Shares Code: 000869， 200869 Shares Abbreviation: Changyu A， Changyu B Notice No.: 2019-Final03
Yantai Changyu Pioneer Wine Co., Ltd.
2019 Semi-annual Report Abstract
1. Important Warning
This semi-annual report abstract comes from the whole contents of semi-annual report. If investorsdesire to comprehend the Company’s operating results, financial situation and future developmentplan, please carefully read the semi-annual report on the media specified by the China SecuritiesRegulatory Commission.
No directors, supervisors or senior executives issue a statement of objection to 2019 semi-annualreport.
Except the following directors, all other directors have personally attended the meeting fordeliberating the semi-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 |
| Duan Changqing | Independent director | On a business trip | Wang Zhuquan |
Non-standard audit opinion notice
□Available ?Not available
The preliminary scheme of the report period’s common stock profit distribution or increasing equitywith reserve deliberated by the board of the directors
□Available ?Not available
The Company has no plan to distribute cash dividends and bonus shares; capital reserve will not betransferred to equity.The preliminary scheme of this report period’s preferred share profit distribution deliberated andpassed by the board
□Available ?Not available
2. Brief Introduction of the Company
1) Company introduction
| Abbreviation of the Shares: | Changyu A, Changyu B | Code number of the Shares | 000869, 200869 | |
| Place of listing of the Shares | Shenzhen Stock Exchange | |||
| Abbreviation of the Shares after alteration | - | |||
| Contact person and information | Secretary to the Board of Directors | Authorized Representative of the Securities Affairs | ||
| Name | Mr. Jiang Jianxun | Mr. Li Tingguo |
| Address | 56 Dama Road, Yantai, Shandong, China | 56 Dama Road, Yantai, Shandong, China |
| Tel | 0086-535-6602761 | 0086-535-6633656 |
| jiangjianxun@changyu.com.cn | stock@changyu.com.cn |
2) Key accounting data and financial indicators
Whether the Company makes retroactive adjustments or restates the accounting data of previousfiscal years.
□Yes ?No
| In the report period | In the same period of last year | More or less than last year (%) | |
| Business revenue (CNY) | 2,558,274,785 | 2,828,230,064 | -9.55% |
| Net profit attributed to the shareholders of the listed company (CNY) | 603,403,789 | 635,837,405 | -5.10% |
| Net profit attributed to the shareholders of the listed company after deducting the irregular profit and loss (CNY) | 552,490,695 | 606,678,719 | -8.93% |
| Net cash flows from the operating activities (CNY) | 499,476,006 | 552,753,472 | -9.64% |
| Basic earnings per share (CNY/share) | 0.88 | 0.93 | -5.38% |
| Diluted earnings per share (CNY/share) | 0.88 | 0.93 | -5.38% |
| Weighted average for earning rate of the net assets | 6.13% | 6.89% | -0.76% |
| The end of the report period | The end of last year | More or less than last year (%) | |
| Total assets (CNY) | 13,383,093,433 | 13,117,729,052 | 2.02% |
| Net Assets attributed to the shareholders of the listed company (CNY) | 9,791,885,091 | 9,606,099,365 | 1.93% |
3) Number of shareholder and shareholding situation
Unit: share
| Total common shareholders at the end of report period | 42,531 | Total number of preferred shareholder recovering voting power at the end of report period (if have) | 0 | ||||
| The top 10 shareholders holding situation | |||||||
| Name of Shareholders | Character of shareholders | Percentage (%) | Number of Shares held | Number of restricted shares | Pledged or frozen | ||
| Share status | Amount | ||||||
| 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(HONG KONG) LIMITED | Foreign legal person | 1.28% | 8,798,233 | 0 | |||
| FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC OPPORTUNITIES FUND | Foreign legal person | 0.93% | 6,350,762 | 0 | |||
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | Foreign legal person | 0.76% | 5,229,016 | 0 | |||
| CENTRAL HUIJIN ASSET MANAGEMENT LTD. | State-owned legal person | 0.69% | 4,761,200 | 0 | |||
| VANGUARD EMERGING MARKETS STOCK INDEX FUND | Foreign legal person | 0.55% | 3,788,487 | 0 | |||
| FIDELITY CHINA SPECIAL SITUATIONS PLC | Foreign legal person | 0.55% | 3,779,202 | 0 | |||
| The explanation for the associated relationship and accordant action of the top 10 shareholders mentioned above | Among the top 10 shareholders, 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 (if have) | The top 10 shareholders do not involve in financing activities and stock trade business. |
4) Changes of controlling shareholders or actual controllers
Changes of controlling shareholders during the report period
□Available ?Not available
There is no change to controlling shareholders during the report period.Changes of actual controllers during the report period
□Available ?Not available
There is no change to actual controllers during the report period
5) Number of preferred shareholder and shareholding of preferred shares of top ten preferred shareholders
□Available ?Not available
There are no shareholdings of preferred shareholders during the report period.
