China Jushi FY2005: Cash generation and working capital

The consolidated monetary-funds note reports CNY 535.774 million at 31 December 2005, compared with CNY 302.725 million a year earlier. The closing amount includes CNY 64.717 million of other monetary funds. The note identifies CNY 21.739 million of bank-draft guarantee deposits at BNBM Technology, CNY 23 million of bank-draft deposits at Jushi Group and CNY 19.691 million deposited for investment by the listed company. Those descriptions matter when assessing funds available to support expansion: the aggregate should not be treated as wholly unrestricted operating cash. The named items do not exhaust the subtotal, and the note does not establish identical restrictions for every remaining balance. The historical cash-flow supplement uses the monetary-funds balances in its cash-change presentation; that presentation alone does not demonstrate unrestricted availability. Some printed foreign-currency amounts and displayed conversion rates do not directly reproduce the reported CNY amounts, so the reported CNY totals are retained without silently recalculating them.

Reported monetary funds / 2005 / consolidated historical monetary funds

RMB 535,773,916.63

Reported monetary funds / 2004 / consolidated historical monetary funds comparative 2004

RMB 302,725,167.88

Reported other monetary funds / 2005 / consolidated historical other monetary funds

RMB 64,716,598.05

The prepayment note attributes the reported CNY 222.5031 million annual increase principally to advance payments for Jushi Group's 210 construction project, the combined 80,000-tonne and 20,000-tonne lines. Its largest advances include equipment, construction and an imported-equipment customs deposit, alongside materials. These are closing claims on suppliers or contractors, not all raw-material purchases consumed during 2005 and not evidence that the lines had entered production at year end. Inventory rose from CNY 150.839 million to CNY 236.845 million. Closing raw materials were CNY 110.552 million and finished goods CNY 117.639 million. Management links the increase to production expansion and associated material and finished-goods stocks. The company reports no inventory impairment provision at the closing date. Neither the inventory balance nor that accounting assessment proves sell-through, future realizable selling prices or customer orders.

Reported supplier prepayments / 2005 / consolidated supplier and construction advances

RMB 251,802,596.65

Reported net inventory / 2005 / consolidated historical inventory net

RMB 236,844,715.02

Reported raw material inventory / 2005 / consolidated raw material inventory

RMB 110,551,701.44

Reported net inventory category / 2005 / consolidated finished goods inventory

RMB 117,638,742.99

Reported supplier prepayments / 2004 / consolidated supplier and construction advances comparative 2004

RMB 28,299,507.28

Reported net inventory / 2004 / consolidated historical inventory net comparative 2004

RMB 150,838,818.05

Reported raw material inventory / 2004 / consolidated raw material inventory comparative 2004

RMB 76,084,636.21

Reported net inventory category / 2004 / consolidated finished goods inventory comparative 2004

RMB 66,662,800.39

Consolidated operating cash inflow fell from CNY 475.970 million in 2004 to CNY 120.053 million in 2005. Management attributes the reduction to greater raw-material advances, wages and settlements with other entities and individuals as operations expanded. The cash-flow notes disclose large gross receipts and payments for such settlements; these flows should not all be classified as customer sales or assumed to be loans without further evidence. Cash spent acquiring or constructing fixed assets, intangible assets and other long-term assets was CNY 549.028 million, with a further CNY 22.993 million paid for investments. After investment receipts, net investing outflow was CNY 568.688 million. Financing supplied CNY 682.394 million net: gross new borrowing was CNY 1,798.205 million, debt repayments CNY 1,062.146 million and cash received from capital contributions CNY 83.353 million. The CNY 136.795 million financing payment line combines dividends, profits and interest; it is not a standalone dividend figure. Including a negative CNY 0.710 million exchange-rate effect, the reported cash increase was CNY 233.049 million. These are consolidated cash flows, distinct from construction-accounting additions and closing debt balances.

Reported operating cash flow / 2005 / consolidated operating cash

RMB 120,053,455.42

Reported cash capital expenditure / 2005 / consolidated long lived asset acquisition cash

RMB 549,028,326.84

Reported cash investment payments / 2005 / consolidated investment payment cash

RMB 22,993,230

Reported investing cash flow / 2005 / consolidated investing net cash

RMB -568,688,451.29

Reported financing cash flow / 2005 / consolidated financing net cash

RMB 682,393,520.93

Reported cash borrowing receipts / 2005 / consolidated new borrowing cash

RMB 1,798,205,000

Reported cash debt repayments / 2005 / consolidated debt repayment cash

RMB 1,062,145,536.16

Reported cash dividends profit interest / 2005 / consolidated combined distribution interest cash

RMB 136,794,849.67

Reported cash fx effect / 2005 / consolidated exchange effect

RMB -709,776.31

Reported cash change / 2005 / consolidated cash change

RMB 233,048,748.75

Reported operating cash flow / 2004 / consolidated operating cash comparative 2004

