2016 Semi-Annual Report of Midea Group Co., Ltd.
Midea Group Co., Ltd.
Semi-Annual Report 2016
August 2016
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior
management of Midea Group Co., Ltd. (hereinafter referred to as the “Company”)
hereby guarantee that the information presented in this Report is truthful, accurate
and complete, and shall together be jointly and severally liable for any false records,
misleading statements or material omissions in this Report.
All directors of the Company attended the Board meeting for reviewing this Report.
The Company plans not to distribute cash dividends or bonus shares or turn capital
reserves into share capital for the first half of 2016.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Mr. Xiao
Mingguang, responsible person for the Company’s financial affairs have represented
and warranted that the financial statements carried in this Report are truthful,
accurate and complete.
This Report has not been audited by a CPAs firm.
The future plans and some other forward-looking statements mentioned in this
Report shall not be regarded as virtual promises of the Company to investors.
Therefore, investors are kindly reminded to pay attention to possible investment
risks.
This Report has been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version
shall prevail.
2016 Semi-Annual Report of Midea Group Co., Ltd.
Contents
Section I Important Notes, Contents and Definitions ...................................................... 2
Section II Corporate Profile .................................................................................................... 5
Section III Summary of Accounting Data and Financial Indicators ............................. 7
Section IV Report of the Board of Directors .................................................................... 10
Section V Significant Events ................................................................................................ 41
Section VI Changes in Shares and Particulars about Shareholders ........................ 66
Section VII Preference Shares ............................................................................................. 72
Section VIII Information about Directors, Supervisors and Senior Management .. 73
Section IX Financial Report .................................................................................................. 74
Section X Documents Available for Reference ............................................................. 153
2016 Semi-Annual Report of Midea Group Co., Ltd.
Definitions
Term Definition
Company, the Company, Midea Group or the Group Midea Group Co., Ltd.
Midea Holding Midea Holding Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
Midea Group Finance Midea Group Finance Co., Ltd.
Toshiba Toshiba Corporation
Toshiba Lifestyle Toshiba Lifestyle Products & Services Corporation
KUKA KUKA Aktiengesellschaft
MECCA MECCA International (BVI) Limited
The Reporting Period The period from 1 January 2016 to 30 June 2016
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section II Corporate Profile
I Corporate information
Stock name Midea Group Stock code
Stock exchange The Shenzhen Stock Exchange
Company name in Chinese 美的集团股份有限公司
Abbr. (if any) 美的集团
Company name in English
MIDEA GROUP CO., LTD.
(if any)
Legal representative Mr. Fang Hongbo
II Contact information
Company Secretary Representative for Securities Affairs
Name Jiang Peng Ou Yunbin
Midea Headquarters Building, 6 Midea Avenue, Beijiao Town, Shunde District,
Address
Foshan City, Guangdong Province, China
Tel. 0757-22607708 0757-23274957
Fax 0757-26605456
E-mail IR@midea.com
III Other information
1. Ways to contact the Company
Changes in the Reporting Period to the registered address, office address and their zip codes, website
address and email address of the Company:
□ Applicable √ N/A
No such changes in the Reporting Period. The said information can be found in the 2015 Annual Report.
2. About the media for information disclosure and the place where materials carrying disclosed
information such as this Report are kept
Changes in the Reporting Period to the media for information disclosure and the place where materials
carrying disclosed information such as this Report were kept:
□ Applicable √ N/A
The newspapers designated by the Company for information disclosure, the website designated by the
2016 Semi-Annual Report of Midea Group Co., Ltd.
CSRC for disclosing this Report and the place where materials carrying disclosed information such as
this Report were kept did not change in the Reporting Period. The said information can be found in the
2015 Annual Report.
3. Changes in the registered information
Changes in the Reporting Period to the registered information:
□ Applicable √ N/A
The registration date and place of the Company, its business license number, taxation registration
number and organizational code did not change in the Reporting Period. The said information can be
found in the 2015 Annual Report.
