Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

LEE & MAN CHEMICAL COMPANY LIMITED

理 文 化 工 有 限 公 司

(Incorporated in the Cayman Islands and its members' liability is limited)

Website: www.leemanchemical.com

(Stock Code: 746)

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

FINANCIAL HIGHLIGHTS

  • Revenue of HK$1,382 million for the period, decreased by 19.6% as compared to last period.
  • Net profit of HK$156 million for the period, decreased by 61.1% as compared to last period.
  • Gross profit margin for the period was 32.1%, net profit margin was 11.3%.
  • Basic earnings per share for the period was HK18.9 cents, with declared interim dividend of HK7.5 cents per share.

- 1 -

INTERIM RESULTS

The board of directors (the "Board") of Lee & Man Chemical Company Limited (the "Company") is pleased to announce the unaudited interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2020 together with comparative figures for the last corresponding period as follows:

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2020

Six months ended 30 June

2020

2019

(Unaudited)

(Unaudited)

Notes

HK$'000

HK$'000

Revenue

3&4

1,381,714

1,718,656

Cost of sales

(938,314)

(1,036,563)

Gross profit

443,400

682,093

Other income

5

41,570

85,426

Other gains or losses

6

353

(3,678)

Selling and distribution costs

(91,172)

(106,511)

General and administrative expenses

(98,498)

(83,813)

Research and development cost

(59,409)

(71,302)

Finance costs

(31,863)

(41,027)

Net exchange (losses) gains

(13,048)

1,591

Share of gains of joint ventures

402

212

Share of losses of associates

(288)

(128)

Profit before taxation

191,447

462,863

Income tax expense

7

(35,234)

(61,683)

Profit for the period

8

156,213

401,180

Other comprehensive expenses:

Items that will not be reclassified to profit

or loss:

(57,863)

Exchange differences arising on translation

(9,161)

Share of other comprehensive expenses of

(616)

joint ventures and an associate

(4)

Other comprehensive expenses for the period

(58,479)

(9,165)

Total comprehensive income for the period

97,734

392,015

Earnings per share:

10

18.9

- Basic (HK cents)

48.6

- Diluted (HK cents)

18.9

48.6

- 2 -

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2020

30 June

31 December

2020

2019

(Unaudited)

(Audited)

Notes

HK$'000

HK$'000

NON-CURRENT ASSETS

Property, plant and equipment

11

4,070,326

4,083,068

Right-of-use assets

138,855

142,998

Intangible assets

92,470

95,405

Deposits paid for the acquisition of property,

plant and equipment

64,602

76,644

Interests in joint ventures

16,589

16,462

Interests in associates

20,084

19,619

Loan to a joint venture

97,755

97,755

Deferred tax assets

21,581

22,335

Goodwill

2,579

2,622

4,524,841

4,556,908

CURRENT ASSETS

Inventories

12

474,324

550,384

Properties under development for sale

304,749

263,163

Trade and other receivables

13

309,075

290,527

Bills receivable

114,250

156,105

Amount due from a joint venture

13,823

14,120

Amount due from an associate

313

1,199

Amounts due from related companies

15,228

16,138

Bank balances and cash

200,220

246,404

1,431,982

1,538,040

CURRENT LIABILITIES

Trade and other payables

14

342,755

366,898

Bills payable

48,597

131,763

Contract liabilities

45,577

55,157

Amounts due to related companies

11,368

15,307

Taxation payable

12,381

85,677

Lease liabilities

1,321

1,850

Bank borrowings - due within 1 year

417,637

587,538

879,636

1,244,190

- 3 -

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(CONTINUED) At 30 June 2020

30 June

31 December

2020

2019

(Unaudited)

(Audited)

Notes

HK$'000

HK$'000

NET CURRENT ASSETS

552,346

293,850

TOTAL ASSETS LESS CURRENT

LIABILITIES

5,077,187

4,850,758

NON-CURRENT LIABILITIES

Other payables

14

36,800

40,747

Lease liabilities

276

-

Contract liabilities

8,963

9,877

Deferred tax liabilities

32,289

38,697

Bank borrowings - due after 1 year

1,158,053

910,914

1,236,381

1,000,235

NET ASSETS

3,840,806

3,850,523

CAPITAL AND RESERVES

Share capital

82,500

82,500

Reserves

3,758,306

3,768,023

TOTAL EQUITY

3,840,806

3,850,523

- 4 -

Notes:

