Stock Code: 000869, 200869 Stock Abbreviation: Changyu A, Changyu B Announcement No.:2020-Final03
Yantai Changyu Pioneer Wine Co., Ltd.
2020 Semi-annual Report Abstract
1. Important Notice
This Semi-annual Report abstract comes from the full text of Semi-annual Report. If investors desireto comprehensively understand the Company’s operating results, financial situation and futuredevelopment plan, please read the Semi-annual Report on the media specified by the ChinaSecurities Regulatory Commission.
Except following directors, all other directors have personally attended the meeting for deliberatingthis Semi-annual Report.
Director name withnon-present in person
| Director name with non-present in person | Director post with non-present in person | Reason for non-present in person | Name of mandatory |
| Enrico Sivieri | Director | Affected by COVID-19 epidemic | Zhou Hongjiang |
| Stefano Battioni | Director | Affected by COVID-19 epidemic | Zhou Hongjiang |
| Aldino Marzorati | Director | Affected by COVID-19 epidemic | Leng Bin |
| Liu Qinglin | Independent Director | Due to official business | Yu Renzhu |
Non-standard audit opinion notice
□Available?Not available
The pre-arranged planning of profit distribution for ordinary share or the pre-arranged planning ofincreasing capital stock with accumulation fund during the report period deliberated by the board ofthe directors?Available?Not availableThe Company plans not to distribute cash dividend or give bonus shares or increase capital stockwith accumulation fund.
The pre-arranged planning of profit distribution for preferred share during the report perioddeliberated and passed by the board of directors
□Available?Not available
2. Basic information of the Company
1) Brief introduction of the Company
Abbreviation of Shares:
| Abbreviation of Shares: | Changyu A, ChangyuB | Code number of the Shares | 000869, 200869 | |
| Place of listing of Shares | Shenzhen Stock Exchange | |||
| Contact person and information | Secretary of Board of Directors | Authorized Representative of 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
| During the report period | In the same period of last year | Increase rate (%) | |
| Business revenue (CNY) | 1,401,606,792 | 2,558,274,785 | -45.21% |
| Net profit attributed to the shareholders of the listed company (CNY) | 307,035,572 | 603,403,789 | -49.12% |
| Net profit attributed to the shareholders of the listed company after deducting the irregular profit and loss (CNY) | 266,766,849 | 552,490,695 | -51.72% |
| Net cash flows from the operating activities (CNY) | -29,652,821 | 499,476,006 | -105.94% |
| Basic earnings per share (CNY/share) | 0.45 | 0.88 | -48.86% |
| Diluted earnings per share (CNY/share) | 0.45 | 0.88 | -48.86% |
| Weighted average for earning rate of the net assets | 2.93% | 6.13% | -3.20% |
| The end of this report period | The end of last year | Increase rate (%) | |
| Total assets (CNY) | 13,286,972,498 | 13,647,932,568 | -2.64% |
| Net Assets attributed to the shareholders of the listed company (CNY) | 10,131,114,317 | 10,308,910,198 | -1.72% |
3) Situation for the number of shareholders and shareholdings of the Company
Unit: share
Total common shareholders at theend of report period
| Total common shareholders at the end of report period | 44,334 | Total number of preferred shareholder recovering voting power at the end of report period (if have) | 0 | |||
| Shareholdings of the top 10 shareholders | ||||||
| Name of Shareholder | Character of shareholder | Shareholding ratio | Shareholding amount | Number of restricted share | Pledged or frozen | |
| Share status | Amount | |||||
| YANTAI CHANGYU GROUP CO., LTD. | Domestic non-state-owned legal person | 50.40% | 345,473,856 | 0 | 0 | |
| GAOLING FUND,L.P. | Foreign legal person | 3.08% | 21,090,219 | 0 | 0 | |
| CHINA SECURITIES FINANCE CORP | State-owned legal person | 2.25% | 15,440,794 | 0 | 0 | |
| BBH BOS S/A FIDELITY FD - CHINA FOCUS FD | Foreign legal person | 2.22% | 15,241,826 | 0 | 0 | |
| SHENWAN HONGYUAN SECURITIES(HONG KONG) LIMITED | Foreign legal person | 1.20% | 8,235,333 | 0 | 0 | |
| HONG KONG SECURITIES CLEANING CO., LTD. | Foreign legal person | 1.14% | 7,815,014 | 0 | 0 | |
| FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC OPPORTUNITIES FUND | Foreign legal person | 0.93% | 6,350,762 | 0 | 0 | |
| GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED | Foreign legal person | 0.76% | 5,224,746 | 0 | 0 | |
