Securities code: Wuxi Apptec Co.Ltd(603259) securities abbreviation: Wuxi Apptec Co.Ltd(603259) Announcement No.: pro 2022028 Wuxi Apptec Co.Ltd(603259)
Announcement on carrying out foreign exchange hedging business
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
On March 23, 2022, Wuxi Apptec Co.Ltd(603259) (hereinafter referred to as “the company”) held the 24th Meeting of the second board of directors and the annual board meeting in 2021, deliberated and adopted the proposal on Approving the amount of foreign exchange hedging business of the company in 2022, It is agreed that the total amount of foreign exchange hedging business carried out by the company and its subsidiaries within the scope of the company’s consolidated statements (hereinafter referred to as “subsidiaries”) with their own funds in 2022 shall not exceed US $5 billion or other equivalent foreign currencies, The term is 12 months from the date of deliberation and approval of the company’s 2021 annual general meeting of shareholders or until the date of deliberation and approval of the amount of foreign exchange hedging business in 2023 by the 2022 annual board of directors or general meeting of shareholders (depending on the approval authority at that time) (whichever is shorter). Within the validity period of the aforesaid quota and resolution, the funds can be recycled. The specific amount shall be subject to the maximum balance of foreign exchange hedging in a single day, and shall not be calculated repeatedly based on the amount incurred. The above proposals need to be submitted to the general meeting of shareholders of the company for deliberation. The relevant matters are explained as follows:
1、 Overview of foreign exchange hedging
(I) purpose of foreign exchange hedging
According to the company’s current business development and future development strategy, the company’s international business volume continues to increase, and the company’s foreign exchange position also increases accordingly. When the exchange rate fluctuates greatly, the impact of exchange gains and losses on the company’s operating performance may also increase. In order to effectively avoid and prevent the adverse impact of large exchange rate fluctuations on the company’s operation and reduce foreign exchange risk, the company has carried out foreign exchange hedging business with banks since 2017. In 2022, the company will continue to carry out forward foreign exchange settlement and sales business with banks to lock the exchange rate and reduce the impact of exchange rate fluctuations on the company’s operating profits, so as to actively respond to the uncertainty of the exchange rate market.
(II) main business types and currencies involved
The foreign exchange hedging business to be carried out by the company and its subsidiaries includes but is not limited to forward business, swap business, swap business, option business and other foreign exchange derivatives business. The main foreign currencies are US dollars and Hong Kong dollars.
(III) business scale and capital source
Considering the export income level of the company, the total amount of foreign exchange hedging business carried out by the company and its subsidiaries in 2022 shall not exceed US $5 billion or other equivalent foreign currencies. The source of funds is the company’s own funds and does not involve raised funds.
(IV) transaction term
The period from the date of review and approval by the shareholders’ meeting in 2021 to the date of approval by the shareholders’ meeting in 2023 (whichever is shorter) shall be regarded as the period from the date of review and approval of the hedging business in 2023.
(V) authorization matters
In order to regulate the foreign exchange derivatives trading business of the company and its subsidiaries and ensure the safety of the company’s assets, the general meeting of shareholders of the company authorizes the board of directors, and the board of directors further authorizes the financial department of the company to carry out foreign exchange derivatives trading business according to business conditions and actual needs within the limit approved by the general meeting of shareholders.
2、 Feasibility analysis of foreign exchange hedging
The company has a certain amount of foreign exchange income, which is affected by international political and economic uncertainties. When the exchange rate fluctuates greatly, the exchange profit and loss will have a certain impact on the operating performance of the company. In order to prevent foreign exchange market risks, it is necessary for the company to appropriately carry out foreign exchange hedging business according to specific conditions.
The foreign exchange hedging business carried out by the company is closely related to the company’s business. The amount of foreign exchange hedging business to be carried out this time is based on the company’s foreign exchange assets and liabilities, the scale of foreign exchange revenue and expenditure business, foreign exchange fluctuation trend and the performance of signed contracts, so as to further improve the company’s ability to deal with foreign exchange fluctuation risks and better avoid and prevent the fluctuation risks of foreign exchange rate and interest rate faced by the company, Enhance the financial stability of the company.
The company has formulated the foreign exchange hedging business system, improved the relevant internal control system, and equipped special personnel for foreign exchange hedging business. The targeted risk control measures taken by the company are practical and feasible, and it is feasible to carry out foreign exchange hedging business.
