Midea Group Co., Ltd.Interim Report for the Third Quarter 2019
October 2019
Section I Important Reminders
1. The Board of Directors, the Supervisory Committee as well as all thedirectors, supervisors and senior management staff of Midea Group Co.,Ltd. (hereinafter referred to as the “Company”) have warranted that thisReport contains no false record, misleading statement or materialomission. And they shall be jointly and severally liable for the factuality,accuracy and completeness of the information given in this Report.
2. All the directors have attended the Q3 report review board meeting.
3. The financial statements contained in this Report have not beenaudited by a certified public auditors (CPAs) firm.
4. Mr. Fang Hongbo, Chairman of the Board and CEO of the Company andMs. Zhong Zheng, Director of Finance of the Company, have representedand warranted that the financial statements in this Report are true,accurate and complete.
Section II Company Profile
1. Major Accounting Data and Financial Indicators
Does the Company adjust retrospectively or restate accounting data of previous years?
□ Yes √ No
| 30 September 2019 | 31 December 2018 | Change (%) | ||||
| Total assets (RMB'000) | 285,289,199 | 263,701,148 | 8.19% | |||
| Net assets attributable to shareholders of the Company (RMB'000) | 98,241,158 | 83,072,116 | 18.26% | |||
| July-September 2019 | YoY Change (%) | January- September 2019 | YoY Change (%) | |||
| Operating revenue (RMB'000) | 67,147,862 | 6.36% | 220,918,162 | 7.37% | ||
| Net profit attributable to shareholders of the Company (RMB'000) | 6,128,898 | 23.48% | 21,315,967 | 19.08% | ||
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 6,042,274 | 27.16% | 20,597,948 | 19.39% | ||
| Net cash flows from operating activities (RMB'000) | -- | -- | 29,790,279 | 52.07% | ||
| Basic earnings per share (RMB/share) | 0.89 | 17.11% | 3.20 | 17.65% | ||
| Diluted earnings per share (RMB/share) | 0.89 | 18.67% | 3.18 | 18.22% | ||
| Weighted average ROE (%) | 6.35% | 0.24% | 23.46% | 0.81% | ||
| Item | January-September 2019 | Note |
| Gains and losses on disposal of non-current asset | -34,416 | |
| Except for effectively hedging business related to normal business operations of the Company, gains and losses | -66,602 |
| arising from the change in the fair value of held-for-trading financial assets and liabilities, as well as investment gains and losses produced from the disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets | ||
| Other | 1,102,169 | |
| Less: Corporate income tax | 268,517 | |
| Minority interests (after tax) | 14,615 | |
| Total | 718,019 | -- |
| Total number of ordinary shareholders at the period-end | 200,887 | Total number of preference shareholders with resumed voting rights at the period-end (if any) | 0 | ||||||
| Top ten shareholders | |||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Number of shares held | Number of restricted shares held | Pledged or frozen shares | ||||
| Status of shares | Number of shares | ||||||||
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 31.77% | 2,212,046,613 | 0 | Pledged | 215,000,000 | |||
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 14.72% | 1,024,708,546 | 0 | - | - | |||
| China Securities Finance Co., Ltd. | State-owned corporation | 2.85% | 198,145,134 | 0 | - | - | |||
| Fang Hongbo | Domestic | 1.97% | 136,990,492 | 102,742,869 | - | - | |||
| individual | |||||||
| Canada Pension Plan Investment Board － own funds (stock exchange) | Foreign corporation | 1.73% | 120,379,067 | 0 | - | - | |
| Central Huijin Asset Management Ltd. | State-owned corporation | 1.30% | 90,169,354 | 0 | - | - | |
| Huang Jian | Domestic individual | 1.26% | 88,032,200 | 0 | - | - | |
| Merrill Lynch International | Foreign corporation | 0.84% | 58,506,848 | 0 | - | - | |
| Li Jianwei | Foreign individual | 0.74% | 51,791,941 | 0 | - | - | |
| Huang Xiaoxiang | Domestic individual | 0.72% | 50,189,788 | 0 | Pledged | 14,648,500 | |
| Top ten non-restricted ordinary shareholders | |||||||
| Name of shareholder | Number of non-restricted ordinary shares held at the period-end | Type of shares | |||||
| Type | Number | ||||||
| Midea Holding Co., Ltd. | 2,212,046,613 | RMB-denominated ordinary share | 2,212,046,613 | ||||
| Hong Kong Securities Clearing Company Limited | 1,024,708,546 | RMB-denominated ordinary share | 1,024,708,546 | ||||
| China Securities Finance Co., Ltd. | 198,145,134 | RMB-denominated ordinary share | 198,145,134 | ||||
| Canada Pension Plan Investment Board － own funds (stock exchange) | 120,379,067 | RMB-denominated ordinary share | 120,379,067 | ||||
| Central Huijin Asset Management Ltd. | 90,169,354 | RMB-denominated ordinary share | 90,169,354 | ||||
| Huang Jian | 88,032,200 | RMB-denominated ordinary share | 88,032,200 | ||||
| Merrill Lynch International | 58,506,848 | RMB-denominated ordinary share | 58,506,848 | ||||
| Li Jianwei | 51,791,941 | RMB-denominated ordinary share | 51,791,941 | ||||
| Huang Xiaoxiang | 50,189,788 | RMB-denominated ordinary share | 50,189,788 | ||||
| GIC Private Limited | 49,053,247 | RMB-denominated ordinary share | 49,053,247 | ||||
| Explanation of related relationship or/and acting- | N/A | ||||||