| CENTRAL HUIJIN ASSET MANAGEMENT LTD. | State-owned legal person | 0.69% | 4,761,200 | 0 | 0 | |
HAITONG INTERNATIONALSECURITIES COMPANYLIMITED- ACCOUNT CLIENT
| HAITONG INTERNATIONAL SECURITIES COMPANY LIMITED- ACCOUNT CLIENT | Foreign legal person | 0.60% | 4,139,187 | 0 | 0 | |
| Explanation for above shareholders’ associated relationship or concerted action | Among the top 10 shareholders, Yantai Changyu Group Company Limited has no associated relationship or concerted action relationship with the other 9 circulating shareholders, and the relationship among the other shareholders is unknown. | |||||
| Explanation for shareholders’ who are involved in securities margin trading business (if have) | The top 10 shareholders are not involved in securities margin trading business. | |||||
4)Changes in controlling shareholders or actual controllers
Changes in the controlling shareholders during the report period
□Available?Not available
There is no change in the controlling shareholders during the report period.
Changes in the actual controllers during the report period
□Available?Not available
There is no change in the actual controllers during the report period.
5)Total number of preferred shareholders of the Company and shareholding status of the top 10 preferred shareholders
□Available?Not available
There is no shareholding status of preferred shareholders during the report period.
6)Situation of corporation bonds
Whether or not there are the Company’s corporation bonds issued in public and listed in the stock exchange, but not due on the issuance dateapproved in the semi-annual report or failing to pay in full on the due dateNo.
3. Management Discussion and Analysis
1) Brief introduction of operation situation during the report period
Whether the Company need to comply with the disclosure requirements of a particular industryThe Company is not required to comply with the disclosure requirements of special industries, andthe operating conditions during the report period are as follows:
①Summary
During the report period, affected by many factors such as the slowdown of domestic economicgrowth, increased uncertainty caused by Sino-US trade frictions and COVID-19 epidemic, domesticwine consumption has experienced a sharp decline, and market competition is very fierce. The salesof both domestic wine and imported wine continued the “double decline” trend over the past twoyears. Some wine production and operation enterprises got into trouble. Facing quite a lot ofunfavorable factors, while taking the protection of the health of employees and cooperative partnersas the top priority of the work, the Company actively resumed all aspects of work based on theunified arrangements of the state and the actual situation. The Company insisted in taking the marketas the center, insisted the development strategy of “Focus on high quality, Focus on middle-and-highlevel, Focus on big product” and the marketing concept of “Increasing sales from the terminal andcontinuously-cultivated consumers” without wavering, and strove to promote product sales. In thefirst half year, the Company realized the business income of CNY 1,401.61 million with ayear-on-year decrease of 45.21% and the net profit attributable to shareholders of the parentcompany realized CNY 307.04 million with a year-on-year decrease of 49.12%. During the reportperiod, the Company mainly did following work:
Firstly, the Company bended over backwards to raise anti-epidemic materials, carried out theprevention and control measures, and fight against the epidemic. After the outbreak, the Companyimmediately formulated relatively strict epidemic prevention and control measures, regulatedresponsibilities at various levels, paid close attention to relevant policies and measures and epidemicdevelopments, and conducted publicity and guidance work to employees and partners throughvarious tools such as WeChat, in order to guide them to respond correctly, not to be panic, not tobelieve and spread rumors and to spread positive energy. By contacting overseas acquisitioncompanies and overseas partners, the Company purchased large numbers of anti-epidemic materialssuch as masks and protective clothing that are shortage in domestic from eight countries includingAustralia, Spain, Chile, France, South Korea, Japan, Malaysia and Thailand, and also provided alarge amount of anti-epidemic materials to the Company’s overseas enterprises when the foreignepidemic situation is severe, better meeting the anti-epidemic needs of domestic and foreignemployees and partners.
