China Jushi FY2012: Cash generation and working capital

The consolidated group generated CNY 1,128,842,340.70 of net operating cash in FY2012, compared with CNY 1,270,759,508.65 in the prior-year column. This is cash from operating activities after related payments, rather than sales revenue or accounting profit. Cash received from sales of goods and services was CNY 3,650,689,352.84. The cash-flow reconciliation starts from net profit of CNY 283,576,505.74 and includes a CNY 706,354,656.43 depreciation adjustment, CNY 16,408,081.14 of intangible-asset amortization and a CNY 712,418,643.10 financial-expense adjustment. These adjustments explain why profit is not operating cash; the financial-expense adjustment is a reconciliation item, not the entire profit-statement expense or an operating cash payment. The inventory adjustment was negative CNY 108,369,651.74, operating receivables negative CNY 39,040,214.06 and operating payables negative CNY 412,525,083.01. They reduced cash in this reconciliation. Their scopes must not be replaced by simple changes in individual balance-sheet accounts or used to claim that every supplier balance fell. The cited adjustments are selected explanatory items, not a complete re-performance of every reconciliation line.

Reported operating cash flow / 2012 / consolidated fy2012

RMB 1,128,842,340.7

Reported comparative operating cash flow / 2011 / consolidated prior column in fy2012

RMB 1,270,759,508.65

Reported sales cash receipts / 2012 / consolidated fy2012

RMB 3,650,689,352.84

Reported cash reconciliation profit / 2012 / consolidated fy2012

RMB 283,576,505.74

Reported cash reconciliation depreciation / 2012 / consolidated fy2012

RMB 706,354,656.43

Reported cash reconciliation amortization / 2012 / consolidated intangible fy2012

RMB 16,408,081.14

Reported cash reconciliation financial expense / 2012 / consolidated fy2012

RMB 712,418,643.1

Reported signed inventory adjustment in cash bridge / 2012 / consolidated fy2012

RMB -108,369,651.74

Reported signed operating-receivable adjustment / 2012 / consolidated operating fy2012

RMB -39,040,214.06

Reported signed operating-payable adjustment / 2012 / consolidated operating fy2012

RMB -412,525,083.01

Consolidated investing cash outflows totaled CNY 1,399,664,224.34. They comprise CNY 983,855,930.08 paid for fixed assets, intangible assets and other long-lived assets, CNY 3,500,000 of investment payments and CNY 412,308,294.26 of net cash paid to acquire subsidiaries or other business units. These categories reconcile exactly to the outflow total. Acquisition payments therefore must not be described as construction spending, while payments for long-lived assets are a broader cash category than a single factory project. Investing cash inflows were CNY 68,723,092.38, including recoveries and disposals. After those inflows, net investing cash was negative CNY 1,330,941,131.96. This net flow measures company investment funding requirements; it is not the annual construction ledger, a project budget or an allocation of cash to the Egyptian plant.

Reported investing cash outflow / 2012 / consolidated fy2012

RMB 1,399,664,224.34

Reported long lived asset cash payments / 2012 / consolidated fy2012

RMB 983,855,930.08

Reported investment cash payments / 2012 / consolidated fy2012

RMB 3,500,000

Reported acquisition net cash payments / 2012 / consolidated fy2012

RMB 412,308,294.26

Reported investing cash inflow / 2012 / consolidated fy2012

RMB 68,723,092.38

Reported investing cash flow / 2012 / consolidated fy2012

RMB -1,330,941,131.96

At year-end, consolidated monetary funds were CNY 2,120,944,070.88. The cash note identifies CNY 338,620,991.68 restricted by pledges, freezing or other realization limits. Subtracting those restricted funds gives CNY 1,782,323,079.20, exactly the closing cash and cash-equivalent balance in the cash-flow statement. Monetary funds held overseas were CNY 690,633,259.69, a disclosed subset rather than an additional amount to add to the total. Management attributes the increase in monetary funds principally to construction-period funding at Jushi Egypt; the note does not allocate all group cash to that project. The wider restricted-asset schedule totals CNY 4,765,722,654.32: the same restricted cash, CNY 33,867,627.20 of bills receivable, CNY 79,387,060.63 of receivables, CNY 4,245,878,156.28 of fixed assets and CNY 67,968,818.53 of intangible assets. The report attributes these restrictions to mortgages, pledges and deposits. Those book values describe financing collateral and restrictions, not cash losses or evidence that the factories could not operate.

