2020 Annual Report 2020 Contents
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CHONGQING MACHINERY & ELECTRIC CO., LTD. CHONGQING MACHINERY (a joint stock limited company incorporated in the People’s Republic of China with limited liability) Stock Code: 02722 ANNUAL REPORT 2020 ANNUAL REPORT 2020 ANNUAL REPORT CONTENTS Corporate Information 2 Financial Highlights 4 Group Structure 5 Results Highlights 6 Chairman’s Statement 7 Management’s Discussion and Analysis 24 Directors, Supervisors and Senior Management 45 Report of the Board of Directors 63 Report of the Supervisory Committee 90 Corporate Governance Report 93 Risk and Internal Control and Governance Report 112 Environmental, Social and Governance Report 120 Independent Auditor’s Report 150 Consolidated Statement of Financial Position 160 Statement of Financial Position of the Company 164 Consolidated Income Statement 167 Income Statement of the Company 170 Consolidated Statement of Cash Flows 172 Cash Flows Statement of the Company 175 Consolidated Statement of Changes in Equity 177 Statement of Changes in Equity of the Company 181 Notes to the Consolidated Financial Statements 185 Supplementary Information to Consolidated Financial Statements 471 Corporate Information DIRECTORS COMMITTEES UNDER BOARD OF DIRECTORS Executive Directors Members of the Audit and Risk Management Mr. Zhang Fulun (Chairman) Committee Ms. Chen Ping Mr. Yang Quan Mr. Lo Wah Wai (Chairman) Mr. Jin Jingyu Non-executive Directors Mr. Liu Wei Mr. Dou Bo Mr. Huang Yong Mr. Zhang Yongchao Members of the Remuneration Committee Mr. Dou Bo Mr. Wang Pengcheng Mr. Ren Xiaochang (Chairman) Mr. Lo Wah Wai Independent Non-executive Directors Mr. Jin Jingyu Mr. Huang Yong Mr. Lo Wah Wai Mr. Ren Xiaochang Members of the Nomination Committee Mr. Jin Jingyu Mr. Liu Wei Mr. Zhang Fulun (Chairman) Mr. Ren Xiaochang SUPERVISORS Mr. Jin Jingyu Mr. Liu Wei Mr. Sun Wenguang (Chairman) Ms. Wu Yi Members of the Strategic Committee Mr. Wang Haibing Mr. Xia Hua Mr. Zhang Fulun (Chairman) Mr. Li Fangzhong Ms. Chen Ping Mr. Yang Quan Mr. Huang Yong Mr. Ren Xiaochang Mr. Jin Jingyu Mr. Liu Wei 2 CHONGQING MACHINERY & ELECTRIC CO., LTD Annual Report 2020 Corporate Information (Continued) LEGAL REPRESENTATIVE AUDITORS Mr. Zhang Fulun ShineWing Certified Public Accountants COMPANY SECRETARY (Special General Partnership) 9th Floor, Block A, Fuhua Mansion, Ms. Chiu Hoi Shan (Practicing Solicitor) No. 8 Chaoyangmen Beidajie, QUALIFIED ACCOUNTANT Dongcheng District, Beijing, the PRC Mr. Kam Chun Ying, Francis (Certified Public LEGAL ADVISOR Accountant) Chiu & Co. (趙凱珊律師行) AUTHORIZED (As to Hong Kong Laws) REPRESENTATIVES AND Beijing ZhongLun (Chongqing) Law Firm CONTACT INFORMATION (As to Chinese Law) Mr. Yang Quan No. 60 Middle Section of Huangshan PRINCIPAL PLACE OF Avenue, New North Zone, BUSINESS IN HONG KONG Chongqing City, the PRC Postal code: 401123 Room 1204-06, 12th Floor, Tel.: (86) 023-63075687 The Chinese Bank Building, 61 Des Voeux Road Central, Ms. Chiu Hoi Shan Central, Hong Kong Room 1204-06, 12th Floor, The Chinese Bank Building, WEBSITE OF THE COMPANY 61 Des Voeux Road Central, Central, Hong Kong www.chinacqme.com Tel.: 852-2155 4820 ALTERNATE AUTHORIZED PRINCIPAL BANKER REPRESENTATIVE AND China Merchants Bank CONTACT INFORMATION Chongqing Shangqingsi Sub-branch Mr. Lo Wah Wai 1st Floor, Zhong-an International Building 33rd Floor, Shui On Centre, No.162 Zhongshan Third Road, Yuzhong