Stock Code: 000726, 200726 Stock Name: LTTC, LTTC-B Announcement No.: 2019-066
LU THAI TEXTILE CO., LTD.
THIRD QUARTER REPORT 2019 (SUMMARY)
Part I Important Notes
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,supervisors and senior management of Lu Thai Textile Co., Ltd. (together with itsconsolidated subsidiaries, the “Company”, except where the context otherwise requires)hereby guarantee the factuality, accuracy and completeness of the contents of this Report andits summary, and shall be jointly and severally liable for any misrepresentations, misleadingstatements or material omissions therein.All the Company’s directors have attended the Board meeting for the review of this Reportand its summary.Liu Zibin, the Company’s legal representative, Zhang Hongmei, the Company’s ChiefAccountant, and Zhang Keming, the Company’s Financial Manager hereby guarantee thatthe financial statements carried in this Report are factual, accurate and complete.This Report and its summary have been prepared in both Chinese and English. Should therebe any discrepancies or misunderstandings between the two versions, the Chinese versionsshall prevail.
Part II Key Corporate Information
I Key Consolidated Financial InformationIndicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √ No
| 30 September 2019 | 31 December 2018 | Change (%) | ||
| Total assets (RMB) | 11,348,273,338.95 | 10,537,759,811.84 | 7.69% | |
| Equity attributable to the listed company’s shareholders (RMB) | 7,351,503,162.46 | 7,146,548,467.86 | 2.87% | |
| Q3 2019 | YoY change (%) | Q1-Q3 2019 | YoY change (%) | |
| Operating revenue (RMB) | 1,626,165,317.03 | -6.71% | 4,811,613,661.04 | -4.22% |
| Net profit attributable to the listed company’s shareholders (RMB) | 176,453,154.53 | -15.79% | 587,899,371.12 | 0.17% |
| Net profit attributable to the listed company’s shareholders before exceptional items (RMB) | 172,442,753.62 | -23.06% | 549,259,289.55 | -6.99% |
| Net cash generated from/used in operating activities (RMB) | -- | -- | 481,803,616.13 | -57.10% |
| Basic earnings per share (RMB/share) | 0.20 | -13.04% | 0.68 | 6.25% |
| Diluted earnings per share (RMB/share) | 0.20 | -13.04% | 0.68 | 6.25% |
| Weighted average return on equity (%) | 2.44% | -0.51% | 8.14% | 0.06% |
Exceptional gains and losses:
√ Applicable □ Not applicable
Unit: RMB
| Item | Q1-Q3 2019 | Note |
| Gain or loss on disposal of non-current assets (inclusive of impairment allowance write-offs) | -510,901.65 | |
| Government subsidies charged to current profit or loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per government’s uniform standards) | 35,960,594.57 | |
| Gain/Loss on changes in fair value arising from holding of trading financial assets and liabilities, derivative financial assets and liabilities and investment income from disposal of trading financial assets and liabilities, derivative financial assets and liabilities and other investments in debt obligation other than effective hedge business related to the Company’s normal operating businesses | 19,090,653.31 | |
| Non-operating income and expense other than above | -5,090,217.43 | |
| Less: Income tax effects | 7,880,401.60 |
| Non-controlling interests effects (net of tax) | 2,929,645.63 | |
| Total | 38,640,081.57 | -- |
Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the ExplanatoryAnnouncement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Exceptional Gain/LossItems:
□ Applicable √ Not applicable
No such cases for the Reporting Period.II Total Number of Shareholders and Holdings of Top 10 Shareholders at 30 September 2019
1. Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed Voting Rights as well asHoldings of Top 10 Shareholders
Unit: share
| Number of ordinary shareholders | 56,184 | Number of preferred shareholders with resumed voting rights (if any) | 0 | |||
| Top 10 shareholders | ||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage | Number of shares | Restricted shares | Shares in pledge or frozen | |
| Status | Shares | |||||
| Zibo Lucheng Textile Investment Co., Ltd. | Domestic non-state-owned legal person | 16.36% | 140,353,583 | |||
| Tailun (Thailand) Textile Co., Ltd. | Foreign legal person | 13.78% | 118,232,400 | 118,232,400 | ||