Reported monetary funds / 2012 / consolidated year end

RMB 2,120,944,070.88

Reported monetary funds restricted for bill deposits and term deposits / 2012 / consolidated year end

RMB 338,620,991.68

Reported cash equivalents / 2012 / consolidated year end

RMB 1,782,323,079.2

Reported overseas monetary funds / 2012 / consolidated year end subset

RMB 690,633,259.69

Reported restricted assets / 2012 / consolidated year end total

RMB 4,765,722,654.32

Reported restricted assets / 2012 / consolidated bills receivable

RMB 33,867,627.2

Reported restricted assets / 2012 / consolidated receivables

RMB 79,387,060.63

Reported restricted assets / 2012 / consolidated fixed assets

RMB 4,245,878,156.28

Reported restricted assets / 2012 / consolidated intangible assets

RMB 67,968,818.53

The parent-company column reports net operating cash of negative CNY 17,836,409.85, net investing cash of negative CNY 1,052,195,486.07 and net financing cash of CNY 1,039,528,566.10. Parent cash and cash equivalents closed at CNY 177,523,278.96. The parent is therefore not the same cash-generating perimeter as the consolidated operating group. The parent column also reports CNY 1,400,000,000 of investment cash payments. That is a financial-statement cash flow, not proof that every capital increase described elsewhere had been paid in full or that all parent investment was construction spending. Consolidated operating cash and available group cash must not be replaced by these parent figures.

Reported operating cash flow / 2012 / parent fy2012

RMB -17,836,409.85

Reported investing cash flow / 2012 / parent fy2012

RMB -1,052,195,486.07

Reported financing cash flow / 2012 / parent fy2012

RMB 1,039,528,566.1

Reported cash equivalents / 2012 / parent year end

RMB 177,523,278.96

Reported investment cash payments / 2012 / parent fy2012

RMB 1,400,000,000

Consolidated gross accounts receivable closed at CNY 1,525,932,145.92, with CNY 64,521,226.19 of bad-debt allowances. Subtraction gives a net carrying amount of CNY 1,461,410,919.73; neither the gross balance nor the allowance is cash collected. Management attributes the substantial receivable balance to relatively long customer credit periods. The collective aging cohort contains CNY 1,510,883,137.09 of gross balances, of which CNY 1,254,427,801.85, or the reported 83.03%, is within one year. That percentage uses the cohort denominator, not all gross receivables including separately assessed items. Separately assessed trade balances of CNY 15,049,008.83 are fully provided because the company expected them to be uncollectible and had no ongoing dealings. Actual FY2012 trade-receivable writeoffs were CNY 3,056,134.98. A closing allowance, a writeoff and an annual impairment charge are different measures; the tables do not establish that all remaining balances will be recovered. The five largest gross accounts totaled CNY 200,326,838.25, reported as 13.12% of total gross receivables, rather than a customer-sales concentration measure.

