China Jushi FY2016: Subsidiaries and invested companies

The company acquired a 26.52% interest in Lianyungang Zhongfu Lianzhong Composite Materials Group, which manufactures and sells wind-turbine blades. The reported cash price was 78,659.55 ten-thousand CNY, equivalent to CNY 786.5955 million. This is consideration for an equity interest, not glass-fiber revenue or construction spending. It separately held 20.10% of Guangrongda Financial Leasing, whose business was leasing. The major-company table distinguishes wholly owned Jushi Group and Beixin Technology Development from these partial holdings. Zhongfu’s reported revenue and profit are figures for the invested company, not wholly owned subsidiary sales to add to listed-group revenue; holding percentage alone is not a cash-dividend entitlement already received. Management attributes the rise in long-term equity investments to these additions. The intended downstream integration is stated as the issuer’s strategy, without inferring exclusive supply contracts, new blade orders or undertaking a separate investigation of the counterparties.

Reported equity interest / 2016 / zhongfu lianzhong

26.52 percent

Reported equity purchase consideration / 2016 / zhongfu lianzhong

RMB 786,595,500

Reported equity interest / 2016 / guangrongda financial leasing

20.1 percent

The financial note gives the cash price for the 26.52% Zhongfu Lianzhong wind-blade interest as CNY 786,595,479.13. This differs by CNY 20.87 from the amount implied by management’s rounded 78,659.55 ten-thousand CNY disclosure; both are retained with their precision. The note recognized CNY 39,730,060.39 of nonoperating income because its acquisition recognition base was CNY 826,325,539.52. Purchase price plus that recognition equals the closing equity-investment carrying amount; the gain is not recurring equity-method profit, a customer sale or a cash dividend. The associate information table reports investee parent equity of CNY 2,883,632,473.11, a proportionate net-asset share of CNY 764,739,331.87 and the investment carrying amount of CNY 826,325,539.52. These measures do not have interchangeable scopes, and the carrying amount is not the whole investee’s net assets. The reported investee revenue of CNY 2,387,274,862.82 and net profit of CNY 332,621,744.68 describe the invested business, not figures to add in full to listed-group sales or shareholder earnings. The filing also describes a further 5.52% purchase agreed on 25 January 2017 for CNY 157,025,209.00; that subsequent event is distinct from the 2016 completed interest. No new wind-blade contracts or exclusive glass-fiber supply relationship are inferred.

Equity-method investment additions / 2016 / zhongfu lianzhong

RMB 786,595,479.13

Associate acquisition nonoperating gain / 2016 / zhongfu lianzhong

RMB 39,730,060.39

Equity-method investment carrying value / 2016 / zhongfu lianzhong

RMB 826,325,539.52

Reported share of associate net assets / 2016 / zhongfu lianzhong

RMB 764,739,331.87

Reported investee revenue / 2016 / zhongfu lianzhong

RMB 2,387,274,862.82

Reported investee net profit / 2016 / zhongfu lianzhong

RMB 332,621,744.68

The annual report lists several legal-entity liquidations at its disclosure stage. Tongxiang Jushi Import and Export published a liquidation notice on 7 December 2016; Beijing Luxin Jiayuan Home Furnishing Market published one on 20 January 2017, with liquidation work still proceeding. It also says Jushi Group’s Licheng Hong Kong company, Jushi Singapore and the South Africa Huaxia entity began liquidation work in the first quarter of 2017. These are different dates and stages, not five completed closures during 2016. The note does not allocate a disposal gain, liquidation cash return, production capacity reduction or replacement trading route to each entity. A trading or home-furnishing entity’s liquidation cannot by itself establish that a glass-fiber factory stopped production. The disclosed changes are retained as organizational context alongside the manufacturing expansion, without investigating the counterparties or inventing an operational effect. The further Zhongfu Lianzhong purchase and share-unlock events are described separately; the release of existing restricted shares is not another new share issue.