Shandong Xinhua Pharmaceutical Company Limited(000756)
And
Zhongtai Securities Co.Ltd(600918)
Reply to the letter on making preparations for the Shandong Xinhua Pharmaceutical Company Limited(000756) non public development bank stock issuance and examination committee meeting
Sponsor (lead underwriter)
Address: No. 86, Jingqi Road, Jinan, Shandong
December, 2001
About Shandong Xinhua Pharmaceutical Company Limited(000756) non public offering of shares
Reply to the letter on preparations for the meeting of the ticket issuance and examination committee
China Securities Regulatory Commission:
We have received the letter on making preparations for the Shandong Xinhua Pharmaceutical Company Limited(000756) non-public development bank stock issuance and examination committee meeting (hereinafter referred to as the “notification letter”) issued by your association on December 28, 2021. Zhongtai Securities Co.Ltd(600918) as the sponsor of Shandong Xinhua Pharmaceutical Company Limited(000756) (hereinafter referred to as ” Shandong Xinhua Pharmaceutical Company Limited(000756) ” or “the issuer” or “the company”) for non-public offering of shares in 2021, has carefully checked the questions raised in the notification letter one by one together with the issuer and the reporting accountant, and made the following reply.
The abbreviations in this reply have the same meaning as those in the due diligence report. The difference in the mantissa between the sum of some totals and each addend in the reply to this notification letter is caused by rounding.
Inventory and inventory falling price reserves. During the reporting period, the applicant’s depreciation reserves for raw materials were 6.56%, 6.38%, 5.22% and 2.87% respectively, the depreciation reserves for inventory goods were 4.01%, 7.55%, 3.80% and 4.25% respectively, and the depreciation reserves for products in process were 8.86%, 15.80%, 12.93% and 14.15% respectively. Excuse me: (1) basis and method for withdrawing inventory falling price reserves for products in process; (2) Whether the reason and rationality that the proportion of inventory falling price reserves withdrawn for products in process is higher than that of raw materials and inventory commodities meet the actual production and industry characteristics. The recommendation institution and the applicant’s accountant shall explain the verification basis and process and express clear verification opinions.
Reply: I. basis and method for withdrawing inventory falling price reserves for products in process
The company has formulated specific accounting policies for inventory falling price reserves in accordance with the relevant provisions of accounting standards for Business Enterprises No. 1 – inventories, as follows:
The ending inventory shall be valued according to the principle of the lower of cost and net realizable value. For the part of the inventory whose cost is expected to be unrecoverable due to damage, all or part of obsolescence or the sales price is lower than the cost, the inventory falling price reserve shall be withdrawn. The inventory falling price reserves of inventory commodities and bulk raw materials shall be withdrawn according to the difference between the cost of a single inventory item and its net realizable value; For other raw and auxiliary materials with large quantities and low unit price, inventory falling price reserves shall be withdrawn by category.
The net realizable value of merchandise inventories directly for sale, such as goods in stock, products in process and materials for sale, shall be determined by the amount of the estimated selling price of the inventory minus the estimated selling expenses and relevant taxes; The net realizable value of material inventories held for production 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.
The net realizable value of the products in progress is determined by the amount of the estimated selling price of the finished products minus the estimated cost to be incurred at the time of completion, the estimated selling expenses and relevant taxes. On the balance sheet date, the company measures the provision for falling price of the products in progress according to the lower of the cost and the net realizable value.
