Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
Stock Code: 200986 Stock Name: Huaxin Packaging-B Announcement No. 2019-012
FOSHAN HUAXIN PACKAGING CO., LTD.
ANNUAL REPORT 2018 (SUMMARY)
Part I Important Notes
This Summary is based on the full text of the 2018 Annual Report of Foshan Huaxin Packaging Co., Ltd. (together with its
consolidated subsidiaries, the “Company”, except where the context otherwise requires). In order for a full understanding of the
Company’s operating results, financial position and future development plans, investors should carefully read the aforesaid full text,
which has been disclosed together with this Summary on the media designated by the China Securities Regulatory Commission (the
“CSRC”).
Objections raised by any of the directors, supervisors or senior management against any contents in this Report or its summary:
Name Office title Objection and explanation of why
Statement of objection:
Except for the following directors, all the other directors attended in person the Board meeting for the review of this Report and its
summary.
Reason for not attending the Proxy entrusted to attend the
Name Office title
meeting in person meeting
Zhang Wenjing Independent Director For the reason of work Li Jun
Independent auditor’s modified opinion:
□ Applicable √ Not applicable
Board-approved final cash and/or stock dividend plan for ordinary shareholders:
□ Applicable √ Not applicable
The Company has no final dividend plan, either in the form of cash or stock.
Board-approved final cash and/or stock dividend plan for preferred shareholders:
□ Applicable √ Not applicable
This Report and its summary have been prepared in both Chinese and English. Should there be any discrepancies or
misunderstandings between the two versions, the Chinese versions shall prevail.
Part II Key Corporate Information
1. Stock Profile
Stock name Huaxin Packaging-B Stock code 200986
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
Stock exchange for stock listing Shenzhen Stock Exchange
Contact information Board Secretary Securities Representative
Name Ding Guoqiang Shi Hui
2/F, Block 7, 3 Keyang Road, Luoge Park, 2/F, Block 7, 3 Keyang Road, Luoge Park,
Chancheng Economic Development Zone, Chancheng Economic Development Zone,
Address
Nanzhuang Town, Chancheng District, Nanzhuang Town, Chancheng District,
Foshan, Guangdong Province, P.R.China Foshan, Guangdong Province, P.R.China
Fax 0756-8666922 0756-8666922
Tel. 0756-8666975 0756-8666978
Email address dinggq@htrh-paper.com shih@htrh-paper.com
2. Principal Activities or Products in the Reporting Period
The Company specializes in the R&D, production and sales of high-end coated ivory board, chemicals for paper making and color
printing products. The businesses are described as follows:
A. High-end coated ivory board
The ivory board is a product of the Company’s main business, as a category of ivory board, is widely applied in various fields such as
cigarette packaging, food packaging, medicine packaging, cosmetic packaging and living supplies packaging, which is an important
source of the Company's major business income. The R&D, production and sales of the ivory board is mainly undertaken by Zhuhai
HongtaRenheng Packaging Co., Ltd. and Zhuhai Huafeng Paper Co., Ltd. HongtaRenheng is the core high-end packaging board
platform under Huaxin Packaging which is based in domestic and overseas high-end packaging markets of cigarette and food and
provides "personalized" products and services for customers with "differentiation" business strategy. The Company now has three
coated ivory board production lines, and the annual production capacity around 600,000 tons. The Company's products can be
divided into the following categories:
a. Coated ivory board for cigarette packaging of company’s dominant product, is widely used in the high-end cigarette packaging
market. The coated ivory board for cigarette packaging produced by HongtaRenheng takes up a dominant position in the domestic
cigarette packaging field. It represents the highest level of coated ivory board quality in China. It has won a Golden Award at China’s
International Paper & Paper Product Brands Exhibition, and the top award of the Chinese science and technology community—the
first-class State Science and Technology Advancement Award. The anti-counterfeit coated ivory board with color fiber and
true-color fiber etc.—a technology that is independently developed by the Company and has been granted the national invention
patent of China—has been successfully applied in the packaging of a series of cigarettes in the “Hongta Group” and
“HongyunHonghe Group" brands to combat counterfeiting from the packaging materials, reaching the significant anti-counterfeit
results of “easily identifiable but difficult to copy”. Currently, a new type of ivory board for cigarette packaging is at the stage of trial
production.
b. The ivory boards for liquid food packaging is an important development direction of the Company. HongtaRenheng is the first to
break the foreign technological monopoly, by independently developing the sterile paper for packaging of liquid milk, fruit juice,
herbal tea and other drinks, effectively substituting imported products. The series of food packaging products such as anti-oil food
grade coated board and high-end paper cup have been recognized by well-known catering groups such as McDonald’s after they are
put into the market.
c. The high-end commercial ivory board papers aim to meet the personalized demands of customers. They are widely applied in the
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
segmented packaging market fields like the high-end medicine, cosmetics, and daily necessities. The anti-counterfeit coated ivory
paper with personalized identification code independently developed by the Company and for which it has been granted the invention
patent has been successfully applied in the anti-counterfeit packaging of the high-end products like high-end medicine and cosmetics,
which does not only solve the difficulties posed by impact from counterfeit and shoddy products for customers at the source, but also
effectively reduces the customer’s anti-counterfeit costs and fake product crackdown expanses and win high trust from the market.