| Hong Kong Securities Clearing Co. Ltd | Foreign legal person | 3.03% | 25,984,811 | |||
| Central Huijin Assets Management Co., Ltd. | State-owned legal person | 2.37% | 20,315,300 | |||
| T.ROWE PRICE INTL DISCOVERY FUND | Foreign legal person | 2.32% | 19,948,219 | |||
| China Securities Finance Corporation Limited | Domestic non-state-owned legal person | 2.13% | 18,313,391 | |||
| Hong Kong Monetary Authority-Self-owned Fund | Foreign legal person | 2.04% | 17,487,884 | |||
| National Social Security Fund Portfolio 103 | Other | 1.40% | 11,999,897 | |||
| National Social Security Fund Portfolio 413 | Other | 0.95% | 8,190,051 | |||
| ASSICURAZIONI | Other | 0.76% | 6,558,889 | |||
| GENERALI-DIVIDEND 2 | ||||
| Top 10 unrestricted shareholders | ||||
| Name of shareholder | Unrestricted shares | Shares by type | ||
| Type | Shares | |||
| Zibo Lucheng Textile Investment Co., Ltd. | 140,353,583 | RMB-denominated ordinary stock | 140,353,583 | |
| Hong Kong Securities Clearing Co. Ltd | 25,984,811 | RMB-denominated ordinary stock | 25,984,811 | |
| Central Huijin Assets Management Co., Ltd. | 20,315,300 | RMB-denominated ordinary stock | 20,315,300 | |
| T.ROWE PRICE INTL DISCOVERY FUND | 19,948,219 | Domestically listed foreign stock | 19,948,219 | |
| China Securities Finance Corporation Limited | 18,313,391 | RMB-denominated ordinary stock | 18,313,391 | |
| Hong Kong Monetary Authority-Self-owned Fund | 17,487,884 | RMB-denominated ordinary stock | 17,487,884 | |
| National Social Security Fund Portfolio 103 | 11,999,897 | RMB-denominated ordinary stock | 11,999,897 | |
| National Social Security Fund Portfolio 413 | 8,190,051 | RMB-denominated ordinary stock | 8,190,051 | |
| ASSICURAZIONI GENERALI-DIVIDEND 2 | 6,558,889 | RMB-denominated ordinary stock | 6,558,889 | |
| RBC EMERGING MARKETS SMALL CAP EQUITY FUND | 6,181,462 | Domestically listed foreign stock | 6,181,462 | |
| Related or acting-in-concert parties among shareholders above | Zibo Lucheng Textile Investment Co., Ltd. is the largest shareholder and the actual controller of the Company. Tailun (Thailand) Textile Co., Ltd. is the second largest shareholder and the foreign sponsor of the Company. All the other shareholders are holding tradable A-shares or B-shares. And it is unknown whether there is any related party or acting-in-concert party among them. | |||
| Top 10 ordinary shareholders involved in securities margin trading (if any) | Naught | |||
Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary shareholders of theCompany conducted any promissory repo during the Reporting Period.
□ Yes √ No
No such cases in the Reporting Period.
2. Number of Preferred Shareholders and Shareholdings of Top 10 of Them
□ Applicable √ Not applicable
Part III Significant EventsI Changes in Key Financial Statement Line Items and Explanation of why
√ Applicable □ Not applicable
| Item | 30 September 2019 | 31 December 2018 | Change | Reason for change |
| Prepayments | 196,906,160.26 | 149,582,616.21 | 31.64% | Increase in prepayments for agricultural means of production in the Reporting Period |
| Current portion of non-current assets | 52,256,130.79 | - | 100.00% | Purchase of trust financial products in the Reporting Period |
| Investment property | 38,266,359.35 | 22,880,242.95 | 67.25% | Transfer of operating leased houses into investment property in the Reporting Period |
| Construction in progress | 502,791,371.42 | 337,230,646.42 | 49.09% | Increase in inputs in Yarn Dye II Project of Lu Thai (Vietnam) and equipment |
| Short-term borrowings | 2,117,741,665.40 | 1,325,273,780.05 | 59.80% | Increase in borrowings from banks in the Reporting Period |
| Notes payable | 22,125,109.37 | 502,347.05 | 4304.35% | Increase in bank’s acceptance bills opened for payments of materials in the Reporting Period |
| Accounts payable | 229,909,541.78 | 353,186,163.90 | -34.90% | Payments for raw materials and equipment in the Reporting Period |
| Current portion of non-current liabilities | 111,331,864.72 | - | 100.00% | Increase in current portion of long-term borrowings |
| Long-term borrowings | 18,961,030.32 | 170,019,083.89 | -88.85% | Reclassification of current portion of long-term borrowings into current portion of non-current liabilities |
