Sinomine Resource Group Co.Ltd(002738)
Feasibility analysis report on carrying out forward foreign exchange settlement and sales business
1、 Background of carrying out forward foreign exchange settlement and sales business
In recent years, affected by international political and economic uncertainties, the foreign exchange market fluctuates more frequently, and the range of exchange rate fluctuations is increasing, resulting in an increase in operational uncertainties. In the course of the company’s business activities, there are overseas sales, overseas procurement, overseas investment and foreign currency credit businesses, and the transaction currency is mainly US dollars. Therefore, when the exchange rate of US dollars against RMB fluctuates greatly, the exchange gains and losses will have a great impact on the company’s business performance. In order to prevent foreign exchange rate risks, it is necessary for the company to appropriately carry out forward foreign exchange settlement and sales business according to specific conditions. The forward foreign exchange settlement and sales business carried out by the company is closely related to the company’s business. Based on the company’s foreign exchange assets, liabilities and foreign exchange revenue and expenditure business, it can further improve the company’s ability to deal with the risk of foreign exchange fluctuation, better avoid and prevent the risk of foreign exchange rate and interest rate fluctuation faced by the company, and enhance the company’s financial stability.
2、 Basic information of carrying out forward foreign exchange settlement and sales business
1. Transaction purpose
Due to the development needs of the company’s business, the company’s overseas procurement, overseas sales, overseas investment and foreign currency credit are mainly in US dollars. In view of the increased volatility of the US dollar exchange rate market, in order to reduce the impact of exchange rate fluctuations on the company’s performance and prevent the adverse impact of large exchange rate fluctuations on the company’s cost control and operating performance, the company plans to carry out long-term foreign exchange settlement and sales business with banks under the condition of ensuring the daily working capital demand. The long-term settlement and sales of Foreign Exchange carried out by the company are aimed at locking costs, avoiding and preventing exchange rate risks, and will not affect the company’s main business.
2. Transaction amount
The total amount of the company’s long-term foreign exchange settlement and sales business shall not exceed US $100 million, and the transaction amount can be recycled and used within the above limit range and period. The board of directors of the company authorizes the management to carry out the long-term foreign exchange settlement and sales business according to the business conditions and actual needs within the scope and period of this quota. The authorization is valid from the date of deliberation and approval by the board of directors to the date of new authorization made by the board of directors on this matter.
3. Transaction business type and counterparty
The transaction currency of the company’s forward foreign exchange settlement and sales business is limited to US dollars. The delivery period of the transaction is basically consistent with the predicted payment period, collection period or repayment period, and the amount of the transaction matches the predicted payment period, collection period or repayment period. The counterparty is a bank approved by the State Administration of foreign exchange and the people’s Bank of China to operate foreign exchange derivatives business.
4. Transaction term
From the date of deliberation and approval by the board of directors to the date of new authorization by the board of directors on this matter.
5. Source of funds
All the funds of the forward foreign exchange settlement and sales transactions to be carried out by the company are the company’s own funds.
3、 Necessity and feasibility of carrying out forward foreign exchange settlement and sales business
The company and its subsidiaries carry out foreign exchange forward settlement and sales business with banks, which is based on normal production and operation needs, relying on specific business operations, aiming at avoiding and preventing exchange rate risks, rather than speculation and arbitrage transactions for profit. From the perspective of locking foreign exchange transaction costs, it can realize asset preservation for the purpose of avoiding risks, enhance the company’s financial stability, meet the requirements of the company’s stable operation, and there is no behavior damaging the interests of shareholders and the company. Therefore, it is necessary for the company to carry out forward foreign exchange settlement and sales business for the purpose of locking foreign exchange costs according to its own actual situation.
In view of the possible risks in carrying out the forward foreign exchange settlement and sales business, the company has formulated the management measures for the forward foreign exchange settlement and sales business, improved the relevant internal control process and approval authority, the targeted risk control measures taken by the company are practical and feasible, and it is feasible to carry out the foreign exchange transaction business. Therefore, it is necessary and feasible for the company to carry out forward foreign exchange settlement and sales business.
