Annual Report 2021 Abridgement
Hengli Petrochemical Co., Ltd.
Company Code: 600346
Dear shareholders, partners and employees:
The tides of Bohai Sea have brought warmth to the springy Northern country.Despite occasional coldness, the changing seasons have marked the inevitable passageof time.
The hardships we have experienced last year were partly expected and partlyunexpected. We have expected that the Covid-19 pandemic would recur, geopoliticalconflicts would continue, and the world economy would be sluggish. However, thefrequency of pandemic recurrence, the depth of the conflicts, and the difficulty ofeconomic recovery were still beyond our expectations. The chill was felt by everyindividual at this juncture of profound changes unseen in a century.
However, hardships are, in themselves, a kind of growth and experience, aninevitable path towards realizing great dreams. We must overcome the difficulties ofthe present in order to achieve a better future.
“Misfortune may be a blessing in disguise.” During this chess game whichfeatures both “crisis” and “opportunity”, “the unchanged” and “changes”, andlockdown and opening-up, the pioneering Hengli people have made each move withdeliberation to prepare for crises in advance and seize opportunities when they come,to seek innovation in the unchanged and remain composed during changes, and tomeditate during lockdown to pursue a brighter future during opening-up. This yearhas witnessed Hengli sailing farther away through the rise and fall of history.
However arduous and long the journey is, it will eventually be accomplished.Against the backdrop of profound changes unseen in a century intertwined with theCovid-19 pandemic, Hengli is willing to be as hard-working as “old cattle” to developits main businesses, achieve critical breakthroughs, deploy the innovation chainaround its industrial chain, and vice versa. During this year, we have promoted the“dual circulation strategy” and focused on developing the real economy, puttinginto operation the 200kt industrial yarn project of Hengli Chemical Fiber, as well asthe polyester film project and degradable plastic project of Kanghui New Material.Hengli (Huizhou) Industrial Park, Hengli Refining and Chemical Fine Chemical ParkPhase I Project, and Hengli (Yangtze River Delta) International New MaterialsIndustrial Base have started construction. The PBS biodegradable plastic project withan annual output of 900kt and the lithium battery diaphragm project with an annualoutput of 1.6 billion square meters have been successively launched. The business
ANNUAL REPORT
2021
layout of the five major industrial chains has begun to emerge. We have carried out agroundbreaking reform to overcome the shortcomings of the industry. We havebecome the second company in the world and the first in China that is able to produce12-micron silicon-coated release laminated lithium battery protective film on line.Our production of MLCC release base film accounted for over 65% of the nationaltotal, and our high-purity tetrahydrofuran (THF) has been used in the innovativeresearch and development of drugs to treat Covid-19. Our self-developed Henglinkindustrial Internet platform has been rated as a “demonstration project” by theMinistry of Industry and Information Technology and selected as a provincialindustrial Internet platform in Liaoning Province. We have applied for 700 patentedtechnologies, with cutting-edge technologies in multiple industries. We haveattached equal importance to environmental protection and intelligentmanufacturing to achieve leading efficiency. As a petrochemical company,despite owning large-scale equipment, Hengli still insists on environmental protectionand intelligent manufacturing throughout its manufacturing process. Since HengliPetrochemical, Hengli Refinery, and Hengke New Material were awarded “NationalGreen Factory” in 2017 and 2020 respectively, Hengli Chemical Fiber was alsoawarded in early 2022. So far, four companies under Hengli have been awarded“National Green Factory”. We have always embraced gratitude and responsibility,and stayed true to our mission since we first started business. Hengli has activelysupported poverty alleviation, student aid and disaster relief among other publicwelfare projects. Our efforts have paid off as in 2021, Hengli made it to the “Top 100Global Enterprises”, won the “National Labor Day Medal”, and achieved gratifyingannual operating data: our annual operating income amounted to RMB197.97 billion,a year-on-year increase of 29.2%; our annual profit amounted to RMB15.53 billion, ayear-on-year increase of 15.37%.Data and honors speak louder than words. They testify to Hengli’s strongmomentum and resilience. However, as we are happily sharing our achievements, wealso know that “a single feather cannot support a roc, just as a single foot cannotsupport a horse.” It is thanks to the national strategic guidance and the support of allshareholders, partners and employees that Hengli can make it this far. Therefore,Hengli has distributed RMB7.02 billion in dividends to repay its shareholders. Thefourth phase of its employee stock ownership plan has earned three times of return,
ANNUAL REPORT
2021
and a new phase of employee stock ownership plan with a larger scale and a widerscope has been launched. We hope that the benefits of development can be shared byall Hengli people.The journey is long and arduous, and we must take every step earnestly. Thenew era has sent us a beautiful invitation but also brought us all kinds of difficulties.At present or in the future, there are going to be challenges for the development of thenation, businesses and households. As we are aware of the close relation between therise and fall of a company and that of a nation, Hengli will always keep the nation onits mind and concentrate on its mission to serve the country.The patriotism of entrepreneurs can take many forms, but the first and foremostis to run a first-class company. Based on the domestic and international environment,for 2022, Hengli has clearly set the path to “lead development with talents and createthe future with innovation”. In the new year, we must be "talent-oriented" andestablish talent leadership. We will create a working environment that recognizes,loves and respects talents, improve the talent pool development mechanism featuring“talent attraction, utilization, retention and training”, and establish a leader trainingand evaluation system oriented by responsibility, ability and contribution. In this way,we can ensure endless brainpower for corporate development. We will adopt adual-motor system driven by efficiency and innovation, advocate a pragmatic,active and intelligent way of working, and encourage hard work, enthusiasm anddetermination. We will advocate a working attitude of being preemptive,time-sensitive, and effective, and dedicate ourselves to building a “learning-oriented,innovative and technological” national enterprise. We will continue to increaseinvestment in research and development by encouraging our employees to innovateand promoting their intrinsic motivation to boost both quantity and quality inscientific research. Meanwhile, we will also strengthen cooperation with domestic andforeign universities, research institutes and major international enterprises, and solicittheir resources to achieve innovative breakthroughs. We will “get the big picturewhile also addressing the finest detail" to achieve progress against all odds. In theface of the complex and intense external environment, we will “get the big picture”strategically by focusing on both international and domestic markets and the five mainsectors and industrial chains; we will also “address the finest detail” tactically byworking on our business essentials featuring “quality, cost effectiveness and
ANNUAL REPORT
2021
responsiveness”. We will improve the construction of the six major systems includingsafety and environmental protection management system, financial security system,talent development system, quality management system, big data and informationsystem, and corporate culture system, and will make efforts in party construction,anti-corruption, and caring for employees.
Granted, the journey ahead will never be smooth, especially one that is againstthe current and amid stormy waves. Looking forward, Hengli firmly believes thatthere are unprecedented opportunities hidden in the “profound changes unseen in acentury”, and that it is the best time to forget ahead with diligence.As long as we march forward regardless of wind and storms, we willeventually see the light at the end of the tunnel. Hengli has built itself “from a dropof oil and a piece of cloth". It started from a small textile factory with only three acresof land to an international company with nine production bases. We have gonethrough all kinds of bitterness and hardships to where we are. As we are sailing in themiddle of the stream, we see that beyond the turbulent wind and waves, there is abright future awaiting.“The broader the future, the more we need to explore.” Based on the currentachievements, Hengli will strengthen its efforts to create a "new highland" for talents,scale new heights in efficiency improvement, achieve breakthroughs in the qualityand quantity of research and development, and make tangible efforts in ensuring safeproduction. Looking forward, Hengli will continue on the path featuring “high quality,low energy consumption, and green and intelligent development”, focus its effortswithin the industry, and enhance the leading role of innovation, so as to live up to theardent expectations of the nation.Together, we will conquer mountains and seas to make great achievements!
Chairman:
ANNUAL REPORT
2021
Reference FileDirectory
representative, person in charge of accounting, and person in
| charge of the accounting organization (accounting supervisor). |
| Original audit report sealed by the accounting firm and signed and sealed by a certified public accountant. |
| Original copies of all company documents and announcements publicly disclosed during the reporting period. |
ANNUAL REPORT
2021
Chapter Ⅰ Definitions
In this report, the terms listed below are defined as follows, unless the context otherwise implies:
| Definition of Frequently-Used Terms | ||
| Reporting Period | Refers to | From 1 January 2021 to 30 June 2021 |
| Company, the Company, or Hengli | ||
Petrochemical
Refers to Hengli Petrochemical Co., Ltd.CSRC Refers to China Securities Regulatory Commission
Technology
Refers to Ministry of Industry and Information Technology of the
People's Republic of China
| Ministry of Industry and Information | ||
| SSE | Refers to | Shanghai Stock Exchange |
| Company Law | Refers to | Company Law of the People's Republic of China |
| Securities Law | Refers to | Securities Law of the People's Republic of China |
Articles of Association Refers to Articles
Ltd."
| of Association of Hengli Petrochemical Co., | ||
| Hengli Group | Refers to | Hengli Group Co., Ltd., controlling shareholder of the |
listed companyHailaide Refers to Hailaide International Investment Ltd., person acting-in-
company
| concert with controlling shareholder of the listed | ||
| Tak Shing Li | Refers to | Tak Shing Li International Holdings Ltd., person |
acting-in-
Hegao Investment
Refers to
| concert with controlling shareholder of the listed company |
| Jiangsu Hegao Investment Co., Ltd., person |
acting-in-
listed companyHengneng Investment
Refers to
| concert with controlling shareholder of the |
| Hengneng Investment (Dalian) Co., Ltd., person |
acting-in- concert with controlling s
listed company
| hareholder of the | ||
| Hengfeng Investment | Refers to | Hengfeng Investment (Dalian) Co., Ltd., person |
acting-in-
| concert with controlling shareholder of the listed company | ||
| Hengli Chemical Fiber | Refers to | Jiangsu Hengli Chemical Fiber Co., Ltd., subsidiary to |
the listed company
Power
| Susheng Thermal | Refers to | Suzhou Susheng Thermal Power Co., Ltd., subsidiary to |
the Hengli Chemical Fiber, sub-subsidiary to the listed
| company | ||
| Hengke Advanced |
Materials
| Refers to | Jiangsu Hengke Advanced Materials Co. Ltd, subsidiary |
to the Hengli Chemical Fiber, sub-subsidiary to the listed
ANNUAL REPORT
2021
companyDeli Chemical Fiber Refers to Jiangsu Deli Chemical Fiber Co., Ltd., subsidiary to the
Hengli Chemical Fiber, sub-
companyKanghui New Material Refers to Formerly known as Yingkou Kanghui Petrochemical Co.,
Ltd., subsidiary to the listed company, now renamed as
Kanghui New Material Technology Co., Ltd.
subsidiary to the listedHengli Petrochemical
Chemical
| Hengli Petrochemical | Refers to | Hengli Petrochemical (Dalian) Chemical Co., Ltd., |
subsidiary to the listed company
| Hengli Investment | Refers to | Hengli Investment (Dalian) Co., Ltd., subsidiary to the |
listed company
(Dalian)
Refers to
| Hengli Petrochemical | Hengli Petrochemical (Dalian) Co., Ltd., subsidiary to |
the Hengli Investment, sub-
company
| subsidiary to the listed | ||
| Hengli Petrochemical |
(Huizhou)
| Refers to | Hengli Petrochemical (Huizhou) Co., Ltd., subsidiary to |
the Hengli Investment, sub-subsidiary to t
company
| he listed | ||
| Hengli Petrochemical |
Refining
| Refers to | Hengli Petrochemical (Dalian) Refining Co., Ltd., |
subsidiary to the listed companyCrude Oil Refers to Crude oil is petroleum directly exploited from an oil well
without being processed and is a dark-
dark-
| green viscous liquid or semisolid flammable |
substance that is composed of various hydrocarbons.Aromatic Hydrocarbon
Refers to A hydrocarbon containing a benzene ring structure in its
b
| enzene, methylbenzene, xylene, etc., are one of the |
most important basic raw materials for the production of
Ethylene Refers to A compound consisting of two carbon atoms and four
hydrogen atoms. It is the basic chemical raw material of
| petrochemicals. |
| synthetic fiber, synthetic rubber, synthetic plastic |
(polyethylene and polyvinyl chloride), synthetic ethanol
(alcohol), and also used in manufacturing chloroethylene,
ethanol, and explosives, etc.
| styrene, ethylene oxide, acetic acid, acetaldehyde, | ||
| Polyethylene | Refers to | A thermoplastic resin produced by polymerization of |
ethylene. Polyethylene is odorless and non-
feels like wax, has excellent low-temperature resistance,
good chemical stability, and resistance to erosion of most
acid and alkali.Polypropylene (PP) Refers to A semi-crystalline synthetic resin material, with strong
acid and alkali resistance, excellent electrical insulation
capacity, harder character, and higher melting point than
PE.
ANNUAL REPORT
2021
Styrene
Refers to An organic compound which is usually a colorless but
aromatic liquid, mainly used in the production of plastic,resin, and rubber.Butadiene Refers to An organic compound which is a colorless gas with a
production of synthetic rubber.
| distinctive odor is the main raw material in the | ||
| Paraxylene (PX) | Refers to | A kind of aromatic hydrocarbon, which is a colorless and |
transparent liquid, and is a raw material in the production
manufacturing plastic, polyester fiber, and film.
| of purified terephthalic acid (PTA), used for | ||
| Purified Terephthalic |
Acid (PTA)
| Refers to | A white crystal or powder at room temperature, |
non-toxic and flammable, which will burn as soo
| n as catching fire if mixing with air to a certain degree. | ||
| Ethylene Glycol (MEG |
or EG)
| Refers to | A colorless, odorless, sweet, viscous liquid, mainly used in the production of polyester fiber, antifreeze, |
unsaturated polyester resin, lubricant, plasticizer,
| non-ionic surfactant, and explosive. | ||
| Acetic Acid |
| Refers to | An organic compound which is a colorless liquid with a |
pungent odor and is the raw material for the productionof rayon, filmstrip, aspirin, etc.
Chip or PET
Refers to
| Polyester, Polyester | Polyethylene Terephthalate, or Polyester or PET, is a |
fiber-
condensation polymerization. Fiber-grade polyester chips
| are used for producing polyester staple fibers and |
polyester filament yarn, while film-grade chips are usedfor producing all categories of film products.
| PBAT | Refers to | Poly (butylene adipate-co-terephthalate), or PBAT, is a |
petrochemical-
biodegradability and is an
| active material in biodegradable plastic research with broad market |
application.PBS Refers to Polybutanediol succinate, or PBS, is polymerized from
succinate acid and Butane-1,4-diol (BDO), with sound
performance. It is a typical fully biodegradable material
easy to be decomposed and metabolized by a variety of
natural microorganisms or enzymes in animals and plants
and finally decomposed into carbon dioxide and water.Polyester Fiber Refers to
| thermal performance and mechanical processing |
| A synthetic fiber made of polyester formed by |
polycondensation of organic diacid and dihydric alcohol
by spinning. The indus
polyester fiber is made from PET and is known as dacron
in China. It is the top major variety of synthetic fiber at
ANNUAL REPORT
2021
present.PolybutyleneTerephthalate (PBT)
Refers to
Butane-1,4-diol, which can be prepared by the methods
| of transesterification or direct esterification through |
polycondensation. PBT and PET together are known as
thermoplastic polyesters.
PolyethyleneTerephthalate (BOPET)
| Biaxially-Oriented | Refers to | BOPET has the characteristics of high strength, good rigidity, transparency, high gloss, etc., with excellent wear resistance, folding resistance, pinhole resistance and tear resistance, minimal thermal shrinkage, and |
sound antistatic property.Denier (D) Refers to 9,000-meter fiber weighs 1 gram and is called 1 denier
(D).
(PFY)
| Polyester Filament Yarn | Refers to | Balls wound by filament yarn of more than 1 km in |
length.
Textile Yarn
| PFY for Civil Use, | Refers to | PFY used for clothing and household textile. |
PFY for Industrial Use,
Refers to Polyester macrofiber in large denier with strong strength
| Industrial Yarn | and high modulus for industrial use. | |
| Differential Fiber | Refers to | A new fiber variety that is differentiated from normal |
varieties with
performance, or with certain special properties, mainly
| used for improving wearability, through chemical |
modification or physical deformation.POY Refers to Pre-oriented yarn, or partially oriented yarn (POY), is
partially drawn PFY obtained by high-
with orientation between the unoriented yarn and the full
drawn yarn.DTY Refers to
| speed spinning |
| Draw textured yarn (DTY) is made of POY through |
drawing and false twist texturing, usually with certain
elasticity and contractibility.
| FDY | Refers to | Full Drawn Yarn (FDY), is a synthetic fiber filament |
further prepared by the spinning and drawing process.
The fiber has been fully drawn and can be directly used
for textile processing.
