Securities code: Cngr Advanced Material Co.Ltd(300919) securities abbreviation: Cngr Advanced Material Co.Ltd(300919) Announcement No.: 2022016 Cngr Advanced Material Co.Ltd(300919)
Announcement on carrying out hedging business in 2022
The company and all members of the board of directors guarantee that the contents of the announcement are true, accurate and complete, and there are no false records, misleading statements or major omissions.
Cngr Advanced Material Co.Ltd(300919) (hereinafter referred to as “the company”) held the 27th meeting of the first board of directors and the 15th meeting of the first board of supervisors on March 14, 2022, deliberated and adopted the proposal on the company’s hedging plan in 2022. The relevant information is hereby announced as follows:
1、 Purpose of hedging business
(I) foreign exchange hedging business
Based on the development of the company’s overseas business, the proportion of foreign currency settlement continues to rise. In order to effectively prevent the operational financial risks caused by the fluctuation of foreign exchange rate, reduce exchange losses and improve the efficiency of the use of foreign currency funds, the company plans to carry out foreign exchange hedging business with banks and other financial institutions with relevant business operation assets approved by relevant government departments.
(II) commodity hedging business
Cobalt metal and nickel metal required by the company’s production and operation account for a large proportion of the company’s product cost, and the purchase price is obviously affected by the market price fluctuation. In order to reasonably avoid the risk of cobalt metal and nickel metal price fluctuation, lock the company’s product cost, effectively prevent the market risk brought by the price change of raw materials, and reduce the impact of raw material price fluctuation on the company’s normal operation, The company and its subsidiaries plan to carry out commodity hedging business. With the help of the price risk hedging function of the futures market, the company uses hedging tools to avoid the price fluctuation risk of cobalt and nickel metals in spot transactions.
2、 Hedging plan for 2022
(I) foreign exchange hedging business
1. Currencies and business types involved in foreign exchange hedging
The currency of the foreign exchange hedging business to be carried out by the company and its subsidiaries is limited to the main settlement currencies used in production and operation, including US dollars, euros, Hong Kong dollars, etc.
The foreign exchange hedging business to be carried out by the company and its subsidiaries is to meet the needs of production and operation. It is handled in banks and other financial institutions with relevant business operation qualifications approved by relevant government departments for the purpose of avoiding and preventing exchange rate risks, including but not limited to forward settlement and sale of foreign exchange, foreign exchange swaps, currency swaps, foreign exchange options and related portfolio products.
2. Business scale and source of investment
According to the company’s asset scale and business needs, the cumulative amount of foreign exchange hedging business proposed by the company and its subsidiaries shall not exceed RMB 5 billion or equivalent foreign currency, and the service life shall be effective within 12 months from the date of deliberation and approval by the company’s general meeting. If the duration of a single transaction exceeds the validity of the resolution, The validity of the resolution shall be automatically extended until the termination of a single transaction.
The sources of funds invested by the company and its subsidiaries in carrying out foreign exchange hedging business are self owned funds and funds raised by other means permitted by laws and regulations, which do not involve raised funds.
3. Term and authorization
Since the foreign exchange hedging business is closely related to the operation of the company, after being deliberated and approved by the general meeting of shareholders, the chairman and his authorized persons are authorized to implement the foreign exchange hedging business plan and sign relevant agreements and documents in accordance with the provisions of the company’s system. The authorization period shall be valid within 12 months from the date of deliberation and approval by the general meeting of shareholders of the company. If the duration of a single transaction exceeds the authorization period, the authorization period will be automatically extended to the termination of the single transaction.
(II) commodity hedging business
1. Transaction types involved in commodity hedging
The hedging business to be carried out by the company and its subsidiaries is limited to cobalt metal and nickel metal related to production and operation, and is limited to futures, options and other derivatives in domestic or overseas markets, including domestic markets, Hong Kong Futures Exchange, London Metal Exchange (LME), etc.
