Securities code: Zhejiang Satellite Petrochemical Co.Ltd(002648) securities abbreviation: Satellite chemistry Announcement No.: 2022022 satellite Chemistry Co., Ltd
Announcement on carrying out commodity derivatives hedging transactions in 2022
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.
Important content tips:
1. Investment type: hedging transactions of propane (LPG), ethylene glycol (eg) and other business-related commodity derivatives.
2. Investment amount: the investment deposit shall not exceed 200 million yuan (including this amount).
3. Special risk tip: in order to effectively control the operation risk and improve the company’s ability to resist market fluctuations, the company and its subsidiaries plan to conduct commodity derivatives hedging trading business of raw materials and products related to their own production and operation. Please pay attention to the investment risk.
1、 Overview of investment
1. Investment purpose
Affected by the macro-economy and commodity prices, the prices of raw materials and products of satellite Chemical Co., Ltd. (hereinafter referred to as “the company”) fluctuate frequently, which directly affects the operating performance of relevant businesses of the company. As a purchaser and producer of bulk commodities, the company will face the impact of changes in shipping schedule and downstream demand, and there will inevitably be spot exposure risk. In order to effectively reduce the operating risk caused by the price fluctuation of commodity spot market and improve the enterprise’s operating level and anti risk ability, the company and its subsidiaries plan to carry out propane (LPG), ethylene glycol (eg) and other business-related commodity derivatives transactions in 2022. The derivative transactions of the company and its subsidiaries are hedging activities, which will not affect the development of the company’s main business.
As the prices of raw materials and main products required by the company’s production and operation are greatly affected by market fluctuations and are highly correlated with commodity futures and paper goods, the trading places and trading varieties selected by the company for relevant derivatives investment are open and transparent, with active transaction activity and strong liquidity. The company believes that it is feasible to avoid the risk of price fluctuation by carrying out derivatives trading business, It is beneficial to production and operation, can reduce the risk of price fluctuation of raw materials and products, and better avoid the risks brought by the rise and fall of raw materials and products to the company’s operation.
2. Investment amount
According to the company’s capacity scale, it is estimated that the deposit invested in commodity derivatives hedging transactions in 2022 will not exceed 200 million yuan (including this amount).
3. Investment mode
In order to effectively control business risks and improve the company’s ability to resist market fluctuations, the company and its subsidiaries plan to conduct commodity derivatives hedging transactions of raw materials and products related to their own production and operation. The investment varieties are propane (LPG), ethylene glycol (eg) and commodity derivatives hedging transactions related to other businesses.
The board of directors of the company requests the general meeting of shareholders to authorize the chairman of the company to organize the establishment of the company’s commodity derivatives trading leading group as the decision-making body to manage the derivatives hedging trading of the company’s commodity futures and paper goods, and operate in accordance with the relevant provisions and processes of the company’s established commodity derivatives trading management system. 4. Investment period
The investment period is from the deliberation and approval of the 2021 annual general meeting of shareholders to the convening of the 2022 annual general meeting of shareholders. 5. Source of funds
The capital source of commodity derivatives hedging transactions is the company’s own funds, which does not involve the use of raised funds or bank credit funds.
2、 Review procedure
On March 18, 2022, the 13th meeting of the Fourth Board of directors of the company considered and adopted the proposal on carrying out commodity derivatives hedging transactions in 2022 with 7 affirmative votes, 0 negative votes and 0 abstention votes.
According to relevant laws and regulations and the articles of association, the proposal needs to be submitted to the general meeting of shareholders for deliberation. This matter does not involve related party transactions, and there is no need to perform the decision-making procedures of related party transactions.
3、 Investment risk analysis and risk control measures
(I) risk analysis of commodity derivatives trading
1. Market risk: affected by relevant factors in the futures and other derivatives markets, the fluctuation time and amplitude of futures price are not completely consistent with the spot price. Relevant businesses may obtain additional profits or losses when hedging current profits and losses. In extreme cases, policy risk or irrational market may have systemic risk, resulting in transaction losses.
2. Liquidity risk: the derivatives business issues capital allocation and operation instructions according to the authority specified by the company. If the market price fluctuates too violently or the scale of the on-hand business is too large, it may lead to losses caused by forced closing of positions due to lack of time to supplement the margin.
3. Technical and internal control risks: due to the strong professionalism and high complexity of commodity derivatives business, there may be unexpected losses due to the abnormal operation of trading system or defects in internal control caused by uncontrollable or unpredictable system, network and communication failures.
4. Policy and legal risks: losses to the company due to changes in relevant legal systems or counterparties’ violation of relevant legal systems or contract agreements, resulting in the failure of normal execution of the contract.
(II) risk control measures taken by the company
1. Match commodity derivatives transactions with the company’s business operations to hedge the risk of price fluctuations. Only invest in derivative hedging transactions of commodity futures and paper products of raw materials and products required by the company’s production and operation.
2. Strictly control the capital scale of hedging, and reasonably plan and use margin. The company has stipulated the design principles of the hedging scheme and the specific approval authority of the hedging scheme. The company’s hedging business is only for the purpose of avoiding the risk of commodity price fluctuation, and does not involve speculation and arbitrage transactions. The varieties of hedging business are limited to the raw materials and products required for the company’s production and operation. Among them, the quantity of hedging cannot exceed the quantity of actual spot transactions, and the futures position cannot exceed the quantity of hedged spot.
3. In accordance with the relevant provisions of the guidelines for self discipline supervision of listed companies of Shenzhen Stock Exchange No. 1 – standardized operation of listed companies on the main board, the company has formulated the commodity derivatives trading management system to manage the trading, so as to avoid the operational risks caused by imperfect system and improper work procedures to the greatest extent.
4. Set up computer systems and related facilities that meet the requirements to ensure the normal operation of transactions. In case of failure, corresponding treatment measures shall be taken in time to reduce losses.
4、 Impact of investment on the company
In accordance with the relevant provisions and guidelines of the Ministry of finance, such as the accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, the accounting standards for Business Enterprises No. 23 – transfer of financial assets, the accounting standards for Business Enterprises No. 24 – hedge accounting, the accounting standards for business enterprises No. 37 – presentation of financial instruments, and the accounting standards for Business Enterprises No. 39 – fair value measurement, the company conducts corresponding accounting treatment for derivative transactions, Reflect relevant items in the balance sheet and income statement.
5、 Opinions of independent directors
After careful review, we believe that the company’s proposed commodity derivatives transaction is a derivative hedging transaction that only invests in commodity futures and paper products of raw materials and products required by the company’s production and operation. The company has established the commodity derivatives trading management system, which can effectively regulate the trading behavior of commodity derivatives and control the trading risk of commodity derivatives. The transaction is based on the specific business, takes hedging as the means, and aims to lock in the cost or selling price. Its decision-making procedure is legal and effective, and does not harm the interests of the company and its shareholders, especially the minority shareholders. We unanimously agree that the company and its subsidiaries will carry out commodity derivatives hedging transactions in 2022, with a deposit of no more than 200 million yuan (including this amount), which will be recycled within this limit, and agree to submit it to the general meeting of shareholders of the company for deliberation.
6、 Documents for future reference
1. Resolutions of the 13th meeting of the 4th board of directors of the company;
2. Resolutions of the 12th meeting of the 4th board of supervisors of the company;
3. Independent opinions of independent directors on matters related to the 13th meeting of the Fourth Board of directors.
It is hereby announced.
Board of directors of satellite Chemical Co., Ltd. March 22, 2002
