China Jushi FY2009: Markets, customers and suppliers

Glass fiber and its products generated CNY 3,038,992,611.00 of main-business revenue and CNY 2,605,558,394.28 of cost. The product table reports a 14.26% margin. Although the original heading describes an operating-profit margin, the listed figures measure revenue less product cost as a share of revenue; selling, administrative and financing expenses are separate in the consolidated accounts. The other-product category contributed CNY 38,367,390.00 of revenue and CNY 18,184,783.53 of cost, with a reported 52.60% margin. This smaller category does not describe the economics of the glass-fiber business or each advanced formulation. The annual category totals do not identify E6 revenue, realized selling prices, plant utilization or the profitability of individual yarn grades.

Reported business revenue / 2009 / glass fiber product main business

RMB 3,038,992,611

Reported business cost / 2009 / glass fiber product main business

RMB 2,605,558,394.28

Reported business revenue / 2009 / other product main business

RMB 38,367,390

Reported business cost / 2009 / other product main business

RMB 18,184,783.53

Reported product revenue cost margin / 2009 / glass fiber product main business

14.26%

Reported product revenue cost margin / 2009 / other product main business

52.6%

Main-business revenue of CNY 3,077,360,001.00 and other-business revenue of CNY 93,575,642.57 reconcile to consolidated revenue of CNY 3,170,935,643.57. Their costs of CNY 2,623,743,177.81 and CNY 81,972,846.77 reconcile to consolidated cost of CNY 2,705,716,024.58. Glass-fiber and other-product sales are components of main business. They are not the same categories as other-business income, which includes CNY 76,607,369.78 of materials sales and CNY 16,968,272.79 in a residual category. Product and geographical splits are alternative views of main business, and must not be added together. These distinctions prevent a materials-sale line or geographical total from being mistaken for additional fiber sales.

Reported business revenue / 2009 / consolidated main business

RMB 3,077,360,001

Reported business revenue / 2009 / consolidated other business

RMB 93,575,642.57

Reported business cost / 2009 / consolidated main business

RMB 2,623,743,177.81

Reported business cost / 2009 / consolidated other business

RMB 81,972,846.77

Reported business cost / 2009 / consolidated total

RMB 2,705,716,024.58

Reported business revenue / 2009 / materials other business

RMB 76,607,369.78

Reported business revenue / 2009 / residual other business

RMB 16,968,272.79

The FY2009 filing retrospectively corrected a FY2008 income-tax estimate after final tax settlement. Additional tax was CNY 3,717,325.70 for Jushi Group and CNY 3,719,243.43 for Jushi Jiujiang, totaling CNY 7,436,569.13. The correction reduced opening retained earnings attributable to the parent by CNY 3,792,650.25 and minority equity by CNY 3,643,918.88. It also reduced comparative FY2008 profit attributable to listed shareholders from CNY 244,417,271.24 to CNY 240,624,620.99. These are revised FY2008 figures disclosed in the FY2009 filing, rather than a FY2009 operating expense. The summary retains unchanged comparative revenue and operating cash flow, but restates owner profit and equity. Comparisons should therefore identify which filing and restatement basis they use. The original FY2008 disclosure remains a separate historical source.

Prior period tax correction / 2008 / jushi group 2008 restatement

RMB 3,717,325.7

Prior period tax correction / 2008 / jiujiang 2008 restatement

RMB 3,719,243.43

Prior period tax correction / 2008 / consolidated 2008 restatement

RMB 7,436,569.13

Comparative owner profit / 2008 / 2008 restated in fy2009

RMB 240,624,620.99

The issuer reports a FY2009 loss attributable to listed shareholders of CNY 154,769,883.68. Its separate nonrecurring-result schedule identifies a pretax subtotal of CNY 145,555,365.33, led by CNY 91,020,169.05 of qualifying government grants and CNY 52,104,133.05 from trading assets and related disposals. After a CNY 10,139,095.69 tax adjustment and CNY 63,498,846.22 attributable to minority interests, the positive owner portion was CNY 71,917,423.42. Excluding those issuer-classified items, the owner loss was CNY 226,687,307.10. The grant subset differs from total subsidy income, and the trading category differs from total investment income, which also includes investee losses. This schedule helps distinguish the reported shareholder result from its nonrecurring support. It is an accounting classification, not a measure of manufacturing cash generation or proof that the items can never recur.

