Hubei Sanonda Co., Ltd. Annual Report 2017
HUBEI SANONDA CO., LTD.
ANNUAL REPORT2017
Adama Agricultural Solutions Ltd., one of the world's leading crop protection companies, and Hubei
Sanonda Co., Ltd. have combined, creating the only integrated, publicly traded Global-China crop
protection company.
At ADAMA, we strive to Create Simplicity in Agriculture – offering farmers effective products and
services that simplify their lives and help them grow. With one of the most comprehensive and
diversified portfolios of differentiated, quality products, our 6,600strong team reaches farmers in
over 100 countries, providing them with solutions to control weeds, insects and disease, and
improve their yields.
Please see key additional information and further details included in the Annex.
March 2018
Hubei Sanonda Co., Ltd. Annual Report 2017
Section I Important Notice, Table of Contents and Definitions
The Company’s Board of Directors, Board of Supervisors, directors, supervisors and senior
managersconfirmthat the content of the Report is true, accurate and complete and contains
no false statement, misleading presentation or material omissions, and assume joint and
several legal liability arising therefrom.
Chen Lichtenstein, the person in charge of the Company as well as its legal representative,
andAviram Lahav, the person in charge of the accounting function(Chief Financial
Officer),hereby state and ensure the truthfulness, accuracy and completeness of the
Financial Report.
All of the Company’s directors attended the board meeting for the review of this Report.
The forward looking information described in the Report, such as future plans,development
strategy etc., does not constitute, in any manner whatsoever, a substantialcommitment of the
Companyto investors. Investors and other relevant people shall be sufficiently mindful
ofinvestment risks as well as the difference between plans, forecasts and commitments.
The Company has described its future development strategies, work plan for 2018 and
possible risks in “IX. Outlook of future development of the Company” in Section IV.
The pre-plan of the dividend distribution approved by the meeting of the Board of Directors
is taking the total outstanding 2,446,553,582 shares of the Company dated February 28,
2018 as the basis to distribute RMB 0.63 (including tax) as cash dividend per 10 shares to
all the shareholders. Zero share (including tax) will be distributed as share dividend, as well
as no reserve will be transferred to equity capital.
This Annual Report and its abstract have been prepared in both Chinese and English. Should
there be any discrepancies between the two versions, the Chinese version prevails.
Hubei Sanonda Co., Ltd. Annual Report 2017
Table of Contents
Section I Important Notice, Table of Contents and Definitions ..................................................... 2
Section II Corporate Profile and Financial Results ........................................................................ 5
Section III Business Profile ............................................................................................................. 10
Section IV Performance Discussion and Analysis ......................................................................... 14
Section V Significant Events ........................................................................................................... 43
Section VI Change in Shares and Shareholders ............................................................................ 66
Section VII Preference Shares ........................................................................................................ 75
Section VIII Directors, Supervisors, Executive Officers and Staff ............................................. 76
Section IX Corporate Governance ................................................................................................. 86
Section X Corporate Bonds ............................................................................................................. 92
Section XI Financial Report ............................................................................................................ 93
Section XII Documents Available for Reference ......................................................................... 242
Hubei Sanonda Co., Ltd. Annual Report 2017
Definitions
Unless otherwise specified, the following terms in the Report shall have the meaning shown below:
General Terms Definition
Company, the Company Hubei Sanonda Co., Ltd.
Adama Agricultural Solutions Ltd.., a wholly-owned subsidiary of the
Adama Solutions
Company, incorporated in Israel according to its laws
Board of Directors/Board The Board of Directors of the Company
Board of Supervisors The Board of Supervisors of the Company
Articles of Association / AOA The Articles of Association of the Company
Group, the Group The Company and its subsidiaries
ChemChina China National Chemical Co., Ltd.
China National Agrochemical Co., Ltd., the controlling shareholder of the
CNAC
Company, a wholly-owned subsidiary of ChemChina
CSRC China Securities Regulatory Commission
GTJA Guotai Junan Securities Co., Ltd.
SZSE Shenzhen Stock Exchange
SASAC State Assets Supervision and Administration Commission of China
Report This 2017 Annual Report
Financial Report The Financial Reports for the year 2017
Reporting period, this period, current year Year 2017
The Company acquired 100% of the shares of Adama Solutions from
CNAC in exchange for the issuance and allotment of 1,810,883,039 new
The transaction, the major assets restructuring A-shares of the Company to CNAC. In addition, the Company issued
104,697,982 new A-shares to selected investors in an A-Share Private
Placement conducted as Supporting Finance for the transaction.
Company Law Company Law of the People’s Republic of China
Securities Law Securities Law of the People’s Republic of China
Listing Rules Listing Rules of the SZSE
Hubei Sanonda Co., Ltd. Annual Report 2017
Section II Corporate Profile and Financial Results
I Corporate information
Stock name Sanonda A, Sanonda B Stock code 000553, 200553
Stock exchange Shenzhen Stock Exchange
Company name in Chinese 湖北沙隆达股份有限公司
Abbr. 沙隆达
Company name in English (if
Hubei Sanonda Co., Ltd.
any)
Abbr. (if any) SANONDA
Legal representative Chen Lichtenstein
Registered address No. 93, Beijing East Road, Jingzhou, Hubei
Zip code
Office address No. 93, Beijing East Road, Jingzhou, Hubei
Zip code
Company website http://www.sanonda.cn
Email irchina@adama.com
II Contact information
Board Secretary Securities Affairs Representative
Name Li Zhongxi Liang Jiqin
Address No. 93, Beijing East Road, Jingzhou, Hubei No. 93, Beijing East Road, Jingzhou, Hubei
Tel. 0716-8208632 0716-8208232
Fax 0716-8321099 0716-8321099
E-mail lizhongxi@agr.chemchina.com liangjiqin@agr.chemchina.com
III Information disclosure and place where this Report is kept
Newspapers designated by the Company for China Securities Journal, Securities Times and Ta Kung Pao
information disclosure
Website designated by the CSRC for the publication
http://www.cninfo.com.cn
of this Report
Place where this Report is kept Securities Office of the Company
Hubei Sanonda Co., Ltd. Annual Report 2017
IV Company registration and alteration
Credibility code 91420000706962287Q
Changes in main business activities of the
No changes
Company after going public (if any)
The controlling shareholder of the Company changed from Jingzhou Sanonda Holdings
Changes of controlling shareholder (if any)
Co., Ltd. to China National Agrochemical Co., Ltd.
V Other information
Accounting Firm hired by the Deloitte Touche Tohmatsu Certified Public
Name
Company Accountants LLP
30/F, Bund Center, 222 Yan An Road East, Shanghai
Office address
PRC
Signing Certified Public Chen Xi, Zhao Yan
Accountant
Sponsor engaged by the Company to continuously perform its supervisory function during this Reporting Period
□ Applicable √ Not applicable
Financial advisor engaged by the Company to continuously perform its supervisory function during this Reporting Period
√Applicable □Not applicable
Name of Financial Advisor Address Names of the Sponsors Period for the Continuous
Supervision
GTJA No. 618 of Shangcheng Road, Zhu Wenchuan, Tang Weijie From Aug 2, 2017 to Dec 31,
Free Trade Area, Shanghai,
China
VI Main Accounting and financial results
Indicate by tick mark whether the Company performed any retroactive adjustments to or restatement of its
accounting data due to changes of accounting policies or correction of accounting errors
√ Yes □ No
2016 +/- (%)
After
2017 Before After Before After
adjustment
adjustment adjustment adjustment adjustment
Operating revenue (RMB’000) 23,819,568 1,854,733 22,070,405 7.93% 2,169,937 21,161,365
Net profit attributable to 1,545,879 -74,490 369,076 318.85% 141,840 409,206
Hubei Sanonda Co., Ltd. Annual Report 2017
2016 +/- (%)
After
2017 Before After Before After
adjustment
adjustment adjustment adjustment adjustment
shareholders of the Company
(RMB’000)
Net profit attributable to
shareholders of the Company
382,275 -92,340 -92,340 NM 137,329 137,329
excluding extraordinary profit and
loss (RMB’000)
Net cash flows from operating
3,958,389 268,365 4,237,145 -6.58% 276,090 3,980,788
activities (RMB’000)
Basic EPS (RMB/share) 0.6601 -0.1254 0.2200 200.05% 0.2388 0.255
Diluted EPS (RMB/share) 0.6601 -0.1254 0.2200 200.05% 0.2388 0.255
Weighted average return on net
9.05% -3.63% 2.97% 298.04% 6.90% 3.57%
assets
31.12.2016 +/- (%) 31.12.2015
31.12.2017 Before After After Before After
adjustment adjustment adjustment adjustment adjustment
Total assets (RMB’000) 39,613,922 2,984,884 36,492,511 8.55% 2,977,268 34,946,504
Net assets attributable to
shareholders of the Company 18,778,013 2,005,058 16,917,794 11.00% 2,097,382 11,522,703
(RMB’000)
The reason for the change of accounting policy and the results of correction of accounting errors
Please see the relevant contents of VI of Section V of this report.
Are there any corporate bonds?
□ Yes √ No
VII Differences in accounting data under domestic and foreign accounting standards
1. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese
and international accounting standards
□ Applicable √ Not applicable
No such differences for this Reporting Period.
2. Differences in the net profit and the net assets disclosed in the financial reports prepared under Chinese
and foreign accounting standards
□ Applicable √ Not applicable
No such differences for this Reporting Period.
Hubei Sanonda Co., Ltd. Annual Report 2017
VIII Main Financial results by quarter
Unit: RMB’000
Q1 2017 Q2 2017 Q3 2017 Q4 2017
Operating revenue 6,343,615 6,426,449 5,624,175 5,425,329
Net profit attributable to
762,710 554,284 282,520 -53,635
shareholders of the Company
Net profit attributable to
shareholders of the Company after
58,358 108,702 246,907 -31,692
deduction of nonrecurring
profits and losses
Net cash flows from operating
37,028 2,212,113 272,400 1,436,848
activities
Indicate by tick mark whether there are any material differences between the financial indicators above or their
summations and those which have been disclosed in quarterly or semi-annual reports
□ Yes √ No
IX Non-Recurring profit/loss
√ Applicable □ Not applicable
Unit: RMB’000
Item 2017 2016 2015 Note
Gains/losses on the disposal of non-current
assets (including the offset part of asset -3,000 17,682 32
impairment provisions)
Government grants charged to the profit/loss
for this Reporting Period (except for the
government grants closely related to the
14,628 5,418 5,585
business of the Company and given at a
fixed quota or amount in accordance with
the State’s uniform standards)
Profit or loss of subsidiaries generated
before combination date of a business 443,651
1,147,797 829,068
combination involving enterprises under
common control
Profit or loss arising from contingencies
other than those related to normal operating -15,671 - -
business
Recovery or reversal of provision for bad 22,204 - -
Hubei Sanonda Co., Ltd. Annual Report 2017
Item 2017 2016 2015 Note
debts which is assessed individually during
the years
Profit or loss on changes in the fair value of
held-for-trading financial assets and
held-for-trading financial liabilities and
investment income on disposal of
held-for-trading financial assets, - 19 -
held-for-trading financial liabilities and
available-for-sale financial assets, other than
those used in the effective hedging activities
relating to normal operating business
Other non-operating income and expenses
4,036 348
other than the above
Less: Income tax effects 6,390 5,616 1,180
NCI (after tax) - 385,503 176,297 --
Total 1,163,604 461,416 271,877
Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the
Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public-Exceptional Profit and Loss, or reclassified any exceptional profit/loss item given as an example in the said
explanatory announcement to recurrent profit/loss
□ Applicable √ Not applicable
No such cases in the Reporting Period.
Hubei Sanonda Co., Ltd. Annual Report 2017
Section III Business Profile
I. Main businesses of the Company during Reporting Period
Doesthe Company need to abide by the disclosure requirement in special industry?
No
The Company is a corporation incorporated in the People's Republic of China.
The Group engages in the development, manufacturing and marketing of crop protection products,that are off-patent, and is one of
the leading companies in the world in this field. The Group supplies solutions to farmers in approximately 100 countries across the
globe, through approximately 60 subsidiary companies throughout the world.
The Group is the world’s leading off-patent crop protection solutionscompany (by sales), and is ranked sixth in the world among all
companies engaged in the field of crop protection.The Group's business model integrates end-customer access, regulatory expertise,
and global R&D and production capacities, thereby providing the Group with a significant competitive edge and allowing it to launch
new and differentiated products that cater to farmers’ needs in key markets worldwide.
Adama-Sanonda combination and flotation
The combination of Adama Solutions and the Company was successfully completed, whereby on July 4, 2017, the entire share
capital of Adama Solutions was transferred from CNAC to the Company, in return for the issuance of new shares in the Company to
CNAC and their registration for trade on the SZSE which was completed on August 2, 2017 (together the “Combined Company”;
the “Combination Transaction”). Subsequently, the Company is consolidating Adama Solutions’ financial statements as of the third
quarter 2017.
Following the completion of the said combination, on September 29, 2017, a new board of directors of the Combined Company was
appointed. Adama Solutions' global management leads the Combined Company, which will operate under the ADAMA name and
brand, subject to the required approvals. In this context Adama Solutions' CEO, CFO and GLC were each appointed to corresponding
positions in the Company.
As part of the combination, Adama Celsius B.V completed the transfer and the cancellation of the B shares of the Company which it
held in accordance with the repurchase agreement signed in September 2016 and its amendment.
Internal group services agreements - on December 28, 2017 the Company and Adama Solutions entered into services agreements for
the provision of various services by Adama Solutions to the Company.
The Company completed a capital raise of approximately 1.5 billion RMBfrom equity investors. The Combined Company will utilize
the funds for further development of its global product portfolio, as well as the establishment and expansion of advanced operational
capabilities.
The Group's primary operations are focused on Europe, North-America, Latin-America, Asia-Pacific and India, the Middle-East and
Africa, and in total, the Group sells its products in approximately 100 countries across the globe.
The Group is focused on the development, manufacturing and marketing of off-patent crop protection products (which are mainly
herbicides, fungicides and insecticides designed to protect agricultural and other crops), and utilizes its expertise for the development
and adaptation of similar products for non-agricultural purposes (Consumer and Professional Solutions).
In addition, the Group leverages its core capabilities in the agricultural and chemical fields and operates in several other
non-agricultural areas, none of which, individually, is material for the Group. These activities include primarily, (a) the manufacture
and marketing of dietary supplements, food colors, texture and flavor enhancers, and food fortification ingredients; (b) fragrance
products for the perfume, cosmetics, body care and detergents industries; (c) the manufacture of industrial products and (d) other
non-material activities.
Trends, events and key developments in the Group's macro-economic environment may have a material impact on its business results
Hubei Sanonda Co., Ltd. Annual Report 2017
and development. The effects of these factors may differ depending on geographic region and different products of the Group. Since
the Group maintains a broad product portfolio and since it is active in many geographic regions, the aggregate effect of these factors
in any given year and the course thereof is not uniform and may sometimes even be mitigated by counterbalancing influences. The
activities and results of the Group is further subject to, and affected by, certain global, localized and other factors, such as
demographic changes; economic growth and rising standards of living; agricultural commodity prices; significant fluctuations in raw
material costs and global energy prices; development of new crop protection technologies; patent expiry and growth in volumes of
off-patent products; the agricultural market and severe weather conditions; regulatory changes; government policies; world ports and
monetary policy and the financial market.
Please see key additional information and further details included in the Annex.
II. Significant changestomain assets
1. Significant changesto main assets
Main assets Significant change
Stock rights/Equity assets No Significant change
Fixed assets No Significant change
Intangible assets No Significant change
Construction in progress/On-going
Investment in main production sites
construction projects
Inventories No Significant change
Trade receivables No Significant change
The increase is mainly due to the funds raised in the supporting finance program at the
Cash
end of 2017 and positive cash flow from operating activities.
Goodwill No Significant change
2. Main overseas assets
√ Applicable □Not applicable
Control Proportion of
Specific Scale of the measures to P/L of the overseas Significant
Operation
contents of Reason assets Location guarantee assets assets out of impairment
mode
the assets (RMB’000) safety of the (RMB’000) the net assets risk?
assets (%)
Equity Acquired
investment in through major Israel and Crop-Protecti Corporate
15,476,873 1,352,687 80% No
Adama assets globally on Governance
Solutions restructuring.
Other
See item I above regarding the completion of the Combination Transaction in July 2017.
explanations
Hubei Sanonda Co., Ltd. Annual Report 2017
III. Core competitiveness analysis
Doesthe Company need to abide by the disclosure requirement in special industry?
No
As the leading off-patent crop protection provider in the $56 billion global crop protection market, the Group believes that the
following strengths provide it with sustainable competitive advantages and the foundation to capitalize on favorable underlying
agriculture and crop protection industry trends:
Off-patent Industry Leader. The Group’s success as a leading off-patent company has given it a deep understanding of
the industry and enabled it to build one of the world’s most extensive off-patent product offerings and registration
capabilities, giving it the ability to provide efficient, value-added solutions to farmers of every major crop around the world.
Moreover, the breadth of the Group’s product portfolio, with no single active ingredient constituting more than 6% of its
sales in 2017, combined with its extensive geographic reach, provides effective diversification and enhanced stability. The
Group aims to continue to gain market share, building on its leading role in the market, farmer-centric focus and broad
product portfolio. Furthermore, the Group’s addressable market continues to expand as the crop protection market globally
has shifted towards off-patent products, the segment of the market in which it focus. This shift is the result of significant
increases in the costs and risks of developing innovative and effective AIs, which has led to significantly fewer
introductions of new molecules each year. The Group’s strength in the off-patent market provides a competitive advantage
relative to RBCs, as it is able to combine off-patent crop protection products developed by all of the various major RBCs
with its research, technology and know-how. This allows the Group to enhance existing crop protection products and
introduce unique mixtures, formulations and applications. In parallel, the Group’s global scale, registration expertise and
manufacturing footprint are competitive advantages as compared to its off-patent peers.
Global Reach and Strength in Emerging Markets. The Group has an industry leading global footprint with extensive
market presence. According to Phillips McDougall (AgriService, 2016 Industry Overview), in 2016, the Group held the #1
rank in global sales among off-patent crop protection providers. The Group enjoys broad geographic diversification by
selling in over 100 countries with a balanced regional split, as evidenced by its 2017 revenue breakdown of 30% in Europe,
21% in Latin America, 18% in North America, 19% in Asia Pacific, and 12% in India, the Middle East and Africa. This
balance enhances the Group’s growth profile and provides diversification across different countries, climates, crops and
planting seasons. The Group has a particularly strong presence in emerging markets, from which it derived approximately
half of its 2017 sales, and where growth is expected to outpace developed markets. Over the past two decades, the Group
has made strategic investments in establishing substantial sales and marketing organizations in key emerging markets
including Brazil (1998), Central and Eastern Europe (beginning in 2004) and India (2009).
Unique Positioning and Access to China. The Group believes that the foundation being provided by itsintegration with
the Chinese Businesses, together with its unique relationship with its controlling shareholder, ChemChina, will provide it
with a clear advantage in penetrating China, one of the largest and fastest growing agricultural markets in the world.
Following the consummation of the Combination Transaction, the Group is one of the only global crop protection providers
with a significant integrated commercial and operational infrastructure within China. The Group intends to leverage this
infrastructure and relationship to pursue a leading position in the domestic Chinese crop protection market and capitalize
on the growing importance of high-quality global brands in China. As part of the ChemChina group, the Group believes itis
uniquely positioned to capitalize on the trend toward consolidation within the high-growth, highly fragmented Chinese crop
protection market. In addition to helping it become a leader in the domestic Chinese crop protection market, the integration
of the Chinese Businesses’ manufacturing facilities into the Group’s global manufacturing operations should provide it with
the ability to more effectively develop and commercialize advanced, differentiated products, as well as benefit from better
Hubei Sanonda Co., Ltd. Annual Report 2017
cost positions in key molecules, enhance the optimization of its global supply chain, over time, driving greater efficiency
throughout the organization, and secure both top line growth as well as increased profitability.
Vertically Integrated Business with Global Scale. The Group is one of the few off-patent crop protection providers that is
active across virtually the entire value chain, from worldwide marketing, sales and distribution, to registration, production
and R&D, which it is further enhancing by the Combination Transaction. As a result, the Group is able to efficiently
manage its product portfolio and operations in response to the dynamic needs of farmers, weather conditions, government
policies and regulations, and capture value at each point in the value chain. Approximately 80% of the Group’s products are
produced, formulated or both in its world-class, well-invested facilities, which adhere to strict international certifications
and standards of the industry. Having deep knowledge, expertise and experience in all aspects of the development process,
integrated chemical synthesis and formulation production and control over the entire supply chain, provides the Group with
cost advantages and the agility to address market challenges and capture value. Further, its global registration network,
providing local registration capabilities in over 100 countries, enables the Group to efficiently introduce new products to
nearly all major markets and provide farmers with a comprehensive portfolio of crop protection solutions. In the last five
years, the Group’s registration network of highly-skilled professionals has obtained approximately 1,300 new registrations.
The Group believes these capabilities are increasingly important as regulatory requirements continue to increase globally.
The Group’s sales and marketing infrastructure is enhanced by its local sales forces in each of its strategic markets, who
build strong relationships with local distributors and with its end users, the farmers, to better understand their needs. This
drives demand at the wholesale, retail and farmer level and provides the Group with valuable market understanding.
Extensive, Differentiated Offering. The Group offers farmers a hybrid portfolio of increasingly differentiated products
and solutions that are tailored to the specific needs of each geographic region and each type of crop. The Group utilizes an
integrated, solutions-based approach to its entire offering in order to meet the unique demands of its global customer base.
The Group strives to “Create Simplicity in Agriculture” by offering farmers a branded portfolio that is comprised of both
high-value off-patent products and high-volume off-patent products, alongside an increasing number of unique mixtures
and formulations and novel, innovative products and services, customized to suit farmers of any size, in nearly every region,
and increase yield of all major crops. The Group’s extensive portfolio is composed of over 120 centrally managed AIs and
over 1,000 mixtures and formulations.
Experienced and Empowered Management Team. With a deep understanding of the crop protection industry and firm
focus on sustaining the Group’s leadership and financial strength, its management team is a cohesive and integrated team
that has the knowledge, skills and experience required to guide the Group on its path to global leadership. The Group
believes in empowering its teams and creating leaders from its strongest performers, with the result that its management
team is composed of the people who have successfully managed its business, and developed and executed its strategy over
the last few years, continuing its track record of consistent, profitable growth.
Hubei Sanonda Co., Ltd. Annual Report 2017
Section IV Performance Discussion and Analysis
I.Overview
Please see key additional information and further details included in the Annex.
Revenues grew robustly in the year, driven by an increase in volumes of an increasingly differentiated product portfolio, despite
generally subdued agricultural market conditions. The strong volume growth was offset to a certain extent by a softer pricing
environment.
Over the year, the net impact of currency movements was relatively muted, with the strengthening of certain currencies against the
dollar in a number of key regions such as Brazil and India being balanced out by the weakening of other currencies, most notably the
British Pound, as well as the lower contribution of currency hedging.
Operating incomeincreased in the year. The strong increase in profitability resulted from a combination of the robust volume growth,
a continued improvement in portfolio mix towards a more differentiated offering, as well as the continued reduction of costs. These
trends were further aided by the strengthening of local currencies against the dollar, and partially offset by the softer pricing
environment. By contrast, the Company saw an increase in sales-related personnel in growing geographies as well as an increase in
other variable expenses as a result of the increase in sales volumes, and increased spend on strategic research and development
projects.
Financial expenses and investment income.Total net financing expenses in the year decreased, primarily due to the decrease in
costs of currency hedging, as well as the reduction in financial debt, which were partially offset by an increase in financial expenses
as a result of the increase in the Israeli CPI over the year.
Taxexpenses. Tax expenses in the year were higher compared to last year, mainly as a result of higher pre-tax income. The low
effective tax rate in 2017 derives mainly from creation of deferred tax assets, while the low effective tax rate in 2016 resulted mainly
from the strengthening of the Brazilian Real against the dollar, which created tax income due to the non-cash revaluation of tax
assets.
Net incomein year grew compared to the corresponding period last year.
Working capital. Balance sheet working capital decreasedcompared to the corresponding period last year, reflecting improved
supplier credit management and collection discipline, which more than compensated for somewhat higher inventory in preparation
for the 2018 season.
Cash Flow. With the significant increase in profits over the year, the Company generated strong, albeit slightly lower operating cash
flow over the year, compared to last year, reflecting the more moderate contribution from the release of working capital this year, in
comparison with the release of working capital last year that emanated from supply chain alignment.
Free cash flow generated over the year was strong, albeit slightly lower than in the corresponding period last year. The higher cash
flow in 2016 reflects the significant release of working capital achieved as a result of the supply chain alignment.
Leverage. The strong cash generation, together with the proceeds of the recent Equity Offering, drove a substantial reduction in
leverage, with balance sheet net debt at the end of the year down by almost half compared to this time last year. This has resulted in
the Net Debt/EBITDA ratio dropping to around 0.7x.
II. Main business analysis
1. Overview
See details on the relevant contents of “I. Overview” of “ManagementPerformance Discussion and Analysis”.
Hubei Sanonda Co., Ltd. Annual Report 2017
2. Revenues and costs
(1) Operating revenuesform
Unit: RMB’000
2017
Ratio of the Ratio of the YoY +/-%
Amount Amount
operating revenue operating revenue
Total of the
23,819,568 - 22,070,405 7.93%
operating revenue
Classified by industries
Industry of
manufacturing
chemical raw 23,819,568 100% 22,070,405 100% 7.93%
materials and
chemical products
Classified by products
Agro 22,033,564 92.5% 20,429,048 92.6% 7.85%
Non-Agro 1,786,004 7.5% 1,641,357 7.4% 8.81%
Classified by regions
Europe 7,107,131 29.84% 6,862,992 31.10% 3.56%
North America 4,363,301 18.32% 4,005,047 18.15% 8.95%
Latin America 5,050,377 21.20% 4,956,848 22.46% 1.89%
Asia-Pacific 4,428,364 18.59% 3,637,068 16.48% 21.76%
India, Middle East
2,870,395 12.05% 2,608,450 11.82%
and Africa 10.04%
(2) List of the industries, products or regions exceed 10% of the operating revenuesor operating profits of
the Company
√ Applicable □ Not applicable
Unit: RMB’000
YoY YoY YoY
Operating
Operating cost Gross margin increase/decrease increase/decrease increase/decrease
revenues
of the operating of the operating of the gross
revenues cost margin
Classified by industries
Industry of
manufacturing chemical
23,819,568 15,403,887 35.33% 7.93% 3.22% 9.11%
raw materials and
chemical products
Classified by products
Agro 22,033,564 14,096,957 36.02% 7.85% 3.56% 7.95%
Classified by regions
-- -- -- -- -- -- --
Hubei Sanonda Co., Ltd. Annual Report 2017
Under the circumstances that the statistical standards for the Company’s main business data adjusted in the Reporting Period, the
Company's main business data in the recent year is calculated based on adjusted statistical standards at the end of the Reporting
Period
□ Applicable √ Not applicable
(3) Whether the Company’s goods selling revenue higher than the service revenue
√ Yes □ No
Industries Items Units 2017 2016 YoY +/-%
Sales volume Ton 523,672 468,236 11.8%
Agro Production Ton 479,319 397,583 20.6%
Inventory Ton 194,987 181,492 7.4%
Reasons for any over -30% YoY movement of the data above:
□ Applicable √ Not applicable
(4) Execution of the significant sales contracts signed by the Company up to the reporting period
□ Applicable √Not applicable
(5) Operating cost form
Category of the industries
Unit: RMB’000
2017
Industries Items Ratio of the Ratio of the YoY +/-%
Amount Amount
operating costs operating costs
Industry of
manufacturing
Cost of materials
chemical raw
(procurement 11,280,306 73% 10,918,047 73% 8%
materials and
costs)
chemical
products
Industry of
manufacturing
chemical raw
Labor cost 968,455 6% 898,015 6% 8%
materials and
chemical
products
Industry of
manufacturing
Depreciation
chemical raw 607,161 4% 569,772 4% 7%
expense
materials and
chemical
Hubei Sanonda Co., Ltd. Annual Report 2017
2017
Industries Items Ratio of the Ratio of the YoY +/-%
Amount Amount
operating costs operating costs
products
(6) Whether the consolidated scope changed during the reporting period
√ Yes □ No
See Section III item I above regarding the completion of the Combination Transaction in July 2017.
(7) List of the significant changes or adjustment of the industries, products or services of the Company
during the reporting period
□ Applicable √ Not applicable
(8) List of the major trade debtors and major suppliers
List of the major trade debtors of the Company
Total sales to the top 5 customers (RMB’000) 1,213,605.1
Ratio of the total sales to the top 5 customers to the
5.09%
annual total sales
Ratio of the total sales to related parties (within the top 5
Not applicable
customers) to the annual total sales
Notes of other situation of the major customers
□ Applicable √ Not applicable
List of the major suppliers of the Company
Total purchase to the top 5 suppliers (mil RMB) 2,119
Ratio of the total purchase to the top 5 suppliers to the
22.00%
annual total purchase
Ratio of the total purchase from related parties (within the
top 5 suppliers) to the annual total purchase Not applicable
Notes of the other situation of the major suppliers
□ Applicable √ Not applicable
3. Expenses
Unit: RMB’000
Hubei Sanonda Co., Ltd. Annual Report 2017
2017 2016 YoY +/-% Notes of the significant changes
Selling and Distribution expenses 4,280,335 4,042,170 5.89%
General and Administrative 1,071,113 31.71%
1,410,772
expenses
Mainly foreign currency effect
Financial (income) / expenses 1,205,286 434,819 177.19%
financial assets and liabilities.
4. R&D investment
√ Applicable □ Not applicable
The Group’s innovation, development, research and registration division (IDR) manages and coordinates all the research and product
development activities in the Group.
In general, the Group, as an off-patent product manufacturer, develops production processes and registration data for molecules
present in the original product. Development and registration of off-patent products offer a significant saving of time and costs
comparing to development costs of the original products required from originator companies, in a manner which enables the Group to
develop a broad and diverse portfolio of mainly off-patent products at competitive prices; Nonetheless, to introduce a new product to
the market still requires considerable investment in development and registration, particularly in view of the increasing regulatory
requirements globally, and the development of, and increasing competition in, the off-patent products market.
The Group's primary development and registration activities focus on the chemical-engineering development of production processes
for active ingredients and new off-patent products, biological and agronomical tests designed to meet regulatory requirements,
development of registration dossiers for the active ingredients and formulations that make up its registration portfolio in the various
regions, development of mixtures and of innovative and unique formulations of existing products, as well as streamlining of
production processes. The Group has also developed several innovative substances, based on molecules acquired from external
sources after a screening process proving their effectiveness. The Group develops the product's biological uses and registers them in
the target countries, as well as engages in chemical development of the production process.
Currently, the Group operates chemical research and development centers in Israel, India, Brazil and China. In addition to chemical
development, the Group conducts development activities for registration purposes through external contractors in Israel and other
countries, including China. Such development efforts may on occasion integrate knowledge exclusively owned by the Group,
knowledge jointly developed with the subcontractor, or sometimes knowledge exclusively owned by the subcontractor.
Currently, the Group operates several analytical labs in Israel, China, India, U.S.A. and Brazil, which inter alia conduct Quality
Assurance (QA) tests for its various products, and a portion of these also conduct tests for registration purposes.
The materials and products marketed by the Group require, at various stages of their production and marketing, registration in every
country where the Group intends to market them. The Group has development and registration centers, located in Europe, Israel,
Latin America, Brazil, North America, India and Asia.The Group has gained registration expertise in over 100 countries.