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section III Summary of Accounting Data and Financial
Indicators
I Key accounting data and financial indicators
Retroactive adjustments to or restatements of accounting data due to changes in the accounting policies
or corrections of accounting errors:
□ Yes √ No
2016H1 2015H1 YoY Change (%)
Operating revenues (RMB'000) 77,522,287 82,509,144 -6.04%
Net profits attributable to the
shareholders of the Company 9,496,493 8,324,123 14.08%
(RMB'000)
Net profits attributable to the
shareholders of the Company
9,100,244 7,433,037 22.43%
excluding non-recurring gains and
losses (RMB'000)
Net cash flows from operating activities
8,129,163 8,815,673 -7.79%
(RMB'000)
Basic earnings per share (RMB/share) 1.48 1.32 12.12%
Diluted earnings per share
1.48 1.31 12.98%
(RMB/share)
Weighted average ROE (%) 17.64% 19.62% -1.98%
As at the end of 2016H1 As at the end of 2015H1 YoY Change (%)
Total assets (RMB'000) 167,502,747 128,841,935 30.01%
Net assets attributable to the
shareholders of the Company 55,333,098 49,201,852 12.46%
(RMB'000)
Total share capital of the Company on the last trading session before the disclosure of this Report:
Total share capital of the Company on the last trading
6,446,691,854
session before the disclosure of this Report (share)
Fully diluted earnings per share based on the latest
1.47
share capital above (RMB/share)
2016 Semi-Annual Report of Midea Group Co., Ltd.
Note: The total share capital of the Company on the last trading session before the disclosure of this Report increased by
21,757,595 shares from the end of the Reporting Period because the Company carried out a stock option incentive
scheme and grantees exercised their stock options.
II Differences in accounting data under the domestic and overseas accounting
standards
1. Differences in the net profits and net assets disclosed in the financial reports prepared under
the international and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
2. Differences in the net profits and net assets disclosed in the financial reports prepared under
the overseas and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
III Items and amounts of non-recurring gains and losses
√ Applicable □ N/A
Unit: RMB'000
Item Amount Note
Gains or losses on disposal of non-current assets (including
6,042
the offset asset impairment provisions)
Government grants charged to the gains/losses for the
Reporting Period (except for the government grants closely
related to the business of the Company and given at a fixed 762,724
quota or amount in accordance with nationally uniform
standards)
Gains or losses on the changes in the fair value of
held-for-trading financial assets and liabilities, as well as
investment gains or losses on the disposal of held-for-trading
-539,590
financial assets and liabilities and available-for-sale financial
assets, except for the effectively hedging business related to
normal business operations of the Company
Non-operating incomes and expense other than the above 67,147
Less: Income tax effects 30,545
Minority interests effects (after tax) -130,471
Total 396,249 --
2016 Semi-Annual Report of Midea Group Co., Ltd.
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the
definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering
Their Securities to the Public—Non-recurring Gains and Losses, or classifies any non-recurring
gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item:
□ Applicable √ N/A
No such cases in the Reporting Period.
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section IV Report of the Board of Directors
I Industry Overview
In the first half year of 2016, the macro-economic growth slowed down in China, housing market
further polarized, raw material price went up and down, foreign exchange rate continued to be fluctuated,
and the home appliance market entered into a stage of focusing on de-stocking, structural change, and
product & consumption upgrading. According to China IOL data, the total sales volume of residential
Air-conditioner for 2016H1 was just 58million units for the whole China market, which saw 15% decline
year-on-year; the total sales volume of refrigerator for 2016H1 was 28.94million units, which saw 1.4%
decline year-on-year; and the total sales volume of wash machine for 2016H1 was 27.50million units,
which saw 3.82% increase year-on-year. Nevertheless, kitchen appliances and small appliances
witnessed fast growth with 16.72million units sold at retail market for 2016H1, which has 4.7% increase
year-on-year, according to All View Cloud data.
Under the new economic environment, consumers showed much more participation in the process
of buying home appliances and using appliances. Home appliances manufacturers become more
product & consumer-oriented. Improving operational efficiency, developing smart appliances, leveraging
online sales, and encouraging technological, sales channel and service model innovation, have been the
core growth momentum for home appliances manufacturers.