2. Business scale and source of investment
According to the company’s demand for raw materials, in 2022, the company and its subsidiaries plan to hedge the futures of metal nickel and metal cobalt with their own funds, with a total deposit of no more than RMB 600 million.
The above-mentioned use period of the deposit shall be valid within 12 months from the date of deliberation and approval by the general meeting of shareholders of the company. If the duration of a single transaction exceeds the validity period of the resolution, the validity period of the resolution shall be automatically extended to the termination of the single transaction.
The funds invested by the company and its subsidiaries in carrying out commodity hedging business are self owned funds and funds raised by other means permitted by laws and regulations, and do not involve raised funds.
3. Term and authorization
In view of the close relationship between commodity hedging business and the operation of the company, after being deliberated and approved by the general meeting of shareholders, the chairman and his authorized persons are authorized to implement the commodity hedging business plan and sign relevant agreements and documents in accordance with the provisions of the company’s system. The authorization period shall be valid within 12 months from the date of deliberation and approval by the general meeting of shareholders of the company. If the duration of a single transaction exceeds the authorization period, the authorization period will be automatically extended to the termination of the single transaction.
(III) review authority
In 2022, the cumulative amount of foreign exchange hedging business proposed by the company and its subsidiaries shall not exceed RMB 5 billion or equivalent foreign currency amount, and the total amount of deposit invested in commodity hedging business proposed to be carried out shall not exceed RMB 600 million; In the actual operation process, the company will strictly control the margin reduction and hedging fluctuation risk in accordance with the margin adjustment ratio of the futures exchange and the regulatory provisions. The above hedging matters need to be submitted to the general meeting of shareholders of the company for deliberation.
As of December 31, 2021, the accumulated margin balance of hedging carried out by the company was 78 million yuan. 3、 Risk analysis of futures hedging business
The company carries out foreign exchange and commodity hedging on the basis of normal production and operation, relying on specific business operations, for the purpose of avoiding and preventing exchange rate risks, and does not carry out transactions for the purpose of arbitrage and speculation. However, there are certain risks in hedging business, mainly including:
1. Market risk: the futures market is vulnerable to the change of basis and fluctuates greatly. The price change range of the spot market and the futures market is different, which may produce the risk of price fluctuation and cause the loss of hedging position.
2. Capital risk: when the market changes sharply, it may cause capital liquidity risk, and even be forced to close the position because it is too late to supplement the margin, resulting in actual losses.
3. Internal control risk: hedging transactions are highly professional and complex, which may lead to risks caused by imperfect internal control system.
4. Counterparty default risk: during the hedging cycle, losses may be caused by the default of OTC counterparties due to the periodic fluctuation of raw material and product prices.
5. Technical risk: due to the abnormal operation of the trading system caused by uncontrollable or unpredictable system, network and communication failures, the trading instructions are delayed, interrupted or data errors, resulting in corresponding risks.
4、 Risk control measures for the company’s Hedging Business
1. In accordance with the Shenzhen Stock Exchange GEM Listing Rules and other relevant laws and regulations, the company has established the commodity futures hedging business management system and the foreign exchange hedging business management system as the internal control and risk management system for the hedging business, and the principles, approval authority, operation process, risk management Information confidentiality and other aspects have been clearly stipulated, and a more comprehensive and perfect internal control system for hedging business has been established.
2. The company shall reasonably set up the organization of hedging business, establish the post responsibility system, and clarify the responsibilities and authorities of relevant departments and posts. Implement the vertical management mode of strategy implementation audit and independent financial control to avoid ultra vires disposal and ensure the independence of financial supervision and management to the greatest extent.
3. The company uses its own funds to carry out hedging business, and does not use the raised funds to carry out hedging business directly or indirectly. The margin scale invested in the planned hedging business matches its own funds, operating conditions and actual needs, and will not affect the normal operation of the company.