List of the R&D investment of the Company
2017 2016 Change (%)
R&D headcount personnel
241 232 3.88%
(person)
% of R&D headcount over total
3.63% 3.47% 0.16%
headcount
Total R&D spending
360,403 225,851 59.58%
(RMB’000)
Ratio of the R&D spending to 1.51% 1.02% 0.49%
Hubei Sanonda Co., Ltd. Annual Report 2017
the operating revenue
Amount of the capitalized R&D
0 0
spending (RMB’000)
Ratio of the capitalized R&D
investment to the R&D 0 0
spending
Reason of remarkable changes over the last year of the ratio of the total R&D investment amount to the operating income
□Applicable√ Not applicable
Reason of the greatly change of the ratio of the R&D investment capitalization and its reasonable explanation
□Applicable √ Not applicable
5. Cash flow
Unit: RMB’000
Item 2017 2016 YoY +/-%
Subtotal of cash inflows from
24,072,684 22,695,133
operating activities 6.07%
Subtotal of cash outflows from
20,114,295 18,457,988
operating activities 8.97%
Net cash flows from operating
3,958,389 4,237,145
activities -6.58%
Subtotal of cash inflows from
265,113 96,614
investing activities 174.40%
Subtotal of cash outflows from
1,552,852 1,522,119
investing activities 2.02%
Net cash flows from investing
-1,287,793 -1,425,505
activities -9.66%
Subtotal of cash inflows from
3,752,157 849,265
financing activities 341.81%
Subtotal of cash outflows from
2,116,038 3,034,495
financing activities -30.27%
Net cash flows from financing
1,636,119 -2,185,230
activities -174.87%
Net increase in cash and cash
4,030,511 860,391
equivalents 368.45%
Notes of the major effects on the YoY significant changes occurred of the data above
√ Applicable □ Not applicable
Cash flow from Operations:With the significant increase in profits over the full year, the Company generated strong operating cash
flow. However, compared to last year there was a slight decline, reflecting the more moderate contribution from the release of
working capital this year, in comparison with the significant release of working capital last year that emanated from supply chain
alignment.
Hubei Sanonda Co., Ltd. Annual Report 2017
Cash flow from Investing Activities:Net cash used in investing activities reflects primarily investments in product registrations and
other intangible and fixed assets, net of one-time proceeds resulting from the divestment of certain products in the US and minor
non-core activities.
Cash flow from Financing Activities: Net cash generated from financing activities in 2017 reflects both an increase in the use of
external bank financing in place of intragroup loans, as well as the receipt of the funds from the Supporting Finance, while in 2016
the net cash used in financing activities reflects the repayment of bank loans using the strong cash flow generated by the business, as
well as the last scheduled repayment of principal on one of the bonds series of Adama Solutions.
Notes to the reason of the significant differences between the net cash flow from the operating activities and the net profits of 2016of
the Company during the reporting period
√ Applicable □ Not applicable
Please refer to the notes provided above under this item.
III. Analysis of the non-core business
√ Applicable □ Not applicable
Unit: RMB’000
Proportion in total
Amount Reason explanation Existence of sustainability
profit
Investment income 73,858 4.43% No
Gain/loss from change Mainly foreign currency effect
269,351 16.15% No
of FV financial assets and liabilities.
Impairment of asset 173,325 10.39% No
Gain or loss from
55,160 3.31% No
disposal of assets
Non-operating income 34,103 2.04% No
Non-operating loss 44,674 2.68% No
IV. List of the assets and liabilities
1. List of the significant changes of the assets form
Unit: RMB’000
As at 31 Dec. 2017 As at 31 Dec. 2016
Proportion Proportion Explain any
Item Proportion in
Amount in total Amount change major change
total assets
assets
Supporting
Cash at bank
7,868,858 19.86% 3,841,547 10.53% 9.33% finance and
and on hand
positive
Hubei Sanonda Co., Ltd. Annual Report 2017
As at 31 Dec. 2017 As at 31 Dec. 2016
Proportion Proportion Explain any
Item Proportion in
Amount in total Amount change major change
total assets
assets
operating cash
flow.
Accounts
5,056,850 12.77% 5,465,258 14.98% -2.21%
receivable
Inventories 7,488,238 18.90% 7,463,957 20.45% -1.55%
Investment
4,408 0.01% 4,721 0.01% 0.00%
property
Fixed assets 6,141,490 15.50% 6,797,889 18.63% -3.13%
Construction in
803,421 2.03% 483,888 1.33% 0.70%
progress
Intangible assets 4,036,588 10.19% 5,056,200 13.86% -3.67%
Goodwill 3,890,097 9.82% 4,064,312 11.14% -1.32%
Deferred tax
891,012 2.25% 646,797 1.77% 0.48%
assets
Short-term loans 2,280,912 5.76% 748,163 2.05% 3.71%
Long-term loans 514,320 1.3% 1,002,177 2.75% -1.45%
Debentures 7,777,410 19.63% 7,417,408 20.33% -0.69%
Accounts
3,906,481 9.86% 3,462,280 9.49% 0.37%
payables
Employee
995,637 2.51% 975,391 2.67% -0.16%
benefits payable
2. Assets and liabilities measured at fair value
√ Applicable □ Not applicable
Unit: RMB’000
Accumulative
Variable profit Summing and
fair value Purchase Amount at
Opening and loss of fair drawing Sale amount in
Item variation with amount in this the end of
balance value in this impairment in this period
rights and period the period
period this period
interests
Financial asset
1. Financial assets
measured at
FVTPL
35,594 0 - -12,594 23,000
(excluding
derivative
financial assets)
2. Derivative
637,450 347,254 -466,569 - -62,982 455,153
financial assets
Hubei Sanonda Co., Ltd. Annual Report 2017
Accumulative
Variable profit Summing and
fair value Purchase Amount at
Opening and loss of fair drawing Sale amount in
Item variation with amount in this the end of
balance value in this impairment in this period
rights and period the period
period this period
interests
Financial asset
3.
Available-for-sale
financial assets
Total financial
673,044 347,254 -466,569 - - -75,576 478,153
assets
Others
Total of above 673,044 347,254 -466,569 - - -75,576 478,153
Financial liability 785,011 4,039 - 789,050
Significant changes in the measurement attributes of the main assets in this Reporting Period
□ Applicable √ Not applicable
3. As at the end of the reporting period, the asset rights were limited
At the end of this Reporting Period, restricted assets including: monetary bank balances of capital RMB’000 4,600 of the Company
was limited. Most of the monetary capital was banks bill cash deposit for bills receivable, fixed assets of RMB’000 6,266 as
mortgage for loans, and other non-current assets of RMB’000 124,450 as deposit for asset securitization and legal suits.
V. List of the investment
1. Overall condition
√ Applicable □ Not applicable
Investment during the Reporting Investment during the Same Period +/-% YoY
Period (RMB) Last Year (RMB)
31,757,508 -- 100%
2. List of the significant equity investment acquired from the reporting period
√ Applicable□Not applicable
RMB’000
Invested Main Investment Investment Source Investment Type of Progress Current If Disclosure Disclosure Web
Shareholding Partner
Company Business Type Amount of Term Product as of the Investment Involved Date (if Link (if any)
Hubei Sanonda Co., Ltd. Annual Report 2017
% Funding Balance Gains/ in any)
Sheet Losses Lawsuits
Date
Adama crop Acquisition18,471,007 100.00% issue none long term agrochemical completed 1,352,687 no July 5, www.cninfo.com.cn
Solutions protection shares
Total -- -- -- -- -- -- -- -- -- -- --
3. List of the significant non-equity investment has been executing during the reporting period
□ Applicable √ Not applicable
4. Investment on the financial assets
(1) List of the securities investment
□ Applicable √ Not applicable
The Company was not involved with such situation during the reporting period.
Hubei Sanonda Co., Ltd. Annual Report 2017
(2)Investment in derivative financial instruments
√Applicable □Not applicable
Unit: RMB’000
The party that Relation Related Type Initial Starting Expiring Investment Amount Amount Impairment Investment Percentage of Gain/loss
operates the with the party investment date date amount at purchased sold during accrued (if amount at end investment during the
investment Company transaction amount beginning of during the the any) of the period amount divided reporting
or not? the period reporting reporting by net asset at period
period period end of the period
Banks No No Option 2,498,306 22/10/2017 15/02/2018 2,498,306 1,718,495 -4,164,527 No 52,274 0.28% -42,005
Banks No No Forward 14,333,857 08/08/2017 18/02/2018 14,333,857 11,568,006 -9,989,940 No 15.911.923 84.74% 431,165
Total 16,832,163 -- -- 16,832,163 13,286,501 -14,154,467 15,964,197 85.02% 389,160
Source of fund for the investment Internal.
Litigation-related situations (if applicable) N/A
Date of disclosure of Board approval (if any) N/A
Date of disclosure of Shareholders’ approval (if
N/A
any)
The aforesaid refers to short term hedging currency transactions made with banks.
The Group’s transactions are not traded in the market. The Transactions are between the applicable company in the Group and the applicable
bank until the expiration date of the transaction, therefore no market risk is involved.
Risk and control analysis for the reporting
Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA
period (including but not limited to market risk,
agreements.
liquidity risk, credit risk, operational risk, legal
As to operational risk, the Group is working with approved software, which is its back office for all transactions.
risk, etc.)
No legal risk is involved.
The controls taken in order to further reduce said risks are:
The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' financial
Hubei Sanonda Co., Ltd. Annual Report 2017
statements committee of the board, which specifies, inter alia, the hedging policy, the persons that has the authorization to deal with
hedging, the tools, rangesetc. The only subsidiary that has hedging positions in the Group in the period wasAdama Solutions and its
subsidiaries.
The relevant subsidiaries apply local SOX audits that audit the working process and the controls of the hedging transactions, in
addition to the quarterly audit.
The controllers of the relevant subsidiaries are involved and monitor the hedging accounting treatment.
Every 2-3 years the internal audit of the relevant subsidiaries department is auditing all the procedure.
Market price or fair value change of The aforesaid refers to short time hedging currency transactions made by the relevant subsidiary with banks.
investments during the reporting period. Segregation of duties as follows:
Specific methodology and assumptions should For the fair value evaluation, the relevant subsidiary is using external experts. The relevant subsidiary hedges currencies only; the relevant
be disclosed in the analysis of fair value of the transactions are simple (Options and forwards) for up to 1.5 years. Therefore, the valuation is straight forward, and the exchange rates are
investments provided by the accounting department of the relevant subsidiary and all other parameters are provided by the experts.
Explanation for any significant changes in
accounting policies and principles, compared N/A
with last reporting period
Independent Directors’ opinion on the
investment in derivative financial instruments N/A
and related risk controls
Hubei Sanonda Co., Ltd. Annual Report 2017
5. Use of raised funds
√ Applicable □Not applicable
(1) Overall Situation of Use of the Funds Raised
√ Applicable □ Not applicable
RMB’0000
Proportion
Total
of
Amount
Accumulated
Total of Fund Accumulated
Amount of Usage and
Amount with Amount of Total Amount of
Total Accumulated Fund with Destination
Year of Type of Used Purpose Fund with Amount Funds Being
Amount Amount Purpose of Funds
Raising Raising during the Being Purpose Not Used Idle for over
Raised Used Being Not Used
Reporting Changed Being Yet Two Years
Changed Yet
Period during the Changed
against Total
Reporting
Amount
Period
Raised
Non-public
offering of Not
2017 155,999.99 2,808 2,808 0 0 0% 153,192
shares applicable
Total -- 155,999.99 2,808 2,808 0 0 0% 153,192 --
GeneralSummary of Use of Raised Funds
The Company received the raised funds on Dec 27, 2017 and paid the underwriting fee of RMB 28,079,998.78. More details of the use of
raised funds can be seen in “Special report on the storage and the actual use of raised funds in 2017” disclosed on 28 March 2018.
(2) The Status of DesignatedProjects ofRaised Funds
√ Applicable □ Not applicable
RMB’0000
Investment Date by
Any Accumulated Progress which
Designated Total Amount Benefits Any
Project Invested by the End the Expected
Projects and Total Investment Invested Realized Material
Change Amount by of the Project Benefits
Investment of Investment after during the during the Change to
(Including the End of Reporting Can be Reached
Extra Funds Committed Adjustment Reporting Reporting Project
Partial the Reporting Period Put into or Not
Raised (1) Period Period Feasibility
Change) Period (2) (3)＝ Use as
(2)/(1) Planned
Designated Projects
The project of
Huai’an
Not Not Not
Pesticide No 24,980 24,980 0 0 0.00%
applicable applicable applicable
Formulation
Center
The projects No 93,507 93,507 0 0 0.00% 2019 Not Not Not
Hubei Sanonda Co., Ltd. Annual Report 2017
Investment Date by
Any Accumulated Progress which
Designated Total Amount Benefits Any
Project Invested by the End the Expected
Projects and Total Investment Invested Realized Material
Change Amount by of the Project Benefits
Investment of Investment after during the during the Change to
(Including the End of Reporting Can be Reached
Extra Funds Committed Adjustment Reporting Reporting Project
Partial the Reporting Period Put into or Not
Raised (1) Period Period Feasibility
Change) Period (2) (3)＝ Use as
(2)/(1) Planned
Designated Projects
of project applicable applicable applicable
development
and
registration
Fixed-asset
Not Not Not
Investment of No 66,204 66,204 0 0 0.00% 2019
applicable applicable applicable
ADAMA
Fees for the
intermediary
Not Not Not
agencies and No 13,600 13,600 2,808 2,808 20.65%
applicable applicable applicable
transaction
taxes
Sub-total of 198,291 2,808 2,808
Designated -- 198,291 -- -- -- --
Projects
Investment of Extra Funds Raised
Not
Applicable
How and why
the planned
progress or
expected Not applicable
income is not
met (per
project)
Explanation
onmaterial
change to Not applicable
project
feasibility
Amount,
purpose of use
and progress Not applicable
of extra funds
raised
Hubei Sanonda Co., Ltd. Annual Report 2017
Investment Date by
Any Accumulated Progress which
Designated Total Amount Benefits Any
Project Invested by the End the Expected
Projects and Total Investment Invested Realized Material
Change Amount by of the Project Benefits
Investment of Investment after during the during the Change to
(Including the End of Reporting Can be Reached
Extra Funds Committed Adjustment Reporting Reporting Project
Partial the Reporting Period Put into or Not
Raised (1) Period Period Feasibility
Change) Period (2) (3)＝ Use as
(2)/(1) Planned
Designated Projects
Change of
location of
Not applicable
designated
projects
Adjustment to
way of
execution of Not applicable
designated
projects
Advance
investment in
designated
Not applicable
projects and
replacement
of funds
Temporary
supplement to
working
Not applicable
capital with
idle raised
funds
Amount of
surplus funds
Not applicable
out of projects
and causes
Usage
anddestination
of funds that Not applicable.
have not been
used
Problems or
other issues in
the use raised Not applicable
funds and
disclosure
Hubei Sanonda Co., Ltd. Annual Report 2017
Note: Funds were received by the Company in December 2017, while the four-parties special bank accounts were not
opened yet and therefore the funds were not yet utilized.
(3) Change to the Designated Projects ofRaised Funds
□ Applicable √ Not applicable
No changes to the projects of raised proceeds were made in the Period.
VI. Selling of the significant assets and the equities
1. List of the selling of the significant assets
□ Applicable √ Not applicable
No selling of the significant assets during the reporting period.
Transfers and Divestments relating to ChemChina’s acquisition of Syngenta –
On May 18, 2017 ChemChina completed the acquisition of Syngenta AG (\"SYT\" and the \"SYT Transaction\"). In the context of
developing its business and to facilitate the obtaining by ChemChina of the regulatory approvals for the acquisition of SYN, Adama
Solutions agreed with ChemChina and SYN to effect the divestment of a number of its products (the “Divested Products”), while
receiving products of similar nature and economic value from SYT (the “Transferred Products”).
In 2017, the transfer of certain SYTproducts and rights to Adama Solutions was completed in the U.S, in exchange for Adama
Solutions' divestiture of certain products there to Amvac Chemical Corporation, conducted to obtain the approval by the US FTC of
the acquisition of SYTby ChemChina. In Europe, the Company and SYT entered on October 23, 2017 into agreements with Nufarm
Limited (“Nufarm”) for the divestment of several of their products in Europe.
In the framework of these agreements, no personnel or physical assets (apart from inventory) was transferred. Furthermore, the
transfer of products maintains the Company's ability to continue to sell such products in other countries outside Europe, and in some
cases within Europe as well.
With the entry into force of these agreements, following the approval of the European commission, and concurrently, the agreements
signed by the Company and SYT for the receipt of a portfolio of products in Europe, including registrations, trademarks and brands
of formulations and active ingredients, as well as distribution rights, came into force on March 15, 2018.Against these products
Nufarm paidAdama Solutions and SYT a total amount of USD 395million, with the Company's share of this amount, net of any
expenses and taxes, to be remitted to SYT on the completion date of the transaction as consideration for the receipt of products from
SYT.
The receipt of the transferred products from SYT and concurrent divestment of Adama Solutions’ products in Europeoccurred in the
first quarter of 2018 and the transaction relating to receiving the products is at a final closing process.
Although the aggregate sales of the products sold by Adama Solutions in Europe in respect of its sales in this region in 2016 terms, is
significant, it is not material in relation to Adama Solutions' aggregate global sales, and furthermore, due to the fact that the portfolio
of Transferred Products from SYT is of similar nature and economic value to the one of the Divested Products, the net impact on
Adama Solutions' business is expected to be immaterial.
Hubei Sanonda Co., Ltd. Annual Report 2017
2. List of the selling of the significant equities
□ Applicable √ Not applicable
VII. Analysis of the major controlling and stock-participating companies
√ Applicable □ Not applicable
List of the stock-participating companies influenced over 10% of the net profits on the major subsidiaries of the Company
Unit: RMB’000
Name Type Registered Operating Operating
Main services Total assets Net assets Net profit
capital revenues profit
development,
manufacturing and
marketing of
agrochemicals,
Adama intermediate
Subsidiary 720,085 31,906,078 12,118,921 21,232,158 1,747,089 1,609,486
Solutions materials for other
industries, food
additives and synthetic
aromatic products,
mainly for export
Subsidiaries acquired or disposed during the reporting period
□ Applicable √Not applicable
VIII. List of the structured main bodies controlled by the Company
□ Applicable √ Not applicable
IX. Outlook of the Company’s future development
(I) Industry structure and trends
1. The competition structure of crop protection industry
(1) The competition structure of crop protection industry
The global crop protection market is dominated by five multinational companies, four of which have annual revenues exceeding
USD four billion in the crop protection product segment (excluding seeds activities). In the past four years, several mergers and
acquisitions were consummated between some of the larger medium-sized companies in the industry, including FMC's acquisition of
Cheminova; Platform's acquisition of Arysta, Agriphar and Chemtura's agrochemical operations; Huapont Nutrichem’s minority
investment in Albaugh. In addition, in the last two years, a number of mergers and acquisitions have been announced (somenot yet
completed) among the largest players in the crop protection industry – the merger between Dow and DuPont and the yet to be
completed acquisition of Monsanto by Bayer – which upon completion will reduce the number of multinational Originator
Companies to four. An additional acquisition in the crop protection industry that has been already completed is the SYT Transaction.
Nonetheless, the crop protection industry as a whole is relatively decentralized with a large number of local manufacturers competing
Hubei Sanonda Co., Ltd. Annual Report 2017
in each country against the global multinational companies. The Group believes that the entry barriers for the crop protection market
are relatively high, however they vary from region to region.
The Group, to the best of its knowledge, is the world’s largest group (in sales terms) focused on off-patent active ingredients. The
Group was ranked sixth by Phillips McDougall on its 2017 list of both Originator Companies and off-patent active ingredients
companies, with a global market share of approximately 5.8% in 2017, based on estimations made by Phillips McDougall regarding
total sales in the crop protection industry in 2017.
The Group's competitors are multinational Originator Companies that continue producing and marketing their original products after
the patent expiry, as well as other off-patent active ingredients companies. According to the Group's experience, in the majority of
instances the Originator Company’s market share in a particular product falls to approximately 60% - 70% within a number of years
following the expiry of the relevant patent, leaving the remaining market share open to competition among off-patent active
ingredients companies, in addition to their competition with the Originator Company (which continues manufacturing the product
and even leads its market prices and sales terms).
The Group competes with Originator Companies and other international off-patent active ingredients companies in all the markets in
which it operates, since these generally also have global marketing and distribution networks. In addition, there are several smaller
Originator Companies that also create competition for the Group’s products. As a rule, other off-patent active ingredients companies
that do not have international marketing and distribution networks compete with the Group locally in those geographical markets in
which they operate.
(2) The competition structure of crop-protection industry in our country
Since 2000, a chemicals industry has developed in China that the Group believes to be the largest in the world. Within this industry,
an agrochemicals industry has also developed, including thousands of companies who have invested in manufacturing infrastructure,
of which roughly half of their production capacity is currently aimed at exports, intended for sale through small and large companies,
including the Group and its competitors. The growth in production capacity, on one hand, and the price levels and competitiveness of
the products produced in China on the other, affect the structure of competition in the entire industry. However, price levels of the
products manufactured in China have started to rise, in light of the trend of rising manufacturing costs in China, which stem from the
increase in wage costs and other production inputs, including environmental costs, as well as from increased regulatory activity in
China, including by way of limited granting of production permits.
2. The development trend of crop-protection industry
In the last few years, some new emerging trends that may affect the nature of competition in this sector can be identified: (1) The
market share of products whose patents have expired continues to rise relative to that of patented original products, primarily due to
the fact that the rate of patent expiry exceeds that of new patent registration; (2) A trend of some off-patent active ingredients
companies expanding and becoming stronger (inter alia, as a result of corporate mergers and acquisitions as well as product
acquisitions), which may lead to them competing with the Group in geographic markets which they have up to now neglected; (3)
Smaller companies have begun operating, in limited scale, in certain markets with relatively lower entry barriers; (4) Development of
the agrochemicals industry in China; (5) Price competition in certain markets by multinational Originator Companies and/or
increasing the credit days to its customers; and (6) Mergers and Acquisitions among leading companies in the sector.
The Group believes that in view of the industry's development trends, the following are critical success factors: (i) reputation,
branding, expertise and accumulated knowledge in the sector in the various countries and among customers and suppliers; (ii)
financial strength and resilience combined with consistent growth, allowing the Group to realize a corporate development strategy
including the potential for mergers and acquisitions with other companies in the sphere, and provide immediate response to attractive
business opportunities so as to expand its product portfolio and the volume of its operations; and (iii) access to funding sources and
reasonable funding terms allowing the Group to make investments and ensure positive ROI.
(II) Development strategy of the Company
Following the completion of the Combination Transaction with Adama Solutions, the Group strives to be a global leader in the Crop
Hubei Sanonda Co., Ltd. Annual Report 2017
Protection industry, and intends to achieve this aim by execution of the following strategies:
Utilize the Group’s Differentiated Offering to Strengthen and Grow its Market Position. The Group intends to continue to
drive the growth of its business through effective commercialization of differentiated, high quality products that meet farmers’
needs efficiently. To that end, the Group will leverage its extensive R&D and registration capabilities to continue to provide unique
yet simple solutions to farmers. In addition, the Group adds value by enhancing the functionality and efficacy of the industry’s
most successful and commercially proven molecules, by developing new and unique mixtures and formulations. These new
products are designed to provide farmers with better solutions to the challenges they face, including weeds, insects and disease,
increasing resistance and insufficient pest control related to the use of genetically modified seeds.
Aiming to provide distinct benefit to farmers and enhance the sustainability of the business, in addition to the ongoing efforts to
expand existing product registrations to additional crops and regions, a key portion of the Group’s strategy involves the deliberate
shift of its product offering towards more innovative and value-added solutions. Such solutions include higher-margin,
higher-value complex off-patent products, unique mixtures and formulations as well as innovative, novel products that are
protected by patents and other intellectual property rights. As evidence of this effort, the Group has significantly increased the
proportion of unique mixtures and formulations in its R&D pipeline over the last several years. Over the coming years, as this shift
in the pipeline towards more differentiated and innovative solutions starts to be reflected in the Group’s commercial offering, it is
expected to be a significant driver of growth, both in revenues and in profitability.
Bridge China and the World. The Group is striving to become a leading global crop protection company in China, both
commercially and operationally, and in so doing, to drive its global growth in the future.
China is currently the third largest, and one of the fastest growing, agricultural markets in the world. Furthermore, the Group
believes that over time, China has the potential to grow into the world’s largest crop protection market. Also, as the Chinese
domestic market is highly fragmented, with limited penetration by the global agrochemical companies, the Group believes that
there is a unique opportunity for it to capitalize on the significant untapped potential of the Chinese market. Moreover, in recent
decades, China has become the leading manufacturing center for the global crop protection industry – from the sourcing of raw
materials and chemical intermediates to the synthesizing of active ingredients and the formulation of finished products.
The Group intends to utilize its status in China and its relationship with ChemChina, as well as the combination with Adama
Solutions, to increase its presence in the country, where it is already building additional infrastructure. The Groupcommenced
commercial collaborationsbetween the Company and Adama Solutions as well as other CNAC-controlled companies in the
crop-protection and related fields in China. Through the CombinationTransaction and the aforementioned commercial
collaboration, the Grouphas an operational infrastructure and commercial foundation upon which a leading Chinese domestic
distribution networkwas built, and which the Group believes will make it one of the only global crop protection providers with
significant integrated commercial and operational infrastructure both within and outside of China.
Through the establishment of a significant operational presence in China and the CombinationTransaction, the Group intends to
achieve cost savings and improved margins and efficiencies through vertical integration of manufacturing and formulation together
with global supply chain and logistics capabilities. In particular, the Group’s global R&D efforts will be supported by a new R&D
center in Nanjing to service the Group’s expanded product development needs and enable the introduction of advanced
technologies into China and globally.The Group expects to drive significant demand for its products by launching new and
advanced active ingredients and intermediates with higher R&D content. In addition, the advanced formulation center in Jiangsu
Province will serve as a platform to introduce cost-advantaged crop protection solutions into China and globally.
The Group expects that its unique positioning and profile in China, including the relationship with ChemChina, should establish it
as a partner of choice for companies outside China seeking to access its domestic market, as well as for Chinese companies looking
to expand their global footprint. In addition to the Combination Transaction and the commercial collaboration, the Group is
assessing strategic joint ventures and selected acquisitions to further bolster its commercial and operational platform in China.
Continue to Strengthen Position in Emerging Markets. In addition to developing its China platform, the Groupenjoys strong
Hubei Sanonda Co., Ltd. Annual Report 2017
and leading positions in key emerging agricultural markets such as Latin America, India, Asia and Eastern Europe, with over half
of its global sales achieved in these markets. Over the last several years, in order to establish direct market access and distribution
capabilities in these markets, the Group has successfully integrated acquisitions in Mexico, Colombia, Chile, Poland, Serbia, the
Czech Republic, Slovakia, and South Korea. Similarly, the Group has implemented a direct go-to-market strategy in many
high-growth markets including India, Indonesia, Vietnam and South Africa, leveraging a direct sales force and driving demand at
the retail and farmer level. The Group intends to continue to invest in its growth in the key emerging markets with high growth
potential. The Group’s strong global platform and leading commercial infrastructure in such markets will allow it to capitalize on
worldwide growth opportunities, and continue to drive its profitable growth.
Grow Revenues and Increase Profitability. The Group believes that it has the capacity and operational leverage to increase
profitability through focused execution of its strategy within the framework of prudent working capital management. The Group
expects to grow revenues and margins over time as it shifts to a more differentiated, higher-margin product portfolio and continues
to strengthen its product pipeline with significant number of higher-value products, unique mixtures and formulations, as well as
innovative and patent-protected products. Similarly, the Group intends to drive revenue growth through increased penetration of
high-growth markets including China, Brazil and other key markets in Latin America, India, Russia, Ukraine and other key markets
in eastern Europe. The Group believes that its investment in developing a manufacturing footprint in China will lower costs,
improve manufacturing efficiency and distribution logistics and reduce inventory requirements in many markets worldwide.
In recent years, the Group has focused on growing and improving its business, infrastructure and brand. Other than investments
with respect to further development of its China operations, the Group believes that its existing global infrastructure is largely of
sufficient scale to support higher revenues, allowing it to enjoy economies of scale and continually improve profitability over time.
Continue to Capitalize on the Global Portfolio Integration and Rebranding Initiative. As part of the Group’s efforts to
“Create Simplicity in Agriculture”, considerable investments have been made to integrate the business across the globe,
streamlining sales and distribution efforts under the new “ADAMA” brand. In connection with this global brand, a unified brand
architecture has been implemented simplifying hundreds of local brands and product names by migrating to two distinct product
umbrellas, “Advanced” and “Essentials”, which are further characterized and differentiated through innovative and unique
packaging, enhancing the recognition of the “ADAMA”brand. Through these initiatives, the Group is simplifying its product
portfolio for farmers and improving its market positioning.
Over the longer term, the Group aims to increasingly offer digital solutions that will enhance direct communication and interaction
with distributors and farmers globally. The Group believes that the farmer-centric approach, while building on a modern, global
brand and utilizing cutting-edge technology, will provide a strong foundation for its continued profitable growth.
Opportunistically Pursue Acquisitions to Enhance Market Access and Strengthen the Product Portfolio. Throughout its
history, the Group has successfully completed and integrated several add-on acquisitions across the globe. The Group intends to
continue to pursue bolt-on acquisitions, in-licensing agreements and joint ventures that offer attractive opportunities to enhance its
market access and position, as well as strengthen and further differentiate its product portfolio. The Group plans to focus these
efforts largely in high-growth geographies, particularly in emerging markets where it aims to gain market share, as well as access
to selected sources of innovation. The Group has a strong track record of integrating acquisitions and believes that future
acquisitions will play an important role in continuing to make the Group a leader in the crop protection industry.
(III) 2018 Business plan
In 2018, the Company is expecting continued growth in all key markets, despite overall challenging market conditions, with some
markets showing signs of improvement and some continuing to decline. Overall, the Group is expecting to see revenue growth
emanating from both volume growth and generally stronger pricing, driven by an improved product offering mix and continued
launch of new products. The overall strengthening of pricing is expected to be only moderate, since the Company is expecting
continued pressure on selling prices in Brazil and other markets of Latin America, where major players attempt to defend their
positions.
The generally stronger price environment is expected to compensate somewhat for the expected increase in Active Ingredient (AI)
Hubei Sanonda Co., Ltd. Annual Report 2017
procurement costs resulting from supply constraints, that are driving increases in the costs of raw materials and AIs.
The Group will continue to exercise discipline in management of its operating expenses, while focusing on continued improvement
in working capital efficiency and quality of business.
In 2018, the Group will continue to pursue its comprehensive portfolio development strategy, driven by continued momentum and
investment in Innovation, Research and Development, and focusing on all aspects of development of its portfolio – product
development, obtaining of registrations, development of advanced formulations and innovative delivery technologies, as well as
differentiated mixtures, alongside further investments in chemical R&D.
During the year, the Group will focus on the design and implementation of its global AI synthesis layout transformation, a
long-term initiative that seeks to align the Group’s AI synthesis layout with the Group’s identified pipeline opportunities.
Furthermore, in the coming year the Group will continue to focus on the continued build-up of its commercial and operational
presence in China, including the full integration between the commercial and operational activities of the Company and Solutions.
The Group will continue to invest in the upgrading and expansion of its IT capabilities, as well as advance its ERP project in the
production facilities in Israel and China.