| in- concert parties among the above-mentioned shareholders | |
| Top ten non-restricted ordinary shareholders taking part in securities margin trading (if any) | 1. The Company’s shareholder Huang Jian holds 88,022,200 shares in the Company through his ordinary securities accounts and 10,000 shares in the Company through his accounts of collateral securities for margin trading, representing a total holding of 88,032,200 shares in the Company. 2. The Company’s shareholder Huang Xiaoxiang holds 39,841,788 shares in the Company through his ordinary securities accounts and 10,348,000 shares in the Company through his accounts of collateral securities for margin trading, representing a total holding of 50,189,788 shares in the Company. |
Section III Significant Events
1. Major changes of main items in financial statements and financial indicatorswithin the Report Period, as well as the reasons for the changes
√ Applicable □ N/A
Unit: RMB’000
| Financial statement items (consolidated) | 30 September 2019/January- September 2019 | 31 December 2018/January- September 2018 | Change (%) | Reasons for the changes |
| Cash at bank and on hand | 52,428,387 | 27,888,280 | 87.99% | Mainly due to the increased net cash flows from operating activities |
| Derivative financial asset | 37,068 | 220,197 | -83.17% | Mainly due to changes of the fair value of derivative financial instrument |
| Construction in progress | 1,400,406 | 2,077,621 | -32.60% | Mainly due to the transfer-out of the completed construction in progress |
| Other non-current asset | 4,845,628 | 550,352 | 780.46% | Mainly due to the increased structural deposit exceeding one year |
| Borrowings from the Central Bank | 0 | 99,754 | -100.00% | Mainly due to the repayment of borrowings from the Central Bank |
| Customer deposits and deposits from banks and other financial institutions | 78,118 | 44,386 | 76.00% | Mainly due to the changes in the business operations of Midea Group Finance |
| Derivative financial liability | 80,813 | 756,299 | -89.31% | Mainly due to the changes in the fair value of derivative financial instrument |
| Current portion of non-current liability | 192,717 | 7,122,712 | -97.29% | Mainly due to the repayment of current portion of debentures payable and long-term borrowing |
| Long-term borrowing | 42,314,469 | 32,091,439 | 31.86% | Mainly due to the increased borrowings |
| Long-term payable | 28,117 | 88,890 | -68.37% | Mainly due to the repayment of long-term payable |
| Other comprehensive income | -852,782 | -1,332,153 | 35.98% | Mainly due to the transfer of gains and losses on changes in fair value of available-for-sale financial asset into undistributed profit |
| Minority interest | 6,120,778 | 9,382,401 | -34.76% | Mainly due to the purchase of minority |
| interest in Little Swan | ||||
| Interest income | 854,941 | 1,647,457 | -48.11% | Mainly due to the changes in the business operations of Midea Group Finance |
| Interest cost | 115,595 | 180,410 | -35.93% | Mainly due to the changes in the business operations of Midea Group Finance |
| Investment income | 183,139 | 1,276,499 | -85.65% | Mainly due to the changes in the gains and losses on the delivery of derivative financial instrument |
| Gains on changes in fair value | 299,107 | -882,313 | 133.90% | Mainly due to the changes in the fair value of derivative financial instrument |
| Asset impairment loss | -59,162 | -237,086 | 75.05% | Mainly due to the transfer of bad debt provision loss and loan provision loss into losses on credit impairment |
| Non-operating income | 343,075 | 226,964 | 51.16% | Mainly due to the increase of other income |
| Net cash flows from operating activities | 29,790,279 | 19,589,580 | 52.07% | Mainly due to the increased cash received from sales of good or rendering of service |
| Net cash flows from financing activities | -7,546,097 | -10,826,057 | 30.30% | Mainly due to the increased borrowing |
| Net increase in cash and cash equivalents | 6,840,248 | -11,608,197 | 158.93% | Mainly due to the increased net cash flows from operating activities |
Centralized Bidding, the Specific Implementation Rules of the Shenzhen Stock Exchange for the ShareRepurchase by Listed Companies, and other applicable rules; therefore, the Company hereby disclosesits share repurchase progress up to the end of September 2019 as follows:
As of 30 September 2019, the Company has cumulatively repurchased 60,252,129 shares (0.8654% ofCompany’s total share capital as of that date) by way of centralized bidding in its securities account forrepurchase. With the highest trading price being RMB 55.00/share and the lowest being RMB 45.62/share,the total payment amounted to RMB 3,099,683,600.75 (exclusive of trading fees). The repurchase wasin line with the requirements of applicable laws and regulations, as well as the repurchase plan of theCompany.Progress of any repurchased share reduction through centralized price bidding
□ Applicable √ N/A
3. Overdue commitments of the Company’s actual controller, shareholders, relatedparties and acquirer, as well as the Company and other commitment makers in theReport Period or ongoing at the period-end
□ Applicable √ N/A
No such cases in the Reporting Period.
