China Jushi FY2015: Operating risks and business commitments

The FY2015 proposal uses 1,105,526,152 shares as its base and provides CNY 3.12 per ten shares before tax, totaling CNY 344,924,159.42. The parent-company profit quoted for the proposal was CNY 1,019,741,181.90. The table instead compares the payout with consolidated attributable profit of CNY 983,047,101.65 and reports a 35.09% payout ratio. Parent and consolidated earnings are different scopes. The report also proposes twelve new shares per ten existing shares through capitalization of capital reserves, adding 1,326,631,382 shares and bringing the proposed total to 2,432,157,534. Reserve capitalization reallocates equity; it raises no new cash and is not operating profit. The quoted parent capital-reserve balance was CNY 9,033,708,095.67. The proposal was not an already implemented FY2015 cash payment or already effective reserve-share issue. In contrast, the FY2014 cash dividend of CNY 143,983,867.50 was implemented on 23 April 2015. Distribution-year labels, proposals and payment dates must remain separate.

Proposed cash distribution / 2015 / fy2015 proposal

RMB 344,924,159.42

Parent net profit / 2015 / parent company

RMB 1,019,741,181.9

Profit attributable to shareholders / 2015 / consolidated

RMB 983,047,101.65

Proposed dividend to attributable profit / 2015 / consolidated attributable profit

35.09 percent

Proposed capital-reserve shares / 2015 / fy2015 proposal

1,326,631,382 shares

Capital reserve / 2015 / parent company

RMB 9,033,708,095.67

Cash dividend implemented / 2015 / fy2014 distribution paid 2015

RMB 143,983,867.5

The share-change explanation states that private-placement registration was completed on 7 January 2016 and increased registered shares from 872,629,500 to 1,105,526,152. The operating account separately places receipt of the proceeds on 28 December 2015. Registration is not a second receipt of financing. The year-end top-shareholder table reports China National Building Material Company Limited, called CNBM Company here, holding 298,186,135 shares or 34.17%; it identifies that company as the controlling shareholder. The separately identified actual-controller group is China National Building Materials Group, rather than the same entity as CNBM Company. Zhenshi Holding held 172,389,223 shares or 19.76%, of which 158,016,560 shares were pledged. These percentages are consistent after rounding with the earlier registered share base, not the enlarged placement base; the labels and dates are retained pending comparison with accounting share capital. A shareholder pledge is distinct from a mortgage of the company’s operating assets. The report says CNBM Company, Zhenshi, Pearl Success and Surest were not related or acting in concert under its stated disclosure rules, while relationships among other shareholders were unknown. Neither controlling status nor a pledge establishes complete ownership, a new company or a factory identity.

Shareholder shares / 2015 / cnbm company

298,186,135 shares

Shareholder ownership / 2015 / cnbm company

34.17 percent

Shareholder shares / 2015 / zhenshi holding

172,389,223 shares

Shareholder ownership / 2015 / zhenshi holding

19.76 percent

Shareholder pledged shares / 2015 / zhenshi holding

158,016,560 shares

The commitment table describes Assure Glory’s compensation obligations arising from the acquisition of Tongxiang Jinshi and Tongxiang Leishi: 75% interests were acquired in 2012 and the remaining 25% in 2013. The combined forecast net-profit commitments were 8,489.67 ten-thousand CNY for 2013, 7,496.10 for 2014 and 7,402.84 for 2015. These are agreed forecast amounts for the two businesses together, not separately measured output, actual profits or cash compensation already received. The table marks the commitments as timely and strictly fulfilled; that issuer status does not itself provide the detailed realized-profit and compensation calculation. The source also describes dated share-purchase plans and non-disposal commitments by the controlling and second-largest shareholders. Plans and commitments are not automatic proof of all purchases or future ownership changes. The named acquisition and shareholder relationships are retained as disclosed; no further investigation of the counterparties is added.

The report shows several directors and supervisors also holding executive, finance or audit roles at CNBM Company, and Zhenshi’s chairman holding management roles at Jushi Group. These disclosed overlaps provide context for control and related-party oversight; they do not by themselves establish misconduct or the failure of operational independence. The issuer reports no major internal-control deficiency and says its auditor issued an unqualified internal-control audit report. That is the annual report’s description of a separate internal-control audit, rather than independent editorial approval of this English research or a guarantee against all business risks. Routine governance procedures, meeting attendance and lengthy biographies are compressed. The annual financial audit opinion and scope still require direct comparison with the financial chapter, while actual related operating transactions remain to be extracted from its notes.

