China Jushi FY2015: Debt and related-party balances

The company issued 232,896,652 shares at CNY 20.61 each in a private placement. Gross proceeds were CNY 4,799,999,997.72 and net proceeds after issuance costs were CNY 4,743,445,378.38; the report states that the funds arrived on 28 December 2015. This receipt date is separate from the January 2016 registration date described in the following annual report, and does not represent a second receipt of the same financing. Management intended the funding to support new construction and refurbishment and improve the balance-sheet structure. Year-end monetary funds were CNY 3,290,275,794.34, with management attributing their increase to the concentrated placement receipts. The business overview separately states that CNY 1.5 billion of temporarily idle proceeds was put into treasury products within other current assets, which totaled CNY 1,720,044,869.02. Monetary funds, treasury-product balances and net proceeds are different measures; they cannot be added to invent available construction cash. Issuing new shares changes the ownership denominator even though the cash supported the same operating business. Detailed restrictions, treasury product terms and financing cash flows remain to be compared with the financial notes.

Shares issued in private placement / 2015 / private placement

232,896,652 shares

Private-placement issue price / 2015 / private placement

20.61 CNY per share

Gross placement proceeds / 2015 / private placement

RMB 4,799,999,997.72

Net placement proceeds / 2015 / private placement

RMB 4,743,445,378.38

Consolidated monetary funds / 2015 / consolidated

RMB 3,290,275,794.34

Other current assets / 2015 / consolidated

RMB 1,720,044,869.02

Short-term borrowings fell to CNY 4,345,743,859.33, and the current portion of non-current liabilities fell to CNY 388,972,036.46. Management attributes the changes to repayment of matured debt and concentrated settlement of long-term loans coming due within one year. Other current liabilities increased to CNY 1,900,000,000.00, which the adjacent explanation links to short-term debt securities. Long-term borrowing increased to CNY 2,857,393,685.14, and long-term payables to CNY 364,395,990.22, with the latter attributed to additional finance leases. These categories show changes in funding instruments and maturity classification; the fall in two categories does not establish that every form of funding or refinancing exposure declined. Equipment purchases also increased accounts payable, and more bank acceptance bills increased notes payable. Those operating and financing balances are not additional construction cash expenditure. Loan currencies, contractual maturity, security and lease terms still require the financial notes.

Short-term borrowings / 2015 / consolidated

RMB 4,345,743,859.33

Current portions of non-current liabilities / 2015 / consolidated

RMB 388,972,036.46

Other current liabilities / 2015 / consolidated

RMB 1,900,000,000

Non-current long-term borrowings after current-portion deduction / 2015 / consolidated

RMB 2,857,393,685.14

Long-term payables / 2015 / consolidated

RMB 364,395,990.22

Guarantees to subsidiaries incurred during the year totaled CNY 11,336,600,000.00, while the outstanding year-end balance was CNY 6,007,600,000.00, or 61.81% of reported net assets. The disclosure separately assigns zero to outstanding guarantees outside the subsidiary perimeter and to guarantees for shareholders, actual controllers and their related parties. Those bounded categories do not mean that all guarantees were zero. Guarantees involving recipients with a debt-to-asset ratio above 70% were CNY 80,170,000.00; the amount above 50% of net assets was CNY 1,148,201,516.79. The source totals the stated categories at CNY 1,228,371,516.79. Annual incurred amounts and outstanding exposure are different measures and must not be added as a new debt principal. Nor is the guarantee balance an already paid cash outflow or evidence that a recipient defaulted. The note says all company guarantees were for subsidiaries, without allocating every balance to a named furnace or project.

Guarantees incurred / 2015 / subsidiaries

RMB 11,336,600,000

Outstanding subsidiary guarantees / 2015 / subsidiaries

RMB 6,007,600,000

Guarantees to net assets / 2015 / report defined

61.81 percent

Guarantees for recipients above70percentleverage / 2015 / report defined

RMB 80,170,000

Guarantees above half net assets / 2015 / report defined

RMB 1,148,201,516.79

The 2012 corporate bond, code 122187, carried a CNY 1,200,000,000 principal, a 5.56% annual simple-interest rate and a 17 October 2019 maturity, with interest paid annually and principal at maturity. Its China Fiberglass name identifies the same issuer before renaming, not a separate factory project. The report says net issue proceeds had been used to repay bank loans and cites an AA+ rating with stable outlook in the dated 2015 tracking report. This is historical reported assurance, not a current SinoFilings credit assessment. The bank-credit discussion reports 252.35 hundred-million CNY of year-end credit from thirty banks and 74.29 hundred-million CNY of used credit, as well as 175.60 hundred-million CNY of bank-loan repayments during the year. Credit lines, used credit and annual repayments are different measures; subtraction does not establish unconditional available cash or a complete bridge to drawn debt. The issuer describes timely service without proving future refinancing. The debt-ratio table reports closing cash and cash equivalents of CNY 2,853,785,300.04, distinct from the larger monetary-fund balance; the financial notes must explain restrictions and exclusions rather than treating the difference as a cash loss.

Reported bond principal / 2015 / 2012 corporate bond

RMB 1,200,000,000

Reported bond coupon rate / 2015 / 2012 corporate bond

5.56 percent

Reported annual bank credit / 2015 / year end credit discussion

RMB 25,235,000,000

Reported annual bank credit used / 2015 / year end credit discussion

RMB 7,429,000,000

Reported rounded loan repayments / 2015 / annual credit discussion

RMB 17,560,000,000

Cash and cash equivalents / 2015 / consolidated cash flow

RMB 2,853,785,300.04

The restricted-assets note reports CNY 4,944,506,157.79 in total: monetary funds of CNY 436,490,494.30, bills receivable of CNY 218,240,430.19, fixed assets of CNY 4,251,493,432.86 and intangible assets of CNY 38,281,800.44. Bills support bank acceptances; fixed assets cover borrowing mortgages and finance-leased assets; intangible assets cover borrowing mortgages. These carrying values describe assets with ownership or use restrictions, rather than new expenditure, guaranteed debt principal or a forecast loss. They also differ from Zhenshi’s pledge of shares in the listed company. The total must not be added to debt or subsidiary guarantees as if it were a further cash liability.