4. Securities investments
√ Applicable □ N/A
Unit: RMB’000
| Type of securities | Code of securities | Abbreviation of securities | Initial investment cost | Measurement method | Opening carrying amount | Profit or loss from changes in fair value during the period | Cumulative fair value changes charged to equity | Purchased in the period | Sold in the period | Profit or loss in the period | Closing carrying amount | Accounting title | Funding source |
| Overseas listed stock | 1810 | XIAOMI-W | 1,272,584 | Fair value method | 1,122,609 | -357,106 | 22,701 | - | - | - | 788,204 | Financial assets held for trading | Own Funds |
| Domestically listed stock | 688018 | Espressif Systems | 14,625 | Fair value method | - | 79,092 | - | 56,340 | - | - | 135,432 | Financial assets held for trading | Own Funds |
| Total | 1,287,209 | -- | 1,122,609 | -278,014 | 22,701 | 56,340 | - | - | 923,636 | -- | -- | ||
| Operating party | Relationship with the Company | Related transaction | Type of derivative | Initial investment amount | Starting date | Ending date | Opening investment amount | Purchased in Reporting Period | Sold in Reporting Period | Amount provided for impairment (if any) | Closing investment amount | Closing investment amount as a percentage of the Company’s closing net asset | Actual gain/loss in Reporting Period |
| Futures company | No | No | Futures contracts | 276 | 01/01/2019 | 31/12/2019 | 276 | - | - | - | 2,184 | 0.0022% | 7,050 |
| Bank | No | No | Forward forex contracts | -644,052 | 01/01/2019 | 31/12/2019 | -644,052 | - | - | - | -524,088 | -0.5335% | -1,005,062 |
| Total | -643,776 | -- | -- | -643,776 | - | - | - | -521,904 | -0.5312% | -998,012 | |||
| Source of derivatives | All from the Company’s own funds | ||||||||||||
| investment funds | |
| Litigation involved (if applicable) | N/A |
| Disclosure date of the announcement about the board’s consent for the derivative investment (if any) | 20/04/2019 |
| Disclosure date of the announcement about the general meeting’s consent for the derivative investment (if any) | 14/05/2019 |
| Risk analysis of positions held in derivatives during the Reporting Period and explanation of control measures (Including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a result of significant fluctuations in raw material prices, the Company not only carried out futures business for some of the materials, but also made use of bank financial instruments and promoted forex funds business, with the purpose of avoiding the risks of exchange and interest rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities, as well as achieving locked-in costs. The Company has performed sufficient evaluation and control against derivatives investment and position risks, details of which are described as follows: 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in compliance with laws and regulations, with clearly covenanted responsibility and obligation relationship between the Company and the agencies. Control measures: The Company has designated relevant responsible departments to enhance learning of laws and regulations and market rules, conducted strict examination and verification of contracts, defined responsibility and obligation well, and strengthened compliance check, so as to ensure that the Company's derivatives investment and position operations meet the requirements of the laws and regulations and internal management system of the Company. 2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the Company to suffer from loss during the course of its futures business and forex funds business. Control measures: The Company has not only developed relevant management systems that clearly defined the assignment of responsibility and approval process for the futures business and forex funds business, but also established a comparatively well-developed monitoring mechanism, aiming to effectively reduce operational risk by strengthening risk control over the business, decision-making and trading processes. 3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange rate fluctuations in foreign exchange market could lead to greater market risk in the futures business and forex funds business. Meanwhile, inability to timely raise sufficient funds to establish and maintain hedging positions in futures operations, or the forex funds required for performance in forex funds operations being unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company shall always |
| be conducted by adhering to prudent operation principles. For futures business, the futures transaction volume and application have been determined strictly according to the requirements of production & operations, and the stop-loss mechanism has been implemented. Besides, to determine the prepared margin amount which may be required to be supplemented, the futures risk measuring system has been established to measure and calculate the margin amount occupied, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted application for funds business should conduct risk analysis on the conditions and environment affecting operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update operating status of the funds business on a timely basis to ensure proper funds arrangement before the expiry dates. | |