ANNUAL REPORT
2021
Chapter II Company Profile and Main
Financial Indicators
I Main Accounting Data
Unit: million RMB2021 2020
Previous Year (%)
2019
| Increase/Decrease over the Same Period of the | ||||
| Operating Income | 197,970.34 | 152,373.40 | 29.92 | 100,782.37 |
| Net Profits Attributable to Shareholders of the Listed |
Company
15,531.08 13,461.79 15.37 10,025.18
Non-
| recurring Gains and |
Losses
14,520.70 12,874.32 12.79 9,275.61
Operating Activities
18,670.17 24,142.88 -22.67 16,936.97
The End of2021
The End of2020
Increase/Decrease at the
End of CurrentReporting PeriodCompared to the End of
| Net Cash Flow from | ||
| Previous Year (%) |
The End of
2019
Company
57,231.38 46,905.08 22.02 36,333.00Total Assets 210,296.23 191,028.73 10.09 174,377.54
II Main Financial Indicators
Main Financial Indicators 2021 2020
Increase/Decrease over the
Net Assets Attributable toShareholders of the ListedSame Period of the
Previous Year (%)
2019
| Same Period of the | ||
| Basic EPS (RMB/Share) |
2.21 1.92 15.10 1.44
2.21 1.92 15.10 1.44
ANNUAL REPORT
2021
Basic EPS after DeductingNon-
Losses (RMB/Share)
2.07 1.83 13.11 1.33ROEWA (%)
30.07 32.55
2.48 Percentage Points
Decreased
31.77
Recurring Gains andROEWA after Deducting
Non-Recurring
| Gains and |
Losses (%)
28.11 31.13
3.02 Percentage Points
Decreased
29.41
III. 2021 Main Financial Data by Quarter
Unit: million RMB
(Jan – Mar)
| First Quarter | Second Quarter |
(Apr – Jun)
(Jul – Sep)
| Third Quarter | Fourth Quarter |
(Oct – Dec)
| Operating Income | 53,230.99 | 51,343.49 | 46,914.11 | 46,481.76 |
| Net Profits Attributable to |
Shareholders of the ListedCompany
4,111.08 4,531.13 4,069.75 2,819.12Net Profits Attributable toShareholders of the ListedCompany after DeductingNon-
Losses
3,757.71 4,508.42 3,748.90 2,505.66
| recurring Gains and |
| Net Cash Flow from |
Operating Activities
5,982.60 10,197.49 3,308.83 -818.74
IV. Items and Amount of Non-recurring Profits and Losses
Unit: RMBNon-recurring Profit and Loss Items Amount in 2021 Amount in 2020 Amount in 2019Profit or loss from disposal of
1,788,290.01
-2,353,388.34 -10,313,930.53
| non-current assets |
| Tax refund or exemption approved ultra vires, or without any formal |
approval, or occurred occasionally
Government subsidies included in theprofit and loss of the current period,excluding those that are closelyrelevant to the normal businessoperation of the Company, andcontinuously enjoyed by the
| Company in accordance with |
760,570,495.82 937,331,851.91 612,253,993.32
ANNUAL REPORT
2021
national policies and regulations by acertain standard quota or quantity
investment or management
| Profit or loss from entrusted asset |
133,647,150.21Current net profit or loss fromsubsidiaries formed by businesscombination under common control,from the beginning period to the
| acquisition date |
754,849.50
Profit or loss arising from investmentincome of trading financial assets,derivative financial assets, tradingfinancial liabilities and derivativefinancial liabilities of the Company,as well as investment gain receivedfrom the disposal of held-for-tradingfinancial assets, derivative financialassets, trading financial liabilities,and derivative financial liabilities,and other debt investments, inaddition to effective hedgingbusiness relevant to normal business
375,366,888.97 -158,168,853.40 266,383,453.84
| operation of the Company |
| Other non-operating incomes and |
expenses in addition to the above
-5,096,728.57 -11,127,746.48 -825,178.73
of non-recurring profit and loss
45,080,477.29 1,561,440.57
Less: effect of income tax183,394,674.73 200,533,876.52 206,150,432.59Influenced amount of the minorityshareholders’ equity (after-tax)
-16,064,003.29 -20,752,079.27 46,177,523.40
Total1,010,378,752.08 587,461,507.01 749,572,381.62
V. Items Measured through Fair Value
Unit: million RMBItem
Opening
Others that conform to the definition
balance
Closing balance Change
Influenced amount
| balance | on current profit | ||
| Derivative |
financial assets
| 361.73 | 696.43 | 334.70 | 729.75 | |
| Derivative |
financial liabilities
| 89.00 | 296.82 | 207.82 | -373.54 |
Bank’s wealth
1,288.40 20.00 -1,268.40 19.24
ANNUAL REPORT
2021
products andstructured deposits
financing
| Receivables | 4,082.39 | 3,419.96 | -662.43 | |
| Fund trust and asset management |
products
97.94 97.94 2.02
reverse repurchase
| National debt | 164.99 | 164.99 | 0.38 | |
| Total | 5,821.52 | 4,696.14 | -1,125.38 | 377.85 |
ANNUAL REPORT
2021
Chapter Ⅲ Discussion and Analysis from
the ManagementI. Discussion and analysis of the business performanceSince 2021, the global economy has been recovering in general with a pick-up inthe pace, and international trade and investment have gradually returned to normal. TheCovid-19 vaccination has been expanded around the globe, and multiple countries haverelaxed the pandemic control while implementing large-scale fiscal stimulus and easingmonetary policies. The world economy has gradually emerged from the recession underthe background. In the first half of 2021, major economies showed vigorous recovery,but when entering Q3, they have experienced a general slowdown and diverged growthrates, showing a fast growth followed by a slow one. Due to the unbalanced globalrecovery, there appeared a mismatch between supply and demand of globalcommodities, resulting in a rapid rise of inflation in the world. The increasing pressureof inflation and the crisis in supply chain and energy cannot be resolved in the shortterm. The global economic recovery and growth hence still face uncertainty. At thebeginning of 2022, the global economy continued to recover between the climbingnumber of Covid cases and price index. Thanks to the improvement of globalvaccination coverage and efficacy, the global economy is expected to show amoderate growth in 2022. However, the withdrawal of easing policies and theweakening of cyclical rebound will constrain the recovery momentum. Because ofdifferences in policy support and vaccination coverage, the “recovery gap” betweendeveloped economies, and emerging markets and developing economies will besustained, leaning towards a diverged recovery. In addition, geopolitical risks havebecome an important driving force for the recent increase in international commodityprices. After the sharp rise in 2021, international commodity prices will see anotherstrong pickup in 2022. The factors influencing the commodity market will be more
ANNUAL REPORT
2021
complex and diverse. On the whole, considering the slowdown of global economicrecovery, the accelerated tightening of monetary policy by the Federal Reserve andthe gradual restoring of the global supply chain, it is unlikely that commodity priceswill surge sharply again. However, the prices of key energy such as crude oil areexpected to keep climbing, as geopolitical events occur, inventories remain at ahistorically low level, and the increase of production in OPEC+ is less than expected.The price of some non-ferrous metals such as copper and nickel may break new highs,because the green transformation of economy results in new large demands of somemetals, and the inventories remain at a historically low level.Domestically speaking, with the pandemic and global changes both unseen in acentury, we should unswervingly do our own things well. China adheres to makingprogress while maintaining stability and high-quality development, strengthens thecross-cycle adjustment of macro policies, and enhances support for the real economy.The national economy has continued to recover its growth, and main targets of 2021have been well accomplished. The government aims to gradually change the traditionalgrowth model driven by real estate and infrastructure investment, and activelypromotes economic transformation and a new development pattern at the same time.China’s economic growth and pandemic prevention and control have maintained aleading position in the world, and its GDP has steadily reached a new level. In 2021,China’s GDP was RMB114.37 trillion, an increase of 8.1% over the previous yearcalculated at constant prices. The average annual growth rate in the past two years is
5.1%. China’s share in the global economy keeps going up, and continues to be a
critical engine that drives the world economic growth.However, China’s economy still faces short and medium-term pressure from“demand contraction, supply shocks, and weakening expectations”. “Development isthe foundation and key to solving all problems.” The Central Economic WorkConference clearly states that the policy for 2022 is to “prioritize stability whilepursuing progress”. On the one hand, China will continue to implement the strategy ofexpanding domestic demand, promote the recovery of consumption, expand effectiveinvestment, and enhance the endogenous drive for development. Our consumer market
ANNUAL REPORT
2021
remains highly resilient, with the trend of enlarging scale, upgrading structure andinnovative consumption models unchanged. Consumption growth is well supported bythe economic recovery, employment growth, increase in residents’ income and thegradual improvement of social security. On the other hand, China will continue totransform the economic structure, develop new drivers of growth, and give rein to thestrong development momentum of high-end manufacturing and high-tech integrationbased on technologically innovative industrial chains such as new energy, 5G,optoelectronic chips, integrated circuits, biotechnology, industrial Internet, andartificial intelligence, etc. China will improve the core competitiveness of themanufacturing industry, break through the bottlenecks in key areas, and enhance theresilience of the industrial chain and the supply chain.With regard to the chemical industry, the year 2021 was characterized as “highgrowth followed by low development”. In the first half, the pandemic in China wasunder control, and various industries gradually recovered and resumed work andproduction. By virtue of the support of public policies, the economy picked up, and themain chemical downstream industries also recovered significantly. The demand forchemical products kept rising and achieved high growth in the first half. The prices andprice differentials of main chemical products produced by upstream refining,coal-gasification and ethylene plants, such as PX, pure benzene, acetic acid,polypropylene, ethylene glycol, styrene, polyethylene, and butadiene, generallymaintained and kept fluctuating significantly within the range, thus leading to stableprofitability. Similar to the upstream, downstream new chemical material products alsobenefited from the increase of raw material costs and terminal demands recovery, theprofitability of polyester yarn for civil use and that for industrial use rapidly returned tonormal, and functional thin films, engineering plastics, biodegradable materials, andother under-supply materials maintained at higher prices with greater profitability.In the second half of 2021, the growth of the manufacturing industry slowed downaffected by the slump real estate and coal and electricity shortages, and the serviceindustry showed decelerated growth due to the dispersed cases of Covid. Due to theadverse factors, problems such as slowing demand growth, rising raw material costs,
ANNUAL REPORT
2021
tightening energy efficiency constraints and periodic supply and demand imbalancegradually emerged, causing the overall declining growth rate of the industry andmounting market volatility and downward pressure. As the crude oil price rose sharply,the price of crude-related products also went up accordingly, whilst the price ofchemical products for the consumer side was more dependent on their own supply anddemand changes. In the turbulent external environment where the oil price and themarket wildly fluctuated, industry leading enterprises with upstream productioncapacity, especially large-scale refining and petrochemical production capacity,demonstrated a more prominent risk-resistance and profitability along the entireindustry chain.
2021 was the first year of the “dual-carbon” actions. China has pledged toestablish and improve an economic system featuring green, low-carbon, and circulardevelopment, increase energy utilization efficiency, raise the share of non-fossil fuels intotal energy consumption, reduce carbon dioxide emissions, and enhance the carbonsink capacity of the ecosystem, so as to ensure that carbon emission peaking and carbonneutrality be achieved on schedule. The “dual-carbon” goal will transform thesupply-side structural reform and the industry, leading to a low-carbon, green, andhigh-quality development period.
Entering the new period of the “14th Five-Year Plan”, with the upstreambreakthrough, the leading companies have fostered greater operation, developmentspace, and growth possibility under an operation mode which allows in-depthcoordination and complementary operation between the platform of “major chemical”and the extension of advanced materials throughout the whole industrial chain.Meanwhile, faced with the exponential growth and huge gap in the demand foradvanced chemical materials caused by the rapid development of “new consumption”and “key & core technologies” in the future, we should make full use of the continuousempowerment of the upstream “major chemical” platform and the cumulativedevelopment of downstream advanced materials for the “bottom down” developmentof the new markets of downstream chemical materials, which will become the historicalmission and core driving force for the development of our peers in the next five or even
ANNUAL REPORT
2021
ten years, and is expected to push the leading companies’ to build achemical-materials-based industrial chain and the improvement of scarce productioncapacity, so as to serve national upgrading in advanced manufacturing and consumption,and achieve a leapfrog breakthrough and a “secondary growth curve” of long-termdevelopment under the effect of core technology, manufacturing technique, and anoverwhelming scale.
At the corporate level, the company proactively adapts to the new situation,development and changes, focuses on the national strategic transformation deploymentof the industry, continues to strengthen the basic support and development function ofthe “major chemical” platform with “refining & chemicals+ethylene+coal chemicals”as the upstream carrier, upholds and adheres to Hengli’s “innovation and R&D genes”,expands, deepens and refines our downstream advanced chemical material business,improves the R&D, and technological capacity, and raise the proportion of R&D in thedownstream sector, in order to realize the “dual circulation” of coordinateddevelopment of the “major chemical” platform and the advanced material business.
During the reporting period, the key tasks of listed companies are as follows:
1. Strengthening the basic support and development function of the “major
chemical” platform with “refining & chemicals+ethylene+coal chemicals” as theupstream carrier, with stable and flexible operation, stable functioning of majorplants, and significant synergy of the whole industrial chain model.
(1) The development of the upstream “major chemical” platform: “gaining
strength from hard work.” In Dalian Changxing Island Petrochemical Industrial Park,
ANNUAL REPORT
2021
one of the top seven petrochemical industrial parks in China, we have concentratedand efficiently built four major capacity clusters: benchmark refining and chemicalintegration project at a capacity of 20000 kta, modern coal chemical plant at acapacity of 5000 kta, the world’s largest single ethylene project at a capacity of 1500kta, and 5 sets of largest single PTA plant in the industry with a total capacity of11600 kta. We have successfully shattered the “bottleneck” in business links and rawmaterial supply in the upstream and formed a strategic support platform of “majorchemical” with a combination of “world-class chemical refineries + modern coalchemical plants” and the integration of oil, coal, and chemical. Meanwhile, as thelisted company owned 100% shares of both Hengli Refining and Hengli Chemical,our refining and chemical integration project is the only self-developed project ownedby a private company in the industry. Owning 100% of the equity and productioncapacity guarantees that the profits of our refining, ethylene, and coal chemicalbusinesses and the output of important chemical raw materials can all be owned bylisted companies and shareholders. This effectively ensures the profitability of thelisted company and the ability to control the upstream “major chemical” developmentplatform.At present, the business segments of the listed company in the midstream andupstream have been based on a processing capacity of 20,000 kt of crude oil and 5000kt of raw coal. The main production is as follows: in the aromatics process, an annualoutput of 4500 kt of PX, 1200 kt of pure benzene, and 1660 kt of PTA (5000 kt fromthe Huizhou base which is under construction). In the olefin process, we have anannual production of 1800 kt of fiber-grade ethylene glycol, 850 kt of polypropylene,720 kt of styrene, 400 kt of high-density polyethylene, and 140 kt of butadiene. In thecoal chemical process, an annual output of 750 kt of methanol, 400 kt of acetic acid,300 kt of pure hydrogen and 126 kt of liquid nitrogen. We have reserved andtransported high-end chemicals that are high value-added and in shortage withinChina, as well as midstream and upstream raw materials and additional gases to thedownstream advanced materialsindustrial chains. At the same time, we were fullyequipped with the industry’s top 520MW high-power self-provided power plant
ANNUAL REPORT
2021
(providing a large amount of low-cost electricity and steam for self-use), self-supplycrude oil terminal (2 terminals at a handling capacity of 300 kt), China’s largestrefinery self-supply crude oil tank area (storage capacity: 6000 kt crude oil), and otherutilities including finished raw material terminals and tank area storage, which greatlyreduces the production and operation costs. The refining and chemical plant, coalchemical plant, ethylene plant, and PTA plant in Changxing Island base are allconnected through the pipeline, saving a lot of intermediate costs and transportationcosts, forming a business strategic layout of a world-class petrochemical industrialdevelopment platform, and combining the matching integrated capacity andtop-equipped utility. This also lays a solid foundation of raw materials and industrialsupporting conditions for us to further develop the downstream advanced chemicalmaterials business of aromatics and olefins with advantages in scale and marketpotential.
(2) Speeding up the construction of Hengli Chemical’s advanced materials
supporting projects: we have started the construction of the advanced materialssupporting project of Hengli Chemical in Dalian Changxing Island with a totalinvestment of 2310 million yuan. We reduced the investment cost through sharing theutilities in the refining and chemical park, and used pure benzene, hydrogen, nitrogen,and carbon dioxide produced by our refining, ethylene, and coal chemical plants asthe main raw materials to produce products like adipic acid and food-grade carbondioxide. The core product of this project is adipic acid with an annual productioncapacity of 300 kt, which will further integrate and improve our whole industrialchain of degradable advanced materials of “crude oil-PTA, adipic acid- PBAT”.Adipic acid is also an important raw material for the production of nylon 66. We willalso purify the carbon dioxide exhaust gas with a concentration of higher than 95%emitted by low-temperature methanol washing equipment to 99.99%, a food grade.This process not only recovers carbon dioxide, an industrial waste gas but alsoincreases our benefits. This advanced material supporting project makes full use ofthe raw material resources provided by the upstream to further add and optimize theraw material supply structure of the “major chemical” platform, enhancing our
ANNUAL REPORT
2021
products’ output and added value. The project also improves the business system ofour whole industrial chain, and marks a substantial and important step for listedcompanies towards refining and chemical industry, fine chemicals downstream ofolefins, and deep processing of advanced materials.
(3) Operations of the “major chemical” platform: During the reporting period,
the prices of crude oil and coal witnessed ups and downs, like riding on a “rollercoaster”. The recovery of downstream demand drove up the price of downstreamchemical products, and significantly improving the price differences. In the volatileindustry environment, the company has given full play to the advantages ofsystematic coupling and technological leadership in refining & chemicals, ethyleneand supporting coal chemical plants, optimized plant operations, and timely combinedthe fluctuation of raw materials and the trend of market demand, so as to “produce oilproducts, ethylene or aromatics as appropriate”, maximizing the benefits of thecompany’s product portfolio, fully responding to market risks and changes, andachieving significant synergies between refining & chemicals and coal chemicals. Thecompany has responded flexibly by dovetailing its own advantages and adjusting itsproduct structure, struck a balance between production and sales of major products,and ensured smooth operations and stable profitability.