B. Paper making business
Chemicals for paper making is business to extend the paper-making industry chain by the Company, the R&D, production and sales
of which are mainly undertaken by Zhuhai Jinji Chemical Co., Ltd., a subsidiary of the Company, which mainly supplies the
carboxylic butadiene-styrene latex, styrene-acrylic latex and calcium carbonate of domestically first-class quality.
C. Color printing business
Color printing business is an important industrial linkage supporting business of the Company, which covers designing and
manufacturing packaging materials and providing packaging solutions for customers. This business is mainly undertaken by Huaxin
(Foshan) Color Printing Co., Ltd.. The Company now owns the offset, flexo and intaglio printing workshop. Main products include
color boxes, various labels (paper label, in-mold label and sticker), barcode printing, brochure, books and periodicals involved in
wide terminal consumption industry.
3. Key Financial Information
(1) Key Financial Information of the Past Three Years
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √ No
Unit: RMB
2018-over-2017
2018 2017 2016
change (%)
Operating revenue (RMB) 3,683,004,543.50 3,583,157,646.37 2.79% 3,607,758,904.01
Net profit attributable to the listed
-2,814,965.92 18,637,865.97 -115.10% 61,324,088.11
company’s shareholders (RMB)
Net profit attributable to the listed
company’s shareholders before -36,089,244.17 12,337,519.04 -392.52% 27,820,866.82
exceptional items (RMB)
Net cash generated from/used in
393,465,394.72 -21,910,921.08 1,895.75% 409,111,111.08
operating activities (RMB)
Basic earnings per share
-0.01 0.04 -125.00% 0.12
(RMB/share)
Diluted earnings per share
-0.01 0.04 -125.00% 0.12
(RMB/share)
Weighted average return on equity Down by 1.08 percen
-0.14% 0.94% 3.13%
(%) tage points
Change of 31
31 December 2018 31 December 2017 December 2018 over 31 December 2016
31 December 2017 (%)
Total assets (RMB) 5,794,694,744.15 5,426,368,352.69 6.79% 6,182,737,808.93
Equity attributable to the listed 1,970,946,820.29 1,982,859,436.21 -0.60% 1,980,395,170.24
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
company’s shareholders (RMB)
(2) Key Financial Information by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Operating revenue 791,489,361.74 955,666,979.18 966,386,108.12 969,462,094.46
Net profit attributable to the listed
-10,204,661.39 -5,095,101.40 5,007,777.78 7,477,019.09
company’s shareholders
Net profit attributable to the listed
company’s shareholders before -11,700,027.27 -7,503,716.60 4,637,788.37 -21,523,288.67
exceptional items
Net cash generated from/used in
25,982,578.72 42,810,407.39 316,624,480.08 8,047,928.53
operating activities
Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially from what
have been disclosed in the Company’s quarterly or interim reports.
□ Yes √ No
4. Share Capital and Shareholder Information at the Period-End
(1) Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well as
Holdings of Top 10 Shareholders
Unit: share
Number
Number of preferred
of
Number of ordinary shareholders with
Number of preferred
shareholders at the resumed voting
ordinary sharehold
13,422 month-end prior to the 13,367 0 rights at the 0
shareholder ers with
disclosure of this month-end prior to
s resumed
Report the disclosure of this
voting
Report
rights
Top 10 shareholders
Total shares Shares in pledge or frozen
Name of Nature of Shareholding
held at the Private shares held
shareholder shareholder percentage Status Shares
period-end
FOSHAN
HUAXIN State-owned
65.20% 329,512,030 329,512,030
DEVELOPME legal person
NT CO., LTD.
GUOTAI
JUNAN
Foreign legal
SECURITIES( 0.63% 3,192,453 0
person
HONGKONG)
LIMITED
WU Foreign natural
0.51% 2,561,991 0
HAOYUAN person
Domestic
CAI YUJIU 0.31% 1,570,000 0
natural person
Domestic
MIU JUN 0.30% 1,522,800 0
natural person
NORGES Foreign legal 0.27% 1,352,720 0
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
BANK person
ESSENCE
INTERNATIO
NAL
Foreign legal
SECURITIES 0.24% 1,205,252 0
person
(HONG
KONG) CO.,
LTD.
