Report of the Directors
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Report of the Directors The Directors of the Company are pleased to present to its shareholders the report of the Directors and the audited consolidated Financial Statements of the Company and its subsidiaries (collectively, the “Group”) for the year ended 31st December, 2001. 1. PRINCIPAL ACTIVITIES The Group is principally engaged in the production and sales of various types of high grade cement and the production of commodity clinker, the raw materials of high grade cement. The cement products are mainly used in construction projects of roads, bridges and housing development, while its commodity clinker is mainly sold to cement grinding mills. 2. MAJOR WORK OF THE DIRECTORS IN 2001 (1) Prepared and convened the 2000 Annual General Meeting, at which the 2000 Annual Report and all proposed resolutions submitted for consideration were approved. (2) Reviewed and approved the 2001 interim report. (3) Approved the resignation of Mr. Zhang Xushang as a non-executive director. Report of the Directors (4) Approved the Company’s investment in the following companies (the details of which are set out in paragraph 30 headed “Disclosure of Major Events” of this report): (a) Bangbu Hailuo Cement Co., Ltd.; (b) Wenzhou Hailuo Cement Co., Ltd.; (c) Anhui Zongyang Hailuo Cement Co., Ltd.; (d) Anhui Chizhou Hailuo Cement Co., Ltd.; (e) Fenyi Hailuo Cement Co., Ltd.; (f) Shangyu Hailuo Cement Co., Ltd.; and 22 (g) Jiande Hailuo Cement Co., Ltd. Anhui Conch Cement Company Limited Annual Report 2001 Report of the Directors (5) Approved the injection of capital by the Company into the following companies (the details of which are set out in paragraph 30 headed “Disclosure of Major Events” of this report): (a) Shanghai Hailuo Mingzhu Cement Co., Ltd.; (b) Zhangjiagang Hailuo Cement Co., Ltd.; and (c) Nanjing Hailuo Cement Co., Ltd. (6) Approved the disposal of accounts receivable of approximately RMB58,500,000 to Anhui Conch Holdings Company Limited (the “Holdings”) by the Company (details are set out in paragraph 9 headed “Connected Transactions” of this report). 3. SUBSIDIARIES AND ASSOCIATED COMPANIES Details of the subsidiaries and associated companies held by the Company as at 31st December, 2001 are set out in Notes 6 and 7 to the Financial Statements as contained in this annual report. 4. RESULTS AND DIVIDENDS The results of the Group for the year ended 31st December, 2001 and financial position of the Group as at such date are set out on pages 51 to 112 of the Financial Statements as Report of the Directors contained in this annual report. According to the financial information collected pursuant to International Accounting Standards, profit after tax and minority interests of the Group for the year 2001 was approximately RMB206,658,000. The Board of Directors of the Company recommended to make allocation in respect of the shareholders’ equity for the year ended 31st December, 2001 as follows: (1) 10% of profit after tax based on the statutory accounts prepared in accordance with PRC accounting standards, amounting to approximately RMB44,606,000, is recommended to be appropriated for the statutory public reserve fund pursuant to the Articles of Association of the Company; (2) 10% of profit after tax based on the statutory accounts prepared in accordance with PRC accounting standards, amounting to approximately RMB44,606,000, is recommended to be appropriated for the statutory public welfare fund pursuant to the Articles of Association of the Company; 23 (3) a total of approximately RMB49,174,000 is recommended by the Directors to be appropriated for payment of final dividend of RMB0.05 per share; and (4) the above proposed allocations are subject to approval by the Company’s shareholders at the 2001 Annual General Meeting. Anhui Conch Cement Company Limited Annual Report 2001 Report of the Directors 5. FINANCIAL SUMMARY (FOR THE YEARS ENDED 31ST DECEMBER) (RMB’000) 2001 2000 1999 1998 1997 (pro forma) Net Income from Operation 2,043,989 1,323,935 1,066,580 831,503 761,789 Net Profit 206,658 113,772 58,588 105,025 170,070 (117,611) (62,427) (108,864) (171,349) Total Assets 5,886,330 4,514,380 4,304,576 4,314,256 2,427,575 (4,335,195) (4,121,552) (4,127,392) (2,236,871) Liabilities 3,001,579 2,051,234 2,053,611 2,113,607 552,494 Note:The bracketed figures are financial data derived after retrospective adjustments made in accordance with the International Accounting Standards to those of the previous years, details of which are set out in Note 31 to the Financial Statements as contained in this annual report. 