The financial note reports CNBM Company’s holding and voting-right percentages as 26.97%. Its earlier ownership table reports the same 298,186,135 shares at 34.17%. The two percentages round consistently using 1,105,526,152 and 872,629,500 shares respectively. The placement note confirms 232,896,652 new shares with CNY 1 face value; the monetary denomination of share capital and a count of shares remain separate concepts even where numerically equal. Cash receipt on 28 December 2015 and registration completed on 7 January 2016 are distinct dated events. In the subsequent-event note, the 14 February 2016 notification reports Zhenshi holding the same 172,389,223 shares at 15.59% after the enlarged base; it also reports a release of 10,000,000 pledged shares and 148,016,560 remaining pledged shares, or 13.39% of total shares. This is a later pledge update, not the year-end pledge balance. The annual report does not supply a full register-versus-accounting cutoff reconciliation; original labels and dates are retained. CNBM Company remains distinct from the actual-controller group.

Shareholder ownership / 2015 / financial note cnbm company

26.97 percent

The financial note reports combined audited net profit of 25,267.06 ten-thousand CNY for Tongxiang Jinshi and Tongxiang Leishi in 2013 and 2014 and says those profit targets were met. This is a two-year combined result, not their actual 2015 profit or an allocation between the two businesses. The earlier combined forecast commitments for 2013, 2014 and 2015 remain distinct. Separately, CNBM Company, Zhenshi, Pearl Success and Surest paid Jushi Group CNY 38,669,767.65 in April 2015 under the historic tax-compensation commitment arising from its conversion to a domestic enterprise, and CNY 146,784.40 under the property-title cost commitment. These are identified shareholder compensation payments, not automatically profit-shortfall compensation, product revenue or a new acquisition. The two amounts total CNY 38,816,552.05, matching the capital-reserve note’s increase in other capital reserves. No further counterparty investigation is added.

Historic tax compensation received / 2015 / 2011 acquisition commitment

RMB 38,669,767.65

Historic title-related compensation received / 2015 / 2011 acquisition commitment

RMB 146,784.4

On 3 February 2016 the board approved participation in a proposed financial-leasing company in the Shanghai Free Trade Zone, provisionally named Guangrongda Financial Leasing. The report describes total registered capital of 50,000 ten-thousand CNY and a proposed Jushi contribution of 10,050 ten-thousand CNY for a 20.10% interest. The name remained subject to registration. This disclosed subsequent proposal does not prove payment, incorporation, licensing or commencement of operations in 2015. Shanghai Dongchang and Yongding are recorded only as the disclosed other investors. The same subsequent-event section reports a 25 January 2016 notice that CNBM Group and Sinoma Group were planning a strategic reorganization whose plan and approvals remained pending. That dated disclosure is not evidence of a completed merger at the 2015 year end.

The related-party note reports finished-product sales of CNY 409,064,874.53 to Hengshi Fiber and CNY 90,817,352.57 to Zhenshi Holding, separately from CNY 499,739.12 to Hengshi Egypt. These annual sales are distinct from closing receivables and from the annual customer-concentration table. Purchases include CNY 193,704,230.21 of logistics from Zhejiang Yushi; other regional logistics entities and transaction categories are disclosed separately. The common Yushi name does not establish that each entry is one legal entity. CNBM International Trade and CNBM Group Import and Export are also separately named counterparties. The guarantee table identifies the reporting company as the guaranteed party and Zhenshi as guarantor for USD 31 million, explicitly in USD despite the surrounding CNY unit heading. Its stated term runs from 17 February 2011 to 11 February 2016 and it had not been fulfilled at the report’s stated point. The table does not identify Jushi Egypt as beneficiary. This corrects the prior English attribution to that subsidiary; the amount and original evidence remain unchanged. This is a disclosed guarantee, not a further sale or proof of a realized loss. Names and relationships are recorded within the issuer’s disclosures, without extending research into counterparties.

Related-party sales / 2015 / hengshi fiber

RMB 409,064,874.53

Related-party sales / 2015 / zhenshi holding

RMB 90,817,352.57

Related-party logistics purchases / 2015 / zhejiang yushi

RMB 193,704,230.21

Related-party closing trade receivables totaled CNY 20,136,574.28 with CNY 201,365.73 of provisions. Related supplier prepayments were CNY 3,875,240.99, trade payables CNY 1,948,544.60 and customer advances CNY 5,077,979.29. These balances are separate from annual related-party sales and purchases. Key management personnel remuneration was CNY 11,370,000 for 2015, compared with CNY 7,034,200 previously; its financial-note population is not assumed to match every person and role in the director-biography remuneration table. The note headed important commitments states none within that section. This statement does not erase separately disclosed guarantees, finance-lease contracts, project plans or historical acquisition commitments. The names and scope are retained from the report without investigating related parties recursively.

Related trade receivables / 2015 / consolidated related party

RMB 20,136,574.28

Related trade receivable allowance / 2015 / consolidated related party

RMB 201,365.73

Related-party trade payables / 2015 / consolidated related party

RMB 1,948,544.6

Key management remuneration / 2015 / financial note key management

RMB 11,370,000