6) Company Bonds
Whether the Company exists public offering and lists on the Stock Exchange, and the Company is unable to fully pay company bonds in theapproved announcement date of this Semi-annual report before maturity or in the maturity date.No.
3. Management Discussion and Analysis
1) Brief introduction of operation situation during the report period
Whether the Company needs to follow the disclosure requirement of special businessNo.
(1) Summarization
During the report period, influenced by the slowdown of domestic economic growth, the overalldemand of domestic wine industry was relatively weak. Both domestic and imported wine hadexperienced decline at varying degrees in sales volume and sales revenue. The competition indomestic wine market, especially for middle-and-low-level wines, was very fierce. Due tocontinuously influences such as increase in the prices of raw materials and packaging materials,depreciation of fixed assets and increase in freight and labor costs, the Company’s profitability wasunder greater pressure. Facing quite a lot of unfavorable factors, the Company insisted in taking themarket as the center, insisted the development strategy of “Focus on middle-and-high level, Focus onhigh quality, Focus on big product” (the strategy of “Three Focuses”) without wavering, continuedintensifying internal reform, further optimized product structure and market layout. Through productinnovation, management innovation and marketing innovation, the Company strived to promoteproduct sales and achieved certain effects, under the background of the market that both domesticwine and imported wine show a large decrease wholly in China market, realizing the businessincome of CNY2558.27million in the first half year with a decrease of 9.55% compared with lastyear and the net profit attributable to the parent company’s shareholders of CNY603.4million in thefirst half year with a decrease of 5.1% compared with last year.During the report period, the Company mainly did following work:
Firstly, the Company's Board of Directors, Board of Supervisors and senior executives weresuccessfully re-elected, injecting new forces, optimizing staff structure, enhancing the managementlevel and decision-making ability of the management team and providing a reliable organizationalguarantee for the Company’s sustainable and healthy development in the future.Secondly, the "Three Focuses" strategy was steadily advanced and initial results were achieved.During the report period, among the three core business segments of domestic wine, brandy andimported wine, the Company concentrated its main resources to focus on the three domestic winebrands such as MOSER, Noble Dragon and ZENITHWIRL; the two brandy brands “KOYA” and“Changyu Superior Five-star Special Fine Brandy” and the two imported wine brands Kilikanoonand INDOMITA achieved good results, which slowed down the Company’s wine decline andachieved a small increase in brandy sales revenue.Thirdly, the organization structure of sales system was basically completed in terms of adjustmentand optimization. The transformation from management dealers to serving dealers was activelypromoted and the construction of “Fund pool” with dealers was energetically developed. During thereport period, the Company eliminated, adjusted, rotated and supplemented some of the provincialand municipal sales personnel, further rationalized the sales management system and enhanced thefighting capacity of the sales team. The authorized operation was deeply advanced, which furthermobilized the enthusiasm and initiative of sales personnel. Besides, the Company improved theperformance appraisal mode and work focus, which promoted sales personnel to be closer to themarket and clients and better served terminals and consumers. Moreover, the construction of salesteam and “Fund pool” with dealers was intensified, which alleviated the contradiction of insufficientmarket input.
