognised in profit or loss.
10.1.3 Designated financial assets at FVTOCI
At initial recognition, the Group can makes an irrevocable election to designate to FVTOCI an investment in an equity instrument that is
held for trading.
With the designation, a gain or loss from the financial asset is recognised in other comprehensive income. When the financial asset is
derecognised the cumulative gain or loss previously recognised in other comprehensive income, is reclassified to retained earnings.
10.2 Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on a financial asset that is measured at amortised cost.
The Group always measures the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not
contain a significant financing component.
For financial assets other than trade receivables, the Group measure the loss allowance for that financial instrument at an amount equal to
12-month expected credit losses or lifetime expected credit losses. At each balance sheet date, if the credit risk on that financial
instrument has increased significantly since initial recognition, the Group measures the loss allowance for a financial instrument at an
amount equal to the lifetime expected credit losses. The Group recognises in profit or loss, as an impairment gain or loss, the amount of
expected credit losses (or reversal) that is required to adjust the loss allowance to the amount that is required to be recognized.
62
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.2 Impairment of financial assets (cont’d)
10.2.1 Significant increases in credit risk
At each balance sheet date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial
recognition.
The Group mainly considers the following list of information in assessing changes in credit risk:
(a) significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception.
(b) significant changes in external market indicators of credit risk for a particular financial instrument or similar financial
instruments with the same expected life.
(c) a significant change in the debtors’s ability to meet its debt obligations.
(d) an actual or expected significant change in the operating results of the receivable.
(e) significant increases in credit risk on other financial instruments of the same debtor.
(f) an actual or expected significant adverse change in the regulatory, economic, or technological environment of the receivable.
(g) significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit
enhancements, which are expected to reduce the debtor’s economic incentive to make scheduled contractual payments or to
otherwise have an effect on the probability of a default occurring.
(h) significant changes that are expected to reduce the receivable’s economic incentive to make scheduled contractual payments.
(i) significant changes in the expected performance and behaviour of the receivable.
(j) past due information.
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial
instrument is determined to have low credit risk at the reporting date.
10.2.2 Credit-impaired financial asset
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:
(a) significant financial difficulty of the issuer or the receivable;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the receivable, for economic or contractual reasons relating to the receivable’s financial difficulty, having
granted to the receivable a concession(s) that the lender(s) would not otherwise consider;
(d) it is becoming probable that the receivable will enter bankruptcy or other financial reorganisation;
63
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.2 Impairment of financial assets (cont’d)
10.2.3 Recognition of expected credit losses
For the purpose of determining significant increases in credit risk and recognising a loss allowance on a collective basis, financial
instruments are grouped on the basis of shared credit risk. Examples of shared credit risk characteristics may include, but are not limited
to, the:
(a) instrument type; (b) credit risk ratings; (c) collateral type; (d) industry; (e) geographical location of the debtor; and (f) the value of
collateral relative to the financial asset if it has an impact on the probability of a default occurring.
Expected credit losses of financial instruemnts are determined as the present value of the difference between: (a) the contractual cash
flows that are due to an entity under the contract; and (b) the cash flows that the entity expects to receive.
For a financial asset that is credit-impaired at the reporting date, an entity shall measure the expected credit losses as the difference
between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate. Any adjustment is recognised in profit or loss as an impairment gain or loss.
The Group measures expected credit losses of a financial instrument in a way that reflects:
(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the time value of money; and
(c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic conditions.
10.2.4 Written-off of financial assets
The Group directly reduces the gross carrying amount of a financial asset when the entity has no reasonable expectations of recovering a
financial asset in its entirety or a portion thereof. A write-off constitutes a derecognition event.
10.3 Transfer of financial asset
The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractual rights to the cash flows from
the financial asset expire; or (ii) the financial asset has been transferred and substantially all the risks and rewards of ownership of the
financial asset is transferred to the transferee; or (iii) although the financial asset has been transferred, the Group neither transfers nor
retains substantially all the risks and rewards of ownership of the financial asset but has not retained control of the financial asset.
64
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.3 Transfer of financial asset (cont’d)
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, and it retains control of
the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and
recognizes an associated liability. The extent of the Group’s continuing involvement in the transferred asset is the extent to which it is
exposed to changes in the value of the transferred asset.
When the company is dercognizing a financial asset in its entirety, except for equity instrument designated to FVTOCI, the difference
between (i) the carrying amount of the financial asset transferred; and (ii) the sum of the consideration received from the transfer is
recognized in profit or loss.
10.4 Classification and measurement of financial liabilities
Based on the economic substance rather than the form of legal contracts, along with the definition of financial liabilities and equity
instruments, the Group shall classify the financial instruments or its components as financial liability or equity instrument at initial
recognition.
On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss and other financial
liabilities.
Other financial liabilities are subsequently measured at amortized cost by using effective interest method. Gain or loss arising from
derecognition or amortization is recognized in current profit or loss.
10.5 Derecognition of financial liabilities
Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in part. An agreement
entered into force between the Group (debtor) and a creditor to replace the original financial liabilities with new financial liabilities with
substantially different terms, derecognize the original financial liabilities as well as recognize the new financial liabilities. When financial
liabilities is derecognized in full or in part, the difference between the carrying amount of the financial liabilities derecognized and the
consideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period.
10.6 Derivatives
Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchange options, etc. Derivatives are
initially measured at fair value at the date when the derivative contracts are entered into and are subsequently re-measured at fair value.
The resulting gain or loss is recognized in profit or loss unless the derivative is designated and highly effective as a hedging instrument,
in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship (Note III 29).
65
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.7 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset, except for circumstances
where the Group has a legal right that is currently enforceable to offset the recognized financial assets and financial liabilities, and
intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and
a financial liability shall be offset and the net amount is presented in the balance sheet.
10.8 Equity instruments
The consideration received from the issuance of equity instruments net of transaction costs is recognised in shareholders’ equity.
Consideration and transaction costs paid by the Company for repurchasing self-issued equity instruments are deducted from
shareholders’ equity.
When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditures relating to the repurchase are
recorded in the cost of the treasury shares, with the transaction entering into the share capital. Treasury shares are excluded from profit
distributions and are stated as a deduction under shareholders’ equity in the balance sheet.
11. Receivables
Receivables are assessed for impairment on an individual basis and/or on a collective group basis as follows:
Lifetime or 12-month expected credit losses in respect of a receivable is calculated based on the assessment of whether the credit risk
on a receivable has increased significantly since initial recognition. Impairment losses are recognised in profit or loss. For account
receivables, the Group always measure the loss allowance at an amount equal to lifetime expected credit losses.
(1) Receivables individually significant for which provision for impairment is assessed individually
Basis or monetary criteria for determining an
A receivable with an amount greater than RMB 125 million
individually significant receivable
Method of provisioning for bad and doubtful debts for Determined mostly according to familiarity with the customer, its quality and
receivables that are assessed individually the collateral amount the customer provides.
66
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
11. Receivables (cont’d)
(2) Receivables for which provision for impairment is assessed collectively
The assessment is made collectively for account receivables, where receivables share similar credit risk characteristics based on
geographical location, using the expected credit losses model including inter-alia aging analysis, historical loss experiences adjusted by
the observable factors reflecting current and expected future economic conditions.
The ratio of the collective provision for non-overdue account receivables is between 0%-5%.
For overdue account receivables, the expected credit losses assessment is as follows:
Aging Ratio of the provision for accounts receivable (%)
Overdue up to 60 days 3-5
Overdue between 60 and 180 days 10
Overdue more than 180 days 40
Legal 100
(3) Other individually not significant receivables but individually tested for impairment:
There is objective evidence to demonstrate that the Group is not able to fully
Reasons for making individual bad debt provision recover the receivables according to the original terms and conditions of the
receivables.
Method of provisioning for bad and doubtful debts for Determined mostly according to familiarity with the customer, its quality and
receivables that are assessed individually the collateral amount the customer provides.
12. Inventories
(1) Categories of inventories and initial measurement
The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goods and reusable materials.
Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not
meet the definition of fixed assets.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other expenditures
incurred in bringing the inventories to their present location and condition including direct labor costs and an appropriate allocation of
production overheads.
(2) Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
(3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories
67
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
12. Inventories (cont’d)
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the net realizable value is below the
cost of inventories, a provision for decline in value of inventories is made. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion, the estimated costs necessary to make the sale and relevant taxes.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down
below cost no longer exist so that the net realizable value of inventories is higher than their carrying amount, the original provision for
decline in value is reversed and the reversal is included in profit or loss for the period.
(4) The perpetual inventory system is maintained for stock system.
13. Assets held for Sale
When the Group realizes the carrying value of a non-current asset or a disposal group through sale instead of continuing operation, such
asset is classified as an asset held for sale.
All the following conditions should be met for the non-current asset or disposal group to be classified as held for sale: (1) ready to be
sold in current condition, based on similar transactions or common practices; (2) the sale is more than likely to happen, i.e. the Group has
approved the sale in a resolution and obtained a certain purchase commitment, and the sale will be closed within one year.
The Group measures the assets held for sales at the lower of book value and fair value less the cost of the sale. If the carrying value is
higher than the fair value less the cost of the sale, the difference is recognized as asset impairment loss. If the fair value of the asset held
for sale recovered subsequent to the balance sheet date, the recovery is recognized, limited to the original carrying amount of the asset,
and relevant asset impairment loss is reversed.
Asset held for sale is not depreciated or amortized.
14. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and associates.
Subsidiaries are the companies that are controlled by the Company. Associates are the companies over which the Group has significant
influence. Joint ventures are joint arrangements over which the Group has joint control along with other investors and has rights to the
net assets of the joint arrangement.
The Company accounts for the investment in subsidiaries at historical cost in the Company's financial statements. Investments in
associates and joint ventures are accounted for under equity method.
68
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
14. Long-term equity investments (cont’d)
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under common control, the investment
cost of the long-term equity investment is the share of the carrying amount of the shareholders' equity of the acquiree attributable to the
ultimate controlling party at the date of combination. For a long-term equity investment acquired through business combination not
involving enterprises under common control, the investment cost of the long-term equity investment is the cost of acquisition. For a
business combination not involving enterprises under common control achieved in stages that involves multiple exchange transactions,
the initial investment cost is carried at the aggregate of the carrying amount of the acquirer’s previously held equity interest in the
acquiree and the new investment cost incurred on the acquisition date.
Regarding the long-term equity investment acquired otherwise than through a business combination, if the long-term equity investment is
acquired by cash, the historical cost is determined based on the amount of cash paid and payable; if the long-term equity investment is
acquired through the issuance of equity instruments, the historical cost is determined based on the fair value of the equity instruments
issued.
(2) Subsequent measurement and recognition of profit or loss
If the long-term equity investment is accounted for at cost, it should be measured at historical cost less accumulated impairment losses.
Dividend declared by the investee should be accounted for as investment income.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Group’s share of the fair value
of the investee’s identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial
investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the
difference is recognized in profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive income of the investee for the
period as investment income or loss and other comprehensive income for the period. The Group recognizes its share of the investee’s net
profit or loss based on the fair value of the investee’s individual separately identifiable assets, etc. at the acquisition date after making
appropriate adjustments to be confirmed with the Group's accounting policies and accounting period. The Group discontinues
recognizing its share of net losses of the investee after the carrying amount of the long-term equity investment together with any
long-term interests that in substance form part of its net investment in the investee is reduced to zero. If the Group has incurred
obligations to assume additional losses of the investee, a provision is recognized according to the expected obligation, and recorded as
investment loss for the period.
(3) Basis for determining control, joint control and significant influence over investee
Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its involvement
with the investee; and has the ability to use its power to affect its returns.
69
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
14. Long-term equity investments (cont’d)
(3) Basis for determining control, joint control and significant influence over investee (cont’d)
Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and
operating policy decisions relating to the activity require the unanimous consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint
control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of
potential voting rights of the investee (for example, warrants and convertible debts) held by the investing enterprises or other parties that
are currently exercisable or convertible shall be considered.
(4) Methods of impairment assessment and determining the provision for impairment loss
If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than their carrying amounts, an
impairment loss should be recognized to reduce the carrying amounts to the recoverable amounts (Note III 21).
(5) The disposal of long-term equity investment
On disposal of a long term equity investment, the difference between the proceeds actually received and receivable and the carrying
amount is recognized in profit or loss for the period.
15. Investment properties
Investment property refers to real estate held to earn rentals or for capital appreciation, or both, including leased land use rights, land use
rights held and provided for transferring after appreciation and leased constructions, etc.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall be included in cost of
investment property only when the economic benefits associated with the asset will likely flow to the Group and its cost can be measured
reliably. All other subsequent expenditures on investment property shall be included in profit or loss for the current period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated or amortized using the same
policy as that for buildings and land use rights.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property net of the
carrying amount and related taxes and surcharges is recognized in profit or loss for the current period.
70
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
16. Fixed assets
(1) Recognition criteria for fixed assets
Fixed assets include buildings and structures, machinery and equipment, transportation vehicles, office equipment and others.
Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrative purposes, and have useful
lives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with the
asset will flow to the Group and the cost of the asset can be reliably measured. Purchased or constructed fixed assets are initially
measured at cost.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is probable that economic benefits
associated with the asset will flow to the Group and the subsequent expenditures can be measured reliably. Other subsequent
expenditures are recognized in profit or loss in the period in which they are incurred.
(2) Depreciation of each category of fixed assets
Fixed asset is depreciated based on the cost of the fixed asset recognized less expected net residual value over its useful life using the
straight-line method since the month subsequent to the one in which it is ready for intended use. Depreciation is calculated based on the
carrying amount of the fixed asset after impairment over the estimated remaining useful life of the asset.
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method applied at least once at
each financial year-end, and account for any change as a change in an accounting estimate.
The estimated useful life, estimated net residual value and annual depreciation rate of each category of fixed assets are as follows:
Residual Annual
Useful life value depreciation rate
Category Depreciation (years) (%) (%)
Buildings the straight-line method 15-50 0-4 1.9-6.7
Machinery and equipment the straight-line method 3-22 0-4 4.4-33.3
Office and other equipment the straight-line method 3-17 0-4 5.6-33.3
Motor vehicles the straight-line method 5-9 0-2 10.9-20.0
(3) Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or disposal, the fixed asset is
derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount of any proceeds on disposal of the asset net of the
carrying amount and related taxes is recognized in profit or loss for the period.
The difference between recoverable amounts of the fixed assets under the carrying amount is referred to as impairment loss (Note III 21).
71
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
17. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various construction, installation costs, borrowing costs
capitalized and other expenditures incurred until such time as the relevant assets are completed and ready for its intended use. When the
asset concerned is ready for its intended use, the cost of the asset is transferred to fixed assets and depreciated starting from the following
month.
The difference between recoverable amounts of the construction in progress under the carrying amount is referred to as impairment loss
(Note III 21).
18. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are capitalized when expenditures
for such asset and borrowing costs are incurred and activities relating to the acquisition, construction or production of the asset that are
necessary to prepare the asset for its intended use or sale have commenced. Capitalization of borrowing costs ceases when the qualifying
asset being acquired, constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequently should
be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or
production of a qualifying asset is suspended abnormally and when the suspension is for a continuous period of more than 3 months.
Capitalization is suspended until the acquisition, construction or production of the asset is resumed.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest expenses
incurred on that borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset
or any investment income on the temporary investment of those funds.
Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be capitalized on such
borrowings by applying a capitalization rate to the weighted average of the excess of cumulative expenditures on the asset over the
amounts of specific-purpose borrowings. The capitalization rate is the weighted average of the interest rates applicable to the
general-purpose borrowings.
During the capitalization period, exchange differences on foreign currency specific-purpose borrowing are fully capitalized whereas
exchange differences on foreign currency general-purpose borrowing is charged to profit or loss.
72
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
19. Intangible assets
(1) Valuation methods, service life, impairment test
The Group’s intangible assets include product registration assets, Intangible assets upon purchase of products, marketing rights and rights
to use trademarks, land use rights and software. Intangible assets are stated at the balance sheet at cost less accumulated amortization and
impairment losses.
When an intangible asset with a finite useful life is available for use, its original cost less any accumulated impairment losses is
amortized over its estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not amortized.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the end of the year, and
makes adjustments when necessary.
The respective amortization periods for such intangible assets are as follows:
Item Amortization period (years)
Land use rights 49-50 years
Product registration 8 years
Intangible assets upon purchased products 1-20 years (Mainly 7-11, 20)
Marketing rights and Rights to use trademarks 4-10 years
Software 3-5 years
The difference between recoverable amounts of the intangible assets under the carrying amount is referred to as impairment loss (III 21).
(2) Research and development expenditure
Internal research and development project expenditures were classified into research expenditures and development expenditures
depending on its nature and the greater uncertainty whether the research activities becoming to intangible assets.
Expenditure during the research phase is recognized as an expense in the period in which it is incurred. Expenditure during the
development phase that meets all of the following conditions at the same time is recognized as intangible asset:
- It is technically feasible to complete the intangible asset so that it will be available for use or sale;
- The Group has the intention to complete the intangible asset and use or sell it;
- The Group can demonstrate the ways in which the intangible asset will generate economic benefits;
- The availability of adequate technical, financial and other resources to complete the development and the
ability to use or sell the intangible asset;
- The expenditure attributable to the intangible asset during its development phase can be reliably measured.