| Capital reserve | 256,632,428.28 | 699,493,647.48 | -63.31% | Capital stock premium from repurchased B-shares cancelled in the Reporting Period |
| Treasury stock | - | 486,922,944.94 | -100.00% | Cancellation of repurchased B-shares in the Reporting Period |
| Other comprehensive income | 111,894,866.80 | 61,157,013.37 | 82.96% | Increase in differences arising from the translation of foreign currency-denominated financial statements in the Reporting Period |
| Item | Q1~Q3 2019 | Q1~Q3 2018 | Change | Reason for change |
| Finance cost | 61,156,464.30 | 37,733,821.10 | 62.07% | Increase in interest expense in the Reporting Period |
| Investment income | 16,777,341.81 | -18,388,041.25 | 191.24% | Increase in income from investments in derivative financial instruments and associated enterprises in |
| the Reporting Period | ||||
| Gain on changes in fair value | 5,638,067.04 | -44,112,150.00 | 112.78% | Losses on changes in fair value of fails-to-delivery derivative financial instruments of the same period of last year |
| Asset disposal income | 162,416.20 | 23,233,253.44 | -99.30% | Recognition of disposal income from demolition by Xinjiang Lu Thai in the same period of last year |
| Non-operating expense | 9,785,667.21 | 3,623,862.73 | 170.03% | Payments for relief donations in the Reporting Period |
| Net cash generated from/used in operating activities | 481,803,616.13 | 1,123,152,616.75 | -57.10% | Increase in net cash outflow in relation to operating activities: 1. YoY increase of RMB331 million in cash paid for purchase of commodities and acceptance of labor services, which driven by increase in payments for cotton; 2. YoY decrease of RMB222 million in cash received from sales of commodities and providing of labor services, which driven by decline in sales of products |
| Net cash generated from/used in financing activities | 212,302,378.28 | -288,801,161.03 | 173.51% | YoY decrease in payments for B-share repurchase and YoY increase in cash received from obtaining borrowings in the Reporting Period |
II Progress, Influence and Solutions with regard to Significant Events
√ Applicable □ Not applicable
The 28th Meeting of the 8
thBoard of Directors reviewed and approved ten proposals on 23 May 2019, including the Proposal ofMeeting the Conditions for Public Issuance of A-share Convertible Corporate Bonds, the Proposal of Plan on Public Issuance ofA-share Convertible Corporate Bonds and the Proposal of Preplan on Public Issuance of A-share Convertible Corporate Bonds. Fordetails, please refer to the announcement (announcement No.: 2019-039) disclosed on www.cninfo.com.cn on 24 May 2019. The 3
rd
Extraordinary General Meeting of 2019 reviewed and approved ten proposals on 16 September 2019, including the Proposal ofMeeting the Conditions for Public Issuance of A-share Convertible Corporate Bonds, the Proposal of Plan on Public Issuance ofA-share Convertible Corporate Bonds, the Proposal of Preplan on Public Issuance of A-share Convertible Corporate Bonds and theProposal of Change in Audit Institution. For details, please refer to the announcement (announcement No.: 2019-059) disclosed onwww.cninfo.com.cn on 17 September 2019. The Company received the Acceptance Form on Application for CSRC AdministrativeLicense issued by CSRC (No. 192620) on 15 October 2019. For details, please refer to the relevant announcement (announcementNo.: 2019-064) disclosed on www.cninfo.com.cn on 16 October 2019.
| Overview of significant events | Disclosure date | Announcement index |
| The progress of relevant matters for public issuance of A-share Convertible Corporate Bonds | 24 May 2019 | Announcements on www.cninfo.com.cn |
| 17 September 2019 | Announcements on www.cninfo.com.cn | |
| 15 October 2019 | Announcements on www.cninfo.com.cn |
Progress of any share repurchase:
□ Applicable √ Not applicable
Progress of any reduction of the repurchased shares through centralized bidding:
□ Applicable √ Not applicable
III Commitments that the Company’s Actual Controller, Shareholders, Related Parties,Acquirers, the Company Itself or Other Parties, Failed to Fulfill on Time during theReporting Period
□ Applicable √ Not applicable
No such cases in the Reporting Period.IV Securities Investments
□ Applicable √ Not applicable
No such cases in the Reporting Period.