Fourthly, the Company actively coordinated controlling shareholders and other relevant parties. Afterrepeated communication and full argumentation, the Company re-determined the proportion oftrademark use fee of "张裕"(Changyu) and other trademarks, revised and improved TrademarkLicense Contract and eliminated defects in the contract. In addition, the Company cooperated closelywith the controlling shareholders and was freely transferred part of trademarks and patents from thecontrolling shareholders, which better guaranteed the integrity of the Company’s assets and reducedrelated transactions.Fifthly, the Company optimized the layout of raw material bases, strengthened quality management,strived to reduce raw material costs and improved product quality. During the report period, theCompany carried out an overall planning for domestic and foreign raw material supply bases and laidout medium and long-term raw material bases in Australia, Chile and France. In addition, theCompany increased a large number of high-quality raw material bases in Xinjiang, Ningxia andYantai, strengthened the assessments of basic management, profit and key work to the raw materialbases, and use internal self-examination, random sampling, third-party inspection, flight inspectionand other means to strengthen product quality monitoring and control. Moreover, the Companyre-approved supplier list, eliminated unqualified suppliers and continuously improved the quality ofraw material and packaging. As these measures become effective, the product quality and reduce rawmaterial costs will be fundamentally improved.Sixthly, it was to strengthen financial management and audit supervision, strive to reduce capitalcosts and operational risks, and improve the Company’s operational efficiency. During the reportperiod, after repeated communication and negotiation, the Company further reduced the bank loaninterest rate and financing cost. In addition, the Company used the SAP system to monitor andallocate cash flow in real time, strictly implemented two-line management of financial revenues andexpenditures and paid use system of funds, which accelerated capital turnover, improved funds useefficiency and reduced funds occupation. Moreover, the Company intensified the audit work of keyareas such as the authenticity of financial revenues and expenditures, channel inventory, unsalableproducts, advertising fees and economic responsibility of outgoing personnel, and timely investigatedand punished illegal acts, which effectively prevented significant operational risks.Seventhly, scientific dispatch, carefully organization and close cooperation guaranteed the goodquality and smooth progress of investment projects. During the report period, all projects underconstruction of the Company progressed as planned and the project quality was excellent.Eighthly, it was to continue implementing the internationalization strategy and actively carry outjoint venture and cooperation with strong foreign peers. During the report period, in order to reduceoperating costs of a single winery and play a synergistic effect, the Company used its wholly-ownedsubsidiary in France Francs Champs Participations SAS to establish a joint venture company L&MHOLDINGS together with Advini SA’s subsidiary SC Garri du Gai in France, promoting themanagement and operation level of the French wine business segment.
