I. Overview
(I) Operating Data and Financial Indicators
In the first half of 2020, the Company realized total operating revenue of RMB280,652,409.37 within the scope of its consolidated statement of accounts, representing an increase of 7.23% over the same period of the previous year, and realized operating profit of RMB62,433,629.86, a decrease of 8.12% compared with the same period of the previous year, and realized net profit attributable to shareholders of listed companies of RMB53,840,422.69, a decrease of 8.93% compared with the same period of the previous year.
During this reporting period, the operating performance of the company's plant extraction business grew steadily, realizing an operating income of RMB 24,522.10 million, accounting for 87.38% of the company's consolidated operating income, an increase of 18.66% over the same period of the previous year, and an increase of 11.93% in net profit over the same period of the previous year, with a good growth trend of the main business. The company's BT project due to near the end of the recognized operating income of 33.1909 million yuan, accounting for 11.83% of the company's consolidated operating income, a decrease of 31.81% over the same period of the previous year, net profit decreased by 27.33% compared with the same period of the previous year, the company's overall performance during the reporting period has a certain impact on the performance of the company.
At the end of the reporting period, the total assets of the Company amounted to RMB2,713,707,259.28, representing an increase of 4.39% compared with the beginning of the reporting period, and the equity attributable to shareholders of listed companies amounted to RMB1,785,232,421.43, representing an increase of 1.53% compared with the beginning of the reporting period.
(ii) Analysis of operating conditions
The global outbreak of the new Crown pneumonia epidemic in 2020 has brought a huge impact on the social and economic development of the world, and all the employees of the Company have actively taken measures to prevent the epidemic since its occurrence, to ensure that the Company resumed production and work in a timely and safe manner, which effectively ensured the smooth development of the Company's main business during the reporting period.
During the reporting period, the Company closely followed the long-term development strategy and annual business objectives formulated by the Board of Directors, fully utilized the Company's brand accumulation and technology accumulation in the plant extract industry, and continued to actively expand the business of large single products, with a focus on promoting the innovative development of the natural sugar-free sweetener business and the construction of the industrial hemp business project and market layout.
1, the development of natural sugar-free sweetener business
The company has always adhered to the "green technology, healthy future" business philosophy, is committed to natural plant-based raw materials for food and beverage, nutritional supplements, food additives, animal feed and other areas of the customer to provide the highest quality products and solutions. At present, the company has mastered the core technology of extracting hundreds of natural ingredients. Over the past 10 years, the company has firmly developed the natural sugar-free sweetener business represented by Luo Han Guo extract and stevia extract, concentrated its advantageous resources and energy to focus on the market of natural sugar-free sweeteners, and actively laid out the development of industrial chain, establishing the whole industry chain operation capability from seedling cultivation to the application of terminal consumer products.
During the reporting period, the operating income of the company's natural sweetener-related products amounted to RMB 157 million, accounting for 64.32% of the operating income of the company's plant extraction business.
The cumulative target revenue of $400 million of natural sweetener procurement contracts signed between the company and Fenmei in 2018 has laid a solid foundation for the long-term development of the company's natural sweetener business in the next few years. Currently, the Company has successfully established partnerships with global food and beverage brands such as Danone, Nestle and PepsiCo through its cooperation with Firmenich.
During the reporting period, we are pleased to see that the domestic terminal consumer goods market for the application of sugar-free sweetener products set off a boom, especially the emergence of a number of new emerging national tide brands represented by Yuanqi Forest, the favor of zero-calorie, zero-sugar and zero-fat sweetener raw materials, and its products have gained the love of a large number of young consumers. From the company's financial data in the first half of the year, the domestic sales of plant extract business revenue rose sharply by 55.72% compared with the same period of the previous year, the company's ability to cooperate with well-known foreign consumer brands for a long time, but also gradually gained the recognition of more domestic brands. The company will continue to develop the domestic market in the future, and strive to provide domestic consumers with more high-end high-quality natural sweetener products.