| Changes in market prices or fair value of derivative products during the Reporting Period, specific methods used and relevant assumption and parameter settings shall be disclosed for analysis of fair value of derivatives | 1. Profit from futures contracts during the Reporting Period was RMB 7,050,000. 2. Loss from forward forex contracts during the Reporting Period was RMB -1,005,062,000. 3. Public quotations in futures market or forward forex quotations announced by the Bank of China are used in the analysis of derivatives fair value. |
| Explanation of significant changes in accounting policies and specific financial accounting principles in respect of the Company's derivatives for the Reporting Period as compared to the previous Reporting Period | N/A |
| Special opinions expressed by independent directors concerning the Company's derivatives investment and risk control | The Company's independent directors are of the view that the futures hedging business is an effective instrument for the Company to eliminate price volatility and implement risk prevention measures through enhanced internal control, thereby improving the operation and management of the Company; the Company's foreign exchange risk management capability can be further improved through the forex funds business, so as to maintain and increase the value of foreign exchange assets and the abovementioned investment in derivatives can help the Company to fully bring out its competitive advantages. Therefore, it is practicable for the Company to carry out derivatives investment business, and the risks are controllable. |
7. Visits received during the Reporting Period
√ Applicable □ N/A
| Date | Type of visit | Type of visitor | Discussions |
| 4-5 July 2019 | Field research | Institution | Please refer to Investor Relations Activities from 4 July 2019 to 5 July 2019 on the website of www.cninfo.com.cn |
| 22-26 July 2019 | Field research | Institution | Please refer to Investor Relations Activities from 22 July 2019 to 26 July 2019 on the website of www.cninfo.com.cn |
| 17-18 September 2019 | Field research | Institution | Please refer to Investor Relations Activities from 17 September 2019 to 18 September 2019 on the website of www.cninfo.com.cn |
| 24 September 2019 | Field research | Institution | Please refer to Investor Relations Activities on 24 September 2019 on the website of www.cninfo.com.cn |
Section IV Financial Statements
1. Financial statements
| Consolidated and Company Balance Sheets | ||||
| Prepared by Midea Group Co., Ltd. 30 September 2019 Unit: RMB’000 | ||||
| Assets | 30 September 2019 | 31 December 2018 | 30 September 2019 | 31 December 2018 |
| Consolidated | Consolidated | Company | Company | |
| Current assets: | ||||
| Cash at bank and on hand | 52,428,387 | 27,888,280 | 42,648,970 | 15,361,626 |
| Financial assets held for trading | 923,636 | - | ||
| Derivative financial assets | 37,068 | 220,197 | - | - |
| Notes receivable | 13,675,697 | 12,556,294 | - | - |
| Accounts receivable | 20,260,192 | 19,390,174 | - | - |
| Receivables financing | 2,701,739 | - | ||
| Advances to suppliers | 2,227,801 | 2,215,888 | 34,727 | 55,069 |
| Loans and advances | 13,367,842 | 11,328,392 | - | - |
| Other receivables | 2,288,711 | 2,971,368 | 13,646,037 | 11,593,020 |
| Inventories | 24,004,608 | 29,645,018 | - | - |
| Other current assets | 68,171,450 | 76,473,827 | 56,771,485 | 55,052,256 |
| Total current assets | 200,087,131 | 182,689,438 | 113,101,219 | 82,061,971 |
| Non-current assets: | ||||
| Available-for-sale financial assets | 1,906,878 | 56,579 | ||
| Long-term receivables | 1,286,584 | 34,815 | - | - |
| Long-term equity investments | 2,755,931 | 2,713,316 | 45,756,076 | 28,236,295 |
| Other non-current financial assets | 1,401,558 | 476,552 | ||
| Investment properties | 372,988 | 391,765 | 529,345 | 560,954 |
| Fixed assets | 21,456,506 | 22,437,212 | 928,983 | 1,056,790 |
| Construction in progress | 1,400,406 | 2,077,621 | 118,199 | 51,872 |
| Intangible assets | 15,783,449 | 16,186,675 | 704,795 | 712,454 |
| Goodwill | 28,996,310 | 29,100,390 | - | - |
| Long-term prepaid expenses | 1,206,972 | 1,191,373 | 130,043 | 174,684 |
| Deferred tax assets | 5,695,736 | 4,421,313 | 40,651 | 202,703 |
| Other non-current assets | 4,845,628 | 550,352 | 4,206,897 | 4,576 |
| Total non-current assets | 85,202,068 | 81,011,710 | 52,891,541 | 31,056,907 |
| Total Assets | 285,289,199 | 263,701,148 | 165,992,760 | 113,118,878 |
| Consolidated and Company Balance Sheets (Continued) | ||||
| Prepared by Midea Group Co., Ltd. 30 September 2019 Unit: RMB’000 | ||||
| Liabilities and Owners’ Equity | 30 September 2019 | 31 December 2018 | 30 September 2019 | 31 December 2018 |
| Consolidated | Consolidated | Company | Company | |
| Current liabilities: | ||||
| Short-term borrowings | 1,033,098 | 870,390 | 385,750 | 575,000 |
| Borrowings from the Central Bank | - | 99,754 | - | - |
