Stock Code: 000869， 200869 Stock Abbreviation: Changyu A， Changyu B Announcement No.: 2019-Final01
Yantai Changyu Pioneer Wine Co. Ltd.
2018 Annual Report Abstract
1. Important Notice
This Annual Report abstract comes from the whole contents of annual report. If investors desire tocomprehensively understand the Company’s operating results, financial situation and futuredevelopment plan, please read the Annual Report on the media specified by the China SecuritiesRegulatory Commission.
No directors, supervisors or senior executives issue a statement of objection to 2018 Annual Report.
Except following directors, all other directors have personally attended the meeting for deliberatingthe annual report.
| Director name with non-present in person | Director post with non-present in person | Reason for non-present in person | Name of mandatory |
| Sun Liqiang | Director | Business trip | Zhou Hongjiang |
| Antonio Appignani | Director | Business trip | Augusto Reina |
Non-standard audit opinion notice□Available ?Not availableThe preliminary scheme of the report period’s ordinary share profit distribution or increasing equitywith reserve deliberated by the board of the directors?Available □Not availableWhether to increase equity with reserve□Yes ?NoThe Company’s draft plan of ordinary share profit distribution deliberated and passed by the board ofthe directors is as following: Based on the Company’s total 685,464,000 shares，the Company plansto pay CNY 6 (including tax) in cash as dividends for every 10 shares to all shareholders and to send0 bonus (including tax). The capital reserve will not be converted to capital stock.The draft plan of preferred share profit distribution during the report period deliberated and passedby the board of directors□Available ?Not available
2. Basic information of the Company(1) Brief introduction of the Company
| Abbreviation of Shares: | Changyu A, Changyu B | Code number of the Shares | 000869, 200869 | |
| Place of listing of Shares | Shenzhen Stock Exchange | |||
| Contact person and information | Secretary to the Board of | Authorized Representative of the | ||
| Directors | Securities Affairs | |
| Name | Mr. Qu Weimin | Mr. Li Tingguo |
| Address | 56 Dama Road, Yantai, Shandong, China | 56 Dama Road, Yantai, Shandong, China |
| Fax | 0086-535-6633639 | 0086-535-6633639 |
| Tel | 0086-535-6633656 | 0086-535-6633656 |
| quwm@changyu.com.cn | stock@changyu.com.cn |
(2) Main businesses during the report period or brief introduction of products
During the report period, the Company’s main business is to produce and operate wine and brandy,providing domestic and foreign consumers with healthy and fashionable alcoholic drinks. Comparedwith last report period, there are no significant changes in the Company’s main business. The wineindustry in which the Company is located is still in the growth stage and the domestic wine market isgenerally on the rise. The Company is at the forefront of domestic wine industry..
(3) Key accounting data and financial indicators
①Key accounting data and financial indicators in recent three years
Whether the Company makes retroactive adjustments or restates the accounting data of previousfiscal years□Yes ?No
Unit: CNY
| Item | 2018 | 2017 | More or less than Last year (%) | 2016 |
| Operation revenue | 5,142,244,740 | 4,932,545,229 | 4.25% | 4,717,596,472 |
| Net profit attributed to the shareholders of the listed company | 1,042,632,929 | 1,031,695,056 | 1.06% | 982,460,488 |
| Net profit attributed to the shareholders of the listed company after deducting the irregular profit and loss | 965,426,238 | 986,095,872 | -2.10% | 941,730,478 |
| Net cash flows from the operating activities | 975,978,746 | 973,243,027 | 0.28% | 889,911,970 |
| Basic earnings per share (CNY/share) | 1.52 | 1.51 | 0.66% | 1.43 |
| Diluted earnings per share (CNY/share) | 1.52 | 1.51 | 0.66% | 1.43 |
| Weighted average for | 11.23% | 12.14% | -0.91% | 12.55% |
| earning rate of the net assets | ||||
| Dec. 31st 2018 | Dec. 31st 2017 | More or less than Last year (%) | Dec. 31st 2016 | |
| Total assets | 13,117,729,052 | 12,536,755,208 | 4.63% | 11,528,077,971 |