73
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
19. Intangible assets (cont’d)
(2) Research and development expenditure (cont’d)
Expenditures that do not meet all of the above conditions are recognized in profit or loss when incurred. If the expenditures cannot be
distinguished between the research phase and development phase, the Group recognizes all of them in profit or loss for the period.
Expenditures that have previously been recognized in the profit or loss would not be recognized as an asset in subsequent years. Those
expenditures capitalized during the development stage are recognized as development costs incurred and will be transferred to intangible
asset when the underlying project is ready for an intended use.
20. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair value of the identifiable net
assets of the acquiree under a business combination not involving enterprises under common control.
Goodwill is not amortised and is stated in the balance sheet at cost less accumulated impairment losses (see Note III 21). On disposal of
an asset group or a set of asset groups, any attributable goodwill is written off and included in the calculation of the profit or loss on
disposal.
21. Impairment of long-term assets
The Company assesses at each balance sheet date whether there is any indication that the fixed assets, construction in progress, intangible
assets with finite useful lives, investment properties measured at historical cost, investments in subsidiaries, joint ventures and associates
may be impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated for such assets. The
recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flow estimated to be
derived from the asset. The Group estimates the recoverable amount on an individual basis. If it is not possible to estimate the
recoverable amount of the individual asset, the Group determines the recoverable amount of the asset group to which the asset belongs.
Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash
inflows from other assets or asset groups.
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any
indication that the asset may be impaired. For the purpose of impairment testing, the carrying amount of goodwill acquired in a business
combination is allocated from the acquisition date on a reasonable basis to each of the related asset groups; if it is impossible to allocate
to the related asset groups, it is allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groups
is an asset group or set of asset group that is able to benefit from the synergies of the business combination and shall not be larger than a
reportable segment determined by the Group. If the carrying amount of the asset group or set of asset groups is higher than its
recoverable amount, the amount of the impairment loss first reduced by the carrying amount of the goodwill allocated to the asset group
or set of asset groups, and then the carrying amount of other assets (other than the goodwill) within the asset group or set of asset groups,
pro rata based on the carrying amount of each asset.
Once the impairment loss of such assets is recognized, it will not be reversed in subsequent periods.
74
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
22. Employee benefits
(1) Short-term employee benefits
Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, and the expense is recorded
when the related service is provided. A provision for short-term employee benefits in respect of cash bonuses is recognized in the amount
expected to be paid where the Group has a current legal or constructive obligation to pay the said amount for services provided by the
employee in the past and the amount can be estimated reliably.
(2) Post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
A defined contribution plan is a post-employment benefit plan under which the Group pays contributions to a separate entity and has no
legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an
expense in profit or loss in the periods during which related services are rendered by employees.
Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans. In accordance with the
projected unit credit method, the Group measures the obligations under defined benefit plans using unbiased and mutually compatible
actuarial assumptions to estimate related demographic variables and financial variables, and discount obligations under the defined
benefit plans to determine the present value of the defined benefit liability. The discount rate used is the yield on the reporting date on
highly-rated corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’s
obligation.
The Group attributes benefit obligations under a defined benefit plan to periods of service provided by respective employees. Service
cost and interest expense on the defined benefit liability are charged to profit or loss and remeasurements of the defined benefit liability
are recognised in other comprehensive income.
(3) Termination benefits
When the Group terminates the employment with employees or provides compensation under an offer to encourage employees to accept
voluntary redundancy, a provision is recognised with a corresponding expense in profit or loss at the earlier of the following dates:
- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee termination plan or a
curtailment proposal.
- When the Group has a formal detailed restructuring plan involving the payment of termination benefits and has raised a valid
expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features
to those affected by it.
75
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
22. Employee benefits (cont’d)
(3) Termination benefits (cont’d)
If the benefits are payable more than 12 months after the end of the reporting period, they are discounted to their present value. The
discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same currency, that have
maturity dates approximating the terms of the Group’s obligation.
(4) Other long-term employee benefits
The Group’s net obligation for long-term employee benefits, which are not attributable to post-employment benefit plans, is for the
amount of the future benefit to which employees are entitled for services that were provided during the current and prior periods.
The amount of these benefits is discounted to its present value and the fair value of the assets related to these obligations is deducted
therefrom. The discount rate used is the yield on the reporting date on highly-rated corporate debentures denominated in the same
currency, that have maturity dates approximating the terms of the Group’s obligation.
23. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency, it is probable that an outflow of economic
benefits will be required to settle the obligation, and the amount of the obligation can be measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the settlement
date, taking into account factors pertaining to a contingency such as the risks, uncertainties and time value of money. Where the effect of
the time value of money is material, the amount of the provision is determined by discounting the related future cash outflows. The
increase in the provision due to passage of time is recognized as interest expense.
If all or part of the provision settlements is reimbursed by third parties, when the realization of income is virtually certain, then the
related asset should be recognized. However, the amount of related asset recognized should not be exceeding the respective provision
amount.
At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then.
76
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
24. Share-based payment
Share-based payment refers to the transaction in order to aquire the service offered by the employees or other parties that grants equity
instruments or liabilities on the basis of the equity instruments. Share-based payment classified into equity-settled share-based payment
and cash-settled share-based payment.
Cash-settled share-based payment
The cash-settled share-based payment should be measured according to the fair value of the liabilities recognized based on the shares or
other equity instrument undertaken by the Company. For cash-settled share-based payment made in return for the rendering of employee
services that cannot be exercised until the services are fully provided during the vesting period or specified performance targets are met,
on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate of the
number of exercisable instruments, be recognized in relevant expenses and the corresponding liabilities at the fair value of the liability
incurred by the Company.
On each balance sheet date and the settlement date before the settlement of the relevant liabilities, the Company should re-measure the
fair value of the liabilities and the changes should be included in the current period profit or loss.
25. Revenue
Revenue of the Group is mainly from sale of goods.
The Group recognises revenue when transferring goods to a customer, at the amount of the transaction price. An asset is transferred when
the customer obtains control of that asset. Transaction price is the amount of consideration to which an entity expects to be entitled in
exchange for transferring goods to a customer, excluding amounts collected on behalf of third parties.
Significant financing component
For a contract with a significant financing component, the Group recognise revenue at an amount that reflects the price that a customer
would have paid for the goods if the customer had paid cash for those goods when they transfer to the customer. The difference between
the amount of consideration and the cash selling price of the goods, is amortized in the contract period with the effective interest rate.
The Group does not adjust the amount of consideration for the effects of a significant financing component if the Group expects, at
contract inception, that the period between when the entity transfers a good to a customer and when the customer pays for that good will
be one year or less.
77
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
25. Revenue (cont’d)
Sale with a right of return
For sale with a right if return, the Group recognizd revenue at the amount of consideration to which the Group expects to be entitled (ie
excluding the products expected to be returned). For any amounts received (or receivable) for which an entity does not expect to be
entitled, the entity shall not recognise revenue when it transfers products to customers but shall recognise those amounts received (or
receivable) as a refund liability. An asset recognised for the Group’s right to recover products from a customer on settling a refund
liability shall initially be measured by reference to the former carrying amount of the product less any expected costs to recover those
products.
26. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Group at no consideration,
including tax returns, financial subsidies and so on. A government grant is recognized only when the Group can comply with the
conditions attaching to the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or receivable. If a government
grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at
a nominal amount. A government grant measured at a nominal amount is recognized immediately in profit or loss for the period.
(1) The basis of judgment and accounting method of the government grants related to assets
Government grants obtained for acquiring long-term assets are government grants related to assets.
A government grant related to an asset is offset with the cost of the relevant asset.
(2) The basis of judgment and accounting method of the government grants related to income
For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent
periods, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are
recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediately in profit or
loss for the period.
Government grants related to the Group’s normal course of business are offset with related costs and expenses. Government grants
related that are irrelevant with the Groups’s normal course of business are included in non-operating gains.
78
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
27. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured at the amount expected
to be paid (or recovered) according to the requirements of tax laws.
(2) Deferred tax assets and deferred tax liabilities
Temporary differences are differences between the carrying amounts of certain assets or liabilities and their tax base.
All taxable temporary differences are recognized as related deferred tax liabilities. Deferred tax assets are recognized to the extent that it
is probable that future taxable profits will be available against which the deductible losses and tax credits can be utilized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent that it is probable that
future taxable profits will be available against which the deductible losses and tax credits can be utilized. However, for deductible
temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a
transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of
transaction, no deferred tax asset or liability is recognized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws, that are expected to apply
in the period in which the asset is realized or the liability is settled.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The Group may be required to pay additional tax in case of distribution of dividends by the Group companies. This additional tax was not
included in the financial statements, since the policy of the Group is not to distribute in the foreseeable future a dividend which creates a
significant additional tax liability.
Except for those current income tax and deferred tax charged to comprehensive income or shareholders’ equity in respect of transactions
or events which have been directly recognized in other comprehensive income or shareholders’ equity, and deferred tax recognized on
business combinations, all other current income tax and deferred tax items are charged to profit or loss in the current period.
79
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
27. Deferred tax assets/deferred tax liabilities (cont’d)
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer probable that sufficient
taxable profits will be available in the future to allow the benefit of deferred tax assets to be utilized. Such reduction is reversed when it
becomes probable that sufficient taxable profits will be available.
(3) Offset of income tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize the assets and settle the
liabilities simultaneously, current tax assets and current tax liabilities are offset and presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which
intend either to settle current tax assets and liabilities on a net basis or to realize the assets and liabilities simultaneously, in each future
period in which significant amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax
liabilities are offset and presented on a net basis.
28. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the
lessee. All other leases are classified as operating leases.
(1) The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are either included in the cost of
related asset or charged to profit or loss for the period. Initial direct costs incurred are charged to profit or loss for the period.
(2) The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the relevant lease. Initial
direct costs with more than an insignificant amount are capitalized when incurred, and are recognized in profit or loss on the same basis
as rental income over the lease term. Other initial direct costs with an insignificant amount are charged to profit or loss in the period in
which they are incurred.
(3) The Group as lessee under finance leases
At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of the fair value of the leased
asset and the present value of the minimum lease payments at the inception of the lease, and recognizes a long-term payable at an amount
equal to the minimum lease payments. The difference between the recorded amounts is deferred. Besides, initial direct costs that are
attributable to the leased item incurred during the process of negotiating and securing the lease agreement are also added to the amount
recognized for the leased asset.
80
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
28. Leases (cont’d)
(4) The Group as lessee under finance leases
The deferred expense are recognized as financial expenses in profit or loss using the effective interest method over the lease term.
Contingent rents are credited to profit or loss in the period in which they are actually incurred. The net amount of minimum lease
payments less deferred expense is separated into long-term liabilities and the portion of long-term liabilities due within one year for
presentation.
29. Other significant accounting policies and accounting estimates
29.1 Hedging
The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflation risks and derivatives that are
not used for hedging.
Hedge accounting
On the commencement date of the accounting hedge, the Group formally documents the relationship between the hedging instrument and
hedged item, including the Group’s risk management objectives and strategy in executing the hedge transaction, together with the
methods that will be used by the Group to assess the effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedge is
expected to be effective in offsetting the changes in the fair value of cash flows that can be attributed to the hedged risk during the period
for which the hedge is designated.
An effective hedge exsists when all of the below conditions are met:
There is an economic relationship between the hedged item and the hedging instrument
the effect of credit risk does not dominate the value changes that result from that economic relationship
the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item
that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that
quantity of hedged item.
With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highly probable and must give rise to
exposure to changes in cash flows that could ultimately affect profit or loss.
Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as
incurred.
81
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
29. Other significant accounting policies and accounting estimates (cont’d)
29.1 Hedging (cont’d)
Cash-flow hedges
Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows are recognized through other
comprehensive income directly in a hedging reserve, with respect to the part of the hedge that is effective. Regarding the portion of the
hedge that is not effective, the changes in fair value are recognized in profit and loss. The amount accumulated in the hedging reserve is
reclassified to profit and loss in the period in which the hedged cash flows impact profit or loss and is presented in the same line item in
the statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, the hedge
accounting is discontinued. The cumulative gain or loss previously recognized in a hedging reserve through other comprehensive income
remains in the reserve until the forecasted transaction occurs or is no longer expected to occur. If the forecasted transaction is no longer
expected to occur, the cumulative gain or loss in respect of the hedging instrument in the hedging reserve is reclassified to profit or loss.
Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge financial assets and liabilities
denominated in foreign currency or CPI linked. Changes in the fair value of such derivatives are recognized in profit or loss as financing
income or expenses.
Derivatives that are not used for hedging
Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as financing income or expenses.
29.2. Securitization of assets
Details of the securitization of asset agreements and accounting policy are set out in Note V.5 Account receivables
29.3. Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal
organisation, management requirements and internal reporting system.
Two or more operating segments may be aggregated into a single operating segment if the segments have similar economic
characteristics and are same or similar in respect of the nature of each product and service, the nature of production processes, the type or
class of customers for the products and services, the methods used to distribute the products or provide the services, and the nature of the
regulatory environment.
29.4. Profit distributions to shareholders
Dividends which are approved after the balance sheet date are not recognised as a liability at the balance sheet date but are disclosed in
the notes separately.
82
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
30. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
The contents and reasons for the changes of accounting policiesh Process for
management
approval
The Group began to adopt the following revised Accounting Standards for Business The change in the
Enterprises (“ASBE”) promulgated by Ministry of Finance from January 1, 2018: accounting policy was
“Revised ASBE 22 - Financial Instruments Recognition and Measurement”, “Revised approved by the board
ASBE 23 - Transfer of Financial Assets”, “Revised ASBE 24 - Hedging”, “Revised of directors meeting in
ASBE 37 - Presentation and Disclosures of Financial insturments” (“new financial 2018.4.26.
instrument standards”), and “Revised ASBE 14 - Revenue” (“new revenue standard”),
promulgated on 2017.
Financial Instruments
According to new financial instrument standards, financial assets are classified as one
of the following three categories: financial assets measured at amortized cost, financial
assets measured at fair value through other comprehensive income (FVTOCI), and
financial assets measured at fair value through profit and loss (FVTPL), based on the
“business model” and “contractual cash flow characteristics”. The categories of loans
and receivables, held-to-maturity investments and available-for-sale financial assets in
the old financial instrument standards are cancelled. Equity investments are normally
classified as financial assets at FVTPL, while it is permitted to irrevocably designate
non-trading equity investments as financial assets at FVTOCI, and cumulative gain or
loss previously recognised in other comprehensive income should not be classified to
profit or loss upon derecognition.
Impairment requirements in new financial instrument standards are applied to financial
assets at amortised cost and FVTOCI, based on the “expected credit loss method”. The
new impairment model requires a three-stage model, to recognize 12-month or lifetime
expected credit losses, depending on whether credit risk on a financial instrument has
increased significantly since initial recognition. An entity shall always measure the loss
allowance at an amount equal to lifetime expected credit losses for trade receivables
that do not have a significant financing component.
Revenue
New revenue standards introduced the 5-step approach, and provides more guidances
for special transactions and events. Refer to Note III.25 for details of the Group’s
revenue recognition and measurement.
According to the new standards, opening balances should be adjusted for accumulated
impact, with regards to retained earnings and other relevant accounts, with no
adjustments for comparative information.
83
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
31. Changes in significant accounting policies and accounting estimates (cont’d)
(1) Changes in significant accounting policies (cont’d)
Note 1: Transfer from loans and receivables to fair value
According to the Standard, the classification of financial assets that constitute debt instruments is generally based on the business
model in which a financial asset is managed and its contractual cash flow characteristics. Trade receivables that are included in the
securitization transaction for which consideration has not yet been received, are measured at fair value through profit or loss.
As a result of the implementation of the Standard, as at January 1, 2018, the balance of other receivables decreased by 8,279
thousand RMB with a corresponding decrease in retained earnings.
Note 2: Transfer from available-for-sale financial assets to other equity investments
As at January 1, 2018, available-for-sale financial assets were designated as financial assets at FVTOCI and reclassified to other
equity investments. Such equity investments are not expected to be sold within the foreseeable future.
Since those equity investments are not quoted in an active market, according to old financial instrument standards, the investments
were measured at cost.
Commencing January 1, 2018, such equity investments are measured at FVTOCI. Impairment loss recognised in prior periods of
RMB 11,991 was reclassified from retained earnings to OCI, the investments were revaluated through OCI in the amount of RMB
71,546 and the deferred tax assets decreased by RMB 8,934. The OCI was increased by net amount of RMB 50,621.
Note 3: Expected credit loss
Commencing from January 1, 2018, the Group recognise credit loss impairment in accordance with new financial instrument
standards.
The Standard includes a new model for the recognition of expected credit loss ('expected credit loss’ model) for financial assets that
are not measured at fair value through profit or loss. As a result of the implementation of the Standard, as of January 1, 2018, the
provision for impairment of trade receivables increased by RMB 42,345, the deferred tax assets increased by RMB 12,277 with a
corresponding decrease of RMB 30,068 in retained earnings.