2. With the support of the “major chemical” platform, and by upholding
and adhering to Hengli’s “innovative R&D genes”, we expand, deepen, andrefine our downstream advanced chemical material business, and improve theR&D and technological capacity, and raise the proportion of R&D in thedownstream sector. Additionally, based on the construction of projects to buildnew materials and new energy businesses, we aim to create a “secondary growthcurve”.For the listed company, the current downstream advanced material sector ismainly distributed in high R&D businesses such as differentiated polyester fibers,functional polymer thins, engineering plastics, and PBS/PBAT biodegradableadvanced materials. With its upstream platform and downstream experiences, Henglitargets the growing demands in the advanced consumption and technological material
ANNUAL REPORT
2021
markets, boasting great potential for scaled production and high-end differentiation.Hengli is bringing its existing rapid and efficient processes and product developmentmodels into the advanced material vertices to permeate these markets. To this end, wehave already established three major materials research institutes, the Fiber ResearchInstitute, the Petrochemical Research Institute, and the Advanced Materials ResearchInstitute, dedicated to the R&D and business expansion of our advanced chemicalmaterials products.
(1) In the field of civilian PET fiber and industrial PET fiber, our subsidiaries
Hengli Chemical Fiber, Hengke New Material, and Deli Chemical Fiber are the mainproducers. They are high-tech companies with solid technical support, rich talentpools, and market reserves. At present, they boast a total production capacity of 2430kt of civilian PET fiber and 400 kt of industrial PET fiber. We follow the developmentpath of market differentiation, high-end technology, and business integration, andmake Hengli’s businesses more refined and differentiated. Hengli is currently the onlyChinese producer that can mass produce FDY products of 7D or below. In the R&Dof microfiber, the company has been at the forefront of the industry by constantlyupdating and introducing advanced technologies to make “one fiber” more fined andlead the industry. During this reporting period, Deli Chemical Fiber began massproduction of ultrafine 0.2 (D) monofilament with a specification of 15D/72f, makingit one of the finest mass-produced ultrafine fibers in China. The high-density fabricultrafine fiber 5D/6f independently developed by the Hengke New Material has thesmallest total linear density in China, suited for the IT industry, such as mobile circuitboards and electromagnetic waves shielding fabrics. For industrial PET fiber, HengliChemical Fiber’s 200kta industrial fiber project is a showcase that Hengli’s researchhas transformed into major high-tech production. The project has been put into fullproduction, for the first time, making specialized downstream industry, such as oil andgas exploration and offshore engineering, accessible to domestically produced fibers,effectively breaking the industry technology monopoly and the bottlenecks of keytechnologies in high-performance industrial yarn.
(2) In the field of functional polymer thin films and engineering plastics
ANNUAL REPORT
2021
sectors: The Company’s wholly-owned subsidiary, Kanghui New Material, is themain producer of differentiated and high-performance polymer thin films withenvironment-friendly nature and new plastic materials of a high-tech company.Through nearly a decade’s research and rapid development, Kanghui has improved itsindustrial competitiveness in mid-to-high-end functional polymer thin films andadvanced plastic materials and is now ranking among first-class of the industry. Atpresent, Kanghui has an annual production capacity of 240 kt in PBT engineeringplastics at its Yingkou Base, making it the largest PBT manufacturer in China. Its PBTis mainly used for auto parts, polymer alloys, optical cable protective sleeves,electronic appliances, and other industrial applications. It has a capacity of 385 kt ofBOPET functional polymer thin films, applied to high value-added scenarios such asBOPET optical equipment, release film liner, electronic appliances, automotivedecoration, construction and packaging. Kanghui has the largest domestic PBATannual production capacity of 33 kt by single set. The PBAT is used in greendevelopment and environmental protection such as food-grade shopping bags,tableware and straws of PBS/PBAT.
During the reporting period, through research in mid-to-high-end products,Kanghui’s high-smooth MLCC (multilayer ceramic capacitor) release base film hasbeen mass produced, and the ultra-smooth MLCC release base film process has beenfinalized. Kanghui has also received certification from Japanese and South Koreanauthorities, and small batch production of the ultra-smooth MLCC release base filmbegun. The ultra-smooth MLCC release base film has passed the technical verificationof the Japanese and South Korean authorities and will reach mass production soon.The 12-micron in-line silicon-coated release film developed by Kanghui has beenmass produced and exported, and Kanghui has become the only company in Chinaand the second in the world that can produce products of the thickness, with amonthly production capacity of more than 60 million square meters.
(3) Construction of major projects in the PET advanced material sector: On
the basis of consolidating the existing PET advanced material production capacity andcompetitiveness, and the R&D efficiency and the support of the upstream “major
ANNUAL REPORT
2021
chemical” platform, Hengli further develops its PBS/PBAT degradable advancedmaterials, high-performance industrial yarns, high-end PET film, lithium batteryseparator film and other emerging market demands and businesses. Details are asfollows:
a. The Jiangsu Xuanda Green Multifunctional Advanced Textile MaterialsProject (Hengke Phase III) with a capacity of 1500 kt is located in Nantong, Jiangsu,with a total investment of RMB9 billion. Its main project capacity includes 150 kt ofnew elastic fibers, 150 kt of environment-friendly fiber, 300 kt of cationic POY, 300kt of full-dull POY, and 600 kt of differential fiber (300 kt/year POY, 300 kt/yearFDY). After completed, the project will bring more advanced technology and addedvalue to our civilian PET fiber sector. The project is under progress in on orderlymanner. In addition, the new production capacity of 1200 kt of textile yarns in DeliPhase II and 1400 kt of industrial yarns in the Suzhou headquarters are also in theirplanning phase and will start construction once government approval and other relatedpreparatory conditions are ripe.
b. The Jiangsu Kanghui New Material Project with an annual output of 800 kt offunctional PET thin films and functional engineering plastics is located in the YangtzeRiver Delta Eco-Green Integrated Development Demonstration Zone of Fenhu,Jiangsu. The total investment is RMB11.120 billion. The construction includes 470 ktof high-end functional polyester film, 100 kt of special available polymer thin films,150 kt of modified PBT, and 80 kt of modified PBAT. The project produces productsthat are in short supply, differentiated, and high value-added in China to meet thedemands of customers for mid-to-high-end PET films and functional plastics. Afterthe project is completed, it will expand the company’s production capacity and marketshare in the PET advanced material sector.c. The 450 kt PBS biodegradable plastic project of Kanghui Dalian New Materialis built on Changxing Island, Dalian. With a total investment of RMB1.798 billion,the project features 450 kt of PBS/PBAT degradable advanced material capacity. Theproject will expand the capacity and scale of the Company’s biodegradable advancedmaterial sector and increase the market share of biodegradable plastics.
ANNUAL REPORT
2021
2021
d. The lithium-ion battery separator film project has an annual output of 1.6billion square meters. Kanghui introduced 12 wet-process production lines oflithium-ion battery separator film from Shibaura Machine Co., Ltd of Japan. andQingdao Zhongke Hualian New Materials Co., Ltd., with an annual productioncapacity of 1.6 billion square meters. The project is expected to be delivered within 18months from January 2022.
3. We implement capital and equity operations of annual cash dividends, the
fifth-phase employee stock ownership plan, share repurchase, and the plan ofissuing short-term financing bonds.
For the investors to get stable and continuous rewards and share the Company’sgrowth benefits with shareholders, Hengli completed the 2020 annual interestdistribution, and returned total cash dividends of RMB5,407,201,800 (tax included).The amount of one-time cash dividends reached a record high, in line with theCompany’s Five-Year Return Plan to Shareholders (2020-2024). The Plan presents anexpectation and mechanism to return stable rewards to shareholders.
To create a community of shared interests between employees and shareholders,the Company has awarded the main core employees of the 1500 kta ethylene project,the 2500 kta PTA-4 project, and the 2500 kta PTA-5 project with corporate stock. Wehave implemented the fifth-phase employee stock ownership plan to share withemployees the rapid development.
Believing in the company’s future development and recognition of theCompany’s value, in order to safeguard the interests of the company and shareholders,we have launched the third-phase share repurchase plan, with a repurchase fund ofRMB500 million to 1000 million. As of the date of this announcement, the Companyhas repurchased shares of the highest amount as planned, and finished the third roundof share repurchase. Since March 2022, the A-share market and the industry havewitnessed great fluctuations. To maintain the stability of the Company’s investmentvalue and market value, we have timely launched a large-scale fourth-phase sharerepurchase plan, with a repurchase fund of RMB1000 million to 1500 million. Up tonow, the fourth phase plan is progressing in an orderly manner. The Company has
2021
repurchased 32,595,903 shares in total, with a payment amount of RMB714 million.The launch and rapid implementation of the plan has played a vital role in stabilizingthe secondary market and avoiding irrational decline in the Company’s market value,building positive reputation in the market.
In order to ensure the diversification of financing channels, meet the needs ofcapital turnover in business operation, and enhance the flexibility of capitalmanagement, the Company has applied to the China National Association of FinancialMarket Institutional Investors for the registration and issuance of short-term financingbonds with an amount not exceeding RMB3000 million (including RMB3000million). As of the date of this announcement, the Company has obtained the Notice ofAcceptance of Registration, and will issue the bonds within the validity period of theregistration based on the real conditions.
4. We always follow safe production, as well as green and low-carbon
development in daily operation, to achieve high-standard, green, andenvironmentally-friendly efficient operations.
Highly viewing design planning, construction operation, and detailedmanagement, we practice the high-standard intrinsic safety, and green and low-carbonoperation, which is essential to the Company’s survival, benefit, and performance inits stable, efficient and sustainable growth. We adhere to the policy of “safety first,prevention as the mainstay, and comprehensive management”, fully implement theprimary safety responsibility of the Company, standardizes safety operation and HSEsystem management, continuously improves technological innovation in safetyproduction, and reduces safety risks. At the same time, we normalize the emergencymanagement of accidents and establish an emergency management system, to preventand reduce the risk of emergencies and be better able to respond to emergencies.
The Company integrates green and low-carbon production into its development.Through multiple measures of reducing the use of resources and energy, improvingthe efficiency of energy use, and technological transformation and innovation, theCompany has integrated upstream and downstream processes, and achieved themutual supply of materials, so as to ensure energy-saving and sustainable
2021
development throughout the whole production process. Hengli Petrochemical (Dalian)has built the world’s first PTA residue recovery system in the industry, the R2R unit,overcoming the challenge the world faces in PTA residue recovery and treatment,recovered benzoic acid in an innovative way, and realized the ecological developmentof the petrochemical industry. Hengli’s refinery sewage treatment plant has adoptedthe world’s leading French Degremont treatment technology, and applied theembedded sewage integrated treatment technology for the first time. With thetechnology, we have treated “waste” with “waste”, and turned waste into treasure withthe available water, gas and residue. Our emission standard is 30% higher than thenational one. Through recovering the waste heat of boilers, low-parameter steam,low-temperature warm water, high-temperature condensate, as well as stepped heatingwith different pressure levels, we have saved nearly 2000 kt of standard coal everyyear. Through energy gradient utilization, steam pipe network optimization,large-scale application of frequency conversion technology and other measures, weachieved 1000 million kWh annual reduction of purchased electricity.Since the “dual-carbon” goal was put forward, the Company has respondedquickly and taken effective measures. Currently, we take the lead in emissionreduction with remarkable results. Hengli Petrochemical has become the refinery withthe largest scale of frequency changers in China, saving 260 million kWh ofelectricity every year, equivalent to a reduction in consumption of 80.1 kt of standardcoal per year. Its aromatics plant has implemented the theoretical proportioningtechnology of carbon monoxide online analysis to reduce the oxygen content of theheating furnace, so that the thermal efficiency of the heating furnace is up to morethan 93%, and the annual fuel consumption can be reduced by 1.4 kt, or about 2.2 ktof standard coal. In 2021, Hengli Petrochemical saved 360 kt of steam, equivalent toabout 41.4 kt of standard coal, by optimizing the operation of the distillation column.Hengli (Nantong) Industrial Park plans to build a “power station on the roof” with aninstalled capacity of 100MW using the idle roofs of warehouses and auxiliaryworkshops, and uses solar PV power to generate electricity. According to estimates,compared with thermal power, after the 100MW “power stations on the roof” is fully
2021
on grid, about 44 kt of standard coal can be saved every year, reducing carbon dioxideemissions by about 109 kt, sulfur dioxide by about 260 tons, and nitrogen oxides byabout 226 tons. Up to now, all four phased PV projects have been put into operation,with a total installed capacity of about 60 MW and a long-term planned installedcapacity of 100 MW, making it the largest company distributed PV power generationproject in Jiangsu Province.Plans and practices will bring about good results. During the reporting period,Hengli Petrochemical (Dalian) Co., Ltd. was awarded the titles of “AdvancedCompany for Energy Conservation in the Petroleum and Chemical Industry Duringthe 13
th
Five-Year Plan Period” and “Benchmarking Company for Energy EfficiencyLeader in the Petroleum and Chemical Industry of 2020”, with its energy efficiency ofpurified terephthalic acid products leading the industry. Hengli Petrochemical (Dalian)Refining Co., Ltd. also won the same two titles for its energy efficiency of crude oilprocessing, p-xylene, and acetic acid leading the industry. Following HengliPetrochemical (Dalian), Hengli Refining and Hengke New Material awarded the titlesof “National Green Plant” in 2017 and 2020 respectively, Hengli Chemical Fiber wasawarded the title of “National Green Plant” in early 2022. So far, four subsidiariesunder the listed Company have been rated as national-level “Green Plants”.Facing the “carbon neutrality” requirement of the industrial development in thefuture, the Company will, as always, put safety and environmental protection first. Wewill continue to perform well in keeping intrinsic safety of plants, accelerate the R&Don key core technologies, and make great efforts in flue gas treatment, wastewaterrecycling, solid waste disposal, waste heat utilization, and reduction of energy andresource consumption. We will create a world-class industrial park that is “the safest,the most environmentally friendly, internally excellent, and externally beautiful”, andpractices our own high-quality growth path of coexistence between industrialdevelopment and ecological and environmental protection, and equal importance oneconomic and social benefits.
2021
II. Information of the Company’s Businesses during the reportingperiodThe main businesses of the Company cover refining, petrochemical, production,R&D and sales of PX, acetic acid, PTA, EG, Polyester Chip, PFY for civil use, PFYfor industrial use, functional films, engineering plastics, and PBS/PBATbio-degradable advanced materials related to the whole industrial chain of advancedpolyester materials, including downstream, midstream and upstream business. It is thefirst listed company of advanced chemical materials in the industry integrating thewhole industry chain of “crude oil, aromatic hydrocarbon, alkene, PTA, EG, and newpolyester materials”.
The Company has a production capacity of 4500 kt of PX and 400 kt of aceticacid annually in the upstream, and 1160 kt of PTA and 1800 kt of fiber-grade EG inthe midstream. Its PTA and EG products are partially for private use, and the rest arefor market sales. In the downstream, it has extensive varieties of advanced chemicalmaterial products with complete specifications, targeting the middle and high-endmarket, including PFY for civil use, PFY for industrial use, BOPET, PBT, PBS/PBAT,and other polyester and advanced chemical material products applied in textile,pharmaceutical, automobile, the environment and new energy, electronics, PV, opticalinstrument, other industries with large scale, differentiation, and high additional value,and civil areas concerning basic necessities of life with massive demands.
As the world-class petrochemical and ethylene projects concerning keyproduction capacity and all categories of scarce chemical raw materials in theupstream have been fully put under operation, and the competitive advantages of thePTA business in the midstream keep expanding and consolidating, the Company isaccelerating its pace to sustain, deepen, and optimize the“major chemical” platformand raw material support for high-end advanced material and fine chemicalengineering business in the downstream, to continuously extend the value andindustrial chain of advanced materials.
2021
III. Analysis of core competitiveness during the reporting period
1. The leading strategic advantage in developing the whole industry chain.
The Company is the first and fastest leading company in the industry to engagein the whole industrial chain strategic development of polyester advanced materials inChina. It actively promotes coordinated and balanced development of all businesssegments, vigorously expands high-end production capacity in both upstream anddownstream, commits itself to creating a world-class development pattern for a listedplatform with collaboration and integration of the whole industrial chain covering“crude oil-aromatic hydrocarbon, alkene, PTA, EG, polyester, PFY for civil use, PFYfor industrial use, films, plastics”. The Hengli 2000 kta petrochemical integrationproject and the 1500 kta ethylene project are under full production, which marks astrategic breakthrough of the Company on key links in the petrochemical andproduction chain of aromatic hydrocarbon and alkene, making the Company theleader in the industry to integrate the whole industry chain of “crude oil, aromatichydrocarbon, alkene, PTA, EG, new polyester materials”. In addition, with newprojects of PTA, advanced chemical materials, and PBS/PBAT bio-degradableadvanced materials, successively being inaugurated and under operation, theCompany is gradually upgrading and optimizing its industrial layout, consolidatingand expanding its industrial strengths in all links, pushing ahead with the quantitativetransition of its business scope and qualitative transition of its business structure, tofoster strategic strength in industrial collaboration and integration, productioncapacity structure and quality, equipment scale and costs, accumulation of processtechniques, speed of project operation and development of the listed platform, in thehigh-quality competition of the whole industrial chain.
