Stock Code: 000726 Short Form of the Stock: Luthai A Public Notice No.: 2010-024
LU THAI TEXTILE CO., LTD.
THE THIRD QUARTERLY REPORT FOR 2010
§1. Important Notice
1.1 The Board of Directors, the Supervisory Committee, directors, supervisors and
other senior management personnel of Luthai Textile Co., Ltd (hereinafter referred to
as “the Company”) hereby guarantee that this report carries no false information,
misleading statements or major omissions, and accept, individually and collectively,
the responsibility for the factuality, accuracy and completeness of the information set
forth herein.
1.2 The Financial Report in the third quarterly report has not been audited by a CPA
firm.
1.3 Mr. Liu Shizhen, Principal of the Company, Ms. Zhang Hongmei, person in
charge of accounting work and accounting organ (Financial Manager) hereby
confirmed that the Financial Report enclosed in Quarterly Report is true and
complete.
§2. Company Profile
2.1 Main accounting data and financial indexes
Unit: RMB Yuan
30 Sep. 2010 31 Dec. 2009 Increase/decrease (%)
Total assets (RMB) 6,321,978,573.36 6,303,066,959.60 0.30%
Owners’ equity attributable to shareholders of
listed company (RMB)
4,239,544,843.20 3,919,660,709.28 8.16%
Share capital (share) 994,864,800.00 994,864,800.00 0.00%
Net assets per share attributable to
shareholders of listed company (RMB/share)
4.26 3.94 8.12%
Jul.-Sep. 2010
Increase/decrease
year-on-year (%)
Jan.-Sep. 2010
Increase/decrease
year-on-year (%)
Total operation income (RMB) 1,367,077,728.87 24.63% 3,613,928,645.73 22.95%
Net profit attributable to shareholders of listed
company (RMB)
206,560,238.17 42.79% 573,438,189.54 40.47%
Net cash flows generated from operating
activities (RMB)
- - 768,833,190.81 167.12%
Net cash flows per share generated from
operating activities (RMB/share)
- - 0.77 165.52%Basic earnings per share (RMB/share) 0.21 40.00% 0.58 41.46%
Diluted earnings per share (RMB/share) 0.21 40.00% 0.58 41.46%
Weighted average return on net assets (%) 4.99% 1.06% 14.06% 2.88%
Weighted average return on net assets after
deducting non-recurring gains and losses (%)
4.25% -0.50% 12.85% 0.88%
Items of non-recurring gains and losses
Amount from year-begin to
the end of this report period
Remark
Gains and losses from disposal of non-current assets -3,142,950.08
Government grant measured into the current period gain and loss, excluding those
government grants closely related to the Company’s business that the Company
enjoyed continually at the certain standard rating and in conformity with provisions of
policies of the State
25,603,403.36
Gains and losses on change in fair value of tradable financial asses and tradable
financial liabilities except for effective hedging business related with normal
operation and business of the Company, and investment income from disposal of
tradable financial asses and tradable financial liabilities and available-for-sale
financial assets
19,392,471.38
Other non-operating income and expenses besides the above items 7,347,238.96
Impact on income tax 3,267,409.06
Impact on minority interests -3,154,147.96
Total 49,313,424.72 -
2.2 Total number of shareholders at the end of the report period and statement on
shares held by the top ten shareholders holding shares not subject to trading
moratorium
Unit: Share
Total number of shareholders 131,334
Shares held by the top ten shareholders holding shares not subject to trading moratorium
Full name of shareholder
Number of shares not subject to trading
moratorium held at the period-end
Type of share
Zibo Lucheng Textile Investment Co., Ltd. 24,956,700 RMB ordinary shares
DBS VICKERS (HONG KONG) LTD A/C CLIENTS 40,976,252
Domestically listed
foreign shares
Guotai Jinma Stable Return Securities Investment Fund 18,677,772 RMB ordinary shares
Desheng Select Stock Securities Investment Fund 9,000,000 RMB ordinary shares
National Social Security Fund 106 Combination 8,081,029 RMB ordinary shares
Changsheng Tongqing Separated Stock Securities Investment
Fund
5,999,838 RMB ordinary sharesFortune SGAM Advanced Growth Stock Securities
Investment Fund
5,997,453 RMB ordinary shares
Baoying Strategy Growth Stock Securities Investment Fund 5,400,000 RMB ordinary shares
Fuligoal Tianrui Strong Area Select Mixed Open-end
Securities Investment Fund
4,773,599 RMB ordinary shares
Greatwall Jiufu Core Growth Stock Fund (LOF) 4,620,450 RMB ordinary shares
§3. Significant Events
3.1 Particulars about major changes of items and financial indexes of the main
accounting statements, as well as the reasons for changes
√Applicable □Inapplicable
Reason for large change of items of financial statements
1. Closing balance of accounts receivable increased by 32.17% compared with the
opening balance, which was mainly because sales income increased.