| Net Assets attributed to the shareholders of the listed company | 9,606,099,365 | 8,906,342,299 | 7.86% | 8,209,010,989 |
②Key accounting data by quarter
Unit: CNY
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Operation revenue | 1,804,057,976 | 1,024,172,088 | 1,032,328,986 | 1,281,685,690 |
| Net profit attributed to the shareholders of the listed company | 479,444,238 | 156,393,167 | 133,916,250 | 272,879,274 |
| Net profit attributed to the shareholders of the listed company after deducting the irregular profit and loss | 466,181,564 | 140,497,155 | 110,520,695 | 248,226,824 |
| Net cash flows from the operating activities | 507,263,964 | 45,489,508 | 224,087,322 | 199,137,952 |
Whether there are significant differences between above-mentioned financial indicators or their sumand the related financial indicators in the quarterly report and semi-annual report disclosed by theCompany.□Yes ?No
(4) Capital stock and shareholders’ situation
① Number of ordinary shareholder and preferred shareholder recovering voting power, and situation of shares held by top tenshareholders
Unit: share
| Total shareholders in the report period | 42,980 | Total number of ordinary shareholders by the end of last month before the disclosure day of the annual report | 45,104 | Total number of preferred shareholder recovering voting power by the end of report period | 0 | Total number of preferred shareholder recovering voting power by the end of last month before the disclosure day of the annual report | 0 | |||
| The top 10 shareholders holding situation | ||||||||||
| Name of Shareholders | Character of shareholders | Shareholding ratio (%) | Number of held shares | Number of held shares with restricted condition | Pledged or frozen situation | |||||
| Share status | Number | |||||||||
| YANTAI CHANGYU GROUP CO., LTD. | Domestic non-state-owned legal person | 50.40% | 345,473,856 | 0 | ||||||
| GAOLING FUND,L.P. | Foreign legal person | 3.08% | 21,090,219 | 0 | ||||||
| CHINA SECURITIES FINANCE CORP | State-owned legal person | 2.25% | 15,440,794 | 0 | ||||||
| BBH BOS S/A FIDELITY FD - CHINA FOCUS FD | Foreign legal person | 2.22% | 15,241,826 | 0 | ||||||
| SHENWAN HONGYUAN SECURITIES(HONGKONG) LIMITED | Foreign legal person | 1.22% | 8,347,663 | 0 | ||||||
| FIDELITY PURITAN TRUST: FIDELITY | Foreign legal person | 0.89% | 6,100,762 | 0 | ||||||
| SERIES INTRINSIC OPPORTUNITIES FUND | |||||||
| TAIKANG LIFE INSURANCE LIMITED LIABILITY COMPANY-- UNIT –LINKED-- INDUSTRY CONFIGURATION | Domestic non-state-owned legal person | 0.75% | 5,159,757 | 0 | |||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | Foreign legal person | 0.74% | 5,043,507 | 0 | |||
| CENTRAL HUIJIN ASSET MANAGEMENT LIMITED | State-owned legal person | 0.69% | 4,761,200 | 0 | |||
| TAIKANG LIFE INSURANCE LIMITED LIABILITY COMPANY-DIVIDEND-PERSONAL DIVIDEND-019L-FH002 SHEN | Domestic non-state-owned legal person | 0.69% | 4,746,954 | 0 | |||
| The explanation for the associated relationship and accordant action | Among the top 10 shareholders, there is associated relationship between Taikang Life Insurance Limited Liability Company- Unit-linked- Industry Configuration and Taikang Life Insurance Limited Liability Company- Dividend- Personal dividend-019L-FH002 Shen. Yantai Changyu Group Company Limited has no associated relationship or accordant action relationship with the other 9 listed shareholders, and the relationship among the other shareholders is unknown. | ||||||
| Explanation for shareholders who involved in financing activities and stock trading business | The top 10 shareholders do not involve in financing activities and stock trade business. | ||||||
②Number of preferred shareholder and situation of preferred shares held by top ten preferred shareholders
□Available ?Not availableThere are no shares held by preferred shareholders during the report period.
③Introduction for property right and control relations between the Company and its actual controllers
(5) Company Bonds
Whether or not the Company has the corporation bonds issued in public, listed in the stock exchange,not due on the annual report’s authorized issue date or failed to pay in full on the due date.No.