2. The comprehensive operation strength in scale + techniques + support.
The Company keeps introducing world-class production equipment and maturetechnique packages for self-learning, absorption and application, and continuouslyengages in technology and technique innovation and upgrading. It has been equippedwith the high-quality and efficient production capacity structure and public
2021
engineering supporting facilities featuring “equipment upsizing, capacity scaling-up,structural integration, technique advancement, green development, and environmentfriendliness, and complete support” in the whole industrial chain of advancedpolyester material covering the upstream, midstream, and downstream. Ourprocessing scale and technical level are second to none in the industry in terms ofindividual unit installation, total production capacity, and process techniques, givingthe Company advantages in scale and operation efficiency in unit investment costs,material and energy consumption conservation, unit processing costs, productdelivery circle, product quality and diversification, and ensuring stable andpreeminent quality performance. In addition, with the most complete supportingcapacity in the industry, including power, energy, port, wharf, tank field, warehouseand logistics, the Company enjoys remarkable advantage in comprehensive operationcovering comprehensive cost saving, service quality and performance, and operationefficiency. In the industrial park, oil refining, chemical engineering and coal-basedchemical processing are complementary, and mutually reliant on each other, with abalance of high efficiency and cost control. The petrochemical business of theCompany is equipped with the largest-scale coal-hydrogen production facility acrossthe country, generating low-cost pure hydrogen, methanol, acetic acid, syngas andother coal-based chemical products, which, plus the Company’s advantages in storageand logistics of raw materials and products, substantially improves the operationalflexibility and comprehensive cost advantage of the project.
3. The strength in market competition driven by advanced R&D.
The Company follows the development path laying equal stress on marketdifferentiation, technology advancement, large-scale equipment, and businessintegration, upholds the innovation mechanism based on integration with market andthe technology, creates R&D teams with experiences in global research, sets uphigh-level platforms for scientific R&D, attaches equal importance to capacity fortechnological R&D and that for innovation of new products, makes quick response tothe latest changes of market demand, and has stable mid-to-high-level client resources.Four subsidiaries under the company, i.e., Hengli Chemical Fiber, Deli Chemical
2021
Fiber, Hengke New Material, and Kanghui New Material, are all high-tech companies.Thanks to fine management and upgrading techniques in the production, the Companyhas independently developed a series of differentiated and functional products basedon research, held patents of a large number of products, and won widespread marketrecognition. We boast strength over our peers in quality and stability of products. Asthe only company in China with the capacity for mass production of 5D FDYproducts, we provide more than 65% of the total output of MLCC release liners inChina, and we are the first company in China, as well as the second in the world tohold the capacity for on-site production of 12-nanometer silicon-coated releaselaminated protective films for lithium batteries. The absolute technological strengthand technical experience in the fields of functional films and PFY for civil use haveput us in an invincible position in the industrial competition that is difficult toreplicate in the short run.
4. The advantages of smart, lean, and efficient management.
We are committed to promoting the idea of “deep integration of the Internet, bigdata, Artificial Intelligence (AI) and the real economy”, by developing advancedmanufacturing capacity and regenerating internal driving force. In achieving this goal,we take the “intelligent interconnection” as a key starting point for industrialupgrading and transformation, through “replacing humans with machines”, “replacingmachines with automatic machines”, “replacing one machine with a complete set ofmachines” and “replacing digitalization with intelligentization”, thus facilitating thegradual transition from “strength in human resources” to “strength in technology” inour development pattern. By means of the integrated application of intelligentmanufacturing, the Internet, the Internet of things, and other technologies, we areconstantly promoting the intelligent manufacturing throughout the entire process.Product traceability and full-process control are realized through a self-developedproduct detection system, automatic bar code system, intelligent warehousemanagement system, and sales system, together with the seamless integration with theERP system, thus promoting the integration of key links such as corporate control,R&D, manufacturing, business management, and financial connection, facilitating the
2021
transition from “manufacturing” to “smart manufacturing”, and transforming fromsingle business management to highly-coordinated operation of the industrial chain.
5. Continuously accumulating talent management advantages.
We have formed a multi-disciplinary and multi-profession technological team,including refining, petrochemical, polymer materials, chemical fiber engineering,textile engineering, and electrical engineering. Besides, our scientific R&Dcapabilities are ahead of our domestic counterparts. While introducing external talents,we also attach great importance to the cultivation of our internal talents at the sametime, by providing our employees with a smooth career development channel. Inaddition, we have also established a complete internal training system and trained alarge number of key personnel, covering various aspects, including R&D, production,sales, and management.Ⅳ. Main Business Operations during the Reporting PeriodBy the end of 2021, the Company’s total assets were RMB210,296 million, ayear-on-year increase of 10.09% and the net assets attributable to the shareholders ofthe Listed Company were RMB57,231 million, a year-on-year increase of 22.02%.
In 2021, the Company recorded a revenue of RMB197,970 million, ayear-on-year increase of 29.2%, a net profit attributable to the shareholders of theListed Company of RMB15,531 million, an increase of 15.37% compared with thesame period of last year.(I) Main Business Analysis
1. Changes of Accounts from Income Statement and Cash Flow Statement
Unit: million RMB
Amount for thereporting period
| Account Item | Amount for the |
same period of last
year
Flux (%)Revenue 197,970.34 152,373.40 29.92Cost of sales 167,518.09 124,116.31 34.97Selling expenses 291.37 177.33 64.31
| Administrative expenses | 1,985.40 | 1,715.59 | 15.73 |
| Financial expenses | 4,916.21 | 5,028.77 | -2.24 |
| R&D expenses | 1,019.45 | 825.97 | 23.42 |
2021
Net cash flow from operating
18,670.17 24,142.88 -22.67
| activities |
| Net cash flow from investing |
activities
-13,097.72 -22,410.88 N/A
activities
-7,387.59 -1,020.97 N/A
| Net cash flow from financing | |
| Explanation of the reasons for changes in cost of sales: increase in cost of sales was | |
primarily due to revenue increase during the reporting periodExplanation of the reasons for changes in selling expenses: primarily due to
2. Revenue and Cost Analysis
(1) Main business by industry, by product, by region and by sales model
Unit: million RMB
warehousing expenses increase during the reporting periodBy Sector
By sector Revenue Cost of sales
Grossprofitmargin
(%)
Year-on-
yearchange of
revenue
(%)
Year-on-
yearchange of
cost ofsales (%)
| By Sector | |
| Year-on- | |
yearchangeof gross
profitmargin
(%)
industry
| Petrochemical | 180,371.58 | 150,068.56 | 16.80 | 31.86 | 37.97 | -3.68 pts |
Other
16,846.29 17,154.51 -1.83 19.27 18.99 0.24 pts
| industries | |
| By Product | |
By product Revenue Cost of sales
Grossprofitmargin
(%)
Year-on-
yearchange of
revenue
(%)
Year-on-
yearchange of
cost ofsales (%)
Year-on-
yearchangeof gross
profitmargin
(%)
chemical
| products | 104,931.71 | 80,915.30 | 22.89 | 16.82 | 19.08 | -1.46 pts |
PTA 48,163.11 47,038.13 2.34 63.56 79.79 -8.81 ptsPolyester
27,276.75 22,115.14 18.92 55.69 50.9 2.57 pts
| products | ||||||
| Others | 16,846.29 | 17,154.51 | -1.83 | 19.27 | 18.99 | 0.24 pts |
| By Region | ||||||
2021
By region Revenue Cost of sales
Grossprofitmargin
(%)
Year-on-yearchange ofrevenue(%)
Year-on-
yearchange ofcost ofsales (%)
Year-on-
yearchangeof gross
profitmargin
| (%) | ||||||
| Domestic | 175,293.88 | 147,063.15 | 16.1 | 27.12 | 33.01 | -3.72 pts |
Overseas 21,923.98 20,159.92 8.05 68.37 59.8 4.94 ptsRevenue, cost and gross profit margin of refining and chemical products, PTA and polyesterproducts include revenue, cost and gross profit margin of trade.
(2) Production and sales volume analysis
Mainproducts
Unit Production
Salesvolume
Inventory
Year-on-
yearchange ofproductio
n (%)
yearchangeof salesvolume
| (%) |
Year-on-y
earchange ofinventory
(%)
andchemicalproducts
| Refining | mt | 23.52 | 23.18 | 0.46 | -6.49 | -7.6 | 161.77 |
| PTA | mt | 12.19 | 11.40 | 0.22 | 26.74 | 23.97 | 559.63 |
| Polyester |
products
| mt | 3.33 | 3.13 | 0.32 | 25.04 | 15.28 | 39.10 |
Sales volume of refining and chemical products, PTA and polyester products include respectivevolume of trade, but exclude volume of internal usage.
(3) Cost analysis
Unit: million RMB
By sector
Costcomposition
Amount in
thereporting
period
| By Sector | ||
| Proport | ||
ion intotalcostsof thereporti
ngperiod
Amount inthe sameperiod oflast year
| (%) | Propor |
tion in
totalcostsof thesameperiodof last
Year-on-
yearchange
(%)
Explanat
ion
2021
(%)Petrochemicalindustry
Directmaterial
136,617.55 81.70 98,878.87 80.27 38.17Petrochemicalindustry
Direct labor 1,616.36 0.97 1,266.45 1.03 27.63
industry
| Petrochemical | Power fuel | 5,439.39 | 3.25 | 3,594.92 | 2.92 | 51.31 |
Petrochemicalindustry
Manufacturing expenses
6,395.26 3.82 5,028.41 4.08 27.18Other
Direct
| industries | material |
15,405.12 9.21 12,939.49 10.50 19.06
industries
| Other | Direct labor | 1,693.29 | 1.01 | 1,399.57 | 1.14 | 20.99 | |
| Other |
industries
| Power fuel | 24.96 | 0.01 | 28.29 | 0.02 | -11.78 |
Other
Manufacturi
| industries | ng expenses |
31.15 0.02 49.33 0.04 -36.86
By Product
By product
Costcomposition
Amount inthereporting
period
Proport
ion intotalcostsof thereporti
ngperiod
(%)
Amount in
the sameperiod oflast year
Proportion in
totalcostsof thesameperiodof last
year(%)
Year-on-
yearchange
(%)
Explanat
ion
chemical
| products | Direct |
material
| 73,408.60 | 43.90 | 62,228.07 | 50.52 | 17.97 | |||
| Refining and |
chemicalproducts
| Direct labor | 581.56 | 0.35 | 455.08 | 0.37 | 27.79 |
Refining andchemicalproducts
Power fuel 2,744.42 1.64 1,840.44 1.49 49.12Refining andchemicalproducts
Manufacturi
ng expenses
4,180.70 2.50 3,426.17 2.78 22.02
| PTA | Direct |
material
| 44,542.80 | 26.64 | 24,889.65 | 20.21 | 78.96 | |||
| PTA | Direct labor | 213.14 | 0.13 | 117.83 | 0.10 | 80.90 | |
| PTA | Power fuel | 1,077.22 | 0.64 | 375.08 | 0.30 | 187.20 |
2021
PTA Manufacturi
1,204.97 0.72 780.43 0.63 54.40
| ng expenses | |
| Polyester |
products
material
| Direct | 18,666.15 | 11.16 | 11,761.14 | 9.55 | 58.71 | ||
| Polyester |
products
| Direct labor | 821.65 | 0.49 | 693.55 | 0.56 | 18.47 |
Polyesterproducts
Power fuel 1,617.75 0.97 1,379.41 1.12 17.28Polyesterproducts
Manufacturi
ng expenses
1,009.59 0.60 821.81 0.67 22.85
| Others | Direct |
material
| 15,405.13 | 9.21 | 12,939.49 | 10.50 | 19.06 |
Others Direct labor 1,693.29 1.01 1,399.57 1.14 20.99
| Others | Power fuel | 24.96 | 0.01 | 28.29 | 0.02 | -11.78 | |
| Others | Manufacturi |
ng expenses
| 31.15 | 0.02 | 49.33 | 0.04 | -36.86 |
Direct material expense of refining and chemical products, PTA and polyester products includepurchase cost of trade.
(4) Main sales customers and suppliers
A. The Company’s main sales customersThe total sales of the top five customers was RMB144,30.81 million, accounting for
7.29% of the total annual sales. Sales from related parties among the top five
customers was RMB0 million, accounting for 0% of total annual sales.B. The Company’s main suppliersThe total purchase of the top five suppliers was RMB54,034.98 million, accountingfor 33.48% of the total annual purchase. Purchase from related parties among the topfive suppliers was RMB0 million, accounting for 0% of total annual purchase.
4. R&D Investment
(1) R&D investment
Unit: million RMB
| Expensed R&D investment during the reporting period | 1,019.45 |
| Capitalized R&D investment during the reporting period | |
| Total R&D investment | 1,019.45 |
2021
Proportion of R&D investment in revenue (%) 0.51Proportion of capitalized R&D investment
(2) R&D personnel
| Number of R&D personnel | 3,220 |
| Proportion of R&D personnel in the Company’s total employees (%) | 9.03 |
| Educational qualifications | |
| Educational qualifications | Number of personnel |
| Doctoral candidate | 6 |
Master 65Bachelor 1,449Junior college 1,188High school degree and below 512
Age
| Age | Number of personnel |
| below 30 years old (excl. 30 years old) | 1,005 |
| 30-40 years old (incl. 30 years old and excl. 40 years old) | 1,468 |
| 40-50 years old (incl. 40 years old and excl. 50 years old) | 523 |
50-60 years old (incl. 50 years old and xcl. 60 years old) 22260 years old and above 2(II) Assets and Liabilities
1. Assets and liabilities
Unit: million RMB
Item
Amount bythe end of thereportingperiod
Percentageintotalassetsin thereporti
ngperiod
(%)
Amount bythe end of the
same period
of last year
Percentage
intotalassetsin thesameperiodof last
year(%)
Flux(%)
Explanation
Tradingfinancialassets
814.37 0.39 1.650.13 0.86 -50.65
balanceAccounts 2,643.84 1.26 1,363.60 0.71 93.89
| Primarily due to decreases in bank wealth management products and structured deposit |
| primarily due to |
2021
receivable
receivable during theclosing periodAdvancepayment
2,636.92 1.25 1,994.37 1.04 32.22
| increases in outstanding sales |
| Primarily due to increases in prepayment for |
material purchase by
reporting periodInventories
33,553.00 15.96 19,691.12 10.31 70.40
| the end of the |
| Primarily due to increases in raw |
material purchase
period
| during the reporting | ||
| Construction in |
progress
| 7,782.85 | 3.70 | 4,195.71 | 2.20 | 85.50 | Primarily due to newly increased investments in the |
5-million-
green multi-function
| textile new material project with an |
annual out of 1500kt
non-current assets
| Other | 3.902.59 | 1.86 | 2,261.80 | 1.18 | 72.54 | Primarily due to increases in prepayment for |
long-
purchaseNotespayable
16,050.29 7.63 7,805.07 4.09 105.64
| term assets |
| Primarily due to increases in unexpired letters of |
credit issued by the
end of the reporting
periodTaxpayable
1,276.89 0.61 2,290.70 1.20 -44.26
decreases in income
| tax payable balance by the end of the |
reporting period
entliabilitiesdue
| Non-curr | 5,423.23 | 2.58 | 3,828.96 | 2.00 | 41.64 | Primarily due to increases in |
long-term
2021
withinone year
reporting period
| within one year by the end of the | ||
| Other |
currentliabilities
| 1,399.27 | 0.67 | 719.12 | 0.38 | 94.58 | Primarily due to newly increased money margin payable for the |
acquisition of HengliFutures
payable
| Bonds | - | - | 1,013.97 | 0.53 | -100.00 | Due to redemption of matured bonds issued by the |
Company
utedprofits
| Undistrib | 31,118.45 | 14.80 | 21,120.65 | 11.06 | 47.34 | Primarily due to transferred net |
profits attributable to
reporting period
2. Overseas assets
Of which: overseas assets were 3150.65368597 (Unit: million RMB), accounting for
1.50% of the total assets.
3. Assets with restrictions by the end of the reporting period
Unit: million RMBItem Closing
the owners of theparent companyrealized during theBook Value
Reasons for Restrictions
| Book Value | ||
| Cash and cash equivalent | 6,211.53 | The Company pledged cash and cash equivalent in |
order to obtain line of credit from financial institutions
| Cash and cash equivalent | 65.32 | Margin paid for futures and financial derivatives |
tradingCash and cash equivalent 0.05 Immature interest receivable
| Cash and cash equivalent | 119.60 | Litigation-related frozen provision |
| Trading financial assets | 20.00 | The Company pledged trading financial assets in order |
to obtain line of credit from financial institutions
financing
| Accounts receivable | 1,338.20 | The Company pledged notes receivable in order to |
obtain line of credit from financial institutionsInventories 0.72
2021
Fixed assets 91,413.84 The Company pledged fixed assets in order to obtain
| line of credit from financial institutions | ||
| Fixed assets | 328.66 | Mortgaged in order to provide guarantee for |
sales-leaseback contracts
| Intangible assets | 3,876.63 | The Company mortgaged intangible assets in order to |
obtain line of credit from financial institutionsConstructions in progress 241.28 The Company mortgaged constructions in progress in
order to obtain line of credit from financial institutionsTotal103,615.83
(Ⅲ) Analysis of Industrial operating information
1. Analysis of Industrial operating information on the chemical industry
Basic information on the industry
(1) Industrial policies and changes
① The 14
th
Five-year Plan For The Development Of The Raw Material IndustryIn December 2021, the Ministry of Industry and Information Technology, theMinistry of Science and Technology, and the Ministry of Natural Resources jointlyissued The 14
thFive-year plan for the Development of Raw Material Industry, puttingforward that technological research will be conducted to develop technology of heavyand inferior oil processing and efficient conversion and utilization, and advancedtechnologies will be applied within the petrochemical industry, especially low-carbontechnologies including the direct production of chemicals from crude oil, intelligentmicro-reaction and continuous production of fine chemical products.