Note: The business plan described above does not constitute a commitment to investors on the Company's performance,
and the Company suggests that investors should maintain adequate risk awareness therefor, and understand the difference
between the Company’s business plan and a performance commitment.
(IV) The Company’s plan of fund demand
The Group finances its business activities by means of its equity as well as credit from external sources. The primary external
financing is by means of long term bonds issued by Solutions.
The Group has additional sources of external funding from: (1) long-term bank credit; (2) short-term bank credit; and (3) supplier
credit. In addition, the Group has significant cash balances as well as unused set bank credit lines.
(V) The risks faced by the Company and countermeasures
The Group believes that it is exposed to several major risk factors, resulting from its economic environment, the industry and the
Group's unique characteristics, as follows (the order below does not indicate priority):
Exchange rate fluctuations
Although the Company reports its consolidated financial statements in RMB, the Company’s material subsidiary Adama Solution
reports its consolidated financial statements in US dollars, which is its functional currency, while its operations, sales and purchases
of raw materials are carried out in various currencies. Therefore, fluctuations in the exchange rate of the selling currency against the
purchasing currency impact the Company’s results. In the Company's assessment, the Group's most significant exposures are to the
Euro, the Israeli Shekel and the Brazilian Real. The Company has lesser exposures to other currencies. The strengthening of the US
dollar against other currencies in which the Company operates reduces the scope of the dollar sales and vice versa.
On an annual perspective, approximately 33% of theAdama Solutions' sales are to the European market and therefore the impact of
long-term trends on the Euro may affect the Company's results and profitability.
Concentration of currency exposure from foreign currency exchange rate fluctuations against assets, including inventory of finished
products in countries of sale, liabilities and cash flow denominated in foreign currencies are done constantly. High volatility of the
exchange rates of these currencies could increase the costs of transactions to hedge against currency exposure, thereby increasing the
Company's financing costs.
Adama Solutions uses commonly accepted financial instruments to hedge most of its substantial net balance sheet exposure to any
particular currency. Nonetheless, since as part of these operations Adama Solutions hedges against most of its balance sheet exposure
and only against part of its economic exposure, exchange rate volatility might impact Adama Solutions’ results and profitability. As
of the date of approval of the financial statements, Adama Solutionshas hedged most of its balance sheet exposure for 2017 as it is on
the date of publication of this report.
Hubei Sanonda Co., Ltd. Annual Report 2017
In addition, as the Company’s product sales depend directly on the cyclical nature of the agricultural seasons, therefore the
Company’s income and its exposure to the various currencies is not evenly distributed over the year. Countries in the northern
hemisphere have similar agricultural seasons and therefore, in these countries, the highest sales are usually during the first half of the
calendar year. During this period, the Company is most exposed to the Euro, the Polish Zloty and the British Pound. In the southern
hemisphere, the seasons are opposite and most of the local sales are carried out during the second half of the year. During these
months, most of the Company's exposure pertains to the Brazilian Real. The Company has more sales in markets in the northern
hemisphere and therefore, the Company's sales volume during the first half of the year is higher than the sales volume during the
second half of the year.
Exposure to Interest rate, Israel CPI and NIS exchange rate fluctuations
The main portion of the debentures issued by Adama Solutions, material subsidiary of the Company, is linked to the Israel Consumer
Price Index (CPI) and therefore an increase in the CPI might lead to a significant increase in its financing expenses. As ofthe date of
approval of the financial statements, Adama Solutions hedged most of its exposure to this risk on an ongoing basis, through CPI
hedging transactions.
Adama Solutions is exposed to changes in the US dollar LIBOR interest rate as Adama Solutions has dollar denominated liabilities,
which bear variable LIBOR interest. Adama Solutions prepares a quarterly summary of its exposure to changes in the LIBOR interest
rate and periodically examines hedging the variable interest rate by converting it to a fixed rate. As of the date of approval of the
financial statements, Adama Solutions has not carried out hedging for such exposure, since US dollar interest rates have been
relatively stable.
Business operations in emerging markets
The Group conducts business – mainly product sales and raw material procurement – inter alia, in emerging markets such as Latin
America (particularly in Brazil, the largest market, country wise, in which the Group operates), Eastern Europe, South East Asia and
Africa. The Group's activity in emerging markets is exposed to risks typical of those markets, including: political and regulatory
instability; volatile exchange rates; economic and fiscal instability and frequent revisions of economic legislation; relatively high
inflation and interest rates; terrorism or war; restrictions on import and trade; differing business cultures; uncertainty as to the ability
to enforce contractual and intellectual property rights; foreign currency controls; governmental price controls; restrictions on the
withdrawal of money from the country; barter deals and potential entry of international competitors and accelerated consolidations by
large-scale competitors in these markets. Developments in these regions may have a significant effect on the Group's operations.
Distress to the economies of these markets could impair the ability of the Group's customers to purchase its products or the ability to
market them at international market prices, as well as harm the Group's ability to collect customer debts, in a way that could have a
significant adverse effect on the Group's operating results.
The Group’s operations in multiple regions allows for the diversification of such risks and for the reduction of its dependency on
particular economies. In addition, changes in registration requirements or customers' preferences in developed western countries,
which may limit the use of raw materials purchased from emerging economies, may require redeployment of the Group's
procurement organization, which might negatively affect its profitability for a certain period.
Operating in a competitive market
The crop protection products industry is highly competitive. Currently, approximately 60% of the industry's global market is shared
by fiveleading Originator Companies, which are based in Europe or North America, these being Monsanto, DowDuPont, Bayer,
BASF and Syngenta, which develop, manufacture and market both patent-protected as well as off-patent products. The Group
competes with the original products with the aim of maintaining and increasing its market share.
The Originator Companies possess resources enabling them to compete aggressively, in the short-to-medium term, on price and
profit margins, so as to protect their market share. Loss of market share or inability to acquire additional market share from the
Originator Companies can affect the Group's position in the market and adversely affect its financial results.For details regarding the
Group’s competitive advantages see section III - subsection III. Core competitiveness analysisabove.
Hubei Sanonda Co., Ltd. Annual Report 2017
Similarly, the Group also competes in the more decentralized off-patent market, with other off-patent companies and smaller-scale
Originator Companies, which have significantly grown in number in recent years and are materially changing the face of the crop
protection products industry, the majority of whom have not yet deployed global distribution networks, and are only active locally.
These companies price their products aggressively and at times have lower profit margins than the Group, which may harm the
volume of the Group's sales and product prices. The Group's ability to maintain its revenues and profitability from a specific product
in the long term is affected by the number of companies producing and selling comparable off-patent products and the time of their
entrance to the relevant market.
Any delay in developing or obtaining registrations for products and/or delayed penetration into markets and/or growth of competitors
that focus on off-patent active ingredients (whether by the expansion of their product portfolio, granting registrations to other
manufacturers (including manufacturers in China and India) to operate in additional markets, transforming their distribution network
to a global scale or increasing the competition for distribution access), and/or difficulty in purchasing low cost raw materials, may
harm the Group’s sales volumes in this sector, affect its global position and lead to price erosion.
Decline in scope of agricultural activities; exceptional changes in weather conditions
The scope of agricultural activities may be negatively affected by many exogenous factors, such as extreme weather conditions,
natural disasters, a significant decrease in agricultural commodity prices, government policies and the economic condition of farmers.
A decline in the scope of agricultural activities necessarily would cause a decline in the demand for the Group’s products, erosion of
its prices and collection difficulties, which may have a significant adverse effect on the Group's results. Extreme weather conditions
as well as damages caused by nature have an impact on the demand for the Group's products. The Group believes that, should a
number of such bad seasons occur in succession, without favorable seasons in the interim, its results may sustain significant harm.
Environmental, health and safety legislation, standards, regulation and exposure
Many aspects of the Group's operations are strictly regulated, including in relation to production and trading, and particularly in
relation to the storage, treatment, manufacturing, transport, usage and disposal of its products, their ingredients and byproducts, some
of which are considered hazardous. The Group's activities involve hazardous materials. Defective storage or handling of hazardous
materials may cause harm to human life or to the environment in which the Group operates. The regulatory requirements regarding
the environment, health and safety could, inter alia, include soil and groundwater clean-up requirements; as well as restrictions on the
volume and type of emissions the Group is permitted to release into the air, water and soil.
The regulatory requirements applicable to the Group vary from product to product and from market to market, and tend to become
stricter with time. In recent years, both government authorities and environmental protection organizations have been applying
growing pressure, including through investigations and indictments as well as increasingly stricter legislative proposals and class
action suits related to companies and products that may potentially pollute the environment. Compliance with the foregoing
legislative and regulatory requirements and protection against such legal actions requires the Group to spend considerable financial
resources (both in terms of substantial ongoing costs and in terms of material one-time investments) as well as human resources in
order to meet mandatory environmental standards. In some instances, this may result in delaying the introduction of products into
new markets or in adverse effects on the Group’s profitability. In addition, the toughening, material alteration or revocation of
environmental licenses or permits, or their stipulations, or the inability to obtain such licenses and permits, may significantly affect
the Group's ability to operate its production facilities, which in turn may have a material adverse effect on the financial and business
results of the Group. The Group may be required to bear significant civil liability (including due to class actions) or criminal liability
(including high penalties and/or high compensation payments and/or costs of environmental monitoring and rehabilitation), resulting
from violation of environmental, health and safety regulations, while some of the existing legislation may impose obligations on the
Group for strict liability, regardless of proof of negligence or malice.
While the Group invests material sums in adapting its facilities and in constructing special facilities in accordance with
environmental requirements, it is currently unable to assess with any certainty whether these investments (current and future) and
their outcomes may satisfy or meet future requirements, should these be significantly increased or adjusted. In addition, the Group is
unable to predict with any certainty the extent of future costs and investments it may incur so as to meet the requirements of the
Hubei Sanonda Co., Ltd. Annual Report 2017
environmental authorities in Israel or in other countries in which it operates since, inter alia, the Group is unable to estimate the
extent of potential pollutions, their length, the extent of the measures required to be taken by the Group in handling them, the division
of responsibility among other parties and the amounts recoverable from third parties.
Furthermore, the Group may be the target of bodily injury claims and property damage claims caused by exposure to hazardous
materials, which are predominantly covered under the Group’s insurance policies.
Legislative, standard and regulatory changes in product registration
The majority of the substances and products marketed by the Group require registration at various stages of their development,
production, import, utilization and marketing, and are also subject to strict regulatory supervision by the regulatory authorities in
each country. Compliance with the registration requirements that vary from country to country and which are becoming more
stringent with time, involves significant time and costs, and rigorous compliance with individual registration requirements for each
product. Noncompliance with these regulatory requirements might materially adversely affect the scope of the Group’s expenses,
cost structure and profit margins, as well as penetration of its products in the relevant market, and may even lead to suspension of
sales of the relevant product, and recall of those products already sold, or to legal action. Moreover, to the extent new regulatory
requirements are imposed on existing registered products (requiring additional investment or leading to the existing registration's
revocation) and/or the Group is required to compensate another company for its use of the latter's product registration data, these
might amount to significant sums, considerably increasing the Group's costs and adversely affecting its results and reputation.
Additionally, the Group believes that, in countries where the Group maintains a competitive edge, any toughening of registration
requirements may actually increase this edge, since this will make it difficult for its competitors to penetrate the same market,
whereas in countries in which the Group possesses a small market share, if any, such toughening may make further penetration of the
Group's products into that market more difficult.
Product liability
Product and producer liability present a risk factor to the Group. Regardless of their prospects or actual results, product liability
lawsuits might involve considerable costs as well as tarnish the Group's reputation, thus impacting its profits. The Group has a
third-party and defective product liability insurance cover. However, there is no certainty that the scope of insurance cover is
sufficient. Any future product liability lawsuit or series of lawsuits could materially affect the Group’s operations and results, should
the Group lose the lawsuit or should its insurance cover not suffice or apply in a particular instance. In addition, while currently the
Group has not encountered any difficulty renewing such insurance policy, it is possible that it will encounter future difficulties in
renewing an insurance policy for third party liability and defective products on terms acceptable to the Group.
Successful market penetration and product diversification
The Group’s growth and profit margins are affected, inter alia, by the extent of its success in developing differentiated products and
obtaining registrations for them, so as to enable it to gain market share at the expense of its competitors. Usually, being the first to
launch a certain off-patent product affords the Group continuing advantage, even after other competitors penetrate the same market.
Thus, the Group's revenues and profit margins from a certain product could be materially affected by its ability to launch such
product ahead of the launch of a comparable product by its competitors.
Should new products fail to meet registration requirements in the different countries or should it take a long period of time to obtain
such registrations, the Group's ability to successfully introduce a new product to the market in question in the future would be
affected, since entry into the market prior to other competitors is important for successful market penetration. Furthermore,
successful market penetration involves, inter alia, product diversification in order to suit each market's changing needs. Therefore, if
the Group fails to adapt its product mix by developing new products and obtaining the required regulatory approvals, its future ability
to penetrate that market and to maintain its existing market share could be affected. Failure to introduce new products to given
markets and meet Group objectives (given the considerable time and resources invested in their development and registration) might
affect the sales of the product in question in the relevant market, the Group’s results and margins.
Intellectual property rights of the Group and of third parties
Hubei Sanonda Co., Ltd. Annual Report 2017
The Group's ability to develop off-patent products is dependent, inter alia, on its ability to oppose patents of an Originator Company
or other third parties, or to develop products that do not otherwise infringe intellectual property rights in a manner that may involve
significant legal and other costs. Originator Companies tend to vigorously defend their products and may attempt to delay the launch
of competing off-patent products by registering patents on slightly different versions of products for which the original patent
protection is about to expire or has expired, with the aim of competing against the off-patent versions of the original product. The
Originator Companies may also change the branding and marketing method of their products. Such actions may increase the Group's
costs and the risk it entails, and harm or even prevent its ability to launch new products.
The Group is also exposed to legal claims that its products or production processes infringe on third-party intellectual property rights.
Such claims may involve time, costs, substantial damages and management resources, impair the value of the Group's brands and its
sales and adversely affect its results. To the best of the Group’s current knowledge, such lawsuits that were concluded involved
non-material amounts.
Furthermore, the Group protects its brands and trade secrets with patents, trademarks and other methods of intellectual property
protection, however these protective means may not be sufficient for safeguarding its intellectual property. Any unlawful or other
unauthorized use of the Group's intellectual property rights could adversely affect the value of its intellectual property and goodwill.
In addition, the Group may be required to take legal action involving financial costs and resources to safeguard its intellectual
property rights.
Fluctuations in raw material inputs and prices, and in sales costs
Significant percentage of the cost of the Groups’ sales derives from raw material costs. Hence, significant increases or decreases in
raw material cost affect the cost of goods sold, which is generally expressed a number of months following such cost fluctuation.
Most of the Group's raw materials are distant derivatives of oil prices and therefore, extreme increase or decrease in oil prices may
affect the costs of raw materials, yet only partially.
To reduce exposure to fluctuations in the prices of raw materials, the Group customarily engages in long-term purchase contracts for
key raw materials, wherever possible. Similarly, the Group acts to adjust its sales prices, if possible, to reflect the changes in the costs
of raw materials.
As of at the date of approval of the financial statements, the Group has not engaged in any hedging transactions against increases in
oil and other raw material costs.
Exposure due to recent developments in the genetically modified seeds market
Any further significant development in the market of genetically modified seeds for agricultural crops, including as a result of
regulatory changes in certain countries currently prohibiting the use of genetically modified seeds, and/or any significant increase in
the sales of genetically modified seeds or Glyphosate and/or to the extent new crop protection products are developed for further
crops that would be widely used (substituting traditional products), will affect demand for crop protection products, requiring the
Group to respond by adapting its product portfolio to the new demand structure. Consequently, to the extent that the Group fails to
adapt its product mix accordingly, this may reduce demand for its products, erode their sales price and necessarily affect the Group’s
results and market share.
Nevertheless, the fact that the Group itself markets Glyphosate acts to mitigate this exposure (albeit only in terms of marketing
margins).
Operational risks
The Group’s operations, including its manufacturing activities, rely, inter alia, on state-of-the-art computer systems. The Group
continually invests in upgrading and protecting these systems. Any unexpected failure of these systems, as well as the integration of
new systems, could involve substantial costs and adversely affect the Group's operations until completion of the repair or integration.
The potential occurrence of a substantial failure that cannot be repaired within a reasonable time frame may also affect the Group's
operations and its results. Currently, the Group has a property and loss-of-profit insurance policy.
Raw material supply and/or shipping and port services disruptions
Hubei Sanonda Co., Ltd. Annual Report 2017
Lack of raw materials or other inputs utilized in the manufacture of Group products may prevent the Group from supplying its
products or significantly increase production costs. Moreover, the Group imports raw materials to its production facilities in Israel
and/or outside Israel, from where it exports the products to its subsidiaries around the world for formulation and/or
commercialization purposes. Disruptions in the supply of raw materials from regular suppliers may adversely affect operations until
an alternative supplier is engaged. If any of the Group's suppliers are unable to supply raw materials for a prolonged period, including
due to ongoing disruptions and/or prolonged strikes and/or infrastructure defects in the operating of a relevant port, and the Group is
unable to engage with an alternative supplier at similar terms and in accordance with product registration requirements, this may
adversely affect the Group's results, significantly affect its ability to obtain raw materials in general, or obtain them at reasonable
prices, as well as limit its ability to supply products and/or meet customer supply deadlines. These might negatively affect the Group,
its finances and operating results. In order to reduce this risk, it is the Group's practice to occasionally adjust the volume of its
product inventories and at times utilize air freight.
Failed mergers and acquisitions; difficulties in integrating acquired operations
The Group's strategy includes growth through mergers, acquisitions, investments and collaborations designed, in a calculated manner,
to expand its product portfolio and deepen its presence in certain geographical markets.
Growth through mergers and acquisitions requires assimilation of acquired operations and their effective integration in the Group,
including realization of certain forecasts, profitability, market conditions and competition.
Failure to successfully implement the above and/or non-realization of the said forecasts may result in not achieving the additional
value forecasted, losing customers, exposure to unexpected liabilities, reduced value of the intangible assets included in the merger or
acquisition as well as the loss of professional and skilled human resources.
Production concentration in limited plants
A large portion of the Group’s production operations is concentrated in a small number of locations. Natural disasters, hostilities,
labor disputes, substantial operational malfunction or any other material damage might significantly affect Group operations, as a
result of the difficulty, the time and investment required for relocating the production operation or any other activity.
International taxation
Most of the Group’s sales are global, through its consolidated subsidiaries worldwide. These individual companies are assessed in
accordance with the tax laws effective in each respective location. The Group’s effective tax rate could be significantly affected by
different classification or attribution of the profits arise from the share of value earned of the companies in the Group in the various
countries, as shall be recognized in each tax jurisdiction; changes in the characteristics (including regarding the location of control
and management) of these companies; changes in the breakdown of the Group's profits into regions where differing tax rates apply;
changes in statutory tax rates and other legislative changes; changes in assessment of the Group's deferred tax assets or deferred tax
liabilities; changes in determining the areas in which the Group is taxed; and potential changes in the Group's organizational
structure.
Changes in tax regulations and the manner of their implementation, including with regard to the implementation of BEPS, may lead
to a substantial increase in the Group's applicable tax rates and have a material adverse effect on its financial state, results and cash
flows.
The Group’s Financial Statements do not include a material provision for exposure for international taxation, as stated above, based
on professional counsel it has received.
Risks arising from the Group’s debt
The Group finances its business operations by means of its own equity and loans from external sources (primarily debentures issued
by Adama Solutions and bank credit). The Group's main source for servicing the debt and its operating expenses is by means of the
profits from the Group companies’ operations. Restrictions applying to the Group companies regarding distribution of dividends to
the Group, or the tax rate applicable on these dividends, may affect the Group's ability to finance its operations and service its debt.
In addition, the Group's Finance Documents require it to meet certain Financial Covenants. Failure to meet these covenants due to an
Hubei Sanonda Co., Ltd. Annual Report 2017
exogenous event or non-materialization of Group forecasts, and insofar as the financing parties refuse to extend or update these
Financial Covenants as per the Group’s capabilities, may lead the financing parties to demand the immediate payment of these
liabilities (or part thereof).
Exposure to customer credit risks
The Group’s sales to customers usually involve customer credit as is customary in each market. A portion of these credit lines are
insured, while the remainder are exposed to risk, particularly during economic slowdowns in the relevant markets. The Group’s
aggregate credit, however, is diversified among many customers in multiple countries, mitigating this risk. In addition, in certain
regions, particularly in South America, credit days are particularly long (compared to those extended to customers in regions such as
Europe), and on occasion, inter alia, owing to agricultural seasons or economic downturns in those countries, the Group may
encounter difficulty in collection of customer debts, with the collection period being extended over several years.
Generally, such issues arise more often in developing countries where the Group is less familiar with its customers, the collaterals are
of doubtful value and the insurance cover of these customers is likely to be limited. Credit default by any of the customers may
negatively impact the Group's cash flow and financial results.
The Group’s working capital and cash flow needs
Similar to other companies operating in the crop protection industry, the Group has substantial cash flow and working capital
requirements in the ordinary course of operations. In view of the Group's growth and considering its primary growth regions, the
Group’s broad product portfolio and the Group’s investments in manufacturing infrastructures, the Group has significant financing
and investment needs. The Group acts continually to improve the state and management of its working capital. While currently the
Group is in compliance with all its financial covenants, significant deterioration of its operating results may in the future lead the
Group to fail to comply with its financial covenants and fail to meet its financial needs. As a result, the Group 's ability to meet its
goals and growth plans, and its ability to meet its financial obligations, may be harmed.
X. List of the received researches, visits and interviews
1. Particulars about researches, visits and interviews received in this reporting period
√ Applicable □ Not applicable
Reception time Reception mode Type of reception object Index of investigation information
How to participate in shareholder
Feb 6th, 2017 Phone call Individual
meeting?
Feb 16th, 2017 Phone call Individual Has the Company got SASAC approval?
Phone call Individual How to participate in shareholder
Mar 7th, 2017
meeting?
Mar 8th, 2017 Phone call Individual Has the Company got SASAC approval?
Phone call Individual How to participate in shareholder
Mar 17th, 2017
meeting?
Mar 30th, 2017 Phone call Individual Issuance price for supporting finance
Apr 18th, 2017 Phone call Individual How is the Q1 performance?
May 23rd, 2017 Phone call Individual When will CSRC issue approval?
Hubei Sanonda Co., Ltd. Annual Report 2017
Reception time Reception mode Type of reception object Index of investigation information
June 9th, 2017 Phone call Individual When will CSRC issue approval?
Phone call Individual Will the Company publish a mid-term
June 13th, 2017
pre-announcement on performance?
Phone call Individual What is the base of determining the
June 19th, 2017
pricing base date of supporting finance?
Phone call Individual Will the Company publish a mid-term
June 29th, 2017
pre-announcement on performance?
Phone call Individual It there a deadline for the issuance of
June 30th, 2017
official approval?
Phone call Individual Will the Company publish a combined
th
Aug 10 , 2017 Half-year financial statement that
includes ADAMA?
Phone call Individual How is the progress of supporting
Aug 30th, 2017
finance?
Phone call Individual Will the Company publish acombined
th
Sep 20 , 2017 Q3 financial statement that includes
ADAMA?
Roadshow (One on One) Institutional Investors Introduced the company's overall
th
Sep 25 , 2017 situation and business development after
the merger of Adama and Sanonda.
Oct 25th, 2017 Phone call Individual How is the progress of B-share buyback?
Roadshow (One on One) Institutional Investors Introduced the company's overall
st th
Nov 1 – 7 , 2017 situation and business development after
the merger of Adama and Sanonda.
Phone call Individual Will the company change its name after
Nov 22nd, 2017
combination?
Conference call(One on Institutional Investors Introduced the company's overall
th
Nov 24 , 2017 One) situation and business development after
the merger of Adama and Sanonda.
Roadshow (One on One) Institutional Investors Introduced the company's overall
th
Nov 27 , 2017 situation and business development after
the merger of Adama and Sanonda.
Conference call(One on Institutional Investors Introduced the company's overall
th
Dec 6 , 2017 One) situation and business development after
the merger of Adama and Sanonda.
Roadshow(One on Many) Institutional Investors Introduced the company's overall
th
Dec 15 , 2017 situation and business development after
the merger of Adama and Sanonda.
Hubei Sanonda Co., Ltd. Annual Report 2017
Reception time Reception mode Type of reception object Index of investigation information
Analysts Meeting Institutional Analysts Introduced the company's overall
th
Dec 19 , 2017 (One on Many) situation and business development after
the merger of Adama and Sanonda.
Dec 21st, 2017 Phone call Individual Issuance price for supporting finance
Times of reception
The number of agencies in reception
The number of individuals in reception
The number of other objects in reception 0
Whether undisclosed significant information is
No
disclosed, revealed or divulged?
Hubei Sanonda Co., Ltd. Annual Report 2017
Section V Significant Events
I. List of the profits distribution of the common shares and turning capital reserve into share
capital of the Company
Common profits distribution policies especially the formulation, execution or the adjustment of the cash dividend policies during the
reporting period
√ Applicable □ Not applicable
According to the requirements of Circular on Further Settling the Issues Concerningthe Payment of Cash Dividends by
ListedCompanies (issued by CSRC on May 4, 2012), the 2nd interim Shareholders Meeting in 2012 of the Company approved the
proposal on the revisions of the Articles of Association. Accordingly, the Articles of Association, as revised, set the dividends
policy, the conditions and ratio for the cash dividends, the approval procedures for the profit distribution plan, and explicit
requirements on the procedures for the adjustment of the profit distribution policy. Therefore, the Company has set up the
decision-making procedures on the profit distribution, and improved the supervisory mechanism on the profit distribution.
Consequently, the legitimate interests of the shareholders, especially the medium and minor shareholders are well protected.
Special explanation of the cash dividend policy
Whether conformed with the regulations of the Articles of
association or the requirements of the resolutions of the Yes
shareholders’ meeting:
Whether the dividend standard and the proportion were definite
Yes
and clear:
Whether the relevant decision-making process and the system
Yes
were complete:
Whether the independent director acted dutifully and exerted the
Yes
proper function:
Whether the medium and small shareholders had the chances to
fully express their suggestions and appeals, of which their legal Yes
interest had gained fully protection:
Whether the conditions and the process met the regulations and
was transparent of the adjustment or altered of the cash dividend Not Applicable
policy:
List of the dividend distribution proposal (preplan) of the common shares and the proposal (preplan) of turning capital reserve into
share capital of the Company of the recent 3 years:
2015 profits distribution proposal: based on the total share capital on 31 Dec. 2015, the Company distributed a cash dividend of
RMB0.25 (tax included) for every 10 shares to the whole shareholders, with 0 share of the bonus shares (tax included), and there was
no turn from capital reserve to share capital.
2016 profits distribution proposal: not allocated, not transferred.
2017 profits distribution proposal: based on the total share capital on February 28, 2018, after obtaining the approval of Board of
Hubei Sanonda Co., Ltd. Annual Report 2017
Directors, the Company declared a cash dividend of RMB 0.63 (including tax) for every 10 shares to the all shareholders. No share
will be distributed as share dividend, as well as no reserve will be transferred to equity capital.
Cash dividend distribution of the common shares of the Companyin the last 3 years (including the reporting period)
Unit: RMB
The ratio accounting
Net profit belonging
in net profit which
to shareholders of
Amount of cash belongs to Amount of the cash Ratio of the cash
the listed company
Dividend year dividend (including shareholders of the dividend by other dividend by other
in consolidated
tax) listed company in methods methods
statement of
consolidated
dividend year
statement
2017 154,132,875.67 1,545,879,000 9.97% 0.00 0.00%
2016 0.00 -74,489,986.54 0.00% 0.00 0.00%
2015 14,848,080.50 141,840,462.97 10.47% 0.00 0.00%
The Company (including its subsidiaries) made profit in the reporting period and the profits distribution of the common shares held
by the shareholders of the Company (without subsidiaries) was positive, but it did not put forward a preplan for cash dividend
distribution of the common shares:
□ Applicable √ Not applicable
II. Pre-plan for profit allocation and turning capital reserve into share capital for the
reporting period
√Applicable □ Not applicable
The Company plans to distribute cash dividends for the year 2017, and does not intend to issue bonus shares, and does not intend to
transfer capital reserve to share capital.
Bonus shares for every 10-share (Share) Not Applicable.
Dividends for every 10-share (RMB) (Tax included) 0.63
Every 10-share increased the shares’ number
Equity base of distribution plan (Share) 2,446,553,582
Total cash dividend (RMB) (Tax included) 154,132,875.67
Distributable profits (RMB) 1,528,754,600
Ratio of cash dividend in total profit distribution 100%
Cash dividends of This Time
If the development phase of the Company was the mature period with significant funds expenditures arrangement, the proportion
of the cash dividend should at least reach 40% of the total profit distribution.
Detailed Description on the Pre-Plan for Profit Allocation or Turning Capital Reserve into Share Capital
As audited by Deloitte Touche Tohmatsu Certified Public Accountants LLP, the net profit attributable to stakeholders of the
Company is RMB 1,545,879,000. After deduction of the transfer to statutory surplus reserve of 10% of the net profit on a
Hubei Sanonda Co., Ltd. Annual Report 2017
standalone basis of the reporting period which is RMB 17,124,000, profit available for distribution for the year 2017 is RMB
1,528,754,600.
Considering: (1) the Company’s dividend policy as contained in its Articles of Associations, (2) the Company’s past practice with
respect to distribution of its profits, and (3) that the execution of Company’s development strategy, including both organic and
inorganic growth opportunities, will require the reinvestment of the Company’s funds in (i) the further development of its
advanced product and broad IP portfolio, (ii) the further upgrading and expansion of its manufacturing facilities, especially in the
twin operational hubs of China and Israel, as well as (iii) in potential acquisitions, in-licensing agreements and joint ventures that
offer attractive opportunities to enhance the Company’s market access and position as well as strengthen and further differentiate
its product portfolio, the proposal for profit distribution and transfer of reserves into equity capital for the year 2017 is a
distribution of approximately 10% of the total profit available for distribution, calculated as follows:
Taking the total outstanding 2,446,553,582 shares of the Company dated February 28, 2018 as the basis, to distribute RMB 0.63
(including tax) per 10 shares as cash dividend to all shareholders, resulting in a total cash dividend of RMB154,132,875.67
(including tax), and zero shares as share dividend, as well as no reserve transferred to equity capital.
III. Performance of commitments
1. Commitments completed by the Company, the shareholders, the actual controllers, the purchasers, the
Directors, the Supervisors and the Senior Executives or the other related parties during the reporting
period and those hadn’t been completed execution up to the period-end
√ Applicable □ Not applicable
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
Commitment on
share reform
I. Commitments on avoiding horizontal
competition: 1. except for the Company
proposed conducting transaction may
lead to competition in domestic trade During the
with Shenzhen NOPOSION reporting
Agrochemical Co., Ltd. disclosed in the period,
B Shares Offer Acquisition Report of ADAMA
Commitments
Hubei Sanonda Co., Ltd. The Company Celsius B.V.
on the
Commitment in ADAMA will take effective measures to avoid the and ADAMA
horizontal
the acquisition Celsius B.V.; Company and its controlling Agricultural
competition, September September 6,
report or the ADAMA subsidiaries engaged in the same or Solutions Ltd.
the related 7, 2013 2020
report on equity Agricultural similar business with Hubei Sanonda becomes the
transaction and
changes Solutions Ltd. Co., Ltd. within the territory.2. If the subsidiaries of
the capital
Company or its controlling subsidiaries the Company.
occupation
domestically conduct related business The
which form horizontal competition with Commitments
Hubei Sanonda Co., Ltd. in future have been
(including related business of the completed.