Note 4: Significant financing component in revenue recognition
In assessing whether a contract contains a significant financing component, the Group examines, among other things, the expected
length of time between the date on which the Group transfers the goods to the customer and the date on which the customer pays
for the goods less than one year. In cases where the difference is one year or less, the Group applies the practical relief prescribed in
the Standard and does not separate the significant financing component.
84
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
32. Changes in significant accounting policies and accounting estimates (cont’d)
(1) Changes in significant accounting policies (cont’d)
Note 4: Significant financing component in revenue recognition (cont’d)
As a result of the implementation of the Standard, as of January 1, 2018, the balance of trade receivables increased by RMB 71,406
and deferred tax assets decreased by RMB 23,837, with a corresponding increase of RMB 47,569 in retained earnings.
Summary of impacts to assets, liabilities and owners’ equity from adoption of new revenue standards and new financial instrument
standards, as at January 1, 2018:
Impact from
December 31, Impact from January 1,
adoption of new
Items adoption of new
2017 financial instrument 2018
revenue standards
standards
Accounts receivable 5,056,850 71,406 (42,345) 5,085,911
Other receivable 1,037,836 - (8,279) 1,029,557
Available for sale
financial assets 19,544 - (19,544)
Other equity
investments - 91,090 91,090
Deferred tax assets 891,012 (23,837) 3,343 870,518
Total impact to
assets 39,613,922 47,569 24,265 39,685,756
Other
comprehensive
income (154,701) - 50,621 (104,080)
Retained earnings 3,286,711 47,569 (26,356) 3,307,924
Total impact to
shareholders’
equity 18,778,013 47,569 24,265 18,849,847
(2) Changes in significant accounting estimates
There are no significant changes in accounting estimates in the reporting period.
85
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
32. Significant accounting estimates and judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates as well as underlying assumptions and uncertainties involved are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Notes V.33, Note IX and Note XII contain information about the assumptions and their risk factors relating to post-employment benefits
– defined benefit plans, fair value of financial instruments and share-based payments. Other key sources of estimation uncertainty are as
follows:
32.1 Impairment of trade receivables
As described in Note III.11, trade receivables are reviewed at each balance sheet date to determine whether credit risk on a receivable has
increased significantly since initial recognition, lifetime expected losses is accrued for impairment provision. Evidence of impairment
includes observable data that comes to the attention of the Group about loss events such as a significant decline in the solvency of an
individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If
there is objective evidence of a recovery in the value of receivables which can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment loss is reversed.
32.2 Provision for impairment of inventories
As described in Note III.12, the net realisable value of inventories is under management’s regular review, and as a result, provision for
impairment of inventories is recognised for the excess of inventories’ carrying amounts over their net realisable value. When making
estimates of net realisable value, the Group takes into consideration the use of inventories held on hand and other information available
to form the underlying assumptions, including the inventories’ market prices and the Group’s historical operating costs. The actual selling
price, the costs of completion and the costs necessary to make the sale and relevant taxes may vary based on the changes in market
conditions and product saleability, manufacturing technology and the actual use of the inventories, resulting in the changes in provision
for impairment of inventories. The net profit or loss may then be affected in the period when the impairment of inventories is adjusted.
86
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
32. Significant accounting estimates and judgments (cont’d)
32.3 Impairment of assets other than inventories and financial assets
As described in Note III.21, assets other than inventories and financial assets are reviewed at each balance sheet date to determine
whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, an impairment loss is
recognised.
The recoverable amount of an asset (or an asset group) is the greater of its fair value less costs to sell and its present value of expected
future cash flows. Since a market price of the asset (or the asset group) cannot be obtained reliably, the fair value of the asset cannot be
estimated reliably, the recoverable amount is calculated based on the present value of estimated future cash flows. In assessing the
present value of estimated future cash flows, significant judgements are exercised over the asset’s production, selling price, related
operating expenses and discount rate to calculate the present value. All relevant materials which can be obtained are used for estimation
of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable
and supportable assumptions.
32.4 Depreciation and amortisation of assets such as fixed assets and intangible assets
As described in Note III.16 and 19, assets such as fixed assets and intangible assets are depreciated and amortised over their useful lives
after taking into account residual value. The estimated useful lives of the assets are regularly reviewed to determine the depreciation and
amortisation costs charged in each reporting period. The useful lives of the assets are determined based on historical experience of
similar assets and the estimated technical changes. If there have been significant changes in the factors used to determine the depreciation
or amortisation, the rate of depreciation or amortisation is revised prospectively.
32.5 Income taxes and deferred income tax
The Company and Group companies are assessed for income tax purposes in a large number of jurisdictions and, therefore, Company
management is required to use considerable judgment in determining the total provision for taxes and attribution of income.
When assessing whether there will be sufficient future taxable profits available against which the deductible temporary differences can be
utilised, the Group recognises deferred tax assets to the extent that it is probable that future taxable profits will be available against which
the deductible temporary differences can be utilised, using tax rates that would apply in the period when the asset would be utilised. In
determining the amount of deferred tax assets, the Group makes reasonable judgements and estimates about the timing and amount of
taxable profits to be utilised in the following periods, and of the tax rates applicable in the future according to the existing tax policies
and other relevant regulations. If the actual timing and amount of future taxable profits or the actual applicable tax rates differ from the
estimates made by management, the differences affect the amount of tax expenses.
87
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
32. Significant accounting estimates and judgments (cont’d)
32.6 Contingent liabilities
When assessing the possible outcomes of legal claims filed against the Company and its investee companies, the company positions are
based on the opinions of their legal advisors. These assessments by the legal advisors are based on their professional judgment,
considering the stage of the proceedings and the legal experience accumulated regarding the various matters. Since the results of the
claims will be determined by the courts, the outcomes could be different from the assessments.
In addition to the said claims, the Group is exposed to unasserted claims, inter alia, where there is doubt as to interpretation of the
agreement and/or legal provision and/or the manner of their implementation. This exposure is brought to the Company’s attention in
several ways, among others, by means of contacts made to Company personnel. In assessing the risk deriving from the unasserted claims,
the Company relies on internal assessments by the parties dealing with these matters and by management, who weigh assessment of the
prospects of a claim being filed, and the chances of its success, if filed. The assessment is based on experience gained with respect to the
filing of claims and the analysis of the details of each claim. By their nature, in view of the preliminary stage of the clarification of the
legal claim, the actual outcome could be different from the assessment made before the claim was filed.
32.7 Employee benefits
The Group’s liabilities for long-term post-employment and other benefits are calculated according to the estimated future amount of the
benefit to which the employee will be entitled in consideration for his services during the current period and prior periods. The benefit is
stated at present value net of the fair value of the plan’s assets, based on actuarial assumptions. Changes in the actuarial assumptions
could lead to material changes in the book value of the liabilities and in the operating results.
32.8 Derivative financial instruments
The Group enters into transactions in derivative financial instruments for the purpose of hedging risks related to foreign currency and
inflationary risks. The derivatives are recorded at their fair value. The fair value of derivative financial instruments is based on quotes
from financial institutions. The reasonableness of the quotes is examined by discounting the future cash flows, based on the terms and
length of the period to maturity of each contract, while using market interest rates of a similar instrument as of the measurement date.
Changes in the assumptions and the calculation model could lead to material changes in the fair value of the assets and liabilities and in
the results.
88
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
IV TAXATION
1. Main types of taxes and corresponding tax rates:
The income tax rate in China to the Company is 25%. The subsidiaries outside of China are assessed based on the tax laws in the country
of their residence.
Set forth below are the tax rates outside China relevant to the subsidiaries with significant sales to third party:
Name of subsidiary Location 2018
ADAMA agriculture solutions Ltd. Israel 23.0%
ADAMA Makhteshim Israel 7.5%
ADAMA Agan Israel 16.0%
ADAMA Brasil S/A Brazil 34.0%
ADAMA of North America Inc. U.S. 24.7%
ADAMA India Private Ltd India 34.6%
ADAMA Deutschland GmbH Germany 32.5%
Control Solutions Inc. U.S. 24.0%
Adama Australia Pty Ltd Australia 30.0%
ADAMA France S.A.S France 32.2%
ADAMA Andina B.V. Sucursal Colombia Colombia 34.0%
ADAMA Italia S.R.L. Italy 27.9%
Alligare Inc. U.S. 27.5%
The VAT rate of the Group's subsidiaries is in the range between 2.5% to 27%.
A. Benefits from Hi-Tech Certificate
The Company, was jointly approved as new and high-tech enterprise, by the Hubei Provincial Department of Science and
Technology, Department of Finance of Hubei Province, Hubei Provincial Office of the State Administration of Taxation and Hubei
Local Taxation Bureau, and the applicable income tax rate from 2017 to 2019 is 15%.
B. Benefits under the Law for the Encouragement of Capital Investments
Industrial enterprises of subsidiaries in Israel were granted “Approved Enterprise” or “Beneficiary Enterprise” status under the Israeli
Law for the Encouragement of Capital Investments, 1959. Part of the income deriving from the “Approved Enterprise” or
“Beneficiary Enterprise” during the benefit period is subject to tax at the rate of up to 25% (the total benefit period is seven years and
in certain circumstances up to ten years, but may not exceed 14 years from the date of the Letter of Approval and 12 years from the
date the “Approved Enterprise” commenced operations or not more than 12 years from the election year for a “Beneficiary
Enterprise”).
Other industrial enterprises of subsidiaries in Israel are entitled to a tax exemption for periods of between two and six years and a tax
rate of up to 25% for the remainder of the benefits period. Should a dividend be distributed from the tax-exempt income, the
subsidiaries will be liable for tax on the income from which the dividend was distributed at a rate of 25%.
89
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
IV. Taxation (cont'd)
2. Tax preferential
The aforementioned benefits are conditional upon compliance with certain conditions specified in the Law, related Regulations and
the Letters of Approval, in accordance with which the investments in the Approved Enterprises were made. Failure to meet these
conditions may lead to cancellation of the benefits, in whole or in part, and to repayment of any benefits already received, together
with interest. Management believes that the companies are in compliance with these conditions.
C. Amendment to the Law for the Encouragement of Capital Investments, 1959.
On December 29, 2010 the Israeli parliament approved the Economic Policy Law for 2011-2012, which includes an amendment to
the Law for the Encouragement of Capital Investments – 1959 (hereinafter – “the Amendment”). The Amendment is effective from
January 1, 2011 and its provisions apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, per
the definition of these terms in the Amendment. Companies can choose not to be included in the scope of the amendment to the
Encouragement Law and to stay in the scope of the law before its amendment until the end of the benefits period of its
approved/beneficiary enterprise.
As of the date of the report, all subsidiaries in Israel adopted the amendment and the deferred taxes were calculated accordingly.
he Amendment provides that only companies in Development Area A will be entitled to the grants track. Further, they will be entitled
to receive benefits both under this track and under the tax benefits track at the same time. In addition, the existing tax benefit tracks
were eliminated (the tax exempt track, the “Ireland” track and the “Strategic” track) and two new tax tracks were introduced in their
place, a preferred enterprise and a special preferred enterprise, which mainly provide a uniform and reduced tax rate for all the
company’s income entitled to benefits.
On August 5, 2013 the Israeli Parliament passed the Law for Changes in National Priorities (Legislative Amendments for Achieving
Budget Objectives in the Years 2013 and 2014) – 2013, which cancelled the planned tax reduction so that as from the 2014 tax year
the tax rate on preferred income will be 9% for Development Area A and 16% for the rest of the country.
On December 22, 2016, the Israeli Parliament passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget
Objectives in the years 2017 and 2018) – 2016, by which, inter alia, preferred enterprise in Development Area A, will be subject to
tax rate of 7.5% instead of 9% effective from January 1, 2017 and thereafter (the tax rate applicable to preferred enterprises located in
other areas remains at 16%)
The amendment further determined that no tax shall apply to dividend distributed out of preferred income to shareholder who is
Israel resident company. On dividend distributed out of preferred income to a single shareholder or a foreign resident subject to
double taxation treaties, tax of 20% shall apply.
D. Benefits under the Law for the Encouragement of Industry (Taxes), 1969
Under the Israeli Law for the Encouragement of Industry (Taxes) 1969, the Company is an Industrial Holding Company and some of
the subsidiaries in Israel are “Industrial Companies”. The main benefit under this law is the filing of consolidated income tax returns
(the Company files a consolidated income tax return with Adama Makhteshim) and amortization of know-how over 8 years.
90
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
V. Notes to the consolidated financial statements
1. Cash at Bank and On Hand
June 30 January 1
2018 2018
Cash on hand 1,065 2,267
Deposits in banks 6,020,315 7,861,991
Other cash at bank 28,150 4,600
6,049,530 7,868,858
Including cash and bank placed outside China 3,931,947 5,580,592
As at 30 June 2018, restricted cash and bank balances was 28,150 thousand RMB (as at January 1, 2018:
4,600 thousand RMB) mainly including deposits that guarantee bank acceptance drafts.
2. Financial Assets at Fair Value through Profit or Loss
June 30 January 1
2018 2018
Financial assets held for trading:
Debt instruments 13,610 14,225
Other 19,083 8,775
32,693 23,000
3. Derivative financial assets
June 30 January 1
2018 2018
Economic hedge 849,346 449,553
Hedge accounting derivatives 90,879 5,600
940,225 455,153
91
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
4. Bills Receivable
(1) Bills receivable by category
June 30 January 1
2018 2018
Post-dated checks receivable 10,335 19,969
Bank acceptance draft 77,950 160,061
88,285 180,030
All bills receivables are due within one year.
(2) Bills receivable which had endorsed by the Company
June 30
2018
Bank acceptance draft 211,682
211,682
5. Accounts Receivable
(1) Accounts receivable by category
June 30, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairment 6,459,562 92 93,425 1 6,366,137
Account receivables assessed
individually for impairment 553,412 8 304,905 55 248,507
7,012,974 100 398,330 6 6,614,644
January 1, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairment 4,935,888 90 104,712 2 4,831,176
Account receivables assessed
individually for impairment 578,799 10 324,064 56 254,735
5,514,687 100 428,776 8 5,085,911
92
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
5. Accounts Receivable (cont’d)
(2) Addition, written-back and written-off of provision for bad and doubtful debts during the years:
Six months
ended ended
June 30
2018
Balance as of January 1, 428,776
Addition during the year, 28,367
Write back during the year (22,742)
Write-off during the year (1,986)
Exchange rate effect (34,085)
Balance as of June 30, 398,330
(3) Five largest accounts receivable by debtor at June 30, 2018:
June 30, 2018
As a percentage of
total accounts Provision for bad debts
Closing balance (%) receivable at the end of the year
Party A 119,105 2 -
Party B 116,465 2 5,823
Party C 81,060 1 -
Party D 75,661 1 -
Party E 75,290 1 -
Total 467,581 7 5,823
(4) Derecognition of accounts receivable due to transfer of financial assets
Certain subsidiaries of the group entered into a securitization transaction with Rabobank International for sale of trade
receivables (hereinafter – “the Securitization Program” and/or “the Securitization Transaction”).
Pursuant to the Securitization Program, the companies will sell their trade receivables debts, in various different currencies, to a
foreign company that was set up for this purpose and that is not owned by the Adama Agricultural Solutions Group (hereinafter
– “the Acquiring Company”). Acquisition of the trade receivables by the Acquiring Company is financed by a U.S. company,
Nieuw Amsterdam Receivables Corporation for the Rabobank International Group.
The trade receivables included as part of the Securitization Transaction are trade receivables that meet the criteria provided in
the agreement.
Every year the credit facility is re approved in accordance with the Securitization Program. As at the date of the report, the
Securitization Agreement was approved up to July 31, 2018. Subsequent to the report date, the Securitization Agreement was
extended up to July 31, 2019.
93
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
5. Accounts Receivable (cont’d)
(4) Derecognition of accounts receivable due to transfer of financial assets (cont’d)
The maximum scope of the securitization is adjusted for the seasonal changes in the scope of the Company’s activities, as
follows: during the months March through June the maximum scope of the securitization is $350 million, during the months
July through September the maximum scope of the securitization is $300 million and during the months October through
February the maximum scope of the securitization is $250 million. The proceeds received from those customers whose debts
were sold are used for acquisition of new trade receivables.
The price at which the trade receivables debts are sold is the amount of the debt sold less a discount calculated based on,
among other things, the expected length of the period between the date of sale of the trade receivable and its anticipated
repayment date. In the month following acquisition of the debt, the Acquiring Company pays in cash most of the debt while the
remainder is recorded as a subordinated note that is paid after collection of the debt sold. If the customer does not pay its debt
on the anticipated repayment date, the Company bears interest up to the earlier of the date on which the debt is actually repaid
or the date on which the Acquiring Company is indemnified by the insurance company (the actual costs are not significant and
are not expected to be significant).
The Acquiring Company bears 90% of the credit risk in respect of the customers whose debts were sold and will not have a
right of recourse to the Company in respect of the amounts paid in cash, except regarding debts with respect to which a
commercial dispute arises between the companies and their customers, that is, a dispute the source of which is a claim of
non-fulfillment of an obligation of the seller in the supply agreement covering the product, such as: a failure to supply the
correct product, a defect in the product, delinquency in the supply date, and the like.
The Acquiring Company appointed a policy manager who will manage for it the credit risk involved with the trade receivables
sold, including an undertaking with an insurance company.