| Customer deposits and deposits from banks and other financial institutions | 78,118 | 44,386 | - | - |
| Derivative financial liabilities | 80,813 | 756,299 | - | - |
| Notes payable | 24,658,451 | 23,325,115 | - | - |
| Accounts payable | 36,717,265 | 36,901,626 | - | - |
| Advances from customers | 12,139,003 | 16,781,666 | - | - |
| Employee benefits payable | 5,271,613 | 5,788,004 | 559,237 | 573,632 |
| Taxes payable | 3,930,320 | 3,875,298 | 555,479 | 280,499 |
| Other payables | 3,443,595 | 3,346,129 | 103,947,539 | 74,714,012 |
| Current portion of non-current liabilities | 192,717 | 7,122,712 | - | - |
| Other current liabilities | 41,860,506 | 31,319,709 | 8,915 | 44,414 |
| Total current liabilities | 129,405,499 | 130,231,088 | 105,456,920 | 76,187,557 |
| Non-current liabilities: | ||||
| Long-term borrowings | 42,314,469 | 32,091,439 | 4,000,000 | - |
| Long-term payables | 28,117 | 88,890 | - | - |
| Provisions | 300,033 | 268,887 | - | - |
| Deferred income | 559,771 | 647,583 | - | - |
| Long-term employee benefits payable | 2,552,655 | 2,480,318 | - | - |
| Deferred tax liabilities | 4,677,501 | 4,422,074 | 56,033 | - |
| Other non-current liabilities | 1,089,218 | 1,016,352 | - | - |
| Total non-current liabilities | 51,521,764 | 41,015,543 | 4,056,033 | - |
| Total liabilities | 180,927,263 | 171,246,631 | 109,512,953 | 76,187,557 |
| Shareholders’ equity: | ||||
| Share capital | 6,962,228 | 6,663,031 | 6,962,228 | 6,663,031 |
| Capital surplus | 19,258,463 | 18,451,307 | 25,599,317 | 10,615,389 |
| Less: Treasury stock | (3,759,732) | (4,918,427) | (3,759,732) | (4,918,427) |
| Other comprehensive income | (852,782) | (1,332,153) | 10,922 | 6,020 |
| General risk reserve | 366,947 | 366,947 | - | - |
| Surplus reserve | 5,079,096 | 5,079,096 | 5,079,096 | 5,079,096 |
| Undistributed profits | 71,186,938 | 58,762,315 | 22,587,976 | 19,486,212 |
| Total equity attributable to shareholders of the Company | 98,241,158 | 83,072,116 | 56,479,807 | 36,931,321 |
| Minority interests | 6,120,778 | 9,382,401 | - | - |
| Total shareholders’ equity | 104,361,936 | 92,454,517 | 56,479,807 | 36,931,321 |
| Total Liabilities and Owners’ Equity | 285,289,199 | 263,701,148 | 165,992,760 | 113,118,878 |
| Consolidated and Company Income Statements | ||||
| Prepared by Midea Group Co., Ltd. July-September 2019 Unit: RMB’000 | ||||
| Item | July-September 2019 | July-September 2018 | July-September 2019 | July-September 2018 |
| Consolidated | Consolidated | Company | Company | |
| 1. Total revenue | 67,441,421 | 63,668,797 | 430,828 | 436,307 |
| Including: Revenue | 67,147,862 | 63,132,816 | 430,828 | 436,307 |
| Interest income | 293,244 | 535,443 | - | - |
| Fee and commission income | 315 | 538 | - | - |
| 2. Total cost of sales | (60,633,135) | (57,678,454) | 398,909 | 443,878 |
| Including: Cost of sales | (48,211,456) | (45,783,292) | (11,247) | (10,607) |
| Interest costs | (10,052) | (12,175) | - | - |
| Fee and commission expenses | (1,672) | (730) | - | - |
| Taxes and surcharges | (363,402) | (376,334) | (7,733) | (5,305) |
| Selling and distribution expenses | (8,148,056) | (7,504,769) | - | - |
| General and administrative expenses | (2,117,322) | (2,294,597) | (188,845) | (113,359) |
| Research and development expenses | (2,459,620) | (2,450,200) | - | - |
| Financial expenses | 678,445 | 743,643 | 606,734 | 573,149 |
| Including: Interest expenses | (139,821) | (206,984) | (420,920) | (222,533) |
| Interest income | 1,240,082 | 505,000 | 1,017,880 | 560,492 |
| Add: Other income | 311,572 | 310,676 | 107,985 | 150 |
| Investment income | 170,499 | 363,875 | 2,421,409 | 2,170,005 |
| Including: Share of profit of associates and joint ventures | 130,349 | 89,122 | 59,881 | 58,329 |
| Including: Profits or losses arising from derecognition of financial assets measured at amortized costs | - | - | - | - |
| Gains on changes in fair value | (48,755) | (268,385) | - | - |
| Asset impairment losses | 85,494 | 63,001 | - | (35) |
| Losses on credit impairment | 2,400 | 1,044 | ||
| Gains on disposals of assets | (20,711) | 16,759 | 12 | 45,364 |
| 3. Operating profit | 7,308,785 | 6,476,269 | 3,360,187 | 3,095,669 |
| Add: Non-operating income | 192,712 | 76,164 | 2,371 | 907 |
| Less: Non-operating expenses | (37,053) | (22,589) | (451) | - |
| 4. Total profit | 7,464,444 | 6,529,844 | 3,362,107 | 3,096,576 |
| Less: Income tax expenses | (1,164,143) | (1,219,284) | (41,229) | (261,715) |
| 5. Net profit | 6,300,301 | 5,310,560 | 3,320,878 | 2,834,861 |
| (1) Classified by continuity of operations | ||||
| Net profit from continuing operations | 6,300,301 | 5,310,560 | 3,320,878 | 2,834,861 |
| Net profit from discontinued operations | - | - | - | - |
| (2) Classified by ownership of the equity | ||||
| Attributable to equity owners of the Company | 6,128,898 | 4,963,393 | 3,320,878 | 2,834,861 |
| Minority interests | 171,403 | 347,167 | - | - |
| 6. Other comprehensive income, net of tax | (36,582) | (4,416) | (1,853) | 35,511 |
| Other comprehensive income attributable to equity owners of the Company, net of tax | 6,956 | (7,368) | (1,853) | 35,511 |