Secondly, the Company vigorously assisted distributors to accelerate product sales. After theoutbreak of the epidemic, due to the drastic reduction in dinner gatherings and the slowdown in salesof alcoholic beverages, there were greater pressures on distributors’ inventory. The Companyactively took efforts to make measures and maintained daily communication with distributorsthrough calls, SMS, WeChat, FaceTime, etc. to keep abreast of the market situation and to ensure the
normal development of business to the greatest extent. After the country released the restrictions onpersonnel flow, the Company’s marketing team seized various opportunities and rushed to the frontline of the market to carry out marketing activities within the scope of the policy and make greatefforts to promote product sales, alleviating the pressure on distributors’ inventory and funds andensuring the healthy operation in sales channels.
Thirdly, the Company re-marked brand positioning, focused on strategic brands and improved brandmanager system. The Company divided the brands of all kinds of alcoholic products into four levels,strategic brand, key brand, cooperative brand and independent brand, according to the resource input,team input and future pursuit goals. Among them, the strategic brand is the brand built with thestrength of the whole company, which will be promoted by the main sales team and is the mainbrand for future sales growth; the key brand is the brand that remains the current investment andpolicies basically unchanged; the cooperative brand is the brand that the company does not invest inresources and basically does not use the power of the sales team, which grows mainly in virtueof external forces and through actively seeking cooperation with large businessmen. For domesticwine, the Company formed 7 brand manager systems, containing Moser, AFIP and Golden IceValley, Castel and Baron Balbon, Rena Castle, Noble Dragon, Zenithwirl and J-Lormin. For Brandy,the Company formed a marketing department system for four major brands including Koya,Five-star, Mminni and Pagese. For imported wine, the Company has formed four brand teamsincluding Kilikanoon, Indomita, Atrio and Mirefleurs. The Company reviewed, summarized,evaluated and improved the marketing contents provided by each brand manager in order topractically guide the market, preliminarily improving the creation and implementation of marketingcontents of each brand system.
Fourthly, the Company correctly understood the market development situation and further improvedthe marketing system. During the report period, with the rapid development of IT and the push fromCOVID-19, “online shopping” accelerated to replace “offline shopping”, “experiential scenario”accelerated to replace “traditional physical shop”, “online customer acquisition mode” accelerated toreplace “traditional customer acquisition mode”, and “online office” accelerated to replace“traditional office”. In order to better adapt to the new market development trends, whileconsolidating the advantages of traditional channels, the Company vigorously promoted digitalmarketing transformation, made better use of blockchain technology, exploited new ways forconsumers to interact deeply online and widely attract member customers by virtue of the brandapplet and Smart Retail Mall applet developed by Tencent in order to further enhance customerstickiness, empower distributors, conduct offline diversion for them, provide big data analysis forregional consumers and accelerate the integration of online and offline businesses. Adopting the ideaof “Establishing images and maintaining price system for nationwide brands, focusing on sales ofbrands owned by E-commerce company”, for Noble Dragon, the Company proposed to adopt theonline mode of “1+4” that made the sales in existing E-commerce company continue growingstronger and bigger and newly developed four major online enterprises and launched four individualsets of products to be sold online; for Brandy and Zenithwirl, the Company adopted the mode of“Mainly based on big online enterprises and supplemented by the E-commerce company” to strive toexpand the scale of online sales.