Pursuant to the Receivables Servicing Agreement, the Group companies handle collection of the trade receivables as part of the
Securitization Transaction for the benefit of the Acquiring Company.
As part of the agreement, the subsidiary committed to comply with certain financial covenants, mainly the ratio of the liabilities
to equity and profit ratios. As of June 30, 2018 the subsidiary was in compliance with the financial covenants.
The accounting treatment of sale of the trade receivables included as part of the Securitization Program is:
The Company is not controlling the Acquiring Company, therefore is not consolidated the Acquiring Company in its financial
statements.
The Company continues to recognize the trade receivables included in the Securitization Program based on the extent of its
continuing involvement therein.
In respect of the part of the trade receivables included in the securitization Program with respect to which cash proceeds were
not yet received, however regarding which the Company has transferred the credit risk, a subordinated note is recorded.
The loss from sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing expenses”
category.
94
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
5. Accounts Receivable (cont’d)
(4) Derecognition of accounts receivable due to transfer of financial assets (cont'd)
In the fourth quarter of 2016, a subsidiary in Brazil (hereinafter - “the subsidiary”) entered into a 3 years securitization
transaction with Rabobank Brazil for sale of trade receivables. Under the agreement, the subsidiary will sell its trade
receivables to a securitization structure (hereinafter - “the entity”) that was formed for this purpose where the subsidiary has
subordinate rights of 5% of the entity's capital.
The maximum securitization scope amounts to BRL 200 million (as of June 30, 2018 - 343 million RMB).
On the date of the sale of the trade receivables, the entity pays the full amount which is the debt amount sold net of discount
calculated, among others, over the expected length of the period between the date of sale of the customer receivable and its
anticipated repayment date.
The entity bears 90% of the credit risk in respect of the customers whose debts were sold such that the entity has the right of
recourse of 10% of the unpaid amount. The subsidiary should make a pledged deposit equal to the amount the entity’s right of
recourse.
The subsidiary handles the collection of receivables included in the securitization for the entity.
The subsidiary does not control the entity and therefore the entity is not consolidated in the group's financial statements.
The subsidiary continues to recognize the trade receivables sold to the entity based on the extent of its continuing involvement
therein (10% right of recourse) and also recognizes an associated liability in the same amount.
The loss from the sale of the trade receivables is recorded at the time of sale in the statement of income in the “financing
expenses” category.
June 30 January 1
2018 2018
Accounts receivables derecognized 2,451,986 2,513,554
Continuing involvement 217,177 227,887
Subordinated note in respect of trade receivables 273,861 575,865
Liability in respect of trade receivables 242,962 37,957
Six months ended June 30
2018 2017
Restated
Loss in respect of sale of trade receivables 32,186 30,739
32,186 30,739
95
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
6. Prepayments
(1) The ageing analysis of prepayments is as follows:
June 30 January 1
2018 2018
Amount Percentage Amount Percentage
Within 1 year (inclusive) 267,654 94 193,322 96
Over 1 year but within 2 years (inclusive) 14,907 5 4,404 2
Over 2 years but within 3 years (inclusive) 3,421 1 3,600 2
Over 3 years 960 - 785 -
286,942 100 202,111 100
(2) Total of five largest prepayments by debtor at the end of the period:
Percentage of
Amount prepayments (%)
June 30, 2018 103,179 36
7. Other Receivables
(1) Other receivables by category
June 30, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairment 705,728 99 149 - 702,579
Account receivables assessed
individually for impairment 7,848 1 5,702 73 2,146
713,576 100 5,851 1 707,725
January 1, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairmentbasis 1,027,087 99 77 - 1,027,010
Account receivables assessed
individually for impairment 7,849 1 5,302 68 2,547
1,034,936 100 5,379 1 1,029,557
96
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
7. Other Receivables (cont'd)
(2) Addition, recovery or reversal and written-off of provision for bad and doubtful debts during the years:
Six months
ended June 30
2018
Balance as of January 1, 5,379
Addition during the year 472
Written back during the year -
Write-off during the year -
Exchange rate effect -
Balance as of June 30, 5,851
(3) Other receivables by nature
June 30 January 1
2018 2018
Trade receivables as part of securitization
transactions not yet eliminated 217,177 227,887
Subordinated note in respect of trade receivables 273,861 575,865
Financial institutions 31,938 60,742
Other 190,600 170,442
Sub total 713,576 1,034,936
Provision for doubtful debts - other receivables (5,851) (5,379)
707,725 1,029,557
Financial institutions represent deposits made by the company with regard to derivatives
transactions.
(4) Total of five largest other receivables by debtor at the end of the period:
Percentage of
Amount other receivables
June 30, 2018 405,803 57
The total five largest other receivables includes the subordinated note in respect of trade
receivables.
97
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
8. Inventories
(1) Inventories by category:
June 30, 2018
Provision for impairment
Book value of inventories Carrying amount
Raw materials 2,984,847 8,842 2,976,005
Work in progress 416,129 788 415,341
Finished goods 4,796,740 163,701 4,633,039
Others 257,918 7,483 250,435
8,455,634 180,814 8,274,820
January 1, 2018
Provision for impairment
Book value of inventories Carrying amount
Raw materials 2,272,637 11,545 2,261,092
Work in progress 522,668 417 522,251
Finished goods 4,623,078 149,252 4,473,826
Others 238,355 7,286 231,069
7,656,738 168,500 7,488,238
(2) Provision for impairment of inventories:
For the six monthes ended June 30, 2018
January 1, Reversal or June 30,
2018 Provision write-off Other 2018
Raw material 11,545 2,767 (5,411) (59) 8,842
Work in progress 417 1,064 (693) - 788
Finished goods 149,252 43,652 (31,111) 1,908 163,701
Others 7,286 452 (350) 95 7,483
168,500 47,935 (37,565) 1,944 180,814
98
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
9. Assets held for sale
Currency
translation
Item January 1, 2018 Decrease adjustment June 30, 2018
Intangible assets – registration
and Intangilbe assets on
purchased products 403,297 (392,403) 10,894 -
The assets held for sales were divested on March 2018, for further information see Note V.16 Intangible assets.
10. Other Current Assets
June 30 January 1
2018 2018
Deductible VAT 449,313 477,117
Current tax assets 60,681 90,350
Others 38,966 47,458
548,960 614,925
11. Long-Term Receivables
June 30 January 1
2018 2018
Long term account receivables from sale of goods 146,399 192,968
99
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
12. Long-Term Equity Investments
(1) Long-term equity investments by category:
June 30 January 1
2018 2018
Investments in joint ventures 80,913 64,523
Investments in associates 38,338 37,860
119,251 102,383
(2) Movements of long-term equity investments for the six months ended June 30, 2018 are as
follows:
Investment
presented as Net Translation
Balance at liability as at balance at Investment differences Balance
January 1, January 1, January 1, income of foreign at June
2018 2018 2018 (loss) operations Other 30, 2018
Joint ventures
Company A 54,362 - 54,362 12,394 (1,217) 3,748 69,287
Company B 6,247 - 6,247 777 109 - 7,133
Company D 3,914 - 3,914 - 122 - 4,036
Company F* - (7,652) (7,652) (413) 225 8,297 457
Sub-total 64,523 (7,652) 56,871 12,758 (761) 12,045 80,913
Associates
Company E 37,860 - 37,860 - 478 - 38,338
Sub total 37,860 - 37,860 - 478 - 38,338
102,383 (7,652) 94,731 12,758 (283) 12,045 119,251
* Negev Aroma (Ramat Hovav) Ltd. (hereinafter "Negev Aroma"), a joint venture accounted for using the equity method, was
presented as a liability in 2017 due to the group's obligation to support Negev Aroma.
13. Other equity investments
June 30 January 1
2018 2018
Other equity investments 91,154 91,090
100
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
14. Fixed assets
Office &
Land & Machinery & Motor other
Buildings equipment vehicles equipment Total
Cost
Balance as at January 1, 2018 2,473,955 11,126,188 100,180 293,399 13,993,722
Purchases 19,054 105,806 2,917 11,624 139,401
Transfer from construction in progress 34,011 104,366 - 2,656 141,033
Disposals (885) (9,283) (8,919) (3,840) (22,927)
Currency translation adjustment 7,694 107,769 1,237 1,954 118,654
Balance as at June 30, 2018 2,533,829 11,434,846 95,415 305,793 14,369,883
Accumulated depreciation
Balance as at January 1, 2018 (1,089,200) (6,290,024) (53,061) (220,477) (7,652,762)
Charge for the year (42,530) (250,305) (5,898) (13,373) (312,106)
Disposals 885 6,946 7,347 3,643 18,821
Currency translation adjustment (8,017) (63,024) (530) (1,069) (72,640)
Balance as at June 30, 2018 (1,138,862) (6,596,407) (52,142) (231,276) (8,018,687)
Provision for impairment
Balance as at January 1, 2018 (19,151) (180,077) - (242) (199,470)
Charge for the year - (121) - (299) (420)
Disposals - 6 - - 6
Currency translation adjustment (205) (952) - (15) (1,172)
Balance as at June 30, 2018 (19,356) (181,144) - (556) (201,056)
Carrying amounts
As at June 30, 2018 1,375,611 4,657,295 43,273 73,961 6,150,140
As at January 1, 2018 1,365,604 4,656,087 47,119 72,680 6,141,490
*The land is located outside of china, owned by some of the group subsidiaries outside of china and reported as fixed
assets.
101
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
15. Construction in Progress
(1) Construction in progress
June 30 January 1
2018 2018
Provision for Provision for
Book value impairment Carrying amount Book value impairment Carrying amount
871,046 - 871,046 803,421 - 803,421
(2) Details and Movements of major construction projects in progress during the six months ended June 30, 2018
Balance at Additions Currency Balance at Percentage of
January 1, during the Transfer to translation June 30, actual cost to Project Source of
Budget 2018 year fixed assets differences 2018 budget (%) progress(%) funds
Project A 359,659 302,821 24,825 - 379 328,025 91 91 Internal finance
Project B 177,067 125,738 15,535 - 2,195 143,468 81 81 Internal finance
Internal finance
Project C 1,509,420 50,693 27,441 - - 78,134 5 5 and bank loan
Project D 41,704 34,011 6,991 - 702 41,704 100 100 Internal finance
102
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
16. Intangible Assets
(1) Intangible Assets
Intangible assets
Product on Purchased Marketing rights
registration Products (1) Software and trademarks Land use rights (2) Others Total
Cost
Balance as at January 1, 2018 8,955,414 1,986,450 559,576 472,190 326,521 352,126 12,652,277
Purchases 185,846 1,966,144 32,638 - 25,100 116,712 2,326,440
Currency translation adjustment 111,061 96,911 7,636 4,441 487 8,173 228,709
Disposal (35,503) (80,253) (2,305) (32,396) (206) 13 (150,650)
Balance as at June 30, 2018 9,216,818 3,969,252 597,545 444,235 351,902 477,024 15,056,776
Accumulated amortization
Balance as at January 1, 2018 (5,889,539) (1,520,132) (365,732) (400,535) (61,242) (227,331) (8,464,511)
Charge for the year (370,897) (126,162) (28,930) (10,119) (3,065) (18,103) (557,276)
Currency translation adjustment (84,890) (19,211) (4,806) (4,098) (153) (3,483) (116,641)
Disposal 22,582 74,484 1,446 32,396 206 (13) 131,101
Balance as at June 30, 2018 (6,322,744) (1,591,021) (398,022) (382,356) (64,254) (248,930) (9,007,327)
Provision for impairment
Balance as at January 1, 2018 (70,230) (48,876) - - (32,072) - (151,178)
Charge for the year - - (134) (51) - (726) (911)
Currency translation adjustment (885) (616) (5) (2) - (28) (1,536)
Balance as at June 30, 2018 (71,115) (49,492) (139) (53) (32,072) (754) (153,625)
Carrying amount
As at June 30, 2018 2,822,959 2,328,739 199,384 61,826 255,576 227,340 5,895,824
As at January 1, 2018 2,995,645 417,442 193,844 71,655 233,207 124,795 4,036,588
(1) The subsidiaries, wholly-controlled by the Company, signed several agreements with Aventis and Syngenta A.G and Bayer Crop Science A.G in 2001, 2002, 2017 and 2018, for the acquisition of intellectual
property rights, trademarks, brand name, technological know-how, information on customers and suppliers of materials and distribution rights in the field of agrochemicals.
(2) Part of the land in Israel has not yet been registered in the name of the Group companies at the Land Registry Office, mostly due to registration procedures or technical problems.
103
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
16. Intangible Assets (cont’d)
(2) Additional information
As part of the development of its business and in order to obtain the necessary regulatory approvals to CNAC from the China
National Chemical Corporation group (hereinafter- “CC”) for the acquisition of Syngenta AG ("Syngenta"), the Company agreed
with CC and Syngenta to sell several of its products against receiving products with similar characteristics and economic value from
Syngenta, including Syngenta's bearing of all expenses and taxes the Company will be required to pay.
Accordingly, during 2017, the Company received certain products and rights from Syngenta in the United States, against the sale of a
number of the Company's products to Amvac Chemical Corporation for the purpose of obtaining approval from the US Authority
(FTC). The proceeds received for the sold products and the cost of the acquired properties in the US are not material.
On March 16, 2018, the transaction for the sale of the Company's registrations assets in certain European countries to Nufarm
Limited was completed, while the Company retained its right to continue to sell these products in other countries outside and
sometimes also within Europe, in addition to signing supply and formulation agreements for a period of two years. The consideration
received from Nufarm for the sale of the assets and for the supply and formulation agreements amounted to 2,511 million RMB
(including deferred income of 93 million RMB). The capital gain generated from the sale amounted to 1,998 million RMB. The tax
expenses in respect of the capital gain amounted to approximately 442 million RMB.
Concurrent with the sale of said assets in Europe, the transaction for the acquisition of certain registration and marketing rights in
Europe from Syngenta by the Company was completed. The cost of purchased intangible assets amounted to 2,072 million RMB.
As a result of these transactions, the addition to intangible assets amounted to 2,137 million RMB that was recorded under intangible
assets.
Approximately 2,025 million RMB in respect of acquisition of registration assets and marketing rights are recorded as assets in the
purchase of products and is amortized over the economic life of the assets, ranging from 1 to 14 years (mainly between 7 and 11
years).
An amount of approximately 112 million RMB was recorded as non-competitive and is amortized over the non-competition period
which is five years or over the economic life of the related assets if it is less than 5 years.
The valuation model used to allocate the consideration to the acquired assets is Discounted Cash Flow (DCF).
104
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
17. Goodwill
The Group identified two cash generating units ("CGU”), Crop Protection (Agro) and Other (Non Agro) units. Operations are
allocated into either one of the two cash generating units according to their business.
At the end of the year, or more frequently whether indicators for impairment exists, the Group estimates the recoverable amount of
Agro and Non Agro units, which are the cash generating units of the Group that contain goodwill.
As at the reporting period, there were no indicators for impairment. The fair value of the cash generating units to which the goodwill
relates exceeds its carrying amount.
Changes Currency
Balance at during the translation Balance at
January 1, 2018 period adjustment June 30, 2018
Book value 3,890,097 - 49,056 3,939,153
Impairment provision - - - -
Carrying amount 3,890,097 - 49,056 3,939,153
18. Deferred Tax Assets and Deferred Tax Liabilities
(1) Deferred tax assets without taking into consideration of the offsetting of balances within the
same tax jurisdiction
June 30 January 1
2018 2018
Deductible Deductible
temporary Deferred tax temporary Deferred tax
differences assets differences assets
Deferred tax assets
Deferred tax assets in respect of
inventories 1,435,611 365,428 1,372,337 353,544
Deferred tax assets in respect of employee
benefits 799,927 104,213 863,820 114,255
Deferred tax assets in respect of carry forward
losses 655,998 43,001 2,363,524 462,184
Other deferred tax asset 911,869 278,208 1,210,681 321,112
3,803,405 790,850 5,810,362 1,251,095
105
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
18. Deferred tax assets and Deferred Tax Liabilities (cont’d)
(2) Deferred tax liabilities without taking into consideration of the offsetting of balances within the
same tax jurisdiction
June 30 January 1
2018 2018
Taxable Taxable
temporary Deferred tax temporary Deferred tax
differences liabilities differences liabilities
Deferred tax liabilities
Deferred tax liabilities in respect of
fixed assets and intangible assets 4,043,564 639,173 3,800,871 605,190
4,043,564 639,173 3,800,871 605,190
(3) Deferred tax assets and deferred tax liabilities presented on a net basis after offsetting
June 30 January 1
2018 2018
The offset
The offset amount Deferred tax amount of Deferred tax
of deferred tax assets or deferred tax assets or
assets and liabilities after assets and liabilities after
liabilities offset liabilities offset
Presented as:
Deferred tax assets 167,231 623,619 380,577 870,518
Deferred tax liabilities 167,231 471,942 380,577 224,613
(4) Details of unrecognised deferred tax assets
June 30 January 1
2018 2018
Deductible temporary differences 45,936 10,018
Deductible losses carry forward 101,309 96,041
147,245 106,059
106
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
18. Deferred tax assets and Deferred Tax Liabilities (cont’d)
(5) Expiration of deductible tax losses carry forward for unrecognised deferred tax assets
June 30 January 1
2018 2018
2018 - -
2019 - -
2020 19,803 19,831
2021 14,161 35,737
2022 5,670 18,008
After 2022 61,675 22,465
101,309 96,041
(6) Unrecognised deferred tax liabilities
When calculating the deferred taxes, taxes that would have applied in the event of realizing investments in subsidiaries were not
taken into account since it is the Company’s intention to hold these investments and not realize them.