2. Closing balance of prepayment has decreased by 53.31% compared with the
opening balance, which caused by decrease of payment for purchasing imported raw
materials.
3. Long-term equity investment increased by 42989.13% (RMB 68,782,600)
compared with the opening balance, which was mainly because the Company invested
RMB 55,282,600 into Rongchang Pharmaceutical Co., Ltd and RMB 12,000,000 into
Gaoqing Hongqiao Thermal electricity Co., Ltd.
4. Closing balance of construction in progress increased by 57.87% compared with
the opening balance, which was mainly because project on reform of yarn dyed
fabrics and the 3-million-piece shirts project increased expenditure.
5. Closing balance of engineering material has increased by 102.55% (RMB
12,011,000) compared with the opening balance due to increase of equipments
purchased in the reporting period.
6. Closing balance of transaction financial liabilities has decreased by 100% (RMB
61,408,200) due to change in fair value of transaction financial liabilities.
7. Closing balance of accounts payable has decreased by 32.91% compared with the
opening balance, which was because the Company paid the payment for seed cotton
to the cotton farmers.
8. Closing balance of accounts received in advance has increased by 74.32% (RMB
30,799,700) compared with the opening balance, which was mainly due to receive
payment for cotton in advance.
9. Closing balance of tax payable has increased by 51.46% (RMB 14,759,000)
compared with the opening balance due to increase of profit in the reporting period.
10. Closing balance of interest payable has increased by 405.44% (RMB 1,987,100)
compared with the opening balance due to that the Company withdrew interests in the
reporting period.
11. Closing balance of dividend payable has increased by 613.76% (RMB 2,716,100)
compared with the opening balance, which was mainly because dividend from BeijingSichuang had not been paid yet.
12. Closing balance of other payables has increased by 31.16%, which was mainly
because Luqun Textile should pay RMB 28,700,000 to Zibo Lucheng Textile
Investment Co., Ltd.
13. Closing balance of non-current liabilities due within one year has decreased by
61.68% compared with the opening balance, which was due to return long-term
borrowing due within one year.
14. Closing balance of deferred income tax liabilities has increased by 843.85%
(RMB 3,432,800) compared with the opening balance due to increase of gains and
losses from changes in fair value.
15. Closing balance of other non-current liabilities has increased by 1201.67% (RMB
32125900) compared with the opening balance, which was mainly because the
Company received financing support specific funds (land) RMB 32,560,000 from
Zichuan People’s Government.
16. Business taxes and surcharges has decreased by 40.41% year-on-year due to
decrease of urban maintenance and construction tax and educational surtax.
17. Administrative expense has increased by 56.19% year-on-year due to increase in
wage and R&D input.
18. Financial expense has decreased by 38.71% year-on-year due to reduction in
interest expense.
19. Loss from Impairment assets has increased by 17843.43% (RMB 38,413,800)
year-on-year due to withdrawal of loss from assets impairment and loss from
inventory falling price in the reporting period.
20. Gain from change in fair value has increased by 235.85% (RMB 147,652,900)
year-on-year due to change in fair value of transaction financial liabilities.
21. Gain from investment has decreased by 363.71% (RMB 76,937,000) year-on-year
due to decrease of investment income from transaction financial assets.
22. Non-operating income has increased by 41.21% year-on-year, which was mainly
because government subsidies increase in the report period.
23. Non-operating expense increased 30.85% year-on-year due to increase of loss
from disposal of fixed assets.
24. Income tax expense has increased by 92.91% (RMB 52,683,700) year-on-year,
which was mainly because of total profit increased compared with last reporting
period, as a result, increase in income tax expense.
3.2 The progress of significant events and its influence, as well as the analysis and
explanation on solutions
3.2.1 About non-standard opinion
□Applicable √Inapplicable
3.2.2 The Company offer capital to the controlling shareholder or other related parties
and provide external guarantees in violation of the prescribed procedures.
□Applicable √Inapplicable
3.2.3 Signing contract and execution of significant contract on routine operation
□Applicable √Inapplicable3.2.4 Others
□Applicable √Inapplicable
3.3 Execution of commitments made by the Company, shareholders and actual
controller
√Applicable □Inapplicable
Commitment
Commitment
maker
Content Execution
Commitment on share merger reform
Zibo Lucheng
Textile
Investment Co.,
Ltd.
The company will not sold within 60 months
after share merger reform; sold price will not low
than RMB 15 Yuan/share within 24 months after
expiration (weight disposal will be adopted in
case that share capital changes); proposed at the
Annual Shareholders’ General Meeting 2006 and
2007 that cash distribution proportion will not
low than 50% of distributable profit realized in
current year, and voted for; purchase Lu Thai
A-share with dividend of 2005 and 2006 in
secondary market within 12 months when the
dividend was received. Growth range of total
profit in 2008 will not lower than 30% over 2005.