In order to further enhance the competitiveness of the natural sweetener business, the company planned the 2020 non-public offering in August this year, and the proceeds were mainly used for the construction of the stevia professional extraction plant and the supplement of liquidity, and the controlling shareholder of the company, Mr. Qin Benjun, based on the confidence in the development prospects of the natural sweetener market, intended to contribute RMB 920 million yuan to subscribe for the shares of the non-public offering in full. After the completion of this non-public offering, it will be conducive to help the company seize the development opportunities of the natural sweetener market, enhance the business scale and market share, and continue to provide high-quality products and services to domestic and foreign customers.
2, continue to promote the construction of industrial hemp business capacity
In 2019, the company gave full play to the technical research and development advantages it possesses in the plant extraction industry, seized the opportunity for development, and carried out the industrial hemp extraction business in the state of Indiana in the United States, investing about 400 million yuan in the construction of the "Industrial Hemp Extraction and Application Engineering Construction Project "This project is an important business layout of the company's strategic development direction and an important extension of the "big single product" development strategy. The completion and production of the project will add new profit growth points for the company, improve the company's profitability and core competitiveness, and create more value for shareholders.
(1) Industrial hemp project development
At present, the civil construction of the industrial hemp extraction plant has been topped out, and the construction progress is in line with expectations. At present, the plant is listed by the Indiana government as a demonstration project in the field of industrial hemp extraction in the United States, for the overall design of the plant, construction, equipment, safety and other requirements are formulated with reference to the industry's highest standards, so that the company's upfront construction investment will be enhanced, but also for the plant's subsequent safe and standardized operation to lay a good foundation. 2020, by the U.S.-China trade relations and the new Crown pneumonia epidemic Since 2020, affected by the trade relations between China and the U.S. and the Xin Guan Pneumonia epidemic, Hemprise, a subsidiary of the Company, has been facing unfavorable factors such as higher tariffs on the importation of equipment from China, restrictions on the entry of personnel into the country, higher installation costs and a longer period of installation of equipment. Based on the construction progress of the project and the current business environment, during the reporting period, the Company actively communicated with the design and construction companies, equipment manufacturers and other partners, and took measures such as constructing three-dimensional drawings, clarifying the parameters of the equipment in detail, and locating the drawings in a fixed position in order to refine the arrangements for the installation work in advance, and to effectively reduce the risk of subsequent increase in the installation cost and extension of the construction period. Not only that, during the reporting period, the company also actively promoted the improvement of soft power such as PCT patent declaration and FDA-GRAS certification, and achieved certain results. Especially in promoting the industrial hemp extract through the GRAS certification of the U.S. FDA, with the company's previous experience in carrying out the GRAS certification of rosmarinus officinalis and stevia, the company established and enhanced the industry standard of industrial hemp extract by closely cooperating with the international third-party laboratories, laying a solid foundation for the sustained development of the company's business, which in the future will also be conducive to the rapid promotion of the company's industrial hemp business The company's industrial hemp business will also be conducive to the rapid promotion of market expansion in the future.
(2) industrial hemp extract application field is wide, market development prospects
From the international market, in the field of plant extraction, industrial hemp downstream application space is broad, category view includes drugs, food and beverage, health care products, tobacco and other fields. At present, the downstream has been used or publicly announced will be used in this area of research and development of a large number of brands, including the famous consumer brands Coca-Cola, PepsiCo, Marlboro, Corona, Red Bull, Nestle and so on. Demand for industrial hemp extracts will continue to expand as extraction processes continue to advance and the benefits of the product are further demonstrated by the scientific community. The global CBD market stood at $4.6 billion in 2018 and is expected to reach $9.3 billion by 2020, according to a relevant report by GrandViewResearch.