Deferred tax assets in respect of losses carried forward for tax purposes as of January 1, 2018 are mainly in respect of
subsidiaries in Israel. Deferred tax assets were recognized because future taxable income was expected against which the
unutilized tax losses could be utilized, mainly due to capital gain from the closing of the transaction for selling certain products in
Europe during the first quarter of 2018, as described in Note 16 Intangible Assets, or up to the balance of deferred tax liability.
19. Other Non-Current Assets
June 30 January 1
2018 2018
Assets related to securitization transactions 62,123 88,832
Judicial deposits 49,823 50,150
Call option in respect of business combination 12,876 13,545
Advances in respect of non current assets 13,463 11,196
Long term loan 7,450 7,606
Others 47,402 30,384
Sub total 193,137 201,713
Due within one year (46) (46)
193,091 201,667
107
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
20. Short-Term Loans
Short-term loans by category:
June 30 January 1
2018 2018
Guaranteed loans 20,000 70,000
Unsecured loans 364,482 2,210,912
384,482 2,280,912
Details of the guarantees are set out in note X.(5) Related parties and related party transactions .
21. Derivative financial liabilities
June 30 January 1
2018 2018
Economic hedge 1,152,625 485,530
Hedge accounting derivatives 57,062 303,520
1,209,687 789,050
22. Bills Payable
June 30 January 1
2018 2018
Post-dated checks payables 39,991 288,557
Note Payables draft 105,000 23,000
144,991 311,557
All of the above bills payable are due within one year and none are overdue.
23. Accounts Payable
June 30 January 1
2018 2018
Within 1 year (including 1 year) 4,209,592 3,892,238
1-2 years (including 2 years) 5,970 8,190
2-3 years (including 3 years) 788 1,176
Over 3 years 4,981 4,877
4,221,331 3,906,481
108
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
24. Advances from customers
June 30 January 1
2018 2018
Within 1 year (including 1 year) 167,338 224,350
1-2 years (including 2 years) 483 351
2-3 years (including 3 years) 123 305
Over 3 years 2,006 1,705
169,950 226,711
25. Employee Benefits Payable
June 30 January 1
2018 2018
Short-term employee benefits 432,396 572,037
Post-employment benefits-defined contribution plans 21,008 20,367
Other benefits within one year 272,521 263,362
725,925 855,766
Current maturities 40,765 139,871
766,690 995,637
26. Taxes Payable
June 30 January 1
2018 2018
VAT 193,852 153,328
Corporate income tax 381,589 250,046
Others 19,783 27,901
595,224 431,275
27. Interest Payable
June 30 January 1
2018 2018
Accrued interest in respect of debenture 32,190 33,174
Accrued interest in respect of bank loans 2,996 3,346
Accrued interest in respect of other liabilities 8,059 9,971
43,245 46,491
As at 30 June 2018, the Group did not have any overdue interest.
109
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
28. Other Payables
June 30 January 1
2018 2018
Liabilities for discounts 722,447 503,362
Accrued expenses 617,284 534,437
Payables in respect of intangible assets 151,183 176,378
Financial institutions 107,804 20,838
Liability in respect of investment in equity-accounted investee company - 7,652
Liability in respect of securitizations transactions 242,962 37,957
Others payables 149,920 95,369
1,991,600 1,375,993
As at 30 June 2018, the Group did not have any significant overdue other payables.
29. Non-Current Liabilities Due Within One Year
Non-current liabilities due within one year by category are as follows:
June 30 January 1
2018 2018
Long-term loans due within one year 440,160 447,779
Long-term payables due within one year 542 725
Long-term deferred income due within one year 47,249 -
487,951 448,504
30. Other Current Liabilities
June 30 January 1
2018 2018
Put options to holders of non-controlling interests 349,575 285,329
Provision in respect of returns 128,905 161,643
Provision in respect of claims 27,512 18,714
Deferred income 22,602 16,505
Others 384 392
528,978 482,583
110
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
31. Long-Term Loans
Long-term loans by category
June 30 January 1
2018 Annual range 2018 Annual range
Long term loans
Loan secured by tangible assets other than
monetary assets 913 5.5% 1,294 5.5%
Guaranteed loans 152,000 4.5% 198,590 4.75%
Unsecured loans 607,629 5.05%-6.80% 762,215 4.22%-6.06%
Toal long term loans 760,542 962,099
Less: Long term loans due within 1 year (440,160) (447,779)
Total long term loans, net 320,382 514,320
For the maturity analysis, see note VIII (c)
The long-term loans were mortgaged by fixed assets with carrying amounts of 6,134 thousand RMB as at June 30th, 2018. Details
of the guarantees are set out in note X (5) Related parties and related party transactions .
32. Debentures Payable
June 30 January 1
2018 2018
Debentures Series B 7,548,581 7,777,410
Total Debentures payable 7,548,581 7,777,410
Due within one year - -
Debentures payable, net 7,548,581 7,777,410
June 30
2018
First year (current maturities) -
Second year -
Third year 444,034
Fourth year 444,034
Fifth year and thereafter 6,660,513
7,548,581
111
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
32. Debentures Payable (Cont'd)
Movements of debentures payable:
For the six months ended June 30, 2018
Face Balance at Issuance Amortization CPI and Repayment Currency
value in Face Issuance Issuance January 1, during the of discounts exchange during the translation Balance at
RMB value NIS date Maturity period amount 2018 period or premium rate effect period adjustment June 30, 2018
Debentures Series B 2,673,640 1,650,000 4.12.2006 November 2020-2036 3,043,742 3,531,088 - 108 (143,484) - 38,992 3,426,704
Debentures Series B 843,846 513,527 16.1.2012 November 2020-2036 842,579 1,027,019 - 4,230 (41,988) - 11,493 1,000,754
Debentures Series B 995,516 600,000 7.1.2013 November 2020-2036 1,120,339 1,295,327 - 1,892 (52,690) - 14,359 1,258,888
Debentures Series B 832,778 533,330 1.2.2015 November 2020-2036 1,047,439 1,233,624 - (1,179) (50,187) - 13,573 1,195,831
Debentures Series B 418,172 266,665 1-6.2015 November 2020-2036 556,941 690,352 - (3,370) (28,069) - 7,491 666,404
7,777,410 - 1,681 (316,418) - 85,908 7,548,581
Series B debentures, in the amount of NIS 3,563.5 million par value, are linked to the CPI and bear interest at the base annual rate of 5.15%. The debenture principal is to be repaid in 17 equal payments in
the years 2020 through 2036.
112
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
33. Long-Term Employee Benefits Payable
June 30 January 1
2018 2018
Total present value of obligation 513,090 530,333
Less: fair value of plan's assets (90,687) (97,614)
Post-employment benefits -Net liability arising from defined benefit plan 422,403 432,719
Termination benefits 112,533 138,948
Share based payment (See note XII) 102,332 55,260
Other long-term employee benefits 34,976 123,658
Total long-term employee benefits, net 672,244 750,585
Including: Long-term employee benefits payable due within one year 40,765 139,871
631,479 610,714
(1) Movement in the net liability and assets in respect of defined benefit plans early
retirement and their components
Defined benefit
obligation and early Fair value of plan
retirement assets Total
2018 2017 2018 2017 2018 2017
Restated Restated Restated
Balance as of January 1, 669,281 620,286 97,614 131,005 571,667 489,281
Expense/income recognized
in profit and loss:
Current service cost 10,928 11,310 - - 10,928 11,310
Past service cost (757) - - - (757) -
Interest costs 10,078 10,663 1,490 2,149 8,588 8,514
Settlements - (50,212) - (40,114) - (10,098)
Changes in exchange rates (26,394) 53,681 (4,783) 8,762 (21,611) 44,919
Actuarial gain/losses due to early
retirement (366) (854) - - (366) (854)
Included in other
comprehensive income:
Actuarial gain/losses as a result of
changes in actuarial assumptions (13,723) 7,072 (1,643) (242) (12,080) 7,314
Foreign currency translation
differences in respect of foreign
operations 6,242 (16,085) 925 (2,510) 5,317 (13,575)
Additional movements:
Benefits paid (29,666) (40,249) (6,145) (4,761) (23,521) (35,488)
Contributions paid by the Group - - 3,229 4,536 (3,229) (4,536)
Balance as at June 30, 625,623 595,612 90,687 98,825 534,936 496,787
113
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
33. Long-Term Employee Benefits Payable (cont'd)
Post-employment benefit plans – defined benefit plan and early retirement
(2) Actuarial assumptions and sensitivity analysis
The principal actuarial assumptions at the reporting date for defined benefit plan
June 30 January 1
2018 2018
Discount rate (%)* 1.1-4.5% 1.1%-4.5%
*According to the demographic and the benefit components
The assumptions regarding the future mortality rate are based on published statistical data and acceptable mortality rates.
Possible reasonable changes as of the date of the report in the discount rate, assuming the other assumptions remain
unchanged, would have affected the defined benefit obligation as follows:
As of June 30, 2018
Increase of 1% Decrease of 1%
Discount rate (41,123) 50,404
34. Provisions
June 30 January 1
2018 2018 Reasons
Obligations of pending litigations, where an
Liabilities in respect of outflow of resources had been reliably
contingencies 74,814 124,882 estimated
Other 38,227 39,031
113,041 163,913
35. Deferred income
Balance at
January 1, Current Balance at
2018 Additions Decrease maturities June 30, 2018
Long term deferred income - 93,153 (1,692) (47,249) 44,212
- 93,153 (1,692) (47,249) 44,212
*See Note V. 16(2).
114
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
36. Other Non-Current Liabilities
June 30 January 1
2018 2018
Long term loans - others 171,770 171,770
Long term transactions in derivatives 10,964 13
Put options to holders of non- controlling interests - 53,509
182,734 225,292
37. Share Capital
Balance at Issuance of Cancellations of Balance at
January 1, 2018 new shares shares June 30, 2018
Share capital 2,446,554 - - 2,446,554
In December 2017, non-publicly offered 104,697,982 ordinary shares (A-share) at nominal value of RMB 1 per share to specific
investors. The Company received proceeds of 1,531,920 thousand RMB, net of the issuing cost of 28,080 thousand RMB on
December 27, 2017. The listing date of the newly-issued 104,697,982 shares was January 17, 2018. The total amount of the
shares of the Company is 2,446,553,582.
38. Capital Reserve
Additions Reductions
Balance at during the during the Balance at
January 1, 2018 year year June 30, 2018
Share premiums 12,973,782 - (9,371) 12,964,411
Other capital reserves 8,495 - - 8,495
12,982,277 - (9,371) 12,972,906
115
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000 )
Notes to the Financial Statements
39. Other Comprehensive Income
Attributable to shareolders of the Company
Less: transfer Less:
Before tax to profit or Income tax Net –of-tax
January 1, 2018 amount loss expenses amount June 30, 2018
Items that will not be reclassified
to profit or loss
Re-measurement of changes in
liabilities under defined benefit
plans (10,862) 12,080 - 974 11,106 244
Fair value changes in other equity
investments 50,621 - - - - 50,621
Items that may be reclassified to
profit or loss
Effective portion of gain or loss of
cash flow hedge (260,950) 72,586 (262,799) 41,912 293,473 32,523
Translation difference of foreign
financial statements 117,111 200,840 - - 200,840 317,951
(104,080) 285,506 (262,799) 42,886 505,419 401,339
116
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
40. Surplus reserves
Additions Reductions
Balance at during the during the Balance at
January 1, 2018 period period June 30, 2018
Statutory surplus reserve 204,009 - - 204,009
Discretional surplus reserve 3,814 - - 3,814
207,823 - - 207,823
41. Retained Earnings
2018 2017
Retained earnings at December 31 of preceding year 3,286,711 937,510
Opening balance adjustment (Note 1) 21,213 847,295
Retained earnings as at January 1, 3,307,924 1,784,805
Net profits for the period attributable to shareholders of the Company 2,362,781 1,316,994
Dividends to non-controlling Interest (16,028) (32,509)
Dividend to the shareholders of the company (Note 2) (154,133) -
Retained earnings as at June 30, 5,500,544 3,069,290
Note 1: The opening balance in current period was adjusted for RMB 21,213 thousands due to adoption of revised CASs for
financial instruments and revenue see Note III 30(1). The opening balance in prior period was adjusted for RMB
847,295 thousands due to a business combination under common control.
Note 2: On March, 27, 2018, after obtaining the approval of the second meeting of the company's 8th
Board of Directors, the Company declared RMB 0.63 (including tax) per 10 shares as cash
dividend to all shareholders, resulting in a total cash dividend of 154,133 thousand RMB
(including tax), and zero shares as share dividend, as well as no reserve transferred to equity
capital. The proposal was approved by the Company’s shareholders at the 2017 annual general
meeting held on June 28, 2018.
42. Operating Income and Cost of Sale
Six months ended June 30
2018 2017 (Restated)
Income Cost of sales Income Cost of sales
Principal activities 13,000,909 8,553,494 12,752,443 8,163,543
Other businesses 25,349 17,923 17,621 16,151
13,026,258 8,571,417 12,770,064 8,179,694
117
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
43. Taxes and Surcharges
Six months ended
June 30
2018 2017
Restated
Tax on turnover 17,620 13,819
Others 33,953 27,410
51,573 41,229
44. Selling and Distribution Expenses
Six months ended
June 30
2018 2017
Restated
Salaries and related expense 734,813 681,720
Delivery and Commissions costs 354,115 357,625
Advertising and sales promotion 156,329 150,608
Depreciation and amortization 541,154 502,029
Registration 48,757 47,170
Insurance 34,252 41,323
Professional services 32,447 35,964
Royalties 13,185 14,840
Others 308,882 291,611
2,223,934 2,122,890
45. General and Administrative Expenses
Six months ended
June 30
2018 2017
Restated
Salaries and related expenses 318,466 298,373
Depreciation and amortization 36,553 36,703
Professional services 83,339 70,660
Office rent, maintenance and expenses 37,514 33,933
IT systems 33,560 31,077
Other 127,697 88,652
637,129 559,398
118
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
46. Financial Expenses, net
Six months ended June 30
2018 2017
Restated
Interest expenses on debentures and loans 288,408 358,317
Interest income from customers, banks and others (41,219) (129,587)
Loss in respect of sale of trade receivables 32,186 30,739
Interest expense in respect of defined benefit obligation and early retirement, 8,588 8,514
net
Revaluation of put option, net 8,027 (2,857)
CPI expense in respect of debentures 64,891 56,668
Exchange rate differences, net (31,251) 583,822
Other expenses 388 6,300
330,018 911,916
47. Impairment Losses
Six months ended June 30
2018 2017
Restated
Inventories 36,214 15,721
Trade and other receivables 6,097 31,535
Fixed assets 420 -
Intangible assets 911 -
Other 238 -
43,880 47,256
48. Gains (losses) from Changes in Fair Value
Six months ended June 30
2018 2017
Restated
Gain (loss) from changes in fair value of derivative financial
instruments (242,567) 229,039
Others (809) (6,763)
(243,376) 222,276
119
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
49. Investment Income
Six months ended June 30
2018 2017
Restated
Investment income from disposal of derivatives 134,295 278,733
Income from long-term equity investments accounted for using the equity method 12,758 2,086
Loss from disposal of long-term equity investment - (11,370)
147,053 269,449
50. Gain from Disposal of Assets
Six months ended June 30 Included in
2018 2017 non-recurring items
Restated
Gain from disposal of intangible assets 1,997,096 58,293 1,997,706
Gain (loss) from disposal of fixed assets 74 (535) 74
1,997,170 57,758
See note 16.
