China Jushi FY2017: Debt and related-party balances

Net fixed assets were CNY 13,415,339,996.11 at year end, up 5.07%, while construction in progress rose 32.83% to CNY 1,253,781,518.92. Management attributes the changes to completed new or upgraded lines and investment in projects including the US80,000-tonne and Jiujiang 120,000-tonne lines; these are aggregate asset accounts, not spending allocated to either project. Prepayments doubled to CNY 317,865,067.80, primarily because of advance construction payments. Short-term loans increased to CNY 4,493,031,536.79 as the company reduced bond financing, and long-term loans rose to CNY 2,624,378,680.00 with construction funding needs. Amounts of non-current liabilities due within a year, supplier notes and lease balances have separate classifications and must not be omitted when assessing the wider funding position. The management table lists CNY 1,900,899,292.19 of restricted assets: cash deposits or pledges, mortgaged or leased fixed assets and land pledged for loans. That total is collateral carrying value, not additional debt, freely available cash or a guarantee payment. Deferred-tax changes are accounting timing effects, not cash refunds or new project funds.

Net fixed assets / 2017 / consolidated

RMB 13,415,339,996.11

Consolidated construction in progress / 2017 / consolidated

RMB 1,253,781,518.92

Prepayments / 2017 / consolidated

RMB 317,865,067.8

Short-term borrowings / 2017 / consolidated

RMB 4,493,031,536.79

Non-current long-term borrowings after current-portion deduction / 2017 / consolidated

RMB 2,624,378,680

Restricted assets / 2017 / management summary

RMB 1,900,899,292.19

Bank wealth-management placements using raised funds had CNY 4,253,000,000 of occurrence and CNY 158,000,000 not yet matured. Placements using the company’s own funds had CNY 600,000,000 of occurrence and CNY 400,000,000 outstanding. The individual list supports the year-end amounts with raised-fund placements of CNY 18 million and CNY 140 million and own-fund placements of CNY 100 million and CNY 300 million, all maturing in 2018. The CNY 4,853,000,000 aggregate occurrence is a flow of placements, not CNY 4.853 billion still available at year end; outstanding placements totaled CNY 558 million. The list gives CNY 34,546,139.43 as actual income or loss, separately from principal and future contractual yields. The summary reported no overdue unrecovered amounts for these products, which does not mean that every group receivable was collected or that future returns were guaranteed. Historical bank-product labels and rates are not current investment recommendations. Individual bank counterparties are retained as source detail without extending research into them.

Wealth-management occurrence / 2017 / raised funds

RMB 4,253,000,000

Wealth-management balance / 2017 / raised funds

RMB 158,000,000

Wealth-management occurrence / 2017 / own funds

RMB 600,000,000

Wealth-management balance / 2017 / own funds

RMB 400,000,000

Wealth-management return / 2017 / listed actual income or loss

RMB 34,546,139.43

The 2012 glass-fiber company bond had CNY 1,200,000,000 outstanding, a 5.56% annual simple-interest coupon and a 17 October 2019 maturity. The report says the interest for 17 October 2016 through 16 October 2017 was paid on 17 October 2017. Its proceeds had already been used to repay bank loans under the prospectus, so this historical bond is not new 2017 proceeds or cash earmarked for a named production line. The issuer separately reported bank credit of CNY 36.9 billion, of which CNY 27.7 billion had been used, and CNY 6.527 billion of bank-loan repayments during 2017. Used credit does not automatically equal outstanding bank loans, and the arithmetic remainder is not assumed to be unrestricted cash or an irrevocably committed facility. Management says loans and interest were paid on time; the dated AA+ credit rating and payment record do not guarantee future solvency. The credit and debt perimeters require comparison with the complete financial notes, which remain under review.

Bond balance / 2017 / 2012 company bond

RMB 1,200,000,000

Bond coupon / 2017 / 2012 company bond

5.56 percent

Bank credit granted / 2017 / reported bank credit

RMB 36,900,000,000

Bank credit used / 2017 / reported bank credit

RMB 27,700,000,000

Bank-loan repayments / 2017 / reported bank loan repayments

RMB 6,527,000,000

Fixed assets had a net carrying value of CNY 13,415,339,996.11, including CNY 6,607,326,760.07 recorded under platinum-rhodium alloy, CNY 4,528,858,181.01 of machinery and CNY 2,192,230,531.27 of buildings. These are asset values, not tonnes of glass fiber capacity, precious-metal reserves available for unrestricted sale or measured production output. Gross fixed-asset additions totaled CNY 1,994,707,388.47, including CNY 1,573,335,843.03 transferred from construction in progress; other movements included transfers back into construction, disposal and reclassification. Such transfers are not new cash payments and should not be counted again as project investment. The depreciation charged in the fixed-asset movement note was CNY 645,373,288.33, whereas the profit-to-cash reconciliation used CNY 974,169,262.19; the source difference is retained rather than forcing the two presentations to match without a disclosed bridge. The note also lists the second-phase factory building of Jushi Group’s sixth plant at CNY 28,283,374.09 without a completed title certificate, describing it as within the normal certificate-processing period. That is the issuer’s explanation, not proof of an ownership dispute or confirmation that the certificate was subsequently issued.