With the gradual increase in policy relaxation and the opening of the application market from pharmaceuticals to healthcare products and even consumer products, the market space for industrial hemp extracts will become more and more expansive. According to the relevant research report of Tianfeng Securities (601162), in June 2020, the United Nations Commission on Narcotic Drugs held its first closed-door meeting to discuss the proposal of removing CBD preparations from the international drug control conventions, and CBD is expected to be allowed to be applied in large scale to terminal consumer products at the end of 2020. Regionally, the U.S. is currently the largest market for industrial hemp extract applications, with the overall U.S. CBD market forecast to exceed $20 billion by 2024. The company's new industrial hemp extraction project in the U.S. fits the development trend of the global industrial hemp industry, and is expected to usher in tremendous development opportunities.
3, to further clarify the development of end-consumer products business strategic position
From the international health industry development trend and relevant national policies, domestic end-consumer products, such as health care products, cosmetics, functional foods, beverages, specialty foods and other industries will usher in a huge opportunity for the development of the demand for natural plant extracts will be further enhanced, and the plant extraction industry is bound to become a healthy development of the end-consumer products industry. The plant extract industry will become a "bridgehead" for the healthy development of the terminal consumer goods industry. Enterprises in the plant extract industry can establish a set of efficient and credible linking system between natural plants and consumers, and escort consumers to enjoy more natural, healthy and safe products throughout the whole process. Therefore, based on the company's industrial chain advantage in the plant extract industry, the company decided to further increase the investment in the field of terminal consumer goods during the reporting period, and clearly included it in the company's future development of one of the core strategic directions.
In order to ensure the implementation of the above strategy, the company will sort out the existing subsidiaries of each terminal consumer goods business, and at the same time, further increase the efforts in the terminal consumer goods market, capital investment, talent introduction policy, management incentive system, investment and financing strategies, etc., to more open-minded and entrepreneurial mentality, to attract a group of innovative spirit and brand building ability of the team, ****with For consumers to dedicate more healthy, green, safe products.
4, and constantly increase investment in research and development to enhance the ability of sustainable development
5, and actively promote the BT project review, transfer and payback, to support the development of the company's main business
During this reporting period, the construction of the BT project has entered into the closing stage, has been completed the cumulative value of about 1.94 billion yuan, has been a cumulative total of 1.448 billion yuan of repurchase money received.
The Company closely tracked the closing stage of the project, and actively maintained efficient communication with the owner in respect of auditing, handover and repayment, so as to promote the early recovery of the repurchase amount of the project and support the development of the Company's plant extraction business.
Second, the company's risks and countermeasures 1, macroeconomic risk The current economic and trade friction between the United States and China has brought greater uncertainty to the industry and economic operation. If the situation is further expanded, the global market is inevitably affected by this systemic risk, and uncertain political factors may affect the process of global economic development. Countermeasures: On the one hand, we will reduce product costs and improve product quality through technological improvements to enhance product competitiveness. On the other hand, we will strengthen close cooperation with our major customers, take the initiative to adjust our sales structure, and expand our market share in Europe, Asia-Pacific and other regions. In order to reduce the impact of macroeconomic fluctuations on the company's performance. 2, the risk of changes in the business model The company's wholly-owned subsidiary Rheinvest engaged in Guilin City, Lingui New District flood control and drainage and lakes and ponds water system project operation and management, construction services, investment and financing and enjoy the operating return, the business model for the BT way. 2020 BT project construction is nearing the end of the project, the project value is reduced year by year, the same period of time, the recognized income is significantly reduced, the net profit is significantly reduced, the impact on the operating results of the reporting period is relatively large. After the completion of the BT project, if the Company's plant extraction business fails to meet the performance targets as scheduled, there is a risk that the Company's performance will drop significantly. Countermeasures: The Company will actively explore the market for plant extracts and, on the basis of stabilizing existing customers, increase the development of strategic customers by taking advantage of the production capacity scale of the new plant and the quality control system. The company further increases strategic investment in R&D and sales, develops new "big single product", continues to strengthen the docking cooperation with Fenmei, to ensure the effective fulfillment of major contracts, to ensure the sustained and rapid growth of the revenue of the plant extract business. 