Securities code: 002211 securities abbreviation: Shanghai Hongda New Material Co.Ltd(002211) Announcement No.: 2022-007
Shanghai Hongda New Material Co.Ltd(002211)
Announcement on the proposed withdrawal of large amount of credit and assets of the company and the recognition of goodwill impairment reserves of subsidiaries
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
Special risk tips:
1. As the annual audit institution of the company has not been determined, relevant tests have not been communicated with accountants.
2. For private network communication cases, public security organs and regulatory departments have recently come to the company to investigate and collect evidence. The management of the company has submitted written materials to the public security organ and the regulatory department on the specific losses caused to the company by the private network communication case, and took the initiative to learn about the progress of the case from the relevant departments. At the same time, the company also actively took legal measures and tried its best to recover the losses. The judgment result of private network communication case will have an impact on the accuracy of this announcement and the company’s performance. In the future, the company will timely perform the obligation of information disclosure according to the progress of the case.
Shanghai Hongda New Material Co.Ltd(002211) (hereinafter referred to as “the company”) held the 16th meeting of the sixth board of directors on January 27, 2022, deliberated and adopted the proposal on the proposed withdrawal of large amount credit and assets of the company and the recognition of goodwill impairment reserves of subsidiaries, and agreed that the company should, in accordance with the accounting standards for business enterprises and relevant accounting policies, Provision for credit impairment shall be made for prepayments and receivables related to private network communication business of two wholly-owned subsidiaries Shanghai GuanFeng Information Technology Co., Ltd. (hereinafter referred to as “Shanghai Guanfeng”) and Shanghai Hongzhu Information Technology Co., Ltd. (hereinafter referred to as “Shanghai Hongzhu”), and for inventories, deferred income tax assets, fixed assets, long-term deferred expenses Provision for impairment of other current assets; In addition, as Shanghai Guanfeng determined that the corresponding annual performance commitment had not been completed, the company recognized the goodwill formed by its investment and made full provision for impairment. At the same time, the proposal will be submitted to the second extraordinary general meeting of shareholders of the company in 2022 for deliberation. The details are hereby announced as follows:
1、 Overview of the provision for impairment this time
In the early stage, the company disclosed relevant announcements such as the risk warning announcement on some business operations of the company’s subsidiaries, the announcement on the proposed litigation and arbitration of the company’s wholly-owned subsidiaries, and the announcement on the progress of major litigation involving the company’s wholly-owned subsidiaries, Due to the downstream customers of private network communication business, Jiangsu hongcui Industrial Development Co., Ltd. (hereinafter referred to as “Jiangsu hongcui”), poly Civil Explosion Technology Group Co., Ltd. (hereinafter referred to as “poly civil explosion”), Zhonghong Zhengyi Energy Holding Co., Ltd. (hereinafter referred to as “Zhonghong Zhengyi”) Zhonghong Ruida Technology Development Co., Ltd. (hereinafter referred to as “Zhonghong Ruida”) has overdue payment for goods and delayed in performing its contractual obligations, and the upstream suppliers zhonganeng (Jiangsu) energy Co., Ltd. (hereinafter referred to as “zhonganeng”) and Shanghai Hengchang Communication Technology Co., Ltd. (hereinafter referred to as “Hengchang communication”) have also overdue supply, The relevant accounts receivable and prepayments are at risk of being unrecoverable and the inventory cannot be fully realized. Shanghai Hongzhu has filed a lawsuit against Jiangsu hongcui to the people’s Court of Minhang District of Shanghai according to law, and Shanghai Guanfeng has filed a lawsuit against Zhonghong Zhengyi to the people’s Court of Qingpu District of Shanghai according to law. In addition to the above litigation cases, there are still some litigation and arbitration cases related to private network communication business in Shanghai Hongzhu and Shanghai Guanfeng that have not been accepted or entered the trial procedure (see the announcement on the proposed litigation and arbitration of the company’s wholly-owned subsidiaries disclosed by the company, Announcement No.: 2021-094). The company will actively promote the progress of relevant cases and disclose the progress of relevant cases in a timely manner.
Based on the principle of prudence, the company fully evaluates the development of private network communication business and litigation related situations. The company withdraws bad debt reserves according to individual items after conducting impairment test through default probability, default loss rate and default risk exposure model based on quantitative analysis of existing objective evidence and forward-looking information analysis of prepayments and accounts receivable involved in private network communication business, The amount to be accrued for the expected credit loss of accounts receivable is 93.2838 million yuan, the amount to be accrued for the expected credit loss of prepayments is 27.4599 million yuan, the amount to be accrued for the provision for inventory falling price is 37.8024 million yuan, the provision for impairment of deferred income tax assets is 13.8355 million yuan, and the provision for impairment of fixed assets is 29.2719 million yuan, The long-term deferred expenses are to be amortized at one time by 3.8849 million yuan, and the impairment provision for other current assets is to be withdrawn by 33.3303 million yuan, with a total impairment loss of 579.0902 million yuan.
