Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
Stock Code: 200986 Stock Name: Huaxin Packaging-B Announcement No. 2021-028
FOSHAN HUAXIN PACKAGING CO., LTD.
ANNUAL REPORT 2020 (SUMMARY)
Part I Important Notes
This Summary is based on the full text of the Annual Report of Foshan Huaxin Packaging Co., Ltd. (the “Company”). In order for a
full understanding of the Company’s operating results, financial condition and future development plans, investors should carefully
read through the aforesaid full text, which has been disclosed together with this Summary on the media designated by the China
Securities Regulatory Commission (the “CSRC”).
Independent auditor’s modified opinion:
□ Applicable √ Not applicable
Board-approved final cash and/or stock dividend plan for ordinary shareholders:
√ Applicable □ Not applicable
Bonus issue from capital reserves:
□ Yes √ No
The Board has approved a final dividend plan for ordinary shareholders as follows: based on the share capital of 505,425,000 shares,
a cash dividend of RMB0.34 (tax inclusive) per 10 shares is planned to be distributed to the shareholders, with no bonus issue from
either profit or capital reserves.
Board-approved final cash and/or stock dividend plan for preference 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
Stock exchange 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,
Office address Chancheng Economic Development Zone, Chancheng Economic Development Zone,
Nanzhuang Town, Chancheng District, Nanzhuang Town, Chancheng District,
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
Foshan, Guangdong Province, P.R.China Foshan, Guangdong Province, P.R.China
Fax 0756-8666922 0756-8666922
Tel. 0756-8666629 0756-8666978
E-mail address dinggq@htrh-paper.com shih@htrh-paper.com
2. Principal Activities or Products for 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:
(I) High-end coated ivory board
High-end coated ivory board is the primary product of the Company. As a category of white paperboard, it is applied in various fields
such as cigarette packaging, liquid and food packaging, medicine packaging, cosmetic packaging and living supplies packaging,
which represent the core business of the Company. The R&D, production and sales of the ivory board is mainly undertaken by
Zhuhai Hongta Renheng Packaging Co., Ltd. and Zhuhai Huafeng Paper Co., Ltd. Based in domestic and overseas high-end
packaging markets of cigarette and food, this business 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:
1. Coated ivory board for cigarette packaging, the primary product of the Company, is used in the high-end cigarette packaging
market. The coated ivory board for cigarette packaging produced by Hongta Renheng 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”. The “tobacco fiber ivory board”, a new product of the Company that pursues the
recycling philosophy of “Coming from Tobacco, Used for Tobacco”, is being tested on the market. And the “black cardboard for
cigarette packaging” newly launched to the market is well-received among customers with stable hue in printing and wide
application.
2. In terms of ivory board for liquid and food packaging, a priority for the Company’s future development with growing market
demand, the Company is the first to break the foreign technological monopoly with its ivory board for liquid packaging. The
Company’s homegrown sterile paperboard for packaging of liquid milk, fruit juice, herbal tea and other drinks has effectively
substituted imported products. The ivory board series for food packaging such as anti-oil food grade coated board and high-end paper
cup have been recognized by well-known catering groups after they are put into the market. Upholding the philosophy of green and
sustainable development and following the national policy of “plastic reduction” and “plastic ban”, the Company has successfully
developed the “plastic-free coated board for food packaging” and the “degradable PBS-coated paper”, which is an effective
alternative to PE-coated paper and can help reduce the use of non-degradable plastic.
3. The high-end commercial ivory board is applied in the segmented packaging market fields like the high-end medicine, cosmetics,
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
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. Featuring an anti-counterfeit function and customization for high-end
brands, this product not only effective reduces anti-counterfeit costs for customers, but also boosts their brand recognition, winning
high trust from the market. Meanwhile, new products such as “high-whiteness sun-proof paper” and “paper for cluster packaging”
deliver a remarkable performance in required circumstances and are well-received among users.