51. Non-Operating Expenses
Six months ended June 30 Included in
2018 2017 non-recurring items
Restated
Donation expenses 4,267 5,264 4,267
Other 3,846 2,997 3,846
8,113 8,261
120
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
52. Income Tax Expenses
Six months ended June 30
2018 2017
Restated
Current year 301,718 257,282
Adjustments for previous years, net (13,831) (12,731)
Deferred tax expenses (income) 439,377 (102,294)
727,264 142,257
(1) Reconciliation between income tax expense and accounting profit is as follows:
Six months
ended June 30
2018
Profit before taxes 3,090,045
Company's main tax rate 25%
Tax calculated according to the main tax rate 772,511
Tax benefits from Approved Enterprises (59,124)
Difference between measurement basis of income for financial statement and for tax purposes 82,208
Taxable income and temporary differences at other tax rate (84,860)
Taxes in respect of prior years (13,831)
Utilization of tax losses from prior years for which deferred taxes were not created (4,545)
Temporary differences and losses in the report year for which deferred taxes were not created 11,484
Non-deductible expenses and other differences 25,709
Neutralization of tax calculated in respect of the Company’s share in results of equity accounted
investees (3,186)
Effect of change in tax rate in respect of deferred taxes 725
Creation and reversal of deferred taxes for tax losses and temporary differences from previous
years 173
Income tax expenses 727,264
53. Other comprehensive income
Details of the Other comprehensive income are set out in Note V.5 (39)
121
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
54. Notes to items in the cash flow statements
(1) Other cash received relevant to operating activities
Six months ended June 30
2018 2017
Restated
Financial institutions 135,686 427
Derivatives transactions - 378,358
Interest income 24,209 156,289
Deferred income 96,946 -
Others 3,955 36,324
Total cash received relevant to operating activities 260,796 571,398
(2) Other cash paid relevant to operating activities
Six months ended June 30
2018 2017
Restated
Transportation and Commissions 342,353 324,023
Advertising and sales promotion 150,284 127,283
Professional services 133,685 106,294
Derivatives transactions 128,503 -
Registration 54,057 46,475
Financial institutions 23,511 122,179
Insurance 20,217 20,630
Others 503,129 615,173
Total cash paid relevant to operating activities 1,355,739 1,362,057
(3) Other cash received relevant to investment activities
Six months ended June 30
2018 2017
Restated
Investment grant - 28,705
Other 57 3,062
Total cash received relevant to investments activities 57 31,767
122
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
54. Notes to items in the cash flow statements (cont'd)
(4) Other cash received relevant to financing activities
Six months ended June 30
2018 2017
Restated
Other - 7,800
Total cash received relevant to financing activities - 7,800
(5) Other cash paid relevant to financing activities
Six months ended June 30
2018 2017
Restated
Financing deposit - 100,000
Restricted cash 28,150 6,820
Other 3,139 -
Total cash paid relevant to financing activities 31,289 106,820
55. Supplementary Information on Cash Flow Statement
(1) Supplementary information on Cash Flow Statement
a. Reconciliation of net profit to cash flows from operating activities:
Six months ended June 30
2018 2017
Restated
Net profit 2,362,781 1,316,994
Add: Impairment provisions for assets 43,880 47,256
Depreciation of fixed assets 312,106 346,102
Amortization of intangible asset 557,276 516,658
Gains on disposal of fixed assets, intangible assets, and other long-term
assets, net (1,997,170) (57,758)
Losses (gains) on changes in fair value 243,376 (222,276)
Financial expenses (income) (78,474) 1,092,678
Losses arising from investments (147,053) (269,449)
Decrease (increase) in deferred tax assets 233,849 (102,293)
Increase (decrease) in deferred tax liabilities 205,528 (290)
Decrease (increase) in inventories, net (801,625) 6,883
Decrease in operating receivables (1,126,210) (1,034,228)
Increase (decrease) in operating payables 926,606 608,869
Others 44,648 -
Net cash flow from operating activities 779,518 2,249,146
123
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
55. Supplementary Information on Cash Flow Statement (Cont’d)
(1) Supplementary information on Cash Flow Statement (Cont’d)
Six months ended June 30
2018 2017
Restated
b. Net increase in cash and cash equivalents
Closing balance of cash and cash equivalents 6,021,380 4,537,654
Less: Opening balance of cash and cash equivalents (7,864,258) (3,833,747)
Net increase in cash and cash equivalents (1,842,878) 703,907
(2) Details of cash and cash equivalents
June 30, January 1,
2018 2018
Cash at bank and on hand
Including: Cash on hand 1,065 2,267
Bank deposits available on demand without restrictions 6,020,315 7,861,991
Cash and cash equivalents as of June 30 6,021,380 7,864,258
56. Assets with Restricted Ownership or Right of Use
June 30
2018 Reason
Cash 28,150 Pledged
Fixed assets 6,134 Mortgaged
Other non-current assets 130,128 Guarantees
164,412
124
HUBEI SANONDA CO., LTD.
( Expressed in RMB '000)
Notes to the Financial Statements
57. Foreign currencies denominated items
(1) Foreign currencies denominated items:
As at June 30, 2018
Foreign currency at RMB at the end of the
the end of the year Exchange rate year
Cash and bank balances
USD 31,450 6.6166 208,093
EUR 83,021 7.7135 640,381
BRL 287,234 1.7160 492,897
ILS 57,710 1.8128 104,615
PLN 97,363 1.7673 172,065
Other 357,911
Total 1,975,962
Financial liabilities at fair value
through profit or loss
BRL 10,595 1.7160 18,182
Total 18,182
Accounts and Bills receivable
USD 68,474 6.6166 453,065
EUR 106,831 7.7135 824,038
BRL 333,288 1.7160 571,926
PLN 107,471 1.7673 189,929
RON 179,840 1.6528 297,238
CAD 55,780 5.0050 279,181
HUF 7,050,654 0.0235 165,395
TRY 104,185 1.4508 151,150
Other 632,468
Total 3,564,390
Other receivables
EUR 46,596 7.7135 359,415
BRL 54,695 1.7160 93,858
ILS 38,879 1.8128 70,478
Other 114,863
Total 638,614
Other current assets
EUR 931 7.7135 7,179
BRL 41,404 1.7160 71,049
ILS 123,735 1.8128 224,303
RMB 19,770 1.0000 19,770
ARS 60,989 0.2293 13,988
Other 37,039
Total 373,328
Long-term receivables
BRL 85,313 1.7160 146,399
Total 146,399
Other non-current assets
BRL 66,212 1.7160 113,620
Other 15,052
Total 128,672
Short-term loans
UAH 250,995 0.2526 63,413
TRY 65,063 1.4508 94,392
Other 4,705
Total 162,510
125
HUBEI SANONDA CO., LTD.
( Expressed in RMB '000)
Notes to the Financial Statements
57. Foreign currencies denominated items (Cont’d )
(1) Foreign currencies denominated items: (Cont’d )
As at June 30, 2018
Foreign currency at RMB at the end of the
the end of the year Exchange rate year
Accounts payable and Bills
payable
USD 7,521 6.6166 49,763
EUR 58,255 7.7135 449,353
BRL 35,396 1.7160 60,740
ILS 180,208 1.8128 326,675
Other 92,976
Total 979,507
Advances from customers
BRL 65,548 1.7160 112,482
Total 112,482
Interest payable
ILS CPI 17,757 1.8128 32,190
Total 32,190
Other payables
USD 1,349 6.6166 8,926
EUR 51,776 7.7135 399,371
BRL 53,079 1.7160 91,084
ILS 46,609 1.8128 84,492
PLN 21,427 1.7673 37,867
CAD 8,307 5.0050 41,579
CHF 4,993 6.6661 33,281
Other 75,489
Total 772,089
Other current liabilities
EUR 3,768 7.7135 29,067
ILS 14,272 1.8128 25,871
Other 18,082
Total 73,020
Long-term loan
BRL 297 1.7160 509
Other 543
Total 1,052
Debentures payable
ILS CPI 4,164,121 1.8128 7,548,581
Total 7,548,581
Other non-current liabilities
BRL 9,026 1.7160 15,489
Total 15,489
126
HUBEI SANONDA CO., LTD.
( Expressed in RMB '000)
Notes to the Financial Statements
57. Foreign currencies denominated items (Cont’d )
(2) Major foreign operations
Registration &
Name of the Principal place Business Functional The basis of selecting
Subsidiary of business nature currency functional currency
ADAMA France The main currency that represent the
FRANCE Distribution USD
S.A.S principal economic environment
Manufacturing;
The main currency that represent the
ADAMA Brasil S/A BRAZIL Distribution; USD
principal economic environment
Registration;
ADAMA Deutschland Distribution; The main currency that represent the
GERMANY USD
GmbH Registration principal economic environment
ADAMA India Private The main currency that represent the
INDIA Manufacturing INR
Ltd. principal economic environment
Manufacturing;
Makhteshim Agan of The main currency that represent the
UNITED STATES Distribution; USD
North America, Inc. principal economic environment
Registration;
Manufacturing;
The main currency that represent the
Control Solutions Inc. UNITED STATES Distribution; USD
principal economic environment
Registration;
The main currency that represent the
ADAMA Agan Ltd. ISRAEL Manufacturing USD
principal economic environment
ADAMA Makhteshim The main currency that represent the
ISRAEL Manufacturing USD
Ltd. principal economic environment
ADAMA Australia The main currency that represent the
AUSTRALIA Distribution AUD
Pty Limited principal economic environment
The main currency that represent the
ADAM Italia SRL ITALY Distribution USD
principal economic environment
ADAMA Northern The main currency that represent the
NETHERLANDS Distribution USD
Europe B.V. principal economic environment
Manufacturing;
UNITED The main currency that represent the
Alligare LLC Distribution; USD
STATES principal economic environment
Registration;
VI . Changes in consolidation Scope
There was no change in the consolidation scope during the reporting period.
127
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VII . Interests in Other Entities
1. Interests in subsidiaries
(1) Composition of the largest subsidiaries of the Group in respect of assets and operating income
Registration & Method of
Principal place of obtaining the
Name of the Subsidiary business Business nature Direct Indirect subsidiary
ADAMA France S.A.S FRANCE Distribution 100% Established
Manufacturing;
ADAMA Brasil S/A BRAZIL Distribution; 100% Purchased
Registration;
Distribution;
ADAMA Deutschland GmbH GERMANY 100% Established
Registration
ADAMA India Private Ltd. INDIA Manufacturing 100% Established
Manufacturing;
Makhteshim Agan of North UNITED
Distribution; 100% Established
America, Inc. STATES
Registration;
Manufacturing;
UNITED
Control Solutions Inc. Distribution; 67% Purchased
STATES
Registration;
ADAMA Agan Ltd. ISRAEL Manufacturing 100% Restructure
ADAMA Makhteshim Ltd. ISRAEL Manufacturing 100% Restructure
ADAMA Australia Pty
AUSTRALIA Distribution 100% Purchased
Limited
ADAM Italia SRL ITALY Distribution 100% Established
ADAMA Northern Europe
NETHERLANDS Distribution 55% Purchased
B.V.
Manufacturing;
UNITED
Alligare LLC Distribution; 80% Purchased
STATES
Registration;
128
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VII . Interests in Other Entities (Cont’d)
2. Interests in joint ventures or associates
June 30 January 1
2018 2018
Joint ventures:
Immaterial joint ventures 80,913 56,871
Associates
Immaterial associates 38,338 37,860
119,251 94,731
June 30, 2018 and six months June 30, 2017 and six months
then ended then ended
Joint ventures:
Total carrying amount 80,913 62,555
The Group's share of the following items:
Net profit 12,758 2,367
Total comprehensive income 12,758 2,367
Associates:
Total carrying amount 38,338 39,346
The Group's share of the following items:
Net profit - (281)
Total comprehensive income - (281)
VIII. Risk Related to Financial Instruments
A. General
The Group has extensive international operations, and, therefore, it is exposed to credit risks, liquidity risks and market risks
(including currency risk, interest risk and other price risk). In order to reduce the exposure to these risks, the Group uses
financial derivatives instruments, including forward transactions, swaps and options (hereinafter – “derivatives”).
Transactions in derivatives are undertaken with major financial and, therefore, in the opinion of Group Management the credit
risk in respect thereof is low.
This note provides information on the Group’s exposure to each of the above risks, the Group’s objectives, policies and
processes regarding the measurement and management of the risk. Additional quantitative disclosure is included throughout the
consolidated financial statements.
The Board of Directors has overall responsibility for establishing and monitoring the framework of the Group's risk
management policy. The Finance Committee is responsible for establishing and monitoring the Group's actual risk management
policy. The Chief Financial Officer reports to the Finance Committee on a regular basis regarding these risks.
129
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments (Cont’d)
A. General (Cont’d)
The Group’s risk management policy are established to identify and analyze the risks facing the Group, to set appropriate risk
limits and controls and monitoring the risks and adherence to limits. The policy and methods for managing the risks are
reviewed regularly, in order to reflect changes in market conditions and the Group's activities. The Group, through training, and
management standards and procedures, aims to develop a disciplined and constructive control environment in which all the
employees understand their roles and obligations.
B. Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and derives mainly from account receivables and other receivables as well as from cash and deposits in
financial institutions.
Accounts and other receivables
The Group’s revenues are derived from a large number of widely dispersed customers in many countries. Customers include
multi-national companies and manufacturing companies, as well as distributors, agriculturists, agents and agrochemical
manufacturers who purchase the products either as finished goods or as intermediate products for their own requirements.
The Company entered into an agreement for the sale of trade receivables in a securitization transaction, for details see note V.5
(4).
In April 2018, a two-year agreement with an international insurance company was renewed. The amount of the insurance
coverage was fixed at $150 million cumulative per year. The indemnification is limited to about 90% of the debt.
The Group’s exposure to credit risk is influenced mainly by the personal characterization of each customer, and by the
demographic characterization of the customer’s base, including the risk of insolvency of the industry and geographic region in
which the customer operates. No single customer accounted for greater than 5% of total accounts receivable.
Company management has prescribed a credit policy, whereby the Company performs current ongoing credit evaluations of
existing and new customers, and every new customer is examined thoroughly regarding the quality of his credit, before
offering him the Group’s customary shipping and payment terms. The examination made by the Group includes an outside
credit rating, if any, and in many cases, receipt of documents from an insurance company. A credit limit is prescribed for each
customer, setting the maximum outstanding amount of the accounts receivable balance. These limits are examined annually.
Customers that do not meet the Group’s criteria for credit quality may do business with the Group on the basis of a prepayment
or against furnishing of appropriate collateral.
Most of the Group’s customers have been doing business with it for many years. In monitoring customer credit risk, the
customers were grouped according to a characterization of their credit, based on geographical location, industry, aging of
receivables, maturity, and existence of past financial difficulties. Customers defined as “high risk” are classified to the
restricted customer list and are supervised by management. In certain countries, mainly, Brazil, customers are required to
provide property collaterals (such as agricultural lands and equipment) against execution of the sales, the value of which is
examined on a current ongoing basis by the Company. In these countries, in a case of a doubtful debt, the Company records a
provision for the amount of the debt less the value of the collaterals provided and acts to realize the collaterals.
130
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII . Risk Related to Financial Instruments (cont’d)
B. Credit risk (cont’d)
The Group closely monitors the economic situation in Eastern Europe and South America where necessary it operates to limit
its exposure to customers in countries having significantly unstable economies.
The Group recognizes an impairment provision, which reflects its assessment regarding the credit risk of account receivables,
other receivables and investments on a lifetime expected credit loss basis. See also notes III.10 and III.11.
Cash and deposits in banks
The Company holds cash and deposits in banks with a high credit rating. These banks are also required to comply with capital
adequacy or maintain a level of security based on different situations.
Guarantees
The Company’s policy is to provide financial guarantees only to investee companies.
Aging of receivables and allowance for doubtful accounts
Presented below is the aging of the past due trade receivables:
June 30
2018
Past due by less than 90 days 466,592
Past due by more than 90 days 544,385
1,010,977
C. Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its financial obligation when they come due. The
Group's approach to managing its liquidity risk is to assure, to the extent possible, an adequate degree of liquidity for meeting
its obligations timely, under ordinary conditions and under pressure conditions, without sustaining unwanted losses or hurting
its reputation.
The cash-flow forecast is determined both at the level of the various entities as well as of the consolidated level. The Company
examines the current forecasts of its liquidity requirements in order to ascertain that there is sufficient cash for the operating
needs, including the amounts required in order to comply with the financial liabilities, while taking strict care that at all times
there will be unused credit frameworks so that the Company will not exceed the credit frameworks granted to it and the
financial covenants with which it is required to comply with. These forecasts take into consideration matters such as the
Company’s plans to use debt for financing its activities, compliance with required financial covenants, compliance with certain
liquidity ratios and compliance with external requirements such as laws or regulation.
The surplus cash held by the Group companies, which is not required for financing the current ongoing operations, is invested
in short-term interest-bearing investment channels.
131
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments (cont’d)
(1) Presented below are the contractual maturities of the financial liabilities at undiscounted amounts, including
estimated interest payments:
As at June 30, 2018
Third- Fifth year
Second Fourth and Contractual Carrying
First year year year above Cash flow amount
Non-derivative
financial liabilities
Short-term loans 395,910 - - - 395,910 384,482
Bills payable 144,991 - - - 144,991 144,991
Accounts payables 4,221,331 - - - 4,221,331 4,221,331
Other payables 1,991,600 - - - 1,991,600 1,991,600
Dividend payable 154,383 - - - 154,383 154,383
Other current liabilities 349,575 - - - 349,575 349,575
Debentures payable (a) 392,073 392,073 1,633,672 9,311,998 11,729,816 7,548,581
Long-term loans (a) 483,261 206,879 143,097 - 833,237 760,542
Long-term payable (a) 1,605 1,784 3,356 26,375 33,120 24,031
Other non-current
liabilities 2,061 2,061 32,751 148,295 185,168 171,770
Derivative financial
liabilities
Foreign currency
derivatives 1,209,632 10,964 - - 1,220,596 1,220,596
CPI/shekel forward
transactions 55 - - - 55 55
9,346,477 613,761 1,812,876 9,486,668 21,259,782 16,971,937
(a) Including related Non current liabilities due within one year and interest payables.
132
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII . Risk Related to Financial Instruments (cont’d)
(2) Interest rate risks
The Group has exposure to changes in the variable interest rate. The Group has different assets and liabilities in
different countries which bear interest according to the economic environment in each country. Most of the loans,
other than the debentures, bear Dollar Libor interest. As a result, most of the variable interest exposure of those loans
is to the Libor interest. Due to market conditions, the variable interest rates on cash are relatively low.
