Profit Cultural & Creative Group Co.Ltd(300640)
Feasibility analysis report on carrying out forward foreign exchange transactions
1、 Background and purpose of the company's forward foreign exchange transactions
Profit Cultural & Creative Group Co.Ltd(300640) (hereinafter referred to as "the company"), whose export business accounts for more than 90% of the main business income, is mainly settled in US dollars. When the exchange rate fluctuates greatly, the exchange gains and losses will have a great impact on the operating performance of the company. In order to cope with the risk of exchange rate fluctuations and reduce exchange gains and losses, the company plans to carry out forward foreign exchange trading business to effectively reduce the risk of exchange losses through reasonable RMB forward foreign exchange transactions. Through forward foreign exchange transactions, the company can effectively avoid exchange rate risks, lock in the transaction costs or benefits at the future time point, and realize asset preservation for the purpose of avoiding risks.
2、 Overview of forward foreign exchange trading business
The forward foreign exchange trading business to be carried out by the company is a forward foreign exchange trading business to avoid and prevent exchange rate risks handled in the bank in order to meet the needs of normal production and operation, with the forward settlement and sales of foreign exchange as the main business type.
Forward foreign exchange settlement and sales business refers to the business of signing a forward foreign exchange settlement and sales contract with a bank, agreeing on the foreign exchange currency, amount, exchange rate and time limit for foreign exchange settlement or sales in the future, and then handling foreign exchange settlement or sales according to the currency, amount and exchange rate agreed in the forward foreign exchange settlement and sales contract at the expiration.
3、 Expected forward foreign exchange transactions
1. Types of forward foreign exchange transactions
The forward foreign exchange trading business to be carried out by the company is limited to the main settlement currency used in the company's production and operation - US dollar. The foreign exchange trading business with the delivery period consistent with the predicted collection period and the amount matching the predicted collection amount is carried out.
2. Estimated Occupied Funds
To carry out forward foreign exchange trading business, the company does not need to invest other funds except paying a certain proportion of deposit or occupying a certain proportion of bank credit line according to the agreement signed with the bank. The deposit will use the company's own funds and does not involve raised funds. The proportion of deposit paid or the proportion of bank credit line occupied shall be determined according to the specific agreements signed with different banks.
3. Estimated business period and transaction amount
The company and its subsidiaries intend to use the capital limit of no more than US $150 million for forward foreign exchange trading business. The service life is 12 months from the date when the proposal is adopted by the general meeting of shareholders (calculated based on the starting time of the transaction). The above limit can be recycled and used on a rolling basis, and the management is authorized to sign the agreements and documents related to the company's forward foreign exchange trading business within the above amount.
4、 Feasibility analysis of forward foreign exchange trading business
The forward foreign exchange trading business of the company and its subsidiaries is carried out around the company's business. Based on normal production and operation, relying on specific business operations and hedging, it is conducive to avoiding and preventing the risk of exchange rate fluctuations and reducing the impact of exchange rate fluctuations on the company's operating performance. The company has formulated the forward foreign exchange trading business management system and improved the relevant internal control processes. The targeted risk control measures taken by the company are feasible and effective; At the same time, the margin of forward foreign exchange trading business to be carried out by the company and its subsidiaries will use its own funds, not involving raised funds. Therefore, it is necessary and feasible for the company and its subsidiaries to carry out forward foreign exchange trading business, which can effectively reduce the risk of exchange rate fluctuation.
5、 Risk analysis of forward foreign exchange trading business
In carrying out forward foreign exchange trading business, the company follows the principle of locking exchange rate risk and hedging, does not carry out speculative and arbitrage trading operations, and carries out transactions in strict accordance with the company's predicted collection period and collection amount when signing contracts. Forward foreign exchange transactions can reduce the impact of exchange rate fluctuations on the company in case of large exchange rate fluctuations, so that the company can focus on production and operation, but at the same time, forward foreign exchange transactions will also have certain risks:
1. Exchange rate fluctuation risk: in the case of large changes in the exchange rate market, the bank's forward foreign exchange settlement exchange rate quotation may be lower than the company's quotation exchange rate to customers, so that the company cannot lock according to the quotation exchange rate to customers, resulting in exchange losses.
2. Customer default risk: the customer's accounts receivable are overdue, and the payment cannot be recovered within the predicted collection period, which will cause delayed delivery and cause losses to the company.
3. Collection forecast risk: the business department forecasts the collection according to the customer's order and expected order. In the actual implementation process, the customer may adjust the order, resulting in inaccurate collection forecast of the company, resulting in the risk of delayed delivery.
4. Internal control risk: forward foreign exchange transactions are highly professional and complex, which may cause risks due to imperfect internal control system.
6、 Risk control measures to be taken by the company
1. The business department of the company will quote to the customer at the forward exchange rate of the bank, so that after the order is confirmed, the company can lock the quotation exchange rate of the customer; When the exchange rate fluctuates greatly, if the forward exchange rate is far lower than the exchange rate quoted to the customer, the company will put forward requirements and negotiate with the customer to adjust the price.
2. Strictly implement the management system of forward foreign exchange trading business, implement the operation principles, internal operation processes and risk handling procedures of forward foreign exchange trading business, and do a good job in information isolation and internal risk report.
3. In order to prevent the delayed delivery of forward foreign exchange settlement, the company attaches great importance to the management of accounts receivable and actively collects accounts receivable to avoid the overdue phenomenon of accounts receivable.
4. The company's forward foreign exchange transactions must be strictly based on the company's foreign currency collection forecast to control the possible risks faced by the company within an acceptable range.
7、 Analysis of fair value
The forward foreign exchange transaction business will enter the risk monitoring scope of the company when it is completed on the operation day. If the forward settlement and sales of foreign exchange is selected, the maturity income can be basically determined, and there is no change in fair value; If it is interest rate swap, foreign exchange swap transaction and foreign exchange option transaction, there will be certain changes in fair value, and the company will calculate its value according to the corresponding fair value change formula.
8、 Accounting policies and accounting principles
The company conducts fair value evaluation and accounting for forward foreign exchange transactions 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. 24 - hedge accounting, accounting standards for Business Enterprises No. 37 - Presentation of financial instruments, etc.
9、 Conclusion of feasibility analysis on carrying out forward foreign exchange transactions
The company plans to carry out forward foreign exchange settlement and sales around the company's business, which is based on the needs of normal production and operation. It is not a forward foreign exchange transaction solely for the purpose of profit, but a forward foreign exchange transaction based on specific business, with hedging as the means, with the purpose of avoiding and preventing the risk of exchange rate fluctuations and with the goal of protecting normal operating profits, which is conducive to improving the company's ability to control foreign exchange risks and in line with the interests of the company and all shareholders, It is necessary. The company has formulated the forward foreign exchange transaction business management system and improved the relevant internal control processes. The targeted risk control measures taken by the company are feasible, and it is feasible for the company to carry out forward foreign exchange transactions.
Profit Cultural & Creative Group Co.Ltd(300640) board of directors
May 20, 2022