3. Management Discussion and Analysis
(1) Brief introduction of operation situation during the report period
①SummaryIn 2018, influenced by many factors, such as the slowdown of domestic economic growth and theincrease in uncertainty resulting from Sino-US trade friction, the overall sales amount of domesticwine industry was relatively stable, but the sales volumes of both imported wine and domestic winedecreased. As imported wine continued occupying the market of domestic wine, the competition indomestic wine market was very strong. Furthermore, the increase in the price of raw materials andpacking materials as well as increase in the depreciation of fixed assets, freight and labor cost furtherincreased the pressure of the company’s increase in profit. Facing quite a lot of externaldisadvantages, the Company insisted in taking the market as the center, insisted the developmentstrategy of “Focus on middle-and-high level, Focus on high quality, Focus on big product”,intensified internal reform, optimized product structure and market layout, quickened the pace ofnew product development and market promotion, and strived to promote product sales, achievinggood results and realizing operating revenue of CNY5142.24million with an increase of 4.25%compared with last year and net profit of CNY1042.63million belonging to the parent company’sshareholders with an increase of 1.06% compared with last year.
②Analysis of main business
| Description | Increase or decrease of the end of the period over the end of last year | Cause of significant changes |
| Operation revenue | 4.25% | Mainly because of increase in average price of products resulting from improvement of product mix |
| Operating cost | 13.76% | Mainly because of increase in the price of raw materials and packing materials |
| Sales expense | 0.16% | Mainly because of year-on-year increase in wage & welfare |
| Management expense | 2.12% | Mainly because of year-on-year increase in wage & welfare and depreciation of afforestation fees |
| R&D expense | 10.72% | Mainly because of increase in expenses for technology research and development in 2018 |
| Financial expense | 93.36% | Mainly because of increase in loan interest expenditure |
| Net amount of cash flow generated in operating activities | 0.28% | Mainly because of increase in received cash from product sales and rendering of serdeputy |
| Net amount of cash flow generated in investment activities | 38.08% | Mainly because of increase in received cash from t recouping the investment |
| Net amount of cash flow generated in capital-raising activities | -77.83% | Mainly because of increase in payment of cash for debt repayment |
Review and summary of the process of the Company’s early-disclosed development strategy andbusiness plan during the report period
During the report period, the Company realized the operating revenue of CNY5142.24million withan increase of 4.25% compared with last year, slightly lower than the target fixed at the beginning ofthe year of realizing operating revenue no less than CNY5.2billion. The net profit of CNY1042.63million belonging to the parent company’s shareholders was realized with an increase of 1.06%compared with last year. The main work during the report period were shown as followed:
Firstly, the Company took the market as the mirror, further promoted the strategy of three Focus,strengthened internal adjustment and reform intensity, accelerated the launch of new products andmarket expansion of core products, and strived to develop E-business, achieving good results.During the report period, the Company reorganized sales team, preliminarily realized the reduce instaff number and the improve of efficiency, conducted the work of “sales team jointly built bymanufacturers and distributors”, actively explored the expense input management and control modeof “check and balance between manufacturers and distributors ”, and received preliminary effects.Ten provincial brandy companies were newly established. Specialized provincial wine companiesand comprehensive provincial companies were subdivided. Three business segments, includingprovinces and cities such as Zhejiang, Fujian, Guangdong, Jiangsu, Shandong, Beijing and Shanghaietc and E-business and so on, realized authorized operation. The Company adjusted the function ofVIP customer business, peeled off distribution business in direct supply system, further defined therelationship between the Changyu parent brand and its subsidiary brands, formed the core brandsystem of various liquors and made development planning of each brand. Series of new products,such as the ninth generation Noble Dragon, new Zenithwirl, 15-year Koya, 10-year Koya, 6-yearKoya, Australian Kilikanoon products and Chilean Indomita products and so on, received widepraises and the demand of partial products exceeds supply owing to their hot sale. The Companyinsisted on the strategy of three Focus, weeded out 134 kinds of wine and centralized mostmarketing resources to be used for market promotion of middle-to-high-end wine, five-star andabove brandy and imported wine with own brands, making sales revenue of wine and brandy achievedifferent levels of increase.