In addition, affected by the thunderstorm of “private network communication”, the business of Shanghai Guanfeng private network, a wholly-owned subsidiary, has stagnated, and the production and operation have been greatly affected. In consideration of prudence, the company plans to fully withdraw the impairment provision of 165.9706 million yuan for the goodwill formed by its investment in the first three quarters. As Shanghai Guanfeng confirms that it has not completed the corresponding annual performance commitment, this goodwill withdrawal is to confirm the goodwill impairment provision to be withdrawn in the first three quarters. 2、 Basis and method of withdrawing impairment provision this time
(I) basis and method for withdrawing credit impairment losses
According to the relevant provisions of the accounting standards for business enterprises and the company’s accounting policies, the company recognizes the provision for loss of receivables on the basis of expected credit loss, evaluates the expected credit risk and measures the expected credit loss on the basis of single financial instrument or combination of financial instruments.
For financial assets with significant single amount (including accounts receivable and prepayments), the impairment test is conducted separately, and there is objective evidence indicating the impairment. The company measures the loss provision through the probability of default, loss rate of default and default risk exposure model according to the quantitative analysis of historical statistical data and forward-looking information.
According to the above standards, the company withdraws the bad debt provision for the accounts receivable and prepayments involved in the private network communication business according to the single item, and transfers back the bad debt provision withdrawn in the previous period according to the aging combination. The specific basis is as follows:
1. Bad debt provision for accounts receivable
Shanghai Hongzhu and Shanghai Guanfeng have started legal procedures to safeguard their legitimate rights and interests, and the relevant litigation is still in progress. At present, the case of Shanghai Hongzhu v. Jiangsu hongcui has progressed to the Minhang District People’s court, which has ruled to reject the objection to jurisdiction raised by Jiangsu hongcui on relevant cases (see the announcement on the progress of major litigation involving wholly-owned subsidiaries of the company disclosed by the company, Announcement No.: 2021-122). The case of Shanghai Guanfeng v. Zhonghong Zhengyi progressed to that it was unable to serve litigation materials to the defendant Zhonghong Zhengyi due to the covid-19 pneumonia epidemic, and the Qingpu District People’s court ruled to suspend the litigation of this case (see the public notice on the progress of major litigation involving the wholly-owned subsidiary of the company disclosed by the company, Announcement No.: 2021-129).
According to the current litigation progress of the company, the obstacles faced by the case in the trial stage and execution stage, and the professional judgment of the company’s agent law firm and lawyer, in accordance with the relevant provisions of the accounting standards for business enterprises and the company’s accounting policies, and based on the principle of prudence, the bad debt reserves are withdrawn individually for the accounts receivable of private network communication business, The provision for bad debts of accounts receivable in the current period is 93.2838 million yuan.
2. Provision for bad debts of prepayments
Shanghai Hongzhu has sent contract performance reminder, payment reminder and lawyer’s letter to Hengchang communication and Shanghai Guanfeng to zhonganeng, urging them to timely perform their contractual obligations and refund relevant payment for goods. As of the date of this announcement, the company has not received relevant replies from Hengchang communication, zhonganeng and other suppliers, and there is a risk that the advance payment for goods can not be recovered. In the future, the company will not rule out safeguarding the rights and interests of the company by means of legal proceedings.
Based on the development of private network communication business and the current progress of Dunning payment, in accordance with the relevant provisions of the accounting standards for business enterprises and the company’s accounting policies, based on the quantitative analysis of existing objective evidence and forward-looking information, after the impairment test of default probability and default loss rate, based on the principle of prudence, the bad debt reserves are withdrawn for the prepayments of private network communication business individually, The provision for bad debts of prepayments in the current period is 27.4599 million yuan.
(II) basis and method for withdrawing asset impairment loss
1. Provision for inventory impairment
For inventories, the company shall measure the lower of cost and net realizable value on the balance sheet date, and withdraw inventory falling price reserves according to the difference between inventory category cost and net realizable value. For the inventory directly used for sale, its net realizable value shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes in the normal production and operation process; For inventories that need to be processed, the net realizable value is determined by the estimated selling price of finished products minus the estimated cost to be incurred at the time of completion, estimated selling expenses and relevant taxes in the normal process of production and operation; On the balance sheet date, if there is a contract price agreement for one part of the same inventory and there is no contract price for other parts, the net realizable value shall be determined respectively, and compared with its corresponding cost to determine the amount of inventory falling price reserves withdrawn or reversed respectively.
According to the above standards, the company calculates and withdraws the falling price reserves for the inventories involved in the private network communication business according to the single measurement of raw materials and inventory commodities. The specific basis is as follows:
On the one hand, the core raw materials of private network communication business have certain customization characteristics. When customers such as Jiangsu hongcui and Zhonghong Zhengyi do not continue to perform the contract, the inventory is full and the liquidity is poor. As the relevant cases are still in progress and no final judgment has been made, according to the current litigation progress, the probability of recovering the accounts receivable of Jiangsu hongcui, Zhonghong Zhengyi and other customers in the short term is low.