2016 has seen consumption being further upgraded, people’s average income being constantly
increased, new consuming group represented by youth born after 1985 being more and more active. All
these contributed to the diversification of consuming demands and expansion of consuming area which
pushed home appliance manufacturers to actively improve product mix, innovation technologies, as well
as structural adjustment. According to All View Cloud data, premium smart home appliances have shown
rapid growth trend. Sales of smart air conditioners account for 15.3% of total air conditioner sales in the
offline channel and achieved 183.8% increase year-on-year, Smart refrigerators account for 10.5% of
total refrigerator sales in the offline channel and achieved 438.2% growth year-on-year. Smart wash
machines account for 5.8% of total wash machine sales in the offline channel and achieved 251%
growth year-on-year.
2016 Semi-Annual Report of Midea Group Co., Ltd.
2016 also witnessed further channel restructuring in the home appliance industry. O2O business
model, application of big data and widespread use of mobile payment have largely promoted channel
upgrading in the home appliance industry as well as cooperation between home appliance and internet
companies. E-commerce has entered into rapid growth period. In the first half of 2016, online sales of
home appliances have reached historic high. The B2C online sales market for home appliances for
2016H1 has reached RMB184.8bn, and achieved 35% growth year-on-year. After five years’ rapid
growth, online shopping has become a significant distribution channel for home appliances.
From mid to long term perspective, the growth momentum of home appliance industry in China
hasn’t had any change. The major reasons are as follows:
1) With constant increase of people’s income and accelerated urbanization in China, the penetration
rate of home appliance market is still expected to be improved. According to the data from the National
Bureau of Statistics of China, the nominal per capita disposable personal income (DPI) for 2016H1 is
RMB 11,886, which has 8.7% increase year-on-year. Meanwhile, urbanization has been accelerated in
China. A number of key projects have entered into implementation stage, which created new growth
opportunities. All these can effectively pull consumption and release potential of domestic demands.
2) Continuous consumption upgrade, combining with the existing 1.6bn units home appliances sold
in the Chinese market, has become a driving force to grow the home appliance sales in China. Notable
progress has been made on improving technologies such as energy-saving, environmental friendly,
smart appliances, industrial design as well as other features and quality of home appliances products.
New generation of consumers has higher demand for life quality which also urged home appliance
manufactures to improve their product offering. All these can help improve the product mix and
profitability of home appliance manufacturers.
3) In an era of internet+, technology & innovation will further push China to become a Manufacturing
Power. Improvement on relevant technologies such as smart control technology, information technology,
IOT, big data, cloud computing etc. as well as the widespread use of mobile devices will effectively drive
the rapid development of smart home which has been widely recognized as the future trend for the
development of home appliances. According to the prediction of China Market Monitor, by 2020 the
penetration rate of smart appliances will be further improved in China with smart appliances account for
45%, 25%, and 28% respectively of white goods, kitchen appliances and small domestic appliances
2016 Semi-Annual Report of Midea Group Co., Ltd.
sales. In the future five years, the demand for smart appliances will reach RMB1500bn in China.
4) Under the new competition environment, the ecology of home appliance industry will be further
improved, and home appliance market will be further consolidated. Leading home appliance
manufacturers, with their competitive advantages in brands, technologies, industrial chain, services, and
channels, are expected to further improve their market share and profitability.
5) Based on the huge domestic market with a big population of 1.4bn in China, the home appliance
manufacturers in China have formed their competitive advantages in respect of scale, product cluster,
industrial chain support and capital, and will still maintain their competitiveness globally. Developing
markets have large population and growing economy, and are now entering into fast-developing period
for home appliances. Chinese companies are expected to play a significant role in these markets which
will provide a solid foundation for the export growth of Chinese companies. Meanwhile, Chinese
companies are very active in the global M&A fields. Acquisitions of brands, channels, technologies will
provide Chinese companies with new competitive advantages worldwide.
II Analysis of Main Businesses
1. Overview
Midea is a leading global player in consumer appliances and heating, ventilation and
air-conditioning (HVAC) systems. In the first half of 2016, the Company continues to adhere to the three
corporate strategic focuses: “Leading Products, Operational Efficiency, and Global Operations”.
Organizational restructuring has centered on products and users. As a result, R&D capability, reputation
of product quality, operational efficiency and business profitability of the Company have been largely
improved. Margins of a number of product categories have reached historic high level, risk factors have
been generally lowered, overseas sales have achieved substantial growth, g