| (1) Other comprehensive income items which will not be reclassified to profit or loss | (45,952) | 27,169 | - | - |
| 1. Changes arising from remeasurement on defined benefit plans | (45,952) | 27,169 | - | - |
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | 52,908 | (34,537) | (1,853) | 35,511 |
| 1. Other comprehensive income that could be reclassified to profit and loss under equity method | (1,332) | 23,639 | (1,853) | 12,939 |
| 2. Changes in fair value of available-for-sale financial assets | - | (117,028) | - | 16,327 |
| 3. Cash flow hedging reserve | (90,476) | (366,451) | - | 6,245 |
| 4. Differences arising from translation of foreign currency financial statements | 144,716 | 425,303 | - | - |
| Other comprehensive income attributable to minority shareholders, net of tax | (43,538) | 2,952 | - | - |
| 7. Total comprehensive income | 6,263,719 | 5,306,144 | 3,319,025 | 2,870,372 |
| Attributable to equity owners of the Company | 6,135,854 | 4,956,025 | 3,319,025 | 2,870,372 |
| Attributable to minority interests | 127,865 | 350,119 | - | - |
| 8. Earnings per share: | ||||
| (1) Basic earnings per share | 0.89 | 0.76 | N/A | N/A |
| (2) Diluted earnings per share | 0.89 | 0.75 | N/A | N/A |
| Consolidated and Company Income Statements | ||||
| Prepared by Midea Group Co., Ltd. January-September 2019 Unit: RMB’000 | ||||
| Item | January-September 2019 | January-September 2018 | January-September 2019 | January-September 2018 |
| Consolidated | Consolidated | Company | Company | |
| 1. Total revenue | 221,774,064 | 207,404,713 | 1,307,278 | 1,302,617 |
| Including: Revenue | 220,918,162 | 205,756,653 | 1,307,278 | 1,302,617 |
| Interest income | 854,941 | 1,647,457 | - | - |
| Fee and commission income | 961 | 603 | - | - |
| 2. Total cost of sales | (196,851,290) | (185,720,216) | 1,107,772 | 486,951 |
| Including: Cost of sales | (156,652,745) | (149,664,730) | (35,306) | (32,561) |
| Interest costs | (115,595) | (180,410) | - | - |
| Fee and commission expenses | (5,343) | (2,259) | - | - |
| Taxes and surcharges | (1,291,992) | (1,223,984) | (18,736) | (23,006) |
| Selling and distribution expenses | (27,677,878) | (24,397,272) | - | - |
| General and administrative expenses | (6,227,447) | (5,629,888) | (400,985) | (281,257) |
| Research and development expenses | (6,994,380) | (6,349,429) | - | - |
| Financial expenses | 2,114,090 | 1,727,756 | 1,562,799 | 823,775 |
| Including: Interest expenses | (540,950) | (511,687) | (1,064,704) | (499,991) |
| Interest income | 3,328,798 | 1,262,815 | 2,612,130 | 1,091,446 |
| Add: Other income | 973,521 | 936,954 | 251,288 | 184,227 |
| Investment income | 183,139 | 1,276,499 | 9,168,806 | 8,753,457 |
| Including: Share of profit of associates and joint ventures | 362,945 | 276,367 | 204,334 | 185,410 |
| Including: Profits or losses arising from derecognition of financial assets measured at amortized costs | (709) | - | ||
| Gains on changes in fair value | 299,107 | (882,313) | - | - |
| Asset impairment losses | (59,162) | (237,086) | - | 251 |
| Losses on credit impairment | (176,647) | (11) | ||
| Gains on disposals of assets | (34,416) | (2,000) | 12 | 45,627 |
| 3. Operating profit | 26,108,316 | 22,776,551 | 11,835,145 | 10,773,130 |
| Add: Non-operating income | 343,075 | 226,964 | 32,559 | 5,325 |
| Less: Non-operating expenses | (97,432) | (79,098) | (740) | (4,038) |
| 4. Total profit | 26,353,959 | 22,924,417 | 11,866,964 | 10,774,417 |
| Less: Income tax expenses | (3,993,735) | (3,834,166) | (211,303) | (269,645) |
| 5. Net profit | 22,360,224 | 19,090,251 | 11,655,661 | 10,504,772 |
| (1) Classified by continuity of operations | ||||
| Net profit from continuing operations | 22,360,224 | 19,090,251 | 11,655,661 | 10,504,772 |
| Net profit from discontinued operations | - | - | - | - |
| (2) Classified by ownership of the equity | ||||
| Attributable to equity owners of the Company | 21,315,967 | 17,900,239 | 11,655,661 | 10,504,772 |
| Minority interests | 1,044,257 | 1,190,012 | - | - |
| 6. Other comprehensive income, net of tax | 135,571 | (590,795) | 4,902 | 132,425 |
| Other comprehensive income attributable to equity owners of the Company, net of tax | 141,924 | (407,255) | 4,902 | 132,425 |
| (1) Other comprehensive income items which will not be reclassified to profit or loss | (124,704) | 45,455 | - | - |
| 1. Changes arising from remeasurement on defined benefit plans | (124,704) | 45,455 | - | - |
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | 266,628 | (452,710) | 4,902 | 132,425 |
| 1. Other comprehensive income that could be reclassified to profit and loss under equity method | (1,583) | 69,613 | 4,902 | 47,245 |
| 2. Changes in fair value of available-for-sale financial assets | - | (102,449) | - | 78,935 |
| 3. Cash flow hedging reserve | (56,352) | (1,000,918) | - | 6,245 |
| 4. Differences arising from translation of foreign currency financial statements | 324,563 | 581,044 | - | - |
| Other comprehensive income attributable to minority shareholders, net of tax | (6,353) | (183,540) | - | - |
| 7. Total comprehensive income | 22,495,795 | 18,499,456 | 11,660,563 | 10,637,197 |