② The 14
th
Five-Year Plan for Industrial Green DevelopmentIn November 2021, the Ministry of Industry and Information Technology issuedThe 14
th
Five-Year Plan for Industrial Green Development, which proposed maintasks such as focusing on promoting advanced energy-saving processes such as thedirect production of chemicals from crude oil in the petrochemical and chemicalindustry, enhancing the process and structural matching, collaborative supply of rawmaterials among chemical companies, strengthening the circular linkage amongcompanies, parks, and industrial clusters, coordinating the domestic and internationalresources, and voluntarily improving cross-region industrial allocation. Efforts mustbe also made to encourage eligible parks and companies to intensify the coupling and
2021
circular utilization of resources in a bid to build “waste-free parks” and “waste-freecompanies”.
③ Action Plan on Energy Conservation and Carbon Reduction for Major
Businesses of Petrochemical Industries (2021-2025)
In October 2021, the National Development Reform Commission and theMinistry of Industry and Information Technology jointly issued Opinions on StrictlyRestraining Energy Efficiency to Drive Energy Saving and Carbon Reduction in KeyAreas and the Action Plan on Energy Conservation and Carbon Reduction in KeyPetrochemical and Chemical Industries (2021-2025), boosting the green and lowcarbon transformation in key industries of oil refining, ethylene, and syntheticammonia to achieve the goal of carbon dioxide peaking as scheduled.
The action plan clearly puts forward the action target that “by 2025, throughenergy saving and carbon reduction, the proportion of production capacity in the oilrefining, ethylene, ammonia and calcium carbide industries reaching the benchmarklevel will exceed 30%, significantly raising the overall energy efficiency of theindustry, cutting carbon emission intensity, and enhancing green and low carbondevelopment”. The overall implementation plan for technological transformation ofcompanies in key petrochemical industries will be formulated, guiding the orderlyreduction of backward production capacity, pushing forward energy-saving and lowcarbon technology and equipment, and promoting the holistic development ofindustries. These majors tasks will be put into effect. We will select advanced andapplicable technologies for energy conservation in the oil refining, ethylene, andsynthetic ammonia industries, and guide the technological transformation and upgradeof backward companies. We will phase out the oil refining units of 2,000 kta andbelow and ethylene units of 300 kta and below, strictly prohibit the construction ofnew atmospheric and vacuum units of less than 10,000 kta, and catalytic cracker ofless than 1,500 kta, continuous catalytic reforming unit (including aromaticsextraction) below 1,000 kta, hydrocracker below 1,500 kta, and naphtha crackingunits of less than 800 kta to produce ethylene. We will apply low carbon deepprocessing of heavy and inferior residues, one-step conversion from syngas to olefins,
2021
directly cracking crude oil to ethylene and other technologies, adhere to thedevelopment direction of refining-chemical integration, the integration of coal,chemicals, power and heat, and poly generation, and also build an industrial chain thatconnects companies in supply and demand with interconnected production units. Wethus can improve the comprehensive utilization of resources, reduce energyconsumption in logistics and transportation, and promote the identification ofchemical parks.○4 The Guidelines of the 14
thFive-Year Plan for the Petrochemical andChemical IndustryIn January 2021, the China Petroleum and Chemical Industry Federation issuedthe The Guidelines of the 14
thFive-Year Plan for the Petrochemical and ChemicalIndustry, which pointed out that in the petroleum and chemicals industry, emphasisshould be laid on producing high value-added oil products and chemical feedstockinstead of mass production of refined oil products, refining capacity should beintegrated, the ethylene industry should be improved, and the competitiveness of PXshould be enhanced. In terms of new chemical materials, the development in specialengineering plastics, high-end functional film materials, and thermoplastic elastomersshould be sped up, making breakthroughs in preparing technologies across the wholeindustry chain as in high-end polyolefins, bio-based fibers, and bio-based polyesters,diversify and upgrade the new chemical materials products, and seeking pathways tomake up for the shortcomings and gaps in technologies.○5 The Ecological & Economic Development Plan of the 14th Five-Year Planfor Liaoning ProvinceIn January 2022, the General Office of the People’s Government of LiaoningProvince released The Ecological & Economic Development Plan of the 14thFive-Year Plan for Liaoning Province, stating that the petrochemical industrial chainshould be extended; The scale advantage of ethylene, propylene, PX, PTA and otherbulk basic chemical feedstocks will be maintained to carry forward the high-enddevelopment of the petrochemical industry and lay out advantageous product chainsalong the olefins, aromatics, new materials, and fine chemicals industry chains.
2021
“ More chemical products less refined oil output” for the petrochemical industrywill be proceeded. Further progress must be made in the transformation of the refiningand chemical production to be safe, clean, green, and effective, to achieve an intensive,high-end, green, and integrated development in the refining and chemical industry.Top priority should be given to the development of such new chemical materials ashigh-end polyethylene, special resin, special engineering plastics, and high-endmembrane.
(2) Basic information on the main industrial segment and industrial status of the
Company
① Petrochemical industry
The Company has a production capacity of 4,500 kt PX, basically meeting thedemand in raw materials for downstream PTA capacity, In addition, it is designed toproduce high-end chemical products that are in short supply with high added value inChina as 1,800 kt EG, 400 kt acetic acid, 1,200 kt of benzene, 850 kt ofpolypropylene, 720 kt of styrene, 400 kt of high-density polyethylene, and 140 kt ofbutadiene, as well as oil products like high-grade gasoline above national VI standard,diesel, and aviation kerosene. With the gradual elimination of small refineries withhigh production costs and outdated equipment, the concentration of the refining andchemical industry and the competitiveness of large-scale new refineries will beincreased significantly. The company has outstanding advantages in policy support,process technology, and industrial collaboration. Compared with other refiningcompanies, we boast obvious strengths of high quality and low cost, thus gainingstrong market competitiveness.
② PTA
PTA is the direct upstream raw material of PET. China is the largest producer andconsumer of PTA in the world. Currently, the Company has a PTA productioncapacity of 16,600 kta (including the 5,000 kt under construction in Huizhou, aprefecture-level city of Guanggong Province). The Company has become the PTAproduction supplier with the largest production capacity, the most advancedtechniques and the most evident cost advantage in the world, and the only company
2021
with equity capacity of more than 10 million tons in the industry.
③ New polyester materials
One of the company’s main businesses is the R&D, production, and sales ofrelated products of the new polyester materials. The main products include polyesterand new chemical material products as PET, POY, FDY, DTY, BOPET, PBT,PBS/PBAT. The Company’s production capacity of filament for civil use ranksamong the top five in China, and that of filament for industrial use ranking the secondplace across the country, making it one of the manufacturers of PFY for both civil andindustrial use with the largest scale and the most advanced techniques in China.Kanghui New Material, a subsidiary of the Company, has an annual productioncapacity of 240 kt of PBT engineering plastics in the manufacturing base of Yingkou,a prefecture-level city of Liaoning Province. As the largest PBT manufacturer inChina, its products are mainly used in auto parts, polymer alloys, optical cableprotective sleeves, and electronic appliances. Kanghui New Material has an annualproduction capacity of 385 kt of BOPET functional film capacity, used in highvalue-added businesses such as BOPET optical equipment, release protection,electronic appliances, vehicle decoration, construction, and packaging. It has thelargest annual single set PBAT production capacity of 33 kt based on its owntechnology in China, used in green applications such as food-grade shopping bags,tableware and straws of PBS/PBAT. The project of 450 kt of degradable plastic isunder construction in Changxing Island, Dalian. Projects of 470 kt of high-endfunctional polyester films, 100 kt of special functional films, 150 kt of modified PBT,and 80 kt of modified PBAT are under construction in Suzhou Fenhu, leading to itsstrong comprehensive competitiveness.
. Products and production
(1) Main products
Products
Businesssegments
upstreamrawmaterials
Applications of majordownstream materials
Main factors affectingprices
| Primary | ||
| Oil |
products
refining
| Petroleum | Crude oil | Aviation kerosene, |
gasoline, and diesel and
like crude oil and
2021
other power fuels downstream demandPX Chemical raw
materials andchemicalsmanufacturing
Crude oil PTA Upstream raw materials
like crude oil anddownstream demandEthylene
chemicalsmanufacturing
Crude oil PE, ethylene glycol Upstream raw materials
like crude oil anddownstream demandPTA
| Chemical raw materials and |
| Chemical raw materials and |
chemicalsmanufacturing
PX Polyester fiber, bottle grade
chips, film grade chips, etc.
Crude oil and PX supplyand downstream demandPolyesterFilament
Polyestermanufacturing
PTA,MEG
Advertising light box cloth,
geotextile, conveyor belt,
automobile fiber and tire
meridian, clothing and
home textiles, etc.
Upstream raw materialslike crude oil anddownstream textileprosperity
chips
| Polyester | Polyester |
manufacturing
MEG
| PTA, | Filature | Upstream raw materials |
like crude oil anddownstream demand
| BOPET | Plastics product |
manufacturing
MEG
| PTA, | Packaging film, insulating |
film, capacitor film, etc.
like crude oil anddownstream demandPBT Plastics product
manufacturing
PTA,BDO
Auto parts, electronic
appliances, aerospace
materials, etc.
Upstream raw materialslike crude oil anddownstream demand
(2) R&D and innovation
By December 31, 2021, Hengli Chemical Fiber, subsidiary to the Company,owned 413 invention patent rights, 91 utility model patents, 109 licensed patentsgranted during the current reporting period (including 89 authorized patents in China,11 in the US, 1 in the ROK, 6 in Japan, and 2 in Europe), and 20 authorized utilitymodel patents. Deli Chemical Fiber, subsidiary to the Company, owned 13 inventionpatent rights, 49 utility model patents, 3 licensed patents granted during the currentreporting period, and 18 authorized utility model patents. Kanghui New Material,subsidiary to the Company, owned 17 invention patent rights, 40 utility model patents,4 licensed patents granted during the current reporting period, and 1 authorized utilitymodel patent. Hengke New Materials, subsidiary to the Company, owned 34 invention
2021
patent rights, 51 utility model patents, 1 PCT (Patent Cooperation Treaty), and 6licensed patents granted during the current reporting period.
(3) Production capacity and construction work
Unit: million RMBMajorplants/projects
Designedcapacity(10 kt)
Capacityutilization(%)
construction
| Capacity under | Investment in capacity |
underconstruction
PlannedcompletiontimePFY of Suzhouplant
140 96.70 400 kt
construction
| of industrial filament yarn under | ||
| PFY for civil |
use of Nantongplant
| 120 | 78.94 | 900 kt under construction | |||
| PFY for civil use of Suqian |
plant
20 93.72Polyester filmof KanghuiNew Material(Yingkou)
38.5 100
| Industrial Park |
| PET of |
Kanghui NewMaterial(Yingkou)Industrial Park
| 1.5 | 100 |
Engineeringplastics ofKanghui NewMaterial(Yingkou)Industrial Park
24 77.74
bio-degradableadvancedmaterialsproject ofKanghui NewMaterial(Yingkou)
| PBS | 3.3 | 78.39 |
2021
Industrial ParkPTA of Dalian
1160 105.05
| plant |
| Refining and |
chemicalproject of
| Dalian plant | 2000 | 103.25 | |||
| Ethylene |
project ofDalian plant
109.45
| 150 |
PTA ofHuizhou plant
5,000 kt 2,849
mid-2022
| To be on stream in | ||
| New material |
supportingchemicalsproject ofHengliPetrochemical(Dalian)Chemical Co.,Ltd.
| 350 kta synthetic |
ammonia, 300 kta nitricacid, 300 kta adipicacid, and 200 ktafood-
dioxide
| , and the supporting map and |
storage facilities
| construction period of 3 |
years
800 ktafunctionalpolymer thinsand functionalplastics projectof JiangsuKanghui NewMaterial Co.,Ltd.
(1) 346 kta functional
polymer thins
(2) 124 kta
polymer thins
(3) 100 kta functional
films
(4) 150 kta modified PBT
(5) 80 kta modified
PBAT facilities
177 constructionperiod of 32months
1,500 ktaJiangsuXuanda GreenMultifunctionalAdvancedTextileMaterialsProject ofJiangsuXuandaPolymerMaterials Co.,Ltd
(1) 150 kta new
ultra-simulation
| high end |
| functional elastic fiber |
project (two-componentpaint)
(2) 150 kta
ultra-simulationdifferentiated
fiber)
(3) 300 kta modified
| polyester fiber project |
1,333 construction
years
2021
(cation)
(4) 300kta differentiated
project (full dull)
(5) 600 kta differentiated
ultra-simulation polyesterfiber project (300 ktaPOY, 300 kta FDY)450 kt PBSbio-degradableadvancedmaterialsproject ofKanghui(Dalian) NewMaterialTechnology
| functional polyester fiber | ||
| Co., Ltd |
450 kt 237 constru
ction period
of 1 year
Note: the designed capacity of the plants and the projects listed above refers to what has been putinto production, excluding those under construction
3. Raw materials procurement
Notes on the raw materialsMajorrawmaterials
Procurementmodel
Settlement model
Procurementamount (10 kt)
Consumptionamount (10 kt)
Variationratio (%)crude oil contract, spot
cable transfer
2,117.78 2,065.84 50PX contract, spot
cable transfer,letter of credit,BA
372.04 374.96 50.60
letter of credit,MEG
| MEG | contract, spot | cable transfer | 10.98 | 10.81 | N/A |
| BDO | contract, spot | BA | 12.25 | 10.35 | 203.89 |
The impact of major procurement price changes on the Company’s operating costs: theprocurement prices of the raw material exerting positive impact on the Company’s operating costs.
Notes on the main energyMajor energy
model
| Procurement | Settlement |
model
amount
| Procurement | Consumption |
amountpower
market-oriented
monthly
| procurement | settlement |
2,907.00
2,907.00million
| million kwh | kwh |
thermal coal
market-orientedprocurement
monthlysettlement
6.7057 mt 7.0056 mt
2021
natural gas
market-oriented
monthly
| procurement | settlement | 160.67 million cubic meters | 158.76 million cubic meters |
The price of major energy sources is directly proportional to the Company's operating costs. Theprices of major energies are affected by national policies, the supply and demand structure of theregional markets, and the stability of supply.
4. Product sales
(1) Main Business Operations By Segments
Unit: million RMBBusinesssegments
Operatingrevenue
Operatingcost
Grossmargin(%)
changes inoperatingrevenue（%）
YOYchanges inoperatingcost（%）
| YOY | YOY |
changes
margin
（%）
| in gross | Gross |
marginsamongthepeerspetrochemical
18,0371.58 150,068.56 16.80 31.86 37.97 -3.68
| segment |
| other |
segments
16,846.28 17,154.51 -1.83 19.27 18.99 0.24
(Ⅳ) Investment Status AnalysisGeneral Analysis on Foreign Equity InvestmentDuring the reporting period, no major equity investment was made by theCompany. Six new major construction projects are as follows:
1. The 1,500 kta green multifunctional textile advanced materials project of
Jiangsu Xuanda Polymer Materials Co., Ltd.
Total investment reached RMB9,000 million. The project is located in the HengliTextile Advanced Materials Industrial Park in the New Binjiang Area (Wujie County),Tongzhou District, Nantong City, with a construction period of 2 years. According tothe feasibility study report, the project is expected to realize annual revenue ofapproximately RMB18,618.87 million with an annual net profit of approximatelyRMB1,300.27 million after it reaches the target output.
2. The PBS biodegradable plastics project with 450 kta output of Kanghui
Dalian New Material Technology Co., Ltd.
Total investment reached RMB1,798.21 million. The project is located in thewestern Industrial Zone of Dalian Changxing Island Economic and TechnologicalDevelopment Zone with a construction period of 1 year. According to the feasibilitystudy report, the project is expected to realize annual revenue of approximately
2021
RMB10,058.18 million with an annual net profit of approximately RMB2,016.40million after it reaches the target output.
3.The functional polyester film and functional plastics project with 800 kta
output of Jiangsu Kanghui New Material Technology Co., Ltd.Total investment reached RMB11,124.52 million. The project is located in thefactories of Jiangsu Kangkui New Material Technology Co., Ltd. in the demonstrationzone of green and integrated ecological development of the Yangtze River Delta witha construction period of 32 months. According to the feasibility study report, theproject is expected to realize annual revenue of approximately RMB14,505.10 millionwith an annual net profit of approximately RMB2,906.32 million after it reaches thetarget output.
4. The advanced material supporting chemical project of Hengli Petrochemical
(Dalian) Chemical Co., Ltd.
Total investment reached RMB2,310.92 million. The project is located in theindustrial park of Hengli Petrochemical (Dalian) in Dalian Changxing Island with aconstruction period of 3 years. According to the feasibility study report, the project isexpected to realize annual revenue of approximately RMB3,517.8674 million with anannual net profit of approximately RMB1,261.1812 million after it reaches the targetoutput.
5.The high performance polyester engineering with 2.6 million-ton annual output
of Hengli Petrochemical (Dalian) New Material Technology Co., Ltd.
Total investment reached RMB4,001.36 million. The project is located in theindustrial park of Hengli Petrochemical (Dalian) New Material Technology inChangxing Island with a construction period of 18 months. According to thefeasibility study report, the project is expected to realize annual revenue ofapproximately RMB16,613.96 million with an annual profit of approximatelyRMB990,54 million and net profit of RMB841.96 million after it reaches the targetoutput.
6. The high performance resin and new material project with 1,600 kta output
of Hengli Petrochemical (Dalian) New Material Technology Co., Ltd.
