Suzhou Huayuan Holdings Co., Ltd. (hereinafter referred to as "Huayuan Holdings" or "the Company") announced on April 9 that the company held its 2023 annual results briefing on the same day. At the meeting, Huayuan Holdings revealed that the company's net profit attributable to the owners of the parent company in 2023 was 8.4311 million yuan, a decrease of 22.94% from 2022. The decrease in net profit was mainly due to the company's recovery of Runtian Zhijianghong's execution payment last year. In addition, the profit of the company's main business plastic packaging is less than expected, combined with the actual operating situation, according to the "Accounting Standards for Business Enterprises No. 8 - Asset Impairment" and related accounting policies, the company is expected to make an impairment provision of 45.8334 million yuan for the goodwill formed by the acquisition of Changzhou Ruijie New Material Technology Co., Ltd. in 2023 based on the principle of prudence.
Screenshot of Huayuan Holdings' announcement
Huayuan Holdings said at the meeting that while the company improves its product structure and consolidates the main packaging business, it will continue to regard technological innovation and process transformation as the source of power to promote the company's progress. Actively respond to customer service needs, continuously improve the production and service methods of the whole process of packaging products, improve the technical process of each link of the business chain, and ensure that customers are provided with high-quality products. Take the route of high-end and refined products, enhance the company's overall profitability and market anti-risk ability, and achieve high-quality development. After the acquisition of Almighty Precision, the company added battery precision structural parts to its business. The packaging shell of the precision structural parts of the battery is also subordinate to the metal packaging, and the packaging shell is an important part of all kinds of batteries as a barrier between the active material in the cell and the whole life cycle of the outside world. With the continuous expansion of battery application scenarios, especially the rise of power tools, electric light vehicles, electric vehicles, new energy storage and other applications in recent years, the market capacity of packaging shells has shown significant growth. With the improvement of battery energy density, the guarantee of battery safety by precision battery structural parts is becoming more and more important, and the market of high-end battery structural parts still has huge growth potential.
The net profit attributable to the owners of the parent company in 2023 will be 8.4311 million yuan, a decrease of 22.94% from 2022. Huayuan Holdings said that the decline in net profit was mainly due to the company's recovery of Runtian Zhijianghong's execution payment last year. In addition, the profit of the company's main business plastic packaging is less than expected, combined with the actual operating situation, according to the "Accounting Standards for Business Enterprises No. 8 - Asset Impairment" and related accounting policies, the company is expected to make an impairment provision of 45.8334 million yuan for the goodwill formed by the acquisition of Changzhou Ruijie New Material Technology Co., Ltd. in 2023 based on the principle of prudence. In the future, the company will adhere to the innovation-driven development strategy, on the one hand, expand economies of scale, on the other hand, strive to control costs, invest in the construction of industrial automation workshops and automatic production lines, provide environmentally friendly, safe, and high-performance new material packaging products, metal packaging business and plastic packaging business coordinated development, and strive to open up new tracks, so as to achieve steady growth of the company's profits and create a good return on investment for all shareholders.
Investors asked, the company in 2023 for the acquisition of Changzhou Ruijie New Material Technology Co., Ltd. to form an impairment provision for goodwill, what considerations is this based on? Huayuan Holdings replied: The company acquired Ruijie Technology in 2018, forming a goodwill of 192.6669 million yuan. Due to factors such as market competition and fluctuations in raw material prices, Ruijie Technology's operating growth in recent years has not been as expected, and the company has carried out impairment of goodwill of 26.807 million yuan, 57.0853 million yuan, 62.9412 million yuan and 45.8334 million yuan respectively from 2020 to 2023, and the goodwill has been impaired. The specific amount of goodwill impairment is determined according to the business development of Ruijie Technology and the appraisal report issued by the appraisal agency.
Talking about the company's R&D investment and market expansion in the field of food packaging, Huayuan Holdings said that the company's food packaging mainly includes metal lids, food cans, food packaging printing iron, etc., at present, the company has gradually laid out international and domestic high-end first-line brand customers in various fields of food packaging, and has done a lot of research and development work for customer needs, invested a lot of resources in food packaging product research and development and market layout, has established a world-class food safety control system, participated in and led a number of international, Domestic standards. With the gradual release of the current production capacity and the continuous development of new customers, food packaging is expected to become a new profit growth point for the company, and the company will increase investment in R&D and production capacity in the field of food in the future. The company believes that food cans belong to an important branch of metal packaging, focusing on the extension of product flavor and shelf life, with the increasing upgrading of living conditions of consumer groups, the importance of food safety, the demand for food convenience and the integration of Chinese and Western diets, and the improvement of the penetration rate of domestic family pets. Canned food is gradually becoming an important part of catering, home, prepared food, and pet food. The emergence of new application scenarios will lead to the incremental market of food metal packaging, focusing on the market, and the future can be expected.
Regarding the specific reasons why the company's profitability in the plastic packaging business is less than expected, Huayuan Holdings said that the company's plastic packaging business has been affected by factors such as economic growth, intensified market competition, and fluctuations in raw material prices, and the operating growth in recent years has been less than expected. The company will actively pay attention to market development and industry trends, increase R&D investment, strengthen cooperation with existing customers and actively expand new customers and new projects, and return shareholders with good operating performance.
Investors are concerned about the significant decline in net cash flow in 2023, does this mean that the company's cash flow situation has deteriorated? Huayuan Holdings replied: The net cash flow generated by operating activities in 2023 decreased by 59.04% compared with the same period last year, mainly due to the increase in the company's payment for materials, taxes and fees, etc., the company's customer collection is normal, the bank credit line is sufficient, and the current production and operation and cash flow are normal.
Talking about the company's development strategy in 2024, Huayuan Holdings said that the company attaches great importance to its own technology research and development and the improvement of industrial technology level, updates research and development equipment, actively absorbs technology research and development talents, and at the same time cooperates with subsidiaries to actively strive for various national innovation support policies to accumulate energy for the development of the enterprise. During the reporting period, the company invested 93.7849 million yuan in research and development, accounting for 3.89% of the company's operating income. The company will coordinate and integrate R&D resources, continuously develop new technologies and new products according to technology trends and customer needs, and at the same time industrialize R&D results, and continue to take scientific and technological innovation capabilities as the core competitiveness of enterprise development. The company uses the advantages of marketing network, supply chain and brand building accumulated over the years, pays close attention to the development trend of the industry, closely focuses on the company's main business, taps potential customers on the basis of consolidating the share of strategic customers, effectively connects with the actual needs of customers, increases the development of overseas markets and small and medium-sized customers in Southeast Asia, strives to increase the sales share of high value-added industrial products, and continues to maintain the competitiveness of the industry.
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