RMB 475,970,216.21

At 31 December 2005 the consolidated group reported CNY 1,345 million of short-term borrowings, up from CNY 684.870 million, and CNY 731.288 million of long-term borrowings, up from CNY 563.762 million. Together the two closing borrowing lines were CNY 2,076.288 million; they do not represent all liabilities or net debt. Short-term borrowing comprised CNY 70 million of credit loans, CNY 1,087 million of guaranteed loans and CNY 188 million of mortgage-backed loans. The long-term summary comprised CNY 598.130 million of CNY-denominated guaranteed loans and USD 16.5 million reported at CNY 133.158 million. The detailed guarantor table prints an inconsistent USD amount; the clearly stated summary amount is retained and the discrepancy is not silently corrected. Related-party guarantees formed part of the financing arrangements, rather than constituting additional borrowing to add to these balances. Finance expenses rose from CNY 56.029 million to CNY 98.540 million. Management cites increased short-term borrowing and reduced interest capitalization after relevant projects were completed. The finance-cost note separately reports CNY 97.373 million of interest expense, CNY 5.528 million of interest income and a signed exchange-result line; the latter adds CNY 3.521 million to expense under the displayed formula. Interest expense, net finance expenses and cash interest payments are different measures.

Reported short-term borrowings / 2005 / consolidated short term borrowings

RMB 1,345,000,000

Reported long term borrowings / 2005 / consolidated long term borrowings

RMB 731,288,300

Reported short-term borrowings / 2004 / consolidated short term borrowings comparative 2004

RMB 684,870,000

Reported long term borrowings / 2004 / consolidated long term borrowings comparative 2004

RMB 563,762,200.6

The tax note states a 15% income-tax rate for the listed parent and local taxation for subsidiaries. For Jushi Group it describes a foreign-invested-enterprise concession of two exempt years followed by three years at half rate, beginning in July 2001; 2005 was the third half-rate year, with a stated resulting tax burden of 13.2%. A July 2005 approval separately granted time-limited relief for Jushi's additional investment associated with the earlier registered-capital increase from USD 29.9516 million to USD 46.9516 million. That earlier capital event is different from the USD 63.2 million increase discussed elsewhere for the 2005 expansion. Jiujiang's note describes rewards equal to the local retained portion of income tax on new lines in 2004-2008, followed by 50% of that portion in 2009-2013; this is not exemption from every tax. These are the issuer's historical concessions and approvals, not current tax guidance or a single consolidated tax rate. Management also attributes limited growth in income-tax expense to credits for domestic equipment purchases. The reported consolidated tax expense therefore should not be modeled simply by applying the parent's 15% rate to all group earnings.

The consolidated income statement reports CNY 1,464.189 million of main-business revenue and CNY 212.971 million of operating profit for 2005, compared with CNY 1,145.654 million and CNY 173.235 million in 2004. Investment income of CNY 21.444 million, subsidy income of CNY 11.663 million and net non-operating items bring 2005 profit before tax to CNY 245.774 million. Income tax of CNY 33.797 million and minority shareholders' earnings of CNY 88.501 million are then deducted to reach CNY 123.476 million of profit attributable to the listed company's shareholders. This amount is not Jushi Group's reported CNY 185.575 million net profit. The report's adjusted profit excluding non-recurring items is CNY 112.986 million, CNY 10.490 million below the reported shareholders' profit. Its reconciliation includes subsidies, impairment reversals and tax and minority-interest effects; the gross subsidy amount alone is not the net benefit accruing to listed shareholders. Investment income includes equity-accounting adjustments and is not interchangeable with cash dividends received.

Reported business revenue / 2005 / consolidated main business revenue

RMB 1,464,189,288.56

Reported business cost / 2005 / consolidated main business cost

RMB 997,729,897.86

Reported consolidated operating profit / 2005 / consolidated operating profit

RMB 212,970,824.04

Reported profit before tax / 2005 / consolidated profit before tax

RMB 245,774,290.29

Profit attributable to subsidiary minority / 2005 / consolidated minority profit

RMB 88,500,829.59

Reported consolidated owner profit / 2005 / consolidated historical owner profit

RMB 123,476,428.8

Reported business revenue / 2004 / consolidated main business revenue comparative 2004

RMB 1,145,653,749.68

Reported business cost / 2004 / consolidated main business cost comparative 2004

RMB 804,543,971.67

Reported consolidated operating profit / 2004 / consolidated operating profit comparative 2004

RMB 173,235,099.58

Reported profit before tax / 2004 / consolidated profit before tax comparative 2004

RMB 191,998,771.96

Profit attributable to subsidiary minority / 2004 / consolidated minority profit comparative 2004

RMB 67,518,796.81

Reported consolidated owner profit / 2004 / consolidated historical owner profit comparative 2004