Total investment reached RMB19,988.26 million. The project is located in theindustrial park of Hengli Petrochemical (Dalian) in Dalian Changxing Island with aconstruction period of 18 months. According to the feasibility study report, the projectis expected to realize annual revenue of approximately RMB25,375.37 million with
2021
an annual profit of approximately RMB9,151.57 million and net profit ofRMB6,863.67 million after it reaches the target output.
(Ⅴ) Analysis of Major Holding and Participating Companies
Unit: million RMBName of the
Shareholding
| Subsidiaries | Ratio (%) |
Business
Registered
| Nature | Capital |
Total
Net
| Assets | Assets |
Net
| Profit | ||
| Hengli |
Petrochemical(Dalian) RefiningCo., Ltd.
100 Manufacturing 17,596 117,893 31,456 9,781
Petrochemical(Dalian) Co., Ltd.
99.83 Manufacturing 5,890 35,689 11,624 -547HengliPetrochemical(Dalian) ChemicalCo., Ltd.
99.99 Manufacturing 2,208 29,416 5,755 1,985Jiangsu Hengli
HengliChemical Fiber
Co., Ltd.
100 Manufacturing 4,575 28,535 6,885 2,249Kanghui NewMaterial
| Chemical Fiber |
| Technology Co., |
Ltd.
100 Manufacturing 831 8,516 2,926 1,086Note: Jiangsu Hengli Chemical Fiber Co., Ltd includes its subsidiaries of Jiangsu HengkeNew Material Co., Ltd, Nantong Teng'an Logistics Co., Ltd., Jiangsu Xuanda Polymer MaterialCo., Ltd., Jiangsu Deli Chemical Fiber Co., Ltd., Suqian Deya New Material Co., Ltd., HengliFutures Co., Ltd., Hengli Hengxin Industry & Trade (Shanghai) Co., Ltd, Suzhou SushengThermal Power Co., Ltd., Suzhou Binglin Trading Co., Ltd., Sichuan Hengli New Material Co.,Ltd., Hengli New Material (Suqian) Co., Ltd.
Hengli Petrochemical (Dalian) Co., Ltd. includes its subsidiaries of Hengli Shipping (Dalian)Co., Ltd., Hengli Petrochemical Co., Limited and Shenzhen Ganghui Trading Co., Ltd.Hengli Petrochemical (Dalian) Chemical Co., Ltd. includes its subsidiary of HengliPetrochemical (Dalian) Advanced Materials Technology Co., Ltd.Hengli Petrochemical (Dalian) Refining Co., Ltd. includes its subsidiaries of HengliPetrochemical International Pte. Ltd., Hengli Oilchem Pte. Ltd., Hengli Shipping International Pte.Ltd., Hengli Energy (Hainan) Co., Ltd., Hengli Oilchem (Hainan) Co., Ltd., Suzhou HengliChemical Import and Export Co., Ltd., Shenzhen Shengang Trading Co., Ltd., Hengli RefiningProducts Sales (Dalian) Co., Ltd., Hengli Aviation Oil Co., Ltd., Hengli Oilchem (Suzhou) Co.,Ltd., Hengli Energy (Suzhou) Co., Ltd., Hengli Energy (Jiangsu) Co., Ltd., Hengli Storage andTransportation (Dalian) Co., Ltd., Suzhou Hengli Chemical Polymer Co., Ltd.Hengli Petrochemical (Dalian) Chemical Co., Ltd. includes its subsidiaries of Hengli
2021
Petrochemical (Dalian) New Material Technology Co., Ltd.
(Ⅵ) The structured entities (SE) controlled by the Company
By December 31, 2021, the SE related to the Company but not included in thefinancial statements were mainly engages in capital management business, manageand operate the customers’ capitals, and provide investment management as in stocks,futures, and other financial products. The total assets of the SE on December 31, 2021were RMB104.3122 million.
V. Discussions and analysis of the Company’s future development(Ⅰ) Industrial landscape and trend1．Petrochemical industry
(1) Leaning towards intensive, efficient, and low-carbon development
Under the goal of “carbon neutrality and carbon emission peaking”, our peerswill work harder to reduce energy consumption and emissions, and improve crude oilconversion. Through process intensification, optimization of device design andprocess flow, and the development and application of energy management systems,the companies will minimize energy and raw material consumption, maximize deviceoperation efficiency and production flexibility, reduce the restrictions of other factors,and efficiently respond to the changing development environment, to achieve lowcarbon and high-quality development.
(2) Accelerating industrial upgrading and expanding demand for new chemical
materials lead to a broader market space
New chemical materials are important basic materials for strategic emergingmaterials such as new energy, high-end equipment, green environmental protection,and biotechnology. Entering the “14
thFive-Year Plan” period, with the rapid growthof strategic emerging industries as high-end equipment, automobile manufacturing,electronic information, new energy, energy conservation and environmental protection,new construction, bio-medicine application, smart grid, and 3D printing, the demandfor new materials such as high-quality synthetic resin, high-performance syntheticrubber, engineering plastics, degradable materials, electronic chemicals andhigh-performance membrane materials continue to grow, driving the rapid growth ofnew chemical materials production capacity. With the development of downstreamindustries, the future market space for new chemical materials tends to be broad.
2021
2．PTAChina is the largest producer and consumer of PTA. Under the competitivelandscape of the integrated industrial chain, leading companies in the PTA industryhave strong market competitiveness in terms of the scale of a single set of facility,stable production and operation, material consumption, energy consumption, andproduct quality. As the PTA industry is going through more fierce competition, itsconcentration will be further increased.3．Polyester fiber
(1) Differentiated and high-end new fiber materials
The Company will develop differentiated and functional fiber products such asintelligent, super-simulation, and dope dyeing, and expand the application offunctional fibers in clothing, home textiles, industry, and environmental protection,continue to optimize the production and application of high-performance fibers,improve the technological maturity of high-performance fibers that have beenengineered and industrialized, improve the stability and uniformity of the existingproduct quality, and meet the needs of downstream applications, enhance thedifferentiation and functioning of basic fibers through copolymerization, blending,and composite spinning to achieve high-quality, efficient production and low costfibers, strive to make breakthroughs in key technologies for large-scale production ofbio-based chemical fibers, develop high-quality differentiated products, andstrengthen application technology development.
(2) Accelerating intelligent and digitized transformation
The Company will build an intelligent manufacturing standard system for thechemical fiber industry, improve the R&D and application of intelligentmanufacturing industrialization technologies such as chemical fiber, seekbreakthroughs in key software and hardware systems, form integrated solutions andfull-process intelligent manufacturing technology integration, and build smartfactories based on big data, artificial intelligence, and the industrial internet.
The Company will push forward its digital transformation and the application ofartificial intelligence, big data, cloud computing, and other emerging digitaltechnologies in chemical fiber enterprises, improve the digitalization of the wholeindustrial chain such as R&D, design, manufacturing, operation and maintenance. Byapplying digital technology to dovetail business processes, management systems, and
2021
supply chain data, it will innovate the management model as organizational structureoptimization, dynamic and accurate services, and auxiliary managementdecision-making to raise enterprise management capabilities.
(3) Seeking green and low carbon transformation
The Company will carry forward energy-saving and low-carbon development,guide enterprises to purchase green electricity, expand the proportion of new energyapplications such as solar energy. It will increase the R&D of green processtechnology and equipment, strengthen the technological transformation of cleanproduction and the application of key energy-saving and emission-reductiontechnologies, accelerate the development and construction of green factories, greenproducts, green supply chains, and green parks in the chemical fiber industry, carryout the construction of a leading water and energy efficiency demonstration company,and proceed with carbon footprint accounting and social responsibility building.Through the recycling improvement, the Company is to speed up the optimization ofthe industrial structure of recycled chemical fibers and the upgrading of itself.
(Ⅱ) Development strategy
General development strategy: we are committed to providing quality fiber andcreating a better life for the society. Under the principle of “doing the right things atthe right time”, we adhere to the development philosophy of “innovation,coordination, green, and sharing”, the operation concept of “winning global marketswith surpassing quality, persistence, and will”, and the management ideal of“people-centered, scientific, institutionalized, and professional”, foster a companyspirit of “solidarity, integrity, steadiness, and innovation”, increase the industrialinnovation capacity, improve industrial structures, and drive the Company intohigh-end, intelligent, green, integrated, and international development.
(1) The Company will take solid steps in “improving the upstream and
enhancing the downstream”. In the first place, the Company will continue tostrengthen the upstream industrial platform to support the development of“refining+ethylene+coalification” underpinning the “big chemicals”, and implement“making up and enhancing the industrial chains” and “R&D and innovations”,reserving space and paving ways for the new downstream material businesses in thefuture. On top of that, the Company will redouble its efforts in the downstreambusinesses, consolidate traditional market strengths, benchmark the breakthroughs in
2021
major new materials as the development and upgrading of “new consumption” and“key&core technologies”, nurture new leading material business growth points inscale, and make strides toward a world leading petrochemical new material companythat covers the whole industrial chain.
(2) The Company will take unswerving steps in adopting integrated development
strategy across the board. The Company will focus on diversifying the specs of theproducts, expanding capacity, differentiating the products through R&D, technologyand innovation upgrading, and strive to realize the industrial development goal of“industrial growth in bases, scale production, meticulous products, professionaltechnology, and sound management”.
(Ⅲ) Operational planThe year 2022 is the crucial year for the Company to implement the 14
th
Five-Year Plan and move faster towards the development model of “platform+newmaterials”. Standing at a new strategic height and seizing the developmentopportunity, the Company firstly actively implements “the renovation andconsolidation of the industrial chains” and “R&D and innovations”, and consolidatethe platform and efficiency of “big chemicals” as the upstream, and secondly, fostersthe “second growing curve” with “new chemical materials” as the new guideline, andstrike a new journey towards a high quality development. Our major work for thewhole year are as follows:
1. To continue to refine and strengthen the four business segments, and enhance
the competitive advantages of the entire industry chain.
Based on maintaining the existing industrial advantages, the Company willstimulate the advantages and potential of the entire industrial chain by continuousrenovation, extension and consolidation of the industrial chain, move towards the highend of the industrial and value chain, continuously optimize the product structure,improve product quality, actively promote the linkage of production and sales, andstrive for safe, stable, long, full, and optimal operation. The Company will achievesteady progress in the 1,600 kta high-performance resin and related supportingprojects, 2,600 kta functional polyester project, 300 kta adipic acid chemical newmaterial supporting project and 1,600 million square meter lithium battery diaphragmproject which are all under construction. The Company will ensure the smooth
2021
progress of the projects and provide strong guarantee for its sustainable andhigh-quality development.
2. To continue to strengthen quality, cost, and rapid response to ensure high
quality and efficiency in the Company’s operations.Quality is the bottom line of a Company’s survival. It is necessary to strive forexcellence in each product, continuously improve quality standards, enhance qualityand brand awareness, push product quality to a higher level, and maximize benefits.The Company will continue to strengthen cost control, reduce costs, and increaseefficiency, adhere to the policy of “set production target based on sales and boost salesfrom production” and the philosophy of “customer-centered , market-based andall-staff-involved marketing ”. It will dig deep into the market potential, closelyfollow up the market conditions, and adjust strategies in a timely manner. TheCompany will unite as one for the same goal, spare no effort to achieve the annualproduction and operation goals, and ensure the high quality growth in profits.
3. To continue to improve the Company’s management system to ensure a stable
and long-term development.The Company will further improve the safety and environmental protectionmanagement system, strengthen risk identification and hidden danger investigationand management, intensify operation supervision and emergency drills, consolidatethe foundation for safe production, deeply practice the concept of green,environmental protection and low carbon development, reduce pollution and carbonemission, gain profits through synergy, improve the financial security system, enhanceinternal financial management, and ensure zero risk of capital security. The Companywill continue to optimize the internal management system, adhere to the principle of“regulating people through systems, managing affairs through processes, and raisingefficiency through forms”, and improve the Company’s risk control capabilities. TheCompany will strengthen the construction of the talent system, cultivate and reserveoutstanding talents, introduce high-quality talents, improve the career promotionmechanism, and provide smooth channels and broad platforms for outstanding talents.It will optimize the corporate culture system, foster the corporate image, care foremployees, make them feel at home, and pass on the core concepts of the Company.
2021
(Ⅳ) Potential Risks
1. Risk of industry cyclical fluctuations
The development of the polyester fiber and petrochemical industry is influencedby industry demands and its own development status, thus featuring a certain level ofcyclicity. Changes of the macro environment, such as China’s national economy andexport policy, would bring risks of cyclical fluctuations to the industry. Duringadjustment cycles, falling product prices, insufficient utilization of capacity anddecreasing profitability would be seen.
2. Risk of raw material price fluctuations
The Company’s production and operation are greatly affected by the pricechanges of upstream raw materials, especially crude oil and coal. If the Company’sinventory, procurement management, and price adjustment of downstream productmarket cannot effectively reduce or absorb the impact of price fluctuations of rawmaterials, its operation, production and business performance could be adverselyimpacted.
3. Foreign exchange risk
If the RMB continues to fluctuate substantially, great uncertainties would beposed to the Company’s exchange gains or losses, export product prices denominatedin foreign currencies, raw material prices and other operational factors. The Companywill leverage forward foreign exchange contracts and other methods to establish andimprove the exchange rate hedging mechanism and reduce the amount of foreigncurrency receipts and payments in order to reduce the impact of exchange ratechanges on the Company’s profitability.
4. Environmental protection and safety Risk
With the enhancement of environmental awareness and stricter environmentalprotection requirements from the government, the Company proactively takesenvironmental protection measures, increase corresponding investments, strictlycomplies with relevant laws, regulations and production specifications in its dailymanagement and establishes strict standard operation procedures. However,environmental or safety production accidents caused by human errors or accidentsstill could not be eliminated, which could affect the Company’s normal businesses.Therefore, there are certain environmental protection and production safety risks.
2021
Chapter Ⅳ Corporate Governance
I. Notes on Corporate Governance
In strict accordance with the requirements of the Company Law, the SecuritiesLaw, the Code of Corporate Governance for Listed Companies, the Rules Governingthe Listing of Stocks on Shanghai Stock Exchange and other laws, regulations andregulatory documents, the Company continuously improved the corporate governancestructure, established and improved a sound system of internal management includingGeneral Shareholders Meetings, the Board of Directors and the Supervisory Committeeto regulate its operations. The Company has formed a corporate governance structurewith clear rights and responsibilities, effective checks and balances, scientificdecision-making and coordinated operations among organs of authority,decision-making organs, supervisory organs and the senior management teams. Thestructure ensures the effective implementation of the decision-making power of thegeneral shareholders’ meeting and the Board of Directors and the supervisory power ofthe supervisory committee as well as efficient and compliant operations andmanagement of the senior management team. The Board of Directors of the Companyestablished four special committees, i.e., the strategy committee, the audit committee,the nomination committee and the remuneration and appraisal committee, to provideconsultation and advice for the Board of Directors and make sure that its deliberationand decision-making is professional and efficient. The Company continued to followclosely new changes in regulatory laws and rules, implement new regulatory policiesand requirements, strengthen risk prevention and control, push forward internal controlmanagement, carry out high-quality information disclosure, narrow the scope ofinsiders under the principle of validity, accuracy, timeliness, completeness and fairnessto ensure equitable access to information of all shareholders. The Company managedinvestor relations proactively and treated all investors fairly with integrity and openness.The Company carried forward the ESG system and delivered its social responsibilities
2021
to safeguard the legitimate rights and interests of the Company and all shareholders andensured a sustainable and stable development.
II. Notes on General Shareholders MeetingsDuring the reporting period, the Company held three General ShareholdersMeetings in total. The convening and holding of the meetings complied with theprovisions of the Company Law, the Rules for the General Shareholders Meetings ofListed Companies and its Articles of Associations. The qualifications of the meetingparticipants and conveners were legal and valid. The voting procedures and results ofthe meetings were legal and valid. The resolutions of the General ShareholdersMeetings were legal and valid.
Meetingsession
Dateofmeeting
resolution disclosure
| on designated |
websites
resolutiondisclosure
Meeting resolutions2020AnnualGeneralMeeting
May7,2021
| Date of | |
| Announcement on |
Resolution of the 2020
Petrochemical
| (Announcement No.: |
2021-
(http://www.sse.com.cn/)
| 044) on Shanghai Stock Exchange website | May 8, |
2021
1. 2020 Annual Report on the Work
of the Board of Directors
2. 2020 Annual Report on the Work
of the Supervisory Committee
abstract
4. 2020 Annual Reports on Final
Accounts
5. 2020 Profit Distribution Plan
6. Proposal on Remunerations for
the Directors of the Board in 2020
7. Proposal on Remunerations for
the Supervisors in 2020
8. Proposal on the Forecast of Daily
Related Party Transactions in 2021
9. Proposal on Developing Foreign
Business in 2021
10. Proposal on the 2021 Guarantee
Program
11. Proposal on Applying for
General Credit Limit from Banks
2021
and Other Financial Institutions
12. Proposal on Re-employing the
Accounting Firm
Executives
| 13. Proposal on Buying Liability Insurance for Directors of the Board, Supervisors and Senior | ||
| The First |
InterimGeneralShareholders’Meeting in2021
13,2021
| July | Announcement on |
Resolution of the FirstInteri
2021-
| 057) on Shanghai Stock Exchange website |
(http://www.sse.com.cn/)
2021
| July 14, | Proposal on Investing to Construct |
the Project of Functional PolyesterFilm and Functional Plastics withan Annual Output of 800 kt
SecondInterimGeneralShareholders’Meetingin 2021
| The | Nove |
mber26,2021
Petrochemical
| (Announcement No.: |
2021-
Excha
| nge website |
(http://www.sse.com.cn/)
r 27, 2021
| Novembe | Proposal on Registering and |
Issuing Short-
Bonds
III. Information on Board Meetings during the Reporting Period
term Financing
Meeting session
| Meeting session | Date of Meeting | Meeting resolutions |
| The 16th |
meeting of the8th Board ofDirectors
| March 1, 2021 | 1.The Fifth Phase of the Employee Stock Ownership Plan of Hengli Petrochemical Co., Ltd. (Draft) |
(Revised) and its Abstract (Revised)
Employee Stock Ownership Plan of HengliPetrochemical Co., Ltd. (Revised)
3. Proposal on Signing the Trust Contract of the Trust
Plan for Pooled Funds of the Fifth Phase of EmployeeStock Ownership
2021
The 17thmeeting of the8th Board ofDirectors
April 12, 2021 1. 2020 Annual Report on the Work of the General
Manager
2. 2020 Annual Report on the Work of the Board of
Directors
3. 2020 Annual Report and its Abstract
4. 2020 Annual Reports on Final Accounts
5. 2020 Profit Distribution Plan
6. 2020 Internal Control Evaluation Report
7. Proposal on Remunerations for the Directors of the
Board and Senior Executives in 2020
8. Proposal on Achievement of Performance
Commitment of Hengli Investment (Dalian) Co., Ltd.