FOSHAN
CHAN BEN
State-owned
DE ASSET 0.23% 1,139,420 1,111,959
legal person
MANAGEMEN
T CO., LTD
KGI ASIA Foreign legal
0.22% 1,111,959 0
LIMITED person
PENG Domestic
0.21% 1,053,239 0
RUIHUA natural person
Related or acting-in-concert
It is unknown whether there is among the above shareholders any related or acting-in-concert
parties among the shareholders
party as defined in the Administrative Measures for the Acquisition of Listed Companies.
above
Shareholders involved in
None
securities margin trading (if any)
(2) Number of Preferred Shareholders and Shareholdings of Top 10 of Them
□ Applicable √ Not applicable
No preferred shareholders in the Reporting Period.
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
(3) Ownership and Control Relations between the Actual Controller and the Company
5. Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding before the date of this
Report’s approval or were due but could not be redeemed in full?
No.
Part III Operating Performance Discussion and Analysis
1. Business Overview of the Reporting Period
Is the Company subject to any disclosure requirements for special industries?
No.
A. Market Environment
In 2018, affected by China-US trade conflicts and exchange rate fluctuations, macroeconomic index fell and the packaging and
paper-making industries that are highly associated with macro economy were impacted at different degrees. The market end demands
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
showed great decrease and the supply side continued the trend of 2017 with new increases instead of any decrease in 2018. The
capacity that could be placed in market increased, while the whole industry witnessed oversupply. As a result, the paper-making
industry took on an overall trend of narrowed profit margins.
B. Company Performance during the Reporting Period
In 2018, based on the core concepts of “four news” and “strictness, practicality, transparency and rapidness”, the Company stuck to
three “consistencies”, aimed at “five new forces”, sought “four breakthroughs” and centered around “three decreases, one increase
and one control” to keep strengthening party building, strive to explore strategic reforms, proactively expand external markets, fully
enhance the internal management level, continue to refine the institutional reform, increase R&D investment and seek the increase of
operating profits.
The competition was fierce with unbalanced supply and demand development in the ivory board industry in which the Company is
engaged and related industries. The production and operation of the ivory board segment were basically stable. In the whole year, the
production reached 513,000 tons, which was an increase of 15% from the previous year; the sales volume reached 483,000 tons, an
increase of 2.2% from the previous year; and the price rose by 6.63% from the previous year, which was an increase against the trend.
In respect of the cost end, affected by the persistently high price of raw wood pulp, production costs increased substantially, resulting
in big YOY decrease in the profits of the paper segment and causing losses. In terms of the printing segment, the total operating
revenue and profits increased by 15% and 561% respectively from the previous year as a result of proactive attraction to external
quality resources and diversification of the industrial chain. In the chemical industry, latex sales volume increased by 3% from the
previous year and revenue rose by 2% from the previous year due to persistent optimization of production techniques, and the
operating budget goal established at the beginning of the year was achieved. Despite the good performance of the printing and
chemical segments, the whole-year budget goal was not achieved by the Company as a whole due to the losses in the paper segment.
For 2018, the Company recorded operating revenue of RMB3,683 million, a net profit attributable to the listed company’s
shareholders of RMB-2.81 million, and net cash generated from operating activities of RMB393.47 million. As at 31 December 2018,
total assets stood at RMB5,794.69 million and equity attributable to the listed company’s shareholders of RMB1,970.95 million.
C. Management Measures Taken within the Reporting Period
a. Reform the organization structure and optimize remuneration distribution and talent promotion mechanism
Aimed at “reducing hierarchies, grouping functions and flattening management”, the Company adjusted its internal organization
structure to serve the purpose of matching staff abilities with position requirements and established a performance-based position
performance and remuneration system. The reform on the Company’s existing remuneration system was carried out in accordance
with the motivating distribution principle of “focusing on performance, awarding diligence and punishing laziness; encouraging
creation and increasing profits”. The career promotion channel was established and a comprehensive review on the technical, skilled
and management professionals at each hierarchy would be conducted in proportion annually to guide staff to be concerned with the
improvement in their skills and abilities, effectively motivate and stabilize the staff team and serve the future strategic development
of the Company.
b. Reform the marketing system and inspire the sales potential
In accordance with the thinking of “new era and new marketing”, the Company carried out an all-round reform on its marketing
system to highlight the core function of marketing. A brand new performance appraisal system was implemented to inspire staff to
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
develop new orders; a new mechanism of bottom out, awarding diligence and punishing laziness was established to keep improving
corporate competitiveness.