3、Management Risk With the expansion of the company's scale and the expansion of the business of the subsidiaries, the company and its subsidiaries for management personnel, marketing personnel, professional and technical personnel, the rapid expansion of the scale of the company's management tasks. If we do not adjust the management mode and improve the management level in accordance with the changes in the external environment in a timely manner, it will bring certain risks to the company's future operation and development. Countermeasures: The company will balance the application of the two talent mechanisms of "internal training and external introduction", develop and utilize the talent resources of domestic universities in an integrated manner, and focus on the accelerated cultivation of high-potential talents. We insist on the combination of self-development and introduction of talents, strengthen the talent cultivation mode with values training as the core, supplemented by professional skills, management skills and complex talent training, clear standards, precise training, long-term counseling, and promote the implementation of talent development from the three levels of resources, operation and system, optimize the strategic layout of talents, and strengthen the talent reserve. The company strives to create a fair competition environment for employees, and implements a competitive recruitment system for key management positions, giving every employee a fair and open promotion opportunity. Through the use of performance management tools, the company's business objectives are broken down step by step into the employee's work assessment, giving full play to the employee's subjective initiative, improve work efficiency, and realize that employees with excellent performance are given priority in enjoying pay rises, grade advancement, job promotion and other treatments. At the same time to implement the combination of material rewards and spiritual rewards, rewards and penalties for the combination of modes, to have outstanding contributions to be heavily rewarded; to cause great losses to be heavily penalized. The company's comprehensive use of a variety of incentives to stimulate the enthusiasm and creativity of all employees to enhance the company's internal cohesion. 4、Financial Risk With the continuous expansion of the company's production scale and the continuous expansion of overseas markets, the company's export business will continue to increase in the future. As the company's import and export business will generate a certain amount of foreign exchange income and expenditure, changes in the country's foreign exchange policy, or large fluctuations in the level of the RMB exchange rate will have a certain impact on the Company's performance. Meanwhile, affected by industry factors, the Company's accounts receivable and inventory balances have been increasing year by year in line with the growth of the Company's main business. Although the overall risk is limited and the Company has made provision for bad debts in accordance with the principle of prudence, it still puts a certain amount of pressure on the Company's working capital. Countermeasures: With regard to the exchange rate market trend, the company will strengthen its bargaining power by enhancing the added value of its products, strive for greater profit margins, avoid the impact of RMB exchange rate fluctuations on the company's export sales, and avoid foreign exchange risks by means of forward settlement and foreign exchange treasure. The company attaches great importance to financial management work in the expected risk of accounts receivable and inventory impairment and other risks, strengthen internal control and risk prevention mechanisms to minimize financial risks and financial losses. 5, the risk of deterioration of the business environment due to the intensification of the new crown epidemic China's domestic new crown epidemic has not yet completely ended, the rest of the world has shown a gradual intensification of the epidemic. The World Health Organization announced on March 11 that the new crown pneumonia epidemic has a global pandemic characteristics, the form is worrying, the company nearly 70% of the revenue from foreign regions, such as foreign epidemics can not be effectively curbed, the company's annual operation will bring certain uncertainty. Response measures: The company will actively respond to the epidemic, actively implement the epidemic prevention and control work, strengthen communication with customers and suppliers, the establishment of the fate of the * * * the same body, hand in hand * * * to overcome the difficulties, and strive to grasp the market opportunities brought about by the impact of the epidemic, to minimize the adverse impact of the epidemic on the company's operations and development. At the same time, with the outbreak of the epidemic, the global market demand for immune-enhancing products has risen sharply, bringing some incremental opportunities for the company's business.