| Attributable to equity owners of the Company | 21,457,891 | 17,492,984 | 11,660,563 | 10,637,197 |
| Attributable to minority interests | 1,037,904 | 1,006,472 | - | - |
| 8. Earnings per share: | ||||
| (1) Basic earnings per share | 3.20 | 2.72 | N/A | N/A |
| (2) Diluted earnings per share | 3.18 | 2.69 | N/A | N/A |
| Consolidated and Company Cash Flow Statements | ||||
| Prepared by Midea Group Co., Ltd. January-September 2019 Unit: RMB’000 | ||||
| Items | January-September 2019 | January-September 2018 | January-September 2019 | January-September 2018 |
| Consolidated | Consolidated | Company | Company | |
| 1. Cash flows from operating activities | ||||
| Cash received from sales of goods or rendering of services | 187,113,896 | 160,376,963 | - | - |
| Net increase in customer deposits and deposits from banks and other financial institutions | 33,732 | 18,824 | - | - |
| Net decrease in loans and advances | - | 1,267,226 | - | - |
| Net decrease in deposits with the Central Bank | 648,514 | - | - | - |
| Net increase in borrowings from the Central Bank | - | 17,458 | - | - |
| Cash received for interest, fee and commission | 902,622 | 975,800 | - | - |
| Refund of taxes and surcharges | 5,917,442 | 4,903,836 | - | - |
| Cash received relating to other operating activities | 3,744,879 | 5,073,697 | 30,468,856 | 23,765,185 |
| Sub-total of cash inflows | 198,361,085 | 172,633,804 | 30,468,856 | 23,765,185 |
| Cash paid for goods and services | (105,994,827) | (98,306,306) | - | - |
| Net increase in loans and advances | (2,092,334) | - | - | - |
| Net increase in deposits with the Central Bank | - | (1,121,072) | - | - |
| Net decrease in borrowings from the Central Bank | (99,754) | - | - | - |
| Cash paid for interest, fee and commission | (128,590) | (183,202) | - | - |
| Cash paid to and on behalf of employees | (20,676,547) | (19,638,796) | (47,774) | (326,747) |
| Payments of taxes and surcharges | (12,283,945) | (11,157,941) | (105,868) | (23,009) |
| Cash paid relating to other operating activities | (27,294,809) | (22,636,907) | (2,242,060) | (2,269,335) |
| Sub-total of cash outflows | (168,570,806) | (153,044,224) | (2,395,702) | (2,619,091) |
| Net cash flows from operating activities | 29,790,279 | 19,589,580 | 28,073,154 | 21,146,094 |
| 2. Cash flows from investing activities | ||||
| Cash received from disposal of investments | 40,816,042 | 47,800,654 | 22,834,164 | 23,444,983 |
| Cash received from returns on investments | 1,863,837 | 1,522,671 | 10,545,206 | 9,761,421 |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 99,908 | 69,144 | - | - |
| Net cash received from disposal of subsidiaries and other business units | - | 24,311 | - | - |
| Sub-total of cash inflows | 42,779,787 | 49,416,780 | 33,379,370 | 33,206,404 |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | (2,882,478) | (3,659,281) | (114,621) | (210,157) |
| Cash paid to acquire investments | (55,452,534) | (66,565,111) | (49,346,463) | (47,235,579) |
| Net cash paid to acquire subsidiaries and other business units | (195,094) | (171,245) | - | - |
| Sub-total of cash outflows | (58,530,106) | (70,395,637) | (49,461,084) | (47,445,736) |
| Net cash flows from investing activities | (15,750,319) | (20,978,857) | (16,081,714) | (14,239,332) |
| 3. Cash flows from financing activities | ||||
| Cash received from capital contributions | 2,438,759 | 2,526,025 | 2,323,132 | 1,910,933 |
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 115,627 | 615,092 | - | - |
| Cash received from borrowings | 11,568,424 | 2,344,612 | 6,509,500 | 1,140,000 |
| Sub-total of cash inflows | 14,007,183 | 4,870,637 | 8,832,632 | 3,050,933 |
| Cash repayments of borrowings | (7,758,275) | (3,084,621) | (2,698,750) | - |
| Cash payments for distribution of dividends, profits or interest expenses | (10,475,327) | (8,953,224) | (9,660,929) | (8,209,025) |
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (1,320,885) | (498,030) | - | - |
| Cash paid relating to other financing activities | (3,319,678) | (3,658,849) | (3,092,751) | (1,828,808) |
| Sub-total of cash outflows | (21,553,280) | (15,696,694) | (15,452,430) | (10,037,833) |
| Net cash flows from financing activities | (7,546,097) | (10,826,057) | (6,619,798) | (6,986,900) |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | 346,385 | 607,137 | - | - |
| 5. Net increase in cash and cash equivalents | 6,840,248 | (11,608,197) | 5,371,642 | (80,138) |
| Add: Cash and cash equivalents at the beginning of the period | 17,952,282 | 21,831,653 | 10,181,934 | 25,978,543 |
| 6. Cash and cash equivalents at the end of the period | 24,792,530 | 10,223,456 | 15,553,576 | 25,898,405 |
2. Adjustments to Financial Statements
1. Adjustments to financial statement items at the beginning of the year of the implementation ofthe new accounting standards governing financial instruments, revenue or leases which havebeen implemented since 2019
√ Applicable □ N/A
| Consolidated and Company Balance Sheets | |||||||
| Prepared by Midea Group Co., Ltd. Unit: RMB’000 | |||||||
| Assets | Consolidated | Company | |||||