Reported gross trade receivables / 2012 / consolidated year end

RMB 1,525,932,145.92

Reported trade receivable allowance / 2012 / consolidated year end

RMB 64,521,226.19

Reported gross trade receivables / 2012 / collective aging cohort year end

RMB 1,510,883,137.09

Reported gross trade receivables / 2012 / collective aging within one year

RMB 1,254,427,801.85

Reported receivable aging percentage / 2012 / collective aging within one year

83.03%

Reported gross trade receivables / 2012 / separately assessed fully provided

RMB 15,049,008.83

Reported trade receivable writeoffs / 2012 / consolidated fy2012

RMB 3,056,134.98

Reported top five receivable balance / 2012 / consolidated year end

RMB 200,326,838.25

Reported top five receivable percentage / 2012 / consolidated gross year end

13.12%

Gross prepayments were CNY 284,458,219.72 at year-end, compared with CNY 65,733,908.94 in the opening column. The closing bad-debt allowance was CNY 8,085,740.01, so the net carrying amount is CNY 276,372,479.71 by subtraction. Management attributes the increase to advance payments for projects. These balances are distinct from completed construction assets, the annual cash investment total and unpaid supplier obligations. The leading-prepayment table includes CNY 13,592,915.29 to Tongxiang Huarui Automatic Control Technology Equipment, identified as controlled by the second-largest shareholder. The related-party schedule identifies this as an equipment prepayment. It is already inside the total prepayment balance, not another amount to add to project spending. The leading items were awaiting invoices according to the source; that description does not establish that suppliers had defaulted or that payments were overdue.

Reported prepayments gross / 2012 / consolidated year end

RMB 284,458,219.72

Reported prepayments gross / 2012 / consolidated opening fy2012

RMB 65,733,908.94

Reported prepayment allowance / 2012 / consolidated year end

RMB 8,085,740.01

Reported related equipment prepayment / 2012 / huarui year end

RMB 13,592,915.29

Gross other receivables were CNY 139,337,752.25 and the related allowance was CNY 12,721,941.24 at year-end. Their difference, CNY 126,615,811.01, is a net carrying amount and must not be combined with customer trade receivables as if all were product sales. Management explains the increase principally by a CNY 24,000,000 financing-lease deposit paid during the year. The leading-balances table reports that amount against CMB Financial Leasing. A lease deposit ties up funds under the arrangement; it is not revenue, available cash or repayment of lease principal. The note separately records CNY 646,540.99 of other-receivable writeoffs against Shenzhen Dapeng Cement, identified as a related transaction and uncollectible after the company was deregistered. That specific loss does not imply all related balances were impaired or that the lease deposit itself was written off.

Reported gross other receivables / 2012 / consolidated year end

RMB 139,337,752.25

Reported other receivable allowance / 2012 / consolidated year end

RMB 12,721,941.24

Reported finance lease deposit / 2012 / cmb leasing closing other receivable

RMB 24,000,000

Reported other receivable writeoffs / 2012 / dapeng related fy2012

RMB 646,540.99

Consolidated inventory had a gross balance of CNY 1,696,071,081.67 and a valuation allowance of CNY 4,923,068.60, leaving CNY 1,691,148,013.07 of carrying value. The opening gross balance was CNY 1,519,216,180.06. Finished goods accounted for CNY 1,369,937,172.87 gross, or CNY 1,367,473,793.53 after their CNY 2,463,379.34 allowance. Raw materials were CNY 224,548,523.03, with additional categories such as goods in transit and work in progress in the source table. Management attributes the inventory balance principally to stocking for sales. This explains the company's rationale, rather than demonstrating eventual demand, specific unfilled orders or the absence of obsolete goods. The total valuation allowance remained unchanged between the opening and closing columns; it is a balance, not a newly charged impairment expense or a cash outflow. Inventory amounts are not production tonnage and should not be allocated to individual plants without further disclosure.

Reported gross inventory / 2012 / consolidated year end

RMB 1,696,071,081.67

Reported inventory allowance / 2012 / consolidated year end

RMB 4,923,068.6

Reported inventory carrying amount / 2012 / consolidated year end

RMB 1,691,148,013.07

Reported gross inventory / 2012 / consolidated opening fy2012

RMB 1,519,216,180.06

Reported gross inventory / 2012 / finished goods year end

RMB 1,369,937,172.87

Reported inventory carrying amount / 2012 / finished goods year end

RMB 1,367,473,793.53

Reported inventory allowance / 2012 / finished goods year end

RMB 2,463,379.34

Reported gross inventory / 2012 / raw materials year end

RMB 224,548,523.03

FY2012 financial expenses totaled CNY 717,285,186.82. The note reports CNY 695,567,578.02 of interest expense, subtracts CNY 2,525,851.96 of interest income and includes an exchange-loss row of negative CNY 1,433,105.62, meaning a gain in that expense calculation, plus CNY 25,676,566.38 of other costs. These components reconcile to the expense total. The note therefore shows the profit effect of financing and currency movements, rather than the amount of gross borrowing or all cash interest paid. Its profit-statement expense is also distinct from the financial-expense adjustment used to reconcile net profit to operating cash. Those measures should not be substituted when explaining the cash available to fund investment.

