Huaxin Cement Co., Ltd. 600801 Annual Report 2020 1 / 79 Important Notice I. The Board of Directors of the Company and its members, the Board of Supervisors of the Company and its members and Top Management members confirm, to the best of their knowledge, that there is no false or misleading statement or material omission in this report and shall be severally and jointly liable for the truthfulness, accuracy and completeness of its contents. II. All the directors attended the Board Meeting. III. Deloitte Touche Tohmatsu Certified Public Accountants LLP issued standard audit report with unmodified opinion for the Company. IV. Chairman of the Company Mr. Xu Yongmo, Legal Representative and CEO Mr. Li Yeqing, person in charge of accounting Ms. Kong Lingling, and Chief of Accounting Department Mr. Wu Xin declare and confirm that the Financial Statements contained in the Annual Report are true, accurate and complete. V. Profit distribution plan or proposal on surplus common reserve fund transferred to increase share capital for the reporting period reviewed by the Board of Directors In 2020, the Parent Company achieved net profit of 3,155,313,737 Yuan or 5,630,598,812 Yuan net profit attributable to the shareholders after consolidation. The allocable profit of the Parent Company is 7,370,600,800 Yuan by the end of December 2020. The Board proposes that on the basis of the total 2,093,874,372 shares (total shares 2,096,599,855 excludes 2,725,483 outstanding shares on the special account for the repurchase) at the end of 2020, a cash dividend of 1.08 Yuan per share (incl. tax) shall be distributed to all shareholders, total distribution of 2,261,384,322 Yuan, 40.16% cash dividend ratio. The Board also proposes that no capital reserve shall be converted into share capital for 2020. The company shares held by the repurchase special account shall not be included in this profit distribution. VI. Future plan, development strategy and other forward-looking description in this Report are not essential commitments of the Company to its investors. Investors are kindly requested to note the investment risk. VII. There was no frequent fund occupation by the controlling shareholders or their related parties. VIII. All the external guarantees provided by the Company are in compliance with the decision-making procedures. IX. Significant Risk Warning The existing industry risks have been described in detail in this Report. Please refer to the possible risks and countermeasures included in the Company’s future development discussion and analysis in Chapter 4 - Discussion and Analysis on Business Operation. 2 / 79 X.Others None 3 / 79 Chapter 1 Interpretation I. Interpretation In this Report, unless otherwise requires, the below terms have the following meanings: Interpretation of the common words Reporting period means Year 2020 RMB, RMB K Yuan, RMB 10000 Yuan, Yuan, K Yuan, 10 K Yuan, means RMB million Yuan, RMB 100 million Yuan, mio Yuan, 100 mio Yuan China’s legal currency LH means LafargeHolcim Ltd. Earnings before interest, tax, depreciation EBITDA means and amortization IT means Information technology KPI means Key Performance Indicators NOx means Nitrogen oxide (s) SNCR means Selective non-catalytic reduction UHPC means Ultra-high performance concrete VAP means Value added product ICC means International Chamber of Commerce EPC means Engineering Procurement Contract Kgce/t.KK means Kilogram standard coal/ton clinker 4 / 79 Chapter 2 General and Key Financial Indicators I. Company Information Name of the Company in Chinese 华新水泥股份有限公司 Abbreviation in Chinese 华新水泥 Name of the Company in English Huaxin Cement Co., Ltd. Abbreviation in English HUAXINCEM Legal Representative Mr. Li Yeqing II. Liaison Information Secretary to the Board Securities Affairs Representative Name Mr. Wang Ximing Ms. Wang Lu Tower B, Huaxin Tower, No.426, Tower B, Huaxin Tower, No.426, Gaoxin Avenue, East Lake Gaoxin Avenue, East Lake Liaison Address High-tech Development Zone, High-tech Development Zone, Wuhan City, Hubei Province Wuhan City, Hubei Province Tel 02787773896 02787773898 Fax 02787773992 02787773992 E-mail [email protected] [email protected] III. Basic Information No. 600, East Daqi Avenue, Huangshi City, Registered location of the Company Hubei Province Post code of the registered location 435007 Tower B, Huaxin Tower, No.426, Gaoxin Administrative location of the Company Avenue, East Lake High-tech Development Zone, Wuhan City, Hubei Province Post code of the administrative location 430073 Website of the Company www.huaxincem.com E-mail [email protected] 5 / 79 IV. Information Disclosure and Place Available China Securities Journal, Shanghai Press for Information Disclosure Securities News Annual Report