Zhongzhun Certified Public Accountants (special general partnership)
Zhongzhun Certified Public Accountants
About Jilin Chemical Fibre Co.Ltd(000420)
Letter on preparations for the meeting of the issuance and Examination Committee for non-public offering of shares
Reply to special instructions
China Securities Regulatory Commission:
According to the questions listed in the letter on making preparations for the meeting of the stock issuance and Examination Committee of Jilin Chemical Fibre Co.Ltd(000420) (hereinafter referred to as the “notification letter”) issued by your commission to Jilin Chemical Fibre Co.Ltd(000420) , “issuer”, “applicant” and “company”), Zhongzhun Certified Public Accountants (special general partnership) (hereinafter referred to as “our firm” or “we”) checked the relevant matters involved in the letter on the preparation for the meeting of the issuance and Examination Committee of Jilin Chemical Fibre Co.Ltd(000420) non-public offering of shares. On the basis of careful verification, the relevant issues are explained as follows:
Question two
2. About performance. The issuer made a meager profit of RMB 231.92 million from January 2020 to January 2021. During the reporting period, the gross profit margin of viscose staple fiber was 0%, – 39.38%, – 21.13% and 7.52% respectively.
Please explain the difference and rationality between the gross profit margin of viscose staple fiber and comparable companies in the same industry in combination with the market price and operating cost.
The recommendation institution and the reporting accountant shall explain the verification basis and process, and express clear verification opinions.
[accountant’s verification]
In view of the above matters, combined with the audit of relevant years, we have mainly implemented the following verification procedures:
1. Obtain the Research Report of viscose staple fiber industry and analyze whether the sales price of Jilin Chemical Fibre Co.Ltd(000420) viscose staple fiber is consistent with the change of market price;
2. Obtain the data of operating income and operating cost of Jilin Chemical Fibre Co.Ltd(000420) viscose staple fiber during the reporting period, and analyze the rationality of the change of operating cost of viscose staple fiber in combination with output and sales volume;
3. Consulted the financial reports of comparable companies in the same industry, compared and analyzed whether there were differences between the fluctuation of the company’s gross profit margin and comparable companies in the same industry, interviewed relevant personnel, and understood and analyzed whether the reasons for the differences were reasonable.
2、 Verification opinions
After verification, we found no major abnormalities in the company’s reply. During the reporting period, the sales price of the issuer’s viscose staple fiber was basically consistent with the market changes. The fluctuation of the gross profit margin of viscose staple fiber was mainly affected by the production sales ratio, and its fluctuation was reasonable.
Question 6
6. On horizontal competition and related party transactions. Jilin Carbon Valley, an enterprise controlled by Jilin SASAC, the actual controller of the applicant, is engaged in the production of carbon fiber precursor. Guoxing carbon fiber, a subsidiary of the applicant’s controlling shareholder chemical fiber group, is mainly engaged in the production of large tow carbon fiber. Kaimeike, a subsidiary of the applicant, is engaged in the production of small tow carbon fiber. Both Guoxing carbon fiber and kaimeike production equipment come from Zhejiang Jinggong Science & Technology Co.Ltd(002006) . Jilin Baojing, a joint-stock company with 49% equity held by the applicant, is engaged in the production of large tow carbon fiber. The issuer’s 12000 ton carbon fiber composite project is downstream of the carbon fiber industrial chain.
The applicant is requested to: (1) in combination with the carbon fiber industry chain and the production and operation of the above enterprises, explain whether there is horizontal competition between the applicant and the controlling shareholder, the actual controller and the enterprises controlled by the applicant, whether the production equipment of Guoxing carbon fiber and kemec can be used commonly, and whether there are relevant arrangements to include Guoxing carbon fiber into the applicant in due time, The performance of the commitments made to avoid or solve horizontal competition, whether there is any violation of the commitments, and whether it damages the interests of the listed company; (2) Combined with the raw material sources of the raised carbon fiber composite project, explain whether there is new horizontal competition and related party transactions after the implementation of the raised carbon fiber composite project.
The recommendation institution, the reporting lawyer and the accountant shall explain the verification basis and process, and express clear verification opinions.
[accountant’s verification]
In view of the above matters, combined with the audit of relevant years, we have mainly implemented the following verification procedures:
1. Obtain the equity structure diagram of Jilin Chemical Fibre Co.Ltd(000420) and understand its equity structure;
2. Obtain the list of related parties of Jilin Chemical Fibre Co.Ltd(000420) , check it with the information obtained from other public channels, and understand the controlling shareholders, actual controllers and enterprises controlled by Jilin Chemical Fibre Co.Ltd(000420) in combination with the query of industrial and commercial registration information;
3. Check the business scope of relevant enterprises and understand their links, main production processes, target customers and main raw material suppliers in the carbon fiber industry chain;
4. Check the ownership structure, legal representative, general manager and director information of Jilin Carbon Valley Carbon Fiber Co., Ltd., compare whether the above personnel are serving as directors, supervisors or senior managers at Jilin Chemical Fibre Co.Ltd(000420) part-time, and judge whether they constitute a related relationship;
5. Inspected the main production lines of Guoxing carbon fiber and kemec, observed the production lines of the two companies, and interviewed relevant personnel to understand their main production processes;
6. Understand the relevant arrangements of Jilin Chemical Fibre Co.Ltd(000420) controlling shareholders on the equity of Guoxing carbon fiber and obtain relevant instructions and commitment documents;
7. Review the commitments made by Jilin Chemical Fibre Co.Ltd(000420) and the controlling shareholders, actual controllers and enterprises under their control to avoid or solve horizontal competition, and verify the performance of the above commitments;
8. Consult the feasibility analysis report of the project invested by the raised funds, understand the sources of the main raw materials required by the project invested by the raised funds, and analyze them;
9. Check the main product description and production and procurement plan of the raised investment project, and analyze whether there are potential related party transactions in combination with the business scope of relevant enterprises and the links in the carbon fiber industry chain.
2、 Verification opinions
After verification, we found no major abnormalities in the company’s reply. The company has no horizontal competition with major shareholders and actual controllers; Affected by product performance indicators and economic factors, Guoxing carbon fiber and kemec production equipment are not universal without transformation; Major shareholders have made commitments on the equity arrangement of Guoxing carbon fiber, avoiding or solving horizontal competition, and are performing normally. According to the company’s instructions and production and procurement plan, there will be no new horizontal competition and new related party transactions after the implementation of the raised investment project.
Zhongzhun Certified Public Accountants (special general partnership)
March 20, 2022