No. 6-8 Harbour Road, Wanchai, District, Chongqing City, the PRC Hong Kong Tel.: 852-2802 2191 SHARE INFORMATION REGISTERED OFFICE Listing Place No. 60 Middle Section of Huangshan Avenue, The Stock Exchange of Hong Kong Limited New North Zone, Chongqing City, the PRC (the “Stock Exchange”) HONG KONG SHARE Stock Code REGISTRAR Computershare Hong Kong Investor 02722 Services Limited Shops 1712-1716, 17th Floor FINANCIAL YEAR END Hopewell Centre, 183 Queen’s Road East, 31 December Wanchai, Hong Kong CHONGQING MACHINERY & ELECTRIC CO., LTD Annual Report 2020 3 Financial Highlights (RMB’000) 2016 2017 2018 2019 2020 (Restated) Revenue and profit Revenue 9,255,032 9,292,602 5,284,318 5,516,812 6,366,966 Profit before income tax 529,854 468,472 555,672 242,946 267,480 Income tax expense (27,182) (102,454) (60,500) (39,031) (50,652) Profit for the year 502,672 366,019 495,172 203,915 216,828 Attributable to Owners of the Company 440,834 316,645 444,061 184,835 182,968 Non-controlling interests 61,838 49,374 51,111 19,080 33,860 Dividends – proposed final dividends 128,963 110,539 147,386 36,846 36,846 Earnings per share attributable to owners of the Company – Basic (RMB) 0.12 0.09 0.12 0.05 0.05 Assets and liabilities Non-current assets 6,137,920 5,745,841 5,747,618 6,167,115 5,885,905 Current assets 9,429,046 10,544,832 10,530,066 10,350,701 10,738,321 Current liabilities 6,135,937 7,083,411 6,736,277 7,014,766 7,093,966 Net current assets 3,293,109 3,461,421 3,793,789 3,335,935 3,644,355 Total assets less current liabilities 9,431,029 9,207,262 9,541,407 9,503,049 9,530,260 Non-current liabilities 2,272,819 2,029,276 2,311,745 2,213,959 2,054,508 Net assets 7,158,210 7,177,987 7,229,662 7,289,090 7,475,752 Equity attributable to owners of the Company 6,577,614 6,777,724 6,808,890 6,844,421 7,021,847 Non-controlling interests 580,596 400,263 420,762 444,669 453,905 4 CHONGQING MACHINERY & ELECTRIC CO., LTD Annual Report 2020 Group Structure 5 49% Water Gen Power S.r.l 70% Chongqing Machinery and Electronics Holding (Group) Finance Co., Ltd. 100% Chongqing Shengpu Materials Co., Ltd. 100% Chongqing Industry Empower Innovation Center Co., Ltd. Industrial Service 6.65% GRIPM Advanced Materials Co., Ltd. 70% Exedy Beijing Co., Ltd. (愛思帝(北京)汽車配件有限公司) 27% Exedy Chongqing Driving System Co., Ltd. 40% Exedy (Guangzhou) Driving System Co., Ltd. 54 subsidiaries of Chongqing Machinery & Electric Co., Ltd in total 20 second-tier subsidiaries, including 9 wholly-owned subsidiaries, 3 subsidiaries with controlling interest, 8 subsidiaries with non-controlling interest 2% Shandong Xinhai Financing and Guarantee Co., Ltd. 28 third-tier subsidiaries, including 14 wholly-owned subsidiaries, 9 subsidiaries with controlling interest, 5 subsidiaries with non-controlling interest 5 fourth-tier subsidiaries, including 5 wholly-owned subsidiaries 44% Chongqing Hongyan Fangda Automobile Suspension Co., Ltd. 94.73% Chengdu Hongyan Fangda Automobile Suspension Co., Ltd. 1 fifth-tier subsidiary, including 1 wholly-owned subsidiary 86.63% Jinan Fangda Zhongtan Automobile Suspension Co., Ltd. 45% Chongqing Holroyd Precision Screw Manufacturing Co., Ltd. 34% Knorr-Bremse Systems for Commercial Vehicles (Chongqing) Ltd. 100% Precision Technologies Group(US)Limited 100% Precision Technologies Group INC. 100% Holroyd Precision Rotors INC. 100% Chongqing CAFF Automotive Braking & Steering System Co., Ltd. 100% PTG Investment Development