V Wealth Management Entrustment
√ Applicable □ Not applicable
Unit: RMB'0,000
| Type of wealth management | Funding source | Principal | Outstanding amount before maturity | Overdue amount |
| Other | Self-funded | 0 | 3,000 | 0 |
| Trust finance products | Self-funded | 5,000 | 5,000 | 0 |
| Total | 5,000 | 8,000 | 0 | |
High-risk wealth management entrustments with amounts that are individually significant, or with low security, low liquidity, or noprotection of the principal:
√ Applicable □ Not applicable
Unit: RMB’0,000
| Trustee | Type of trustee | Type of wealth management product | Principal | Funding source | Start date | End date | Investment with principal | Way of payback | Reference annualized return (%) | Expected return (if any) | Actual gain/loss in Reporting Period | Collection/payment of gain/loss in Reporting Period | Impairment allowance (if any) | Through prescribed procedure or not | Any plan for further entrustment | Overview and index to more information (if any) |
| Gopher Asset Management Co., Ltd | Fund corporation | Fixed-income | 3,000 | Self-funded | 22 December 2017 | 26 December 2019 | Granting of trust loans to HOME | Annual payment of interests and payment of | 8.50% | 255 | 250.32 | N/A | Yes | Temporarily no |
| CREDIT | principal upon maturity | |||||||||||||||
| Avic trust co. LTD | Trust company | Fixed-income | 5,000 | Self-funded | 7 March 2019 | 9 March 2020 | Investment trust assets | Payment of principal and interest upon maturity | 8.00% | 400 | 0 | N/A | Yes | Temporarily no | ||
| Total | 8,000 | -- | -- | -- | -- | -- | -- | 655 | 250.32 | -- | -- | -- | -- | |||
Wealth management entrustments with possible impairments including an expectedly unrecoverable principal:
□ Applicable √ Not applicable
VI Investments in Derivative Financial Instruments
√ Applicable □ Not applicable
Unit: RMB’0,000
| Counterparty | Relationship with the Company | Related-party transaction or not | Type of derivative | Initial investment amount | Start date | End date | Beginning investment | Purchased in Reporting Period | Sold in Reporting Period | Impairment allowance (if any) | Ending investment | Ending investment as % of the Company’s ending net assets | Actual gain/loss in Reporting Period |
| Commercial bank | Non-connected | No | Forward exchange settlement | 98,187.76 | 19 June 2018 | 11 November 2019 | 6,512.05 | 91,675.71 | 93,944.02 | 4,243.74 | 0.53% | 776.34 | |
| Commercial bank | Non-connected | No | Foreign exchange option | 16,018.76 | 23 March 2018 | 30 August 2019 | 1,909.89 | 14,108.87 | 16,018.76 | 0 | 40.15 | ||
| Commercial bank | Non-connected | No | Forward exchange transactions | 3,049.7 | 28 September 2018 | 10 May 2019 | 1,610.11 | 1,439.59 | 3,049.7 | 0 | 50.04 |
| Total | 117,256.22 | -- | -- | 10,032.05 | 107,224.17 | 113,012.48 | 4,243.74 | 0.53% | 866.53 | |
| Funding source | Self-funded | |||||||||
| Legal matters involved (if applicable) | N/A | |||||||||
| Disclosure date of board of directors announcement on approval of derivative investment (if any) | 27 April 2018 | |||||||||
| 30 April 2019 | ||||||||||
| Disclosure date of general meeting of shareholders announcement on approval of derivative investment (if any) | ||||||||||
| Analysis of risks and control measures associated with derivative investments held in Reporting Period (including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | The Company conducted derivatives products transaction in order for hedging. And the forward settlement hedging was operated by installments, with the relevant amount not more than the planned derivatives products transactions. And all derivatives products transaction was zero-deposit. Meanwhile, the Company had a complete risk control system for sufficient analysis and prevention of possible risks such as market risk, liquidity risk and credit risk, operation risk and risk of laws and regulation. 1. Market risk: when the international and domestic economic situations change, the corresponding changes in exchange rates and interest rates may have an adverse impact on the financial derivatives transactions of the Company. Precautionary measures to be taken include: the Company chooses risk-controlled financial derivative tools with simple structure and good liquidity to carry out the hedging business, strictly controls the scale of financial derivatives trading by staged operations, and adjusts the strategy according to market changes in a timely manner. 2. Liquidity risk and credit risk: a credit risk arising from failure of the contractually due Company or counterparty in performing the contract due to liquidity or factors other than liquidity. Precautionary measures to be taken include: the Company determines the upper limit of derivatives transaction amounts according to production and operation scale as well as foreign exchange income, and conducts operations by stage according to the budget of future collections and disbursement. The derivative trades are free of guarantee deposit and can still be guaranteed in performance after the contract expires by means of extension and balance settlement etc. to prevent the Company from credit damages due to lack of liquidity. The Company selects financial institutions with strong capability and good reputation as a counterparty and signs standard derivative trading contracts to strictly control credit risk of the counterparty. 