9. Proposal on the Forecast of Daily Related Party
Transactions in 2021
10. Proposal on Developing Foreign Exchange
Derivatives Trading Business in 2021
Business
12. Proposal on Entrusted Wealth Management and
Investment Plan in 2021
13. Proposal on the 2021 Guarantee Program
14. Proposal on Applying for General Credit Limit
from Banks and Other Financial Institutions
15. Proposal on Accounting Policy Changes
16. Proposal on Re-employing the Accounting Firm
17. Proposal on Buying Liability Insurance for
Directors of the Board, Supervisors and SeniorExecutives
18. Proposal on Convening the 2020 Annual General
Meeting
| 11. Proposal on Developing Futures Hedging | ||
| The 18th |
meeting of the8th Board ofDirectors
| April 21, 2021 | 1. Full text and main text of the 2021 First Quarter |
Report
2. Report on the Impairment Test by the end of 2020
on Underlying Assets of Material AssetsReorganizationThe 19thmeeting of the8th Board ofDirectors
June 24, 2021 1. Proposal on Investing to Construct the Project of
Green Multi-functional Textile New Materials with anAnnual Output of 1500 kt
2. Proposal on Investing to Construct the Project of
PBS Biodegradable Plastics with an Annual Output of450 kt
Chemical Program for New Materials
4. Proposal on Investing to Construct the Project of
2021
Functional Polyes
with an Annual Output of 800 kt
5. Proposal on Convening the First Interim General
Shareholders Meeting in 2021The 20thmeeting of the8th Board ofDirectors
August 16, 2021 Full text and abstract of the 2021 Interim Report
ter Film and Functional PlasticsThe 21st
meeting of the8th Board ofDirectors
| The 21st | October 27, 2021 | 2021 Third Quarter Report |
| The 22nd |
meeting of the8th Board ofDirectors
| November 5, 2021 | 1. Proposal on Share Repurchase by Means of |
Centralized Bidding
2. Proposal on Authorizing the Senior Management to
Handle Matters Related to the Share Repurchase
meeting of the8th Board ofDirectors
| The 23rd | November 10, |
2021
Financing Bonds
2. Management System of Debt Financing Instruments
Information Disclosure of Hengli Petrochemical Co.,Ltd.
3. Proposal on Convening the Second Interim General
Shareholders Meeting in 2021
| 1. Proposal on Registering and Issuing Short-term | ||
| The 24th |
meeting of the8th Board ofDirectors
2021
| December 30, | 1. Proposal on the Purchase of Assets by Affiliated |
Companies and Related Party Transactions
2. Proposal on Convening the First Interim General
Shareholders Meeting in 2022
Ⅳ. Information on the Special Committees under the Board ofDirectors(I) Members of the special committees under the Board of Directors
| Special committee | Members |
| Audit Committee | Fu Yuanlue, Cheng Longdi, Li Feng |
| Nomination Committee | Li Li, Cheng Longdi, Liu Dunlei |
| Remuneration and |
Appraisal Committee
Li Li, Fu Yuanlue, Gong Tao
Committee
Fan Hongwei, Cheng Longdi, Li Feng
(II) The Audit Committee convened seven meetings during the reporting periodDate of Meeting content Material Other
2021
Meeting comments
andsuggestions
performance of dutiesApril 7, 2021
Convened the second communication meeting toexchange views on the preliminary audit opinionsproposed by the annual audit accountants on the
Company’s financial statements
Nil Nil
2021
| April 12, | Deliberated the 2020 Annual Financial Statements, |
Summary Report of the Audit Committee of the Boardof Directors on the Audit Work in 2020, the Proposal onRe-
Report and its Abstract and the Proposal
| on the |
Forecast of Daily Related Party Transactions in 2021
Nil Nil
| April 21, |
2021
written opinions
Nil Nil
| Reviewed the 2021 First Quarter Report and issued | |
| August 16, |
2021
Reviewed the 2021 Interim Report and issued writtenopinions
Nil Nil
2021
| October 27, | Reviewed the 2021 Third Quarter Report and issued |
written opinions
Nil NilDecember10, 2021
Convened a communication meeting with annual auditaccountants in advance of the 2021 Annual Report
Nil NilDecember30, 2021
Affiliated Companies and Related Party Transactions
Nil Nil
(III) The Remuneration and Appraisal Committee convened one meeting duringthe reporting periodDate ofMeeting
Meeting content
Materialcommentsandsuggestio
ns
Otherperformance of duties
Deliberated the Proposal on Purchase of Assets byApril 7,
2021
Deliberated the Proposal on 2020 Remunerations of Directorsof the Board and Senior Executives
Nil Nil
(IV) The Strategy and Investment Committee convened two meetings during thereporting periodDate ofMeeting
Meeting content
April 7,
Material
comments
andsuggestio
ns
Otherperformance of duties
| Material | ||
| June 23, |
2021
Deliberated the Proposal on
Project of Green Multi-functional Textile New Materialswith an Annual Output of 1500 k
| t, the Proposal on |
Nil Nil
2021
Plastics with an Annual Output of 450 kt, the Proposalon Investing to Construct Supporting Chemical Program
| for New Materials and the Proposal on Investing to |
Construct the Project of Functional Polyester Film andFunctional Plastics with an Annual Output of 800 kt
November 9, 2021
Short-term Financing Bonds
Nil Nil
V. Plan of Profit Distribution or Converting Capital Reserve into NewShares
During the reporting period, there was no adjustment to the Company’s cashdividend policy. The Company strictly complied with related provisions of the Articlesof Associations and the Five-year Plan for Shareholder Return (2020-2024) toimplement the policy.
The Company deliberated and passed the 28
th
meeting of the 8
thBoard of Directorsof the Company, profit distribution in 2021 was proposed as follows: the Companyplanned to distribute cash dividends of RMB10.10 (including tax) for every 10 sharesbased on the total share capital on the date of record (excluding the Company’s sharerepurchase by cash). The proposal would be implemented after being submitted fordeliberation to the 2021 General Shareholders’ Meeting.
VI. Notes on and Impacts of the Company’s Equity Incentive Plan,Employee Stock Ownership Plan and Other Employee IncentiveMeasures
Deliberated the Proposal on Registering and Issuing
Event
| Event | Index |
The revision of the fifthphase of the Company’semployee stockownership plan draft
Please refer to details in the Announcement on the Fifth Phase of the
(Draft) (Revised) disclosed on the Shanghai Stock Exchange website onMarch 2, 2021
| Employee Stock Ownership Plan of Hengli Petrochemical Co., Ltd. | |
| The completion of stock |
purchase of the fifthphase of the Company’s
Purchase of the Fifth Phase of the Employee Stock Ownership Plan ofHengli Petrochemical Co., Ltd. (Announcement No.: 2021-012)
2021
employee stockownership plan
disclosed on the Shanghai Stock Exchange website on March 16, 2021
VII. Information on the Internal Control Audit Report
In accordance with the Basic Norms for Company Internal Control and itssupporting guidelines and other internal control regulatory requirements, also basedon the Company’s internal control system and evaluation methods, the Companyevaluated the effectiveness of its internal control based on daily and specialsupervisions over internal control. In accordance with the format, content, andrequirements stipulated by China Securities Regulatory Commission and ShanghaiStock Exchange, the “2021 Annual Internal Control Evaluation Report” wasformulated.The Company’s external auditor Zhonghui Certified Public Accountants (specialgeneral partnership) issued a standard unmodified internal control audit report for theCompany.
2021
Chapter Ⅴ Environmental and Social
Responsibility
The Company pays great heed to environmental protection, and strictly acts uponthe Environmental Protection Law of the People’s Republic of China, the Law of thePeople’s Republic of China on Promoting Clean Production, and the Law of thePeople’s Republic of China on the Prevention and Control of Environmental Pollutionby Solid Wastes and other relevant laws and regulations. The key pollutantdischarging companies and their subsidiaries mainly include Hengli Chemical Fiber,Susheng Thermal Power, Deli Chemical Fiber, Hengke New Material, Kanghui NewMaterial, Hengli Petrochemical (Dalian) Chemical, Hengli Refining and Chemical,and Hengli Petrochemical.During the reporting period, each pollutant discharging subsidiary carried outself-monitoring of their environmental impact and engaged professional third partiesto test various pollutant factors. The test results showed that the emissionconcentrations of various pollutants were in compliance with national and localpollutant discharge standards and other relevant standards. The total discharge ofpollutants is under the required limit as outlined by operation permits. (Due to theswitch between old and new pollutant discharge licenses, there were some changes inthe approved total annual pollutant discharge amount and discharge calculationmethods of some key pollutant discharge subsidiaries.)The specific pollutant discharge is as follows:
1. Hengli Chemical Fiber
During the reporting period, Hengli Chemical Fiber commissioned JiangsuGuoce Testing Technology Co., Ltd., Suzhou Huanyou Testing Co., Ltd., SuzhouGuotai Testing Co., Ltd.and Suzhou Changhe Environmental Monitoring Co., Ltd. totest various pollutants. The test results showed that the emission concentrations ofvarious pollutants were in line with the national and local pollutant dischargestandards or other relevant standards. The total discharge of pollutants is under therequired limit as outlined by operation permits.
2021
Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Totalemission
The total amount of wastewater (tons per year)Wastewater COD Ammonia
| Total phosphorus | Total nitrogen | ||
| Amount of discharge during the reporting period |
67,311 1.57 0.018 0.027 0.727
/ 8.623 0.675 0.0684 5.748Total amount of exhaust gas (tons per year)
Approved amount ofdischarge (year)Sulfurdioxide
| Sulfur dioxide | Nitrogen oxides |
PM VOCs
14.183 115.713 13.587 0.273
| Amount of discharge during the reporting period |
| Approved amount of discharge (year) |
152.25 201.13 30.16 1.9008
2. Susheng Thermal Power
During the reporting period, Susheng Thermal Power installed the boiler exhaustgas online self-monitoring equipment in accordance with the governmentalenvironmental regulations and technical specifications, adopted a combination ofmanual and automatic monitoring approach. Suzhou Zhenghe ChemicalEnvironmental Protection Co., Ltd. outsourced the continuous emission monitoringequipment and system for maintenance and operation. The plant boundary noise andfugitive exhaust gas emission monitoring, the manual quarterly monitoring of flue gas,and the daily monitoring of industrial and desulfurization waste water are outsourcedto Suzhou Shengze Environmental Monitoring Co., Ltd. Suzhou Shengze testedvarious pollutant factors, and the test results showed that the emission concentrationsof various pollutants met the national and local pollutant emission standards or otherrelated standards. The total discharge of pollutants is under the required limit asoutlined by operation permits.Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emissionTotalemission
Total amount of wastewater (tons per year)
Wastewater COD Ammonia Total Suspended
2021
| phosphorus | solids | ||
| Amount of discharge during the reporting period |
33,070 / / / /
98,550 / / / /Total amount of exhaust gas (tons per year)
Approved amount ofdischarge (year)Sulfurdioxide
| Sulfur dioxide | Nitrogen oxides |
Smoke
| Acetaldehyde | Ethylene glycol |
NMHC
83.564 216.101 13.163 / / /
| Amount of discharge during the reporting period |
| Approved amount of discharge (year) |
434.337 868.674 173.735 / / /
3. Deli Chemical Fiber
During the reporting period, Deli commissioned Jiangsu Hengyu EnvironmentalProtection Technology Co., Ltd., Jiangsu Cishi Environmental Protection TechnologyCo., Ltd., and Jiangsu TST Testing Technique Co., Ltd. to test various pollutantfactors. The test results showed that the emission concentrations of various pollutantswere in line with national and local pollutant emission standards or other relatedstandards. The total discharge of pollutants are under the required limit as outlined byoperation permits.Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Totalemission
Total amount of wastewater (tons per year) Wastewater
COD Ammonia
| Total phosphorus | Suspended solids | ||
| Amount of discharge during the reporting period |
69,433 3.167379 0.158088 0.060942 0.795731
105,160 45.54 0.502 0.094 /Total amount of exhaust gas (tons per year)
Approvedamount ofdischarge (year)Sulfurdioxide
| Sulfur dioxide | Nitrogen oxides |
Smoke
| Acetaldehyde | Ethylene glycol |
NMHC
2.94429 25.438522 0.412249 / / 0.198922
| Amount of discharge during the reporting period |
| Approved amount of |
39.20 33.75 6.75 / / /
2021
4. Kanghui New Material
During the reporting period, Kanghui commissioned Dalian Boyuan Testing andEvaluation Center Co., Ltd. to test various pollutant factors. The test results showedthat the emission concentrations of various pollutants met the national and localpollutant emission standards or other related standards. The total discharge ofpollutants met the requirements of the total discharge permits.Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Total emission
Total amount of wastewater (tons per year)Wastewater COD Ammonia
discharge (year)Amount of discharge duringthe reporting period
461,821 11.0448 0.0902
| Amount of discharge during the reporting period |
| Approved amount of discharge (year) |
961,800 23.21 2.318Total amount of exhaust gas (tons per year)Sulfur dioxide Nitrogen oxides Smoke
7.297 21.521 3.364
| Amount of discharge during the reporting period |
| Approved amount of discharge (year) |
20.23 89.71 50.591
5. Hengke New Material
During the reporting period, Hengke commissioned Suzhou Huace TestingTechnology Co., Ltd. to test various pollutant factors during the reporting period. Thetest results showed that the concentrations of various pollutants was in compliancewith the national and local pollutant discharge standards or other related standards.The total discharge of pollutants is under the required limit as outlined by operationpermits.
Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emissionTotalemission
Total amount of wastewater (tons per year)
Wastewater COD Ammonia
2021
6. Hengli Petrochemical (Dalian)
During the reporting period, Hengli Petrochemical (Dalian) tested variouspollutant factors. The test results showed that the emission concentrations of variouspollutants were in compliance with national and local pollutant emission standards orother related standards.Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Totalemission
Total amount of wastewater (tons per year)Wastewater COD Ammonia
| Total nitrogen | ||
| Amount of discharge during the reporting period |
12,377,385.21 367.77 2.33 109.84
/ 559 111.8 240.05Total amount of exhaust gas (tons per year)Sulfur dioxide
Approved amount ofdischarge (year)Nitrogenoxides
Smoke NMHC
| Nitrogen oxides | ||
| Amount of discharge during the reporting period |
232.64 453.09 44.51 520.95
598 821.77 405.981 /
7. Hengli Petrochemical Refining
During the reporting period, Hengli Petrochemical Refining commissionedDalian Hyseen Testing Technology Co., Ltd. and Dalian Huaxin Jiance Co., Ltd. Toconduct tests on various pollutant factors, and the test results showed that theemission concentrations of various pollutants complied with national and localpollutant emission standards or other related standards. The total discharge ofpollutants is under the required limit as outlined by operation permits.
Approved amount ofdischarge (year)Amount of dischargeduring the reporting period
841,124 15.068 1.319 0.662
| Amount of discharge during the reporting period |
| Approved amount of discharge (year) |
/ 381.95 6.05 0.92Total amount of exhaust gas (tons per year)
Sulfur dioxide
Smoke NMHC
| Nitrogen oxides | ||
| Amount of discharge during the reporting period |
5.385 26.973 1.257 5.249
279.51 349.39 52.41 28.86
2021
Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Totalemission
Total amount of wastewater (tons per year)Wastewater COD Ammonia
| Total nitrogen | Suspended solids | ||
| Amount of discharge during the reporting period |
2,350,139 38.0881 0.3604 0.301679
| 34.703315 | ||
| Approved amount of discharge (year) |
12,620,000 249.23 19.86 /
Total amount of exhaust gas (tons per year)
/
| Sulfur dioxide | Nitrogen oxides |
Smoke
| Acetaldehyde | Ethylene glycol |
NMHC
1,176.995 2,805.204 83.562 / /
| Amount of discharge during the reporting period |
2,
| 824.695 | ||
| Approved amount of discharge (year) |
2,121.7 5,064.92 965.78 / /
| 3,274.58 |
8. Hengli Petrochemical Chemical
During the reporting period, Hengli Petrochemical Chemical HengliPetrochemical Refining commissioned Dalian Hyseen Testing Technology Co., Ltd. toconduct tests on various pollutant factors, and the test results showed that theemission concentrations of various pollutants complied with national and localpollutant emission standards or other related standards. The total discharge ofpollutants is under the required limit as outlined by operation permits.