Secondly, the Company took the quality as the basis, regarded product quality as an important magicweapon to defeat enemies. It conducted all-around self-examination, self-correction andoptimization on the selection of grape base, grape planting mode, production process and technology,quality testing equipment and product quality control system etc, formulated three-year planning,implementation scheme and specific measures for product development and quality improvement infuture three years, strengthened technical exchanges at home and abroad and team construction ofwinemakers, focused on new product development and technical difficulties, improved the qualitytraceability system and strengthened quality control in the whole production process, making thecompany's technical level and product quality reach a new level. The Company carried out 45technology researches and completed one sub-project of national 863 project. Drafted standards ofWine-making Grape and Oak Barrel passed the group standards assessment by China AlcoholicDrinks Association, filling in gaps of domestic wine industry. Key Technology Research andApplication in Industrialization of Domestic Oak Products was declared for 2018 scientific andtechnological progress award of China Alcoholic Drinks Association. Key Technology Research forPremium and Characteristic Wine-making Grape Cabernet Gernischt and Wine Production wonscientific and technological progress award of China National Light Industry Council. In 2018 IWSC,Kilikanoon Wines Pty Ltd in Australia was awarded “Australian Best Wine Producer of the Year”and was the only one chateau awarded by IWSC among more than 4000 chateaux in Australia, ofwhich 2014 Kilikanoon Estate Special Reserve Shiraz 8K won outstanding gold medal with scoresof 93 points and above) as well as the trophy of “World’s Best Shiraz of the Year” while 2016Kilikanoon Estate Wine Blend 6K won gold medal with scores of 90 to 92.9 points. KilikanoonWines Pty Ltd was honored with the title of “Australian Best Wine Producer of the Year” in 2018Mundus Vini. 2014 Kilikanoon Estate Special Reserve Shiraz 8K won gold medal in DAWA withthe score of 95. 2015 Moser Family Cabernet Sauvignon Red Wine, 2016 Moser Legend CabernetSauvignon White Wine, 2015 Golden-label Icewine of Golden Icewine Valley and 2015 Blue-labelIcewine of Golden Icewine Valley won gold medal in the 22nd session of Berliner Wein Trophy.Changyu Five-star Fine Brandy won gold medal in 2018 Spirits Selection by Concours Mondial deBruxelles. Changyu Koya 15-years XO brandy ageing in oak barrel won the design award of luxurycategory in 2018 Pentawards Award Ceremony. “Water-drop Decanter” of Changyu Koya 10-yearsXO Brandy won the design award of packaging category in 2018 iF Design Award Ceremony heldat BMW Welt in Munich, Germany.
Thirdly, the Company realized online identification and order-driven mode of major products.During the reporting period, the Company issued Assessment Measures for Performance Rate ofProduction Order, gave full play to advantages of advanced production facilities, high automationand informationization and fast production speed, optimized and adjusted business processes, andstrengthened coordination of supply, production and sales, making 27 kinds of Noble Dragonproducts with high sales volume and all domestic chateau wines achieve order-driven mode. Mostdomestic wine products achieved online tagging, which improved production efficiency and deliveryspeed, dramatically reduced product and capital backlogs and better satisfied the market needs.
Fourthly, the Company enhanced financial management and established and improved theassessment system taking profit as principal line. During the report period, the Companystrengthened the management in financial budget, fixed funds and overseas enterprises’ financial
affairs, enhanced the audit in price execution, gross profit margin, capital occupation, key expenses,and investment projects, increased the investigation of economic responsibility, scientificallyallocated internal capital, vigorously strived for policy-based capital loans and continuously reducethe cost of capital. It strengthened the simulated profit assessment of authorized business units andstrived to establish a profit assessment system covering all business segments and respectiveresponsibilities in order to provide a basic basis for more reasonable and efficient performanceassessment and to improve profitability.
Fifthly, the Company successfully completed the procurement of raw materials including grapes andfurther strengthened the management in grape base. The Company comprehensively accomplishedthe procurement plan of raw materials exemplified as grapes, improved the fermentation rate ofpremium wines, further deepened sort management and sort acquisition of grape bases and continuedpromoting the mechanization process in vineyards, lowering the operating costs of self-supportedgrape bases and making scientific and normative management in grape base reach a higher level. Itraised grape purchase standard, improved raw material quality, actively conducted the introduction,selective breeding and improvement of new grape varieties and characteristic varieties and cultivateda lot of new varieties, enriching the variety resource for future product development. It alsoorganized orchardist to take professional training on grape planting technology, which improvedtheir grape planting and management level.
Sixthly, the Company continued promoting internationalization strategy and steadily implementedoverseas acquisition. It acquired 80% equity of Kilikanoon Estate Pty Ltd in Australia.