3. Operation risk: The derivatives had high specialty and complexity, so imperfect internal operation procedures, staffs and external events would make the Company to undertake risks during the transaction. Risk control measures: The Company promulgated strict authorization and approval system and perfect regulatory mechanism, fixed the operation procedures and approval procedures system to conduct derivative products transaction, implemented strict authorization and post checks and balances system, meanwhile, it improved the overall quality of relevant personnel through strengthening the professional ethics education and business training for them. Besides, it established the System of Reporting the Abnormal Situation Timely so as to ensure to lower the operation risks to the maximum. 4. Risk of laws and regulation: | |||||||||
| The Company conducted derivatives products transaction in strict accordance with relevant laws and rules. If there were no standard operation procedures and strict approval procedures, it was easy to cause compliant and regulatory risks existing in the validity and feasibility of contract, commitments and other legal documents signed. Risk control measures: The Company carefully studied and mastered laws, regulations and policies relevant to derivative products transaction, formulated internal control rules for the forward settlement hedging business, standardized the operation procedures. And strengthened the compliant examination on derivative products transaction business. The Company conducted derivative transaction business according to the relevant approval procedure, which was in line with relevant laws, regulations, the Company’s Articles of Association, the Management Rules for Derivative Transaction of Lu Thai Textile Co., Ltd., and the Proposal on the Plan of Lu Thai Textile Co., Ltd. for Derivative Transactions approved at the 17th Meeting of the 8th Board of Directors on 25 April 2018 and the 26th Meeting of the 8th Board of Directors on 29 April 2019, and performed relevant information disclosure responsibilities. | |
| Changes in market prices or fair value of derivative investments in Reporting Period (fair value analysis should include measurement method and related assumptions and parameters) | 1. As of 30 September 2019, the Company held financial derivative worth USD6 million in totals, which was forward settlement of exchange executed in accordance with the contracts. The latest contract expiration date was 11 November 2019. Financial derivatives occupied 0.53 % of the net assets as at the period end. 2. In Q1~Q3 2019, the amount of maturing financial derivatives of the Company amounted to USD165.0969 million which was executed as per the contract in full, which generated an income of RMB8.6653 million. The delivery amount of forward settlement of exchange amounted to USD137.1132 million which generated an income of RMB7.7634 million; the delivery amount of foreign exchange options was USD23.5 million which generated an income of RMB0.4015 million. The delivery amount of foreign exchange transaction amounted to USD4.4837 million which generated an income of RMB0.5004 million. |
| Major changes in accounting policies and specific accounting principles adopted for derivative investments in Reporting Period compared to last reporting period | No significant changes |
| Opinion of independent directors on derivative investments and risk control | The Company’s independent directors Zhou Zhiji, Bi Xiuli, Pan Ailing, Wang Xinyu and Qu Dongmei concerning conducting derivatives business, have issued the following professional advice: We are of the opinion that it will strengthen the Company’s competitiveness to use derivative transactions with focus on forward settlement and purchase 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. In conducting derivative transactions with focus on forward settlement and purchase, the Company follows a legal approval procedure, has sound relevant institutions and keeps the risks relatively controllable. No harm has been done to the interests of the Company’s shareholders. |
VII Communications with the Investment Community such as Researches, Inquiries andInterviews during the Reporting Period
√ Applicable □ Not applicable
| Date | Way of communication | Type of communication | Index to main information |
| party | communicated | ||
| 29 March 2019 | By phone | Individual | Basic information of the Company |
VIII Irregularities in the Provision of Guarantees
□ Applicable √ Not applicable
No such cases in the Reporting Period.IX Occupation of the Company’s Capital by the Controlling Shareholder or Its RelatedParties for Non-Operating Purposes
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Signature of the Chairman of the Board: Liu ZibinLu Thai Textile Co., Ltd.
30 October 2019