About Shenwu Energy Saving Co.Ltd(000820)
Reply to relevant questions in the letter of concern
Zhonghuan zhuanzi (2022) No. 0100021 Shenzhen Stock Exchange:
We are entrusted to audit the financial statements of Shenwu Energy Saving Co.Ltd(000820) (hereinafter referred to as “the company” or “Shenwu energy conservation”) in 2021. As of the date of issuance of this special note, our audit work is still in progress and the final audit opinion has not been formed.
According to the letter of concern about Shenwu Energy Saving Co.Ltd(000820) issued by your ministry on January 25, 2022 (company department concern letter [2022] No. 37) (hereinafter referred to as the “concern letter”), the company’s reply to the concern letter is as follows:
1、 The report of the third quarter of 2021 disclosed by your company in the early stage shows that your company achieved an operating revenue of 1.5442 million yuan in the first three quarters. Please explain the reason and rationality of the substantial increase in operating revenue in the fourth quarter of 2021, the matching between the composition of relevant operating revenue and the scope of main business, whether there is a surprise transaction at the end of the year to avoid delisting risk, and whether the recognition of relevant revenue complies with the provisions of the accounting standards for business enterprises.
Company reply:
(I) reasons and rationality for the substantial increase of the company’s operating revenue in the fourth quarter of 2021
1. Contract signing of the company in 2021
In 2021, the company’s subsidiary Jiangsu Metallurgical Design Institute Co., Ltd. (hereinafter referred to as “Jiangsu Institute”) completed bankruptcy reorganization and was placed in Wuhan United Liben Energy Technology Co., Ltd. (hereinafter referred to as “United Liben”). Therefore, the actual business of the company in 2021 mainly focused on the clean smelting design and general contracting (EP) business of iron and steel metallurgy industry of Jiangsu Institute, as well as the business of industrial sewage treatment, comprehensive utilization of waste heat and pressure and its ancillary equipment and relevant control systems.
After completing the bankruptcy reorganization, Jiangsu Institute has gradually resumed normal operation. Relying on its accumulated market resources and core technology (Shenwu regenerative rotary hearth furnace (SRF) direct reduction clean smelting technology), Jiangsu Institute continues to deeply cultivate the fields of bulk industrial solid waste and energy-saving and environmental protection process reengineering in China’s iron and steel industry, focusing on the development of solid waste dust (iron and zinc dust) in the iron and steel industry Resource treatment of smelting waste slag in nonferrous industry; And provide engineering design, consulting and general contracting services for iron and steel, nonferrous metals and other industries with traditional technology, covering sintering, pelletizing, ironmaking, steel rolling, flue gas treatment, water treatment, industrial and civil construction and other fields.
The joint venture focuses on three modes: general contracting in the form of overall system supply, sales service of system main equipment and its auxiliary equipment and system engineering construction and installation service. It is committed to the comprehensive utilization system of natural gas pressure energy, ORC power generation and steam compressor units in the chemical industry, comprehensive utilization system of coal mine waste heat, mine heat hazard treatment system Industrial sewage treatment and other fields
In 2021, the company signed 20 contracts with a total contract amount of 159.959 million yuan. By the end of 2021, the company had not executed a total of 4 contracts with a contract amount of 14.5159 million yuan. Among them, the total amount of individual contracts signed by the subsidiary Jiangsu Institute is 90.7453 million yuan, and the total amount of contracts signed by the joint venture is 69.2137 million yuan.