  1. BASIS OF PREPARATION
    The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").
    The functional currency of the Company is Renminbi ("RMB"), while the condensed consolidated financial statements are presented in Hong Kong dollars ("HK dollars") as the Company is listed in The Stock Exchange of Hong Kong Limited (the "Stock Exchange").
  2. PRINCIPAL ACCOUNTING POLICIES
    The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values as appropriate.
    Other than new accounting policies resulting from application of amendments to Hong Kong Financial Reporting Standards ("HKFRSs") and application of certain accounting policies which became relevant to the Group, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those presented in the Group's annual financial statements for the year ended 31 December 2019.
    Application of amendments to HKFRSs

In the current interim period, the Group has applied the Amendments to References to the Conceptual Framework in HKFRS Standards and the following amendments to HKFRSs issued by the HKICPA, for the first time, which are mandatorily effective for the annual period beginning on or after 1 January 2020 for the preparation of the Group's condensed consolidated financial statements:

Amendments to HKAS 1 and HKAS 8

Definition of Material

Amendments to HKFRS 3

Definition of a Business

Amendments to HKFRS 9, HKAS 39

Interest Rate Benchmark Reform

and HKFRS 7

Except as described below, the application of the Amendments to References to the Conceptual Framework in HKFRS Standards and the amendments to HKFRSs in the current period has had no material impact on the Group's financial positions and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements.

2.1 Impacts of application on Amendments to HKAS 1 and HKAS 8 "Definition of Material"

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity."

The amendments also clarify that materiality depends on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements taken as a whole.

- 5 -

The application of the amendments in the current period had no impact on the condensed consolidated financial statements. Changes in presentation and disclosures on the application of the amendments, if any, will be reflected on the consolidated financial statements for the year ending 31 December 2020.

2.2 Impacts and accounting policies on application of Amendments to HKFRS 3 "Definition of a Business"

  1. Accounting policies
    Business combinations or asset acquisitions Optional concentration test
    Effective from 1 January 2020, the Group can elect to apply an optional concentration test, on a transaction-by-transaction basis, that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.
  2. Transition and summary of effects
    The amendments had no impact on the condensed consolidated financial statements of the Group.

3. REVENUE

(i)

Disaggregation of revenue

Six months ended 30 June

2020

2019

HK$'000

HK$'000

Types of goods or services

Manufacture and sale of chemical products

Caustic soda

532,594

691,484

Chloromethane products

318,856

498,129

Polymers

193,557

212,538

Hydrogen peroxide

154,934

105,861

Fluorochemical products

23,556

85,581

Styrene acrylic latex surface sizing agent

31,456

25,581

Others

126,761

99,482

1,381,714

1,718,656

- 6 -

  1. Performance obligations for contracts with customers
    Manufacture and sale of chemical products with product delivery services
    The Group manufactures and sells chemical products directly to customers. Revenue is recognised when control of the goods has transferred, being when the goods have been shipped to the customer's specified location (delivery). The normal credit term is 7 to 60 days upon delivery.

4. SEGMENT INFORMATION

  1. Operating segments
    HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker ("CODM"), being the Chairman of the Company, in order to allocate resources to segments and to assess their performance. The CODM reviews the Group's profit as a whole, which is generated solely from the manufacture and sale of chemical products and determined in accordance with the Group's accounting policies, for performance assessment. Therefore no separate segment information is prepared by the Group.
  2. Geographical information
    The Group's operations are located in the PRC. Most of the Group's revenue from external customers is derived from the PRC and most of the Group's non-current assets are located in the PRC for both periods.
  3. Revenue from major customers
    Revenue from customers individually contributing over 10% of the Group's revenue is as follows:

Six months ended 30 June

20202019

HK$'000 HK$'000

Customer A

N/A*

172,021

  • The corresponding revenue from the customer did not contribute over 10% of the total revenue of the Group for the six months ended 30 June 2020.

- 7 -

5. OTHER INCOME

Six months ended 30 June

2020

2019

HK$'000

HK$'000

Government grants

22,693

64,452

Electricity and steam income

8,960

13,295

Scrap sales

5,108

3,453

Bank interest income

3,032

2,455

Rental income

1,026

1,168

Interest income from a joint venture

309

236

Others

442

367

41,570

85,426

6.