5、 Accounting policies and accounting principles
According to the relevant provisions and guidelines of the Ministry of finance, such as accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, accounting standards for Business Enterprises No. 24 – hedge accounting, accounting standards for Business Enterprises No. 37 – presentation of financial instruments, accounting standards for Business Enterprises No. 39 – fair value measurement, the company will conduct corresponding accounting treatment for the hedging business to be carried out, Reflect relevant items in the balance sheet and income statement.
6、 Review procedures and relevant opinions for implementation
(I) deliberations of the board of directors
The 27th meeting of the first board of directors of the company deliberated and approved the proposal on the company’s hedging plan in 2022, and agreed that the company and its subsidiaries should carry out hedging business.
(II) deliberation of the board of supervisors
The 15th meeting of the first board of supervisors of the company deliberated and approved the proposal on the company’s hedging plan in 2022. The board of supervisors of the company believes that the company and its subsidiaries’ commodity and foreign exchange hedging business is conducive to making full use of the function of the futures market and reasonably avoiding the adverse impact of the price fluctuation of raw materials and exchange rate fluctuation on the company’s operation. This item does not harm the interests of the company and shareholders, and complies with the provisions of the CSRC, Shenzhen Stock Exchange and other relevant documents. (III) opinions of independent directors
After verification, the independent directors agreed that the procedure of the company’s deliberation on this matter was in line with relevant national laws, regulations, the articles of association and other relevant provisions. The hedging business of the company and its subsidiaries follows the principle of prudence and does not carry out transactions for the purpose of speculation. All hedging businesses are based on normal production and operation, rely on specific business operations, and aim to avoid and prevent exchange rate risks. There is no situation that damages the interests of shareholders, especially small and medium-sized shareholders. At the same time, the company formulated the management system of commodity futures hedging business and the management system of foreign exchange hedging business, improved the relevant business approval process, determined reasonable accounting principles, and controlled the risk.
Therefore, the independent directors unanimously agree that the company and its subsidiaries carry out hedging business in accordance with the provisions of relevant systems.
(IV) verification opinions of the recommendation institution
After verification, the recommendation institution believes that:
1. The company and its subsidiaries carry out hedging business. In order to make full use of the hedging function of the futures market, avoid the risks caused by the price fluctuation and exchange rate fluctuation of the company’s purchased and sold commodities, and reduce the impact of commodity price fluctuation and exchange rate fluctuation on the company’s operating performance, it is necessary and feasible.
2. The company has formulated the management system of commodity futures hedging business and the management system of foreign exchange hedging business in accordance with the requirements of relevant laws and regulations, and taken relatively perfect risk control measures.
3. The hedging business of the company and its subsidiaries has been deliberated and approved by the board of directors and the board of supervisors of the company, and all independent directors have expressed their independent opinions with explicit consent, which is in line with the relevant provisions of laws and regulations such as the Listing Rules of gem shares of Shenzhen Stock Exchange.
The recommendation institution draws the company’s attention: in the process of foreign exchange hedging business, it is necessary to strengthen the training and risk responsibility education of business personnel, implement specific risk control measures and accountability mechanism, put an end to profit-making speculation, and do not use the raised funds to hedge directly or indirectly.
The sponsor draws investors’ attention: Although the company has taken corresponding risk control measures for the hedging business, the inherent metal price fluctuation risk, exchange rate fluctuation risk, transaction default risk, collection and payment prediction risk and internal control risk of the hedging business may have an impact on the company’s operating performance.
To sum up, Huatai United agrees that the company and its subsidiaries carry out foreign exchange hedging business.
7、 Documents for future reference
1. Resolutions of the 27th meeting of the first board of directors;
2. Resolutions of the 15th meeting of the first board of supervisors;
3. Independent opinions of independent directors on matters related to the 27th meeting of the first board of directors;
Opinions of Huatai Securities Co., Ltd. on conducting hedging business.
It is hereby announced.
Cngr Advanced Material Co.Ltd(300919)
Board of directors
March 16, 2002