Fifthly, the Company continued strengthening quality management and continuously improvedproduct quality. In accordance with the quality improvement programme, the Company increasedinvestment in key links and key equipment affecting product quality. It established brand winemakersystem, completed the selection and appointment, salary settings and work procedures settings ofwinemakers at all levels, clarified the core requirements of winemakers at all levels in product shelflife, blind tasting result, international awards, external quality and presentation ability, and signedwork commitment letter with every winemaker to further clarifying the quality improvementresponsibilities of winemakers, giving full play to the professional potential of winemakers. Itstrengthened the integration of both global raw materials and global winemakers and selectedfirst-class outsourcing design companies for product appearance design to reach the requirement of“not stunning, not to public”. Besides that, the Company established a dual quality evaluation systemof internal quality management departments plus external consumers to evaluate the quality in anall-around way and connected the evaluation results with the income of the person in charge ofproduction.
Sixthly, the Company strengthened financial management and internal audit to prevent operationalrisks. During the report period, the Company mainly strengthened capital management, budgetmanagement and tax planning, reduced capital occupation, improved capital turnover efficiency andenhanced the pertinence and effectiveness of budget management. It further improved the financialmanagement system for overseas enterprises and focused on monitoring the cash flow to avoid debtrepayment risks. It conducted special audit in key expenses, conducted off-office audit in keypersonnel, conducted settlement audit in technological transformation and infrastructure projects,and investigated personnel accountable for economic losses, ensuring the full implementation of theCompany’s management and control system. It also conducted a comprehensive investigation,statistic and analysis to the inventory of Changyu products held by distributors, which providedimportant decision-making basis for operating management.
Seventhly, the Company accelerated the reform of employment system and improved the capacity ofthe team. During the report period, the Company implemented the employment strategy of “Strictlycontrol the number of new recruits and release the restriction in demission”, raised the standards foremploying new recruits, adopted the mode of “survival of the fittest”, and improved the overallcapacity of the sales team through “upgrade, simplification and absorption”.
In order to achieve the business objectives set by the Company at the beginning of the year, theCompany will focus on following work in the second half of 2020:
Firstly, the Company will take “pursuing market health” as the top priority to implementdistributor-level code scanning during inbound and outbound and establish the timely reporting andmonitoring system for distributors’ inventory. It will establish “limited quantity” and “reducedquantity” rules to distributors selling core products, which will be associated with cross region sales,sales at low price and online sales and so on. In addition, the Company will strengthen the flightaudit in allopatric warehouses, cost and distributors’ inventory. It will also vigorously continuepromoting the order-driven system to prevent malicious cross region sales, sales at low price andillegal online sales so as to maintain the overall stability and smoothness of the Company’s sales
system.
Secondly, the Company will further clarify brand and product positioning, clearly divide strategicbrands, key brands, cooperative brands and independent brands, formulate marketing scheme basedon “life taste+ health concepts+ consumption guidance”, distribute market resources on the basis ofbrand positioning and do well in brand building and new product market cultivation in order to betterplay the role of different brands in promoting and driving product sales.
Thirdly, the Company will strengthen the marketing assessment, determine market personnel’sincome, promotion and dismission through considering the market health degree and the indicatorassessment results, adhere to the assessment of proportion of salary in sales amount and proportionof sales expense in pre-tax sales amount, and promote the integration of regional logistics anddistribution center in order to better control the market costs.
Fourthly, the Company will further improve the brand winemaker system and continue significantlyimproving product quality. It will take the best-selling product in domestic and overseas at thesimilar price as the benchmark, strive to realize a comprehensive surpassing in product quality andcost performance.
Fifthly, the Company will accelerate the pace of digital marketing transformation, work closely withTencent and other outsourcing units to do well in the production of products integrating“anti-cross-region-sales code + marketing code + anti-counterfeiting code”, launch brand applet andSmart Retail Mall applet and strengthen cooperation with major online business so as to constantlyexpand the sales scale of the Company’s online products.
Sixthly, the Company will implement the Youth Excellent Talent Plan and adopt the way of “tutorleading apprentices” for tracking and training to provide more job exchanges and market practiceopportunities for outstanding talents, which will enhance working ability and broaden promotionchannels.