Restricted assets total / 2015 / consolidated

RMB 4,944,506,157.79

Pledged bills receivable / 2015 / consolidated

RMB 218,240,430.19

Restricted fixed assets / 2015 / consolidated

RMB 4,251,493,432.86

Restricted intangible assets / 2015 / consolidated

RMB 38,281,800.44

The consolidated cash-flow statement reports CNY 885,661,288.59 paid to acquire or construct fixed, intangible and other long-term assets, separately from CNY 1,520,265,596.54 paid for investments. Accordingly, the CNY 2,392,894,467.26 net investing cash outflow cannot all be called factory capital expenditure. Operating cash inflow of CNY 2,429,601,488.84, investing outflow and financing inflow of CNY 1,866,578,209.07, together with a negative CNY 42,849,703.05 exchange-rate effect, produce the CNY 1,860,435,527.60 increase in cash and equivalents. Sale-and-leaseback financing receipts of CNY 302,212,724.94 are financing flows, not product revenue or automatically the same figure as contractual rent. Parent operating cash flow was negative CNY 1,039,328,360.27 and belongs to a separate accounting perimeter. The profit-to-cash reconciliation includes noncash depreciation and depletion, provisions and working-capital movements; its combined depreciation/depletion label must not be substituted for ordinary machine depreciation alone.

Capital asset cash payments / 2015 / consolidated

RMB 885,661,288.59

Investment cash payments / 2015 / consolidated

RMB 1,520,265,596.54

Cash exchange-rate effect / 2015 / consolidated

RMB -42,849,703.05

Sale-and-leaseback financing receipts / 2015 / consolidated

RMB 302,212,724.94

Future minimum finance-lease payments were CNY 575,458,921.76. Deducting CNY 47,496,548.13 of unrecognized financing expenses gives a calculated CNY 527,962,373.63 of lease principal: CNY 163,566,383.41 classified as current and CNY 364,395,990.22 as noncurrent. The payment schedule is therefore not the same as the current principal classification. Minimum payments within one year were CNY 184,528,762.80; amounts in later buckets were CNY 184,104,979.82, CNY 89,434,371.20 and CNY 117,390,807.94. Future operating-lease payments of CNY 20,054,211.41 are separately disclosed. Finance-leased assets had a calculated carrying value of CNY 853,299,841.46 after accumulated depreciation. The disclosed sale-and-leaseback contracts transferred legal ownership while the equipment stayed in use. Their stated rent, first payments, equipment value and terms measure different things; they do not show that factories ceased operating or that each rent figure equals borrowing principal.

Minimum finance-lease payments / 2015 / consolidated

RMB 575,458,921.76

Unrecognized finance lease charges / 2015 / consolidated

RMB 47,496,548.13

Current finance-lease principal / 2015 / consolidated

RMB 163,566,383.41

Finance expense was CNY 740,571,097.02: interest expense of CNY 716,308,175.45, less interest income of CNY 49,120,119.98, plus exchange losses of CNY 46,963,048.24 and other finance costs of CNY 26,419,993.31. The exchange loss in earnings differs from the exchange effect in the cash-flow statement and from foreign-operation translation in other comprehensive income. The financial statements report a negative CNY 39,472,693.73 fair-value movement in the relevant financial-instrument line; this is not reconciled here to the closing CNY 41,334,330 derivative liability contract by contract. Effective cash-flow hedge gains of CNY 51,471,145.65 after tax and foreign-operation translation of CNY 25,668,868.75 contributed to owners’ other comprehensive income, rather than new product revenue. The Egyptian subsidiary used USD as functional currency. Currency denomination, functional currency and cash physically held abroad are distinct measures. Contract receipts, fair-value changes and investment gains must not be added together as if all were the same cash realization.

Finance expense / 2015 / consolidated

RMB 740,571,097.02

Interest expense / 2015 / consolidated

RMB 716,308,175.45

Exchange losses in earnings / 2015 / consolidated

RMB 46,963,048.24

Effective cash-flow hedge gains after tax / 2015 / owners oci

RMB 51,471,145.65

The issuer states that 60.44% of debt matured in less than one year at 31 December 2015, compared with 64.42% previously. Separately, 24.25% of interest-bearing borrowing bore fixed rates, compared with 33.12%. These are different reported denominators and are not inferred shares of every liability on the balance sheet. The maturity table is labeled as undiscounted contractual cash flows, while individual rows also match several financial-instrument carrying amounts; the report does not supply a complete principal-and-interest bridge here. Current bank principal of CNY 225,405,653.05 and current lease principal of CNY 163,566,383.41 together make the CNY 388,972,036.46 current portion of noncurrent liabilities. Short-term bonds of CNY 1,900,000,000 are separate from bank loans and long-term bonds carried at CNY 2,190,719,935.12. Interest-bearing debt, trade payables, guarantee exposures and asset collateral must not all be added as if they were new borrowing. Reported financing flexibility and credit controls are issuer statements, not assurance of future refinancing or zero collection risk.

Reported debt maturing under one year / 2015 / issuer defined debt

60.44 percent

Fixed-rate interest-bearing borrowing ratio / 2015 / issuer defined interest bearing borrowing

24.25 percent