(II) Chemicals for paper making
Chemicals for paper making represent an upstream extension of the Company’s business of the paper-making industrial chain. The
R&D, production and sales of which are mainly undertaken by Golden Pheasant Chemical, a subsidiary of the Company, which
mainly supplies carboxylic butadiene-styrene latex, styrene-acrylic latex, calcium carbonate and auxiliary chemicals for paper
making. These products are mainly used as adhesive and pigment by major coated board producers in China for packaging of
high-quality food and cigarette. Chemicals of different grades with domestically first-class quality can be supplied as the customer
requires. Golden Pheasant Chemical is considered a well-known papermaking latex producer in China.
(III) Color printing products
Color printing represents a downstream extension of the Company’s business of the paper-making industrial chain, which covers
designing and manufacturing packaging materials and providing one-stop packaging solutions for customers. This business is mainly
undertaken by Huaxin (Foshan) Color Printing Co., Ltd., which owns offset, flexo and intaglio printing workshops. Huaxin Color
Printing focuses on process and technological innovation of foldable paper boxes, cartons, wet glue labels, self -adhesive labels,
shrink labels, in-mold labels, film labels, barcode printing, brochures and books, and variable data printing is also available, which
cater to various fields of end consumer goods, including medicine, condiments and beverages. The most outstanding advantage is
customization from the material end, providing greener, more economical and individualized packaging materials for customers.
No significant changes have occurred to either the principal acidities of the Company or its business models in the Reporting Period.
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
2020-over-2019
2020 2019 2018
change (%)
Operating revenue 4,064,071,623.72 3,930,629,985.81 3.39% 3,683,004,543.50
Net profit attributable to the listed
139,427,823.70 35,704,671.22 290.50% -2,814,965.92
company’s shareholders
Net profit attributable to the listed
company’s shareholders before 122,347,146.60 25,885,573.07 372.65% -36,089,244.17
exceptional gains and losses
Net cash generated from/used in
713,924,336.73 91,344,251.74 681.58% 393,465,394.72
operating activities
Basic earnings per share
0.28 0.07 300.00% -0.01
(RMB/share)
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
Diluted earnings per share
0.28 0.07 300.00% -0.01
(RMB/share)
Weighted average return on equity Up by 4.93 percentag
6.73% 1.80% -0.14%
(%) e points
Change of 31
31 December 2020 31 December 2019 December 2020 over 31 December 2018
31 December 2019 (%)
Total assets 5,648,229,669.75 5,591,643,310.38 1.01% 5,794,694,744.15
Equity attributable to the listed
2,138,497,940.21 2,006,651,491.51 6.57% 1,970,946,820.29
company’s shareholders
(2) Key Financial Information by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Operating revenue 822,098,273.22 1,027,484,101.48 1,058,146,561.68 1,156,342,687.34
Net profit attributable to the listed
20,649,171.61 26,920,655.88 39,880,379.86 51,977,616.35
company’s shareholders
Net profit attributable to the listed
company’s shareholders before 19,396,299.90 22,877,752.19 35,323,204.13 44,749,890.38
exceptional gains and losses
Net cash generated from/used in
418,064,605.24 129,167,404.31 -192,911,242.60 359,603,569.78
operating activities
Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs materially f rom 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 Preference Shareholders with Resumed Voting Rights as well
as Holdings of Top 10 Shareholders
Unit: share
Number
of
preferenc Number of
e preference
Number of Number of ordinary
sharehold shareholders with
ordinary shareholders at the
ers with resumed voting
shareholder 11,870 month-end prior to the 11,807 0 0
resumed rights at the
s at the disclosure of this
voting month-end prior to
period-end Report
rights at the disclosure of this
the Report
period-en
d
Top 10 shareholders
Sharehol Shares in pledge or frozen
Total shares
Nature of ding Restricted shares held at
Name of shareholder held at the
shareholder percenta the period-end Status Shares
period-end
ge
FOSHAN HUAXIN State-owned
65.20% 329,512,030 329,512,030
DEVELOPMENT CO., LTD. corporation
CHINA MERCHANTS State-owned 0
0.89% 4,503,434
SECURITIES (HK) CO., corporation
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
LIMITED
GUOYUAN SECURITIES 0
Foreign
BROKERAGE (HONG KONG) 0.83% 4,173,450
corporation
LIMITED
GUOTAI JUNAN 0
Foreign
SECURITIES(HONGKONG) 0.63% 3,160,585
corporation
LIMITED
Foreign 0
WU HAOYUAN 0.62% 3,127,291
individual
Domestic 0
ZHAI YUZHEN 0.41% 2,066,800
individual
Domestic 0
CAI YUJIU 0.39% 1,963,900
individual
Foreign 0
NORGES BANK 0.27% 1,352,720
corporation
Domestic 0
ZHOU SHIYU 0.26% 1,321,100
individual
ESSENCE INTERNATIONAL 0
Foreign
SECURITIES (HONG KONG) 0.24% 1,205,252
corporation
CO., LTD.
