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Public company info - Shanghai Prime Machinery Co. Ltd. - H Shares , 02345.HK
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Shanghai Prime Machinery Co. Ltd. - H Shares, 02345.HK - Company Profile
Chairman Zhou Zhiyan
Share Issued (share) 912,000,000
Par Currency Renminbi
Par Value 1.0
Industry Industrial Goods
Corporate Profile Business Summary: The principal activities of the Group are the design, manufacture and sale of turbine blades, bearings, fasteners, cutting tools and others, the provision of related technical services and investment holding. Performance for the year: Revenue for FY2019 decreased by 7.0% to RMB8,395 million. Gross profit for FY2019 decreased by 10.9% to RMB1,586 million with gross profit margin reduced to 18.9%, comparing with 19.7% in FY2018. EBITDA for FY2019 was RMB584 million, down 13.3%. EBITDA to revenue margin was 7.0%. Profit attributable to owners of the Company for FY2019 was RMB127 million, down 54.6%. Business Review Fastener business The Group primarily supplies standard and safety-critical fasteners for the automotive industry as well as various fastener products for the energy industry, aerospace industry and for general industrial applications. In addition, the Group also offers customers premium and one-stop services, ranging from testing, logistics and warehousing to ERP and electronic procurement via a proprietary B2B online platform. The Group is a leading global fastener partner for world-renowned automobile manufacturers and the Group's diversified customer portfolio includes Volkswagen, BMW, Renault, Audi, Daimler, Paccar, Volvo, ZF Group, Adient and SAIC Motor. The Group also supplies highly engineered parts and components for high-performance and motorsport cars and provides related design and engineering services. To evolve into a high-tech engineering company for the automotive and motorsport industry, the Group strives to develop functionality knowledge and technical know-how relating to future vehicle concepts including electric and driverless vehicles, and to strengthen the Group’s business relationship with its automotive customers. In response to the demanding business environment, the Group has continued to invest in upgrading IT and ERP systems of Nedschroef, a key member of the Group in Europe, and centralized certain back-office supporting functions in order to further streamline operations and enhance efficiency in 2019. In June 2019, Nedschroef celebrated its 125th anniversary as a trusted and innovative partner to its automotive customers. In November 2019, the Group announced a restructuring plan to close down a Nedschroef production plant located in a rented premises in Berlin, Germany, transferring substantially all existing business and assets (primarily machineries) of the plant to certain other production plants in Europe. As of todate, the Group is expected to incur one-off net restructuring costs of circa RMB49.5 million (EUR6.4 million) covering mainly staff reduction compensation and reinstallation of machineries. Of this, circa RMB33.2 million (EUR4.3 million) has been provided for in FY2019. The aforementioned restructuring is expected to be completed in the third quarter of 2020 and bring recurrent annual saving of RMB29.2 million (EUR3.8 million). Revenue of fastener business amounted to RMB6,138 million for FY2019 (FY2018: RMB6,784 million), representing a decrease of 9.5% as compared with FY2018. Revenue generated from automotive products decreased by 8.6% as compared with FY2018 to RMB5,116 million (FY2018: RMB5,597 million), primarily due to weaker demand in car markets in Europe and China as well as early phase-out of certain higher-margin products for some customers. Revenue generated from products for general industrial applications and testing services declined 16.3% as compared with FY2018 to RMB972 million (FY2018: RMB1,161 million), mainly due to lower export sales to the United States, Europe, South Africa and Turkey. Nonetheless, sales of high-tensile strength fasteners grew by 22.2% as compared with FY2018 due to higher sales to wind energy and urban metro customers. Included in this segment was revenue of RMB27.5 million (FY2018: RMB24.0 million) generated from sale of high-performance automotive components and provision of related engineering services. The segment’s average gross profit margin was reduced to 16.2% (FY2018: 17.9%), mainly due to under-absorption of overhead as a consequence of lower production rate; and the early phase-out of certain higher-margin business. Turbine blade business By virtue of its advanced process technologies and professional management, the Group is a world-renowned supplier of power components for the energy industry and the aviation industry, and has a leading position in the relevant markets in China. The Group primarily supplies gas turbine blades, steam turbine blades and forged products for the energy industry; and turbine blades and forged products for the aviation industry. In particular, the Group is a leading supplier of large-scale thermal power steam turbine blades in China, enjoying a significant share in the relevant market therein. The Group’s customer portfolio includes wellknown energy equipment companies such as Shanghai Electric, Dongfang Electric, Alstom, General Electric and Siemens. It also includes well-known aeronautical engine manufacturers such as Aviation Industry Corporation of China, GE Aviation as well as Rolls-Royce. Revenue of the turbine blade business amounted to RMB897 million for FY2019 (FY2018: RMB867 million), up 3.5% as compared with FY2018. Revenue generated from energy products decreased by 11.1% as compared with FY2018 to RMB568 million (FY2018: RMB639 million), mainly due to lower domestic sales as a consequence of further reduction in demand for coal-fired power equipment in China despite growth in overseas sales underpinned by increase in share of certain customers’ purchases. Of