3、 Foreign exchange hedging risk
The foreign exchange hedging business conducted by the company follows the principles of legality, prudence, safety and effectiveness, and does not aim at speculation. All foreign exchange hedging businesses are based on normal production and operation, rely on specific business operations, and aim at avoiding and preventing exchange rate risks. However, foreign exchange hedging business also has certain risks:
(I) exchange rate fluctuation risk: the company’s foreign currency loans and overseas bonds are closely related to the changes in the exchange rate market, and there is great uncertainty in the exchange rate changes. When the trend of the foreign exchange rate deviates greatly from the direction of the company’s judgment on the exchange rate fluctuation, the cost incurred by the company after locking the exchange rate may exceed the cost incurred when it is not locked, resulting in the loss of the company;
(II) performance risk: during the term of the contract, the cooperative financial institution has major uncontrollable risk situations such as bankruptcy, market failure or other situations, resulting in the company’s failure to deliver the original foreign exchange contract at the contract price at the expiration of the contract, that is, the risk caused by the failure to perform the contract at the expiration of the contract;
(III) internal operational risk: foreign exchange hedging business is highly professional and complex, which may cause risks due to imperfect internal control or the level of operators;
(IV) customer default risk: the overdue accounts receivable of customers and the adjustment of orders by customers will make the actual payment collection inconsistent with the expected payment collection, which may make the actual cash flow unable to fully match the period or amount agreed in the foreign exchange hedging business contract signed by the company, resulting in the loss of the company. 4、 Risk control measures
In order to ensure the safe and smooth development of the company’s foreign exchange hedging, the company further refined the work flow and internal management organization of foreign exchange hedging, introduced more professional departments to analyze the macro situation and foreign exchange market, strengthened internal publicity and strictly implemented the authorization of the board of directors.
(I) the company has formulated the foreign exchange hedging business system, which clearly stipulates the management principles and requirements, approval authority, management and internal operation process, information isolation measures, internal risk reporting system and risk handling procedures, information disclosure, etc. of the company’s foreign exchange hedging business, and effectively regulates and controls the behavior and risk of foreign exchange hedging business. The company will operate in strict accordance with the provisions of the foreign exchange hedging business system, control business risks and ensure the effective implementation of the system;
(II) the company carries out foreign exchange hedging business for the purpose of avoiding risks and prohibits speculation and arbitrage transactions. The financial department is responsible for the unified management of the foreign exchange hedging business of the company and its subsidiaries within the scope of consolidated statements, and is equipped with professionals such as investment decision-making, business operation and risk control to carry out business operations in strict accordance with the provisions of the foreign exchange hedging business system, so as to effectively ensure the implementation of the system;
(III) in order to control the risk of transaction default, the company only carries out foreign exchange hedging business with large banks and other financial institutions with legal business qualification to avoid possible legal risks;
(IV) the company will choose trading instruments with simple structure, strong liquidity, recognizable risk and high market recognition to carry out hedging business and reduce transaction risk;
(V) in order to avoid the risk of sharp fluctuation of exchange rate, the company will strengthen the research and analysis of exchange rate, pay real-time attention to the changes of international market environment, adjust business strategy in time and avoid exchange loss to the greatest extent;
(VI) strengthen the control of bank accounts and funds, and strictly abide by the approval procedures for fund allocation and use; (VII) in case of major changes in the foreign exchange market, timely report, actively respond and properly handle them.
5、 Accounting principles for carrying out foreign exchange hedging business
The company conducts corresponding accounting and disclosure of foreign exchange hedging business in accordance with 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. 23 – transfer of financial assets, accounting standards for Business Enterprises No. 24 – hedge accounting and accounting standards for Business Enterprises No. 37 – presentation of financial instruments.
6、 Independent opinions of independent directors
The independent directors of the company believe that it is necessary for the company to continue to carry out foreign exchange hedging business in 2022 to reduce the impact of exchange rate fluctuations on the company’s operating profit to a certain extent, which is conducive to controlling exchange rate risk. The company has formulated the foreign exchange hedging business system in accordance with relevant laws and regulations, and established a relatively perfect internal control and risk management system for foreign exchange hedging business, which does not harm the interests of the company and shareholders. Therefore, it is agreed that the company will continue to carry out foreign exchange hedging business in 2022, and that the total amount of foreign exchange hedging business carried out by the company and its subsidiaries with their own funds in 2022 will not exceed US $5 billion or other equivalent foreign currencies, and it is agreed to submit this proposal to the general meeting of shareholders of the company for deliberation. It is hereby announced.
Wuxi Apptec Co.Ltd(603259) board of directors March 24, 2022
