Securities code: Zhejiang Huatong Meat Products Co.Ltd(002840) securities abbreviation: Zhejiang Huatong Meat Products Co.Ltd(002840) Announcement No.: 2022027 Zhejiang Huatong Meat Products Co.Ltd(002840)
Announcement on the reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Recently, Zhejiang Huatong Meat Products Co.Ltd(002840) (hereinafter referred to as “the company” or ” Zhejiang Huatong Meat Products Co.Ltd(002840) “) received the letter of concern on Zhejiang Huatong Meat Products Co.Ltd(002840) from Shenzhen Stock Exchange (company department concern letter [2022] No. 158). After receiving the letter of concern, the company attached great importance to it and immediately organized relevant departments to conduct analysis and verification. Now the reply to the questions raised in the letter of concern is as follows:
1、 In combination with the calculation of relevant asset impairment reserves at the time point of your company’s previous performance forecast, the macro environment, industry status, recent pig market price trend, and the consideration of the same factors in the performance forecast of Companies in the same industry, explain the calculation process of your company’s supplementary provision for biological asset impairment reserves at the end of 2021, And the rationality of supplementary provision for impairment.
reply:
1. Calculation of relevant asset impairment reserves at the time point of the previous performance forecast
(1) Calculation method of impairment of biological assets
The company’s impairment provision is mainly formed by the withdrawal of inventory and productive biological assets. The ending inventory is measured by the lower of cost and net realizable value, and the difference between the inventory cost and its net realizable value is withdrawn and recognized as impairment provision; At the end of the period, productive biological assets are measured according to the lower of their recoverable amount than their book value, and the difference between the recoverable amount of productive biological assets and their book value is recognized as impairment provision. Inventories are mainly used for recent sales. The company confirms its net realizable value and calculates the impairment provision in combination with the recent market sales price and market fluctuation at the time point of performance forecast, book balance cost and estimated new breeding cost. The specific process is as follows:
The sum of the current cost of each pig herd plus the cost that needs to be invested from the estimated breeding to 130kg is lower than the net realizable value in the future.
Productive biological assets are mainly used for self breeding and breeding. The company recognizes the recoverable amount and calculates the impairment provision in combination with the changes in the stock of fertile sows and the price fluctuation of piglets. The specific process is as follows:
Productive biological assets (breeding pigs): the net cash flow of effective piglets in the next three years is discounted to the balance sheet date and the impairment is calculated and withdrawn compared with the cost. Calculation method of net realizable value in the future: (number of existing breeding pigs (1 – elimination rate of breeding pigs) average litter survival rate estimated sales price + recovery value of eliminated breeding pigs – cash cost) discount rate.
Productive biological assets (reserve breeding pigs): calculation method: net realizable value = basic weight price + exceeding basic weight impairment is accrued by comparing the sales price of fat pigs with the existing cost.
(2) Calculation of relevant asset impairment reserves at the time point of the previous performance forecast
The management of the company, in combination with the judgment of the trend of pig marketing price in 2021, believes that the pig marketing price has fallen to a low level in the third quarter of 2021, and has increased significantly in the fourth quarter of 2021. Although it fell slightly in early 2022, the pig price will not continue to fall significantly in the future, Therefore, when preparing the financial statements in January 2022, the company measured the impairment of the inventory falling price reserves, used the pork price sold to the outside world at the end of December 2021 to test the impairment of biological assets, and accrued the inventory falling price reserves of consumable biological assets of 20.65 million yuan. The calculation process of consumable biological assets with impairment is as follows:
Unit: 10000 yuan
Consumption to be released
Population book cost estimated cost estimated recoverable value impairment cost
Waiting suckling pig 3768211581027195784818466381112.1
Conservation pigs 221709147495369204349184 200.2
Fattening pig herd 750257199448949705874403 753.02
Total 134878719279732767573070225206532
2. Macro environment, industry status, recent pig market price trend
In January 2021, with the effective control of classical swine fever, China’s pig production capacity gradually recovered, the slaughter volume increased, and the pig price continued to fall sharply. By October 8, 2021, the low point of pig price stage is 10.78 yuan / kg, which is 73.69% lower than the highest point of 40.98 yuan / kg in November 2019. Compared with the previous pig cycle, the rapid decline has accelerated the clearing of pig production capacity. By the end of 2021, the number of fertile sows in China has decreased month by month for six consecutive months.
At the same time, since October 2021, the demand for pigs in China has improved seasonally, and the demand for pigs has increased due to more pickles and enemas on the market and the stock period of the Spring Festival. In addition, the central and local governments carried out the collection and storage of 30000 tons of pork, and the pig price rebounded slightly in the short term, rising from the lowest point of 10.78 yuan / kg to 16.30 yuan / kg at the end of 2021, an increase of 51.20%.