note, the Group has been focusing on developing gas turbine blade products, which initiatives have led to relevant sales rising by 42.9% as compared with FY2018 to RMB160 million (FY2018: RMB112 million). Revenue generated from aviation products grew 44.3% as compared with FY2018 to RMB329 million (FY2018: RMB228 million), primarily driven by higher demand from both domestic and overseas customers. The Group continued to gain positive recognition from its key aviation and energy customers for the quality and reliability of the Group's products and services. The segment’s average gross profit margin was relatively stable at 20.4% (FY2018: 20.6%), with gross profit margin of aviation products rising significantly offsetting the decline in gross profit margin of energy products. Bearing business The Group supplies a diversified portfolio of bearing products ranging from precision micro bearings to standard bearings and specialized bearings for various industries such as aerospace, automobile, cargo railway as well as for general industrial applications. In addition to this, the Group also provides repair and maintenance services relating to bearings used in the cargo railway industry. The Group has a diversified customer portfolio for this segment and enjoys significant shares in relevant markets such as aerospace and cargo railway in China. Revenue of the bearing business upped moderately to RMB797 million for FY2019 (FY2018: RMB786 million). Revenue generated from cargo railway products and services amounted to RMB271 million (FY2018: RMB303 million), down 10.6% as compared with FY2018, as customers reduced their inventory and intense price competition. Revenue generated from automotive products increased by 4.6% to RMB248 million (FY2018: RMB237 million), underpinned by the success in securing orders from certain automotive OEMs amid a difficult automotive market in China. Revenue generated from aerospace products grew 26.5% as compared with FY2018 to RMB103 million (FY2018: RMB81.4 million), primarily due to higher market demand. Revenue generated from products for general industrial applications increased by 6.1% as compared with FY2018 to RMB175 million (FY2018: RMB165 million) mainly due to growth in export sales as certain customer stocked up amid United States-China trade relations uncertainty. The segment’s average gross profit margin was 26.2% (FY2018: 27.0%), with gross profit margin of aerospace products rising significantly partly offsetting the decline in gross profit margin of cargo railway products. Cutting tool business The Group is one of the leading suppliers of cutting tools with a sizeable production capacity, industry-leading sales and distribution network and a comprehensive product portfolio in China. The Group principally supplies a variety of cutting tool products for general industrial applications. Revenue of the cutting tool business decreased by 4.7% as compared with FY2018 to RMB563 million for FY2019 (FY2018: RMB591 million), as demand was negatively impacted by the general slow-down in industrial production during FY2019. The segment’s average gross profit margin for FY2019, however, expanded to 35.2% (FY2018: 30.1%), primarily because of the increase in product prices during FY2019. Prospects: Implementation of “Double Drive” strategies With the slowdown of China’s economic growth, the competition of traditional industries have shifted from “incremental business” to “existing business”, with distinctive characteristics of “stronger remains as strong” and increasing concentration of the industry. Under such economic situation, the Group will be committed to maintaining the steady growth of its existing business and increasing the scale of incremental business by mergers and acquisitions to achieve continuous steady growth in operating income and gradual improvement of profitability. Promote transformation and upgrading Under fierce competition in the “existing business”, sustainable growth can only be achieved by developing new products, expanding new markets, acquiring new customers and promoting the transformation and upgrading of the business. Through market analysis and technology research and development, the Group will promote customer-oriented product upgrading, the business of the Group will transform from mechanical components to spare parts, functional components, and mechanical and electrical units, which will continuously enhance the profitability of the business. Business collaboration In the competition of “existing business”, customer resources are the most valuable resources of an enterprise. The Group’s business segments shared a large number of domestic and overseas customer resources. It is expected to drive the growth of existing business by the synergy in sales created through the sharing of customer and channel resources between domestic and overseas companies and different business segments. Take advantage of innovative mechanism The competition is more intensive than the past in the “existing business” competition. The Group will continue to improve the mechanism by adopting measures such as mixed ownership reform and the introduction of strategic investors. In the future, the Group will put more efforts in reforms and will actively promote the reform of mixed ownership in other business segments. Strategic investors with high compatibility and synergy will also be introduced to form the new mechanism of “risk sharing and benefit sharing” to stimulate the competitiveness and vitality of the Company. Gradient transfer In the competition of “existing business”, efficient operation is a key for success. At present, the operating costs of some subsidiaries of the Group are high but with insufficient operating efficiency. Therefore, it is necessary to achieve gradient transfers by integrating business, improving management, reducing operating costs, and improving operational efficiency and product competitiveness.

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