Seventhly, the Company will scientifically formulate the procurement plan of grapes and other rawmaterials according to the industry development trend and the Company’s future development inorder to fully complete the procurement work of raw materials this year.
②Analysis of main business
i. Change in major financial data on year-on-year basis
Unit: CNY
| In the report period | In the same period of last year | More or less (%) | Reason for changes | |
| Operating revenue | 1,401,606,792 | 2,558,274,785 | -45.21% | Mainly owing to the year-on-year decrease in sales volume affected by COVID-19 epidemic |
| Operating costs | 574,650,677 | 936,252,225 | -38.62% | Mainly owing to the year-on-year decrease in sales volume affected by COVID-19 epidemic |
| Sales expenses | 250,531,046 | 591,970,801 | -57.68% | Mainly owing to the year-on-year decrease in marketing activities and marketing input affected by COVID-19 epidemic |
| Administration expense | 113,069,869 | 155,552,312 | -27.31% | Mainly owing to the year-on-year decrease in employee compensation, repair charge and administrative expenses |
| Financial expense | 11,961,102 | 8,789,583 | 36.08% | Mainly owing to the significant year-on-year increase in long-term loan |
| Income tax expense | 109,689,969 | 210,281,578 | -47.84% | Mainly owing to the significant year-on-year decrease in total profit caused by the reduce in profitability affected by COVID-19 epidemic |
| Net cash flow from operating activities | -29,652,821 | 499,476,006 | -105.94% | Mainly owing to the significant year-on-year decrease in received cash from selling products and providing labor service affected by COVID-19 epidemic |
| Net cash flow from investment activities | -39,726,131 | -114,534,608 | 65.32% | Mainly owing to the significant year-on-year decrease in the cash outflow for investment activities including purchase and construction of fixed assets and fixed time deposit etc |
| Net cash flow from financing activities | 4,704,625 | -18,128,357 | 125.95% | Mainly owing to the year-on-year increase in received cash from obtaining bank loan |
Net increased amount ofcash and cash equivalents
| Net increased amount of cash and cash equivalents | -64,982,286 | 366,866,743 | -117.71% | Mainly owing to the significant year-on-year decrease in received cash from selling products and providing labor service affected by COVID-19 epidemic |
ii. Composition of operating revenue
Unit: CNY
| This report period | The same period of last year | Year-on-year increase or decrease (%) | |||
| Amount | Proportion in operating revenue | Amount | Proportion in operating revenue | ||
| Total operating revenue | 1,401,606,792 | 100% | 2,558,274,785 | 100% | -45.21% |
| Sector-classified | |||||
| Sector of liquor and alcoholic beverage | 1,401,606,792 | 100% | 2,558,274,785 | 100% | -45.21% |
| Product-classified | |||||
| Wine | 993,972,425 | 70.92% | 1,928,554,268 | 75.38% | -48.46% |
| Brandy | 372,909,239 | 26.61% | 563,451,068 | 22.02% | -33.82% |
| Tourism | 22,217,264 | 1.59% | 42,604,382 | 1.67% | -47.85% |
| Others | 12,507,864 | 0.89% | 23,665,067 | 0.93% | -47.15% |
| Area-classified | |||||
| Domestic | 1,183,622,477 | 84.45% | 2,330,780,056 | 91.11% | -49.22% |
| Overseas | 217,984,315 | 15.55% | 227,494,729 | 8.89% | -4.18% |
iii. The cases of industry, product or area accounting for over 10% in the Company’s operating revenue or operating profits
Unit: CNY
| Operating revenue | Operating cost | Gross margin | Year-on-year increase or decrease (%) of operating 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 | 1,401,606,792 | 574,650,677 | 59% | -45.21% | -38.62% | -4.40% |
| Product-classified | ||||||
| Wine | 993,972,425 | 397,080,517 | 60.05% | -48.46% | -41.62% | -4.68% |
| Brandy | 372,909,239 | 164,881,016 | 55.79% | -33.82% | -28.22% | -3.45% |
| Tourism | 22,217,264 | 6,492,009 | 70.78% | -47.85% | -47.25% | -0.33% |
| Others | 12,507,864 | 6,197,135 | 50.45% | -47.15% | -56.10% | 10.10% |
| Area-classified | ||||||
| Domestic | 1,183,622,477 | 442,340,877 | 62.63% | -49.22% | -44.09% | -3.43% |
| Abroad | 217,984,315 | 132,309,800 | 39.30% | -4.18% | -8.84% | 3.10% |
Explanation on the causes of over 30% year-on-year changes of the related comparison dataDuring the report period, the Company’s operating revenue and operating costs, as well as the operating revenue and operating costs of wine,brandy, tourism and domestic business, all decreased significantly over the same period of last year, mainly due to the decline in the salesvolume of products affected by COVID-19 epidemic.