4、 Risk analysis of carrying out forward foreign exchange settlement and sales business
1. Exchange rate fluctuation risk
When the foreign exchange rate fluctuates greatly, if the fluctuation direction of the exchange rate is inconsistent with the judgment of the company, resulting in the inconsistency between the exchange rate fluctuation and the direction of the forward foreign exchange settlement and sales contract, and the large deviation between the forward exchange rate agreed in the forward foreign exchange settlement and sales contract and the real-time exchange rate will cause exchange losses.
2. Internal control risk
The forward foreign exchange settlement and sales business is highly professional and complex, which may cause risks due to the imperfect internal control mechanism.
3. Collection and payment forecast risk
The company forecasts revenue and expenditure according to sales orders, purchase orders and foreign currency loan contracts. In the actual implementation process, customers or suppliers may adjust orders, and foreign currency loans may be repaid in advance or extended, resulting in inaccurate prediction of foreign currency revenue and expenditure and delivery risk.
5、 Risk control measures for carrying out forward foreign exchange settlement and sales business
1. In order to avoid the operational risks brought to the company by the 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, timely adjust the operation strategy of long-term settlement and sales of foreign exchange, and avoid exchange losses to the greatest extent. 2. In order to avoid exchange rate fluctuation and contract deviation of forward foreign exchange settlement and sales business, a more flexible forward foreign exchange settlement and sales business mode that can be delivered in advance or extended delivery is preferred.
3. The company has formulated the management measures for long-term foreign exchange settlement and sales business, established a strict and effective risk management system, and used the risk control measures before, during and after the event to prevent, discover and reduce various risks. The system meets the relevant requirements of the regulatory authorities, meets the needs of practical operation, and the risk control measures formulated are practical and effective.
4. In order to avoid internal control risks, the company’s financial management department, audit and supervision department, securities affairs department and legal risk control department, as relevant responsible departments, have clear management positioning and responsibilities. Through hierarchical management, a supervision mechanism is formed to eliminate the risk of single person or separate department operation from the system and effectively control the operational risk.
5. The company’s forward foreign exchange settlement and sales business must be based on the company’s foreign currency collection forecast under export and foreign currency payment forecast under import, or the company’s foreign currency bank loan stock. The foreign currency amount of the forward foreign exchange settlement and sales business contract shall not exceed the foreign currency collection or foreign currency payment forecast. The delivery period of the forward foreign exchange settlement and sales business shall match the foreign currency collection time or foreign currency payment time predicted by the company, Or match the repayment period of the corresponding foreign currency bank loan.
6. The internal control of the company will regularly review the actual operation, capital use and profit and loss of the long-term foreign exchange settlement and sales business.
6、 Accounting policies and principles
The company will conduct accounting treatment for the long-term settlement and sales of foreign exchange in accordance with the relevant provisions and guidelines issued by 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. 37 – presentation of financial instruments and accounting standards for business Enterprises No. 39 – fair value measurement, reflecting the relevant items of the balance sheet and income statement.
7、 Conclusion of feasibility analysis of carrying out forward foreign exchange settlement and sales business
The company’s forward foreign exchange settlement and sales business will focus on the company’s main business and rely on specific business. It is not a forward foreign exchange transaction solely for the purpose of profit. It is necessary for the company to protect its normal operating profits by means of locking the exchange rate and for the purpose of avoiding and preventing the risk of exchange rate fluctuation; The company has improved relevant internal control processes, and the targeted risk control measures taken are feasible. By carrying out forward foreign exchange settlement and sales business, we can lock in the transaction income or cost at the future time point and realize asset preservation for the purpose of avoiding risks. Therefore, it is necessary and feasible for the company to carry out forward foreign exchange settlement and sales business, which can effectively reduce the risk of exchange rate fluctuation.
Sinomine Resource Group Co.Ltd(002738) may, 2002