Third, the core competitiveness of the analysis of the company as a domestic plant extract industry leader, in the technology research and development, equipment, technology, management system and other aspects of the accumulation of rich experience and advantages. The company actively innovates, grasps market opportunities, and digs deep into the market potential, so that the brand awareness and customer recognition in the plant extract industry are gradually improving, and the company's core competitiveness is constantly increasing. 1. R&D and technology advantages After years of R&D investment and technology accumulation, the company has accumulated rich experience in R&D and technology in the plant extract industry. Relying on the R&D platform of high-tech enterprises, the company has been approved to establish "Postdoctoral Research Station", "National Tropical Fruit Processing Technology R&D Sub-center", "Guangxi Natural Sweetener Engineering Technology Research Center", "Guangxi Natural Sweetener Engineering Technology Research Center", "Guangxi Natural Sweetener Engineering Technology Research Center", "Guangxi Natural Sweetener Engineering Technology Research Center" and "Guangxi Natural Sweetener Engineering Technology Research Center". ", "Guangxi Luo Han Guo Industrialization Engineering Institute" and "Guangxi academician workstation" and other research and development platforms, the technology center has been recognized as the Guangxi autonomous region-level enterprise technology center. The company has set up a plant science innovation center led by a returned doctor from the University of Nottingham in the UK, which is dedicated to carrying out the research and development and cultivation of high-quality and high-yield Luo Han Guo and Stevia seedlings; at the same time, the company has set up a health product research and development center in Shanghai to carry out research and development of the formulation application of plant extracts in the terminal consumer products, which can provide the overall solution for the company's customers in terms of product innovation and formulation development, as well as providing strong technical solutions for the development of the company's terminal consumer products business. It also provides strong technical support for the development of the company's terminal consumer products business. The Company attaches importance to strengthening technical cooperation with domestic famous universities and scientific research institutions, relying on their technical and talent advantages, to accelerate the research and development process of the Company's products and processes or to establish technical reserves and accumulation. The company has established long-term cooperative relationship with many universities and research institutes, such as Tianjin Institute of Bioindustry of Chinese Academy of Sciences, Shanghai Institute of Pharmaceutical Sciences, Guangxi Institute of Botany, Hunan Agricultural University, East China University of Science and Technology, Guangxi University, Guangxi Normal University, Guilin Medical College, Guilin University of Science and Technology and so on. As of the end of this report, the company owns 58 national invention patents and has mastered the core technology of extracting nearly 300 natural ingredients. 2、Brand Advantage The company pays attention to brand building in operation and development, and actively implements the brand strategy of "LaynInside". After years of brand operation and maintenance, the company has cultivated and formed the brand of "LaynInside" with high-quality product quality and stable and reliable supply system, and owns the brand of "LaynInside". LaynInside" brand, with "Layn Bio", "Layn", "Fruit Story" and other trademarks. The company has won the awards of "High Quality Supplier of Plant Extracts", "State Key Leading Enterprise of Agricultural Industrialization", "China Quality and Integrity Enterprise", etc., and has established a good corporate image and enjoys a certain reputation in the plant extract industry. The company has established a good corporate image in the plant extract industry and enjoys a certain degree of popularity and reputation. The company has been based on the health industry for nearly 20 years, and the precipitation of intangible assets has continuously enhanced the company's brand value. At present, the company has established good cooperative relations with many top 500 enterprises, and further enhanced the company's brand image by virtue of high-quality products and excellent service. 3、Marketing Advantage The company has strong market adaptability and control ability in marketing, and has built a global marketing system with three major marketing centers in Shanghai, China, Los Angeles, U.S.A. and Savona, Italy as the core, radiating to the European, American and Asian markets. We have conducted business with more than 100 food, beverage, health care and cosmetic manufacturers and pharmaceutical raw material traders in more than 60 countries and regions around the world, and have established stable cooperative relationships with a number of Fortune Global 500 companies. The successful layout of the company's domestic and international markets is an important guarantee for the composition and realization of the company's comprehensive competitive advantages. 