The Company is not aware of, among the shareholders above, any related or
Related or acting-in-concert parties among the
acting-in-concert parties as defined in the Methods for the Administration of the
shareholders above
Acquisition of Listed Companies.
Shareholders involved in securities margin
None
trading (if any)
(2) Number of Preference Shareholders and Shareholdings of Top 10 of Them
□ Applicable √ Not applicable
No preference shareholders in the Reporting Period.
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (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 t his
Report’s approval or were due but could not be redeemed in full?
No.
Part III Manage ment Discussion and Analysis
1. Business Overview for the Reporting Period
(I) Market environment of the industry
In the first half of 2020, affected by the COVID-19 pandemic and the complicated economic conditions at home and abroad, the
market condition was tough, with a great number of manufacturers under tremendous pressure. In the second half of the year, as the
domestic pandemic condition improved, along with the implementation of government policies of “plastic ban” and “restriction on
the use of plastic” such as the Opinion on Further Strengthening the Control of P lastic Pollution and the Announcement on Matters
Concerning Comprehensively Prohibiting the Import of Solid Wastes, the demand of ivory board saw an increase, with better
prospects for the industry. Meanwhile, as China carried on with the structural reform of the supply side, outdated ivory board
capacity faded away. At the same time, the integration of top paper-makers in China produced prominent results. All these created
tremendous opportunities and challenges for the Company’s reform and development. In addition, as consumer spending upgraded,
demand for color printing, a supporting sector for the packaging of consumer goods, was on the rise. As for the chemicals ind ustry,
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
the year under review saw great volatility in the prices of raw materials, posing challenges for the operation and development of
enterprises in the industry.
(II) Operating results during the Reporting Period
In 2020, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the Company implemented the
guidelines at the work meetings of superior Party committees, fulfilled its responsibility in strengthening Party discipline, gave full
play to the role of “controlling directions, managing the overall situation and ensuring implementation”, made tangible effort to
ensure stability on the six fronts, performed the tasks of ensuring security in the six areas, and promoted the integration of Party
building into production and operations. These efforts were meant to lay a solid foundation for the Company to seek strategic
transformation and achieve high-quality development. While guaranteeing the anti-epidemic effort, the Company centered around its
annual production and operation budget and followed the requirements of “Reduce Inventories, Receivables and Expenditure,
Improve Efficiency and Control Costs”. It addressed external market changes and boosted the efficiency of internal management by
taking a suite of measures, including proactively expanding the external market, increasing effort in R&D and innovation, adjusting
the product structure, reforming its organizational management system, refining the development of its supplier management system,
strengthening risk control, enhancing the level of information management, introducing market-oriented talents and exercising lean
production management.
