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Public company info - Hua Lien International (Holding) Co. Ltd. , 00969.HK
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Hua Lien International (Holding) Co. Ltd., 00969.HK - Company Profile
Chairman Liu Yan
Share Issued (share) 2,191,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Agricultural, Poultry & Fishing Production
Corporate Profile Business Summary: The Group is principally engaged in provision of supporting services and sweetener business, cultivation of sugar cane and manufacturing of sugar and ethanol biofuel business. Performance for the year: Capital deficiency attributable to owners of the Company as at 31st December 2019 amounts to approximately HK$746.6 million (2018: approximately HK$670.5 million). Business Review Overall Performance For the year ended 31st December 2019, the revenue of the Group increased by approximately 0.8% to approximately HK$135.5 million (2018: approximately HK$134.5 million). The moderate increase in revenue of approximately HK$1.0 million in year 2019 was caused by the approximately HK$10.4 million increase in revenue from the supporting service business segment and the approximately HK$9.4 million decrease in revenue from the sugar business segment. The gross loss of approximately HK$9.0 million in year 2018 became gross profit of approximately HK$6.2 million in year 2019 for reason of an increase of approximately HK$15.2 million in gross profit. The gross loss percentage of approximately 6.7% in year 2018 became gross profit percentage of approximately 4.6% in year 2019 due to an increase in gross profit percentage of approximately 11.3%. As further elaborated below, the increase in gross profit was mainly due to the increase of average selling prices of the sugar business segment. The loss before taxation increased by approximately HK$27.1 million to approximately HK$120.3 million (2018: approximately HK$93.2 million). The increase in loss before taxation was mainly due to net effect of the positive impacts which included (i) the increase of gross profit of approximately HK$15.2 million; (ii) the decrease of administrative expense of approximately HK$29.3 million; and (iii) the decrease of finance expense of HK$12.8 million, as well as the negative impacts which included (iv) the decrease in gain from change in fair value of biological assets of approximately HK$5.5 million; (v) the decrease in other income of approximately HK$2.2 million; (vi) the decrease in gain from change in fair value of derivative component of convertible notes of approximately HK$36.4 million; and (vii) the increase in other operating expenses of approximately HK$40.4 million. Basic loss per share for the year was approximately HK4.19 cents (2018: approximately HK3.24 cents). The directors do not recommend the payment of a dividend for the year ended 31st December 2019 (2018: nil). Sugar Cane Growing and Sugar Manufacturing Business in Jamaica The Joyful Right Limited is the holding company of Pan-Caribbean Sugar Company Limited (“PCSC”) which has operated the three sugar estates, namely Bernard Lodge Sugar Estate, Monymusk Sugar Estate and Frome Sugar Estate and two sugar factories, namely Monymusk Sugar Fatory and Frome Sugar Factory in Jamaica since 15th August 2011, a 70% indirectly owned subsidiary of the Company, together called “Joyful Right Group”. Due to the severe business environment for the sugar cane growing and sugar manufacturing business in Jamaica, the Group has suspended certain agricultural and factory operations that were under serious loss since June 2016, which include two sugar estates of Bernard Lodge Sugar Estate and Monymusk Sugar Estate as well as one sugar factory of Monymusk Sugar Factory. Joyful Right Group resumed the operation of Monymusk Sugar Factory in year 2018 and suspended again the operation in year 2019 and continues to operate the Frome Sugar Estate and Frome Sugar Factory. The following analysis of sugar cane growing and sugar manufacturing business in Jamaica is based on Joyful Right Group. Ethanol Biofuel Business in Benin Reference is made to the announcement of the Company dated 3rd March 2014 in relation to the impairment losses on ethanol biofuel business in Benin. Terms used in this annual report shall have the same meanings as those defined in the announcement dated 3rd March 2014 unless otherwise defined herein. The ethanol operation in Benin is operated by Compagnie Beninoise De Bioenergie SA (“CBB”), a company incorporated under the Republic of Benin with limited liability and is a 90% indirectly owned subsidiary of the Company. The construction of ethanol plant of CBB continues to suspend during the year because Benin Government is still unable to execute the Leased Land provision in the Cooperation Agreement and Leased Land is still unavailable for CBB for cultivation of cassava and/or sugar cane to supply raw materials of its production of bioethanol. Construction works were still under suspension pending for appropriate alternate business plan. In current year, the Board considered that the likelihood to resume the construction in near future is still extremely remote as the Group still cannot figure out how to obtain sufficient