In order to achieve the business objectives set by the Company at the beginning of the year, theCompany will focus on the following work in the second half of 2019:
Firstly, the current market situation has determined that the Company must unswervingly promotethe development strategy of “Three Focus”. The Company will continue classifying products,
compressing the number of products, centralizing superior resources and focusing on marketexploration and marketing work.Secondly, considering that the main contradiction for future development lies in the market, theCompany will continue focusing on the construction of two teams of backbone distributors andfull-time sales personnel and further establish and improve the sales system to extend marketcoverage. The Company will also make deep penetration into key markets and strive to achievebreakthrough. In addition, the marketing innovation will be strengthened and the communicationsmedia will be optimized in order to improve the marketing level. A systematic brand manager systemwill also be established and a full-time marketing team will be set up for providing systemicmarketing solutions to boost brands by virtue of the top outsourcing companies in the industry. TheCompany will take full advantage and integrate online advantageous platform and explore the digitalmarketing mode in line with Changyu to provide consumers with a more perfect consumerexperience and enhance user stickiness.Thirdly, continuous improvement in product quality is the most fundamental thing to win the marketcompetition. While strictly implementing various quality management measures, the Company willestablish a systematic brand winemaker system, give full play to the main responsibility ofwinemakers at all levels and propose clear requirements of salary, appointment, selection, promotionand exit for winemakers at different levels in order to stimulate winemakers' enthusiasm and sense ofresponsibility and promote the significant improvement in product quality.Fourthly, the establishment of a talent team that is compatible with the Company's development tothe core to achieve sustained and rapid development. The Company will focus on cultivating 60high-level provincial general managers and 600 outstanding city managers comprehensivelyoptimize talent echelon and strive to make up the weakness in talents. Moreover, the Company willfurther optimize performance appraisal methods, establish and improve various flexible and efficientincentive mechanisms with the combination of long-term mechanism and short-term mechanism aswell as complementary advantages, and further stimulate the Company’s vitality to enhance theattraction and centripetal force to the outstanding talents.Fifthly, the Company will reasonably arrange the production schedule, do well the connectionbetween production and sales, make full use of sales peak season including Mid-Autumn Festival,National Day and Spring Festival, increase marketing efforts and promote product sales, providingimportant guarantee for achieving annual sales targets.Sixthly, the Company will scientifically make procurement plan for raw materials such as grapes,rationally arrange procurement progress and fully complete the procurement work of grape rawmaterial, providing core raw materials with sufficient quantity, complete varieties, high quality andlow price for future development.In short, we preliminarily judge that in the second half of this year, with the cumulative effects ofvarious reform measures in the past year starting to appear, although the downward pressure on thedomestic wine market is increasing, the sales situation of our company may actually gradually go outof the trough, and revenue may also begin to enter the growth track. The Company will strive tocomplete the established revenue target of not lower than CNY5.3 billion at the beginning of the year.In addition, affected by the double favorable factors of the national cutting taxes and fees policiesand the controlling shareholder's offset of trademark use fee, the Company's profit level may beimproved compared with the same period of last year.
(2) Analysis of main business
See “1. Summarization” in “Management Discussion and Analysis”.Period comparison of main financial data
Unit: CNY
| In the report period | In the same period of last year | More or less (%) | Reason for changes | |
| Operating revenue | 2,558,274,785 | 2,828,230,064 | -9.55% | Mainly owing to the year-on-year decrease in sales volume |
| Operating costs | 936,252,225 | 974,557,292 | -3.93% | Mainly owing to the year-on-year increase in the price of grape material |
| Sales expenses | 591,970,801 | 710,659,033 | -16.70% | Mainly owing to the year-on-year decrease in marketing expense and trademark use fee |
| Administration expense | 155,552,312 | 157,964,882 | -1.53% | No major change |
| Financial expense | 8,789,583 | 13,085,942 | -32.83% | Mainly owing to the year-on-year decrease in interest expenditure |
| Income tax expense | 210,281,578 | 211,979,735 | -0.80% | No major change |
| Research & Development Investment | 2,706,811 | 2,127,006 | 27.26% | Mainly owing to the increased investment in scientific research |
| Net cash flow from operating activities | 499,476,006 | 552,753,472 | -9.64% | Mainly owing to the decrease in received cash from selling products and providing labor service |
| Net cash flow from investment activities | -114,534,608 | -291,217,548 | 60.67% | Mainly owing to the decrease in the cash paid for purchasing fixed term deposit and the net cash paid by subsidiaries and other business units |
| Net cash flow from financing activities | -18,128,357 | -6,350,537 | -185.46% | Mainly owing to the year-on-year decrease in received fixed term deposit used for pledge of long-term loan |
| Net increased amount of cash and cash equivalents | 366,866,743 | 247,781,188 | 48.06% | Mainly owing to the year-on-year decrease in the cash outflow of investment activities |
Whether there is any great change for the Company’s profit structure or profit source during the report period
□Available ?Not available
There is no great change for the Company’s profit structure or profit source during the report period.