③Revenue and cost
1) Composition of operation revenue
Unit: CNY
| ` | 2018 | 2017 | Year-on-year increase or decrease (%) | ||
| Amount | Proportion in operation revenue | Amount | Proportion in operation revenue | ||
| Total operation revenue | 5,142,244,740 | 100% | 4,932,545,229 | 100% | 4.25% |
| Industry-classified | |||||
| Industry of liquor and alcoholic beverage | 5,142,244,740 | 100% | 4,932,545,229 | 100% | 4.25% |
| Product-classified | |||||
| Wine | 4,000,233,434 | 77.79% | 3,829,326,556 | 77.63% | 0.16% |
| Brandy | 999,207,299 | 19.43% | 989,889,728 | 20.07% | -0.64% |
| Others | 142,804,007 | 2.78% | 113,328,945 | 2.30% | 0.48% |
| Area-classified | |||||
| Domestic | 4,486,387,956 | 87.25% | 4,497,288,066 | 91.18% | -3.93% |
| Abroad | 655,856,784 | 12.75% | 435,257,163 | 8.82% | 3.93% |
2) Condition of industry, product or area accounting for over 10% of the Company’s operationrevenue or operating profit
?Available □Not availableWhether the Company needs to follow disclosure requirements of special industryNo
Unit: CNY
| Operation revenue | Operating cost | Gross profit rate | Year-on-year increase or decrease (%) of operation revenue | Year-on-year increase or decrease (%) of operating cost | Year-on-year increase or decrease (%) of gross profit rate | |
| Sector-classified | ||||||
| Sector of liquor and alcoholic beverage | 5,142,244,740 | 1,901,611,507 | 63.02% | 4.25% | 13.76% | -3.09% |
| Product-classified | ||||||
| Wine | 4,000,233,434 | 1,460,855,413 | 63.48% | 4.46% | 15.36% | -3.45% |
| Brandy | 999,207,299 | 403,699,973 | 59.60% | 0.94% | 14.58% | -4.81% |
| Others | 142,804,007 | 37,056,121 | 74.05% | 26.01% | -29.91% | 20.70% |
| Total | 5,142,244,740 | 1,901,611,507 | 63.02% | 4.25% | 13.76% | -3.09% |
| Area-classified | ||||||
| Domestic | 4,486,387,956 | 1,477,589,238 | 67.07% | -0.24% | 7.17% | -2.27% |
| Abroad | 655,856,784 | 424,022,269 | 35.35% | 50.68% | 44.76% | 2.65% |
Under the condition that the statistical caliber of the Company’s main business data is adjustedduring the report period, the Company’s main business data adjusted on the basis of caliber at theend of report period in recent one year.□Available ?Not available
(2) Whether major business has significant changes during the report period?
□Yes ?No(3) Condition of products accounting for over 10% in the Company’s main business income ormain business profit
?Available □Not available
Unit: CNY
| Operation revenue | Operating cost | Gross profit rate | Year-on-year increase or decrease (%) of Operation revenue | Year-on-year increase or decrease (%) of operating cost | Year-on-year increase or decrease (%) of gross profit rate | |
| Wine | 4,000,233,434 | 1,460,855,413 | 63.48% | 4.46% | 15.36% | -3.45% |
| Brandy | 999,207,299 | 403,699,973 | 59.60% | 0.94% | 14.58% | -4.81% |
| Others | 142,804,007 | 37,056,121 | 74.05% | 26.01% | -29.91% | 20.70% |
| Total | 5,142,244,740 | 1,901,611,507 | 63.02% | 4.25% | 13.76% | -3.09% |
(4) Whether there are seasonality or periodicity operating features required special attention□Yes ?No
(5) Explanation for significant changes in operation revenue, operating cost, total net profit orconstitution attributable to the ordinary shareholders of the listed company compared withlast report period□Available ?Not available
(6) Condition of Facing listing suspension and termination□Available ?Not available
(7) Items related to financial report
①Situation explanation for changes in the accounting policy, accounting estimation andaccounting method compared with 2017 annual financial report
□Available ?Not availableThere is no change in the accounting policy, accounting estimation and accounting method during thereport period.
②Situation explanation for the correction of major accounting errors need to be retrospectedand restated during the report period
□Available ?Not availableThere is no situation for the correction of major accounting errors need to be retrospected andrestated.
③Situation explanation for changes in the scope of consolidated statements compared with2017 annual financial report
?Available □Not availableAccording to Share Sale & Purchase Agreement signed on December 5
th
, 2017 between theCompany and shareholders of Kilikanoon Estate Pty Ltd, the Company acquired 80% equity ofKilikanoon Estate Pty Ltd with the price of AUD20,860,825 (equivalence CNY107,194,420) to. TheCompany has completed equity transfer on January 18
th
, 2018, obtaining control rights of financeand business policy for Kilikanoon Estate Pty Ltd. During the report period, this company has beenincluded in the scope of consolidated statements.
Yantai Changyu Pioneer Wine Co., Ltd.
Board of DirectorsApril 20
th
, 2019