2、 The company has reasonable reasons why the proportion of inventory falling price reserves withdrawn for products in process is higher than that of raw materials and inventory commodities, which is in line with the actual production of the company
The company makes a comprehensive inventory of inventories at the end of the year. For the part of the inventory whose cost is expected to be unrecoverable due to damage, all or part of obsolescence or sales price is lower than the cost, the inventory falling price reserve is accrued. At the end of each reporting period, the company’s inventory falling price reserves are as follows:
Unit: 10000 yuan
Project 2021.9.302020.12.31
Provision proportion for book balance depreciation provision proportion for book balance depreciation provision
Inventory 49314.452097.724.25% 62903.712390.813.80%
development cost
(developed products: 9295.89 — 16147.78)
Products in process 14985.672120.9414.15% 18293.312364.6912.93%
Raw materials 14697.05421.192.87% 13752.84717.715.22%
Issued goods 4555.85 — 5128.2739.080.76%
Low value consumables 1811.5838.972.15% 1577.8338.982.47%
Special reserve 183.97 — 183.97 — materials
Total 94844.474678.834.93% 117987.715551.284.70%
(Continued)
Project December 31, 2019 December 31, 2018
Provision proportion for book balance depreciation provision proportion for book balance depreciation provision
Inventory goods 63698.174807.467.55% 61399.732460.644.01%
development cost
(developed products: 18162.47 — 13037.96)
Products in process 17443.552759.0215.82% 15912.571410.638.86%
Raw materials 12187.38778.106.38% 9295.56609.436.56%
Goods issued 8268.77216.282.62%—
Low value consumables 1791.13140.287.83% 1638.04140.288.56%
Special reserve 183.97 — 183.97 — materials
Total 121735.438701.157.15% 101467.834620.984.55%
The company’s inventory impairment category mainly includes inventory goods, products in process and raw materials. At the end of each reporting period, at
(i) There are structural differences between the composition of inventory goods and products in process and raw materials
The company’s raw materials are mainly basic raw materials, which are widely used, highly liquid and fast turnover. Therefore, the amount of impairment of raw materials is small and the proportion of provision for depreciation reserves is low.
The company’s inventory goods include self-produced inventory goods and purchased commercial circulation products. Among them, the purchased commercial circulation products are directly used for external sales without production and processing, with fast turnover speed. Generally, there is no sign of impairment, while the company’s in-process products are mainly self-produced pharmaceutical products. Therefore, the amount and proportion of impairment provision are listed separately according to the categories of inventory commodities, and the comparison with the impairment provision of products in process and raw materials is as follows:
Unit: 10000 yuan
Project 2021.9.302020.12.31
Provision proportion for book balance depreciation provision proportion for book balance depreciation provision
Inventory goods – self produced 32438.542097.726.47% 44534.572390.815.37%
Inventory goods – purchased ? — 18369.14 — commercial circulation products
Products in process 14985.672120.9414.15% 18293.312364.6912.93%
Raw materials 14697.05421.192.87% 13752.84717.715.22%
(Continued)
Project December 31, 2019 December 31, 2018
Provision proportion for book balance depreciation provision proportion for book balance depreciation provision
Inventory goods – self produced 49250.104807.469.76% 48552.222460.645.07%
Stock goods – purchased 14448.07 — 12847.51 — commercial circulation products
Products in process 17443.552759.0215.82% 15912.571410.638.86%
Raw materials 12187.38778.106.38% 9295.56609.436.56%
According to the above table, at the end of each reporting period, the balance of depreciation reserves for self-produced inventory commodities was 24.0664 million yuan, 48.0746 million yuan, 23.9081 million yuan and 20.9772 million yuan respectively, and the depreciation reserves were 5.07%, 9.76%, 5.37% and 6.47% respectively, although it was still lower than the depreciation reserves of products in progress at the end of the same period by 8.86%, 15.82%, 12.93% and 14.15%, However, the difference in the provision proportion has been greatly reduced.
（2） During the reporting period, hormone products (including products and raw materials) were significantly impaired, and the proportion of hormone products in products was high
There are obvious signs of impairment of hormone products: during the reporting period, they were developed, produced and sold in Europe, America and other high-end markets
Hydrocortisone, prednisolone and other hormone products are sold, but because these products are in the early stage of the market, the market is quasi stable
The acquisition speed of entry qualification is slow, and the development progress is less than expected. The company turns some products to low-end products such as Southeast Asia
Market sales (at present, the company’s main hormone products mentioned above have obtained access to EU and other high-end markets, and have not been sold
As a result, the net realizable value of hormone products in the reporting period was lower than the production value
In this year, the proportion of provision for inventory falling price of hormone products is higher than that of non hormone products
The situation is as follows:
Unit: 10000 yuan
Project category 2021.9.302020.12.3