The Company prepares a quarterly summary of exposure to a change in the Libor interest rate. As at the approval
date of the financial statements, the Company had not hedged this exposure.
(A) Type of interest
The interest rate profile of the Group’s interest-bearing financial instruments was as follows:
June 30
2018
Fixed-rate instruments – unlinked to the CPI
Financial assets
Cash at banks 421,735
Other non-current assets 8,357
Financial liabilities
Short-term loans 341,348
Long-term loans 152,913
Long-term payables 17,832
Other non-current liabilities 171,770
(253,771)
Fixed-rate instruments – linked to the CPI
Financial liabilities
Debentures payable 7,584,581
7,584,581
133
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII . Risk Related to Financial Instruments (cont’d)
(A) Type of interest (Cont’d)
June 30
2018
Variable-rate instruments
Financial assets
Cash at banks 536,296
Financial assets at fair value through profit or loss 32,693
Other non-current assets 48,857
Financial liabilities
Short-term loans 43,134
Long-term loans 607,629
(32,917)
(B) Sensitivity analysis regarding variable-interest instruments
A change of 5% in the interest rates on the reporting date would increase or reduce equity and profit or loss
by the amounts presented below. This analysis assumes that all the remaining variables, among others
exchange rates, remained fixed.
Profit or loss Equity
Increase in Decrease in Increase in Decrease in
interest interest interest interest
As at June 30, 2018 1,262 (1,278) 1,262 (1,278)
D. Market risks
Market risk is the risk that changes in market prices, such as foreign exchange rates, CPI, interest rates and prices of capital
instruments, will affect the Group’s revenues or the value of its holdings in its financial instruments. The objective of market
risk management is to manage and monitor the exposure to market risks within acceptable parameters, while optimizing the
return.
During the ordinary course of business, the Group purchases and sells derivatives and assumes financial liabilities for the
purpose of managing market risks.
134
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments (cont’d)
(1) CPI and foreign currency risks
Currency risk
The Group is exposed to currency risk from its sales, purchases, expenses and loans denominated in currencies that differ from
the Group’s functional currency. The main exposure is in Euro, Brazilian real, USD and in NIS. In addition, there are smaller
exposures to various currencies such as the British pound, Polish zloty, Australian dollar, Indian rupee, Argentine peso,
Canadian dollar, South African Rand, Ukraine Hryunia, Turkish lira and Chinese Renminbi.
The Group uses foreign currency derivatives – forward transactions and currency options – in order to hedge the cash flows
risk, which derive from existing monetary assets and liabilities and anticipated sales and purchases, which may be affected by
exchange rate fluctuations.
The Group hedged a part of the estimated currency exposure to anticipate sales and purchases for the subsequent year.
Likewise, the Group hedges most of its monetary assets and liabilities denominated in a non-USD currency. The Group uses
foreign currency derivatives to hedge its currency risk, mostly with maturity dates of less than one year from the reporting date.
The wholly-owened subsidiary debentures are linked to the NIS-CPI and, therefore, an increase in the NIS-CPI, as well as
changes in the NIS exchange rate, could cause significant exposure with respect to the subsidiary functional currency – the U.S.
dollar. As of the approval date of the financial statements, the subsidiary had hedged most of its exposure deriving from
issuance of the debentures, in options and forward contracts.
(A) The Group’s exposure to NIS-CPI and foreign currency risk, except in respect of derivative
financial instruments is as follows:
June 30, 2018
Total Assets Total liabilities
Denominated in or linked to the Dollar 1,111,720 1,120,955
In Euro 1,903,875 913,713
In Brazilian real 1,507,931 287,960
CPI-linked NIS - 7,580,771
In New Israeli Shekel 445,872 437,040
Denominated in or linked to other foreign currency 3,185,293 480,000
Total 8,154,691 10,820,439
135
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
VIII. Risk Related to Financial Instruments (cont’d)
(B) The exposure to CPI and foreign currency risk in respect of derivatives is as follows:
June 30, 2018
Currency/ Currency/ Average USD RMB
linkage linkage expiration thousands thousands
receivable payable date Par value Par value Fair value
Forward foreign
currency USD EUR 2019/02/15 610,531 4,039,642 (164,455)
contracts and call
options USD PLN 2018/10/10 54,182 358,504 39,154
USD BRL 2018/08/22 220,471 1,455,963 77,290
USD GBP 2018/11/16 20,396 134,953 8,934
USD ZAR 2018/07/24 15,850 104,870 12,704
ILS USD 2018/12/07 1,270,284 8,404,963 (390,208)
USD Others 477,091 3,156,717 127,372
CPI forward CPI ILS 2018/12/17 698,630 4,622,556 31,221
contracts
(C) Sensitivity analysis
The appreciation or depreciation of the Dollar against the following currencies as of June 30, 2018 and the increase or decrease
in the CPI would increase or decrease the equity and profit or loss by the amounts presented below. This analysis assumes that
all the remaining variables, among others interest rates, remains constant.
June 30, 2018
Decrease of 5% Increase of 5%
Equity Profit (loss) Equity Profit (loss)
New Israeli shekel 6,021 (1,346) 657 8,024
British pound (354) 1,230 354 (1,230)
Euro (106,949) 6,833 127,970 (4,105)
Brazilian real (3,859) 14,222 3,859 (14,222)
Polish zloty (2,403) 658 2,403 (658)
South African Rand 269 269 (269) (269)
Chinese Yuan Renminbi 2,473 2,473 (2,473) (2,473)
CPI-linked NIS 167,939 167,939 (167,939) (167,939)
E. Cash flow hedge accounting
The table below presents the periods in which the cash flows associated with derivatives that are cash flow hedges are expected
to occur and impact the P&L:
June 30, 2 0 1 8
Carrying Expected 6 months 6-12 Second
amount cash flows or less months year
Forward contracts and options on exchange
rates: 40,752 40,752 (29,318) 63,210 6,861
136
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
IX. Fair Value
The fair value of forward contracts on foreign currency is based on their listed market price, if available. In the absence of market
prices, the fair value is estimated based on the discounted difference between the stated forward price in the contract and the
current forward price for the residual period until redemption, using an appropriate interest rate.
The fair value of foreign currency options is based on bank quotes. The reasonableness of the quotes is evaluated through
discounting future cash flow estimates, based on the conditions and duration to maturity of each contract, using the market
interest rates of a similar instrument at the measurement date and in accordance with the Black & Scholes model.
(1) Financial instruments measured at fair value for disclosure purposes only
The carrying amount of certain financial assets and liabilities, including cash at bank and on hand, bills and accounts receivable,
other receivables, derivatives financial assets, short-term loans, bills accounts payable and other payables, are the same or
proximate to their fair value.
The following table details the carrying amount in the books and the fair value of groups of non-current financial instruments
presented in the financial statements not in accordance with their fair values:
June 30, 2018
Carrying Fair
amount value
Financial assets
Other non-current assets (a – Level 2) 56,135 59,103
Financial liabilities
Long-term loans and others (b – Level 2) 957,528 992,306
Debentures (c – Level 1) 7,584,581 9,426,908
(a) The fair value of the other non-current assets is based on a discounted future cash flows, using the acceptable interest
rate for similar investment having similar characteristics (Level 2).
(b) The fair value of the long-term loans and others is based on a discounted future cash flows, using the acceptable
interest rate for similar loans having similar characteristics (Level 2).
(c) The fair value of the debentures is based on stock exchange quotes (Level 1).
(2) The interest rates used determining fair value
The interest rates used to discount the estimate of anticipated cash flows are:
June 30, 2018
%
Brazilian real interest 8.46 - 11.39
U.S. dollar interest 2.66 - 4.00
Indian Rupee 6.69 - 8.22
137
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
IX. Fair Value (cont’d)
(3) Fair value hierarchy of financial instruments measured at fair value
The table below presents an analysis of financial instruments measured at fair value. The various levels have been defined as
follows:
Level 1: quoted prices (unadjusted) in active market for identical instrument.
Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.
Level 3: inputs that are not based on observable market data (unobservable inputs).
The Company’s forward contracts and options are carried at fair value and are evaluated by observable inputs and therefore are
concurrent with the definition of level 2.
June 30
2018
Forward contracts and options used for hedging the cash flow (Level 2) 40,752
Forward contracts and options used for economic hedging (Level 2) (298,739)
Debt instruments (Level 1) 13,610
Other equity investments (Level 2) 91,154
Other (Level 2) 19,083
(134,140)
Financial
Instrument Fair value
Forward contracts Fair value measured on the basis of discounting the difference between the stated forward
price in the contract and the current forward price for the residual period until redemption
using an appropriate interest rates.
Foreign currency options The fair value is measured based on the Black&Scholes model.
(4) No transfer between any levels of the fair value fierarchy in the reporting period.
(5) No change in the valuation techniques in the reporting period.
138
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions
1. Information on parent Company
Company Registered Business Registered capital Shareholding Percentage
name place nature (Thousand) percentage (%) of voting rights (%)
CNAC Beijing, Production CNY 3,338,220 78.91 78.91
China and sales of
agrochemicals
The ultimate controller of the company is China National Chemical Corporation (hereinafter - “CC”).
2. Information on the subsidiaries of the Company
For information about the subsidiaries of the Company, refer to Note VII.1.
3. Information on joint ventures and associates of the Company
For information about the joint ventures and associates of the Company, refer to Note V.12. Other joint ventures and
associates that have related party transactions with the Group during the period or the previous period are as follows:
Name of entity Relationship with the Company
Negev Aroma (Ramat Hovav) Ltd. Joint venture of the Group
Alfa Agricultural Supplies S. Joint venture of the Group
Innovaroma SA Joint venture of the Group
Agribul Ltd. Joint venture of the Group
139
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions (cont’d)
4. Information on other related parties
Name of other related parties Related party relationship
China National Agrochemical Corporation Parent company (Direct holding)
Jingzhou Sanonda holdings co. LTD Common control
Syngenta Crop Protection AG Common control
Syngenta Supply AG Common control
Syngenta Crop Protection LLC. Common control
Syngenta France SAS Common control
Syngenta Canada INC Common control
Syngenta Agro Sociedad Anonima Common control
Syngenta Proteo de Cultivos Ltda. Common control
Syngenta Czech s.r.o. Common control
Syngenta Espaa S.A. Common control
Syngenta India Limited Common control
Syngenta Agro AG Common control
Syngenta Polska Sp. z o.o. Common control
Syngenta Agro, S.A. DE C.V. Common control
Syngenta Italia S.p.A. Common control
Syngenta crop protection BV Common control
Syngenta AGRO S.R.L. Common control
Syngenta Crop Protection Lda. Common control
Syngenta Crop Protection NV Common control
Syngenta Nordics A.S. Common control
Syngenta Tarim Sanayi ve Ticaret A.S. Common control
Syngenta Agro GmbH Wien Common control
Syngenta Agro GmbH Maintal Common control
Syngenta Slovakia S.R.O. Common control
Syngenta Hungary Kft. Common control
Syngenta UK Ltd Common control
Syngenta Ireland Ltd Common control
China Bluestar Lehigh Engineering Corp. Common control
Bluestar Silicones USA Corp. Common control
Bluestar Lehigh Engineering Institute Institute Co., Ltd. Common control
China Bluestar Chengrand Common control
Bluestar (Beijing) Chemical Machinery Co., Ltd. Common control
Beijing Grand AgroChem Co., Ltd. Common control
Shandong Dacheng International Trading co. LTD. Common control
Shandong dacheng agricultural chemical co. LTD. Common control
Shandong Dacheng Pesticide Co., Ltd. Common control
Southwest Chemical Research and Design Institute Co., Ltd. Common control
Jiangsu Anpon Electrochemical Co., Ltd Common control
Jiangsu Lianhai Testing Co., Ltd. Common control
Jiamusi Black Dragon Pesticide Chemical Co., Ltd. Common control
Anhui Kelihua Chemical Co., Ltd. Common control
Anhui Research Institute of Chemical Industry Common control
Haohua engineering co. LTD. Common control
Shanghai branch of China blue lianhai design and research institute. Common control
China National Chemical Information Center Common control
Beijing guangyuan yiong chemical co. LTD. Common control
140
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions (cont’d)
5. Transactions and balances with related parties
(1) Transactions with related parties
Summary of Purchase of goods/services received and fixed assets
Six months ended June 30
2018 2017
Restaed
Type of purchase Related party relationship
Purchase of goods/services received
Common control under CC 858,609 136,346
Joint venture 6,325 4,820
Purchase of fixed assets and other
assets Common control under CC 2,129,457 78,580
Summary of Sales of goods:
Sale of goods/ Service rendered Common control under CC 258,409 47,011
Joint venture 99,823 134,994
(2) Leases
The Group as lessor
Six months ended June 30
2018 2017
Restated
Type of leased assets Lessee
Building and Structures Common control under CC 10 57
(3) Guarantee (as guarantee receiver)
Amount of Inception Maturity Guaranty
guaranteed date of date of completed
loan guaranty guaranty (Y / N)
As At June 30, 2018
Common control under CC 303,000 20/02/2017 19/02/2020 Y
Parent 50,000 18/10/2017 18/10/2021 N
50,000 10/01/2017 10/01/2020 Y
300,000 20/11/2017 20/11/2022 N
100,000 13/06/2018 12/06/2022 N
Ultimate controller 200,000 25/09/2013 25/09/2020 N
160,000 27/05/2014 09/06/2021 N
150,000 30/09/2013 13/10/2020 N
141
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions (cont’d)
5. Transactions and balances with related parties (cont'd)
(4) Remuneration of key management personnel and directors
Six months ended
June 30
2018 2017
Remuneration of key management personnel 24,999 850
(5) Receivables from and payables to related parties (including loans)
June 30 January 1
Receivable Items 2018 2018
Bad debt Bad debt
Provision Provision
Items Related Party Relationship
Trade receivables
Common control under CC 84,982 - 28,565 -
Joint venture 18,560 - 33,710 -
Other receivables
Common control under CC 14,731 - 22,780 -
Joint venture 602 - - -
Prepayments Common control under CC 117 - 12,357 -
Other non-current
assets Joint venture 7,404 - 7,514 -
June 30 January 1
Payable Items 2018 2018
Items Related Party Relationship
Trade payables Common control under CC 210,089 78,614
Joint venture - 320
Other non-current
liabilities * Common control under CC 171,770 171,770
* The interest expense related to this liability recognized in the current period is 1,042 thousand RMB (amount
for prior period is 1,042 thousand RMB).
142
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
X. Related parties and related party transactions (cont’d)
5. Transactions and balances with related parties (cont'd)
(6) Other related party transactions
The closing balance of bank deposit in ChemChina Finance Corporation was 226 thousand RMB (2017.12.31 – 155,700
thousand RMB). Interest income of bank deposit in current period is 738 thousand RMB (amount for prior period is 0
thousand RMB).
XI. Commitments and contingencies
Significant commitments
(1) Capital commitments
June 30 January 1
2018 2018
Investment in Fixed assets 653,409 590,043
(2) Operating lease commitments
The total future minimum lease payments under non-cancellable operating leases of fixed assets
June 30 January 1
2018 2018
Within 1 year (including 1 year) 137,847 138,827
1-2 years (including 2 years) 104,067 100,043
2-3 years (including 3 years) 78,765 69,263
Over 3 years 142,025 126,804
462,704 434,937
143
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XI. Commitments and contingencies (cont’d)
Commitments and Contingent Liabilities
On October 30, 2017, the 22nd meeting of the 7th session of Board of Directors of Hubei Sanonda Co., Ltd. (hereinafter referred to as
the “Company”) resolved to approve as a frame work decision, the Company’s engagement in annual liability insurance policies for
directors, supervisors and senior officers of the Company. On November 15, 2017 the 4th interim Shareholders Meeting approved the
above resolution.
According to the Policy between the Company and Ping An Property & Casualty Insurance Company of China, Ltd., for one year
insurance (from October 1st, 2017 to September 30, 2018), the liability limit is $50 million for any one Claim and in the annual
aggregate and the actual premium is negligible.
Environmental protection
The manufacturing processes of the Company, and the products it produces and markets, entail environmental risks that impact the
environment. The Company invests substantial resources in order to comply with the applicable environmental laws and attempts to
prevent or minimize the environmental risks that could occur as a result of its activities. To the best of the Company’s knowledge, at the
balance sheet date, none of its applicable permits and licenses with respect to environmental issues have been revoked. The Company has
insurance coverage for sudden, unexpected environmental contamination.
Claims against subsidiaries
In the ordinary course of business, legal claims were filed against subsidiaries, including lawsuits regarding claims for patent
infringement. Inter alia, from time to time, the Company, similar to other companies operating in the plant protection industry, is exposed
to class actions for large amounts, which it must defend against while incurring considerable costs, even if these claims, from the start,
have no basis. In the estimation of the Company’s management, based, inter alia, on opinions of its legal counsel regarding the prospects
of the proceedings, the financial statements include appropriate provisions where necessary to cover the exposure resulting from the
claims.