c. Practice the concept of “four newness” and strictly control period costs
Centering around the concept of “four newness” of “new measures for reforms, new methods for management, new thinking for
operations and new mechanisms for activation”, the Company implemented the outsourcing of warehousing and logistics in its
factory area to save and reduce logistics costs through a professional warehousing and logistics outsourcing service mode. The
Company expanded financing channels and financing modes to increase the fund utilization efficiency and control the risk of
exchange rate fluctuations, resulting in an obvious YOY decrease in financial costs.
d. Persist in technology-orientation and intensify the creation of profits through R&D
The Company adjusted the organization of the Technical R&D Department to make the function of new product development and the
function of routine process maintenance run independently. It persisted in the goal of technology-orientation, intensified the core
function of technical R&D and motivated the vitality of innovation and profits creation. So far there have been more than ten types of
new product projects being developed, with breakthroughs made in some products.
2. Significant Change to Principal Activities in the Reporting Period
□ Yes √ No
3. Product Category Contributing over 10% of Principal Business Revenue or Profit
√ Applicable □ Not applicable
Unit: RMB
YoY change in YoY change in YoY change in
Operating Gross profit
Product category Operating profit operating revenue operating profit gross profit
revenue margin
(%) (%) margin (%)
Ivory board 2,948,225,373.27 149,605,735.68 5.07% 5.72% -57.08% -7.43%
Presswork 300,249,287.80 66,689,633.12 22.21% 17.48% 80.41% 7.75%
Latex 340,511,671.17 82,087,112.39 24.11% -0.87% 52.93% 8.48%
4. Business Seasonality to which Special Attention should Be Paid
□ Yes √ No
5. Significant YoY Changes in Operating Revenue, Cost of Sales and Net Profit Attributable to the Listed
Company’s Ordinary Shareholders or Their Compositions
□ Applicable √ Not applicable
6. Possibility of Listing Suspension or Termination
□ Applicable √ Not applicable
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
7. Matters Related to Financial Reporting
(1) YoY Changes to Accounting Policies, Accounting Estimates or Measurement Methods
√ Applicable □ Not applicable
1) The Company prepared 2018 Financial Statements in accordance with the Notes of the Ministry of Finance on
Revising and Printing the Format of 2018 General Enterprises Financial Statement (CK [2018] No. 15) and the
interpretation of it and the requirements of the Accounting Standards for Enterprises. Retroactive adjustment was
adopted for the changes in the accounting policy. The significantly affected items and amounts in 2017 Financial
Statements are as follows:
Item and amount in original financial statement Item and amount in new financial statement
Notes receivable 430,699,664.45 1,160,829,887.51
Notes and accounts
Accounts receivable 730,130,223.06
receivable
Interest receivable 141,388.09 Other receivables 20,249,531.23
Other receivables 20,108,143.14
Notes payable 8,530,196.41 Notes and accounts 349,777,358.80
payable
Accounts payable 341,247,162.39
Interest payable 7,865,380.83 Other payables 50,811,351.70
Dividends payable 12,116,789.76
Other payables 30,829,181.11
Administrative expense 125,476,808.28 120,342,343.74
Administrative
expense
5,134,464.54
R&D expense
Cash generated from other 66,763,328.29 Cash generated from 81,627,128.29
operating activities[Note] other operating
activities
Cash generated from other 735,773,715.83 Cash generated from 720,909,915.83
investing activities [Note] other investing
activities
[Note]: the presentation of actually received Government subsidy of RMB14,863,800.00 related to assets in cash
flow statement shall be adjusted from “cash generated from other investing activities” to “cash generated from
other operating activities”.
2) The Ministry of Finance in 2017 announced the Interpretation to the Accounting Standards for Enterprises No.
9 - Regarding the Accounting Treatment of Net Investment Losses under the Equity Method, Interpretation to the
Accounting Standards for Enterprises No. 10 - Regarding the Depreciation Method Based on the Use of Incomes
Generated from Fixed Assets, Interpretation to the Accounting Standards for Enterprises No. 11 - Regarding the
Amortization Method Based on the Use of Incomes Generated from Intangible Assets and Interpretation to the
Accounting Standards for Enterprises No. 12 - Regarding Whether the Provider and the Receiver of Key
Management Personnel Service Are Related Parties. The Company has implemented the aforementioned
interpretations to the accounting standards for enterprises since 1 January 2018 and the implementation does not
have any effect on the opening financial data of the Company.
(2) Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period
□ Applicable √ Not applicable
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2018 (Summary)
No such cases.
(3) YoY Changes to the Scope of Consolidated Financial Statements
√ Applicable □ Not applicable
Kunshan Focai Packaging & Printing Co., Ltd. has been liquidated and de-registered during the Reporting Period, and has thus no
longer been included in the consolidated financial statements.
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