Structure of main businesses
Unit: CNY
| Operating revenue | Operating cost | Gross profit (%) | Increase or decrease of operating revenue over the same period of last year (%) | Increase or decrease of operating cost over the same period of last year (%) | Increase or decrease of gross profit over the same period of last year | |
| By sector | ||||||
| Manufacturing of liquor and alcoholic beverages | 2,558,274,785 | 936,252,225 | 63.40% | -9.55% | -3.93% | -2.14% |
| By product | ||||||
| Wine | 1,928,554,268 | 680,125,496 | 64.73% | -13.01% | -9.65% | -1.31% |
| Brandy | 563,451,068 | 229,703,175 | 59.23% | 3.33% | 18.50% | -5.22% |
| Tourism | 42,604,382 | 12,307,699 | 71.11% | -7.44% | -12.47% | 1.66% |
| Other | 23,665,067 | 14,115,855 | 40.35% | 19.01% | 1.95% | 9.98% |
| Total | 2,558,274,785 | 936,252,225 | 63.40% | -9.55% | -3.93% | -2.14% |
| Region | ||||||
| Domestic business | 2,330,780,056 | 791,113,867 | 66.06% | -9.92% | -2.36% | -2.63% |
| Overseas business | 227,494,729 | 145,138,358 | 36.20% | -5.50% | -11.69% | 4.47% |
| Total | 2,558,274,785 | 936,252,225 | 63.40% | -9.55% | -3.93% | -2.14% |
2) Related items involving financial report
(1) Explanation for the changes of the accounting policy, accounting estimation and accounting method, compared with the lastaccounting period’s financial report
?Available □Not availableIn 2017, the Ministry of Finance published the revised Accounting Standard for Enterprises No.22 - Recognition and Measurement of FinancialInstruments，Accounting Standard for Enterprises No.23 -Financial Assets Transfer，Accounting Standard for Enterprises No.24 - HedgeAccounting，and Accounting Standard for Enterprises No.37 - Presentation of Financial Instruments (“New Financial Instruments Standard”for short). The Company began the accounting treatment in accordance with the new revised standards started from January 1
st
, 2019.According to connection requirements, data in comparable duration shall not be adjusted, and differences between the implementation of thenew standard on the first day and the current standard retrospectively adjust the undistributed profit at the beginning of the report period.Affected by this, regarding the balance sheet consolidation on January 1
st, 2019, accounts receivable changed from CNY242,153,083 toCNY237,781,161, deferred income tax assets changed from CNY285,436,259 to CNY286,529,2239, and undistributed profit changed fromCNY8,008,982,547 to CNY8,005,703,605.Based on the requirement of Notification on Revising and Issuing Financial Statement Format for General Enterprises in 2019（Accounting[2019] No. 6）, in the balance sheet, the item “Notes receivable and accounts receivable” is divided into “Notes receivable” and “Accountsreceivable”, and the item “Notes payable and accounts payable” is divided into “Notes payable” and “Accounts payable”. In the incomestatement, regarding the item “Research and development expenses”, in addition to reflecting the expenses incurred during the research anddevelopment process, it also includes the amortization of self-developed intangible assets originally listed in the item “Administrativeexpenses”. The changes in accounting policy have no effect on consolidation and the Company's net profit and owner's equity.
(2) During the report period, the situation explanation for the correction of major accounting errors which need to be retrospect andrestated
□Available ?Not available
There is no situation for the correction of major accounting errors which need to be retrospect and restated.
(3) Compared with the previous year’s financial report, explanation for the changes of the consolidated statements scope.
□Available ?Not available
There is no change in the consolidated statements scope during the report period.
Yantai Changyu Pioneer Wine Co. Ltd.
Board of Directors
August 28
th, 2019