Fixed asset carrying value / 2017 / platinum rhodium alloy

RMB 6,607,326,760.07

Fixed asset carrying value / 2017 / machinery

RMB 4,528,858,181.01

Fixed asset carrying value / 2017 / buildings

RMB 2,192,230,531.27

Gross fixed asset additions / 2017 / consolidated

RMB 1,994,707,388.47

Construction transfer to fixed assets / 2017 / all fixed assets

RMB 1,573,335,843.03

Fixed asset depreciation charge / 2017 / movement note

RMB 645,373,288.33

Asset without title certificate / 2017 / sixth plant phase2 building

RMB 28,283,374.09

Consolidated construction in progress ended at CNY 1,253,781,518.92, against CNY 943,888,082.50 at the start of the year. The important-project movement table covers a narrower set of projects, with a closing balance of CNY 1,123,666,646.16; the balance-sheet note separately identifies CNY 130,114,872.76 of other projects. Construction additions and transfers to fixed assets are accounting movements. They are not interchangeable with cash paid for long-term assets or tonnes of commercial output. The project table separately reports budget utilisation and physical progress, which can have different percentages. Blank opening balances, transfers, budgets and progress cells are retained as undisclosed cells rather than converted into verified zeros. Funding described as own funds and borrowings does not identify a specific loan allocated to each line.

Construction-note balance / 2017 / important project table

RMB 1,123,666,646.16

Construction-note balance / 2017 / other projects

RMB 130,114,872.76

Short-term borrowings ended at CNY 4,493,031,536.79, including CNY 605 million of mortgage-backed borrowing, CNY 1,643,492,312.50 of guaranteed borrowing and CNY 2,244,539,224.29 of unsecured credit borrowing. Non-current borrowings were CNY 2,624,378,680, separately from CNY 552,900,600 classified as long-term loans due within one year. The total current portion of non-current liabilities was CNY 666,380,359.45, including lease obligations. Bond carrying values totaled CNY 1,495,355,641.44; these are not the same as issue face values or annual cash proceeds. The note says the two private-placement notes totaling CNY 700 million that had become current in 2016 were repaid in 2017. Four short-term financing instruments with CNY 1.9 billion of opening principal were also repaid, with the table recording CNY 1,942,748,767.12 including interest. These repayments coexist with increased short-term and long-term loans; they do not establish that financing needs disappeared. Management reports that 63.90% of debt matured within one year, compared with 73.43% a year earlier, while 53.52% of interest-bearing borrowing carried fixed rates, compared with 26.60%. Its reported asset-liability ratio fell to 49.36% from 53.84%. These are dated issuer measures with different denominators, not guarantees of future refinancing or rates.

Borrowing component / 2017 / short term mortgage

RMB 605,000,000

Borrowing component / 2017 / short term guaranteed

RMB 1,643,492,312.5

Borrowing component / 2017 / short term credit

RMB 2,244,539,224.29

Non-current long-term borrowings after current-portion deduction / 2017 / non current

RMB 2,624,378,680

Current portion of long-term loans / 2017 / consolidated

RMB 552,900,600

Current portions of non-current liabilities / 2017 / consolidated

RMB 666,380,359.45

Bond carrying value / 2017 / non current

RMB 1,495,355,641.44

Short financing repayment including interest / 2017 / four scp instruments

RMB 1,942,748,767.12

Future minimum finance-lease payments totaled CNY 244,789,999.98: CNY 126,041,110.64 within one year, CNY 68,438,543.08 in the following year and CNY 50,310,346.26 in the third year. Unrecognised finance charges were CNY 17,536,222.51. After deducting those charges, the CNY 227,253,777.47 obligation reconciles to CNY 113,479,759.45 in current liabilities and CNY 113,774,018.02 in non-current finance-lease payables. Gross future minimum payments and discounted carrying balances should not be added together as separate debts. The report also describes an equipment sale-and-leaseback involving assets valued at CNY 373,626,596.64, a CNY 73,626,596.64 initial rental payment and a stated remaining rental total of CNY 300 million over a five-year term. Jushi Group retained possession, with no physical delivery of the equipment, while ownership was deemed transferred on payment of the transfer price. China Jushi provided an irrevocable joint-liability guarantee for that contract. This is financing of equipment already held, rather than evidence of a newly commissioned line or an additional physical shipment. The contract’s stated amounts and term are not represented as a new transaction completed during 2017.

Minimum finance-lease payments / 2017 / remaining schedule

RMB 244,789,999.98

Minimum finance-lease payments / 2017 / within one year

RMB 126,041,110.64

Unrecognised lease finance charges / 2017 / remaining schedule

RMB 17,536,222.51

Finance-lease payable / 2017 / current

RMB 113,479,759.45

Finance-lease payable / 2017 / non current

RMB 113,774,018.02

Land-use rights had a net carrying value of CNY 387,290,730.01, while mining rights were carried at CNY 115,364,984.54. These amounts represent intangible assets after accumulated amortisation, rather than land market values, mineral tonnage or cash freely available to finance expansion. The mining-rights original cost was CNY 116,863,895.90 and accumulated amortisation CNY 1,498,911.36. The land-use-rights note records CNY 60,669,727.95 of additions and CNY 10,738,535.17 of decreases in original cost, including land-return payments and other decreases. The note does not allocate the total carrying values to specific furnace lines, provide ore grades or remaining mine reserves, or verify the addresses and title status of every site. Upstream mineral integration therefore remains distinct from the accounting value of mining rights.

Intangible net carrying value / 2017 / land use rights

RMB 387,290,730.01

Intangible net carrying value / 2017 / mining rights

RMB 115,364,984.54