raw materials under the situation Leased Land is not made available by the Benin Government. In light of the expected prolonged suspension of the construction of ethanol biofuel plant in the Republic of Benin, there is no sight of increase in the recoverable amount, which is the higher of value in use and fair value less costs of disposal during the year. As full provision of impairment loss has been made for the construction in progress, inventories and value-added tax recoverable; there is no additional impairment loss in year 2019. In terms of net operation results, this segment recorded net loss of approximately HK$1.4 million (2018: net profit of approximately HK$2.1 million). The net loss in year 2019 was mainly related to the foreign exchange loss incurred. Supporting services to sweetener and ethanol business The supporting service business segment recorded revenue of approximately HK$10.4 million in year 2019 (2018: HK$ nil). The business of the supporting service business segment was seriously hindered by proposed resolution in respect of the renewal of the continuing connected transactions in relation to the 2019-2021 supply agreements with customers and supplier was voted down by the independent shareholders at the extraordinary general meeting held on 31st May 2019. Therefore, the supporting service business segment cannot carry out any continuing connected transaction with its customers with connected parties. In order to mitigate this negative impact, the supporting service business segment has incorporated a new subsidiary in the PRC, Zheng Cheng International Trade (Guangzhou) Limited (“Zheng Cheng”), in February 2019 to carry out supporting services to sweetener and ethanol business with independent customers in the PRC and recorded a revenue with independent customers of approximately HK$10.4 million during year 2019. The gross profit ratio of new supporting service business segment to independent customers in the PRC was only approximately 0.9% in year 2019. The low gross profit was caused by the demand for the supporting service business segment was low in the PRC as the trade war between U.S. and China have affected many manufacturers in the PRC. A lackluster PRC market made, Zheng Cheng to adopt penetration pricing policy by setting price low to lure new customers. The strategy aims to build a customer base and stimulate future sales for Zheng Cheng. Once obtaining enough new customers, Zheng Cheng will raise price within a appropriate time frame and promote other profitable products in the future years. The operating loss of this segment (that after elimination of inter-segment profit, if any,) was approximately HK$19.8 million (2018: approximately HK$18.1 million). The operating loss was mainly due to (i) the other operating expenses of approximately HK$10.7 million incurred in year 2019 (2018: HK$ nil) in relation of the specific provision of allowance of doubtful debt made for reason of the delay in repayment from trade receivables. The production of a customer was suspended for six months since August 2019 to carry out factory overhaul to re-comply with the new environmental laws requirements in the PRC after the inspection by the environmental authority in the PRC in July 2019, (ii) the administration expense of approximately HK$6.9 million incurred in year 2019 (2018: approximately HK$19.0 million) as well as (iii) the financial expenses incurred in relation to exchange loss of approximately HK$1.2 million in year 2019 (2018: approximately exchange gain of 0.6 million) incurred. Prospects: Sugar business segment The Jamaican government has been active in responding to the recent pandemic by restricting the movement of people. The confirmed cases are still in low level in Jamaica. The sugar business segment (with measures to ensure safety of the employees) is still maintaining operation in Jamaica up to the date of this annual report. However, the slowdown in global demand and global supply by the pandemic is expected to affect the business in short term, the production volume and sales quantity in year 2020 is expected to decline as compared to year 2019. Consequently, the sugar business segment plans to concentrate more effect to boost the sales of the higher price 20kg small pack sugar and plans to further reduce the quantity for the lower price export sales in year 2020 in order to reduce the negative effect on the expected decline in sales quantity so as to maintain the overall sales revenue in similar level. Supporting service segment The Group expects that Sino-Africa Technology & Trading Limited will continue to suspend those continuing connected transactions with connected parties in year 2020. Affected by the epidemic in the PRC, the market demand for the supporting service provided to independent third parties has shrunk, Zheng Cheng thus may not conduct further business in year 2020 until the market rebound and the account receivables can collect to finance future transactions. Ethanol business segment For the Group’s ethanol biofuel business, the construction of ethanol plant will continue to suspend in year 2020, pending for appropriate alternate business plan for this operation.

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