Zhejiang NHU Company Ltd. Annual Report 2020（Abstract）
Ⅰ. Important NotesThis Abstract is extracted from 2020 Annual Report of Zhejiang NHU Company., Ltd. (“theCompany). In order to have a full understanding of the operating results, financial status andfuture development planning of the Company, investors are suggested to read the full reportcarefully on the media designated by the China Securities Regulatory Commission (the “CSRC”).The Company’s 2020 Annual Report is prepared and published in Chinese version, and theEnglish version is for reference only. Should there be any inconsistency between the Chineseversion and English version, the Chinese version shall prevail.All directors attended the Board Meeting for reviewing of this Report.Indicate by check mark if independent auditor issues non-standard unqualified opinion
□Applicable √Not applicable
Indicate by check mark if there is a pre-arranged plan of profit distribution or transferring capitalreserve into common stock for the report period which has been reviewed and approved by theBoard of Directors
√Applicable □Not applicable
Indicate by check mark if transferring capital reserve into common stock
√Applicable □Not applicable
The common stock profit distribution plan of the Company was considered and passed by theBoard of Directors as follows: with 2,148,662,300 shares as the base, distribute 7 Yuan cashdividends per 10 common stocks (tax inclusive), send bonus of 0 share (tax inclusive), and 2 stockdividend per 10 common stocks through capital reserve to all shareholders.Indicate by check mark if preplan for preferred stocks profit distribution to shareholders for thereport period which has been reviewed and approved by the Board of Directors
□Applicable √Not applicable
Ⅱ. Company Profile
1. Stock profile
| Stock abbr. | NHU | Stock code | 002001 | |
| Stock exchange | Shenzhen Stock Exchange | |||
| Contract information | Board Secretary | Securities Representative | ||
| Name | Guanqun Shi | Shuying Zeng | ||
| Office add. | No.418 Xinchang Dadao West Road, Xinchang, Zhejiang , P.R.China | No.418 Xinchang Dadao West Road, Xinchang, Zhejiang , P.R.China | ||
| Tel. | (0575)86017157 | (0575)86017157 | ||
| sgq@cnhu.com | 002001@cnhu.com | |||
2. Brief introduction to main business or products in report period
NHU is a national high-tech enterprise that mainly engaged in the production and sales ofnutritional products, aroma chemicals, new polymer materials. NHU focuses on the fine chemicals,adheres to the concept of customer orientation, creates value for customers. NHU is providingsolutions for customers in more than 100 countries and regions, continuously improving thequality of human life with high-quality, health and green products, and creating sustainable valuethrough win-win development. With leading technology, scientific management and creditableservice, NHU is now one of the four largest vitamin manufacturers in the world, a large nationalaroma chemicals manufacturer and a well-known special engineering plastic manufacturer.Nutrition: As a messenger of nutrition health, NHU has successfully developed a variety ofhealthy and efficient feed and food additives. It not only improves animal nutrition health andbreeding profits, but also promotes the development of human health care. In addition, thanks tothe continuous nutrition research, applied technology research and technical services, we are ableto provide improved products and solutions in the field of nutrition. Vitamin, the main business ofNHU, has a high market share, a prominent industrial position and an obvious brand advantageover others, making NHU in a leading stage in China and also a well-known position worldwide.The main products include Vitamin E, Vitamin A, Vitamin C, DL-Methionine, Vitamin D3,D-Biotin, Coenzyme Q10, Carotenoids, etc. NHU actively implements the serialization anddifferentiation development of nutritional products, at the same time promotes a significantincrease in product competitiveness by optimizing process routes and tackling key projects. Inaddition, NHU is fully open to internal linkage and external cooperation, actively deployscutting-edge biotechnology, and builds a "bio＋" platform. During the reporting period, the firstphase of DL-Methionine with capacity 50,000 tons achieved full capacity operation, significantlyreduced the annual cost and effectively enhanced the competitiveness of the product. In the projectof second phase with capacity 250,000 tons per year, among which the 100,000 tons have been put
Securities Code: 002001 Securities Abbr.: NHUinto use as scheduled and are running normally, and the last 150,000 tons were designed asplanned, the overall process was controllable; the biological fermentation project (phase I)successfully completed the acceptance of production and realized full load production.Aroma chemicals: As a global aroma chemicals enterprise, relying on the two technologyplatforms of chemical synthesis and biological fermentation, NHU continuously enriches thevarieties of fragrances to meet the ever-changing market needs. The main products includeLinalool series, Citral series, Leaf Alcohol series, Methyl Dihydro Jasmonate, Raspberry Ketone,Ligustral, etc., covering various fields such as daily chemicals, food and medicine. At present, themain aroma chemicals are targeting the global market with strong product competitiveness andhigh market share, the market pattern is relatively stable. During the reporting period, NHUcontinuously improved the competitiveness of existing products, accelerated the research,development and industrialization of new products through internal potential exploration. In thefuture, the endogenous potential of our products will continue to grow steadily.New polymer materials: Based on the high-performance resin polymerization technology, thedownstream application research and development, NHU provides more comfortable, moreenvironmentally friendly and healthier materials for human life through high-efficiency, stable,energy-saving, and environmentally-friendly professional production. New polymer materials isone of the seven national strategic emerging industries and its future development will besupported by national policies, economic environment and market environment, etc. In particular,new polymer materials and special engineering materials have broad development prospects.During the reporting period, NHU timely resumed work and production while preventing andcontrolling the COVID-19. The annual operating rate was close to 100%. After the market demandpicked up in the second half of the year, the sales recovered quickly.