Product sales volume in the paper segment grew steadily and the operation efficiency improved markedly with an upward trend of
various operating indicators. In 2020, over 580,000 tons of paper products were sold, up by 11.3% year-on-year; the inventory of
finished paper products declined by over 32%. The paper segment went from loss to huge profits. In terms of the color printin g
segment, efforts were continuously made to expand the external market, strengthen internal management and adjust the product mix,
leading to stable growth in operating revenue and profits. In the chemical segment, the Company faced up to the unfavorable
business environment by overcoming difficulties such as shortage in supply of raw materials from external parties. Through
continuous R&D and innovation and improvement in production process, the Company had the sales volume of latex up by 23% with
an evidently stronger profitability.
For the Reporting Period, the Company recorded operating revenue of RMB 4,064.0716 million, a gross profit of RMB291.37 million,
and a net profit attributable to the listed company’s shareholders of RMB 139.4278 million. As at the end of the Reporting Period, the
total assets of the Company amounted to RMB5,648.2297 million, with a debt/asset ratio of 32.77%.
(III) Operation measures during the Reporting Period
1. Sticking to Party leadership and integrating such guidance in the Company’s operations
In 2020, the Company’s Party committee adhered to Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era,
conscientiously implemented the decisions and arrangements of the CPC Central Committee, and put into effect the guidelines of
superior Party committees’ work meetings on Party building. In accordance with the “Three-Five-Four” reform and development
guidance, the Company focused on production and operations, and persisted in the deep integration of Party building into
production, operations, corporate culture, team building and the work about organizations. It gave play to the role of “controlling
directions, managing the overall situation and ensuring implementation”, carried out the action of strengthening and deepening Party
building and advanced the Party building projects of integrating bylaws, leadership systems and program mechanisms and integrating
informatization and industrialization. The Company adhered to the employment standards of “being loyal to the Party, being bo ld for
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
innovation, managing itself properly, prospering itself with tangible results and staying incorruptible”, exercised a work style of
“strictness, honesty, transparency and efficiency”, strengthened discipline and accountability, and drove the work of reinforcing Party
discipline, so as to lay a solid foundation for its transformation and high-quality development.
2. Reinforcing the internal mechanism reform and enhancing operation efficiency
In 2020, the Company continued to improve its organizational structure and at the same time stepped up effort in the recruitment of
marketized mature talents, and introduced professionals to inject new impetus into the Company for its development. Furthermore,
the Company promoted the new appraisal model focusing on the maximization of “efficiency and profits” to boost the morale of
employees. It carried out a reform on its existing remuneration system based on the principle of linking performance with salary,
which “values performance, rewards the diligent, punishes the lazy, encourages creation, and increases profits”. The Company
established promotion channels comprising five hierarchies to conduct annual comprehensive review of technical, skilled and
management talents at each hierarchy in a specific proportion, thus satisfying the development needs of both itself and its employees,
improving the core competitiveness of both, and guiding employees to focus on improving their skills and abilities.
3. Increasing spending on R&D and innovation and improving the incentive mechanism
In 2020, the Company continued to improve R&D spending and pursued “differentiation” in the increasingly homogeneous market.
Its newly founded New Material Development and Industrial Technology Research Institute integrates paper manufacturing,
chemical engineering, printing and packaging technologies of the paper-making industrial chain, extends research into the “new
materials+” in emerging industries, and engages in the R&D of new products, new processes, new technologies and new raw and
auxiliary materials in businesses. In addition, the Research Institute undertakes the product R&D and technical services to external
companies in paper manufacturing and chemical industry, and engages in the scientific research projects on new materials in national
and provincial strategic emerging industries. New Material Development and Industrial Technology Research Institute has set up a
flexible and market-oriented new incentive mechanism to inspire the technological innovation ability of scientific and technological
personnel, and fully exert and mobilize their creativity and activity.