Reported financial expense / 2012 / consolidated fy2012

RMB 717,285,186.82

Reported interest expense / 2012 / consolidated fy2012

RMB 695,567,578.02

Reported interest income / 2012 / consolidated fy2012 expense note

RMB 2,525,851.96

Reported exchange loss / 2012 / consolidated fy2012 expense note

RMB -1,433,105.62

Reported other financing expense / 2012 / consolidated fy2012

RMB 25,676,566.38

Investment income was CNY 21,215,113.34 in FY2012, comprising CNY 23,332,252.51 of gains on disposal of long-term equity investments offset by negative CNY 2,117,139.17 of equity-accounted investment results. This is a profit contribution from investments and disposals, not glass-fiber sales or the cash proceeds of those disposals. Nonoperating income included CNY 50,723,592.20 of government subsidies; the source classified CNY 40,375,464.21 of that amount in nonrecurring profit and loss, so the full subsidy figure and that subset are not interchangeable. The grant schedule includes CNY 7,830,000 identified as a natural-gas price-difference subsidy relating to 2011, CNY 2,000,000 of new working-capital loan interest support and CNY 4,520,000 of infrastructure support for a technical-upgrade project in the current column. These items help explain funding and energy-cost support; their historical labels do not turn them into sales earned in those earlier years or prove that every grant was received in cash during FY2012. Income recognition, project funding and sustainability of product profit remain separate. The selected items do not reproduce the entire subsidy ledger.

Consolidated investment income or loss / 2012 / consolidated fy2012

RMB 21,215,113.34

Reported investment disposal gain / 2012 / consolidated fy2012

RMB 23,332,252.51

Reported equity accounted result / 2012 / consolidated fy2012

RMB -2,117,139.17

Reported government subsidy income / 2012 / consolidated fy2012

RMB 50,723,592.2

Reported government subsidy income / 2012 / nonrecurring subset fy2012

RMB 40,375,464.21

Reported government subsidy income / 2012 / gas price difference 2011 label current column

RMB 7,830,000

Reported government subsidy income / 2012 / working capital interest support current column

RMB 2,000,000

Reported government subsidy income / 2012 / upgrade infrastructure support current column

RMB 4,520,000

The year-end goodwill balance was CNY 472,512,501.24. The table records CNY 368,996,776.12 of additions, including CNY 176,839,725.90 for Tongxiang Jinshi Precious Metal Equipment, CNY 189,612,641.95 for Tongxiang Leishi Micropowder and CNY 2,544,408.27 for Hubei Hongjia Kaolin Mining. These businesses connect to glass-fiber equipment and material supply, but the goodwill amounts are acquisition-accounting balances rather than their annual sales, physical plant cost or cash consideration. Management attributes the increase to consideration above assessed fair values and says goodwill was allocated to relevant asset groups and tested without impairment. That reported test outcome is not a guarantee of future recoverability. The group cash note separately reports acquisition prices totaling CNY 755,087,910.00, cash paid of CNY 531,283,629.73 and acquired cash of CNY 118,975,335.47. Their subtraction gives the already-reported net acquisition cash of CNY 412,308,294.26; the price and cash totals have different scopes and are not silently substituted for one another. Earlier explanations of ownership purchases and profit compensation remain separate from these annual cash and goodwill measures.