3. Selected Financial Data
(1) Key accounting data and financial ratios for the past three years
Indicate by check mark if there is any retrospectively restated accounting data of previous years.
√Yes □No
Reasons for retrospective adjustment or restatementMerger of Enterprises under Common Control
Unit:Yuan
| 2020 | 2019 | Increase/decrease of current year over prior year | 2018 | |||
| Before Adjustment | After Adjustment | After Adjustment | Before Adjustment | After Adjustment | ||
| Operating | 10,314,084,354.21 | 7,620,982,935.87 | 7,660,412,519.26 | 34.64% | 8,683,381,746.84 | 8,731,706,336.53 |
| income | ||||||
| Net profit attributable to shareholders | 3,563,759,939.48 | 2,168,616,205.89 | 2,165,282,489.11 | 64.59% | 3,078,884,552.84 | 3,075,141,222.50 |
| Net profit attributable to shareholders excluding non-recurring gains and losses | 3,410,367,513.01 | 1,934,679,280.23 | 1,934,679,280.23 | 76.28% | 2,889,118,351.12 | 2,889,118,351.12 |
| Net cash flows from operating activities | 3,122,807,363.21 | 2,102,315,194.76 | 2,106,765,618.26 | 48.23% | 3,660,322,312.11 | 3,657,708,623.87 |
| Basic EPS (RMB Yuan / share) | 1.66 | 1.01 | 1.01 | 64.36% | 1.43 | 1.43 |
| Diluted EPS (RMB Yuan / share) | 1.66 | 1.01 | 1.01 | 64.36% | 1.43 | 1.43 |
| Weighted average ROE | 19.63% | 13.24% | 13.20% | Increase by 6.43 pts | 20.54% | 20.48% |
| As of Dec.31, 2020 | As of Dec.31, 2019 | Increase/decrease of current year over prior year | As of Dec.31, 2018 | |||
| Before Adjustment | After Adjustment | After Adjustment | Before Adjustment | After Adjustment | ||
| Total assets | 30,897,007,799.54 | 28,501,522,704.89 | 28,723,817,186.44 | 7.57% | 21,934,888,570.86 | 22,044,674,253.85 |
| Net assets attributable to shareholders | 19,336,254,922.95 | 16,848,122,324.18 | 17,010,913,336.77 | 13.67% | 16,170,396,082.67 | 16,194,814,428.04 |
Notes: Zhejiang NHU Special Materials Co., Ltd, a subsidiary, has acquired the equity ofShaoxing Qinjin New Material Co., Ltd. and Shaoxing Rossence material technology Co., Ltd.;Shandong NHU Holding Co., Ltd., a subsidiary, has acquired equity of Weifang Jinhe Real EstateCo., Ltd.. The Company made retrospective adjustment to relevant financial statement data.
(2) Key accounting data by quarter
Unit:Yuan
| Q1 | Q2 | Q3 | Q4 | |
| Operating income | 2,624,605,161.78 | 2,678,560,340.47 | 2,170,163,165.68 | 2,840,755,686.28 |
| Net profit attributable to shareholders | 899,742,390.12 | 1,309,187,887.08 | 726,592,641.58 | 628,237,020.70 |
| Net profit attributable to shareholders excluding non-recurring gains and losses | 879,433,307.00 | 1,235,403,798.23 | 686,225,513.80 | 609,304,893.98 |
| Net cash flows from operating activities | 258,196,301.24 | 869,363,918.87 | 917,120,965.75 | 1,078,126,177.35 |
Indicate by check mark if any material difference between the above financial indicators or theirsummations and those which have been disclosed in the Company’s Quarterly or Interim report.