Excessiveemission
Wastewater No excessive emissionExhaust gas No excessive emissionNoise No excessive emission
Totalemission
Total amount of wastewater (tons per year)Wastewater COD Ammonia
2,140,278.2 39.8409 0.4478Approved amount of discharge (year) 4,660,000 204.3 32.7
Total amount of exhaust gas (tons per year)
Amount of discharge during thereporting periodSulfurdioxide
| Sulfur dioxide | Nitrogen oxides |
Smoke NMHC
35.0183 433.2057 135.88 135.88
Approved amount of discharge (year) 116.5 974.4 149 736.088
2021
During the reporting period, the above companies who discharged pollutants allbuilt their pollutant control facilities following the requirements for environmentalimpact assessment of the construction project. Currently, the facilities are undernormal operation. The companies carry out daily maintenance of the facilities toensure their efficient and stable operations of keeping emissions within the standards.The company’s key pollutant discharging subsidiaries have formulated theirenvironmental monitoring plan in accordance with relevant national standards andenvironmental management system requirements. They have applied for the pollutantdischarge permits and filed with the environmental regulative organ of theirjurisdiction. The company’s environmental monitoring station regularly tested variouspollutants at the sewage outlets of each plant. If a company were unable to conducttests, it would commission third-party agencies with environmental monitoringqualifications to conduct discharge tests of the special pollutants such as wastewaterand exhaust gas. The Company will appoint special personnel to check andsummarize pollutant indicators every day, analyze the data, and submit feedback torelevant departments for reference to adjust technical parameters, all to ensureemission compliance.The Company attaches great importance to environmental protection, strictly actsin line with the Environmental Protection Law of the People’s Republic of China, andcomplies with national and local environmental protection laws and regulations,industry technical specifications, and government regulations, and activelyimplements daily environmental protection management work. The non-productionaffiliates to the Company exert less impact on the environment, and the consumptionand discharge of energy and resources are mainly concentrated in daily operations andoffice activities. Other subsidiaries of the Company actively undertake the mainresponsibility for corporate environmental protection, stringently abide by variousenvironmental protection policies, and effectively carry out environmental protectionmeasures.Hengke New Material has been pushing ahead with R&D and application of PVpower generation projects since 2015. Through PV construction, technologicaltransformation, innovation and upgrading, it reduces carbon emissions and achievesenergy-saving and environmentally friendly production. As of the date of thisannouncement, the Phase Four of the PV projects of Hengke New Material have all
2021
been put into operation, with a total installed capacity of about 60 MW and along-term planned installed capacity of 100 MW. According to the statistics ofHengke New Material, the cumulative PV power generation in 2021 is 305.94 millionkwh, making it the largest distributed PV power generation project in JiangsuProvince.Hengli Chemical has implemented APC control on the whole process of theethylene cracker, greatly improving the stability of the operation, increasing the yieldof diene, reducing the consumption of fuel gas, steam, the use of energy from thesource, and carbon emissions. After the implementation of APC control, the fuel gasconsumption of the ethylene cracking furnace can be saved by 3.7 t/h, saving about 31kt of fuel gas and 13 kt of CO
emission every year.The 20,000 kta refining and chemical integration project of HengliPetrochemical Refining realizes high value-added recycling and utilization of C2components in refining and chemical dry gas, reducing carbon emission by about1,590 kta. By full recovery and utilization of all the excess hydrogen through ethylene,if the annual surplus hydrogen is calculated as 51 kt and the carbon emission intensityof coal-to-hydrogen as 11t CO
/t of hydrogen, the carbon emission reduction to beachieved is about 560 kta.During the reporting period, for the Company’s construction projects,environmental impact assessment reports (forms) or approval forms have beenprepared by qualified bodies and have received the approval of the correspondingenvironmental protection authorities. The project incorporates environmentalprotection into the project “design, construction and production simultaneously”. Thecompleted projects and supporting facilities have all passed final inspections from theenvironmental protection organs, and the projects under production have obtainedtheir relevant administrative permits.
2021
Chapter Ⅵ Share Changes and
ShareholdersI. Changes in Shares
Unit: Share
change
Increase/decrease from the change (+, -)
After thechange
Numberofshares
Percentage(%)
Newissueofshares
Bonusshares
| Before the | ||
| Shares |
convertedfromcapitalreserve
Others
Sub-total
Number ofshare
s
Percentage
(%)
withtradingrestrictions
2,407,164,177
34.20
-2,407,164,177
-2,407,164,177
0 0
| I. Shares |
| 1. |
State-owned shares
2.State-own
personshares
| ed legal |
| 3. Shares held by |
otherdomesticentities
2,407,164,177
34.20
-2,407,164,177
-2,407,164,177
0 0Incl.:
Shares
domesticnon-state-ownedlegalperson
1,521,058,208
21.61
-1,521,058,208
-1,521,058,208
0 0
Shares 886,105,12.59 -886,105,9-886,0 0
2021
domesticnaturalpersons
969 69 105,9
| held by |
| 4. Shares held by |
foreignentities
Incl.:
Shares
overseaslegalperson
Shares
| held by |
| held by |
overseasnaturalpersons
Circulatin
| g shares |
withouttradingrestrictions
4,631,935,609
65.80
2,407,164,
2,407,164,
7,039,099,7
100.0
ordinaryshares
4,631,935,609
65.80
2,407,164,
2,407,164,
7,039,099,7
100.0
2.Domesticlistedforeignshares
3.Overseaslistedforeignshares
4. OthersIII. Totalnumber ofshares
7,039,099,786
100.00 0 0
7,039,099,7
100.0
On February 8, 2021, 2,407,164,177 restricted shares due to the Company’s material
2021
asset reorganization were listed and circulated.
II. Changes in Shares with Trading Restrictions
Name ofsharehold
ers
Number ofshares withtradingrestrictions atthe beginning of
the reporting
period
Numbers ofshares releasedfrom tradingrestrictionsduring thereporting period
Increasein shares
withtradingrestrictions during
thereportingperiod
Numberof shareswithtradingrestrictions by theend of thereportingperiod
Reasons
forrestriction
s
Date ofsharesreleasedfromtradingrestriction
Hongwei
| Fan | 886,105,969 | 886,105,969 | 0 | 0 | Shares |
acquiredas a resultofreorganiza
transferre
| d within |
36 months
suchshares
| from the listing of | February |
8, 2021HengnengInvestmen
Co., Ltd.
1,498,478,926 1,498,478,926 0 0 February
8, 2021HengfengInvestmen
| t (Dalian) |
| t (Dalian) |
Co., Ltd.
22,579,282 22,579,282 0 0 February
8, 2021
| Total | 2,407,164,177 | 2,407,164,177 | 0 | 0 | / | / |
III. Information of Security Issuance and Listing
1. Securities
The 2019 corporate bonds (first tranche) publicly issued by the Company werelisted on the Shanghai Stock Exchange on October 15, 2019 and were available fortrading by qualified investors. The bond is, abbreviated as “19 Hengli 01” with a bondcode of “155749” and raised RMB1,000 million. The coupon rate is 6.30% with aduration of 3 years. The bond provides investors with a put option by the end of thesecond year and the issuer with an option to adjust the coupon rate.During the reporting period, the Company exercised the option to adjust the
2021
coupon rate based on the reality and the current market environment. It decided to cutthe coupon rate for one interest-bearing year after the duration of the bond by 380basis points, i.e., the coupon rate of the bond from September 27, 2021 to September26, 2022 is 2.50%. During the period for exercising a bond put option (August 26,2021, August 27, 2021, August 30, 2021, August 31, 2021, September 1, 2021), abondholder can file to exercise the put option. According to the statistics of theShanghai Branch of China Securities Depository and Clearing Corporation, 1 millionlots were filed and repurchased at the price of RMB1,000 million. The Company didnot resell the repurchased bonds. The value of retired bonds was RMB1,000 million.In accordance with relevant provisions of the bond prospectus, on September 27,2021, the Company has fully paid the remaining principal and corresponding interestsdated from September 27, 2020 to September 26, 2021 and delisted the bond from theShanghai Stock Exchange on October 14, 2021 ahead of the schedule.
2. Short-term Financing Bonds
The Company held the 23
rd
meeting of the 8
th Board of Directors and the 2
nd
Interim General Shareholders Meeting in 2021 on November 10, 2021 and November26, 2021 respectively to deliberate and pass the Proposal on Registering and IssuingShort-term Financing Bonds, which allowed the Company to apply to the NationalAssociation of Financial Market Institutional Investors for registration and issuance ofshort-term financing bonds with an amount not exceeding RMB3,000 million(including RMB3,000 million).
By the end of the reporting period, the short-term financing bonds have not beenissued yet.
IV. Controlling Shareholders and Actual Controllers(I) Controlling ShareholdersName Hengli Group Co., Ltd.Responsible person or legalrepresentative
Chen JianhuaDate of Establishment January 16, 2002Main Business production and sales of textile and paper packaging materials
2021
(excluding printing); sales of chemical fiber materials, plastics,
PTA and MEG; industrial investment; textile material newproducts R&D; import and export of self-operated and agencygoods and technologies. The following business are limited tobe operated by branches: thermal power generation and steamproduction and supply (Business activities subject to legalapproval can only be carried out upon approval by relevantauthorities).Controlling and participating sharesof the controlling shareholder inother domestic and overseas listedcompanies during the reportingperiod
Hengli Group is the controlling shareholder of GuangdongSongfa Ceramics Co., Ltd. listed on Shanghai Stock Exchange(stock abbreviation: Songfa Stock, stock code: 603268) andSuzhou Wujiang Tongli Lake Tourist Resort Co., Ltd. listed on
| electromechanical devices, instruments and apparatus, ash, |
| the National Equities Exchange and Quotations (stock |
abbreviation: Tongli Tourism, stock code: 834199).Other information Nil
(II) Property Rights and Control Relations Between the Company and theControlling Shareholder
When calculating the shareholding ratio of the controlling shareholder HengliGroup, the number of shares indirectly held through the “Hengli Group-SouthwestSecurities-21 Hengli E1 special guarantee and trust property account” is alsoincluded.(III) Actual ControllersName Chen Jianhua and Fan Hongwei (Couple)Nationality ChinaWhether the actual controllers have
other countries or regions
NoMain occupations and positions Chen Jianhua is the Chairman and General Manager of Hengli
Group Co., Ltd., the controlling shareholder of the Listed
Company; Fan Hongwei is the Chairman and General Manager
Hengli Group Co,. Ltd.
29.84%
Hengli Petrochemical Co., Ltd.
2021
of the Listed CompanyDomestic and overseas listedcompanies controlled by the actualcontrollers in the past ten years
Chen Jianhua and Fan Hongwei are the actual controllers of
Guangdong Songfa Ceramics Co., Ltd. listed on Shanghai
code: 603268) and Suzhou Wujiang Tongli Lake Tourist
Resort Co., Ltd. listed on the National Equities Exchange and
Quotations (stock abbreviation: Tongli Lvyou, stock code:
834199).
(IV) Property Rights and Control Relations between the Company and the ActualControllers
Suzhou Shenglun
Stock Exchange (stock abbreviation: Songfa Stock, stock
Investment Co., Ltd.
Hengneng Investment
Investment Co., Ltd.(Dalian) Co., Ltd.
Tak Shing Li
| (Dalian) Co., Ltd. | International Holdings Ltd. |
Hengli Group Co., Ltd.Jiangsu HegaoInvestment Co., Ltd.
Hengli Petrochemical Co., Ltd.
Chen Jianhua and Fan Hongwei (Spouses)
Hengfeng Investment
(Dalian) Co., Ltd.
Hailaide International
| (Dalian) Co., Ltd. | Investment Co., Ltd. |
Suzhou Huaer
Investment Co., Ltd.of the Listed Company
(IV) Property Rights and Control Relations between the Company and the ActualControllers
Suzhou Shenglun
Hengneng Investment
Investment Co., Ltd.(Dalian) Co., Ltd.
Tak Shing Li
| (Dalian) Co., Ltd. | International Holdings Ltd. |
Hengli Group Co., Ltd.Jiangsu HegaoInvestment Co., Ltd.
Chen Jianhua and Fan Hongwei (Spouses)Hengli Petrochemical Co., Ltd.
Hengfeng Investment
Hengli Petrochemical Co., Ltd.
(Dalian) Co., Ltd.
Hailaide International
| (Dalian) Co., Ltd. | Investment Co., Ltd. |
Suzhou Huaer
2021
Chapter Ⅶ Relevant Information of Bonds(I) Basic Information of Corporate Bonds
Unit: RMBName of bond Public issuance of corporate bonds of 2019 by Hengli Petrochemical Co.,
Ltd. (First Tranche)Short name 19 Hengli 01Code 155749.SHDate of issuance From September 25, 2019 to September 27, 2019Value date September 27, 2019Maturity date October 14, 2021Bond balance 0
| Interest rate | 2.5% |
| Principal and interest |
payment
basis and no compound interest will be applied. Interests will be paid
once a year and the principal is repaid in a lump sum when the bond is
due. The last installment of interest will be paid together with the
repayment of the principal.
Trading venue Shanghai Stock ExchangeWhether there is riskof termination oflisting
No
The Company has paid interests of “19 Hengli 01” dated from September 27,2020 to September 26, 2021 in full on September 27, 2021 and the bond registrationdate was September 24, 2021. Please refer to the Announcement of 2021 InterestPayment for the Publicly Issued Corporate Bonds in 2019 (First Tranche) by HengliPetrochemical Co., Ltd. disclosed on the Shanghai Stock Exchange bond informationwebsite.
(1) Exercising of the issuer’s option to adjust the coupon rate.
In accordance with provisions regarding the option to adjust the coupon rate inthe Prospectus of the Public Issuance of 2019 Corporate Bonds of HengliPetrochemical Co., Ltd. (Available for Qualified Investors, First Tranche) (hereinafteras “the Prospectus”), the Company (namely the Issuer) has the right to decide the
2021
coupon rate for one interest-bearing year after the duration of this tranche of bonds atthe end of the second interest-bearing year of the publicly issued 2019 corporatebonds (first tranche) of Hengli Petrochemical Co,. Ltd.The Company disclosed the Announcement on the Adjustment of Coupon Rate ofthe Publicly Issued 2019 Corporate Bonds (First Tranche) on August 26, 2021 andbased on the actual situation and the current market environment, the Companydecided to cut the coupon rate for one interest-bearing year after the duration of thebond by 380 basis points, i.e., the coupon rate of the bond from September 27, 2021to September 26, 2022 is 2.50% (simple interest is used to calculate interest on anannual basis and no compound interest will be used).
(2) Exercising of the investors’ put option.
In accordance with provisions regarding the investors’ put option set in theProspectus of the Public Issuance of 2019 Corporate Bonds of Hengli PetrochemicalCo., Ltd. (First Tranche, Available for Qualified Investors), investors have the right toregister during the period of application for exercising a bond put option to sell all orpart of the 2019 corporate bonds publicly issued by Hengli Petrochemical Co., Ltd.(first tranche, hereinafter as “the tranche of bonds) they held back to HengliPetrochemical Co., Ltd. (hereinafter as “the issuer) at par, or choose to continue tohold the tranche of bonds.
The Company disclosed the Announcement on Repurchasing the Publicly Issued2019 Corporate Bonds (First Tranche) on August 26, 2021 that it would repurchaseall or part of “19 Hengli 01” held by bondholders at par (RMB100 per bond) withinthe period of application for exercising the bond put option (August 26, 2021, August27, 2021, August 30, 2021, August 31, 2021, September 1, 2021). The issuer did notresell the repurchased bonds.
The Company disclosed the Announcement on the Result of Repurchasing thePublicly Issued 2019 Corporate Bonds (First Tranche) on September 3, 2021.According to the statistics of the Shanghai Branch of China Securities Depository andClearing Corporation on the repurchase of the tranche of bonds, the registered volumeof “19 Hengli 01” (bond code: 155749) during the application for exercising the bond
2021
put option was 1 million lots, which were repurchased at the price of RMB1,000million. The issuer did not resell the repurchased bonds. The value of retired bondswas confirmed as RMB1,000 million. The payment date for the repurchase wasSeptember 27, 2021.The original maturity date of “19 Hengli 01” was September 26, 2022. TheCompany disclosed the Announcement on Delisting the Publicly Issued 2019Corporate Bonds (First Tranche) ahead of the Schedule on September 28, 2021. The“19 Hengli 01” bonds were fully repurchased and retired and were delisted ahead ofthe schedule on October 14, 2021.
(II) Accounting Data and Financial Indicators of the Company in thePrevious Two Years by the End of the Reporting Period
Unit: million RMB
Key indicators 2021 2020 Flux (%)
ReasonsforchangesNet profit excludingextraordinary profit and loss
14,520.69797128 12,874.32414650 12.79
Current ratio 0.67 0.61 9.84
Quick ratio 0.24 0.38 -36.84
Debt-to-assets ratio (%) 72.75 75.38 -2.63
Total debt-to-EBITDA ratio 0.2191 0.2052 6.77
Interest coverage ratio 4.93 4.31 14.39
ratio
4.73 3.44 37.50
| cash flow interest coverage |
EBITDA-to-interest coverageratio
6.74 5.58 20.79
Loan repayment rate (%) 100.00 100.00 0
Interest coverage rate (%) 100.00 100.00 0