Reported goodwill / 2012 / consolidated year end

RMB 472,512,501.24

Reported goodwill additions / 2012 / consolidated fy2012

RMB 368,996,776.12

Reported goodwill / 2012 / jinshi year end

RMB 176,839,725.9

Reported goodwill / 2012 / leishi year end

RMB 189,612,641.95

Reported goodwill / 2012 / hongjia year end

RMB 2,544,408.27

Reported acquisition price / 2012 / group cash note fy2012

RMB 755,087,910

Reported acquisition cash paid / 2012 / gross group cash note fy2012

RMB 531,283,629.73

Reported acquired cash / 2012 / group cash note fy2012

RMB 118,975,335.47

The management-expense note reports technical-development expense of CNY 158,818,281.49. The research table's original ten-thousand-yuan presentation converts to CNY 158,818,300, only CNY 18.51 higher than this detailed expense figure. This is consistent with the table's displayed precision and is not presented as a material economic discrepancy. The broader research paragraph uses a still less precise CNY 158,000,000 presentation, retained in the product-technology explanation. The cash-flow note separately reports research-development payments of CNY 105,314,396.48. Expense recognition and cash payments therefore should not be added as two research budgets, or treated as interchangeable evidence of unpaid research liabilities without an actual bridge. The detailed expense is one component of management expenses totaling CNY 485,659,782.96. These figures help explain the cost of technical development and the cash supporting it, without equating R&D spending with new-product revenue.

Reported technical development expense / 2012 / management expense note fy2012

RMB 158,818,281.49

Reported research cash payments / 2012 / cash note fy2012

RMB 105,314,396.48

Reported management expenses / 2012 / consolidated fy2012

RMB 485,659,782.96

The payable note says trade payables increased61.68% from the opening balance and attributes this to suppliers extending credit periods during a weak glass-fiber market. That is management's explanation of funding terms, not evidence that every balance was overdue. Year-end bills payable were CNY 81,945,611.40, all due in the following accounting period; the company says it changed settlement methods to use bills more often. Trade payables outstanding for more than one year totaled CNY 49,062,395.59, with payment not yet due under the contracts, and CNY 3,040,000.00 paid by the financial-statement approval date. Customer advances aged more than one year were CNY 37,596,777.78 because the goods had not yet shipped; CNY 2,450,000.00 was settled by the approval date. These aged subsets, total bills, year-end balances and subsequent settlements have different periods and perimeters. Customer advances do not themselves establish delivered sales, and related-party payable subsets already reported must not be added again to group totals.

Reported trade payable growth / 2012 / year end versus opening

61.68%

Bills payable / 2012 / year end due next period

RMB 81,945,611.4

Reported aged trade payables / 2012 / more than one year year end

RMB 49,062,395.59

Reported aged customer advances / 2012 / more than one year year end

RMB 37,596,777.78

Selling expenses totaled CNY 174,633,902.79, including CNY 133,477,126.10 of transport costs. Transport in this note is a selling expense, not an additional amount of the glass-fiber production-cost table. Income-tax expense was CNY 88,859,923.59, comprising current tax of CNY 92,099,344.13 and deferred tax expense of negative CNY 3,239,420.54. The source reconciliation identifies differing subsidiary rates, adjustments for earlier periods, unrecognized deductible losses and tax deductions among the reasons group expense differs from the simple statutory-rate amount. Those explain reported profit quality, but this note is not a statement of tax cash paid or a promise of permanent tax benefits. Separately, CNY 10,559,336.15 of borrowing costs were capitalized in FY2012, with reported capitalization rates of5.93%–6.43%. Capitalized borrowing costs enter qualifying asset cost rather than immediately appearing as financing expense; they are not an additional cash capital-expenditure amount to add again to the cash-flow totals.

Reported selling expenses / 2012 / consolidated fy2012

RMB 174,633,902.79

Reported selling transport expenses / 2012 / consolidated fy2012

RMB 133,477,126.1

Reported consolidated income-tax expense / 2012 / consolidated fy2012

RMB 88,859,923.59

Current corporate-income-tax expense / 2012 / consolidated fy2012

RMB 92,099,344.13

Deferred corporate-income-tax expense / 2012 / consolidated fy2012

RMB -3,239,420.54

Reported capitalized borrowing cost / 2012 / consolidated fy2012

RMB 10,559,336.15