OTHER GAINS OR LOSSES

Six months ended 30 June

2020

2019

HK$'000

HK$'000

Net gain (loss) on settlement of derivative financial instruments

306

(3,380)

Net gain (loss) on disposal of property, plant and equipment

47

(298)

353

(3,678)

7.

INCOME TAX EXPENSE

Six months ended 30 June

2020

2019

HK$'000

HK$'000

The charge comprises:

Current tax:

PRC Enterprise Income Tax ("EIT")

40,855

70,598

Withholding tax on dividend income

5,805

8,947

Over provision in prior years - EIT

(6,013)

(9,044)

Deferred tax

(5,413)

(8,818)

35,234

61,683

The Group's major business is in the PRC. Under the Law of the PRC on EIT and its Implementation Regulation, the tax rate of the subsidiaries in the PRC is 25%.

For the periods ended 30 June 2019 and 30 June 2020, Jiangsu Lee & Man Chemical Limited ("Jiangsu L&M") and Jiangxi Lee & Man Chemical Limited ("Jiangxi L&M") were entitled to reduced EIT rate of 15% as they have been qualified as a High and New Technology Enterprise.

Taxation arising in other jurisdiction is calculated at the rate prevailing in the relevant jurisdiction.

No provision for Hong Kong Profits Tax is made for both periods since there is no assessable profit for both periods.

- 8 -

8.

PROFIT FOR THE PERIOD

Six months ended 30 June

2020

2019

HK$'000

HK$'000

Profit for the period has been arrived

at after charging:

Directors' emoluments

24,305

26,027

Other staff costs:

Salaries and other benefits (excluding directors)

122,172

119,812

Retirement benefit schemes contributions (excluding directors)

3,516

7,667

Total staff costs

149,993

153,506

Finance costs:

Interest on bank borrowings wholly repayable within five years

31,558

38,823

Interest on lease liabilities

46

131

Less: amounts capitalised to property, plant and equipment

(note)

(608)

(99)

30,996

38,855

Cost of inventories recognised as expenses

938,314

1,036,563

Depreciation of property, plant and equipment

167,416

173,748

Depreciation of right-of-use assets

2,636

3,430

Amortisation of intangible assets

1,389

1,621

Total depreciation and amortisation

171,441

178,799

Capitalised in inventories

(147,501)

(159,007)

23,940

19,792

Note: During the period ended 30 June 2020, certain borrowing costs capitalised arose from the specific borrowings and were calculated by applying a capitalisation rate of 4.9875% (2019: 4.75%) per annum to expenditures on qualifying assets.

- 9 -

9.

DIVIDENDS

Six months ended 30 June

2020

2019

HK$'000

HK$'000

Final dividend paid during the period:

2019 final dividend HK15 cents per share

(2019: 2018 final dividend of HK15 cents per share)

123,750

123,750

Interim dividend declared subsequent to period end:

2020 interim dividend HK7.5 cents per share (2019: 2019 interim

dividend of HK18 cents per share)

61,875

148,500

The Board has declared that an interim dividend of HK7.5 cents (2019: HK18 cents) per share for the six months ended 30 June 2020 to shareholders whose names appear in the Register of Members on 24 August 2020.

10. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the profit for the year attributable to owners of the Company of HK$156,213,000 (2019: HK$401,180,000) and 825,000,000 (2019: 825,000,000) shares in issue during the period.

The calculation of diluted earnings per share is based on the profit attributable to equity shareholders of the Company and the weighted average number of ordinary shares in issue after adjusting for the potential dilutive effect caused by the share options granted under the share option scheme.

Six months ended 30 June

2020

2019

'000 Shares

'000 Shares

Weighted average number of ordinary shares for the purpose of

basic earnings per share

825,000

825,000

Effect of deemed issue of shares under the Company's

share option scheme

N/A

1,402

Weighted average number of ordinary shares for the purpose of

diluted earnings per share

825,000

826,402

The computation of diluted earnings per share for the current period did not assume the exercise of the Company's share options because the adjusted exercise price of those share options was higher than the average market price for shares in that period.

11. ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

During the period, the Group spent approximately HK$223 million on property, plant and equipment to expand its operation.