Reported nonrecurring grant income / 2009 / consolidated qualifying grants

RMB 91,020,169.05

Nonrecurring trading result / 2009 / consolidated trading disposal category

RMB 52,104,133.05

Nonrecurring subtotal / 2009 / consolidated pretax

RMB 145,555,365.33

Nonrecurring tax adjustment / 2009 / consolidated nonrecurring

RMB -10,139,095.69

Nonrecurring minority adjustment / 2009 / consolidated nonrecurring aftertax

RMB -63,498,846.22

Nonrecurring owner result / 2009 / consolidated owner aftertax

RMB 71,917,423.42

Profit excluding nonrecurring / 2009 / consolidated owner

RMB -226,687,307.1

The FY2009 tax note reports a 25% corporate income-tax rate for the listed parent and Jushi Jiujiang, while Jushi Group and Jushi Chengdu applied 15% rates. Jushi Group’s treatment followed recognition as a high-technology enterprise, stated to be valid for three years; Chengdu’s treatment related to the western-region policy described in the filing. A separate Jiujiang arrangement provided for refunding 50% of the local-government share of its income tax during 2009–2013. That is not a 50% reduction of the entire statutory rate. Some Shenzhen building-material subsidiaries were on a transitional rate schedule, with 20% stated for 2009. These historical entity-level treatments help explain why a group tax result cannot be inferred by applying the parent’s rate to consolidated profit. They are not current tax guidance or proof of a later cash refund.

Domestic main-business revenue was CNY 1,396,167,168.08, while foreign main-business revenue was CNY 1,681,192,832.92. Together they reconcile to main-business revenue, excluding other-business income. These are selling markets, not a count or location of factories. The disclosed overseas subsidiary network includes trading operations and a South African composite-material business; foreign sales do not establish manufacturing in every customer market. The five largest disclosed sales customers contributed CNY 613,264,135.72, reported as 19.34% of consolidated revenue. That denominator differs from main-business revenue. Customer sales concentration also differs from the year-end receivables ranking, which measures unsettled balances. Names and related-party classifications should be retained as disclosed for FY2009, without extending research into each counterparty.

Reported business revenue / 2009 / domestic main business

RMB 1,396,167,168.08

Reported business revenue / 2009 / foreign main business

RMB 1,681,192,832.92

Reported top five customer sales / 2009 / consolidated annual

RMB 613,264,135.72

Reported top five customer share / 2009 / consolidated annual

19.34%

The detailed related-transaction note reports CNY 192,640,644.78 of finished-product sales to GIBSON ENTERPRISES INC., described as controlled by a Jushi Group shareholder, and CNY 100,495,642.80 to the China National Building Material import-export company. Their reported shares of the applicable sales category were 6.26% and 3.27%. Transactions with Hengshi Fiber amounted to CNY 19,858,200.09 and combined rent, materials and finished products. Separately, supplies to Jushi Pandeng Electronic Substrate of gas, materials and wastewater-treatment services totaled CNY 45,287,186.30, or 48.40% of the applicable other-business category. Those different transaction roles explain industrial and distribution relationships; they are not all fiber sales, overseas end-customer orders or incremental sales to add to consolidated revenue. Registered related-party names and the reported pricing policy do not establish subsequent customer collections or counterparty performance.

Reported related sales / 2009 / gibson finished goods

RMB 192,640,644.78

Reported related sales / 2009 / cnbm import export finished goods

RMB 100,495,642.8

Reported related sales / 2009 / hengshi rent materials products

RMB 19,858,200.09

Reported related sales / 2009 / pandeng energy materials water service

RMB 45,287,186.3

At the end of FY2009, management described the business as substantially dependent on exports and exposed to movements in the renminbi. It said that the European Union, Turkey and India had initiated antidumping investigations into glass-fiber exports from China. These were investigations as described in the historical filing, not evidence of final duties or their present-day status. Management proposed more domestic sales, changes to processes and raw-material formulations, and some foreign procurement of materials and equipment to offset currency effects. It also proposed accelerating production-line development abroad and responding to trade proceedings through government and industry channels. These responses explain its intended market and production strategy; the disclosure does not establish a quantified currency hedge, completed overseas capacity or successful resolution of the investigations.