Company Ltd. (精密技術集團投資發展有限公司) 100% Precision Technologies Group (PTG) Limited 100% PTG Deutschland GmbH (“PTG Deutschland”) (精密技術集團) 100% Milnrow Investments Ltd. (“Milnrow Investments”) 100% PTG Heavy Industries Ltd. (“PTG Heavy Industries”) 100% Precision Components Ltd. (“Precision Components"”) High-End Smart Equipment 100% Holroyd Precision Ltd. (“Holroyd”) 35% Chongqing Shenjian Automotive Drive Part Co., Ltd. 40% Chongqing Sino-Germany Smart Factory Solutions Co., Ltd. 51% Xinjiang Fubaotian Cotton-picking Service Co., Ltd. Chongqing Machinery & Electric Co., Ltd. 100% Chongqing Machine Tools (Group) Co., Ltd. 55% Chongqing Holroyd Precision Screw Manufacturing Co., Ltd. 100% Chongqing Yinhe Forging & Founding Co., Ltd. 100% Chongqing No. 2 Machine Tools Factory Co., Ltd. 100% Chongqing Tool Factory Co., Ltd. 100% Chongqing Machinery & Electronic Intelligent Manufacturing Co., Ltd. 26.67% Chongqing Chongtong Turbine Technology Co., Ltd. 66.26% Chongqing Unication Electronic Technology Co., Ltd. 41% Chongqing Jiangbei Machinery Co., Ltd. 76% Chongqing Machinery and Electronics Additive 37.8% Chongqing ABB Power Transformer Co., Ltd. Manufacturing Co., Ltd. ( 重慶機電增材製造有限公司 ) 50% Chongqing Cummins Engine Co., Ltd. 58.4% Shenzhen Chongfa Cummins Engine Co., Ltd. 64.21% Chongqing Gas Compressor Factory Co., Ltd. 100% Chongqing Pump Industry Co., Ltd. 100% Chongqing Water Turbine Works PVT.LTD 100% Chongqing Water Turbine Works Co., Ltd. (重慶水輪尼泊爾公司) Clean Energy Equipment 74% Chongqing Pigeon Electric Wires & Cables 50% Chongqing Pigeon Electric Materials Co., Ltd. Co., Ltd. 100% Chongqing Pigeon Electric Porcelain Co., Ltd. 100% Gansu Chongtong Chengfei New Material Co., Ltd. 40% Chongqing Chongtong Turbine Technology Co., Ltd. 100% Chongtong Chengfei Wind Power Equipment Jiangsu Co., Ltd. 100% Chongqing General Industry (Group) Co., Ltd. 96.0267% Jilin Chong Tong Chengfei New Material Co., Ltd. 100% Chongqing Chongtong Chengfei New Material Co., Ltd. 100% Chongqing Shunchang General Electric Equipment Co., Ltd. 100% Xilinhaote Chenfei Wind-Power Equipment Co., Ltd. CHONGQING MACHINERY & ELECTRIC CO., LTD Annual Report 2020 Results Highlights Results highlights of Chongqing Machinery & Electric Co., Ltd. (the “Company” or “Chongqing Machinery & Electric”) and its subsidiaries (collectively the “Group”). The revenue of the Group for the year ended 31 December 2020 amounted to approximately RMB6,367.0 million, representing an increase of approximately RMB850.2 million or approximately 15.4% as compared with approximately RMB5,516.8 million for the same period of 2019. Profit attributable to the shareholders of the Company for the year ended 31 December 2020 was approximately RMB183.0 million, representing a decrease of approximately RMB1.8million or approximately 1.0% as compared with approximately RMB184.8 million for the same period of 2019. Basic earnings per share for the year ended 31 December 2020 amounted to approximately RMB0.05 (2019: approximately RMB0.05). The board of directors (the “Board”) of the Company proposed to declare a final dividend of RMB0.01 per share (tax inclusive) for the year ended 31 December 2020 (2019: RMB0.01 (tax inclusive)). 6 CHONGQING MACHINERY & ELECTRIC CO., LTD Annual Report 2020 Chairman’s Statement Dear Shareholders, On behalf of the Board, I am pleased to announce the annual results of the Group for the year ended 31 December 2020 (the “Period” or the “Year”).