- 10 -

12. INVENTORIES

30 June

31 December

2020

2019

HK$'000

HK$'000

Raw materials and consumables

276,013

394,661

Work in progress

22,190

22,780

Finished goods

176,121

132,943

474,324

550,384

13. TRADE AND OTHER RECEIVABLES

The Group generally allows its trade customers an average credit period ranged from 7 to 60 days.

Included in the balance are trade receivables of approximately HK$130,044,000 (31 December 2019: HK$115,432,000). The aged analysis of trade receivables based on invoice date at the end of the reporting period is as follows:

30 June

31 December

2020

2019

HK$'000

HK$'000

Not exceeding 30 days

118,973

103,929

31 to 60 days

9,017

8,376

61 to 90 days

1,152

2,748

91 to 120 days

-

81

Over 120 days

902

298

Trade receivables

130,044

115,432

Prepayments

110,243

102,014

Deposits to suppliers

24,130

18,983

Value-added tax receivable

39,013

36,950

Other receivables

5,645

17,148

Total trade and other receivables

309,075

290,527

- 11 -

14. TRADE AND OTHER PAYABLES

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period obtained for trade purchases is 7 to 45 days.

Included in trade and other payables are trade payables of approximately HK$120,686,000 (31 December 2019: HK$107,160,000). The aged analysis of trade payables based on invoice date at the end of the reporting period is as follows:

30 June

31 December

2020

2019

HK$'000

HK$'000

Not exceeding 30 days

57,410

62,624

31 to 60 days

27,250

16,807

61 to 90 days

6,688

3,692

Over 90 days

29,338

24,037

Trade payables

120,686

107,160

Construction costs payables and accruals

116,137

137,338

Value-added tax accruals

11,310

16,136

Other payables

90,005

103,872

Other accruals

41,417

43,139

Total trade and other payables

379,555

407,645

Analysed for reporting purposes as:

Current liabilities

342,755

366,898

Non-current liabilities

36,800

40,747

379,555

407,645

As at 30 June 2020, other payables included a non-current deferred income, amounting to HK$25,325,000 (31 December 2019: HK$29,080,000) received from the PRC government for an innovative technology project. The amounts will be utilised to the relevant research and development expenses.

15. REVIEW OF UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited interim financial information for the six months ended 30 June 2020 has been reviewed with no disagreement by the Audit Committee of the Company.

- 12 -

INTERIM DIVIDEND

The Board has declared an interim dividend of HK7.5 cents per share for the six months ended 30 June 2020 to shareholders whose names appear on the Register of Members on 24 August 2020. It is expected that the interim dividend will be paid around 3 September 2020.

CLOSURE OF REGISTER OF MEMBERS

The Register of Members of the Company will be closed from 19 August 2020 to 24 August 2020, both days inclusive, during which period no transfer of shares in the Company can be registered. In order to qualify for the interim dividend, all transfers accompanied by the relevant share certificates must be lodged with the Company's Branch Share Registrars, Tricor Secretaries Limited, at Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration no later than 4:30 p.m. on 18 August 2020.

BUSINESS REVIEW

For the six months ended 30 June 2020, the Group recorded a revenue of approximately HK$1,382 million, decreased by 19.6% when compared to the corresponding period last year; and a net profit of approximately HK$156 million for the period, representing a decrease of 61.1% when compared to the corresponding period last year.

The Group's gross profit margin was 32.1%, decreased by 7.6 percentage points when compared to the corresponding period last year and the net profit margin was 11.3%, decreased by 12 percentage points when compared to the corresponding period last year.

During the period under review, China has imposed a large-scale lockdown in early 2020 in response to the novel coronavirus ("COVID-19") pandemic. The supply chain of manufacturing industry was hard hit, which would take time for rectification. Countries around the world are being affected by the pandemic one after another, resulting in drastic slowdown and even contraction of the overall economy. Except for the prices of certain chemical products for epidemic prevention and sterilization had once increased, the overall market prices of chemical products have slid to the low end in recent years after the production was resumed in 2020, imposing tremendous pressure on the Group's profitability.

PROSPECTS

As the pandemic situation remains volatile and the business environment is still full of challenges, the unprecedented widespread influence has created a new normal across different industries that is yet to be adapted to and navigate within. The Group expects the restrictive measures in Mainland China and some European countries to be gradually lifted in the second half of 2020. The domestic chemical industry is expected to bottom out soon, but the operating environment remains extremely challenging. The Group will strive to preserve its competitive edge over cost-effectiveness, and cautiously explore other sources of business growth by handpicking investment opportunities. The Group will also continue to enhance occupational safety measures and to provide all-round training for its employees, so as to attain the 'Grade-A Safe Production Standardization Enterprise Certification' and ensure sustainable development under the conditions of safe production.