Company proposed conducting
transaction may lead to competition in
domestic trade with Shenzhen
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
NOPOSION Agrochemical Co., Ltd.
disclosed in the B Shares Offer
Acquisition Report of Hubei Sanonda
Co., Ltd.) The Company will according
to the securities laws and regulations
and industry policy within 7 years or
when the management think the
condition is ripe to actively take steps,
gradually eliminate the competition, the
concrete measures including but not
limited to the following one or more:
fight for internal assets reconstruction,
(including putting the business into
Hubei Sanonda Co., Ltd. or operated
through Hubei Sanonda Co., Ltd. ) to
adjust the industrial plan and business
structure, to transform technology and
to upgrade products, to divide the
market so as to make each corporation
differ in the products and its ultimate
users, thus to avoid and eliminate the
current domestic horizontal competition
between the Company’s controlling
subsidiaries and Sanonda.
II. Commitments on maintaining the
Company’s operation independence and
specify the related transaction: 1. After
the complement of the tender offer,
During the
Sanonda will continue to maintain
reporting
complete purchase, production and sales
period,
system, and to gain the independent
ADAMA
Commitments intellectual property. The Company and
Celsius B.V.
on the its direct or indirect controlling
ADAMA and ADAMA
horizontal shareholders and Sanonda of which the
Celsius B.V.; Agricultural
competition, personnel, assets, finance, business and September Long term
ADAMA Solutions Ltd.
the related institutions will be completely 7, 2013 effective.
Agricultural becomes the
transaction and separated, and at the same time
Solutions Ltd. subsidiaries of
the capital maintain the operation ability of
the Company.
occupation Sanonda that independently face to the
The
China agrochemical industry market. 2.
Commitments
The Company will avoid and reduce the
have been
related transactions with Sanonda
completed.
according to the requirements stipulated
by the laws, regulations and other
normative documents; but for those
related transactions that are inevitable
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
or occur with reasonable cause, will
have to obey the just, fair and open
market principles. And to sign the
agreement according to the law and to
carry out legal program, and to make
sure not to harm the legal interest of
Sanonda and other shareholders by
related transaction according to the
Articles of Association of Sanonda, the
relevant system about related
transaction and to conduct the duty of
information disclosure as well as the
approval process which stipulated by
the relevant regulations.\"
I. Commitments on avoiding horizontal
competition: 1. The business of the
ChemChina’s subsidiaries-- Jiangsu
Anpon Electrochemical Co., Ltd., Anhui
1.Shandong
Petroleum Chemical Group Co., Ltd.,
DachengAgro
Shangdong Dacheng Agrochemical Co.,
chemical Co.,
Ltd. and Jiamusi Heilong
Ltd.has
Agrochemicals Co., Ltd., and Hunan
transferred its
Haohua Chemical Co., Ltd. and its
agrochemical
subsidiary had the same or similar
business to a
situations with the main business of
third party,
Sanonda, and aimed at the domestic
which is not a
horizontal competition, the Company
subsidiary of
committed to gradually eliminate such
ChemChina.
Commitments kind of horizontal competition in the
At present,
on the future and to fight for the internal assets September September 6,
ChemChina Shandong
horizontal reconstruction, to adjust the industrial 7, 2013 2020
Dacheng is
competition plan and business structure, to transform
not in the
technology and to upgrade products, to
same or
divide the market so as to make each
similar
corporation differ in the products and its
business to
ultimate users according to the
Sanonda.
securities laws and regulations and
2. On-going.
industry policy within 7 years, thus to
The
eliminate the current domestic
committed
horizontal competition between the
parties comply
Company’s controlling subsidiaries and
with the
Sanonda. 2. Excepting the competition
commitments.
situation disclosed in the offer
acquisition report, the Company take
effective measures to avoid the
Company and its controlling
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
subsidiaries (excepting Commitments
respectively made in acquisition report
by Celsius Property B.V. and MAI)’
new increased business engaged in the
same or similar business with Hubei
Sanonda Co., Ltd. within the territory in
future. 3. If the Company or its
controlling subsidiaries (excepting
Commitments respectively made in
acquisition report by Celsius Property
B.V. and MAI) domestically conduct
related business which form horizontal
competition with Hubei Sanonda Co.,
Ltd. in future, the Company will
actively take steps, gradually eliminate
the competition, the concrete measures
including but not limited to fight for
internal assets reconstruction, (including
putting the business into Hubei Sanonda
Co., Ltd. or operated through Hubei
Sanonda Co., Ltd.) to adjust the
industrial plan and business structure, to
transform technology and to upgrade
products, to divide the market so as to
make each corporation differ in the
products and its ultimate users, thus to
avoid and eliminate the current
domestic horizontal competition
between the Company’s controlling
subsidiaries and Sanonda.
1. The company will comply with
laws, regulations and other
regulatory documents to avoid and
reduce related-party transactions
Commitments with Sanonda. However, for
on the related-party transactions that are
On-going. The
independence inevitable or based on reasonable
committed
of grounds, the company will follow September Long term
ChemChina parties comply
theCompany the market principles of just, 7, 2013 effective
with the
and the fairness and openness, enter into
commitments.
related-party agreement(s) legally and go
transaction through lawful procedures. The
company will honor its disclosure
obligations and apply for relevant
approvals according to the AOA of
Sanonda, rules regarding
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
related-party transactions and
relevant regulations, not damaging
the lawful rights and interest of
Sanonda and its shareholders by
related-party transactions.
After completion of this transaction,
Sanonda will continue to keep complete
procurement, production and sales
systems and to possess independent
intellectual properties. The company
and its affiliated parties will be
completely independent from Sanonda
in terms of staff, assets, finance,
business and organization. Sanonda will
have full capacity of operation in
Chinese agricultural chemical market.
The subsidiaries controlled by
ChemChina, namely Anpon, HH,
Maidao, Anhui Petrochemical and
Heilong as well as their subsidiaries are
in similar or the same business as
Sanonda. For the horizontal competition
in China, ChemChina commits itself to
take appropriate actions to solve the
horizontal competition between its
subsidiaries and Sanonda step-by-step
in an appropriate way within 4 years
after completion of the reorganization,
in accordance with securities laws,
On-going. The
Commitments Commitments regulations and sector/industrial
committed
made at the on the policies. October 12, Long term
ChemChina parties comply
time of assets horizontal The means by which ChemChina 2016 effective
with the
reorganization competition addresses the horizontal competition
commitments.
include but are not limited to the
following,
Sanonda acquires crop
protection-related assets under
ChemChina. Sanonda holds or controlls
other crop protection-related assets of
ChemChina in line with national laws
and by reasonable commercial means
such as entrusted operation. ChemChina
divests other crop protection-related
assets or transfers the control power of
such subsidiaries to external parties.
ChemChina reorganizes internal assets,
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
adjusts sector planning and business
structure, upgrades technologies and
products and makes market
segmentation so that each company will
differentiate its products and end users
to eliminate horizontal competition
between the subsidiaries controlled by
ChemChina and Sanonda.
ChemChina will take effective actions
to avoid adding new business in China
same or similar to Sanonda by itself and
its controlled subsidiaries.
If ChemChina or its controlled
subsidiaries are in the future engaged in
the business in China that constitute
horizontal competition against Sanonda, On-going. The
Commitments
ChemChina will take active actions, committed
on Potential October Long term
ChemChina including but not limited to parties comply
Horizontal 12,2016 effective
reorganizing internal assets, adjusting with the
Competition
sector planning and business structure, commitments.
upgrading technologies and products
and making market segmentation so that
each company will differentiate its
products and end users to avoid and
eliminate horizontal competition
between the subsidiaries controlled by
ChemChina and Sanonda.
The Company will, as required by law,
regulation and other specifications,
avoid and reduce connected transactions
with Sanonda; however, for the
connected transactions that are
inevitable or based on reasonable
Commitment grounds, the Company will follow the On-going. The
to reduce and just, fairness and open principles in committed
August 4, Long term
ChemChina standardize market, legally enter into agreement(s) parties comply
2016 effective
related-party by law, go through lawful procedures, with the
transactions and perform its disclosure obligations commitments.
and approving procedures as required
by related systems and regulations. The
Company warrants that no connected
transaction will be done to impair
lawful rights and interest of Sanonda
and its shareholders.
Commitment After completion of this acquisition August 4, Long term On-going.
ChemChina
to maintain transaction, Sanonda will continue to 2016 effective The
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
independence keep complete procurement, production committed
of the listed and sales systems and to possess parties comply
company independent intellectual properties, and with the
the Company and its affiliated party will commitments.
be completely independent from
Sanonda in terms of staff, assets,
finance, business and organization, and
Sanonda will have full capacity of
operation in Chinese agricultural
chemical market. The Company will
follow related regulations in Company
Law and Securities Law, and avoid
engagement in any action that impairs
the operating independence of Sanonda.
All new shares purchased and held by
share issuance for assets purchase shall
be prohibited from transfer in whatever
forms within 36 months after date of
listing, including but not limited to
public transfer via securities market or
transfer by agreements and will not
have such shares of the listed company
managed by any other person entrusted,
except such transfer is required and
made between ChemChina and its
subsidiaries as a result of state-owned
assets reorganization, consolidation or
free transfer of stock equity, in which On-going.
case the transferee must keep such The
Commitment
shares obtained locked up until the October 12, August 1, committed
CNAC on share
lock-up period expires. According to 2016 2020 party complies
lock-up
regulations in Article 48 of the with the
Administrative Measures for the commitments.
Material Asset Reorganizations of
Listed Companies, if within a period of
6 months after completion of this
transaction, the closing price of the
listed company is lower than the
offering price in any continuous 20
trading days, or if within a period of 6
months after completion of this
transaction, the closing price at the end
of such 6-month period is lower than
the offering price, then the lock-up
period of shares held will be extended
automatically by at least 6 months.
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
Upon expiry of the lock-up period, such
shares shall be subject to applicable
laws, regulations and CSRC and SZSE
rules.
CNAC shall fulfill the performance
compensation obligations in the
transaction in accordance with
Performance Compensation Agreement
signed with the listed company and
relevant laws and regulations. In the
event that a performance compensation On-going.
Commitments obligation takes place, CNAC shall first The
on fulfill the obligation of compensation September December 31, committed
CNAC
performance with the shares of Sanonda and the 13, 2016 2019 party complies
compensation deficient portion (if any) shall be made with the
up in cash. CNAC commits thatthe net commitments.
profits of ADAMA attributable to the
parent company after deducting
non-recurring gains and losses shall not
be less than USD 147,675,000, USD
173,321,900 and USD 222,416,800
respectively in 2017, 2018, 2019.
All shares of the listed company held by
Sanonda Holding before this transaction
shall be prohibited from transfer within
12 months after date of listing of the
new shares issued under this
transaction, including but not limited to
public transfer via securities market or
transfer by agreements and Sanonda On-going. The
Commitment Holding will not have such shares of the committed
Sanonda October 12, August 1,
on share listed company managed by any other party complies
Holding 2016 2018
lock-up person entrusted, except such transfer is with the
required and made between ChemChina commitments.
and its subsidiaries as a result of
state-owned assets reorganization,
consolidation or free transfer of stock
equity, in which case the transferee
must keep such shares obtained locked
up within the lock-up period of the
remaining shares
China Cinda The new shares issued in the non-public On-going. The
Asset Commitment offering to raise supporting fund shall December committed
January 18,
Management on share not be transferred in any manner within 25, 2017 parties comply
Co., Ltd., lock-up 12 months after the initial trading day of with the
CCB Principle the new issued shares. commitments.
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
Asset
Management
Co.,Ltd.,
Aegon-industr
ial Fund Co.,
Ltd., Penghua
Fund
Management
Co., Ltd.,
China
Structural
Reform Fund
Co. ,Ltd.,
Caitong Fund
Management
Co., Ltd.
1.The Company shall complete
repurchase and cancellation of
62,950,659 B-shares of the Company
held by Celsius no later than January 4,
2018 and share issuance to raise
supporting fund, whichever is earlier;
2. During the period from July 4, 2017 The
to the completion of the commitment
above-mentioned B-share repurchase has been
Repurchasing July 20,
Sanonda and cancellation, Celsius, the indirect Jan4, 2018 completed
B shares
held subsidiary of the Company will not during the
exercise the right to request, call upon, reporting
preside over, participate in or appoint a period.
shareholder agent to participate in the
shareholder's meeting, nor exercise the
corresponding voting power.
3. The Company promises that the
Company will not distribute dividend
before completing the above-mentioned
B-share repurchase and cancellation.
Commitments
made in the
initial public
offering or
refinancing
Commitment on
equity incentive
Other
commitments
Hubei Sanonda Co., Ltd. Annual Report 2017
Time of
Commitment Commitment Period of
Commitment Contents making Fulfillment
maker type commitment
commitment
made to
minority
shareholders
Executed timely
Yes
or not?
2. The assets or projects existing profit forecast, which were still in the profit forecast period, the Company
made note and explain to the assets or project arrived at original profit forecast
√ Applicable □ Not applicable
Assets or Starting Terminal Current Current Reasons of Disclosure Index
project with time time forecast actually fails to date for
profit performance performance achieve the former
forecasted (in forecast prediction
RMB’000) (in number (if
RMB’000) applicable)
Adama Jan 1, 2017 Dec 31, Not July 5, 2017 www.cninfo.com.cn
Solutions 2019 applicable
Report of Hubei
Sanonda Co., Ltd.
on Share Issuance
1,008,791.0 1,581,152.4
for Assets Purchase
and Supporting
Funds Raise &
Connected
Transactions
Commitment made by shareholders of the Company and counterparty in annual operation performance
□Applicable√ Not applicable
IV. Occupation of the Company’s capital by the controlling shareholder or its related parties
for non-operating purposes
□ Applicable √ Not applicable
The Company was not involved with such situation during the reporting period.
V. Explanation by the Board of Directors and the Supervisory Committee about the
“non-standard audit report” issued by the CPAs firm for the reporting period
□ Applicable √ Not applicable
Hubei Sanonda Co., Ltd. Annual Report 2017
VI. Explanation of the changes of the accounting policy, the accounting estimates and the
accounting methods compared to the last financial report
√ Applicable □Not applicable
The changes of the accounting policies of the Group are as follows:
1. The Group began to apply the newly issued Accounting Standard for Business Enterprise No.42 Held-for-sale Non-current Assets
and Disposal Groups and Discontinued Operations (\"CAS42\") since 28 May 2017.
2. The Group began to apply the newly issued Accounting Standard for Business Enterprise No.16 - Government Grants (\"CAS16\")
since 12 June 2017.
These financial statements were prepared under the requirements of the newly issued \"the Notice of the Revised Format of Financial
Statements for General Business Enterprise\" (\"Notice No.2017-30\") by MOF on 25 December 2017.
VII. Explain retrospective restatement due to correction of significant accounting errors in
the reporting period
□ Applicable √ Not applicable
No such cases in the reporting period.
VIII. Explain change of the consolidation scope as compared with the financial reporting of
last year
√ Applicable □ Not applicable
Within 2017, the Company acquired 100% equity of Adama Solutions through major asset restructuring, after which Adama
Solutions is consolidated within the Group’s financial statements.
IX. Particulars about engagement and disengagement of CPAs firm
CPAs firm engaged at present
Name of domestic CPAs firm Deloitte Touche Tohmatsu Certified Public Accountants LLP
Remuneration for domestic CPAs firm for the
reporting period (RMB Ten Thousand Yuan)
Consecutive years of the audit services provided by
domestic CPAs firm
Name of domestic accountants Chen Xi, Zhao Yan
Name of overseas CPAs firm Not applicable
Remuneration for overseas CPAs firm for the
--
reporting period (RMB Ten Thousand Yuan)
Consecutive years of the audit services provided by
--
overseas CPAs firm
Name of overseasaccountants --
Hubei Sanonda Co., Ltd. Annual Report 2017
Changeof the CPAs firm at current period or not?
√ Yes □ No
Did the re-engagement happen during the audit?
□ Yes √ No
The details on the change of the auditors
On March 31, 2017, the 19th meeting of the 7th session of the BOD approved the resolution on engaging Deloitte Touche Tohmatsu
Certified Public Accountants LLP as the auditing institution for the Company’s 2017 financial statements. On May 5, 2017, the
annual shareholders meeting approved the engagement.
Particulars on engaging the audit firm for the internal control, financial adviser or sponsor
√ Applicable □ Not applicable
During the reporting period, the Company engaged GTJA as its financial advisor for the Major Assets Restructuring Project. The
Company has paid up the financial advisor fees RMB 15,000,000to GTJA.
Particulars about trading suspension and termination faced after the disclosure of annual report
□ Applicable √ Not applicable
XI. Bankruptcy and reorganization
□ Applicable √ Not applicable
No such cases in the reporting period.
XII. Significant lawsuit or arbitration
□ Applicable √ Not applicable
No such cases in the reporting period.
XIII. Punishment and rectification
□ Applicable √ Not applicable
No such cases in the reporting period.
XIV. Integrity of the Company, its controlling shareholders and actual controller
□ Applicable √ Not applicable
During reporting period, there was no effective judgment of a court and large amount of debt maturity that the Company, its
controlling shareholders and actual controller failed to perform or pay off.
Hubei Sanonda Co., Ltd. Annual Report 2017
XV. The actual implementation of the stock incentive plan, ESOP, or other Staff incentives
□ Applicable √ Not applicable
To the date of the report, the Company does not have stock incentive plans, ESOP or other staff incentives. It shall be noted, that the
Company’s subsidiary approved in December 2017 and granted long-term cash rewardsto executive officers and employees, which is
based on the performance of the Company's shares (phantom cash incentives).
XVI. Significant related-party transactions
1. Related-party transactions relevant to routine operation
□ Applicable √ Not applicable
(1) There are no significant related-party transactions during the reporting period.
(2) Item XII of Section XI “Financial Statements” has set out the related parties and the related-party transactions of the Company.
2. Related-party transactions arising from asset acquisition or sale
□ Applicable √ Not applicable
The Company was not involved in any significant related-party transactions arising from asset acquisition or sale during the reporting
period.
3. Related-party transitions with joint investments
□ Applicable √ Not applicable
The Company was not involved in any significant related-party transaction with joint investments during the reporting period.
4. Credits and liabilities with related parties
√ Applicable □Not applicable
Whether there was non-operating credit and liability with related parties
□ Yes √ No
The Company was not involved in any non-operating credit and liability with related parties.
5. Other significant related-party transactions
√ Applicable □ Not applicable
During the reporting period, the Company issued 1,810,883,039 A shares to CNAC for acquiring 100% of shares of Adama Solutions
held by CNAC.On July 4, 2017, CNAC transferred the title of 100% of shares of Adama Solutions to the Company. The increased
1,810,883,039 A shares issued to CNAC have been listed on SZSE on August 2, 2017.
Hubei Sanonda Co., Ltd. Annual Report 2017
Disclosure date of the interim Website to disclose the interim
Name of the interim announcement
announcement announcement
The Announcement for Implementation of Issuing Shares to
Purchase Assets and Raise Matching Funds and Related August 1, 2017 www.cninfo.com.cn
Transactions and Listing of Newly-issued Shares
The Announcement on the Completion of the Assets
Transfer of Issuing Shares to Purchase Assets and Raise
July 7, 2017 www.cninfo.com.cn
Matching Funds and Related Transactions and Listing of
Newly-issued Shares
The website to disclose the interim announcements on significant related-party transactions
Please further note the transaction for the transfers and divestments relating to the ChemChina acquisition of Syngenta, as provided
in Section IV – VI 1 above (its shall be noted that said transaction is not a significant related party transaction).
XVII. Particulars about significant contracts and their fulfillment
1. Particulars about trusteeship, contract and lease
(1) Trusteeship
□ Applicable √ Not applicable
There was no trusteeship of the Company in the reporting period.
Items generated over 10% gains/losses in total profit in reporting period for the Company
□ Applicable √ Not applicable
The Company had no trust items generated over 10% gains/losses in total profit in reporting period.
(2) ContractOperation
□ Applicable √ Not applicable
There was no contract operation of the Company in the reporting period.
(3) Lease
√ Applicable □ Not applicable
Explanation on the lease
The 7th floor of the Company’s office building had rented to Jingzhou Sanonda Holdings Co., Ltd. for business operation in the
reporting period with the annual rent of RMB 138, 982.
The lease whose profits reaching more than 10% of the total profits of the Company in the reporting period
□ Applicable √ Not applicable
There was no any lease whose profits reaching more than 10% of the total profits of the Company in the reporting period.
Hubei Sanonda Co., Ltd. Annual Report 2017
2. Significant guarantees
√ Applicable □ Not applicable
(1) List of guarantees
Unit: RMB’0000
Guarantees provided by the Company for external parties (excluding those for subsidiaries)
Disclosure
date on Guarante
Actual
relevant Actual e for a
Amount for occurrence date Type of Period of Executed
Guaranteed party announcem guarantee related
guarantee (date of guarantee guarantee or not
ent of amount party or
agreement)
guaranteed not
amount
Guarantees provided by the Company for its subsidiaries
Disclosure
date on Guarante
Actual
relevant Actual e for a
Amount for occurrence date Type of Period of Executed
Guaranteed party announcem guarantee related
guarantee (date of guarantee guarantee or not
ent of amount party or
agreement)
guaranteed not
amount
Hubei Sanonda Joint
March 18, November 29,
Foreign Trading Co., 30,900 7,000 Liability 1 year Yes Yes
2016
Ltd. Guarantee
Total actual occurred
Total guarantee line approved for
amount of guarantee for the
the subsidiaries during the 21,900
subsidiaries during the
reporting period (B1)
reporting period (B2)
Total actual guarantee
Total guarantee line that has been
balance for the subsidiaries
approved for the subsidiaries at the 21,900
at the end of the reporting
end of the reporting period (B3)
period (B4)
Guarantees provided by subsidiaries for subsidiaries
Disclosure
date on Guarante
Actual
relevant Actual e for a
Amount for occurrence date Type of Period of Executed
Guaranteed party announcem guarantee related
guarantee (date of guarantee guarantee or not
ent of amount party or
agreement)
guaranteed not
amount
Hubei Sanonda Co., Ltd. Annual Report 2017
Total actual occurred
Total guarantee line approved
amount of guarantee during
during the reporting period 21,900
the reporting period
(A1+B1+C1)
(A2+B2+C2)
Total guarantee line that has been Total actual guarantee
approved at the end of the balance at the end of the
21,900
reporting period reporting period
(A3+B3+C3) (A4+B4+C4)
Proportion of total guarantee amount (A4+B4+C4) to the net
assets of the Company
Of which:
The balance of the guarantee provided to the shareholders, actual
controller and its related parties (D)
Amount of debt guarantee provided for the guaranteed party
whose asset-liability ratio is not less than 70% directly or
indirectly (E)
The amount of the guarantee which exceeds 50% of the net assets
(F)
Total amount of the above three guarantees (D+E+F)
As for undue guarantee, liability to guarantee has happened or
joint liquidated liability may be undertaken during this Reporting No
Period (if existing)
Regulated procedures are violated to offer guarantee (if existing) No
Note:The Company does not have significant guarantees during the reporting period. It shall be noted that Adama Solutions provided
a guarantee to Negev Aroma (joint venture; held 50%), on February 2017, to secure a loan in the amount of RMB 7,834,000.
(2) Particulars about illegal external guarantee
□ Applicable √ Not applicable
There was no particular about illegal external guarantee of the Company in the reporting period.
3. Cash assets management entrustment
(1) Wealth management entrustment
□ Applicable √ Not applicable
No such cases in the reporting period.
Hubei Sanonda Co., Ltd. Annual Report 2017
(2) Entrustment loans
□ Applicable √ Not applicable
No such cases in the reporting period.
(4) Other significant contracts
□ Applicable √ Not applicable
No such cases in the reporting period.
XVIII. Social responsibilities
1. Perform social responsibilities
The values of corporate socialresponsibility are woven throughout the Company’s culture. The Company holds itself to a high
standard of integrity, fairness, reliability and responsibility, and believes that this is essential for the Company’s long term success.
The Company has made a strong commitment, to education, safety, and protection of the environment, and the development of its
employees.
The Company insists on the policy “safety, quality, environmental protection, efficiency”, carries out production and operation in
strict accordance with OHSAS18001 occupational health and safety management system, ISO14001 environment management
system, ISO9001 quality management system and national cleaning production standards, carries forward the construction of SHE
system, technically reforms production devices, technologies and tail gas treatment, enhances the safety of production devices,
carries forward lean production, reduces the consumption of energy and materials and carries forward energy conservation and
emission reduction. For output value per ten thousand yuan, the overall energy consumption and water consumption decrease year by
year. The Company will invest more in environmental protection, carry forward comprehensive treatment on environment and
persistently improve the performance of environmental protection.
The Company relates high promotion of education in agriculture, chemistry, sustainability and other related areas as integral part of
its mission. The Company is dedicated to the nurturing of the next generation of scientist and to strengthen and invest in the
communities in which it operates.
2. Perform the social responsibility of targeted poverty alleviation
(1) Targeted Poverty Alleviation Planning
The Company actively implements targeted poverty alleviation according to relevant instructions from Jingzhou Leading Group on
Poverty Alleviation.
(2) Annual Overview
The Company’s one-on-one poverty alleviation subject is Sanzhou Village of Guanyindang Township. The Company attached great
importance and designates the general office to be in charge of daily poverty alleviation. During the reporting period, the Company
and Sanzhou village had discussions over its economic development, number and current state of households living in poverty. The
Company transferred 50,000RMB to the special account for poverty alleviation of Sanzhou village. In addition, the deputy party
secretary of the Company visited 20 households below the poverty line in Sanzhou village and gave 300RMB to each family.
Hubei Sanonda Co., Ltd. Annual Report 2017
(3) Results of Targeted Poverty Alleviation
Indicator Unit Quantity/ Progress
I. Overview —— ——
Of which, 1.funds 10,000RMB 5.6
II. Input Breakdown —— ——
1. Sector development —— ——
Of which, 1.1 Sector of Project —— Poverty alleviation in agriculture and forestry sectors
1.2 Number of Project Project
1.3 Inputs 10,000RMB 5.6
1.4No. of people out of poverty Person
2. Employment transfer —— ——
3. Movement and relocation —— ——
4. Education —— ——
5. Health —— ——
6. Ecological conservation —— ——
7. Subsistence support —— ——
8. Social activities —— ——
9. Others —— ——
III. Awards —— ——
(4) Follow-up Plan
The Company will continue to steadily promote poverty alleviation with one-on-one subject following instructions of Jingzhou
disciplinary Committee and Leading Group on Poverty Alleviation.
3. Environmental Protection
Is the Company listed as key polluting entities by environmental protection agencies?
Yes
Main
Number
pollutants Layout of Total
Company Way of of Pollution standards Total amount Exceeding
and emission Concentration amount
name emission emission applied emitted/discharged limit
special points approved
points
pollutants
Centralized Comprehensive
Sanonda COD Continuous 1 Within limit 304.9 391.3 No
discharge Standard on
Hubei Sanonda Co., Ltd. Annual Report 2017
Main
Number
pollutants Layout of Total
Company Way of of Pollution standards Total amount Exceeding
and emission Concentration amount
name emission emission applied emitted/discharged limit
special points approved
points
pollutants
point Discharge of Waste
Water
(GB8978-1996) ，
COD<100mg/L
Comprehensive
Standard on
Centralized Discharge of Waste
Ammonia
Sanonda Continuous 1 discharge Within limit Water 33 50 No
nitrogen
point (GB8978-1996),
Ammonia
nitrogen<15mg/L
Standard on Air
Pollution of Power
Power
Sanonda NOx Continuous 1 Within limit Plant 543.7 564.7 No
plant
（GB13223-2011）
NOx <200mg/m3
Standard on Air
Pollution of Power
Power
Sanonda SO2 Continuous 1 Within limit Plant 345.8 380 No
plant
（GB13223-2011）
SO2<200mg/m3
Standard on Air
Pollution of Power
Fume and Power Plant
Sanonda Continuous 1 Within limit 46.2 80 No
dust plant （GB13223-2011）
Fume and
dust<30mg/m3
(1) Development and Operation of Environmental Facilities
1. Development and Operation of Waste Water Facilities
The Company has a waste water treatment facility whose capacity is designed at 12,400 tons per day. The waste water facility is
running well and COD and ammonia nitrogen concentration after treatment meet the standards.
2. Development and Operation of Waste Gas Facilities
The treatment facility for the Company’s coal-based power plant is running well. SO2, NOx and dust in the tail gas after treatment
meet the standards.
3. The Company discloses production and pollution information according the Interim Measures on Environmental Information
Disclosure and transfers information of main waste water and air pollutants to the provincial information platform on a daily basis.
Hubei Sanonda Co., Ltd. Annual Report 2017
(2) EIA of construction projects and other environmental administrative permits
No.
(3) Contingency plan of environmental accidents
The contingency plan is development with a purpose of implementingprecautionary approach for environmental safety, ensuring
quick response to potential environmental emergencies and carrying out rescue in a well-organized way according to pre-made
rescue plan.
1. Composition of the command team
2. Emergency response
(1) Alarm and Telecommunication
(2) Field Rescue
3. Relief and Rescue of Environmental Pollution Accidents
（1）Pollutants and Main Sources
（2）Cause Analysis of Environmental Pollution
（3）Relief and Rescue Measures
（4）Handling and Precautionary Measures of Environmental Pollution Accidents
4. Supporting Measures
（1）Supply support
（2）System support
5. Training and Exercises
(4) Environment self-monitoring plan
The Company developed 2017 Annual Environment Self-Monitoring Plan according to relevant requirements to enhance
environment management, understand emission and discharge of pollutants of the Company, evaluating its impact on surrounding
environment, enhancing management of pollutant discharge and emission in the process of production, be subject to supervision of
environmental agencies and provide basis to pollution prevention and control.
1. Monitored Indicators
Waste water: COD,NH3-N,PH,SS,BOD, Petroleum, TP, Volatile Phenol.
Air Pollutant: SO2,NOX, Dust.
Noise: Noise by site border
2. Frequency
Boiler emission and waste water discharged from the centralized point: continuous auto monitoring
Manual sampling: SS,BOD, Petroleum, TP, Volatile Phenol, once a month.
Noise: once a quarter.
(5) Other environmental information that should be disclosed
No.
XIX. Other significant events
□ Applicable √ Not applicable
As a part of the Major Assets Restructuring, title of 100% of shares of Adama Solutions held by CNAC has been transferred to the
Company, and the Company holds title of 100% of shares of Adama Solutions on July 4, 2017. The Company also completed the
non-public offering to raise matching funds. The listing date of newly-issued shares is January 17, 2018. For details, please see the
Hubei Sanonda Co., Ltd. Annual Report 2017
announcements disclosed on the website of www.cninfo.com.cn on July 7, 2017 and January 16, 2018.
XX. Significant events of subsidiaries
□ Applicable √ Not applicable
Please refer to the SYG Transaction, mentioned in Section IV. – VI 1. above.
Hubei Sanonda Co., Ltd. Annual Report 2017
Section VI. Change in Shares & Shareholders
I. Changes in shares
Unit: share
Before the change Increase/decrease (+/-) After the change
Capitalization
Newly issue Bonus
Amount Proportion of public Other Subtotal Amount Proportion
share shares
reserves
I. Restricted
20,531 0.00% 1,810,883,039 119,692,546 1,930,575,585 1,930,596,116 82.44%
shares
2.