Contract amount revenue amount contract signing revenue recognition Revenue category
(10000 yuan) construction period
October 11, 2021
Engineering design 969.00 499.63 1-3 months Fourth Quarter Month
Engineering design + equipment supply (EP) 7981.00 7075.69 the fourth quarter of August September 1-4 months 2021
Customized equipment integration 6064.07 4706.74 fourth quarter of August November 1-3 months 2021
Technical service 10.00 1.91 fourth quarter of November 2021
Maintenance 223.50 197.79 fourth quarter from March to December 2021
Scrap sales 114.53 101.36 2021.11.30 fourth quarter
Equipment sales 633.80 269.29 the fourth quarter of August November 1-3 months 2021
Total 15995.90 12852.41 —
2. Reasons for the sharp growth of the company’s operating revenue in the fourth quarter
2.1 reasons for the sharp increase in operating revenue of Jiangsu Institute in the fourth quarter
(1) Restrictions on bankruptcy reorganization
The Nanjing Intermediate People’s court ruled to approve the bankruptcy reorganization plan of Jiangsu Court on April 20, 2021. The bankruptcy reorganization of Jiangsu court entered the implementation stage, and the distribution of debt repayment of bankruptcy reorganization was completed by the end of June 2021. After the approval of bankruptcy reorganization, Jiangsu Institute gradually carried out business activities, which is the main reason for the low income of the company in the first three quarters.
(2) Impact of new order execution
After the bankruptcy and reorganization, the management of Jiangsu Institute actively promoted the company’s full resumption of production and work. After personnel supplement and structure adjustment, the company fully tapped the resources accumulated in the previous industry and comprehensively considered the actual operating conditions of the company, focusing on the restoration of design business, clean smelting and comprehensive utilization of waste residue in iron and steel and metallurgy industries with strong competitive advantage and executable ability, In the third quarter, several EPC (EP) and design project contracts were successively signed; In 2021, the design projects undertaken by Jiangsu Institute were all core advantage technology projects of Jiangsu Institute, and the design duration ranged from 1 to 3 months according to the contract. Based on the previous design experience and accumulated design basis of Jiangsu Institute for similar projects, the design projects signed by the company maintained a high completion progress during the reporting period, and the design projects were completed at the end of the fourth quarter; The EP project is mainly the blast furnace environmental protection transformation and steelmaking continuous caster construction project of the traditional iron and steel plant. Based on the construction experience and supplier basis of Jiangsu Institute for the traditional iron and steel project, and the contracts actually signed by Jiangsu Institute are the design and equipment supply of some bid sections of the original project. Therefore, the relevant contracts are completed within this year and the revenue is recognized at the end of the fourth quarter.
In conclusion, under the joint influence of bankruptcy reorganization and new order execution, although Jiangsu Institute did not fully carry out business activities in the first half of the year, it has successively signed contracts since the third quarter and completed orders and delivered according to the contract requirements in the fourth quarter, so the revenue is recognized accordingly, resulting in a “significant increase” in the revenue in the fourth quarter compared with the first three quarters.
2.2 reasons for the substantial increase of operating revenue in the fourth quarter of this year
The company obtained the control of the joint venture at the end of May 2021, so the actual consolidated business in this year is only from June to December. In the first half of the year, affected by the repeated epidemic situation in some regions of China and the adjustment of national macro policies, the original projects in the coal / chemical industry involved by UnionPay were delayed and failed to be carried out as scheduled, resulting in the fact that only part of the maintenance contracts were executed by UnionPay. Therefore, from the merger date to the end of the third quarter, it only realized an operating revenue of only 1.5442 million yuan. However, since the third quarter, relying on its own technical advantages and accumulated customer resources in the chemical industry, Unilever has focused on the development of technical services and equipment supply of chemical waste heat comprehensive utilization projects (system auxiliary equipment (container products)). By the end of 2021, Unilever has successively signed multiple contracts with a total amount of 69.2137 million yuan, Among them, the total amount of contracts executed at the end of the reporting period was 58.3978 million yuan, the accumulated recognized income was 51.7382 million yuan, and the total amount of contracts not executed was 10.8159 million yuan.