- 13 -

The infrastructure construction of the new factory in Gaolan Port, Zhuhai is near completion. Commercial production of the Group's internally-developed lithium battery electrolyte additives is expected to commence by the end of 2020. Furthermore, the Group will still be dedicated to undertaking research and commercialization of specialty polymers, lithium battery chemicals and innovative surface treatment agents, as well as furthering vertical expansion to widen the variety of downstream products.

In view of the further strengthening of industrial safety and environmental protection requirements of the PRC government, the Group will be committed to improving internal control standards, so as to achieve sustainable development. Moreover, the Group will strive to promote the concept of green manufacturing, and to manage with clean, efficient and low- carbon development, in order to fulfill our social responsibility through energy conservation and emission reduction, and deliver sustainable and reasonable returns to shareholders.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

As at 30 June 2020, the total shareholders' equity of the Group was approximately HK$3,841 million (31 December 2019: HK$3,851 million), current assets were approximately HK$1,432 million (31 December 2019: HK$1,538 million) and current liabilities approximately HK$880 million (31 December 2019: HK$1,244 million). The current ratio was 1.63 as at 30 June 2020 (31 December 2019: 1.24).

The Group generally finances its operations with internally generated cash flow and credit facilities provided by its principal bankers in Hong Kong and the PRC. As at 30 June 2020, the Group had outstanding bank borrowings of approximately HK$1,576 million (31 December 2019: HK$1,498 million). These bank loans were secured by corporate guarantees provided by the Company and its certain subsidiaries. As at 30 June 2020, the Group maintained bank balances and cash of approximately HK$200 million (31 December 2019: HK$246 million). The Group's net debt-to-equity ratio (total bank borrowings net of cash and cash equivalents over shareholders' equity) was 35.81% as at 30 June 2020 (31 December 2019: 32.52%).

The Group's liquidity position remains strong and the Group possesses sufficient cash and available banking facilities to meet its commitments, working capital requirements and future investments for expansion.

CAPITAL AND OTHER COMMITMENTS

As at 30 June 2020, the Group had capital expenditure contracted for but not provided in the condensed consolidated financial statements in respect of the acquisition of property, plant and equipment and land use rights in amount of approximately HK$297 million.

- 14 -

HUMAN RESOURCES

As at 30 June 2020, the Group had a workforce of around 2,100 people. Salaries of employees are maintained at competitive level and are reviewed annually, with close reference to the relevant labour market and economic situation. The Group also provides internal training to staff and provides bonuses based upon staff performance and profits of the Group. The Group has not experienced any significant problems with its employees or disruption to its operations due to labour disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff. The Group maintains a good relationship with its employees.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities during the six months ended 30 June 2020.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

In the opinion of the directors, the Company has complied with the code provisions set out in the Corporate Governance Code (the "Code") contained in Appendix 14 to the Listing Rules throughout the six months ended 30 June 2020.

AUDIT COMMITTEE

The Audit Committee, comprising all the independent non-executive directors of the Company, has reviewed the result of the Group for the period ended 30 June 2020 and has discussed with the management the accounting principles and practices adopted by the Group and its internal controls and financial reporting matters.

APPRECIATION

On behalf of the Board, I would like to extend our sincere gratitude to the Company's shareholders, customers and business partners for their strong support throughout the period. In addition, I would also like to take this opportunity to thank all our colleagues and staff for their persistent efforts and contribution to the Group.

By Order of the Board

Lee & Man Chemical Company Limited

Wai Siu Kee

Chairman

Hong Kong, 4 August 2020

As at the date of this announcement, the Board comprises four executive directors, namely, Ms. Wai Siu Kee, Mr. Lee Man Yan, Professor Chan Albert Sun Chi and Mr. Yang Zuo Ning, and three independent non-executive directors, namely, Mr. Wong Kai Tung, Tony, Mr. Wan Chi Keung, Aaron BBS JP and Mr. Heng Victor Ja Wei.

- 15 -

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Lee & Man Chemical Co. Ltd. published this content on 04 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2020 04:11:09 UTC