State-owned
legal 0 0.00% 1,810,883,039 119,687,202 1,930,570,241 1,930,570,241 82.44%
person’s
shares
3. Shares
held by
20,531 0.00% 5,344 5,344 25,875 0.00%
domestic
investors
Shares held
by domestic
20,531 0.00% 5,344 5,344 25,875 0.00%
natural
person
II. Shares
not subject
593,902,689 100.00% -182,643,205 -182,643,205 411,259,484 17.56%
to trading
moratorium
1. RMB
ordinary 363,902,689 61.27% -119,692,546 -119,692,546 244,210,143 10.43%
shares
2.
Domestically
230,000,000 38.73% -62,950,659 -62,950,659 167,049,341 7.13%
listed foreign
shares
III. Total
593,923,220 100.00% 1,810,883,039 -62,950,659 1,747,932,380 2,341,855,600 100.00%
shares
Reason for the change in shares
√ Applicable □ Not applicable
During the reporting period, the Company issued 1,810,883,039 shares to CNAC as a part of the material assets restructuring project.
The listing date for such shares is August 2, 2017; On November 24, 2017, the Company completed the cancellation of 62, 950,659 B
shares held by Adama Celsius B.V. By the end of the reporting period, the total amount of the shares of the Company is
Hubei Sanonda Co., Ltd. Annual Report 2017
2,341,855,600.
Approval of the change in shares
√Applicable □ Not applicable
On September 13, 2016, the Company held the 15th meeting of the 7th session of the BOD, on which proposals related to share
issuance for assets purchase and supporting funds raising and connected transactions, and proposal on the buyback and cancellation
of B shares from Adama Celsius B.V. were approved.
On January 9, 2017, the Company held the 17th meeting of the 7th session of the BOD, on which the Report (draft) on the share
issuance to purchase assets, the raising of supporting funds and the connected transactions was considered and adopted.
On February 24, 2017, the Company held the 18th meeting of the 7th session of the BOD, on which the proposals on the Plan and the
Report (draft & revision) on the share issuance to purchase assets, the raising of supporting funds and the connected transactions
were considered and adopted.
On March 27, 2017, the Company held the first interim shareholders meeting of 2017, on which the proposal on the Report (draft &
revision) on the share issuance to purchase assets, the raising of supporting funds and the connected transactions, and the proposal on
the buyback and cancellation of the B shares were considered and adopted.
On May 12, 2017, the Company held the 7th interim meeting of the 7th session of the BOD, on which the proposals on the Plan and
the Report (draft & revision) on the share issuance to purchase assets, the raising of supporting funds and the connected transactions
were considered and adopted.
On July 3, 2017, the Company received the Approval on Issuing Shares by Hubei Sanonda Co., Ltd. to China National Agrochemical
Corporation for Acquiring Assets and Raising Supporting Funds (CSRC license No. [2017]1096).
The registered status for the change in shares
√Applicable □ Not applicable
Shenzhen Branch of China Securities Depository and Clearing Corporation Limited accepted the registration application of the
non-public issuance of shares to CNAC on July 11, 2017, and issued an Acceptance Confirmation Letter on Share Registration
Application. The Company has completed the registration of the additional 1,810,883,039 shares issued for acquiring the assets.
On July 31, 2017, the Company opened the special account for buyback shares at Shenzhen Branch of China Securities Depository
and Clearing Corporation Limited. The 62,950,659 shares held by Adama Celsius B.V. were transferred to the account on November
23, 2017 and cancellation procedures are completed on November 24, 2017.
Effects of the change in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the
Company and other financial indexes over the last year and last period
√Applicable □ Not applicable
Please refer to the above notes regarding (1) the buyback and cancellation of the B shares of the Company; and (2) the share issuance
made in the framework of the Combination Transaction.
Other contents that the Company considered necessary or were required by the securities regulatory authorities to disclose
√Applicable □ Not applicable
The listing date of the newly-issued 104,697,982 shares in the non-public offering under which the Company raised is January 17,
2018.The total amount of the shares of the Company listed is 2,446,553,582.
Hubei Sanonda Co., Ltd. Annual Report 2017
2. Changes in restricted shares
√Applicable □ Not applicable
Shareholders Restricted Shares Restricted Ending shares Restricted reasons Date for
shares at the released in shares restricted released
opening of the the reporting increased in
reporting period the reporting
period period
CNAC 0 0 1,810,883,039 1,810,883,039 Share issuance August 1st,
Sanonda August 1st,
0 0 119,687,202 119,687,202 As committed
Holding
All the shares held
by a senior
management shall be March 30th,
Liu Zhiming 16,031 0 5,344 21,375
locked up for half a 2018
year after he/she
leaves office.
Shares held by a
Jiang August 2nd
4,500 0 0 4,500 supervisor should be
Chenggang , 2018
locked up.
Total 20,531 0 1,930,575,585 1,930,596,116 -- --
II. Issuance and listing of securities
1. Issuance of securities (excluding preferred stock) in reporting period
√Applicable □ Not applicable
Name of stock and Number of
Issue price (or Date of termination of
derivative Issue date Number of issue Date of listing permitted listed
interest rate) the transaction
securities transactions
Stock
RMB 10.20 per
Sanonda A August 2, 2017 1,810,883,039 August 2, 2017 1,810,883,039
share
Switching Company bonds, the separation transaction of switching company bonds, corporate bonds
Other derivative securities
Description of the issue of securities in the reporting period (excluding preferred shares)
During the reporting period, the Company issued 1,810,883,039 shares to CNAC as a part of the material assets restructuring project.
The listing date for such shares is August 2, 2017.Such shares shall be prohibited from transfer in whatever forms within 36 months
after date of listing, including but not limited to public transfer via securities market or transfer by agreements and will not have such
shares of the listed company managed by any other person entrusted, except such transfer is required and made between ChemChina
and its subsidiaries as a result of state-owned assets reorganization, consolidation or free transfer of stock equity, in which case the
transferee must keep such shares obtained locked up until the lock-up period expires.
Hubei Sanonda Co., Ltd. Annual Report 2017
2. Explanation on changes in share capital & the structure of shareholders, the structure of assets and
liabilities
√ Applicable □Not applicable
During the reporting period, the Company issued restricted shares 1,810,883,039 to CNAC as a part of the material assets
restructuring project. The listing date for such shares is August 2, 2017; On November 24, 2017, the Company completed the
cancellation of non-restricted 62, 950,659 B shares held by Adama Celsius B.V. By the end of the reporting period, the total amount
of the shares of the Company is 2,341,855,600. On December 31, 2017, the Company’s asset-liability ratio was 52.6%, down by 1.04%
compared with the asset-liability ratio at the end of 2016 which was 53.64%.
3. Existent shares held by internal staffs of the Company
□ Applicable √ Not applicable
III. Particulars about the shareholders and actual controller
1. Total number of shareholders and their shareholding
Unit: share
Total number of
preferred
Total number of stockholder with
Total number of shareholders on vote right
Total number of preferred
shareholders at the 30th trading restored on the
50,534 52,684 stockholder with vote 0
the reporting day before the 30th trading day
right restored(if any)
period disclosure date of before the
the annual report disclosure date
of the annual
report(note 8)
Shareholding of shareholders holding more than 5% shares
Number of Increase and Number of Number of Pledged or frozen
Holding shareholding decrease of shares held shares held shares
Name of Nature of
percentage at the end of shares during subject to not subject
shareholder shareholder Status of
(%) the reporting reporting trading to trading Amount
shares
period period moratorium moratorium
State-owned
CNAC 77.33% 1,810,883,039 1,810,883,039 1,810,883,039
legal person
State-owned
Sanonda holding 5.11% 119,687,202 119,687,202
legal person
National Social Other 0.38% 9,004,717
Hubei Sanonda Co., Ltd. Annual Report 2017
Security Fund
Portfolio 118
Domestic
Li Hongsheng 0.28% 6,483,229
individual
Domestic
Zhang Ping 0.25% 5,891,300
individual
GUOTAI JUNAN
SECURITIES(HO Foreign
0.19% 4,526,245
NGKONG) corporation
LIMITED
Domestic
Xie Qingjun 0.19% 4,490,133
individual
Qichun County On behalf of
State-owned Assets the 0.18% 4,169,266
Administration government
Domestic
Shi Yun 0.12% 2,830,100
individual
Domestic
Wu Feng 0.09% 2,193,288
individual
Strategic investors or the general
legal person due to the placement
Not applicable
of new shares become the top 10
shareholders (if any) (note 3)
Jingzhou Sanonda Holdings Co., Ltd. and CNAC are related parties, and are acting-in-concert
parties as prescribed in the Administrative Methods for Acquisition of Listed Companies.
Explanation on associated
Sanonda Holding is a wholly-controlled subsidiary of CNAC. It is unknown whether the other
relationship or/and persons
shareholders are related parties or acting-in-concert parties as prescribed in the Administrative
Methods for Acquisition of Listed Companies.
Particulars about shares held by top 10 shareholders not subject to trading moratorium
Type of share
Number of shares held not subject to trading moratorium at the end of
Name of shareholder Type of
the period Amount
share
RMB
National Social Security Fund
9,004,717 ordinary 9,004,717
Portfolio 118
share
RMB
Li Hongsheng 6,483,229 ordinary 6,483,229
share
RMB
Zhang Ping 5,891,300 5,891,300
ordinary
Hubei Sanonda Co., Ltd. Annual Report 2017
share
Domestica
GUOTAI JUNAN
lly listed
SECURITIES(HONGKONG) 4,526,245 4,526,245
foreign
LIMITED
share
Domestica
lly listed
Xie Qingjun 4,490,133 4,490,133
foreign
share
RMB
Qichun County State-owned
4,169,266 ordinary 4,169,266
Assets Administration
share
RMB
Shi Yun 2,830,100 ordinary 2,830,100
share
RMB
Wu Feng 2,193,288 ordinary 2,193,288
share
Domestica
Guotai Junan Securities(Hong lly listed
2,070,003 2,070,003
Kong) Limited foreign
share
China Construction Bank
RMB
Corporation, Rongtong Leading
1,946,363 ordinary 1,946,363
Growth Hybrid Securities
share
Investment Fund (LOF)
Explanation on associated
relationship among the top ten
shareholders of tradable share not
Qichun County Administration of State-Owned Assets held shares of the Company on behalf of
subject to trading moratorium, as
the government. It is unknown whether the other shareholders are related parties or
well as among the top ten
acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed
shareholders of tradable share not
Companies.
subject to trading moratorium and
top ten shareholders, or
explanation on acting-in-concert
1. Shareholder Shi Yun held 2,830,100 shares of the Company through a credit collateral
Particular about shareholder securities trading account and held 0 shares of the Company through a common securities
participate in the securities account, who thus held 2,830,100 shares of the Company in total.
lending and borrowing business 2. Shareholder Wu Feng held 775,726 shares of the Company through a credit collateral
( if any) securities trading account and held 1,417,562 shares of the Company through a common
securities account, who thus held 2,193,288 shares of the Company in total.
Hubei Sanonda Co., Ltd. Annual Report 2017
Did any top 10 common shareholders or the top 10 common shareholders not subject to trading moratorium of the Company carry
out an agreed buy-back in the reporting period?
□ Yes √ No
The shareholders of a company did not conduct the transaction of repurchase under the agreement during the reporting period.
2. Particulars about the controlling shareholder
Nature of controlling shareholder: The central state-owned
Type of controlling shareholder: legal person
Name of controlling Legal representative / Date of
Organization code Business scope
shareholder company principal establishment
Chemical fertilizer production; Agricultural
chemicals and chemical products and
chemical raw materials (except hazardous
chemicals), electromechanical device,
electrical equipment, control system,
instrumentation, building materials,
industrial salt, natural rubber and products,
computer hardware and software, office
automation equipment and textile materials
purchasing and marketing; Storage of
China National
goods; Import and export business;
Agrochemical Co., Chen Hongbo Jan 21, 1992 91110000100011399Y
Technical consultation and technical
Ltd.
service. (the enterprise independently
selects and operates the project and carries
out business activities; Projects subject to
approval in accordance with the law shall
conduct business activities in accordance
with the approved content after approval by
relevant departments; It shall not engage in
the business activities of the municipal
industrial policy prohibiting or restricting
such projects.
Shares held by the
controlling
shareholder in other
By the end of the reporting period, CNAC held indirectly 46.25% equity shares of Cangzhou Dahua Co.
listed companies by
Ltd. through Cangzhou Dahua Group Co. Ltd.
holding or
shareholding during
the reporting period
Change of the controlling shareholder during the reporting period
√Applicable □Not applicable
Name of the new controlling shareholder: China National Agrochemical Co., Ltd.
Date of the replacing: August 1, 2017
Query index of the designated website: www.cninfo.com.cn
Disclosing date of the replacing on the designed website: August 1,2017
Hubei Sanonda Co., Ltd. Annual Report 2017
3. Particulars about actual controller
Nature of actual controller: State-owned Assets Supervision and Administration Commission
Type of actual controller: Legal person
Legal
representative / Date of
Name of the actual controller Organization code Business scope
company establishment
principal
State-owned Assets Supervision
and Administration Commission - 16 Mar. 2003 - -
of the State Council
Shares held by the actual
controller in other listed
companies by holding or Not applicable
shareholding during the
reporting period
Change of the actual controller during the reporting period
□ Applicable √ Not applicable
The actual controller did not change during the reporting period
Block diagram of equity and control relationship between the Company and actual controller:
State-owned Assets Supervision and Administration Commission of the State Council
100%
China National Chemical Co., Ltd.
100%
China National Agrochemical Co., Ltd.
100%
CNAC International Company Limited
100%
JingzhouSanonda Holdings Co., Ltd.
5.11%
77.33%
Hubei Sanonda Co., Ltd.
100%
ADAMA Agriculture Solutions Ltd.
Note: The listing date of the newly-issued 104,697,982 shares in the non-public offering to raise matching funds is January 17, 2018.
Hubei Sanonda Co., Ltd. Annual Report 2017
After that, CNAC holds 74.02% share equity of the Company, and Jingzhou Sanonda Holdings Co., Ltd. holds 4.89% share equity of
the Company.
The actual controller controls the Company via trust or other ways of asset management
□ Applicable √ Not applicable
4. Particulars about other corporate shareholders with shareholding proportion over 10%
□Applicable√ Not applicable
5. Particulars about restriction of reducing holding-shares of controlling shareholders, actual controller,
restructuring parties and other commitment entities
□Applicable √Not applicable
Hubei Sanonda Co., Ltd. Annual Report 2017
Section VII. Preferred Shares
□ Applicable √ Not applicable
There was no preferred stock during reporting period.
Hubei Sanonda Co., Ltd. Annual Report 2017
Section VIII. Directors, Supervisors, Senior Management Staff &
Employees
I. Changes in shareholding of directors, supervisors and senior executives
Office Amount Amount of
Shares
Status of shares shares
Beginning Ending Shares Other held at the
increased decreased
date of date of held at the changes end of the
Name Position Gender Age at the at the
office office year-begin increase/de reporting
reporting reporting
term term (share) crease period
period period
(share)
(share) (share)
Yang Chairman of In Office Sep 29,
Male 50 0 0 0 0
Xingqiang the BOD
In Office Sep 29,
Ren Jianxin Director Male 59 0 0 0 0
Director, In Office
Chen Sep 29,
President& Male 50 0 0 0 0
Lichtenstein
CEO
In Office Apr 29,
An Liru Director Male 48 0 0 0 0
Tang Independent In Office Dec 25,
Male 73 0 0 0 0
Yunwei Director
Independent In Office Dec 25,
Xi Zhen Male 54 0 0 0 0
Director
Chief In Office
Aviram Sep 29,
Financial Male 58 0 0 0 0
Lahav
Officer
General In Office
Michal Sep 29,
Legal Female 59 0 0 0 0
Arlosoroff
Counsel
Chairman of In Office
Jiang Jan 6,
the Male 43 6,000 0 0 0 6,000
Chenggang
Supervisor
March 19,
Li Dejun Supervisor In Office Male 59 0 0 0 0
Guo Zhi Supervisor In Office Male 40 March 19, 0 0 0 0
Hubei Sanonda Co., Ltd. Annual Report 2017
Office Amount Amount of
Shares
Status of shares shares
Beginning Ending Shares Other held at the
increased decreased
date of date of held at the changes end of the
Name Position Gender Age at the at the
office office year-begin increase/de reporting
reporting reporting
term term (share) crease period
period period
(share)
(share) (share)
Secretary of In Office Feb 9,
Li Zhongxi Male 47 0 0 0 0
the BOD
Demission March
Jan 6,
Fu Liping Supervisor Male 52 19, 0 0 0 0
Demission March
Ding Jan 24,
Supervisor Male 55 19, 0 0 0 0
Shaojun
Demission March
Dong Apr 29,
Supervisor Male 49 19, 0 0 0 0
Chunji
Demission March
Apr 29,
Xu Yan Supervisor Female 45 19, 0 0 0 0
Demission Apr 29, Sep 29,
Guo Hui Director Male 54 0 0 0 0
2015 2017
Demission Apr 29, Jun 16,
She Zhili Director Female 53 0 0 0 0
2015 2017
Demission Apr 29, Sep 29,
Shiri Ailon Director Female 42 0 0 0 0
2015 2017
Independent Demission Feb 26, Dec 25,
Ai Qiuhong Male 49 0 0 0 0
director 2010 2017
Zhang Independent Demission Jul 9, Dec 25,
Female 53 0 0 0 0
Huide director 2010 2017
Independent Demission Jul 9, Dec 25,
Li Dejun Male 60 0 0 0 0
director 2010 2017
Liu Anping Demission May 11, Sep 29,
GM Male 50 0 0 0 0
2012 2017
Demission Jan 6, Sep 29,
Yin Hong Vice GM Male 51 0 0 0 0
2013 2017
Liu GMAssistant Demission Male 42 Jan 6,2013 Sep 29, 21,375 0 0 0 21,375
Hubei Sanonda Co., Ltd. Annual Report 2017
Office Amount Amount of
Shares
Status of shares shares
Beginning Ending Shares Other held at the
increased decreased
date of date of held at the changes end of the
Name Position Gender Age at the at the
office office year-begin increase/de reporting
reporting reporting
term term (share) crease period
period period
(share)
(share) (share)
Zhiming
Total -- -- -- -- -- 27,375 0 0 0 27,375
II. Particulars about changes of Directors, Supervisors and Senior Executives
Name Position Type Date Reason
Guo Hui Director Left the position Sep 29, 2017 Voluntary demission
She Zhili Director Left the position Jun 16, 2017 Voluntary demission
Shiri Ailon Director Left the position Sep 29, 2017 Voluntary demission
Independent
Ai Qiuhong Left the position Dec 25, 2017 Term of office expired
Director
Independent
Zhang Huide Left the position Dec 25, 2017 Term of office expired
Director
Independent
Li Dejun Left the position Dec 25, 2017 Term of office expired
Director
Liu Anping GM Dismissal Sep 29, 2017 Change of the position
Yin Hong Vice GM Dismissal Sep 29, 2017 Change of the position
Liu Zhiming GM Assistant Dismissal Sep 29, 2017 Change of the position
III. Resumes of important personnel
Main working experience of current directors, supervisors and senior management staff
Mr. Ren Jianxin, Master Degree, senior engineer at professor grade. Mr. Ren Jianxin used to be the General Manager and Party
Secretary of Chemical Cleaning Company (a company belonged to the Ministry of Chemical Industry), the General Manager and
Party Secretary of China National Blue Star Group, the General Manager and Party Secretary of China National Chemical Co., Ltd.
Currently, Mr. Ren Jianxin is Director of the Company,the Chairman of the BOD and Party Secretary of China National Chemical
Co., Ltd., Chairman of the BOD of Syngenta A.G., Chairman of the BOD of Pirelli & C. S.P.A.
Mr. Yang Xingqiang, Bachelor Degree, senior engineer at professor grade. Mr. Yang used to be the General Manager of Blue Star
Cleaning Agent Co., Ltd., the General Manager and Party Secretary of China National Blue Star Group, the Deputy General Manager
of China National Chemical Co., Ltd., the Chairman of the BOD of China National Agrochemical Co., Ltd. Currently, Mr. Yang is
theChairman of the BOD of the Company,the General Manger and Deputy Party Secretary of China National Chemical Co., Ltd.,
Chairman of the BOD of Adama Agricultural Solutions Ltd.
Hubei Sanonda Co., Ltd. Annual Report 2017
Mr. Chen Lichtenstein, Israeli. He holds joint doctoral degrees from Stanford University's Graduate School of Business and School
of Law. He used to be the clerk of Israeli High Court, the lawyer of Yigal Arnon & Co. Law Firm, the Executive Director of
Investment Banking at Goldman Sachs in New York and London, the Deputy CEO of Adama Agricultural Solutions Ltd., the
President and CEO of China National Agrochemical Co., Ltd. Currently, Mr. Lichtensetin is the Director of the Company, the
President and CEO of the Company, Directorandthe President and CEO of Adama Agricultural Solutions Ltd.
Mr. An Liru, Master of chemical engineering and MBA, senior engineering, senior economist. He used to be the Assistant of
General Manager, Vice General Manager, General Manager, Deputy Party Secretary of Jiangsu Anpon Electrochemical Co., Ltd.,
Chairman of Directors, Party Secretary of Jiangsu Huaihe Chemicals Co., Ltd., Executive Directors and CEO of Jiangsu Maidao
Agrochemical Co., Ltd., the Chairman of the BOD of the Company, Chairman of Directors and Party Secretary of China National
Agrochemical Co., Ltd. Currently, he is the Director of the Company, the Director and the Senior Vice President of ADAMA
Agricultural Solutions Ltd.
Mr. Tang Yunwei, professor, Doctor of economics, honorary member of Association of Chartered Certified Accountants,and the
Returned Overseas Student with Outstanding Contribution to Socialist Modernization Construction which was awarded by the State
Education Commission and Ministry of Personnel. He had successively served as the associate professor and professor of Shanghai
University of Finance and Economics (SUFE), the Executive Vice President of the SUFE, and the President of SUFE. He used to be
a member of Auditing Standards Committee of Chinese Institute of Certified Public Accountants, the legal representative of
Accounting Society of Shanghai, and the partner of Ernst & Young. Mr. Tang has been a member of Accounting Standard Committee
of Ministry of Finance of the PRC since October 1998. Mr. Tang is the independent director of the Company, the independent
director of Universal Scientific Industrial (Shanghai) Co., Ltd..
Mr. Xi Zhen, professor,Doctor of Bioorganic Chemistry,worked since 1983. Mr. Xi was Assistant Professor in Hubei Medical School
which is currently the Wuhan University School of Medicine from 1983 to 1985, was Engineer in Beijing Institute of Chemical
Reagents from 1988 to 1990, was a Research Associate in Department of Biological Chemistry and Molecular Pharmacology of
Harvard Medical School from 1997 to 2001. Mr. Xi is currently Cheung Kong Scholar of Pesticide Science of the Ministry of
Education of the PRC, Chairman of Department of Chemical Biology, Professor of Chemistry and Chemical Biology, Fellow of the
University Committee of Nankai University in China, and Director of National Pesticide Engineering Research Center (Tianjin). Mr.
Xi is also a Committee Member of Chinese Chemical Society and Deputy Director of its Division of Chemical Biology, Deputy
Director of the Pesticide Science Division of Chinese Chemical Industry and Engineering Society, and a Committee Member of
Chinese Society for Crop Protection. In addition, He is the independent director of the Company,and the director of Suzhou Ribo Life
Science Co., Ltd..
Mr. Aviram Lahav, Israeli, acts as the Chief Financial Officer. Mr. Lahav also acts as Executive Vice President and Chief Financial
Officer of Adama Agricultural Solutions Ltd.Mr. Lahav earned a Practical Engineering Degree in Mechanical Engineering from Tel
Aviv University, Israel. Mr. Lahav hasalso earned a BA in Economics and Finance from the Hebrew University in Jerusalem, Israel
and graduated from the Advanced Management Program at Harvard Business School.Before joining the Group, Mr. Lahav served as
CEO of Synergy Cables, a publicly traded manufacturing company. He had also served as CFO, COO and eventually CEO of Delta
Galil Industries (Israel). In 2000, he was awarded thetitle of“Israel’s CFO of the Year”.
Ms. Michal Arlosoroff,Israeli, acts as the Company’s General Legal Counsel. Ms. Arlosoroff also acts as Senior Vice President,
General Legal Counsel, Company Secretary and CSR Officerof Adama Agricultural Solutions Ltd.Ms. Arlosoroff holds an LL.B. as
well as a B.A. in Political Science and Labor Relations (cum laude) from Tel Aviv University, Israel. Ms. Arlosoroff also graduated
from Harvard Business School the Advanced Management Program (AMP186). Prior to joining the Group, Ms. Arlosoroff served as
Hubei Sanonda Co., Ltd. Annual Report 2017
Full Partner and General Manager in Tel Aviv at E.S. Shimron, I. Molho, Persky &Co.,one of the most prominent, respected and
established law firms in Israel for 22 years.
Mr. Jiang Chenggang, acts as the Supervisor, Deputy Director of the Office and Deputy Secretaries of the Discipline Inspection
Commission of the Company from Jun. 2006 to Jun. 2012; acted as the Chairman of the Labor Union, Supervisor, Deputy Director of
the Office and Deputy Secretaries of the Discipline Inspection Commission of the Company from Jun. 2012 to Dec. 2012; has been
acting as the Deputy Party Committee Secretary of Jingzhou Sanonda Holdings Co., Ltd. and the Chief of the Company’s Party
Committee Work Department since January 2017; and he has been the Chairman of the Labor Union, Supervisor and Secretaries of
the Discipline Inspection Commission of the Company since Jan. 2013.
Mr. Li Dejun, acts as the Supervisor of the Company. Mr. Li holds a Doctor degree. He successively acted as Chief Officer, Deputy
Chief, Chief of CCNU and Research Institute of Wuhan Province Commission for Restructuring Economic System and Editor in
Chief of Overview of Private Economy, Secretary General of Research Institute of Hubei Province Commission for Restructuring
Economic System and Hubei Province Culture and Economy Research Society, Chief of Hubei Regional Economic Development
Research Center as well as Independent Director of J.S. Machine, Angel Yeast. From Jul. 2010 to December 2017, he was an
independent director of the Company.
Mr. Guo Zhi, acts as the Supervisor of the Company. He is the China Legal Counsel of ADAMA (China) Investment Co., Ltd. Mr.
Guo got his Master of Laws severally from Peking University and Melbourne University. From 2004 to 2017, he practiced law in
Commerce & Finance Law Offices and had been a partner of that firm for eight years. His practicing area covers IPO, M&A, and
Foreign Investment.
Mr. Li Zhongxi, he has been the Secretary to the Board of Directors since Feb. 2000.
Post-holding in shareholder units
√ Applicable □ Not applicable
Name of the
Position in
person holding Receives payment
the Beginning date Ending date of
any post in any Name of the shareholder unit from the
shareholder of office term office term
shareholder shareholder unit?
unit
unit
Chairman of
the BOD,
Ren Jianxin ChemChina December 2014 Yes
Party
Secretary
GM, Deputy
Yang
ChemChina Party January 2015 Yes
Xingqiang
Secretary
Executive
An Liru Jingzhou Sanonda Holdings Co., Ltd. April2015 No
director, GM
Jiang Deputy Party No
Jingzhou Sanonda Holdings Co., Ltd. December2016
Chenggang Secretary
Hubei Sanonda Co., Ltd. Annual Report 2017
Post-holding in other units
√ Applicable □ Not applicable
Name of the
Receives payment
person holding Beginning date Ending date of
Name of other unit Position in other unit from the other
any post in any of office term office term
unit?
shareholder unit
Ren Jianxin Syngenta A.G. Chairman of the BOD June 2017 No
Ren Jianxin Pirelli & C. S.p.A Chairman of the BOD October 2015 No
Ren Jianxin ADAMA Solutions Director October 2011 No
Yang Xingqiang ADAMA Solutions Chairman of the BOD April 2017 No
Yang Xingqiang Pirelli & C. S.p.A Director November 2015 No
Yang Xingqiang Information Morning Post Legal Representative February 2005 No
Chen
ADAMA Solutions President & CEO October 2017 Yes
Lichtenstein
An Liru ADAMA Solutions Director February 2014 Yes
Head of China September
An Liru ADAMA Solutions Yes
Cluster
Aviram Lahav ADAMA Agricultural Solutions EVP & CFO October 2017 Yes
SVP, General October 2017
Michal Counsel, Company
ADAMA Solutions Yes
Arlosoroff Secretary & CSR
Officer
Tang Yunwei Universal Scientific Industrial
Independent Director April 2017 Yes
(Shanghai) Co., Ltd.
Xi Zhen Professor, Chairman
of Department of
Nankai University Chemical Biology, August 2002 Yes
Fellow of the
University Committee
Xi Zhen National Agrochemical Engineering
Director May 2014 No
Research Center (Tianjin)
Xi Zhen Division of Chemical Biology of
Deputy Director January 2015 No
Chinese Chemical Society
Xi Zhen Agrochemical Science Division of
Chinese Chemical Industry and Deputy Director November 2014 No
Engineering Society
Xi Zhen Suzhou Ribo Life Science Co., Ltd. Director January 2007 Yes
Li Dejun The Economic System Reform
Secretary General December 2009 No
Institute of Hubei Province
Li Dejun Angel Yeast Co., Ltd. Independent Director April 2013 Yes
Hubei Sanonda Co., Ltd. Annual Report 2017
Li Dejun J.S. Machine Independent Director October, 2016 Yes
Particulars about the Company's current directors, supervisors and senior punishments from Securities Regulatory Institution of
recent three years in reporting period
□ Applicable √ Not applicable
IV. Remuneration for directors, supervisors and senior management
Decision-making procedures, basis for determination and actual payment of the remuneration to directors, supervisors and senior
executives
The remunerations are decided by the Company according to the Remuneration Policy.Global professional benchmarks, the
implementation of the performance at the Company level, and the performance of the respective person are the basis for deciding
their remunerations.
Independent directors would not enjoy salary in the Company while the Company would drop annual allowanceto independent
directors respectively. Independent directors would present relevant meetings, perform responsibilities according to Articles of
Association and apply for allowance factually.
Annual salary for supervisors was paid according to their posts.
Remuneration of the directors, supervisors and senior management of the Company during the reporting period is as follow:
Unit RMB’0000
Name Position Gender Age Current/Former Total before-tax Whether gained
remuneration remuneration
gained from the from the related
Company parties of the
Company
Yang Chairman of Male Current Yes
Xingqiang the BOD
Ren Jianxin Director Male 59 Current Yes
Director, Male Current No
Chen
President&
Lichtenstein
CEO
An Liru Director Male 48 Current No
Independent Male Current No
Tang Yunwei
Director
Independent Male Current No
Xi Zhen
Director
Chief Financial Male Current No
Aviram Lahav
Officer
Michal General Legal Female 59 Current No
Hubei Sanonda Co., Ltd. Annual Report 2017
Name Position Gender Age Current/Former Total before-tax Whether gained
remuneration remuneration
gained from the from the related
Company parties of the
Company
Arlosoroff Counsel
Jiang Chairman of Male Current No
Chenggang the Supervisor
Secretary of the Male Current No
Li Zhongxi
BOD
Fu Liping Supervisor Male 52 Former No
Ding Shaojun Supervisor Male 55 Former No
Dong Chunji Supervisor Male 49 Former No
Xu Yan Supervisor Female 45 Former No
Guo Hui Director Male 54 Former No
She Zhili Director Female 53 Former No
Shiri Ailon Director Female 42 Former No
Independent Male Former No
Ai Qiuhong
director
Independent Female Former No
Zhang Huide
director
Independent Male Former No
Li Dejun
director
Liu Anping Male Former No
GM
Yin Hong Vice GM Male 51 Former No
Liu Zhiming GM Assistant Male 42 Former No
Total -- -- -- -- 2,122 --
Situations of equity incentives awarded to the directors, supervisors and senior management of the Company during the reporting
period
□ Applicable √ Not applicable
V. About employees
1. The number of employees and their specialty structure and educational background
The number of on-duty employees in parent company (person) 1,536
Hubei Sanonda Co., Ltd. Annual Report 2017
The number of on-duty employees in main subsidiary companies
(person)
The total number of on-duty employees (person) 1,598
The total number of employees who get salary in the period
1,598
(person)
The number of retired employees who need to pay expense in
1,762
parent company and main subsidiary companies (person)
Specialty classification
Specialty category Number
Production personnel 1,290
Sales personnel
Technicians
Financial personnel
Administrative personnel
Total 1,598
Education classification
Education category Number
Doctor
Master
Bachelor
College
Others
total 1,598
Note: The above table includes information as to the Company only (without Adama Solutions, which as of December 31, 2017
employs on-duty 5,057 employees).