All the commitments
have been executed
except the
commitment on not
selling shares within
60 months after share
merger reform.
Commitment made in merger report or
report on change of equity
None None None
Commitment made when
reorganization of significant assets
None None None
Commitment made when offering
Lu Thai Textile
Co., Ltd
Investment project with raised capital
In progress of
execution as planned
Other commitments (including added
commitment)
None None None
3.4 Warnings of possible losses or major changes of the accumulative net profit
achieved during the period from year-begin to the end of the next report period
compared with the same period of last year, as well as explanation on reasons
□Applicable √Inapplicable
3.5 Other significant events need to be explained
3.5.1 Securities Investment
□Applicable √Inapplicable
3.5.2 Researches, interviews and visits received in report period
Reception time Reception place Reception way Visitor Main discussion and materials provided
8 Apr. 2010
Reception room of
the Company
Field research
Kong Jun from China Jianyin
Investment Securities
Basic information of the Company and
revival of export
8 Apr. 2010
Reception room of
the Company
Field research
Lu Jing from Guotai Asset
Management Co., Ltd
Basic information of the Company and
revival of export2 Sep. 2010
Reception room of
the Company
Field research
He Shuai from GTJA Allianz
Funds
Basic information of the Company
3.6 Investments in derivatives
√Applicable □Inapplicable
Analysis on risks and
control measures of
holding positions of
derivatives in the report
period (including but
not limited to market
risk, liquidity risk,
credit risk, operation
risk, law risk, etc.)
Analysis on risk control measures concerning position of derivatives investments:
Persisting in hedging as purpose when the Company carried out derivatives transactions, the transactions
shall be operated by installments, relevant amount is not more than the amount from foreign exchange
planned to be collected by the Company, and all the derivatives transactions is zero-margin. Meanwhile,
the Company set up a completed risk control system, and make sufficiently analysis and precaution to
possible risk on laws and regulations, credit risk, operation risk and market risk.
1. Risk on laws and regulations
All the derivatives transactions launched by the Company must abide by relevant laws and regulations of
the state, as well as the provisions of stock exchange, at the same time, definitely promise the rights and
obligations between the Company and bank.
Precaution measure: the Company seriously studied and grasped relevant laws, regulations and market
regulations, and drew up the internal control management system of derivatives investments,
strengthened accuracy inspection, and strictly abided by relevant provision of laws and regulations and
internal control management system of the Company.
2. Credit risk and liquidity risk
The derivatives trading business of the Company was carried out on the basis of contracts signed
between the Company and bank, the delivery on schedule or extension is recognized based on one of the
contract price and exchange tendency after such contract of forward settlement of exchange falls due, no
default risk exists in the Company so as to ensure delivery on schedule or extension.
Precaution measure: the Company formulated the Management Rules for Derivatives Trading of Lu Thai
Textile Co., Ltd. and the Plan for Derivatives Transactions in Coming 12 Months as approved at the 1st
Meeting of the 6th Board of Directors, in which the appropriate authorization system shall be set out, and
amount for hedging shall be confirmed by installments in accordance with the production and operation
scale and exchange revenue progress, and ensure no credit risk and liquidity risk occurred by means of
extension at the specified date.
3. Operation risk
Faulty internal progress, employees, as well as system and external matters resulted in risk as well in the
course of hedging, including employee risk, process risk, system risk and external risk.
Precaution measure: the Company set up stringent authorization and approval system, stipulated
operating departments, operating process and examination and approval process, and perfect regulation
can reduce the operation risk effectively.
4. Market risk
The forward settlement of exchange is the most important derivatives trading business of the Company,
involving huge sums and comparatively long periods. In the operation of the forward settlement of
exchange, if the RMB is devalued by a large margin on the basis of the current situation before the
contract is due, so then, the larger losses shall incur in the contract on forward settlement of exchange
signed by the Company.
Risk analysis and precaution measure: at present, in face of the appreciation pressure on Renminbi, there
was no risk on large devaluation of the RMB before the contract is due signed by the Company.According to price quoted from each bank, the RMB shows appreciation tendency within 1 year, thus,
gain on change in fair value shall occur in the forward contract signed by the Company.
Changes of market
prices or fair values in
the report period of the
invested derivatives,
and the analysis on the
fair value of the
derivatives should
include how to use, and
the relevant
assumptions and
parameters
1. Up until 30 Sept. 2010, the undue financial derivatives contract held by the Company totaled USD
305,117,400, including about 31 contracts for the forward settlement of exchange, which valued USD
288,500,000 and were due before 30 Jun. 2011; and about 4 contracts for the forward purchase of
exchange, which valued USD 16,617,400 and were due before 30 Jun. 2011. The said two kinds of
financial derivatives accounted for 48.53% of the net assets at the end of the report period.