RMB 91,846,101.98

Gross consolidated trade receivables increased from CNY 304.420 million to CNY 383.472 million. The closing allowance was CNY 19.924 million, leaving CNY 363.547 million net, compared with CNY 285.533 million net a year earlier. The five largest closing trade debtors accounted for CNY 122.230 million, or 31.87% of the gross balance; this differs from the top-five customers' 34.97% share of annual sales. The aging table places 86.22% of closing gross trade receivables within one year, but aging from recognition is not a contractual overdue analysis. Some allowance amounts do not reproduce a simple multiplication of the displayed aging-band rates, so the reported amounts are retained without substituting a recalculated allowance. Other receivables were CNY 47.607 million gross and CNY 45.093 million net after a CNY 2.514 million allowance, versus CNY 19.606 million net in 2004. These include settlements, deposits and advances rather than only customer invoices. The note identifies CNY 7.797 million of settlement receivables from shareholder Zhenshi and CNY 4.643 million from Shenzhen Zhujiang Building Materials. Part of the latter arose from payments made on that entity's behalf, including court-forced debits from BNBM Technology. A repayment plan signed in December 2005 called for payment by 31 December 2007. That agreement is not evidence that recovery had occurred.

Reported gross trade receivables / 2005 / consolidated historical trade receivables gross

RMB 383,471,680.15

Reported trade-receivable allowance / 2005 / consolidated historical trade receivables allowance

RMB 19,924,201.66

Reported net trade receivables / 2005 / consolidated historical trade receivables net

RMB 363,547,478.49

Reported gross other receivables / 2005 / consolidated historical other receivables gross

RMB 47,607,444.82

Reported other-receivable allowance / 2005 / consolidated historical other receivables allowance

RMB 2,514,309.66

Reported other receivables net / 2005 / consolidated historical other receivables net

RMB 45,093,135.16

Reported gross trade receivables / 2004 / consolidated historical trade receivables gross comparative 2004

RMB 304,420,115.6

Reported trade-receivable allowance / 2004 / consolidated historical trade receivables allowance comparative 2004

RMB 18,887,393.66

Reported net trade receivables / 2004 / consolidated historical trade receivables net comparative 2004

RMB 285,532,721.94

Reported gross other receivables / 2004 / consolidated historical other receivables gross comparative 2004

RMB 29,811,278.84

Reported other-receivable allowance / 2004 / consolidated historical other receivables allowance comparative 2004

RMB 10,205,482.33

Reported other receivables net / 2004 / consolidated historical other receivables net comparative 2004

RMB 19,605,796.51

Reported top five receivable balance / 2005 / consolidated top five trade receivables gross

RMB 122,230,168.12

The parent's CNY 139.28295082 million accounting investment income was not the same as the CNY 67.00266610 million of investment-income cash received in 2005. It paid CNY 360.03133596 million for investments and reported net investing cash outflow of CNY 292.60618365 million. Net parent operating cash inflow was CNY 102.97839674 million, while the large other-operating receipts and payments of CNY 1,787.38164930 million and CNY 1,687.80669676 million should not be described as external glass-fiber customer sales or purchases. The parent borrowed CNY 632 million and repaid CNY 390 million, with CNY 44.68484025 million of combined dividends, profits and interest cash payments; net financing inflow was CNY 197.31515975 million. These three net cash-flow categories reconcile to the CNY 7.68737284 million cash increase and CNY 61.98102625 million closing cash. Parent short-term loans rose from CNY 278 million to CNY 520 million. Parent investment payments and borrowings help explain how the listed entity funded its holdings, but they cannot simply be added to consolidated capital expenditure or debt without eliminating transactions within the group.

Reported operating cash flow / 2005 / parent only operating cash

RMB 102,978,396.74

Reported investing cash flow / 2005 / parent only investing cash

RMB -292,606,183.65

Reported financing cash flow / 2005 / parent only financing cash

RMB 197,315,159.75

Reported cash investment payments / 2005 / parent only investment payment cash

RMB 360,031,335.96

Reported cash borrowing receipts / 2005 / parent only borrowing cash

RMB 632,000,000

Reported cash debt repayments / 2005 / parent only debt repayment cash

RMB 390,000,000

Reported short-term borrowings / 2005 / parent only short term borrowings

RMB 520,000,000

Huazheng's audit report, dated 13 April 2006, gives an unmodified opinion on the 2005 consolidated and parent-company balance sheets, profit and profit-distribution statements and cash-flow statements. It refers to the Chinese Enterprise Accounting Standards and Enterprise Accounting System applicable to those statements. The figures here retain that historical basis; they are not presented as an IFRS restatement or automatically comparable with later annual reports prepared under changed rules. Consolidated operations and parent-company results are kept separate. Minority interests and proposed cash dividends also appear separately in this report's balance-sheet presentation. The financial auditor's opinion covers the issuer's financial statements and does not constitute independent review of this site's English selection or translation.