③ Assets and liabilities situation
i. Major changes in assets
| The end of this report period | The end of the same period of last year | Proportion increase or decrease (%) | Explanation for major changes | |||
| Amount | Proportion in the total assets (%) | Amount | Proportion in the total assets (%) | |||
| Monetary funds | 1,476,207,055 | 11.11% | 1,848,632,953 | 13.81% | -2.70% | Mainly owing to the year-on-year decrease in the cash inflow for operating activities affected by COVID-19 epidemic |
| Account receivable | 167,738,633 | 1.26% | 186,131,192 | 1.39% | -0.13% | No major change |
| Inventory | 2,936,133,260 | 22.10% | 2,606,781,436 | 19.48% | 2.62% | Mainly owing to the year-on-year increase in work-in-process including bulk wine at the end of report period |
| Investment real estate | 28,344,687 | 0.21% | 30,560,470 | 0.23% | -0.02% | No major change |
| Long-term equity investment | 42,810,445 | 0.32% | 0 | 0% | 0.32% | Mainly owing to the establishment of SAS L&M HOLDINGS |
| Fixed assets | 5,818,499,845 | 43.79% | 5,684,612,653 | 42.48% | 1.31% | Mainly owing to the transfer-in of construction in process during the report period |
| Construction in process | 647,036,593 | 4.87% | 789,872,373 | 5.90% | -1.03% | Mainly owing to the transfer of construction in process into fixed assets during the report period |
| Short-term borrowing | 737,183,701 | 5.55% | 678,170,667 | 5.07% | 0.48% | Mainly owing to the increase in short-term bank loan in the second half year of last year |
| Long-term loan | 218,613,336 | 1.65% | 165,949,250 | 1.24% | 0.41% | No major change |
ii. Limitations of assets rights up to the end of the report period
For the limitations of assets rights up to the end of the report period, please refer to Announcementon External Guarantee (Announcement no.:2016- temporary 021), Announcement on ExternalGuarantee (Announcement no.:2018- temporary 020), Announcement on External Guarantee(Announcement no.:2019- temporary 038) and Announcement on Guarantee provided by SpanishAtrio Company for Bank Loan (Announcement no.:2020- temporary 013) disclosed on ChinaSecurities Journal, Securities Times and CNINFO (http://www.cninfo.com.cn/).
(2) Items related to financial report
①Compared with the financial report of the previous accounting period, explanation for thechanges of accounting policy, accounting estimation and accounting method
?Available□Not availableDuring the report period, the Company made changes to the accounting policy implemented for“Income” in accordance with the relevant regulations of the Ministry of Finance. For otherinformation about changes in accounting policy, please refer to Announcement on Changes inAccounting Policy (Announcement no.: 2020- temporary21)
②The situation explanation for the correction of major accounting errors which need to beretrospect and restated during the report period
□Available?Not available
There is no situation for the correction of major accounting errors which need to be retrospect andrestated.
③Compared with the financial report of the previous accounting period, explanation for thechanges of the consolidated statements scope
?Available ?Not availableThere is no change of consolidated statements scope during the report period.
Yantai Changyu Pioneer Wine Co., Ltd.
Board of Directors August 28
th
, 2020