2. Employee’s remuneration policy and training plan
Firstly, the Company renewed and reconfirmed positions and personnel at the beginning of 2017, including salary assessment based
on employees’ performance in June 2017,and released salary after assessing employees’ performance.
Secondly, the Company established legal holiday overtime management regulations, according to the standard prescribed by the
national legal holiday overtime pay.
3. Employee’s training plan and relevant situation
(1) Retrain on-duty employees
During this Reporting Period, the Company actively carried out the work of retraining on-duty employees (not including subsidiaries).
16,104person-time had been retrained and retrain for 3,935.5class hours had been completed. In addition, the retraining was
Hubei Sanonda Co., Ltd. Annual Report 2017
inspected monthly.
(2) Training on new employees and rotational training
The Company organized pre-job training for the current year's graduates, including theoretical knowledge and practical operation
training, especially safety training.
(3) Remote training of class leaders and group leaders
Participated in Tsinghua University remote training of class leaders and group leaders: 37people in the eighth remote learning class
for class leaders and group leaders had attended examination according to plan.
(4) Increasing safety awareness
During the year the Company holds seminars, trainings and exercises and refresh procedures in its plants all over the world, to
increase awareness and strengthen employees’ personal commitment to safety.The system enables the Companyto improve the
quality and update of safety performance data.
4. Labor outsourcing
√ Applicable □ Not applicable
Total number of hours of service outsourcing (hours) 783,000
Total remuneration paid for service outsourcing (RMB) 22,902,315.63
Hubei Sanonda Co., Ltd. Annual Report 2017
Section IX. Corporate Governance
I. Basic details of corporate governance
During the reporting period, the Company continuously improved the awareness of corporate governance and corporate governance
structure and perfected the corporate system as well as standardized the operation of the Company, promoted internal control
activities, and constantly improve the Company's management levels stringently according to requirements of relevant laws and
regulations like the Company Law, Securities Law, and Corporate Governance Principle of Listed Company, as well as Rules for
Listing Shares in Shenzhen Stock Exchange.
During this Reporting Period, according to the spirit of Advices About Insisting on the Lead of Party and Strengthening the
Construction of Party, in the Process of Deepening the Reform of State-Owned Enterprises issued by the Central Committee of the
Communist Party of China and Notification About Accelerating Involvement of General Requirement on the Work of Party Building
of Central Enterprises, into Articles of the Company (G-Z-D-W-D-J [2017] No.1) issued by State-owned Assets Supervision and
Administration Commission, of the State Council and the requirement of Guidance to the Articles of Listed Companies (revised in
2016) issued by China Securities Regulatory Commission;the Company revised its Articles of Associations and included in it the
general requirement on the work of party building.
Whether there is any difference between the corporate governance and the Company Law and relevant rules of CSRC or not?
□ Yes √ No
There is no difference between the corporate governance and the Company Law and relevant rules of CSRC.
II. Particulars about the Company’s separation from the controlling shareholder in respect of
business, personnel, assets, organization and financial affairs
1.In respect of business: the Company had a complete business system and independent operation. There was no competition
between the controlling shareholders.
2.In the aspect of personnel: The Company and controlling shareholder are mutually independent in the labor, personnel and salary
management, the Company CEO and other senior management personnel get the salary in the Company, and not perform
administrative work in the controlling shareholder unit.
3. In respect of assets: The assets relationship betweenthe Companyandthe controlling shareholder is clear.The company has
complete control over all its assets.There is no such thing as a free possession or usage by the controlling shareholder.
4. In respect of financing, the Company owned independent financial department, established independent accounting system and
financial management system, opened independent bank account, paid tax in line with laws.
5. In respect of organization, the Company has set up the organization that was independent from the controlling shareholder
completely, the Board of Directors, the Supervisory Committee and internal organization could operate independently.
Hubei Sanonda Co., Ltd. Annual Report 2017
III. Horizontal competition
√Applicable □ Not applicable
Type Name of Nature of Controlling Cause of the Solutions Work-schedule
Controlling Shareholder problem and follow-up plan
Shareholder
Horizontal ChemChina State-ownedenterprise The subsidiaries ChemChina In performing.
competition controlled by commits itself to
ChemChina are in take appropriate
similar or the same actions to solve the
business as the horizontal
Company. competition
between its
subsidiaries and
the Company
step-by-step in an
appropriate way
within 4 years
after completion of
the assets
restructuring, in
accordance with
securities laws,
regulations and
sector/industrial
policies.
For details, please see III Performance of commitments of Section V of the Annual Report.
IV. Particulars about the annual shareholders’ general meeting and special shareholders’
general meetings held during the reporting period
1. Particulars about the shareholders’ general meeting in reporting period
Proportion of
Index to the
Session Type investors' Convening date Disclosure date
disclosed
participation
Announcement on
the 1stInterim
The 1st Interim Interim Shareholders’
Shareholders’ Shareholders’ 7.90% March 27, 2017 March 28, 2017 Meeting in 2017
Meeting in 2017 Meeting (Announcement
No:2017-20) was
published on
Hubei Sanonda Co., Ltd. Annual Report 2017
www.cninfo.com.cn
Announcement on
the Annual
Shareholders’
The Annual
The Annual Meeting of 2016
Shareholders’ 21.08% May 5, 2017 May 6, 2017
Shareholders’ (Announcement
Meeting of 2016
Meeting No:2017-35) was
published on
www.cninfo.com.cn
Announcement on
the 2ndInterim
Shareholders’
The 2nd Interim Interim
Meeting in 2017
Shareholders’ Shareholders’ 1.17% September 8, 2017 September 9, 2017
(Announcement
Meeting in 2017 Meeting
No:2017-53) was
published on
www.cninfo.com.cn
Announcement on
the 3rd Interim
Shareholders’
The 3rd Interim Interim
Meeting in 2017
Shareholders’ Shareholders’ 80.46% September 29, 2017 September 30, 2017
(Announcement
Meeting in 2017 Meeting
No:2017-62) was
published on
www.cninfo.com.cn
Announcement on
the 4thInterim
Shareholders’
The 4th Interim Interim
Meeting in 2017
Shareholders’ Shareholders’ 80.63% November 15, 2017 November 16, 2017
(Announcement
Meeting in 2017 Meeting
No:2017-69) was
published on
www.cninfo.com.cn
Announcement on
the 5th Interim
Shareholders’
The 5th Interim Interim
Meeting in 2017
Shareholders’ Shareholders’ 77.68% December 25, 2017 December 26, 2017
(Announcement
Meeting in 2017 Meeting
No:2017-79) was
published on
www.cninfo.com.cn
Hubei Sanonda Co., Ltd. Annual Report 2017
2. Special Shareholders’ General Meeting applied by the preferred stockholder with restitution of voting
right
□ Applicable √ Not applicable
V. Performance of the Independent Directors
1. Particulars about the independent directors attending the board sessions and the shareholders’ general
meetings
1. Particulars about the independent directors attending the board sessions
Sessions required Attendance to
Attendance by Entrusted Non-attendance in
to attend during Attendance Absence shareholder
Independent director way of presence person for two
the reporting in person rate meetings
communication (times) consecutive times
period
Li Dejun 17 6 11 No
Zhang Huide 17 6 11 No
Ai Qiuhong 17 6 11 No
Tang Yunwei 1 1 No
Xi Zhen 1 1 No
2. Particulars about independent directors proposing objection on relevant events
Whether independent directors propose objection on relevant events or not?
□ Yes √ No
During the reporting period, no independent directors proposed any objection on relevant events of the Company.
3. Other explanations about the duty performance of independent directors
Whether advices to the Company from independent directors were adopted or not
√ Yes □ No
Explanation on the advices of independent directors for the Company being adopted or not adopted
During the reporting period, the Company independent director according to the Company Law, the Listed Corporate Governance
Standards, \"Articles of Association\" and \"Company of the Independent Director System” focused on the Company operation actively,
independently perform their duties, rendered professional suggestions to the Company's information disclosure and daily
management decision-making, etc. issue the independent and impartial advice to related transactions, hiring annual auditors, guaranty
matters, nominations of directors and senior executives and other events need advice of the independent director, play a proper role in
improving the supervision of company safeguard the legitimate rights and interests of the Company and all shareholders. The
Company especially paid attention to its operation state, dynamic state of the industry, public opinion and dynamic state report about
the Company, and progress of major assets restructuring. It actively and effectively performed the duties of independent directors and
well maintained overall benefits of the Company and the legal interests of all shareholders, especially the middle and small
shareholders. This played positive functions for normalized, stable and healthy development of the Company.
Hubei Sanonda Co., Ltd. Annual Report 2017
VI. Performance of the Special Committees under the Board during the reporting period
(I) Performance of the Audit Committee of the Board: According to regulations of CSRC and Shenzhen Stock Exchange, The Annual
Work System of Independent Director and Detailed Rules for the Implementation of the Audit Committee of the Board of the
Company, and based on the principle of compliance, the Company enables full and free authorization of the supervisory function
during the reporting period. The Audit Committee carefully reviewed the periodical reports, considered the engaging of the auditors,
and other relevant events.Through communicating with the auditors, making annual audit plan and participating in and supervising
the whole process, smooth annual audit work was guaranteed. The audit summary report of audit institution and the suggestions on
employing auditors were submitted to board of directors. This fully satisfied the function of examination and supervision.
(II) Duty performance of the Remuneration & Appraisal Committee under the Board: During the reporting period, the
Remuneration & Appraisal Committee of the Company revised the Remuneration Policy of Senior Management and reviewed the
remuneration of independent directors and senior management.
(III) Duty performance of the Nomination Committee under the Board: During the Reporting Period, the Nomination Committee
discussed the candidates of directors and senior executivesand carefully reviewed the profiles.
(IV) Duty performance of Strategy Committee under the Board:During the reporting period, the Strategy committee performedits
duties; to enhance the competitiveness; the Strategy Committee studied long-term development strategic planning and put forward
suggestions for the Company.
VII. Performance of the Supervisory Committee
During the reporting period, the Supervisory Committee found whether there was risk in the Company in the supervisory activity
□ Yes √ No
The Supervisory Committee has no objection on the supervised events during the reporting period.
VIII. Performance Evaluation and Incentive Mechanism for Senior Management Staff
The performance evaluation and incentives of the senior executives of the Company are based on theRemuneration Policy forSenior
Executives of the Company.The remuneration of senior executives are composed of three parts: (i) base salary; (ii) variable
components - medium and short-term incentives which shall include Annual bonuses based on results and contingent upon targets;
(iii) long term incentives - Share-based cash reward and/or other long-term incentive in the form of cash. The Remuneration Policy
establishes a fair and reasonable performance evaluation and incentives system. It helps to give full play to the talents of the senior
executives and promote the long-term and healthy development of the Company.
IX. Internal Control
1. Particulars about significant defects found in the internal control during reporting period
□ Yes √ No
2. Self-appraisal report on internal control
The Company decided not to disclose the self-appraisal report on internal control of 2017, and the Company did not engage the
external auditors to audit and issue an audit opinion on the internal control of the Company.
Hubei Sanonda Co., Ltd. Annual Report 2017
According to the Circular on Implementing the Corporate Internal Control Regulation System for Main Board Listed Companies in
Batches( Cai Ban Kuai [2012] No.30), the Company satisfies the requirement of “special circumstance” , i.e. the Company
completed the Major Assets Restructuring Project during the reporting period and cannot establish the complete internal control
system during the reporting period. Therefore, the Company will disclose the self-appraisal report on internal control and the audit
report on internal control in the next annual report.
X. Audit report on internal control
□Applicable√Not applicable
Please see the above explanation for not applying the audit report on internal control in 2017.
Hubei Sanonda Co., Ltd. Annual Report 2017
Section X Corporate Bonds
Are there any corporate bonds publicly offered and listed on the stock exchange, which were undue before the
approval date of this Report or were due but could not be redeemed in full?
□ Applicable √ Not applicable
Hubei Sanonda Co., Ltd. Annual Report 2017
Section XIFinancial Report
I．Auditor’s report
Type of auditor’s opinion Standard unqualified opinion
Name of the auditor Deloitte Touche Tohmatsu CPA LLP
Name of CPA Chen Xi, Zhao Yan
Hubei Sanonda Co., Ltd. Annual Report 2017
INDEPENDENT AUDITOR'S REPORT
De Shi Bao (Shen) Zi (18) No P01859
Page 1 of 6
To the shareholders of Hubei Sanonda Co., Ltd.
I. Opinion
We have audited the financial statements of Hubei Sanonda Co., Ltd. (the \"Company) and its subsidiaries
(collectively referred to as the \"Group\"), which comprise the consolidated and the Company's balance
sheets as at December 31, 2017, and the consolidated and the Company's statements of profit or loss and
other comprehensive income, the consolidated and the Company's statements of changes in equity and
the consolidated and the Company's statements of cash flows for the year then ended, and notes to the
financial statements.
In our opinion, the accompanying financial statements of the Group present fairly, in all material
respects, the consolidated and the Company's financial position as of 31 December 2017, and the
consolidated and the Company's results of operations and cash flows for the year then ended in
accordance with Accounting Standards for Business Enterprises.
II. Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under
those standards are further described in the Auditor's Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the Code of
Ethics for Chinese Certified Public Accountants (the \"Code\"), and we have fulfilled our other ethical
responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
III. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. The followings are key audit matters that we have
determined to communicate in the auditor's report.
Hubei Sanonda Co., Ltd. Annual Report 2017
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (18) No P01859
Page 2 of 6
III. Key Audit Matters - continued
1. Recoverability of accounts receivable
1.1 Description
As stated in Note V, 5 to the consolidated financial statements, the book value of accounts receivable
net of allowance of doubtful debts of the Group was RMB5,056,850 thousand as at December 31, 2017,
which was significant for the consolidated financial statements.
As disclosed in Note III, 11 and 31.1, the Group identified the objective evidences of impairment and
evaluates the present value of the underlying future cash flows from recovering of these receivables which
are measured at amortised cost for impairment assessment purpose. The objective evidences of
impairment include observable data showing a significant decline in the expected future cash flows of
individual or combined receivables, and observable data showing significant negative changes in the
debtors' financial positions in individual or combined receivables. The recoverability assessment involved
management estimates and judgements.
For the above reasons, we identified the recoverability of accounts receivable as a key audit matter.
1.2 Audit response
Our procedures in relation to the recoverability of accounts receivable mainly included:
(1) Corroborating the relevant consideration and objective evidences employed by management's
assessment on the recoverability of accounts receivable;
(2) For receivables individually assessed to be impaired, reviewing the supporting documentation for the
estimated future cash flows on a sample basis;
(3) For receivables assessed to be impaired by reference to the credit risk characteristics, assessing the
reasonableness of the Group's assessment on impairment with reference to the credit risk characteristics
combined with the historical losses;
(4) Testing the cash collections subsequent to end of the reporting period on a sample basis.
Hubei Sanonda Co., Ltd. Annual Report 2017
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (18) No P01859
Page 3 of 6
III. Key Audit Matters - continued
2. Valuation of net realisable value of inventories
3.1 Description
As stated in Note V, 8, the carrying amount of inventories net of provisions for impairment of the
Group was RMB7,488,238 thousand as at December 31, 2017, which was significant for the consolidated
financial statements.
As disclosed in Note III, 12.3 and 31.2, the inventories of the Group are stated at the lower of cost and
net realisable value. Provisions for inventories were made when the net realisable values are lower than
the carrying amounts. The determination of the net realisable value of inventories requires management
to estimate the estimated selling prices of the inventories, the costs to be incurred when they are
completed, the sales expenses, and the related taxes and fees, which involved management estimates and
judgements.
For the above reasons, we identified valuation of net realisable value of inventories as a key audit
matter.
3.2 Audit response
Our procedures in relation to assessment of net realisable value of inventories mainly included:
(1) Evaluating the appropriateness and consistency of the methodology of the impairment test ;
(2) Evaluating the inventory age and turnover conditions, and checking the management's identification
of the damaged and slow moving inventories with the inventory monitoring procedures;
(3) Corroborating the key assumptions involved in management's determination of the net realisable
value of inventories, including:
Testing the actual sales prices of the relevant inventories subsequent to end of the reporting period
on a sample basis;
For work in progress, according to their work progress and the actual costs of the relevant finished
goods, assessing the costs to be incurred, on a sample basis;
Assessing the reasonableness of the estimated sales expenses and the related taxes and fees on a
sample basis based on the historical data of the Group.
IV. Other Information
Management of the Company is responsible for the other information. The other information
comprises the information included in the 2017 annual report, but does not include the financial
Hubei Sanonda Co., Ltd. Annual Report 2017
statements and our auditor's report thereon.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (18) No P01859
Page 4 of 6
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information; we are required to report that fact. We have nothing to report in this regard.
V. Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management of the Company is responsible for the preparation of the financial statements that give
a true and fair view in accordance with Accounting Standard for Business Enterprises, and for such internal
control as management determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless management either intends to liquidate the Company or to
ceases operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting
process.
VI. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with China Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Hubei Sanonda Co., Ltd. Annual Report 2017
As part of an audit in accordance with China Standards on Auditing, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (18) No P01859
Page 5 of 6
(1)Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
(2)Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group's internal control.
(3)Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the management.
(4)Conclude on the appropriateness of the management' use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company's ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor's report to the related disclosures in the financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor's report. However, future events or
conditions may cause the Company to cease to continue as a going concern.
VII. Auditor's Responsibilities for the Audit of the Financial Statements - continued
(5) Evaluate the overall presentation, structure and content of the financial statements, including
the disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the financial statements.
We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in internal
Hubei Sanonda Co., Ltd. Annual Report 2017
control that we identify during our audit.
AUDITOR'S REPORT - continued
De Shi Bao (Shen) Zi (18) No P01859
Page6 of 6
We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current year and are
therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Deloitte Touche Tohmatsu CPA LLP Chinese Certified Public Accountant
Shanghai China Chen Xi (Engagement Partner)
Chinese Certified Public Accountant
Zhao Yan
27 March 2018
This independent auditor's report of the financial statements and the accompanying financial statements are English
translations of the independent auditor's report and the financial statements prepared under accounting principles and
practices generally accepted in the People's Republic of China. These financial statements are not intended to present the
balance sheet and results of operations and cash flows in accordance with accounting principles and practices generally
accepted in other countries and jurisdictions. In case the English version does not conform to the Chinese version, the
Chinese version prevails
Hubei Sanonda Co., Ltd. Annual Report 2017
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Consolidated Balance Sheet
December 31 December 31
Notes 2017
Restated
Current assets
Cash at bank and on hand V.1 7,868,858 3,841,547
Financial assets at fair value through profit or loss V.2 23,000 35,594
Derivative financial assets V.3 455,153 637,450
Bills receivables V.4 180,030 108,226
Accounts receivable V.5 5,056,850 5,465,258
Prepayments V.6 202,111 219,218
Other receivables V.7 1,037,836 633,375
Inventories V.8 7,488,238 7,463,957
Assets held for sale V.9 403,297 -
Non-current assets due within one year V.19 46
Other current assets V.10 614,925 510,164
Total current assets 23,330,344 18,914,838
Non-current assets
Available-for-sale financial assets V.11 19,544 20,227
Long-term receivables V.12 192,968 185,648
Long-term equity investments V.13 102,383 104,284
Investment properties 4,408 4,721
Fixed assets V.14 6,141,490 6,797,889
Construction in progress V.15 803,421 483,888
Intangible assets V.16 4,036,588 5,056,201
Goodwill V.17 3,890,097 4,064,312
Deferred tax assets V.18 891,012 646,797
Other non-current assets V.19 201,667 213,707
Total non-current assets 16,283,578 17,577,674
Total assets 39,613,922 36,492,512
The notes on pages 112 to 238 form part of these financial statements.
Hubei Sanonda Co., Ltd. Annual Report 2017
(Expressed in RMB'000)
Consolidated Balance Sheet (continued)
December 31 December 31
Notes 2017
Restated
Current liabilities
Short-term loans V.20 2,280,912 748,163
Derivative financial liabilities V.21 789,050 785,011
Bills payable V.22 311,557 317,403
Accounts payable V.23 3,906,481 3,462,280
Advances from customers V.24 226,711 106,774
Employee benefits payable V.25 995,637 975,391
Taxes payable V.26 431,275 344,113
Interest payable V.27 46,491 73,407
Dividends payable 250 151,074
Other payables V.28 1,375,993 1,756,452
Non-current liabilities due within one year V.29 448,504 634,740
Other current liabilities V.30 482,583 419,151
Total current liabilities 11,295,444 9,773,959
Non-current liabilities
Long-term loans V.31 514,320 1,002,177
Debentures payable V.32 7,777,410 7,417,408
Long-term payables 24,203 21,810
Long-term employee benefits payable V.33 610,714 511,063
Provisions V.34 163,913 166,439
Deferred income V.35 - 167,252
Deferred tax liabilities V.18 224,613 295,765
Other non-current liabilities V.36 225,292 218,845
Total non-current liabilities 9,540,465 9,800,759
Total liabilities 20,835,909 19,574,718
Shareholders' capital
Share capital V.37 2,446,554 593,923
Capital reserve V.38 12,982,277 13,660,829
Less: Treasury shares - 359,431
Other comprehensive income V.39 (154,701) 1,027,107
Including: Translation difference of foreign financial statements 117,111 868,226
Special reserves 9,349 19,862
Surplus reserve V.40 207,823 190,699
Retained earnings V.41 3,286,711 1,784,805
Total shareholders’ equity 18,778,013 16,917,794
Total liabilities and shareholders’ equity 39,613,922 36,492,512
Chen Lichtenstein Aviram Lahav
Legal representative Chief of accounting work & Chief of
accounting organ
These financial statements were approved by the Board of Directors of the Company on March 27, 2018.
Hubei Sanonda Co., Ltd. Annual Report 2017
(Expressed in RMB'000)
Balance Sheet
December 31 December 31
Notes 2017
Current assets
Cash at bank and on hand XV.1 1,868,603 257,541
Bills receivable 146,525 88,457
Accounts receivable XV.2 855,116 611,495
Prepayments 24,019 35,685
Other receivables 1,140 3,083
Inventories 177,402 168,497
Other current assets 1,406 5,738
Total current assets 3,074,211 1,170,496
Non-current assets
Available-for-sale financial assets 8,573 8,573
Long-term equity investments XV.3 15,939,826 55,527
Investment properties 4,408 4,723
Fixed assets 1,262,330 1,475,229
Construction in progress 81,993 21,225
Intangible assets 183,920 196,093
Deferred tax assets 35,064 36,981
Other non-current assets 11,000 7,123
Total non-current assets 17,527,114 1,805,474
Total assets 20,601,325 2,975,970
Current liabilities
Short-term loans 70,000 -
Bills payable 23,000 26,000
Accounts payable 234,615 162,151
Advances from customers 63,904 26,358
Employee benefits payable 30,491 26,353
Taxes payable 19,301 10,662
Interest payable 105 -
Dividends payable 250
Other payables 482,503 172,325
Non-current liabilities due within one year 126,590 147,000
Total current liabilities 1,050,759 571,099
Non-current liabilities
Long-term loans 72,000 196,590
Long-term employee benefits payable 93,025 -
Provisions 15,671 -
Deferred income - 16,667
Other non-current liabilities 171,770 171,770
Total non-current liabilities 352,466 385,027
Total liabilities 1,403,225 956,126
Shareholders’ equity
Share capital V.37 2,446,554 593,923
Capital reserve 15,423,034 263,800
Special reserve 10,040 14,893
Surplus reserve 207,823 190,699
Retained earnings 1,110,649 956,529
Total shareholders’ equity 19,198,100 2,019,844
Total liabilities and shareholders’ equity 20,601,325 2,975,970
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB'000)
Consolidated Income Statement
Year ended December 31
Notes 2017
Restated
I. Total operating income 23,819,568 22,070,405
Including: Operating income V.42 23,819,568 22,070,405
Less: Total operating costs 22,539,364 20,755,606
Including: Cost of sales V.42 15,403,887 14,923,776
Taxes and surcharges V.43 74,759 73,232
Selling and Distribution expenses V.44 4,280,335 4,042,170
General and administrative expenses V.45 1,401,772 1,071,113
Financial expenses, net V.46 1,205,286 434,819
Impairment losses, net V.47 173,325 210,496
Add: Gains (loss) from changes in fair value V.48 269,351 135,076
Investment income (loss), net V.49 73,858 (672,146)
Including: Income (loss) from investment
in associates and joint ventures 22,239 )99,324(
Gain (loss) from disposal of assets 55,160 55,174
II. Operating profit 1,678,573 832,903
Add: Non-operating income 34,103 17,213
Less: Non-operating expenses V.50 44,674 19,343
III. Total profit 1,668,002 830,773
Less: Income tax expense V.51 122,123 76,194
IV. Net profit 1,545,879 754,579
(1). Classified by nature of operations
(1.1). Continuing operations 1,545,879 754,579
(1.2). Discontinued operations - -
(2). Classified by ownership
(2.1). Shareholders of the Company 1,545,879 369,076
(2.2). Non-controlling interests - 385,503
For business combination involving entities under common control occurred during the period, net profit of the
acquiree generated before the business combination is 1,147,797 thousand RMB, net profit of the acquiree attributed
to the shareholders of the company generated in prior period is 829,068 thousand RMB attributed to both shareholders
and non-controlling interest.
103
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB '000)
Consolidated Income Statement (continued)
Year ended December 31
Notes 2017 2016
Restated
V. Other comprehensive income, net of tax V.39 (1,181,808) 911,690
Other comprehensive income (net of tax)
attributable to shareholders of the Company (1,181,808) 701,378
(1) Items that will not be reclassified to profit or loss:
(1.1)Re-measurement of defined benefit planliability (17,178) 6,514
(2) Items that were or will be reclassified to profit or loss
(2.1)Effective portion of gains or loss of cash flow hedge (413,515) 45,993
(2.2) Translation differences of foreign financial statements (751,115) 648,871
Other comprehensive income (net of tax)
attributable to non-controlling interests - 210,312
VI. Total comprehensive income for the year 364,071 1,666,269
Attributable to:
Shareholders of the Company 364,071 1,070,454
Non-controlling interests - 595,815
VII. Earnings per share
(1) Basic earnings per share (Yuan/share) XIV (2) 0.66 0.22
(2) Diluted earnings per share (Yuan/share) N/A N/A
Chen Lichtenstein Aviram Lahav
Legal representative Chief of accounting work & Chief of
accounting organ
These financial statements were approved by the Board of Directors of the Company on March 27, 2018.
104
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB '000)
Income Statement
Year ended December 31
Notes 2017
I. Operating income XV.4 2,898,396 1,830,114
Less: Operating cost XV.4 2,159,982 1,582,723
Taxes and surcharges 20,620 14,158
Selling and Distribution expenses 97,443 80,872
Generaland administrative expenses 317,401 214,619
Financial income (expenses), net 24,808 10,553
Impairment losses 47,818 52,871
Add: Gains (loss) from changes in fair value, net (130)
Investment income (loss) (1,650) 4,407
Including: Income (expense) from investment
in associates and joint ventures - -
Gain (loss) from disposal of assets - 7,492
II. Operating Profit (Loss) 228,544 (113,690)
Add: Non-operating income 2,051 4,590
Less: Non-operating expenses 19,071 -
III. Total profit (loss) 211,524 (109,100)
Less: Income tax expense 40,280 (28,126)
IV. Net profit (loss) 171,244 (80,974)
Continuing operations 171,244 (80,974)
Discontinued operations - -
V. Other comprehensive income, net of tax 171,244 (80,974)
(1) Item that will not be reclassified to profit or loss - -
(2) Item that may be reclassified to profit or loss - -
VI. Total comprehensive income (Loss) for the year 171,244 (80,974)
105
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB '000)
Consolidated Cash Flow Statement
Year ended December 31
Notes 2017
Restated
I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 23,226,321 22,258,492
Refund of taxes and surcharges 44,773 45,716
Cash received relating to other operating activities V.53(1) 801,590 390,925
Sub-total of cash inflows from operating activities 24,072,684 22,695,133
Cash paid for goods and services 13,552,204 12,676,853
Cash paid to and on behalf of employees 2,972,392 2,545,213
Payments of taxes and surcharges 417,818 387,105
Cash paid relating to other operating activities V.53(2) 3,171,881 2,848,817
Sub-total of cash outflows from operating activities 20,114,295 18,457,988
Net cash flows from operating activities V.54(1)(a) 3,958,389 4,237,145
II. Cash flows from investing activities:
Cash received from disposal of investments 37,798
Cash received from returns of investments - 8,964
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets 97,376 70,536
Net cash received from disposal of subsidiaries or other business
units V.54(2) 100,138 -
Cash received relating to other investing activities V.53(3) 29,801 16,514
Sub-total of cash inflows from investing activities 265,113 96,614
Cash paid to acquire fixed assets, intangible assets and
other long-term assets 1,503,343 1,380,559
Net cash paid to acquire subsidiaries or other business units - 62,296
Cash paid relating to other investment activities V.53(4) 49,509 79,264
Sub-total of cash outflows from investing activities 1,552,852 1,522,119
Net cash flows used in investing activities (1,287,739) (1,425,505)
106
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB '000)
Consolidated Cash Flow Statement (continued)
Year ended December 31
Notes 2017
Restated
III. Cash flows from financing activities:
Cash received from capital contributions 1,531,920 -
Cash received from borrowings 2,212,437 577,495
Cash received from other financing activities V.53(5)(b) 7,800 271,770
Sub-total of cash inflows from financing activities 3,752,157 849,265
Cash repayments of borrowings 1,247,395 2,211,176
Cash payment for dividends, profit distributions and interest 764,043 815,519
Including: Dividends paid to non-controlling interest 32,509 134,145
Cash paid relating to other financing activities V.53(6)(b) 104,600 7,800
Sub-total of cash outflows from financing activities 2,116,038 3,034,495
Net cash from (used in) financing activities 1,636,119 (2,185,230)
IV.Effects of foreign exchange rate changes on cash and cash
equivalents (276,258) 233,981
V. Net increase in cash and cash equivalent V.54(3) 4,030,511 860,391
Add: Cash and cash equivalents at the beginning of the year 3,833,747 2,973,356
I. VI.Cash and cash equivalents at the end of the year V.54(3) 7,864,258 3,833,747
107
Hubei Sanonda Co., Ltd. Annual Report
2017
(Expressed in RMB '000)
Cash Flow Statement
Year ended December 31
2017
I. Cash flows from operating activities:
Cash received from sale of goods and rendering of services 1,729,363 1,127,251
Refund of taxes and surcharges 2,884
Cash received relating to other operating activitiesXV.5 8,410 14,987
Sub-total of cash inflows from operating activities 1,740,657 1,142,406
Cash paid for goods and services 844,830 743,994
Cash paid to and on behalf of employees 181,657 181,891
Payments of taxes and surcharges 107,719 64,412
Cash paid relating to other operating activitiesXV.5 210,703 122,496
Sub-total of cash outflows from operating activities XV.6 1,344,909 1,112,793
Net cash flows from operating activities 395,748 29,613
II. Cash flows from investing activities:
Cash received from disposal of investments -
Cash received from returns of investment - 1,461
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets 701 10,625
Cash received relating to other investing activities 548 -
Sub-total of cash inflows from investing activities 1,249 12,686
Cash paid to acquire fixed assets, intangible assets and
other long-term assets 123,995 130,133
Sub-total of cash outflows from investing activities 123,995 130,133
Net cash flows from investing activities (122,746) (117,447)
III.Cash flows from financing activities:
Cash received from capital contributions 1,531,920 -
Cash received from borrowings 75,000 -
Cash received relating to other financing activitiesXV.5 7,800 271,770
Sub-total of cash inflows from financing activities 1,614,720 271,770
Cash repayments of borrowings 150,000 264,000
Cash payment for dividends, profit distributions or interest 16,252 40,885
Cash paid relating to other financing activities XV.5 104,600 7,800
Sub-total of cash outflows from financing activities 270,852 312,685
Net cash used in financing activities 1,343,868 (40,915)
IV.Effects of foreign exchange rate changes on cash and cash equivalents (2,608)
V.Net increase (decrease) in cash and cash equivalents 1,614,262 (128,709)
Add: Cash and cash equivalents at the beginning of the year XV.6 249,741 378,450
VI. Cash and cash equivalents at the end of the year XV.6 1,864,003 249,741
108
Hubei Sanonda Co., Ltd. Annual Report 2017
(Expressed in RMB '000)
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2017
Attributable to shareholders of the Company
Other
Capital Treasury comprehensive Special Surplus Retained
Share capital reserve shares income reserves reserve earnings Total
I. Balance at December 31, 2016 593,923 263,064 - - 19,862 190,966 937,510 2,005,058
Add: Business combination under
common control - 13,397,765 (359,431) 1,027,107 - - 847,295 14,912,736
II. Balance at January 1, 2017 (359,431) 1,027,107 19,862 190,966
(Restated) 593,923 13,660,826 1,784,805 16,917,794
III. Changes in equity for the year 1,852,631 (678,552) 359,431 (1,181,808) (10,513) 17,124 1,501,906 1,896,219
1. Total comprehensive income - - - (1,181,808) - - 1,545,879 364,071
2. Owner’s contributions and reduction 1,852,631 (678,552) 359,431 - - - - 1,533,510
2.1 Issuance of shares 1,915,581 18,088,936 - - - - - 20,004,517
2.2 Repurchase and cancellation
of treasury shares (62,950) (296,481) 359,431 - - - - -
2.3 Consideration paid for business
combination under common
control - (18,471,007) - - - - - (18,471,007)
3. Appropriation of profits - - - - - 17,124 (49,633) (32,509)
3.1 Transfer to surplus reserve - - - - - 17,124 (17,124) -
3.2 Distribution to non-controlling - - - (32,509) (32,509)
interest - - -
4. Special reserve - - - - (10,513) - 5,660 (4,853)
4.1 Transfer to special reserve - - - - 8,360 - - 8,360
4.2 Amount utilized - - - - (13,213) - - (13,213)
4.3 Amount reversed due to disposal
of a subsidiary - - - - (5,660) - 5,660 -
IV. Balance at December 31, 2017 2,446,554 12,982,277 - (154,701) 9,349 207,823 3,286,711 18,778,013
Please refer to Note V. 37 – V.41 for details.
