Concentrated juice maker Deli shares plan to increase securities investment Directors who have been serving for more than 10 years voted against it

Per reporter: Zeng Jian Per editor: Wei Guanhong

Deli Co., Ltd. (605198, SH) is mainly engaged in the processing, production and sales of concentrated juice, and is one of the largest concentrated juice processing enterprises in the world. Today, the company has developed a strong interest in securities investment.

According to the announcement of Deli shares on the evening of October 8, the company intends to use idle own funds for securities investment, and the upper limit of the securities investment quota has increased by 100 million yuan compared with the previous round. For the above move, Liu Zongyi, a veteran director of Deli Shares, expressed his opposition. In its view, securities investment is too risky. The "Daily Economic News" reporter noted that Deli shares had planted a fight on securities investment in the first half of this year.

<h2>Proposed to increase securities investment</h2>

According to the announcement of Deli shares, the company intends to use no more than 300 million yuan (including 300 million yuan) of its own funds for securities investment, the funds can be used on a rolling basis during the use period, the income obtained from the investment can be reinvested, and the amount of reinvestment is not included in the estimated investment quota. The resolution shall be valid for 12 months from the date of its adoption at the eighteenth meeting of the Seventh Board of Directors. The investment scope is stock market investment, bond market investment, securities repurchase, public funds, exchange funds, new share placement and subscription, and additional issuance or allotment of shares by listed companies.

"[This move is to) further improve the efficiency of the use of the company's own funds, rationally use idle own funds, and increase investment returns." Deli shares said.

The "Daily Economic News" reporter noted that Deli co., Ltd. announced in October last year that it intends to use no more than 200 million yuan (including 200 million yuan) of its own funds for securities investment, and the listed company has raised the upper limit of securities investment quota by 100 million yuan.

In fact, Deli shares have tasted sweetness in investment. According to the company's 2020 annual report, the company's total trading financial assets at the end of the reporting period were 288 million yuan, compared with 0 in the same period of 2019, a substantial increase due to the use of idle funds by listed companies to purchase wealth management products. In 2020, the fair value change income of Deli shares' trading financial assets was 37.6173 million yuan, and the investment income obtained from the disposal of trading financial assets was 15.4671 million yuan.

The proposal to increase the investment in securities received "6 votes in favor, 1 vote against and 0 abstentions" in the vote of the board of directors of Deli Shares. Liu Zongyi, a non-executive director of the company, voted against the proposal. He said that he understood the management's desire to increase the return on temporarily idle own funds, but securities investment was not the company's main business and had the potential risk of huge market fluctuations, so he opposed the proposal to (use) idle own funds for securities investment.

According to his resume, Liu Zongyi is currently the associate of the Corporate Integration Department of Unified Enterprise Co., Ltd. (hereinafter referred to as Unified Shares), a listed company on the Taiwan Stock Exchange. He has been a non-executive director of Deli Co., Ltd. since June 2009.

Unity shares are an important shareholder force of Deli shares. As of June 30, Chengdu Unified Enterprise Food and Guangzhou Unified Enterprise held 11.55% and 5.81% of deli shares respectively, and the controlling shareholders of both were Unified Enterprise (China) Investment Co., Ltd. The prospectus of Deli shares shows that the ultimate controllers of Chengdu Unified Enterprise Food and Guangzhou Unified Enterprise are all unified shares.

<h2>After the listing of A-shares, the performance declined significantly</h2>

In fact, Liu Zongyi's concerns are not unreasonable. Deli shares have previously suffered losses in securities investment.

According to the "Announcement of Pre-reduction of First Quarter 2021 Performance" issued by the listed company in mid-April, the company expected that the net profit in the first quarter would drop from 33.06 million yuan to about 8.06 million yuan to 15.06 million yuan, a year-on-year decrease of 55% to 75%; the net profit after deducting non-recurring gains and losses would drop from about 30.35 million yuan to about 18.68 million yuan to 25.68 million yuan, a year-on-year decrease of about 14% to 35%. As for the reasons for the pre-reduction in performance, Deli co., Ltd. said that the decline in the profit of the main business was mainly due to the high freight rate of international routes, which caused the decline in the number of sales and the increase in operating costs; the impact of the non-operating profit and loss was mainly due to the decline in the fair value of trading financial assets such as stocks held by about 15.76 million yuan.

Judging from the 2021 semi-annual report of Deli Shares, at the end of the reporting period, the investment income obtained by the company in holding trading financial assets, derivative financial assets and other debt investments was -6.1369 million yuan. Among them, the fair value change income of trading financial assets was -15.8503 million yuan.

The main products of Deli co., Ltd. are concentrated apple juice, apple fructose (decolorized and deacidified concentrated apple juice), etc., and the products are relatively single. In April 2003, the company was listed on the Hong Kong stock market, becoming the earliest concentrated juice enterprise in China to achieve listing; in September last year, the company landed on the Shanghai Stock Exchange, becoming the first domestic juice beverage "A + H" double-listed enterprise.

From the performance point of view, Deli shares did not perform well after the A-share listing. In 2020, the company achieved operating income of 842 million yuan, an increase of 0.46% year-on-year, but net profit fell by 10.33% year-on-year to 152 million yuan. After deducting non-recurring gains and losses, the company's net profit was only 86.084 million yuan, down 45.78% year-on-year. In the first half of this year, the company achieved operating income of 418 million yuan, down 11.01% year-on-year; achieved a net profit of 51.8379 million yuan, down 40.07% year-on-year. Factors such as the decline in product sales prices and the sharp rise in sea freight rates have become stumbling blocks to the company's performance.

The performance of the main business is mediocre, and it is not difficult to understand the behavior of Deli shares to increase the investment of securities.

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