□Yes √No
4. Capital and Shareholders
(1) Top 10 shareholders of common stock and preferred stock with resumed voting rights
Unit: Share
| Total number of shareholders of common stocks at the end of the reporting period | 61,126 | Total number of shareholders of common stocks at previous month-end of this report’s disclosure | 56,951 | Total number of shareholders of preferred stock with resumed voting right at the end of the reporting period | 0 | Total number of shareholders of preferred stock with resumed voting rights at previous month-end of this report’s disclosure | 0 | |||||
| Top 10 shareholders | ||||||||||||
| Name | Nature | Ownership | Quantity of stocks | Quantity of restricted stocks held | Pledged or frozen stocks | |||||||
| Status | Quantity | |||||||||||
| NHU Holding Group Co., Ltd. | Domestic non-state-owned corporate | 48.55% | 1,043,253,037 | 0 | ||||||||
| Hong Kong Securities Clearing | Foreign corporate | 2.68% | 57,551,815 | 0 | ||||||||
| Shanghai Chongyang Strategic Investment Co., Ltd.- Chongyang Strategic Huizhi Fund | Other | 1.61% | 34,579,938 | 0 | ||||||||
| Beijing Panfeng Investment | Other | 0.88% | 18,989,821 | 0 | ||||||||
| Management Partnership (Limited Partnership) -Panpeng Value Private Securities Investment Fund | ||||||||
| NSSF 503 Portfolio | Domestic state-owned corporate | 0.79% | 17,000,014 | 0 | ||||
| Industrial Fund - Industrial Bank - Organic Growth No.1 Special Multi-client Asset Management Plan | Other | 0.73% | 15,680,349 | 0 | ||||
| Central Huijin Ltd. | Domestic state-owned corporate | 0.59% | 12,680,980 | 0 | ||||
| NSSF 112 Portfolio | Domestic state-owned corporate | 0.47% | 10,189,099 | 0 | ||||
| Baishan Hu | Domestic natural person | 0.47% | 10,136,062 | 7,602,046 | ||||
| Chongyang Group Co., Ltd. | Domestic non-state-owned corporate | 0.45% | 9,695,966 | 0 | ||||
| Explanation on the above-mentioned shareholders’ affiliated relationship or concerted action | ||||||||
| Explanation on the above-mentioned shareholders that are engaged in margin trading business | Shanghai Chongyang Strategic Investment Co., Ltd. -Chongyang Strategic Huizhi Fund holds 34,579,838 shares through the client credit transaction guarantee securities account of Guotai Junan Securities Co., Ltd.; Beijing Panfeng Investment Management Partnership (Limited Partnership) -Panfeng Value Private Securities Investment Fund holds 2,649,097 shares through the client credit transaction guarantee securities account of Huatai Securities Co., Ltd.; Chongyang Group Co., Ltd. holds 9,695,796 shares through the client credit transaction guarantee securities account of China Merchants Securities Co., Ltd.. | |||||||
(2) Total number of and top 10 shareholders of preferred stocks
□Applicable √Not applicable
No shareholders holding preferred stocks noted in the reporting period.
(3) The ownership and controlling relationship between the Company and its actualcontroller in form of diagram
5. Bonds
Does the Company have any corporate bond that is publicly issued and listed on the stockexchange and that are immature or not fully redeemed as of the approved issuance date of theAnnual Report?None
Securities Code: 002001 Securities Abbr.: NHUIII. Management Discussion and Analysis
1. Business review for the reporting period
In 2020, NHU comprehensively implemented epidemic prevention and control measures, andmade every effort to implement the “13th Five-Year Strategic Plan” by focusing on the operatingguiding ideology of “strategic breakthrough, consolidate management, implement the plan, andimprove quality and efficiency”. All employees strengthened the problem consciousness andadhered to bottom-line thinking. The company effectively responded to changes in the externalenvironment, coordinated the promotion of epidemic prevention and control and businessdevelopment, and also accurately grasped market opportunities. During the reporting period, NHUachieved operating income of 10,314.08 million, a year-on-year increase of 34.64%; the totalprofits was 4,109.89 million, a year-on-year increase of 60.21%; net profit attributable toshareholders was 3,563.76 million, a year-on-year increase of 64.59%.During the reporting period, the Company's main operations are as follows:
(1) NHU adhered to the overall planning of epidemic prevention and control and businessdevelopment. We made every effort to ensure the resumption of work and production while doinga good job in epidemic prevention and control. We strengthened production and sales linkagemanagement, actively met customer needs, optimized production plans, and coordinatedtransportation resources actively. The annual operating indicators achieved steady growth and theperformance reached a record high. The market share of DL-Methionine and other major productshave increased significantly, the market for Vitamin C has been developed smoothly, and theproduction and sales scale of Leaf Alcohol series products has been further released. In order tomake the sales of new products increasing steadily, we established a “many-to-one” customerservice model for R&D, production, application, and quality assurance to enhance customerstickiness and satisfaction, and also enriched the sales model.