109
Hubei Sanonda Co., Ltd. Annual Report 2017
(Expressed in RMB '000)
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2016 (Restated)
Attributable to shareholders of the Company
Other
Share Capital Treasury comprehensive Special Surplus Retained Non-controlling
capital reserve shares income reserves reserve earnings interest Total
I. Balance at December 31, 2015 593,923 263,063 - - 22,849 190,933 1,026,848 - 2,097,382
Add: Business combination
under common control - 9,102,651 (359,431) 101,489 - - 580,611 4,174,703 13,600,023
II. Balance at January 1, 2016
(Restated) 593,923 9,365,714 (359,431) 101,489 22,849 190,933 1,607,459 4,174,703 15,697,405
III. Changes in equity for the year - 4,295,115 - 925,618 (2,987) - 177,346 (4,174,703) 1,220,389
1. Total comprehensive income - - - 701,378 - - 369,076 595,815 1,666,269
2. Appropriation of profits - - - - - - (191,730) (117,922) (309,652)
2.1 Dividend to non-controlling
interest - - - - - - (16,223) (117,922) (134,145)
2.2 Dividend to Shareholders - - - - - - (175,507) - (175,507)
3. Special reserve - - - - (2,987) - - - (2,987)
3.1 Transfer to special reserve - - - - 8,807 - - - 8,807
3.2 Amount utilized - - - - (11,794) - - - (11,794)
4. Non-controlling interest - 4,295,115 - 224,240 - - - (4,652,596) (133,241)
4.1 Acquisition of non-controlling interest - 4,306,216 - 224,240 - - - (4,530,456) -
4.2 Disposal of non-controlling interest - - - - - - - (17,044) (17,044)
4.3 Share based payment - (11,101) - - - - - (105,096) (116,197)
III. Balance at December 31, 2016 593,923 13,660,823 (359,431) 1,027,107 19,862 190,933 1,784,805 - 16,917,794
110
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
For the year ended December 31, 2017
Attributable to shareholders of the Company
Share Capital Special Surplus Retained
capital reserve reserve reserve earnings Total
I. Balance at January 1, 2017 593,923 263,800 14,893 190,699 956,529 2,019,844
II. Changes in equity for the year 258,15992 15,159,234 (4,853) 17,124 154,120 17,178,256
1. Total comprehensive income - - - - 171,244 171,244
2. Owner’s contributions and reduction 1,852,631 15,159,234 - - - 17,011,865
2.1 Issuance of shares 1,915,581 18,088,936 - - - 20,004,517
2.2 Premium paid in business
Combinationunder common control - (2,580,794) - - - (2,580,794)
2.3 Repurchase and cancellation
(62,950) (348,908) - - - (411,858)
of treasury shares
3. Appropriation of profits - - - 17,124 (17,124) -
3.1 Transfer to surplus reserve - - - 17,124 (17,124) -
4. Special reserve - - (4,853) - - (4,853)
4.1 Transfer to special reserve - - 8,360 - - 8,360
4.2 Amount utilized - - (13,213) - - (13,213)
III. Balance at December 31, 2017 2,446,554 15,423,034 10,040 207,823 1,110,649 19,198,100
For the year ended December 31, 2016
Attributable to shareholders of the Company
Share Capital Special Surplus Retained
capital reserve reserve reserve earnings Total
I. Balance at January 1, 2016 593,923 263,800 17,880 190,699 1,052,352 2,118,654
II. Changes in equity for the year - - (2,987) - (95,823) (98,810)
1. Total comprehensive income - - - - (80,974) (80,974)
2. Appropriation of profits - - - - (14,849) (14,849)
2.1 Dividend to Shareholders - - - - (14,849) (14,849)
3. Special reserve - - (2,987) - - (2,987)
3.1 Transfer to special reserve - - 8,807 - - 8,807
3.2 Amount utilized - - (11,794) - - (11,794)
III. Balance at December 31, 2016 593,923 263,800 14,893 190,699 956,529 2,019,844
111
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
I BASIC CORPORATE INFORMATION
Hubei Sanonda CO., Ltd (the “Company”) is a company limited by shares established in China with its head
office located in Hubei Jingzhou.
During the reporting period a major assets restructuring was successfully completed, with the acquisition of
Adama Agricultural Solutions Ltd (hereinafter: \"Solutions\"), a wholly-owned subsidiary of China National
Agrochemical Corporation Limited (hereinafter: \"CNAC\").
On July 4, 2017 the entire share capital of Solutions was transferred from CNAC to the Company, in return for
the issuance of 1,810,883,039 new shares in the Company to CNAC and their registration for trade on the
Shenzhen Stock Exchange (which was completed on August 2).
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the
Company. The combination was considered as a business combination under common control.
The Company's parent company is CNAC, and the ultimate holding company is China National Chemical
Corporation (hereinafter - “ChemChina”).
On November 24, 2017, the Company completed the cancellation of 62,950,659 B shares held by Adama
Celsius B.V. an indirect wholly owned subsidiary. The shares were repurchased by the company from the
subsidiary prior to the cancellation.
On December 2017, a non-publicly offered of 104,697,982 ordinary shares (A-share) at nominal value of RMB
1 per share to the specific investors. On December 27th, 2017, the Company received proceeds of 1,531,920
thousand RMB, net of the issuing cost of 28,080 thousand RMB. The listing date of the newly-issued
104,697,982 shares was January 17, 2018.
The principal activities of the Company and its subsidiaries (together referred to as the “Group”) are engaged in
development, manufacturing and marketing of agrochemicals, intermediate materials for other industries, food
additives and synthetic aromatic products, mainly for export. For information about the subsidiaries of the
Company, refer to Note VII.
The Company and consolidated financial statements had been approved by the Board of Directors of the
Company on March 27, 2018.
Details of the scope of consolidated financial statements are set out in Note VII \"Interest in other entities\",
whereas the changes of the scope of consolidation are set out in Note VI \"Changes of the scope of
consolidation\".
112
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
II BASIS OF PREPARATION
1. Basis of preparation
The Group has adopted the Accounting Standards for Business Enterprises issued by the Ministry of Finance
(the \"MoF\"). In addition, the Group has disclosed relevant financial information in these financial statements in
accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public
No. 15－General Provisions on Financial Reporting (revised by China Securities Regulatory Commission
(hereinafter \"CSRC”) in 2014).
2. Accrual basis and measurement principle
The Group has adopted the accrual basis of accounting. Except for certain financial instruments which are
measured at fair value and deferred tax assets and liabilities, assets and liabilities relating to employee benefits,
provisions, and investments in associated companies and joint ventures, the Group adopts the historical cost as
the principle of measurement in the financial statements. Where assets are impaired, provisions for asset
impairment are made in accordance with relevant requirements.
In the historical cost measurement, assets obtained shall be measured at the amount of cash or cash equivalents
or fair value of the consideration paid. Liabilities shall be measured at the actual amount of cash or assets
received, or the contractual amount in a present obligation, or the prospective amount of cash or cash
equivalents paid to discharge the liabilities.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing market participants in an arm’s length transaction at the measurement date. Fair value measured and
disclosed in the financial statements are determined on this basis whether it is observable or estimated by
valuation techniques.
The following table provides an analysis, grouped into Levels 1 to 3 based on the degree to which the fair value
input is observable and significant to the fair value measurement as a whole:
Level 1 - based on quoted prices (unadjusted) in active markets;
Level 2 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is observable, either directly or indirectly;
Level 3 - based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Group has performed an assessment of the going concern for the following 12 month from 31 December
2017 and not identify any significant doubtful matter or event on the going concern, as such the financial
statement have been prepared on the going concern basis.
113
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES
1. Statement of compliance
These financial statements are in compliance with the Accounting Standards for Business Enterprises to truly
and completely reflect consolidated and the Company's financial position as at 31 December 2017 and
consolidated and the Company's operating results and cash flows for the year then ended.
2. Accounting period
The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.
3. Business cycle
The company takes the period from the acquisition of assets for processing to their realisation in cash or cash
equivalents as a normal operating cycle. The operating cycle for the company is 12 months.
4. Reporting currency
The Company and its domestic subsidiaries choose Renminbi (hereinafter \"RMB\") as their functional currency.
Functional currencies of overseas subsidiaries are determined on the basis of the principal economic
environment in which the overseas subsidiaries operate. The functional currency of the overseas subsidiaries is
mainly the United States Dollar (hereinafter \"USD\"). The presentation currency of these financial statements is
Renminbi.
5. Business combinations
(1) Business combinations involving enterprises under common control
A business combination involving enterprises under common control is a business combination in which all of
the combining enterprises are ultimately controlled by the same party or parties both before and after the
combination, and that control is not transitory. Assets and liabilities obtained shall be measured at their
respective carrying amounts as recorded by the combining entities at the date of the combination. The difference
between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the
combination is adjusted to the share premium in capital reserve. If the share premium is not sufficient to absorb
the difference, any excess shall be adjusted against retained earnings. Costs that are directly attributable to the
combination are charged to profit or loss in the period in which they are incurred.
During the reporting period a major assets restructuring was successfully completed, with the acquisition of
Solutions, a wholly-owned subsidiary of CNAC. On July 4, 2017 the entire share capital of Solutions was
transferred from CNAC to the Company, in return for the issuance of 1,810,883,039 new shares in the Company
to CNAC and their registration for trade on the Shenzhen Stock Exchange (which was completed on August 2).
114
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
5. Business combination (cont’d)
Following the completion of the major assets restructuring, Solutions became a wholly owned subsidiary of the
Company. The combination was considered as a business combination under common control. Therefore, the
2016 comparative financial information was restated so that the main reports, notes and additional information
includes the information of the combined Company, in accordance with the Accounting Standards for Business
Enterprises.
(2) Business combinations not involving enterprises under common control and goodwill.
A business combination not involving enterprises under common control is a business combination in which all
of the combining enterprises are not ultimately controlled by the same party or parties before and after the
combination.
The costs of business combination are the fair value of the assets paid, liabilities incurred or assumed and equity
instruments issued by the acquirer for the purpose of achieving the control rights over the acquiree.
The intermediary costs such as audit, legal services and assessment consulting costs and other related
management costs that are directly attributable to the combination by the acquirer are charged to profit or loss in
the period in which they are incurred. Direct capital issuance costs incurred in respect of equity instruments or
liabilities issued pursuant to the business combination should be charged to the respect equity instruments or
liabilities upon initial recognition of the underlying equity instruments or liabilities.
The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business
combination, that meet the recognition criteria shall be measured at fair value at the acquisition date. Where the
cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the
difference is treated as an asset and recognized as goodwill, which is measured at cost on initial recognition.
Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s identifiable
net assets, the remaining difference is recognized immediately in profit or loss for the current year.
The goodwill raised because of the business combination should be separately disclosed in the consolidated
financial statement and measured by the initial amount less any accumulative impairment provision.
115
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
6. Basis for preparation of consolidated financial statements
The scope of consolidation in consolidated financial statements is determined on the basis of control. Control is
achieved when the Company has power over the investee; is exposed, or has rights, to variable returns from its
involvement with the investee; and has the ability to use its power to affect its returns.
For a subsidiary disposed of by the Group, the operating results and cash flows before the date of disposal (the
date when control is lost) are included in consolidated income statement and consolidated statement of cash
flows.
For a subsidiary acquired through a business combination not involving enterprises under common control, the
operating results and cash flows from the acquisition date (the date when control is obtained) are included in
consolidated income statement and consolidated statement of cash flows.
For a subsidiary acquired through a business combination involving enterprises under common control, it will
be fully consolidated into consolidated financial statements from the date on which the subsidiary was
ultimately under common control by the same party or parties.
The significant accounting policies and accounting years adopted by the subsidiaries are determined based on
the uniform accounting policies and accounting years set out by the Company. For those subsidiaries acquired
through business combinations not involving enterprises under common control, the identifiable assets and
liabilities recorded in the financial statements of the acquired subsidiaries should be adjusted based on the fair
value determined at the acquisition date.
All significant intra-group balances, transactions and unrealized profits are eliminated on consolidation.
The portion of subsidiaries' equity that is not attributable to the Company is treated as non-controlling interests
and presented as \"non-controlling interests\" in the shareholders’ equity in consolidated balance sheet. The
portion of net profits or losses of subsidiaries for the period attributable to non-controlling interests is presented
as \"non-controlling interests\" in consolidated income statement below the \"net profit\" line item. Total
comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated income
statement below the total comprehensive income line item.
When the amount of loss for the period attributable to the non-controlling shareholders of a subsidiary exceeds
the non-controlling shareholders' portion of the opening balance of owners' equity of the subsidiary, the excess
amount is still allocated against non-controlling interests.
116
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
6. Basis for preparation of consolidated financial statements(cont’d)
Acquisition of non-controlling interests or disposal of equity interest in a subsidiary that does not result in the
loss of control over the subsidiary is accounted for as equity transactions. The carrying amounts of the
Company's interests and non-controlling interests are adjusted to reflect the changes in their relative interests in
the subsidiary. The difference between the amount by which the non-controlling interests are adjusted and the
fair value of the consideration paid or received is adjusted to capital reserve under owners' equity. If the capital
reserve is not sufficient to absorb the difference, the excess is adjusted against retained earnings. Other
comprehensive income attributed to the non-controlling interest is reattributed to the shareholders of the
company.
A put option issued by the Group to holders of non-controlling interests that is settled in cash or other financial
instrument is recognized as a liability at the present value of the exercise price. The Group’s share of a
subsidiary’s profits includes the share of the holders of the non-controlling interests to which the Group issued a
put option.
When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons, any
retained interest is re-measured at its fair value at the date when control is lost. The difference between (i) the
aggregate of the consideration received on disposal and the fair value of any retained interest and (ii) the share
of the former subsidiary's net assets cumulatively calculated from the acquisition date according to the original
proportion of ownership interest is recognized as investment income in the period in which control is lost. Other
comprehensive income associated with the disposed subsidiary is reclassified to investment income in the period
in which control is lost.
7. Classification and accounting methods of joint arrangement
Joint arrangement involves by two or more parties jointly control. Joint control is the contractually agreed
sharing of control over an economic activity, and exists only when the strategic financial and operating
decisions relating to the activity require the unanimous consent of the parties sharing control (the ventures).
The Group makes the classification of the joint arrangements according to the rights and obligations in the joint
arrangements to either joint operations or joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights
to the net assets of the joint arrangement. Joint ventures are accounted for using the equity method.
8. Cash and cash equivalents
Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are the
Group's short-term, highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
117
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies
(1) Transactions denominated in foreign currencies
On initial recognition, foreign currency transactions are translated into functional currency using the spot
exchange rate prevailing at the date of transaction.
At the balance sheet date, foreign currency monetary items are translated into functional currency using the spot
exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot
exchange rates prevailing at the balance sheet date and those on initial recognition or at the previous balance
sheet date are recognized in profit or loss for the period, except that (i) exchange differences related to a
specific-purpose borrowing denominated in foreign currency that qualify for capitalization are capitalized as
part of the cost of the qualifying asset during the capitalization period. (ii) exchange differences related to
hedging instruments for the purpose of hedging against foreign currency risks are accounted for using hedge
accounting.
When preparing financial statements involving foreign operations, if there is any foreign currency monetary
items which in substance forms part of the net investment in the foreign operations, exchange differences arising
from the changes of foreign currency should be recorded as other comprehensive income, and will be
reclassified to profit or loss upon disposal of the foreign operations.
Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional
currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency
remain unchanged.
(2) Translation of financial statements denominated in foreign currency
For the purpose of preparing consolidated financial statements, financial statements of a foreign operation are
translated from the foreign currency into RMB using the following method: assets and liabilities on the balance
sheet are translated at the spot exchange rate prevailing at the balance sheet date; shareholders' equity items
except for retained earnings are translated at the spot exchange rates at the dates on which such items arose; all
items in the income statement as well as items reflecting the distribution of profits are translated at average rate
or at the spot exchange rates on the dates of the transactions; the opening balance of retained earnings is the
translated closing balance of the previous year's retained earnings; the closing balance of retained earnings is
calculated and presented on the basis of each translated income statement and profit distribution item. The
difference between the translated assets and the aggregate of liabilities and shareholders' equity items is
recorded as other comprehensive income. Cash Flows arising from transaction in foreign currency and the cash
flows of a foreign subsidiary are translated at the spot exchange rate on the date of the cash flow, the effect of
exchange rate changes on the cash and cash equivalents is regarded as a reconciling item and present separately
in the statement “effect of foreign exchange rate changes on the cash and cash equivalents\".
118
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
9. Translation of transactions and financial statements denominated in foreign currencies (cont’d)
(2) Translation of financial statements denominated in foreign currency (cont’d)
The opening balances and the comparative figures of prior year are presented at the translated amounts in the
prior year's financial statements.
On disposal of the Group's entire equity interest in a foreign operation, or upon a loss of control over a foreign
operation due to disposal of certain equity interest in it or other reasons, the Group transfers the accumulated
translation differences, which are attributable to the owners' equity of the Company and presented under other
comprehensive income to profit or loss in the period in which the disposal occurs.
In case of a disposal or other reason that does not result in the Group losing control over a foreign operation, the
proportionate share of accumulated translation differences are re-attributed to non-controlling interests and are
not recognized in profit and loss. For partial disposals of equity interest in foreign operations which are
associates or joint ventures, the proportionate share of the accumulated translation differences are reclassified to
profit or loss.
10. Financial instruments
Financial instruments include cash at bank and on hand, investments in debt and equity securities other than
those classified as long-term equity investments, receivables, payables, loans and borrowings, debentures
payable and share capital.
The Company, recognizes financial assets or liabilities when becoming a party to a financial instrument
contract. The financial assets and liabilities were initially recognized at fair value. For the financial assets and
liabilities measured at fair value through profit or loss (FVTPL), related transaction expenses are directly
changed to the profit or loss, for other financial assets and liabilities, related transaction expenses are included in
the initial recognized amount.
10.1 Effective interest method
Effective interest method represents the method for calculating the amortized costs and interest income or
expense of each period in accordance with the effective interest rate of financial assets or financial liabilities
(inclusive of a set of financial assets or financial liabilities). Effective interest rate represents the rate that
discounts the future cash flow over the expected subsisting period or shorter period, if appropriate, of the
financial asset or financial liability to the current carrying value of such financial asset or financial liability.
When calculating the effective interest rate, the Group will consider the anticipated future cash flow (not
considering the future credit loss) on the basis of all contract clauses of financial assets or financial liabilities, as
well as consider all kinds of charges, transaction fees and discount or premium paid forming an integral part of
the effective interest rate paid or received between both parties of financial asset or financial liability contract.
119
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.2 Classification, recognition and measurement of the financial assets
Financial assets are divided into financial assets at fair value through profit or loss, held-to-maturity investments,
loans and the accounts receivable and available-for-sale financial assets when they are initially recognized.
Financial instruments held by the Group are loans and the accounts receivable, financial assets at FVTPL and
available-for-sale financial assets. Financial assets purchased and sold in regular way are recognized and
derecognized based on the accounting at transaction date.
10.2.1 Financial assets and liabilities at fair value through profit or loss (\"FVTPL\")
Financial assets and liabilities at FVTPL include financial assets and liabilities held for trading and those
designated as at fair value through profit or loss.
Financial assets carried at FVTPL are subsequently measured at fair value. The gain or loss arising from changes
in fair value and dividends and interest income related to such financial assets are charged to profit or loss for
the current period.
10.2.2 Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Financial assets classified as loans and receivables by the Group include cash and
bank balances, bills receivable, accounts receivable, interests receivable, dividends receivable, other receivables,
non-current assets due within one year and long-term receivables.
120
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.2 Classification, recognition and measurement of the financial assets(cont’d)
10.2.3 Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are, upon initial recognition
designated as available for sale, and financial assets other than those carried at FVTPL, loans and receivables
and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value, and gains or losses arising from
changes in the fair value are recognized as other comprehensive income, except that impairment losses and
exchange differences related to amortized cost of monetary financial assets denominated in foreign currencies
are recognized in profit or loss, until the financial assets are derecognized, at which time the gains or losses are
released and recognized in profit or loss.
Interest income and cash dividend declared from the available-for-sale financial assets are recognized as
investment income.
For those equity instrument investments with no joint control or significant influence over the investee, and
there is no quoted price in active markets and the fair value of such instrument cannot be measured reliably,
those equity instruments shall be accounted as available-for-sale financial assets and subsequently measured at
cost.
121
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
Loans and receivables and held-to-maturity investments are subsequently measured at amortized cost using the
effective interest method. Gains or losses arising from derecognition, impairment or amortization is recognized
in profit or loss.
10.3 Impairment of financial assets
Except for the financial assets at FVTPL, the Group reviews the book value of other financial assets at each
balance sheet date and provide for impairment where there is objective evidence that financial assets are
impaired. The objective evidence that financial assets are impaired is referred to the matters that happen
subsequent to the initial recognition of the financial assets and have impact on the expected future cash flows of
the financial assets which is able to measure reliably of the impact.
Objective evidence of impairment on financial assets includes those observable matters listed as follow:
- Significant financial difficulty of the issuer or obligor
- A breach of contract by the borrower, such as a default or delinquency in interest of principal payment.
- The group for the economic or legal reason relating to the borrower’s financial difficult, granting a concession
to the borrower.
- It becoming probable that the borrower will enter bankruptcy or other financial reorganizations.
- The disappearance of an active market for the financial asset because of the financial difficulties of the issuer.
- Upon an overall assessment of a group of financial. Observable date indicates that there is a measurable
decrease in the estimated future cash flows from the group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual financial assets in the group,
such observable date includes:
(i) Adverse changes in the payment status of borrower in the group of assets
(ii) Economic conditions in the country or region of the borrower, which may lead to a failure to pay the
group of assets.
- Significant adverse changes in the market, economic or legal environment in which the issuer rate, indicating
that the cost of the investment in the equity instrument may not be recovered by the investor.
- Other objective evidence indicating there is an impairment financial asset.
10.3.1 Impairment of financial assets measured at amortized cost
If financial assets carried at amortized cost are impaired, the carrying amounts of the financial assets are
reduced to the present value of estimated future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original effective interest rate. The amount of reduction is
recognized as an impairment loss in profit or loss. If, subsequent to the recognition of an impairment loss
on financial assets carried at amortized cost, there is objective evidence of a recovery in value of the
financial assets which can be related objectively to an event occurring after the impairment is
recognized, the previously recognized impairment loss is reversed. However, the reversal is made to the
extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed
what the amortized cost would have been had the impairment not been recognized.
122
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.3 Impairment of financial assets (cont’d)
10.3.1 Impairment of financial assets measured at amortized cost (cont’d)
For a financial asset that is individually significant, the Group assesses the asset individually for impairment.
For a financial asset that is not individually significant, the Group assesses the asset individually for impairment
or includes the asset in a group of financial assets with similar credit risk characteristics and collectively
assesses them for impairment. If it is determined that no impairment exists for an individually assessed financial
asset, whether the financial asset is individually significant or not, the financial asset is included in a group of
financial assets with similar credit risk characteristics and collectively assessed for impairment again. Financial
assets for which an impairment loss is individually recognized are not included in the collective assessment for
impairment for a group of financial assets with similar credit risk characteristics.
10.3.2 Impairment of available-for-sale financial assets
When an available-for-sale financial asset at fair value is impaired, the cumulative loss arising from decline in
fair value previously recognized directly in other comprehensive income is transferred out and recognized in
profit or loss. The transferred amount of the cumulative loss is the difference between the acquisition cost (net
of any principal repayment and amortization) and the current fair value, less any impairment loss on that
financial asset previously recognized in profit or loss.
If, subsequent to the recognition of an impairment loss on available-for-sale financial assets, there is objective
evidence of a recovery in value of the financial assets which can be related objectively to an event occurring
after the impairment is recognized, the previously recognized impairment loss is reversed. The amount of
reversal of impairment loss on available-for-sale equity instruments is recognized as other comprehensive
income, while the amount of reversal of impairment loss on available-for-sale debt instruments is recognized in
profit or loss.
10.3.3 Impairment of financial assets measured at cost
If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted price
in an active market) whose fair value cannot be reliably measured, the carrying amount of the financial asset is
reduced to the present value of estimated future cash flows discounted at the current market rate of return for a
similar financial asset. The amount of reduction is recognized as an impairment loss in profit or loss. The
impairment loss on such financial asset is not reversed once it is recognized.
123
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.4 Transfer of financial asset
The Group derecognizes a financial asset if one of the following conditions is satisfied: (i) the contractual rights
to the cash flows from the financial asset expire; or (ii) the financial asset has been transferred and substantially
all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (iii) although the
financial asset has been transferred, the Group neither transfers nor retains substantially all the risks and rewards
of ownership of the financial asset but has not retained control of the financial asset.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset,
and it retains control of the financial asset, it recognizes the financial asset to the extent of its continuing
involvement in the transferred financial asset and recognizes an associated liability. The extent of the Group’s
continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of the
transferred asset.
For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between (i)
the carrying amount of the financial asset transferred; and (ii) the sum of the consideration received from the
transfer and any cumulative gain or loss that has been recognized in other comprehensive income, is recognized
in profit or loss.
10.5 Classification and measurement of financial liabilities
Based on the economic substance rather than the form of legal contracts, along with the definition of financial
liabilities and equity instruments, the Group shall classify the financial instruments or its components as
financial liability or equity instrument at initial recognition.
On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or
loss and other financial liabilities. The financial liabilities held by the Group is other financial liabilities.
Other financial liabilities are subsequently measured at amortized costs by using effective interest method. Gain
or loss arising from derecognition or amortization is recognized in current profit or loss.
124
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.6 Derecognition of financial liabilities
Financial liabilities are derecognized in full or in part only when the present obligation is discharged in full or in
part. An agreement is entered into between the Group (debtor) and a creditor to replace the original financial
liabilities with new financial liabilities with substantially different terms, derecognize the original financial
liabilities as well as recognize the new financial liabilities. When financial liabilities is derecognized in full or in
part, the difference between the carrying amount of the financial liabilities derecognized and the consideration
paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the
current period.
10.7 Derivatives
Derivative financial instruments include forward exchange contracts, currency swaps and foreign exchange
options, etc. Derivatives are initially measured at fair value at the date when the derivative contracts are entered
into and are subsequently re-measured at fair value. The resulting gain or loss is recognized in profit or loss
unless the derivative is designated and highly effective as a hedging instrument, in which case the timing of the
recognition in profit or loss depends on the nature of the hedge relationship.
10.8 Offsetting financial assets and financial liabilities
Financial assets and financial liabilities shall be presented separately in the balance sheet and shall not be offset.
Except for the circumstances where the Group has a legal right that is currently enforceable to set off the
recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the
financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be
offset and the net amount is presented in the balance sheet.
10.9 Equity instruments
The consideration received from the issuance of equity instruments net of transaction costs is recognised in
shareholders’ equity. Consideration and transaction costs paid by the Company for repurchasing self-issued
equity instruments are deducted from shareholders’ equity.
When the Company repurchases its own shares, those shares are treated as treasury shares. All expenditures
relating to the repurchase are recorded in the cost of the treasury shares, with the transaction entering into the
share capital. Treasury shares are excluded from profit distributions and are stated as a deduction under
shareholders’ equity in the balance sheet.
125
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
10. Financial instruments (cont’d)
10.9 Equity instruments (cont’d)
When treasury shares are cancelled, the share capital should be reduced to the extent of the total par value of the
treasury shares cancelled. Where the cost of the treasury shares cancelled exceeds the total par value, the excess
is sequentially deducted from capital reserve (share premium), surplus reserve and retained earnings in that
order. If the cost of treasury shares cancelled is less than the total par value, the difference is recorded in the
capital reserve (share premium).