6. MAJOR PROJECTS During the reported period, the Group had numerous technological upgrading and expansion projects related to grinding mills and clinker factories. These projects resulted in heavy workload and onerous responsibilities. However, staff of the Company were determined to Report of the Directors meet the schedule in implementing the construction projects diligently by effective planning and careful organisation. As a result, these projects progressed smoothly and were completed with the preset objectives being attained generally. Construction of Clinker Production Lines (1) Phase One of the project for Anhui Digang Hailuo Cement Co., Ltd, a subsidiary of the Company, comprises the construction of two dry-process clinker production lines, each with an annual production capacity of 750,000 tonnes. Approval for the project was granted by approval document Wan Jing Mao Tou Zi [2000] No.686. The project progressed smoothly and trial production was carried out in 2001. (2) Phase Two of the project for expanding the clinker production line, with an annual production capacity of 1.2 million tonnes, of Anhui Tongling Hailuo Cement Co., Ltd. 24 started in May 2001, and was in smooth progress. Anhui Conch Cement Company Limited Annual Report 2001 Report of the Directors (3) The project for Anhui Zongyang Hailuo Cement Co., Ltd. comprises the construction of two clinker production lines, each with an annual production capacity of 750,000 tonnes. Approval for the project had been granted by approval document Wan Jing Mao Tou Zi [2000] No.665 issued by Anhui Economic and Trade Committee. The project was in smooth progress and machinery installation was completed ahead of schedule. Both clinker production lines commenced trial production in December 2001 and the Group’s annual clinker production capacity has thereby been increased by 1,500,000 tonnes. (4) Phase One of the project for Anhui Chizhou Hailuo Cement Co., Ltd. comprises the construction of two clinker production lines, each with an annual production capacity of 1,500,000 tonnes. The construction of the first clinker production line started in July 2001. Approval had been granted by the approval document Guo Jing Mao Tou Zi [2001] No.404 issued by the State Economic and Trade Committee. The project has been in smooth progress and is expected to begin trial production in 2002. Preparatory works such as utility connections and site formation for the second clinker production line began in October 2001. Approval had been granted by approval document Guo Jing Mao Tou Zi [2001] No.499 issued by the Anhui Economic and Trade Committee. Technological upgrading or new projects for the grinding production lines (1) Construction of the cement grinding production line with an annual production capacity Report of the Directors of 300,000 tonnes in Jianyang Hailuo Cement Co., Ltd. was completed in March 2001, and trial production has been carried out. (2) Technological upgrading and expansion of the cement grinding production line, with an annual production capacity of 500,000 tonnes, of Nantong Hailuo Cement Co., Ltd. was completed in November 2001 and trial production has begun. At present, the annual cement grinding capacity of that company reached 1,200,000 tonnes. (3) For the technological upgrading and expansion of the cement grinding production line, with an annual production capacity of 300,000 tonnes, of Taizhou Hailuo Cement Co., Ltd, calibration and testing of equipment started in December 2001. The project was approved by approval document Tai Hai Zheng Jing [2000] No.37. Upon completion of the project, the annual cement grinding capacity of that company will reach 300,000 tonnes. (4) Construction of the cement grinding production line, with an annual production capacity 25 of 550,000 tonnes, of Bangbu Hailuo Cement Co., Ltd. commenced in May 2001. The project was approved by approval document Jing Mao Ji Zi [2000] No.305. Essential machinery installation is underway and trial production is expected to start in February 2002. Upon completion of the project, the annual cement grinding capacity of that company will reach 600,000 tonnes. Anhui Conch Cement Company Limited Annual Report 2001 Report of the Directors (5) Technological upgrading of the cement grinding production line, with an annual production capacity of 500,000 tonnes including replacement of grinding machines and pier reconstruction for Shanghai Hailuo Cement Co., Ltd. started in June 2001 and has been progressing well. The project was approved by approval document Feng Jing Gui Zi [2000] No.55 and 69. All civil works were completed and trial production is expected to start in March 2002. Upon completion of all the projects, the annual cement grinding capacity will reach 1,500,000 tonnes. Moreover, throughput and efficiency of the pier will also be enhanced significantly. (6) Technological upgrading and expansion of the cement grinding production line, with an annual production capacity of 1,500,000 tonnes, of Zhangjiagang Hailuo Cement Co., Ltd. started in July 2001 and has been progressing well. The project was approved by approval document Su Jing Mao Ji Zi Gai [2000] No.930. Trial production is expected to start in the first half of 2002.