4. Advancing the marketing system reform and promoting synergy in the internal management system
The Company has established a market-oriented system in its marketing department to optimize “value marketing”. It appraises sales
performance by measuring the growth of sales volume, forming a competitive remuneration and incentive mechanism. Moreover,
based on its product characteristics and the market status quo, the Company has continued to improve its marketing structure towards
better allocation and use of marketing resources. It has made improvement to various supply chain links to enhance its overall
business capacity.
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
Operating Gross profit YoY change in YoY change in YoY change in
Product category Operating profit
revenue margin operating revenue operating profit gross profit
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
(%) (%) margin (%)
Ivory board 3,393,698,281.73 512,222,207.99 15.09% 3.92% 117.33% 7.88%
Presswork 309,495,589.03 68,274,278.99 22.06% 2.34% -9.27% -2.82%
Latex 321,808,839.14 98,605,369.96 30.64% 1.63% 33.15% 7.25%
Total 4,025,002,709.90 679,101,856.94 16.87% 3.61% 76.39% 6.96%
4. Business Seasonality that Calls for Special Attention
□ 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
In 2020, the Company actively responded to the challenges posed by the COVID-19 pandemic. It firmly implemented the
government’s decisions and planning, strengthened its responsibility as part of the real economy, boosted development through
innovation, refined its talent team, vigorously explored markets externally and increased operating efficiency internally. As a result,
solid improvement was achieved in business size, earnings and quality.
Operating revenue grew steadily while profit increased substantially, representing a solid and improving operating performanc e. For
2020, the Company recorded operating revenue of RMB4,064.0716 million, up by RMB133.4416 million (or 3.39%) year on year;
operating profit of RMB279.8590 million, up by RMB251.6333 million (or 891.51%) year on year; a gross profit of RMB291.4194
million, up by RMB259.2676 million (or 806.39%) year on year; and year-on-year increases of 1058.2% and 290.64% in net profit
and net profit attributable to the Company as the parent respectively.
6. Possibility of Delisting
□ Applicable √ Not applicable
7. Matters Related to Financial Reporting
(1) YoY Changes to Accounting Policies, Accounting Estimates and Measurement Methods
√ Applicable □ Not applicable
(1) The Company implemented the Accounting Standards for Business Enterprises No. 14 - Revenue (hereinafter referred to as the
new revenue standards) revised by the Minis try of Finance from January 1, 2020. According to the relevant provisions on the
transition between the new and old standards, information of comparable periods shall not be adjusted. For the cumulative impact
from the implementation of the new standards on the date of the first implementation, the amount of retained earnings as at the
beginning of the reporting period and other related items in the financial statements will be retroactively adjusted.
1) The main influence on the Company’s financial statements on 1 January 2020 by the implementation of new standards governing
revenue is as follows:
Item Balance sheet
31 December 2019 Influenced 1 January 2020
Advances from customers 23,303,552.10 -23,303,552.10
Contract liabilities 20,622,612.48 20,622,612.48
Other current liabilities 2,680,939.62 2,680,939.62
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Foshan Huaxin Packaging Co., Ltd. Annual Report 2020 (Summary)
2) For contract changes before 1 January 2020, the Company adopts the simplified treatment method. In respect of all contracts,
according to the final arrangement of contract changes, the Company identifies fulfilled and unfulfilled performance obligations,
determines transaction prices, and apportions transaction prices between fulfilled and unfulfilled performance obligations. The
simplified method has no significant impact on the Company’s financial statements.
(2) The Company implemented the Interpretation No. 13 on Accounting Standards for Business Enterprises issued by the Ministry of
Finance in 2019 from 1 January 2020. The accounting policy change is treated in the prospective application method.
(2) Retrospective Restatements due to Correction of Material Accounting Errors in the Reporting Period
□ Applicable √ Not applicable
No such cases.
(3) YoY Changes to the Scope of Consolidated Financial Statements
□ Applicable √ Not applicable
No such cases.
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