11. Receivables
Receivables are assessed for impairment on an individual basis and/or on a collective group basis as follows:
Where impairment is assessed on an individual basis, an impairment loss in respect of a receivable is
calculated based on the assessment of collectability of relevant receivables. Impairment losses are recognised
in profit or loss.
The assessment is made collectively where receivables share similar credit risk characteristics, based on their
historical loss experiences, and adjusted by the observable factors reflecting current economic conditions.
(1) Receivables individually significant for which provision for impairment is assessed individually
Basis or monetary criteria for determining A receivable with an amount greater than RMB 125 million is
an individually significant receivable considered to be individually significant.
Method of provisioning for bad and
Determined mostly according to familiarity with the customer, its
doubtful debts for receivables that are
quality and the collateral amount the customer provides.
assessed individually
(2) Receivables for which provision for impairment is assessed collectively in portfolios of credit risk
characteristics
Bad debt provision method by portfolios of credit risk characteristics
Group 1: With credit risk according to aging from issuance date. Aging analysis method
Group 2: With credit risk according to aging from overdue date. Overdue analysis method
Receivables for which provision for impairment is assessed collectively in portfolios of credit risk
characteristics:
126
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
11. Receivables (cont’d)
Aging analysis method Region A:
Aging from issuance date Ratio of the provision for accounts receivable (%)
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Over five years
Overdue analysis method Region B:
Aging from overdue date Ratio of the provision for accounts receivable (%)
Up to 60 days
Between 60 and 180 days
More than 180 days
Legal
(3) Other individually not significant receivables but individually tested for impairment:
There is objective evidence to demonstrate that the
Group is not able to fully recover the receivables
Reasons for making individual bad debt provision
according to the original terms and conditions of the
receivables.
Determined mostly according to familiarity with the
Method of provisioning for bad and doubtful debts
customer, its quality and the collateral amount the
for receivables that are assessed individually
customer provides.
127
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
12. Inventories
(1) Categories of inventories and initial measurement
The Group's inventories mainly include raw materials, work in progress, semi-finished goods, finished goods
and reusable materials. Reusable materials include low-value consumables, packaging materials and other
materials, which can be used repeatedly but do not meet the definition of fixed assets.
Inventories are initially measured at cost. Cost of inventories comprises all costs of purchase, costs of
conversion and other expenditures incurred in bringing the inventories to their present location and condition
including direct labor costs and an appropriate allocation of production overheads.
(2) Valuation method of inventories upon delivery
The actual cost of inventories upon delivery is calculated using the weighted average method.
(3) Basis for determining net realizable value of inventories and provision methods for decline in value of
inventories
At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the net
realizable value is below the cost of inventories, a provision for decline in value of inventories is made. Net
realizable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion, the estimated costs necessary to make the sale and relevant taxes.
After the provision for decline in value of inventories is made, if the circumstances that previously caused
inventories to be written down below cost no longer exist so that the net realizable value of inventories is higher
than their carrying amount, the original provision for decline in value is reversed and the reversal is included in
profit or loss for the period.
(4) The perpetual inventory system is maintained for stock system.
128
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
13. Assets held for Sale
When the Group realizes the carrying value of a non-current asset or a disposal group through sale instead of
continuing operation, such asset is classified as an asset held for sale.
All the following conditions should be met for the non-current asset or disposal group to be classified as held for
sale: (1) ready to be sold in current condition, based on similar transactions or common practices; (2) the sale is
more than likely to happen, i.e. the Group has approved the sale in a resolution and obtained a certain purchase
commitment, and the sale will be closed within one year.
The Group measures the assets held for sales at the lower of book value, and fair value less the cost of the sale.
If the carrying value is higher than the fair value less the cost of the sale, the difference is recognized as asset
impairment loss. If the fair value of the asset held for sale recovered subsequent to the balance sheet date, the
recovery is recognized, limited to the original carrying amount of the asset, and relevant asset impairment loss is
reversed.
Asset held for sale is not depreciated or amortized.
129
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
14. Long-term equity investments
Long-term equity investments include investments in subsidiaries, joint ventures and associates.
Subsidiaries are the companies that are controlled by the Company. Associates are the companies over which
the Group has significant influence. Joint ventures are joint arrangements over which the Group has joint control
along with other investors and has rights to the net assets of the joint arrangement.
The Company accounts for the investment in subsidiaries at historical cost in the Company's financial
statements. Investments in associates and joint ventures are accounted for under equity method.
(1) Determination of investment cost
For a long-term equity investment acquired through a business combination involving enterprises under
common control, the investment cost of the long-term equity investment is the share of the carrying amount of
the shareholders' equity of the acquiree attributable to the ultimate controlling party at the date of combination.
For a long-term equity investment acquired through business combination not involving enterprises under
common control, the investment cost of the long-term equity investment is the cost of acquisition. Fora business
combination not involving enterprises under common control achieved in stages that involves multiple exchange
transactions, the initial investment cost is carried at the aggregate of the carrying amount of the acquirer’s
previously held equity interest in the acquiree and the new investment cost incurred on the acquisition date.
Regarding the long-term equity investment acquired otherwise than through a business combination, if the
long-term equity investment is acquired by cash, the historical cost is determined based on the amount of cash
paid and payable; if the long-term equity investment is acquired through the issuance of equity instruments, the
historical cost is determined based on the fair value of the equity instruments issued.
(2) Subsequent measurement and recognition of profit or loss
If the long-term equity investment is accounted for at cost, it should be measured at historical cost less
accumulated impairment losses. Dividend declared by the investee should be accounted for as investment
income.
Under the equity method, where the initial investment cost of a long-term equity investment exceeds the
Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment
is made to the initial investment cost. Where the initial investment cost is less than the Group’s share of the fair
value of the investee’s identifiable net assets at the time of acquisition, the difference is recognized in profit or
loss for the period, and the cost of the long-term equity investment is adjusted accordingly.
130
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
14. Long-term equity investments (cont’d)
(2) Subsequent measurement and recognition of profit or loss (cont’d)
Under the equity method, the Group recognizes its share of the net profit or loss and other comprehensive
income of the investee for the period as investment income or loss and other comprehensive income for the
period. The Group recognizes its share of the investee’s net profit or loss based on the fair value of the
investee’s individual separately identifiable assets, etc. at the acquisition date after making appropriate
adjustments to be confirmed with the Group's accounting policies and accounting period.The Group
discontinues recognizing its share of net losses of the investee after the carrying amount of the long-term equity
investment together with any long-term interests that in substance form part of its net investment in the investee
is reduced to zero. If the Group has incurred obligations to assume additional losses of the investee, a provision
is recognized according to the expected obligation, and recorded as investment loss for the period.
(3) Basis for determining control, joint control and significant influence over investee
Control is achieved when the Company has power over the investee; is exposed, or has rights, to variable returns
from its involvement with the investee; and has the ability to use its power to affect its returns.
Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the
strategic financial and operating policy decisions relating to the activity require the unanimous consent of the
parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies.
When determining whether an investing enterprise is able to exercise control or significant influence over an
investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held
by the investing enterprises or other parties that are currently exercisable or convertible shall be considered.
(4) Methods of impairment assessment and determining the provision for impairment loss
If the recoverable amounts of the investments to subsidiaries, joint ventures and associates are less than their
carrying amounts, an impairment loss should be recognized to reduce the carrying amounts to the recoverable
amounts (Note III21).
(5) The disposal of long-term equity investment
On disposal of a long term equity investment, the difference between the proceeds actually received and
receivable and the carrying amount is recognized in profit or loss for the period.
131
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
15. Investment properties
Investment property refers to real estate held to earn rentals or for capital appreciation, or both, including leased
land use rights, land use rights held and provided for transferring after appreciation and leased constructions,
etc.
Investment property is initially measured at cost. Subsequent expenditures related to an investment property
shall be included in cost of investment property only when the economic benefits associated with the asset will
likely flow to the Group and its cost can be measured reliably. All other subsequent expenditures on investment
property shall be included in profit or loss for the current period when incurred.
The Group adopts cost method for subsequent measurement of investment property, which is depreciated or
amortized using the same policy as that for buildings and land use rights.
When an investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the
property net of the carrying amount and related taxes and surcharges is recognized in profit or loss for the
current period.
16. Fixed assets
(1) Recognition criteria for fixed assets
Fixed assets include buildings and structures, machinery and equipment, transportation vehicles, office
equipment and others.
Fixed assets are tangible assets that are held for use in the production or supply of goods or for administrative
purposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when it is
probable that economic benefits associated with the asset will flow to the Group and the cost of the asset can be
reliably measured. Purchased or constructed fixed assets are initially measured at cost when acquisition.
Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it is
probable that economic benefits associated with the asset will flow to the Group and the subsequent
expenditures can be measured reliably. Other subsequent expenditures are recognized in profit or loss in the
period in which they are incurred.
132
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
16. Fixed assets (cont’d)
(2) Depreciation of each category of fixed assets
Fixed asset is depreciated based on the cost of fixed asset recognized less expected net residual value over its
useful life using the straight-line method since the month subsequent to the one in which it is ready for intended
use. Depreciation is calculated based on the carrying amount of the fixed asset after impairment over the
estimated remaining useful life of the asset. The estimated useful lives, estimated residual values and annual
depreciation rate of fixed assets are reviewed at each year end date to assess if any change is needed. The
estimated useful life, estimated net residual value and annual depreciation rate of each category of fixed assets
are as follows:
Residual
Useful life Annual depreciation
Category Depreciation value
(years) rate (%)
(%)
Buildings the straight-line method 15-50 0%-4% 1.9-6.7
Machinery and equipment the straight-line method 3-22 0%-4% 4.4-33.3
Office and other equipment the straight-line method 3-17 0%-4% 5.6-33.3
Motor vehicles the straight-line method 5-9 0%-2% 10.9-20.0
(3) Other explanations
If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or
disposal, the fixed asset is derecognized. When a fixed asset is sold, transferred, retired or damaged, the amount
of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognized in profit or
loss for the period.
The difference between recoverable amounts of the fixed assets under the carrying amount is referred to as
impairment loss (Note III 21).
The Group reviews the useful life and estimated net residual value of a fixed asset and the depreciation method
applied at least once at each financial year-end, and account for any change as a change in an accounting
estimate.
133
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
17. Construction in progress
Construction in progress is measured at its actual costs. The actual costs include various construction,
installation costs, borrowing costs capitalized and other expenditures incurred until such time as the relevant
assets are completed and ready for its intended use. When the asset concerned is ready for its intended use, the
cost of the asset is transferred to fixed assets and depreciated starting from the following month.
The difference between recoverable amounts of the construction in progress under the carrying amount is
referred to as impairment loss (Note III21).
18. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying asset are
capitalized when expenditures for such asset and borrowing costs are incurred and activities relating to the
acquisition, construction or production of the asset that are necessary to prepare the asset for its intended use or
sale have commenced. Capitalization of borrowing costs ceases when the qualifying asset being acquired,
constructed or produced becomes ready for its intended use or sale. Borrowing costs incurred subsequently
should be charged to profit or loss. Capitalization of borrowing costs is suspended during periods in which the
acquisition, construction or production of a qualifying asset is suspended abnormally and when the suspension is
for a continuous period of more than 3 months. Capitalization is suspended until the acquisition, construction or
production of the asset is resumed.
Where funds are borrowed under a specific-purpose borrowing, the amount of interest to be capitalized is the
actual interest expenses incurred on that borrowing for the period less any bank interest earned from depositing
the borrowed funds before being used on the asset or any investment income on the temporary investment of
those funds.
Where funds are borrowed under general-purpose borrowings, the Group determines the amount of interest to be
capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess of
cumulative expenditures on the asset over the amounts of specific-purpose borrowings. The capitalization rate is
the weighted average of the interest rates applicable to the general-purpose borrowings.
During the capitalization period, exchange differences on foreign currency specific-purpose borrowing are fully
capitalized whereas exchange differences on foreign currency general-purpose borrowing is charged to profit or
loss.
134
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
19. Intangible assets
(1) Valuation methods, service life, impairment test
The Group’s intangible assets include product registration assets, Intangible assets upon purchase of products,
marketing rights and rights to use trademarks, land use rights and software. Intangible assets are statute at the
balance sheet at cost less accumulated amortization and impairment losses.
When an intangible asset with a finite useful life is available for use, its original cost less any accumulated
impairment losses is amortized over its estimated useful life using the straight-line method. An intangible asset
with an indefinite useful life is not amortized.
For an intangible asset with a finite useful life, the Group reviews the useful life and amortization method at the
end of the year, and makes adjustments when necessary.
The respective amortization periods for such intangible assets are as follows:
Item Amortization period (years)
Land use rights 49-50 years
Product registration 8 years
Intangible assets upon purchase of products 20 years
Marketing rights and Rights to use trademarks 4-10 years
Software 3-5 years
The difference between recoverable amounts of the intangible assets under the carrying amount is referred to as
impairment loss (III18).
(2) Research and development expenditure
Internal research and development project expenditures were classified into research expenditures and
development expenditures depending on its nature and the greater uncertainty whether the research activities
becoming to intangible assets.
Expenditure during the research phase is recognized as an expense in the period in which it is incurred.
Expenditure during the development phase that meets all of the following conditions at the same time is
recognized as intangible asset:
- It is technically feasible to complete the intangible asset so that it will be available for use or sale;
- The Group has the intention to complete the intangible asset and use or sell it;
- The Group can demonstrate the ways in which the intangible asset will generate economic benefits;
- The availability of adequate technical, financial and other resources to complete the development and the
ability to use or sell the intangible asset;
- The expenditure attributable to the intangible asset during its development phase can be reliably measured.
135
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
19. Intangible assets (cont’d)
Expenditures that do not meet all of the above conditions at the same time are recognized in profit or loss when
incurred. If the expenditures cannot be distinguished between the research phase and development phase, the
Group recognizes all of them in profit or loss for the period. Expenditures that have previously been recognized
in the profit or loss would not be recognized as an asset in subsequent years. Those expenditures capitalized
during the development stage are recognized as development costs incurred and will be transferred to intangible
asset when the underlying project is ready for an intended use.
20. Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s interest in the fair
value of the identifiable net assets of the acquiree under a business combination not involving enterprises under
common control.
Goodwill is not amortised and is stated in the balance sheet at cost less accumulated impairment losses (see Note III
21). On disposal of an asset groupor a set of asset groups, any attributable goodwill is written off and included in the
calculation of the profit or loss on disposal.
21. Impairment of long-term assets
The Company assesses at each balance sheet date whether there is any indication that the fixed assets,
construction in progress, intangible assets with finite useful lives, investment properties measured at historical
cost, investments in subsidiaries, joint ventures and associates may be impaired. If there is any indication that
such assets may be impaired, recoverable amounts are estimated for such assets. The recoverable amount of an
asset is the higher of its fair value less costs to sell and the present value of the future cash flow estimated to be
derived from the asset. The Group estimates the recoverable amount on an individual basis. If it is not possible
to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the
asset group to which the asset belongs. Identification of an asset group is based on whether major cash inflows
generated by the asset group are largely independent of the cash inflows from other assets or asset groups.
136
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
21. Impairment of long-term assets (cont’d)
Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of
whether there is any indication that the asset may be impaired. For the purpose of impairment testing, the
carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a
reasonable basis to each of the related asset groups; if it is impossible to allocate to the related asset groups, it is
allocated to each of the related set of asset groups. Each of the related asset groups or set of asset groups is an
asset group or set of asset group that is able to benefit from the synergies of the business combination and shall
not be larger than a reportable segment determined by the Group. If the carrying amount of the asset group or
set of asset groups is higher than its recoverable amount, the amount of the impairment loss first reduced by the
carrying amount of the goodwill allocated to the asset group or set of asset groups, and then the carrying amount
of other assets (other than the goodwill) within the asset group or set of asset groups, pro rata based on the
carrying amount of each asset.
Once the impairment loss of such assets is recognized, it is not be reversed in any subsequent period.
22. Employee benefits
(1) Short-term employee benefits
Employee wages or salaries, bonuses, social security contributions, measured on a non-discounted basis, and the
expense is recorded when the related service is provided. A provision for short-term employee benefits in
respect of cash bonuses is recognized in the amount expected to be paid where the Group has a current legal or
constructive obligation to pay the said amount for services provided by the employee in the past and the amount
can be estimated reliably.
(2) Post-employment benefits
Post-employment benefits are classified into defined contribution plans and defined benefit plans.
A defined contribution plan is a post-employment benefit plan under which the Group pays contributions to a
separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions
to defined contribution plans are recognized as an expense in profit or loss in the periods during which related
services are rendered by employees.
137
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
22. Employee benefits (cont’d)
(2) Post-employment benefits (cont’d)
Defined benefit plans of the Group are post-employment benefit plans other than defined contribution plans. In
accordance with the projected unit credit method, the Group measures the obligations under defined benefit
plans using unbiased and mutually compatible actuarial assumptions to estimate related demographic variables
and financial variables, and discount obligations under the defined benefit plans to determine the present value
of the defined benefit liability. The discount rate used is the yield on the reporting date on highly-rated corporate
debentures denominated in the same currency, that have maturity dates approximating the terms of the Group’s
obligation.
The Group attributes benefit obligations under a defined benefit plan to periods of service provided by
respective employees. Service cost and interest expense on the defined benefit liability are charged to profit or
loss and remeasurements of the defined benefit liability are recognised in other comprehensive income.
)9( Termination benefits
When the Group terminates the employment with employees or provides compensation under an offer to
encourage employees to accept voluntary redundancy, a provision is recognised with a corresponding expense
in profit or loss at the earlier of the following dates:
- When the Group cannot unilaterally withdraw the offer of termination benefits because of an employee
termination plan or a curtailment proposal.
- When the Group has a formal detailed restructuring plan involving the payment of termination benefits and
has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement
that plan or announcing its main features to those affected by it.
If the benefits are payable more than 12 months after the end of the reporting period, they are discounted to their
present value. The discount rate used is the yield on the reporting date on highly-rated corporate debentures
denominated in the same currency, that have maturity dates approximating the terms of the Group’s obligation.
(4) Other long-term employee benefits
The Group’s net obligation for long-term employee benefits, which are not attributable to post-employment
benefit plans, is for the amount of the future benefit to which employees are entitled for services that were
provided during the current and prior periods.
The amount of these benefits is discounted to its present value and the fair value of the assets related to these
obligations is deducted therefrom. The discount rate used is the yield on the reporting date on highly-rated
corporate debentures denominated in the same currency, that have maturity dates approximating the terms of the
Group’s obligation.
138
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
23. Provisions
Provisions are recognized when the Group has a present obligation related to a contingency, it is probable that
an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be
measured reliably.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the settlement date, taking into account factors pertaining to a contingency such as the risks,
uncertainties and time value of money. Where the effect of the time value of money is material, the amount of
the provision is determined by discounting the related future cash outflows. The increase in the provision due to
passage of time is recognized as interest expense.
If all or part of the provision settlements is reimbursed by third parties, when the realization of income is
virtually certain, then the related asset should be recognized. However, the amount of related asset recognized
should not be exceeding the respective provision amount.
At the balance sheet date, the amount of provision should be re-assessed to reflect the best estimation then.
139
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
24. Share-based payment
Share-based payment refers to the transaction in order to require the service offered by the employees or other
parties that grants equity instruments or liabilities on the basis of the equity instruments. Share-based payment
classified into equity-settled share-based payment and cash-settled share-based payment.
(1) Cash-settled share-based payment
The cash-settled share-based payment should be measured according to the fair value of the liabilities
recognized based on the shares or other equity instrument undertaken by the Company. For cash-settled
share-based payment made in return for the rendering of employee services that cannot be exercised until the
services are fully provided during the vesting period or specified performance targets are met, on each balance
sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate
of the number of exercisable instruments, be recognized in relevant expenses and the corresponding liabilities at
the fair value of the liability incurred by the Company.
On each balance sheet date and the settlement date before the settlement of the relevant liabilities, the Company
should re-measure the fair value of the liabilities and its changes should be included in the current gains and
losses.
25. Revenue
The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group's activities as
described below:
(1) Revenue from sale of goods
Revenue from sale of goods is recognized when:
- The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
- The Group retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
- The amount of revenue can be measured reliably;
- It is probable that the associated economic benefits will flow to the Group;
- The associated costs incurred or to be incurred can be measured reliably.
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable under
the sales contract or agreement.
The timing of transferring the risks and rewards changes according to the specific terms of the sale contract.
(2) Interest income
Interest income is recognized on a time proportion basis with reference to the principal outstanding and the
applicable effective interest rate.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
140
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
26. Government grants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Group
at no consideration, including tax returns, financial subsidies and so on. A government grant is recognized only
when the Group can comply with the conditions attaching to the grant and the Group will receive the grant.
If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or
receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair
value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a
nominal amount is recognized immediately in profit or loss for the period.
(1) The basis of judgment and accounting method of the government grants related to assets
Government grants obtained for acquiring long-term assets are government grants related to assets.
A government grant related to an asset is offset with the cost of the relevant asset.
(2) The basis of judgment and accounting method of the government grants related to income
For a government grant related to income, if the grant is a compensation for related expenses or losses to be
incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or loss over
the periods in which the related costs are recognized. If the grant is a compensation for related expenses or
losses already incurred, the grant is recognized immediately in profit or loss for the period.
Government grants related to the Group’s normal course of business are offset with related costs and expenses.
Government grants related that are irrelevant with the Groups’s normal course of business are included in
non-operating gains.
141
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
27. Deferred tax assets/deferred tax liabilities
The income tax expenses include current income tax and deferred income tax.
(1) Current income tax
At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are measured
at the amount expected to be paid (or recovered) according to the requirements of tax laws.
(2) Deferred tax assets and deferred tax liabilities
For temporary differences between the carrying amounts of certain assets or liabilities and their tax base.
All taxable temporary differences are recognized as related deferred tax liabilities under normal circumstances.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available
against which the deductible losses and tax credits can be utilized.
For deductible losses and tax credits that can be carried forward, deferred tax assets are recognized to the extent
that it is probable that future taxable profits will be available against which the deductible losses and tax credits
can be utilized. However, for deductible temporary differences associated with the initial recognition of
goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination)
that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no
deferred tax asset or liability is recognized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates, according to tax laws,
that are expected to apply in the period in which the asset is realized or the liability is settled.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the timing
of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The Group may be required to pay additional tax in case of distribution of dividends by the Group companies.
This additional tax was not included in the financial statements, since the policy of the Group is not to distribute
in the foreseeable future a dividend which creates a significant additional tax liability.
142
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
27. Deferred tax assets/deferred tax liabilities (cont’d)
Except for those current income tax and deferred tax charged to comprehensive income or shareholders’ equity
in respect of those transactions or events which have been directly recognized in other comprehensive income or
shareholders’ equity, and deferred tax recognized on business combinations, all other current income tax and
deferred tax items are charged to profit or loss in the current year.
At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer
probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets to
be utilized. Such reduction is reversed when it becomes probable that sufficient taxable profits will be available.
(3) Offset of income tax
When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realize
the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and
presented on a net basis.
When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets
and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to settle current tax assets and liabilities on a net
basis or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of
deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are
offset and presented on a net basis.
143
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
28. Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
(1) The Group as lessee under operating leases
Operating lease payments are recognized on a straight-line basis over the term of the relevant lease, and are
either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred
are charged to profit or loss for the period.
(2) The Group as lessor under operating leases
Rental income from operating leases is recognized in profit or loss on a straight-line basis over the term of the
relevant lease. Initial direct costs with more than an insignificant amount are capitalized when incurred, and are
recognized in profit or loss on the same basis as rental income over the lease term. Other initial direct costs with
an insignificant amount are charged to profit or loss in the period in which they are incurred.
(3) The Group as lessee under finance leases
At the commencement of the lease term, the Group records the leased asset at an amount equal to the lower of
the fair value of the leased asset and the present value of the minimum lease payments at the inception of the
lease, and recognizes a long-term payable at an amount equal to the minimum lease payments. The difference
between the recorded amounts is accounted for as unrecognized finance charge. Besides, initial direct costs that
are attributable to the leased item incurred during the process of negotiating and securing the lease agreement
are also added to the amount recognized for the leased asset.
Unrecognized finance charges are recognized as finance charge for the period using the effective interest
method over the lease term. Contingent rents are credited to profit or loss in the period in which they are
actually incurred. The net amount of minimum lease payments less unrecognized finance charges is separated
into long-term liabilities and the portion of long-term liabilities due within one year for presentation.
144
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
29. Other significant accounting policies and accounting estimates
29.1 Hedging
The Group uses derivative financial instruments to hedge its risks related to foreign currency and inflation risks
and derivatives that are not used for hedging.
Hedge accounting
On the commencement date of the accounting hedge, the Group formally documents the relationship between
the hedging instrument and hedged item, including the Group’s risk management objectives and strategy in
executing the hedge transaction, together with the methods that will be used by the Group to assess the
effectiveness of the hedging relationship.
The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedge is expected to be “highly effective” in offsetting the changes in the fair value of cash flows
that can be attributed to the hedged risk during the period for which the hedge is designated, and whether the
actual results of each hedge are within a range of 80–125 percent.
With respect to a cash-flow hedge, a forecasted transaction that constitutes a hedged item must be highly
probable and must give rise to exposure to changes in cash flows that could ultimately affect profit or loss.
Measurement of derivative financial instruments
Derivative financial instruments are recognized initially at fair value; attributable transaction costs are
recognized in profit or loss as incurred.
- Cash-flow hedges
Subsequent to the initial recognition, changes in the fair value of derivatives used to hedge cash flows are
recognized through other comprehensive income directly in a hedging reserve, with respect to the part of the
hedge that is effective. Regarding the portion of the hedge that is not effective, the changes in fair value are
recognized in profit and loss. The amount accumulated in the hedging reserve is reclassified to profit and loss in
the period in which the hedged cash flows impact profit or loss and is presented in the same line item in the
statement of income as the hedged item.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, the hedge accounting is discontinued. The cumulative gain or loss previously recognized in a hedging
reserve through other comprehensive income remains in the reserve until the forecasted transaction occurs or is
no longer expected to occur. If the forecasted transaction is no longer expected to occur, the cumulative gain or
loss in respect of the hedging instrument in the hedging reserve is reclassified to profit or loss.
145
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
29.1. Hedging (cont’d)
- Economic hedge
Hedge accounting is not applied with respect to derivative instruments used to economically hedge financial
assets and liabilities denominated in foreign currency or CPI linked. Changes in the fair value of such
derivatives are recognized in profit or loss as financing income or expenses.
- Derivatives that are not used for hedging
Changes in the fair value of derivatives that are not used for hedging are recognized in profit or loss as financing
income or expenses.
29.2. Securitization of assets
Details of the securitization of asset agreements and accounting policy are set out in Note V.5 Account
receivables
29.3. Segment reporting
Reportable segments are identified based on operating segments which are determined based on the structure of
the Group’s internal organisation, management requirements and internal reporting system.
Two or more operating segments may be aggregated into a single operating segment if the segments have
similar economic characteristics and are same or similar in respect of the nature of each product and service, the
nature of production processes, the type or class of customers for the products and services, the methods used to
distribute the products or provide the services, and the nature of the regulatory environment.
Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment
reporting. Segment accounting policies are consistent with those for the consolidated financial statements.
29.4. Profit distributions to shareholders
Dividends which are approved after the balance sheet date are not recognised as a liability at the balance sheet
date but are disclosed in the notes separately.
146
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
30. Changes in significant accounting policies and accounting estimates
(1) Changes in significant accounting policies
The contents and reasons for the changes of accounting policies Process for
management
approval
The changes of accounting policies of the Group are as follows:
1. The Group began to apply the newly issued Accounting Standard for
Business Enterprise No.42 Held-for-sale Non-current Assets and
Disposal Groups and Discontinued Operations (\"CAS42\") since 28 May
2017.
2. The Group began to apply the newly issued Accounting Standard for
Business Enterprise No.16 - Government Grants (\"CAS16\") since 12
June 2017.
Besides, these financial statements were prepared under the
requirements of the newly issued \"the Notice of the Revised Format of
Financial Statements for General Business Enterprise\"(\"Notice
No.2017-30\") by MOF on 25 December 2017.
Non-current assets held for sale and Disposal Groups, and This change of
discontinued operations: accounting policy was
approved by the board
CAS42 sets out requirements for the classification, measurement and or shareholder's
presentation of non-current assets held for sale and Disposal Groups, meeting in 2018.3.27
and the disclosure of profit from continuing operations and discontinued
operations separately listed in Income Statement and detailed
information of non-current assets held for sale and Disposal Groups in
financial statement notes. According to CAS42's requirements, the
Group adopted prospective application method for treating this change
of accounting policy, so there exists no impact on the comparative
financial statements.
147
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
30.Changes in significant accounting policies and accounting estimates(cont’d)
(1) Changes in significant accounting policies(cont’d)
The contents and reasons for the changes of accounting policies Process for
management
approval
Government grants: This change of
accounting policy
Before applying the newly issued CAS16, the Group adopted the following was approved by
accounting treatment towards government grants: (i) A government grant the board or
related to an asset shall be recognised as deferred income, and evenly shareholder's
amortised to profit or loss over the useful life of the related assets. (ii) A meeting in
government grant related to income shall be accounted for as follows: (a) if 2018.3.27
the grant was a compensation for related expenses or losses to be incurred
by the enterprise in subsequent periods, the grant would be recognised as
deferred income, and recognised in profit or loss over the periods in which
the related costs are recognised. (b) if the grant was a compensation for
related expenses or losses already incurred by the enterprise, the grant
would be recognised immediately in profit or loss for the current period.
After applying the newly issued CAS16, the Group adopted the following
accounting treatment towards government grants:
(i) A government grant related to an asset would be deducted the book
value of relevant assets.
(ii) A government grant related to income shall be accounted for as
follows: (a) if the grant was a compensation for related expenses or losses
to be incurred by the enterprise in subsequent periods, the grant would be
recognised as deferred income, and recognised in profit or loss over the
periods in which the related costs are recognized by deducting the relevant
cost; b) if the grant was a compensation for related expenses or losses
already incurred by the enterprise, the grant would be recognized
immediately in profit or loss by deducting the relevant cost and expenses.
(iii) A government grant related to daily business activities shall be deduct
from the relevant cost and expense; A government grant not related to daily
business activities shall be accounted for Non-operating income.
The Group adopted prospective application method for treating this change
of accounting policy, so there exists no impact on the comparative financial
statements.
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
148
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
30. Changes in significant accounting policies and accounting estimates (cont’d)
(1) Changes in significant accounting policies(cont’d)
The contents and reasons for the changes of accounting policies Process for
management
approval
The presentation of gain/(loss) on disposal of assets:
Before the Notice No.2017-30 was issued by MOF, the Group presented
the gain/(loss) on disposal of non-current assets held for sale (except for
financial instruments, long-term equity investment and investment
property) or group of disposed assets, as well as the gain/(loss) on disposal
of fixed assets, construction in process and intangible assets that were not
classified as non-current assets held for sale under the account
\"Non-operating income\" and \"Non-operating expenses\". After the Notice
No.2017-30 was issued by MOF, the gain/(loss) as stated above were
presented under the account \"Gain/(loss) on disposal of assets\".
The Group adopted the above changes of presentation retrospectively, and
the comparative amounts for prior periods were adjusted accordingly.
(2) Changes in significant accounting estimates
There are no significant changes in accounting estimates in the reporting period.
149
HUBEI SANONDA CO., LTD.
(Expressed in RMB '000)
Notes to the Financial Statements
III SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (cont’d)
31. Significant accounting estimates and judgments
The preparation of the financial statements requires management to make estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.Estimates as well as underlying assumptions and uncertainties
involved are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