(II) the matching between the composition of relevant operating income and the main business scope, and whether there is a situation of surprise trading at the end of the year to avoid delisting risk
Details of the company’s revenue composition and corresponding contract amount in 2021 are as follows:
Single income constitutes the contract amount and the company’s main business
Bit (10000 yuan)
Engineering design 969.00
Jiang engineering design + equipment supply (EP) 7981.00 comprehensive utilization of resources of bulk industrial solid wastes of high energy consumption and high pollution industries such as mineral resources, iron and steel, nonferrous metals, etc., technical service of the Institute of Mines 10.00 comprehensive utilization of resources, waste sales of energy-saving and environmental protection process reengineering business 114.53
Joint customization equipment integration 6064.07
The cooperative amateur comprehensive utilization of heat and residual pressure provides industrial and mining enterprises with scheme design, product research and development, system integration, project implementation, etc. of liweibao 223.50 comprehensive utilization system of waste heat and residual pressure
Equipment sales 304.30
As shown in the above table, the actual business of the company during the reporting period mainly focused on the clean smelting design and general contracting (E, P) business of the iron and steel metallurgy industry of Jiangsu Institute, as well as the industrial sewage treatment, comprehensive utilization of waste heat and pressure and computer system integration business of the company. By the end of 2021, the projects actually implemented and recognized by the company are in line with the company’s main business scope; The company’s sales business is based on the orderly development and delivery of relevant design results and assets according to the progress agreed in the contract, and there is no surprise transaction at the end of the year to avoid the delisting risk.
(III) whether the recognition of relevant income complies with the provisions of the accounting standards for business enterprises
1. Policies on revenue recognition in the accounting standards for business enterprises:
On the commencement date of the contract, identify each individual performance obligation in the contract, and allocate the transaction price to each individual performance obligation according to the relative proportion of the individual selling price of the goods promised by each individual performance obligation. When determining the transaction price, the influence of variable consideration, major financing components in the contract, non cash consideration, consideration payable to customers and other factors is considered.
For each single performance obligation in the contract, if one of the following conditions is met, the company will recognize the transaction price allocated to the single performance obligation as revenue according to the performance progress within the relevant performance period: the customer obtains and consumes the economic benefits brought by the company’s performance at the same time of the company’s performance; Customers can control the goods under construction during the performance of the company; The goods produced during the performance of the contract by the company have irreplaceable uses, and the company has the right to collect payment for the performance part accumulated so far during the whole contract period. The performance progress shall be determined by the input method or output method according to the nature of the transferred goods. When the performance progress cannot be reasonably determined, if the costs incurred by the company are expected to be compensated, the revenue shall be recognized according to the amount of costs incurred until the performance progress can be reasonably determined.
If one of the above conditions is not met, the company will recognize the revenue according to the transaction price apportioned to the single performance obligation at the time when the customer obtains the control over the relevant goods. When judging whether the customer has obtained control of the goods, the company considers the following signs: the enterprise has the current collection right for the goods, that is, the customer has the current payment obligation for the goods; The enterprise has transferred the legal ownership of the commodity to the customer, that is, the customer has owned the legal ownership of the commodity; The enterprise has transferred the goods in kind to the customer, that is, the customer has possessed the goods in kind; The enterprise has transferred the main risks and rewards of the ownership of the commodity to the customer, that is, the customer has obtained the main risks and rewards of the ownership of the commodity; The customer has accepted the goods; Other signs indicating that the customer has obtained control of the goods.
Specific principles:
① Revenue recognized by time period method
According to the specific agreement of the contract on the transaction, the performance progress is determined by the input method or output method according to the nature of the transferred goods.
② Revenue recognized by time point method
The company has fulfilled the performance obligation in the contract, that is, the sales revenue is recognized when the customer receives and confirms the relevant goods. 2. The company’s recognition of revenue:
As listed in Items 1 and 2 of the reply to question 1, the company’s main business income is mainly composed of engineering design, general contracting (E, P) and equipment procurement and technical services. The time points of recognition of various business income and the provisions of the accounting standards for business enterprises are as follows:
Revenue amount
Revenue category revenue recognition method revenue recognition conditions
(10000 yuan)
499.63 time point method for engineering design: the customer has accepted and obtained the product control right
Engineering design + equipment supply (EP) 7075.69 time point method: the customer has accepted and obtained the product control right
Customized equipment integration 4706.74 time point method: the customer has accepted and obtained the product control right
technical service