available on the Internet www.sse.com.cn website appointed by CSRC Securities and Investor Relations Place available Department of the Company V. Company Stock Company Stock Type Place of listing Abbreviation Stock code Shanghai Stock A share Huaxin Cement 600801 Exchange Shanghai Stock B share Huaxin B share 900933 Exchange VI. Other Information Deloitte Touche Tohmatsu Name Certified Public Accountants LLP Certified Public Accountants (domestic) 30th Floor, No. 222, Yanan appointed by the Company Address East Road, Huangpu District, Shanghai Appointed Mr. Chen Jialei, Mr. Pang Yong accountants (I) VII. Financial Statements Summary and Financial Indicators for the Last Three Years (I) Financial Statements Summary 6 / 79 Unit: Yuan Change over Item 2020 2019 2018 last year (%) Operating revenue 29,356,515,691 31,439,214,600 -6.62 27,466,044,481 Net profit attributable to 5,630,598,812 6,342,304,317 -11.22 5,181,448,611 shareholders of the Company Net profit attributable to shareholders of the Company after 5,553,708,292 6,179,988,412 -10.13 5,127,542,064 extraordinary items Net cash flow from operating 8,405,472,760 9,679,185,865 -13.16 7,899,606,105 activities At the end of At the end of Change over At the end of 2020 2019 last year (%) 2018 Net assets attributable to 23,571,375,317 21,309,042,690 10.62 16,672,962,778 shareholders of the Company Total assets 43,928,509,151 36,645,386,717 19.87 33,161,505,602 (II) Financial Highlights Change over last year Item 2020 2019 2018 (%) Basic earnings per share (Yuan/share) 2.69 3.03 -11.22 2.47 Diluted earnings per share (Yuan/share) 2.69 3.03 -11.22 2.47 Basic earnings per share after 2.65 2.95 -10.17 2.45 extraordinary items (Yuan/share) Return on net assets, weighted average Down by 8.60 25.03 33.63 36.27 (%) percentage points Return on net assets after extraordinary Down by 8.09 24.68 32.77 35.89 items, weighted average (%) percentage points Note: According to the Corporate Accounting Standard No.7, when calculating EPS, for the repurchased shares for the ESOP, we made adjustment on the numerator and denominator. VIII. Differences between Accounting Data under Overseas Accounting Standard and Accounting Data under Domestic Accounting Standard □Applicable √Inapplicable IX. Quarterly key financial indicators of 2020 7 / 79 Unit：Yuan The first The second The third The fourth quarter quarter quarter quarter (Jan.- Mar.) (Apr.-Jun.) (Jul.-Sep.) (Oct.-Dec.) Operating revenue 3,849,201,089 8,715,746,087 7,846,727,754 8,944,840,761 Net profit attributable to shareholders of the 354,137,040 1,897,836,971 1,772,441,202 1,606,183,599 Company Net profit attributable to shareholders of the 361,768,654 1,881,018,063 1,757,534,258 1,553,387,317 Company after extraordinary items Net cash flow from 434,960,772 3,066,013,912 2,151,090,732 2,753,407,344 operating activities X. Non-routine items and Amount Unit: Yuan Currency: RMB 2020 2019 2018 Non-routine items Amount Amount Amount Gains/losses from disposal of non-current -9,013,118 157,081,620 -17,370,924 assets Government subsidies, excluding regular fixed 101,892,558 74,943,476 73,387,762 amount government subsidies Gains from the investment costs for obtaining subsidiaries, joint ventures and cooperative enterprises being less than the fair value of the - 3,823,563 4,489,836 identifiable net assets of the investee when the investment is obtained In addition to the effective hedging business related to the normal business of the Company, gains and losses on changes in fair value arising from tradable financial assets and tradable 3,744,543 12,735,027 16,955,156 financial liabilities, as well as the investment income from disposal of tradable financial assets, tradable financial liabilities and available-for-sale financial assets Reversal of provisions for assets impairment of 2,338,361 43,412,375 - accounts In addition to the above items, other -12,559,351 -13,216,729 -8,972,304 non-operating income and expenses Gains/losses from defined as extraordinary - - -1,603,657 items Impacts from minority shareholders’ interests 2,220,722 -47,537,062 382,389 8 / 79 Impacts from income tax -11,733,195 -68,926,365 -13,361,711 Total 76,890,520 162,315,905 53,906,547 XI. Item measured by Fair Value Unit: Yuan Impacts on Period Change in the Item Period end the profits of beginning period the period Tradable financial assets - 1,004,581,752 1,004,581,752 5,920,897 Financing from accounts 1,308,788,934 1,020,306,419 -288,482,515 - receivable Other equity instrument 38,230,101 33,774,995 -4,455,106 1,133,360 investment Other non-current financial 35,003,608 32,827,254 -2,176,354 -768,187 assets Total 1,382,022,643 2,091,490,420 709,467,777 6,286,070 9 / 79 Chapter 3 Brief Introduction on the Company’s businesses I.