Various immaterial claims have been filed against Group companies in courts throughout the world, in immaterial amounts, for causes of
action involving mainly employee-employer relations and various civil claims, for which the Company did not record a provision in the
financial statements. Furthermore, claims were filed for product liability damages, for which Solutions has appropriate insurance
coverage, such that the Company’s exposure in respect thereof is limited to the amount its deductible requirement or the amount thereof
does not exceed the deductible amount.
144
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XII. Share-based Payments
(1) In December 2017, the remuneration committee and the Board of Directors (and the General Meeting with respect to the CEO) of
Adama solutions, a wholly-owned subsidiary, approved the allocation of 49,042,146 phantom warrants to officers and employees in
accordance with the long-term phantom compensation plan ("the Plan"). The allocation date is December 28, 2017.
The warrants will vest in four equal portions, where the first and second quarters are exercisable after one year, the third quarter after two
years and the fourth quarter after three years from January 1, 2018. The warrants will be exercisable, in whole or in part, in accordance
with the terms of the plan, and subject to achieving financial targets as determined in the plan. The warrants may be exercised until the
end of 2023.
Upon exercise of each warrant, the offeree will be entitled to receive cash payment equal to the difference between the base price as
determined at the time of the grant and the closing price of one share of the company on the Shenzhen Stock Exchange, as it will be on
the exercise date up to the ceiling that was determined under the plan.
The fair value of the granted warrants as aforesaid was estimated using the binomial pricing model.
The cost of the benefit embodied in the warrants that were allocated as aforesaid, based on the fair value at the end of the reporting
period, amounted to a total of 206 million RMB. The liability at the end of the reporting period was recorded according to the vesting
period as determined in the plan, taking into account the extent of the service that the employees provided until that date.
Phantom
Statement of share based payments in the year warrants
Total number of Phantom warrants granted in current period 198,417
Total number of Phantom warrants exercised in current period -
Total number of Phantom warrants forfeited in current period 679,585
Total number of Phanom warrents at the end of the period 48,560,977
The range of the exercise prices and the remainder of the contractual period for Phantom warrants outstanding at the 15.13 RMB
end of period 5.5 years
The parameters used in implementing the model are as follows:
Stock price (RMB) 15.81
Original exercise increment (RMB) 15.13
Expected volatility 46.73%
Risk-free interest rate 3.45%
Economic value as of June 30, 2018 (in thousands RMB) 206,041
The methods for the determination of the fair value of liabilities arising from cash-settled
share-based payments The binomial pricing model
Accumulated amount of liabilities arising from cash-settled share-based payments (in thousands
RMB) 102,332
Expenses arising from cash-settled share-based payments in current period (in thousands RMB) 44,648
145
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Other significant items
(1) Segment Reporting
The Company presents its segment reporting based on a format that is based on a breakdown by business segments:
Crop Protection (Agro)
This is the main area of the Company’s operations and includes the manufacture and marketing of conventional
agrochemical products and operations in the seeds sector.
Other (Non Agro)
This field of activity includes a large number of sub-fields, including: Lycopan (an oxidization retardant), aromatic
products, and other chemicals. It combines all the Company’s activities not included in the agro-products segment.
Segment results reported to the chief operating decision maker include items directly attributable to a segment as well as
items that can be allocated on a reasonable basis. Unallocated items comprise mainly financing expenses, net, gains from
changes in fair value, investment income and tax expenses.
All assets and liabilities that can be attributed to a specific segment were allocated accordingly. Attributed assets include:
accounts receivables, bills receivables, inventory, assets held for sale, fixed assets, construction in progress, intangible
assets, goodwill, non-current trade receivables and long term equity investments. Attributed liabilities include account
payables, bill payables, liability in respect of long-term equity investee and deferred income. All other assets and liabilities
which are not attributable to a specific segment are presented as unallocated assets and liabilities.
146
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Other significant items (cont'd)
(1) Segment reporting (cont’d)
(1) Information regarding the results and assets and liabilities of each reportable segment is included below:
Elimination among
Crop Protection (Agro) Other (Non Agro) segments Total
Six months ended June Six months ended June Six months ended June Six months ended June
30 30 30 30
2018 2017 2018 2017 2018 2017 2018 2017
Restated Restated Restated Restated
Operating income from external customers 12,132,725 11,860,787 893,533 909,277 - - 13,026,258 12,770,064
Inter-segment operating income - - 380 4,382 (380) (4,382) - -
Interest in the profit or loss of associates
and joint ventures 12,394 5,819 364 (3,733) - - 12,758 2,086
Segment's results 3,481,515 1,801,891 47,629 79,637 - - 3,529,144 1,881,528
Financial expenses, net (330,018) (911,916)
Gains from changes in fair value (243,376) 222,276
Investment income 134,295 267,363
Profit/loss before tax 3,090,045 1,459,251
Income tax expense (727,264) (142,257)
Net profit 2,362,781 1,316,994
Unallocated assets and
Crop Protection (Agro) Other (Non Agro) liabilities Total
January
June 30, January 1, June 30, January 1, June 30, 1, June 30, January 1,
2018 2018 2018 2018 2018 2018 2018 2018
Total assets 30,938,535 27,358,558 1,652,066 1,777,897 8,987,197 10,549,301 41,577,798 39,685,756
Total liabilities 4,214,113 4,027,089 196,420 198,600 15,623,840 16,610,220 20,034,373 20,835,909
147
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Other significant items (cont'd)
(1) Segment reporting (cont’d)
(2) Geographic information
The following tables sets out information about the geographical segments of the Group’s operating income based on the location
of customers (sales target) and the Group's non-current assets (including fixed assets, construction in progress, investment
properties, intangible assets and goodwill). In the case of investment property, fixed assets and construction in progress, the
geographical location of the assets is based on its physical location. In case of intangible assets and goodwill, the geographical
location of the company which owns the assets.
Operating income from external
customers
Six months ended June 30
2018 2017
Restated
Europe 4,469,617 4,716,623
North America 2,589,664 2,482,507
Latin America 1,978,828 1,826,603
Asia Pacific 2,267,794 2,191,368
Africa, Middle East (including Israel) and India 1,720,355 1,552,963
13,026,258 12,770,064
Specified non-current assets
June 30 January 1
2018 2018
Europe 723,016 732,024
Latin America 2,053,806 1,030,652
North America 474,496 464,183
Asia Pacific 2,220,746 2,186,442
Africa, Middle East (including Israel) and India 11,535,894 10,592,839
17,007,958 15,006,140
(3)Dependency on major customers
No single customer's proportion of the total amount of sales is over 10%.
148
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIII. Other significant items (cont'd)
(2) Calculation of basic earnings per share and Diluted earnings per share
Amount for the Amount for the
current period prior period
Restated
Net profit for the current period attributable to shareholders of the
company 2,362,781 1,316,994
Including: Net profit from continuing operations 2,362,781 1,316,994
Net profit for the current period attributable to ordinary shareholders 2,362,781 1,316,994
Amount for the Amount for the
Thousands shares current period prior period
Restated
Number of ordinary shares outstanding at the beginning of the year 2,446,554 2,341,856
Add: weighted average number of ordinary shares issued during the
period - -
Less: weighted average number of ordinary shares repurchased during
the period - -
Number of ordinary shares outstanding at the end of the period 2,446,554 2,341,856
On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company,
in return for the issuance of 1,810,883,039 new shares of the Company to CNAC, which is a
business combination under common control. According to “Preparation Rules for Information
Disclosure by Companies Offering Securities to the Public No. 9-Calculation and Disclosure of
Return on net assets and Earnings per Share”, in a business combination involving enterprises
under common control when calculating the basic earnings per share during the comparative period,
the shares shall be treated as issued at the beginning of the comparative period.
Six months Six months
ended June 30, ended June 30,
2018 2017
Restated
Calculated based on net profit attributable to ordinary
shareholders
Basic earnings per share 0.9658 0.5624
Diluted earnings per share N/A N/A
Calculated based on net profit from continuing operations
attributable to ordinary shareholders:
Basic earnings per share 0.9658 0.5624
Diluted earnings per share N/A N/A
Calculated based on net profit from discontinued operations
attributable to ordinary shareholders:
Basic earnings per share N/A N/A
Diluted earnings per share N/A N/A
149
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements
1. Cash at bank and on hand
January 1,
June 30, 2018 2018
Deposits in bank 1,761,572 1,864,003
Other cash at bank 28,150 4,600
Total 1,789,722 1,868,603
As at June 30, 2018, restricted cash and bank balances was 28,150 thousand (as at January 1, 2018): 4,600
thousand RMB) mainly including deposits that guarantee bank acceptance drafts.
2. Accounts receivable
(1) Accounts receivable classification disclosure
June 30, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairment 855,056 89 4,414 1 850,642
Account receivables assessed
individually for impairment 106,582 11 14,518 14 92,064
961,638 100 18,932 2 942,706
January 1, 2018
Provision for bad and
Book value doubtful debts
Amount Percentage Amount Percentage Carrying
(%) (%) amount
Account receivables assessed
collectively for impairment 830,914 96 1,879 - 829,035
Account receivables assessed
individually for impairment 35,209 4 14,210 13 20,999
866,123 100 16,089 2 850,034
150
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
2. Accounts receivable (Cont’d)
(2) Addition, written-back and written-off of provision for bad and doubtful debts during the years:
Six months ended
June 30,
2018
Balance as of January 1, 16,089
Addition during the year, net 2,889
Write back during the year (28)
Write-off during the year (18)
Balance as of June 30 18,932
(3) Five largest accounts receivable by debtor:
Provision for
As a percentage of total bad debts at the
Accounts receivable Closing balance accounts receivable(%) end of the year
Party 1 583,244 61 -
Party 2 183,530 19 -
Party 3 89,047 9 -
Party 4 50,027 5 2,501
Party 5 5,842 1 292
Total 911,690 95 2,793
3. Long-term equity investment
June 30, 2018 January 1, 2018
Amount Amount
Impairment loss Book value Impairment loss Book value
balance balance
Investment in
subsidiaries 15,939,826 - 15,939,826 15,939,826 - 15,939,826
Total 15,939,826 - 15,939,826 15,939,826 - 15,939,826
151
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
3. Long-term equity investment (Cont’d)
(1) Investments in subsidiaries
Current Balance
provision provision
January 1, June Impairment Impairment
2018 Increase Decrease 30,2018 loss loss
Jingzhou
Hongxiang
Chemical Co.
Ltd. 37,620 - - 37,620 - -
Hubei Sanonda
foreign trade
co. Ltd. 11,993 - - 11,993 - -
ADAMA
Agricultural
Solutions
Ltd. 15,890,213 - - 15,890,213 - -
Total 15,939,826 - - 15,939,826 - -
4. Operating income and operating costs
Six months ended June 30,
Six months ended june 30, 2018
2017
Operating Operating Operating Operating
income costs income costs
Main operations 1,585,485 1,096,095 1,325,666 1,005,632
Other operations 81,088 73,662 116,399 115,141
Total 1,666,573 1,169,757 1,442,065 1,120,773
5. Supplementary information to cash flow statement
(1) Other cash received relevant to operating activities
Six months ended Six months ended
June 30, 2018 June 30, 2017
Interest income 13,035 544
Government subsidies 748 1,725
Other 1,409 1,218
Total 15,192 3,487
152
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
5. Supplementary information to cash flow statement (cont’d)
(2) Other cash paid relevant to operating activities
Six months ended Six months ended
June 30, 2018 June 30, 2017
Professional services 36,133 9,707
Transportation and Commissions 38,259 37,952
Other 11,790 13,116
Total 86,182 60,775
(3) Other cash received relevant to financing activities
Six months ended Six months ended
June 30, 2018 June 30, 2017
Other - 7,800
Total - 7,800
(4) Other cash paid relevant to financing activities:
Six months ended Six months ended
June 30, 2018 June 30, 2017
Funding deposit - 100,000
Share repurchase (B shares) 393,025 -
Restricted cash 28,150 6,820
Other 3,138 -
Total 424,313 106,820
153
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
6. Supplementary information to cash flow statement (cont'd)
Six months ended June 30
Supplementary materials 2018 2017
Net profit 282,383 147,813
Add: Impairment provisions for assets 3,978 8,051
Depreciation of fixed assets 79,145 101,449
Amortization of intangible assets 2,503 2,575
Loss on disposal of fixed assets, intangible assets and other long-term assets
- 410
Loss on discard of fixed assets 44 -
Loss on change in fair value - 206
Financial expenses (income) (9,876) 8,277
Decrease (increase) in deferred tax assets (4,870) 15,572
Decrease (increase) in inventory 13,343 (9,103)
Increase (decrease) in operating accounts receivable 15,037 (365,016)
Increase in operating payables 99,968 48,243
Net cash flows from operating activities 481,655 (41,523)
2. Investing and financing activities that do not involving cash receipts and
- -
payment
3. Net increase in cash and cash equivalents - -
Closing balance of cash and cash equivalents 1,761,572 52,761
Less: Opening balance of cash and cash equivalents 1,864,003 249,740
Net increase in cash and cash equivalents (102,431) (196,979)
7. Related parties and related parties transcations
(1) Information on parent Company
Registered
capital Shareholding of voting rights
Company name Registered place Business nature (Thousand) percentage (%) Percentage (%)
Production and RMB
CNAC Beijing, China sales of 3,338,220 78.91 78.91
agrochemicals
The ultimate controller of the company is China National Chemical Corporation.
(2) Information on the subsidiaries of the Company
For information about the main subsidiaries of the Company, refer to Note VII.1.
154
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
7. Related parties and related parties transcations( Cont’d)
(3) Transactions and balances with related parties
a. Transactions of goods and services
Related Party Relationship Six months ended June 30
2018 2017
Summary of Purchase of goods/services received:
Purchase of goods/services received Common control under CC
7,846 5,003
Subsidiary 114,174 97,561
Purchase of fixed assets and other Common control under CC
assets 54,060 2,759
Summary of Sales of goods:
Sale of goods Subsidiary 473,846 303,242
Sale of fixed assets Subsidiary 1,528 364
b. Leases
Six months ended June 30
Type of leased assets Lessee 2018 2017
Building and Structures Common control under CC 10 57
c. Guarantee (as a guarantee receiver)
Amount of Inception Maturity Guaranty
guaranteed date of date of completed
loan guaranty guaranty (Y / N)
As At June 30, 2018
Common control under CC 303,000 20/02/2017 19/02/2020 Y
Parent 300,000 20/11/2017 20/11/2022 N
50,000 18/10/2017 18/10/2021 N
50,000 10/01/2017 10/01/2020 Y
100,000 13/06/2018 12/06/2022 N
Ultimate controller 200,000 25/09/2013 25/09/2020 N
160,000 27/05/2014 09/06/2021 N
150,000 30/09/2013 13/10/2020 N
155
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
XIV. Notes to major items in the Company's financial statements (cont'd)
7. Related parties and related parties transactions (Cont’d)
(3) Transactions and balances with related parties (Cont’d )
d. Receivables from and payables to related parties (including loans)
Receivable Items
Items Related Party Relationship June 30 January 1
2018 2018
Bad debt Bad debt
Provision Provision
Trade - -
receivables Subsidiary 855,820 793,330
Prepayments Common control under CC 117 - 12,357 -
Payable Items
Items Related Party Relationship June 30 January 1
2018 2018
Trade payables Subsidiary - 3,465
Common control under CC 10,986 980
Other payables Subsidiary 51,653 436,268
Other non-current liabilities* Common control under CC 171,770 171,770
* The interest expense related to this liability recognized in the current period is 1,042 thousand RMB (amount
for prior period is 1,042 thousand RMB).
e. Other related party transactions
The closing balance of bank deposit in ChemChina Finance Corporation was 20 thousand RMB (2017.12.31 –
25,014 thousand RMB). Interest income of bank deposit in current period is 537 thousand RMB (amount for
prior period is 0 thousand RMB).
156
XV. Supplementary information
(1) Extraordinary Gain and Loss
Six months ended
June 30, 2018
Disposal of non-current assets 1,997,170
Government grants recognized through profit or loss 10,787
Recovery or reversal of provision for bad debts which is assessed individually during the
years 13,249
Other non-operating income and expenses besides items above (787)
Tax effect (447,934)
1,572,485
Note: Extraordinary gain and loss items listed above are presented in the amount before taxation
(2) Return on net assets and earnings per share (“EPS”)
The information of Return on net assets and EPS is in accordance with the Preparation Rules for
Information Disclosure by Companies Offering Securities to the Public No. 9 – Calculation and
Disclosure of Return on net assets and Earnings per share (2010 Amendment) issued by China
Securities Regulatory Commission
Weighted average rate EPS
Profit during the reporting of return on net assets Basic EPS Diluted EPS
period (%) （RMB/share） （RMB/share）
Net profit attributable to ordinary
shareholders of the Company
11.65 0.9658 N/A
Net profit after deduction of
extraordinary gains/losses
attributable to ordinary
shareholders of the Company 3.90 0.3230 N/A
157
Section XI Documents Available for Reference
(I) Financial Statements carried with signatures and seals of Legal Representative and Accounting Principal;
(II) In the Reporting Period, originals of all documents of the Company ever disclosed publicly in media designated by China
Securities Regulatory Commission as well as the originals of all the public notices were deposited in the office of the Company.
Hubei Sanonda Co., Ltd.
Legal Representative: Chen Lichtenstein
August 27, 2018
158