On the other hand, Jiangsu hongcui and Zhonghong Zhengyi, as downstream customers, did not inform Shanghai Hongzhu and Shanghai Guanfeng of the final sales destination of the products. Shanghai Hongzhu and Shanghai Guanfeng have sent contract performance reminders, payment reminders and lawyer letters to Jiangsu hongcui and Zhonghong Zhengyi, urging them to perform their contractual obligations and pay in time. As of the date of this announcement, the company has not received relevant replies from Jiangsu hongcui, Zhonghong Zhengyi and other customers.
Limited by the customization characteristics and unclear end-user factors, if customers such as Jiangsu hongcui and Zhonghong Zhengyi refuse to continue to perform the contract, the inventory may not be fully realized.
Based on the full assessment of the development trend and litigation situation of private network communication business, combined with the professional opinions of litigation agency law firms and lawyers, and in accordance with the relevant provisions of the accounting standards for business enterprises and the company’s accounting policies, and the principle of the lower of cost and net realizable value, the inventory involved in private network communication business is calculated and withdrawn according to the single calculation of raw materials and inventory commodities, The provision for inventory falling price in the current period is RMB 378024000.
2. Provision for impairment of deferred income tax assets
The company shall review the book value of deferred income tax assets on the balance sheet date. If it is likely that sufficient taxable income will not be obtained in the future to take advantage of the benefits brought by the deductible difference, the book value of the deferred income tax assets shall be written down. The company expects that Shanghai Guanfeng and Shanghai Hongzhu will not be profitable in the future. According to the above principles, 13.8355 million yuan of deferred income tax asset impairment provision shall be accrued in the current period.
3. Provision for impairment of fixed assets
If the fixed assets are expected to produce no economic benefits through use or disposal, i.e. “the economic benefits related to the fixed assets are likely to flow into the enterprise”, after the recognition conditions of the fixed assets are no longer met, the recognition of the fixed assets shall be terminated and the corresponding impairment reserves shall be accrued. Due to the stagnation of private network communication business, the relevant fixed assets have been unable to bring the inflow of economic benefits to the company. According to the above principles, the amount of provision for impairment of fixed assets in the current period is 29.2719 million yuan.
4. Long term deferred expenses shall be amortized in advance
As an asset, one of the main characteristics of long-term deferred expenses is the inflow of economic benefits to the company. If the asset cannot bring economic benefits to the enterprise or the economic benefits are lower than its book value, it indicates that the asset has been impaired. The company shall reduce the book value of the asset to recoverable amount by recognizing the asset impairment loss. The company expects that Shanghai Guanfeng and Shanghai Hongzhu will not be profitable in the future, so the long-term unamortized expenses should be amortized one-time in advance. The amount of one-time amortization in advance in this period is 3.8849 million yuan.
5. Loss of other current assets
As an asset, one of the main characteristics of other current assets is the inflow of economic benefits to the company. If the asset cannot bring economic benefits to the enterprise or the economic benefits are lower than its book value, it indicates that the asset has been impaired. The company shall reduce the book value of the asset to recoverable amount by recognizing the asset impairment loss. The company’s other current assets of 33.3303 million yuan are the input retention formed by Shanghai Hongzhu private network communication business. Due to the stagnation of private network communication business, the input retention may need to be transferred out as one of the losses of the company.
(III) basis and method for withdrawing goodwill impairment loss
In September 2019, Shanghai Hongda New Material Co.Ltd(002211) acquired 100% equity of Shanghai GuanFeng Information Technology Co., Ltd., completed industrial and commercial changes on October 16, 2019, and December 31, 2019 was the date of consolidated statements.
According to the asset appraisal report (Dongzhou pingbao Zi [2019] No. 0633) issued by Dongzhou appraisal, the value of all shareholders’ equity of Shanghai GuanFeng Information Technology Co., Ltd. on the benchmark date of acquisition and appraisal is 200 million yuan. In view of the unpaid part of the registered capital of Shanghai GuanFeng Information Technology Co., Ltd. on the benchmark date of April 30, 2019, through friendly negotiation between the two parties, the original shareholders Ningbo Meishan free trade port Jiqin Investment Co., Ltd. and Jiangsu zhuorei Holding Co., Ltd. respectively made a supplementary contribution of 23.75 million yuan and 1.25 million yuan. Finally, the price of 100% equity of Shanghai GuanFeng Information Technology Co., Ltd. was RMB 225 million. In addition, the fair value share of identifiable net assets of Shanghai Guanfeng on December 31, 2019 was 59.0294 million yuan, forming a goodwill of 165.9706 million yuan.
The relevant agreement terms in the equity acquisition agreement on Shanghai GuanFeng Information Technology Co., Ltd. signed by Shanghai Guanfeng in September 2019 show that Shanghai Guanfeng company needs to complete various performance commitments within three years (the audited net profit in 2019, 2020 and 2021 shall not be less than 9 million yuan, 19.5 million yuan and 23 million yuan). In the first three quarters of 2021, due to the abnormal production and operation of private network wireless communication business, the relevant private network communication business was basically at a standstill, resulting in a great risk that Shanghai Guanfeng could not fulfill the relevant annual performance commitments. In consideration of prudence, the company will acquire Shanghai view in the first three quarters of 2021