(2) NHU pursued both independent research and development and open cooperation, promoted theimplementation of innovative achievements. Guided by demand, we focused on key technologiesand successfully built a molecular biology platform. The company continued to increase itsinvestment in innovative R&D and more than 5% of operating income was invested for R&D forseven consecutive years. NHU obtained 102 authorized patents throughout the year."Development and Application of Nitrogen-doped Carbon Supported Hydrogenation Catalyst"project won the only technical invention special award of 2020 China Petroleum and ChemicalIndustry Federation, NHU also ranked the 16th among the top 100 innovative high-techenterprises in Zhejiang Province.
(3) NHU persisted in business development and project construction go hand in hand, and speededup the high-quality development pace. The company has always been guided by strategic goals topromote transformation and upgrading and enhance core competitiveness. We continuouslyimproved the comprehensive competitiveness of old products by exploring the potential andreforming, improving quality and efficiency; we also deployed new businesses and expanded theproduct library. In the project of second phase with capacity 250,000 tons per year, among which
Securities Code: 002001 Securities Abbr.: NHUthe 100,000 tons have been put into use as scheduled and are running normally, and the last150,000 tons were designed as planned, the progress was controllable; the biological fermentationproject (Phase I) was officially put into operation; other projects are proceeded as planned.
(4) NHU adhered to the concept of safety and green development first, and built a sustainabledevelopment pattern. We always implement the "safety first" development concept, furtherdeepened the construction of the HSE management system. We also carried out special operationsfor the investigation and management of equipment safety hazards, and formulated comprehensiveemergency plans. NHU always implement the "green development" business philosophy, carriedout a number of clean production projects, promoted the construction of an environmentalmanagement system, and further promoted the utilization of hazardous waste resources. Therefore,the energy consumption per 10,000 RMB of output value was reduced.
(5) NHU adhered to the two-pronged approach of system reform and cultural construction,improved the efficiency of operation and management. We created a highland of talents byintroducing all kinds of talents, optimizing training and performance systems, and publishing acustomized work manual; we also improved the risk management and control system as well asthe legal work management mechanism, promoted the construction of a confidential system,established a cash flow risk dynamic evaluation system, and introduced network securitymanagement consulting to ensure the network and information security of the company;meanwhile, the construction of the process information system was deepened, the company’soverall plan for digital transformation was compiled, the digital transformation pilot was launched,and the construction of the intelligent manufacturing system and the optimization of key processessuch as ISC was promoted. In the meantime, NHU took multiple measures to promote theimplementation of culture and improved the incorrupt management system.
2. Significant changes in main business in the reporting period
□Applicable √Not applicable
3. Products contributing to over 10% of the Company’s main business revenue or profit
√Applicable □Not applicable
Unit:Yuan
| Product | Operating income | Profit | Gross profit margin(%) | Revenue: +/-% over last year | Profit: +/-% over last year | Gross profit margin +/-% over last year |
| Nutritional products | 7,152,084,881.08 | 4,132,789,171.83 | 57.78% | 51.93% | 78.68% | +8.65pts |
| Aroma chemicals | 1,955,729,401.52 | 1,084,882,007.87 | 55.47% | 9.06% | 7.25% | -0.94pts |
4. Seasonal or periodic characteristics in operating performance that needs special attention
□Applicable √Not applicable
5. Significant changes in revenues, costs and net profit attributable to shareholders withcommon shares or their composition comparing to prior reporting period
□Applicable √Not applicable
6. Listing suspension or termination
□Applicable √Not applicable
7. Matters related to financial statements
(1) Explanation on changes in accounting policy, accounting estimations and accountingmethods comparing to prior year financial statement
√Applicable □Not applicable
On March 27, 2020, the Company implemented the Accounting Standards for BusinessEnterprises No.14 – Revenue (C.K.[2017] No.22) (hereinafter referred to as the “New RevenueStandards”) issued by the Ministry of Finance in July 2017. According to the provisions on theconnection between the old and new standards, the information during the comparative periodshall not be adjusted. Accumulated impact of the implementation of the new standards on the dateof first time adoption shall be retroactively adjusted the retained earnings and other relevant itemsin the financial statements at the beginning of this reporting period. The details are set out in therelevant announcement on March 27, 2020 of the Company (Announcement No.: 202-011).
(2) Explanation on retrospective restatement due to significant accounting error correctionin the reporting period
□Applicable √Not applicable
No correction of material accounting error required to be retrospectively restated in theCompany’s reporting period.
(3) Explanation on changes of consolidation scope comparing to prior year’s financialstatement
√Applicable □Not applicable
Increased scope of consolidation
| Company | Method of Acquisition |
| Shaoxing Rossence material technology Co.,Ltd | takeover |
| Shaoxing Qinjin New Material Co.,Ltd | takeover |
| Weifang Jinhe Real Estate Co., Ltd. | takeover |
Zhejiang NHU Company Ltd.
March 31 2021