2. For the first three quarters of 2010, the due financial derivatives of the Company totaled USD
369,033,700, of which the actually settled amount reached USD 357,033,700 and the loss amounted to
RMB 65,657,100. To be specific, the due forward settlement exchanges reached USD 362,500,000, of
which USD 350,500,000 were settled as scheduled and the loss stood at RMB 63,585,600; the extended
amount stood at USD 12,000,000; and the due forward exchange purchase and sale transactions valued
USD 6,533,700, of which all was settled as scheduled and the loss stood at RMB 2,071,500.
Whether significant
changes happened to
the Company’s
accounting policy and
specific accounting
principles of the
derivatives in the report
period compared with
the last report period
No change took place.
Specific opinion from
independent directors,
sponsors or financial
consultants on the
Company’s derivatives
investment and risk
control
The Company’s independent directors—Zhou Zhiji, Li Zhixian, Qi Haodong, Bi Xiuli and Wang
Lei—issued their professional opinions on the Company’s derivative transactions as follows:
1. Up until 30 Sept. 2010, the undue financial derivatives contract held by the Company totaled USD
305,117,400, including about 31 contracts for the forward settlement of exchange, which valued USD
288,500,000 and were due before 30 Jun. 2011; and about 4 contracts for the forward purchase of
exchange, which valued USD 16,617,400 and were due before 30 Jun. 2011. The said two kinds of
financial derivatives accounted for 48.53% of the net assets at the end of the report period.
2. For the first three quarters of 2010, the due financial derivatives of the Company totaled USD
369,033,700, of which the actually settled amount reached USD 357,033,700 and the loss amounted to
RMB 65,657,100. To be specific, the due forward settlement exchanges reached USD 362,500,000, of
which USD 350,500,000 were settled as scheduled and the loss stood at RMB 63,585,600; the extended
amount stood at USD 12,000,000; and the due forward exchange purchase and sale transactions valued
USD 6,533,700, of which all was settled as scheduled and the loss stood at RMB 2,071,500.
3. When operating its derivatives investment business, the Company went through relevant approving
procedures, which was in line with relevant laws, regulations, the Company’s Articles of Association, the
Management Rules for Derivatives Trading of Lu Thai Textile Co., Ltd. and the Plan for Derivatives
Transactions in Coming 12 Months as approved at the 1st Meeting of the 6th Board of Directors.
4. Concerning its derivatives investment business, the Company established and improved its relevant
internal control systems such as the organization structure, the business operation flow and the approving
procedures, which was effectively executed.
5. On the basis of its normal operation, the Company used its own funds to conduct the derivatives
investment business, which could help the Company avoid the risk of RMB exchange rate changes andimprove the Company’s resistance ability to exchange rate fluctuations. Such a move of the Company
would do no harm to the interest of the Company and its shareholders.
6. In the report period, the Company operated its derivatives investment business in strict compliance
with relevant laws, regulations, the Company’s Articles of Association and the Management Rules for
Derivatives Trading of Lu Thai Textile Co., Ltd..
7. The Management Rules for Derivatives Trading of Lu Thai Textile Co., Ltd. and the Plan for
Derivatives Transactions in Coming 12 Months were reviewed and approved at the 1st Meeting of the 6th
Board of Directors, further improving the management over derivatives investments.
8. According to requirements of the Memorandum of Shenzhen Stock Exchange for Information
Disclosure No.26—Investment in Derivatives, the Company fulfilled the relevant information disclosure
duty in the Third Quarterly Report for 2010.
To sum up, we were of the opinion that it would strengthen the Company’s competitiveness to use
derivatives transactions (with the business of forward purchase/sale of foreign currencies as the focus) as
an effective tool to avoid foreign exchange risks, to strengthen the relevant internal control and to carry
out the loss and risk prevention measures so as to improve the operation and management. It was
considered feasible for the Company to conduct derivatives transactions (with the business of forward
purchase/sale of foreign currencies as the focus) and the relevant risks were controllable. No harm would
be done to interests of the listed Company’s shareholders.
3.6.1 Positions of derivatives investments held at the period-end
√Applicable □Inapplicable
Unit: RMB Yuan
Type of contract
Opening contract
amount
Closing contract
amount
Gains/losses in report
period
Proportion of the
closing contract
amount in the
Company’s closing net
assets
Contracts for forward settlement of
exchange
2,748,279,800.00 2,057,476,674.62 -65,657,054.22 48.53%
Total 2,748,279,800.00 2,057,476,674.62 -65,657,054.22 48.53%