Based on the trend of pig price in 2021 and the continuous decline of fertile sows, the management of the company judged in the announcement of 2021 annual performance forecast on January 29, 2022 that the number of pigs sold in the first half of 2022 is expected to trend downward. Under the condition of rigid pork demand, it is expected that the price of pigs will not continue to decline significantly in the first half of 2022.
However, after February 2022, with the decrease of pork market demand after the Spring Festival, the supply of pigs exceeded the demand, which led to the further decline of pig prices, which was much higher than the previous judgment of the company’s management. According to the monitoring of the national development and Reform Commission, from February 21 to 25, 2022, the national average pig grain price ratio was 4.98:1, entering the level-1 early warning range of excessive decline determined in the working plan for improving the regulation mechanism of government pork reserves and ensuring supply and price stability in the pork market. The national development and Reform Commission and relevant departments immediately started the collection and storage of the central frozen pork reserve and guided all localities to actively collect and store.
After the introduction of this favorable policy, pig prices still did not stop the downward trend.
Three yuan pig price outside Zhejiang Province (yuan / kg)
twenty
nineteen
eighteen
seventeen
sixteen
fifteen
fourteen
thirteen
twelve
Series 1 Series 2
Data source: Dongjin choice data, series 1 is the daily price, and series 2 is the monthly average price. After the Spring Festival in 2022, the price of live pigs fell again by a large margin, making pig breeding enterprises face a new round of operating performance pressure.
3. Consideration of the same factors in the performance forecast of Companies in the same industry
During the reporting period, the performance forecast of Listed Companies in the same industry in 2021 and the impairment of biological assets are shown in the following table:
Unit: 100 million yuan
Project Muyuan Foods Co.Ltd(002714) Wens Foodstuff Group Co.Ltd(300498) Jiangxi Zhengbang Technology Co.Ltd(002157) New Hope Liuhe Co.Ltd(000876) Tech-Bank Food Co.Ltd(002124) Zhejiang Huatong Meat Products Co.Ltd(002840)
Operating income 770 to 800 not announced 465 to 495 not announced not announced not announced
-130 to – 180 to – 1.7 to net profit 70 to 85 – 86 to – 96 – 35 to – 40
-138 -197 -2.3
Provision for impairment not announced 25 12 10 8 2.17
It can be seen from the above table that among the companies in the same industry, except Muyuan Foods Co.Ltd(002714) other listed companies have suffered losses and the range of losses is large; Except that Muyuan Foods Co.Ltd(002714) did not announce the specific amount of impairment, other listed companies in the same industry have accrued impairment for biological assets.
4. The calculation process of the company’s supplementary provision for impairment of biological assets at the end of 2021 and the rationality of supplementary provision for impairment of biological assets
(1) The calculation process of the company’s supplementary provision for impairment of biological assets
At the end of December 2021, the specific impairment calculation process and details of the company’s consumable biological assets with impairment are shown in the following table:
Unit: 10000 yuan
Consumption to be released
Population book cost estimated cost estimated recoverable value impairment cost
Waiting suckling pig 1195506745304586485517770523878028
Suckling pig herd 128822635501764324697364 669.6
Conservation pigs 4919276354321127361039012 883.48
Fattening pigs 149341390956324029762121511281464
Total 330966996335411294321116284091314801
The details of impairment of the company’s reproductive assets at the end of December (2021) are as follows:
Unit: 10000 yuan
Discounted net cash flow of the first year, the second year and the third year
Population cost present value impairment rate cash flow cash flow present value of cash flow
Can reproduce mother
5% 268.6571847844003210573831424352366969 pigs
5% 268.6571847844003210573831424352366969
At the end of December 2021, the company calculated the specific impairment calculation process and details of productive biological assets (reserve) with impairment as follows:
Unit: 10000 yuan
Population book cost base price recoverable value overweight recoverable value total estimated recoverable value impairment amount
Reserve breeding pig 863389406995204608611603251786
Total 863389406995204608611603251786
(2) Rationality of supplementary provision for impairment
The company revised the performance forecast of 2021 and added the provision for impairment, which is mainly due to the continued decline of pig market price after the balance sheet date due to the influence of market supply.
Affected by the macro policies of the industry and the state, the price of live pigs fluctuates greatly. At the same time, the pig breeding cycle is relatively long, so it is difficult to predict the sales price at the time of marketing. The company has also predicted in the original performance