| 2018-12-31 | 2019-01-01 | Adjustment | 2018-12-31 | 2019-01-01 | Adjustment | ||
| Current assets: | |||||||
| Cash at bank and on hand | 27,888,280 | 27,888,280 | - | 15,361,626 | 15,361,626 | - | |
| Financial assets held for trading | N/A | 2,654,045 | 2,654,045 | N/A | 1,521,007 | 1,521,007 | |
| Derivative financial assets | 220,197 | 220,197 | - | - | - | - | |
| Notes receivable | 12,556,294 | 11,049,539 | (1,506,755) | - | - | - | |
| Accounts receivable | 19,390,174 | 18,641,979 | (748,195) | - | - | - | |
| Receivables financing | N/A | 2,254,950 | 2,254,950 | N/A | - | - | |
| Advances to suppliers | 2,215,888 | 2,215,888 | - | 55,069 | 55,069 | - | |
| Loans and advances | 11,328,392 | 11,328,392 | - | - | - | - | |
| Other receivables | 2,971,368 | 2,960,939 | (10,429) | 11,593,020 | 11,593,020 | - | |
| Inventories | 29,645,018 | 29,645,018 | - | - | - | - | |
| Other current assets | 76,473,827 | 74,952,820 | (1,521,007) | 55,052,256 | 53,531,249 | (1,521,007) | |
| Total current assets | 182,689,438 | 183,812,047 | 1,122,609 | 82,061,971 | 82,061,971 | - | |
| Non-current assets: | |||||||
| Available-for-sale financial assets | 1,906,878 | N/A | (1,906,878) | 56,579 | N/A | (56,579) | |
| Long-term receivables | 34,815 | 34,815 | - | - | - | - | |
| Long-term equity investments | 2,713,316 | 2,713,316 | - | 28,236,295 | 28,236,295 | - | |
| Other non-current financial assets | N/A | 784,269 | 784,269 | N/A | 56,579 | 56,579 | |
| Investment properties | 391,765 | 391,765 | - | 560,954 | 560,954 | - | |
| Fixed assets | 22,437,212 | 22,437,212 | - | 1,056,790 | 1,056,790 | - | |
| Construction in progress | 2,077,621 | 2,077,621 | - | 51,872 | 51,872 | - | |
| Intangible assets | 16,186,675 | 16,186,675 | - | 712,454 | 712,454 | - | |
| Goodwill | 29,100,390 | 29,100,390 | - | - | - | - | |
| Long-term prepaid expenses | 1,191,373 | 1,191,373 | - | 174,684 | 174,684 | - | |
| Deferred tax assets | 4,421,313 | 4,421,313 | - | 202,703 | 202,703 | - | |
| Other non-current assets | 550,352 | 550,352 | - | 4,576 | 4,576 | - | |
| Total non-current assets | 81,011,710 | 79,889,101 | (1,122,609) | 31,056,907 | 31,056,907 | - | |
| Total Assets | 263,701,148 | 263,701,148 | - | 113,118,878 | 113,118,878 | - | |
| Balance Sheets (Continued) | ||||||
| Prepared by Midea Group Co., Ltd. Unit: RMB’000 | ||||||
| Liabilities and Owners’ Equity | Consolidated | Company | ||||
| 2018-12-31 | 2019-01-01 | Adjustment | 2018-12-31 | 2019-01-01 | Adjustment | |
| Current liabilities: | ||||||
| Short-term borrowings | 870,390 | 870,390 | - | 575,000 | 575,000 | - |
| Borrowings from the Central Bank | 99,754 | 99,754 | - | - | - | - |
| Customer deposits and deposits from banks and other financial institutions | 44,386 | 44,386 | - | - | - | - |
| Derivative financial liabilities | 756,299 | 756,299 | - | - | - | - |
| Notes payable | 23,325,115 | 23,325,115 | - | - | - | - |
| Accounts payable | 36,901,626 | 36,901,626 | - | - | - | - |
| Advances from customers | 16,781,666 | 16,781,666 | - | - | - | - |
| Employee benefits payable | 5,788,004 | 5,788,004 | - | 573,632 | 573,632 | - |
| Taxes payable | 3,875,298 | 3,875,298 | - | 280,499 | 280,499 | - |
| Other payables | 3,346,129 | 3,346,129 | - | 74,714,012 | 74,714,012 | - |
| Current portion of non-current liabilities | 7,122,712 | 7,122,712 | - | - | - | - |
| Other current liabilities | 31,319,709 | 31,319,709 | - | 44,414 | 44,414 | - |
| Total current liabilities | 130,231,088 | 130,231,088 | - | 76,187,557 | 76,187,557 | - |
| Non-current liabilities: | ||||||
| Long-term borrowings | 32,091,439 | 32,091,439 | - | - | - | - |
| Long-term payables | 88,890 | 88,890 | - | - | - | - |
| Provisions | 268,887 | 268,887 | - | - | - | - |
| Deferred income | 647,583 | 647,583 | - | - | - | - |
| Long-term employee benefits payable | 2,480,318 | 2,480,318 | - | - | - | - |
| Deferred tax liabilities | 4,422,074 | 4,422,074 | - | - | - | - |
| Other non-current liabilities | 1,016,352 | 1,016,352 | - | - | - | - |
| Total non-current liabilities | 41,015,543 | 41,015,543 | - | - | - | - |
| Total liabilities | 171,246,631 | 171,246,631 | - | 76,187,557 | 76,187,557 | - |
| Shareholders’ equity: | ||||||
| Share capital | 6,663,031 | 6,663,031 | - | 6,663,031 | 6,663,031 | - |
| Capital surplus | 18,451,307 | 18,451,307 | - | 10,615,389 | 10,615,389 | - |
| Less: Treasury stock | (4,918,427) | (4,918,427) | - | (4,918,427) | (4,918,427) | - |
| Other comprehensive income | (1,332,153) | (994,706) | 337,447 | 6,020 | 6,020 | - |
| General risk reserve | 366,947 | 366,947 | - | - | - | - |
| Surplus reserve | 5,079,096 | 5,079,096 | - | 5,079,096 | 5,079,096 | - |
| Undistributed profits | 58,762,315 | 58,424,868 | (337,447) | 19,486,212 | 19,486,212 | - |
| Total equity attributable to shareholders of the Company | 83,072,116 | 83,072,116 | - | 36,931,321 | 36,931,321 | - |
| Minority interests | 9,382,401 | 9,382,401 | - | - | - | - |
| Total shareholders’ equity | 92,454,517 | 92,454,517 | - | 36,931,321 | 36,931,321 | - |
| Total Liabilities and Owners’ Equity | 263,701,148 | 263,701,148 | - | 113,118,878 | 113,118,878 | - |