4、Quality Management System Advantage The company adheres to the production policy of survival by quality and development by quality, and carries out strict quality control on the whole production process through system construction, and has a complete quality certification system and quality control capability, and the company has passed a number of certificates such as FSSC22000, ISO9001, ISO22000, ISO14001, etc., and a number of products have KOSHER, HALAL, FDA-GRAS, ORGANIC, SC, non-GMO certificates. The company has strategically invested in Zhejiang Ruide Testing and Certification Technology Co., Ltd, which lays the foundation for the company to accurately carry out quantitative and qualitative testing and analysis. The company carries out in-depth management standardization, implements scientific management, strengthens group operation and improves production efficiency. 5、Management Team Advantage The company has an experienced management team, the core management personnel is stable, the main management personnel and business backbone have many years of experience in the industry, the industry has a profound knowledge and a high degree of sensitivity to the future development of the industry has a unique, deep understanding of the industry, to grasp the trend of the industry's development faster, scientific, efficient and lead the company's steady development. According to the development needs of the company, the company continuously expands and improves the strength of the core team through various channels such as internal training and external introduction, which empowers and boosts the company's sustainable development. At the same time, in order to maintain the stability of the management team and enrich the strength of the management team, the Company implements the performance appraisal program for the entire staff, motivates the Company's management team to strive to improve the business performance, stimulates the vitality of the team by perfecting the organizational structure and process management system, and fosters and improves the management personnel's business awareness, so as to lay the foundation for the realization of the sustained and stable development of the enterprise. 6、Resource and Industry Chain Advantage As a natural sugar-free sweetener product, Luo Han Guo extract is an important strategic core product of the company. Luo Han Guo is a special food and medicine resource, due to its more demanding requirements for growth conditions, the main producing areas of Luo Han Guo in the world are in the Guilin area, the headquarters of the company, the company has a unique advantage of origin in this species. The company takes Luo Han Guo extract as the core product, makes full use of the natural geographic advantage of Luo Han Guo raw material, establishes organic planting demonstration base of Luo Han Guo in Guilin, and relies on the business model of "Company + Base + Farmers" to plant Luo Han Guo on a large scale, which drives the development of neighboring farmers and saves the cost of raw materials, and ensures the safety and reliability of the company's product quality. The quality of products is safe and reliable. At the same time, the company has a complete industrial chain, the upper reaches of the raw material planting base, the lower reaches of the food, beverages, specialty agricultural products and other end-consumption products business, the whole industrial chain layout for the company to increase new economic growth points, enhance the company's risk resistance. 7, production scale advantage The fourth generation of the company's plant extraction plant was officially put into operation in November 2017, the new plant in the production of related equipment and facilities for a comprehensive upgrade, process, capacity, energy efficiency, environmental protection, automatic control and other aspects of the old plant have been qualitatively improved. During the reporting period, the technical staff continuously debugged the equipment of the new plant, and the production capacity of the new plant was gradually released, and the economic benefits grew steadily. In terms of environmental protection, the company adheres to the concept of simultaneous development of production and environmental construction, and cooperates with gas supply enterprises to carry out "coal to gas" cooperation, which greatly realizes energy saving and emission reduction, reduces part of the input of labor, water, electricity and equipment, and eliminates the need to deal with a large amount of waste residue after the combustion of biomass materials. At the same time, we have invested in a sewage treatment system of 8,000m3/d, and the water quality after treatment reaches the national level standard; at the same time, a certain amount of biogas can be generated in the process of sewage treatment, which can be recycled as the fuel for natural gas boilers, and is completely non-polluting to the environment.In September 2019, our Guilin plant was awarded the title of "national green factory". "The approval of the national green factory marks that the company has the characteristics of land intensification, clean production, waste resourcing and low-carbon energy, and has become a model benchmark for the green transformation and upgrading of the manufacturing industry.