Yangtze River material safety accident, three people, capacity utilization rate, landslide, gross profit rate, win

Editor of China Economic Net: Recently, Chongqing Changjiang Modeling Materials (Group) Co., Ltd. ("Changjiang Materials") disclosed the latest prospectus. The company is mainly engaged in the production and processing of raw sand, coated sand production, sand core production, waste sand regeneration treatment, petroleum fracturing proppant, casting auxiliary material production.

2016 Changjiang Materials achieved operating income of 653 million yuan, up 7.29% from 609 million yuan in 2015; net profit was 98.7648 million yuan, up 38.13% from 2015's 71.491 million yuan.

Previously, the CSRC’s feedback to the Yangtze River Materials first paid attention to the safety incident that caused the death of three people. The Audit Committee requested Changjiang Securities to disclose the establishment of the safety production system and the effectiveness of the implementation of the safety production system, and whether it was Administrative punishments, etc.

In addition to frequent safety loopholes, the capacity utilization rate of major products of Changjiang Materials is not high. In the first half of 2017, 2016, 2015 and 2014, the capacity utilization rate of foundry sand was 51.43% and 81.92. %, 90.05% and 132%. In the same period, the capacity utilization rate of recycled sand was 59.28%, 91.19%, 80.33% and 105.49%. The capacity utilization rate of small and medium power diesel engines is less than 30%.

In the first half of this year, the capacity utilization rate of the above major products was less than 60%. Among the 458 million yuan raised by Changjiang Materials, in addition to the 50 million yuan supplementary liquidity, the rest are used for environmentally-friendly coated sand production and foundry waste sand recycling production.

In addition, the foundry sand series products account for more than 70% of Changjiang's gross profit, which is the company's main source of profit, but the gross profit margin of this product is the first in the same industry, which is also the first in the industry. The Committee's attention requires the company to analyze the reasons for the difference in gross profit margin during the reporting period based on the business structure, business model, average sales unit price of comparable products, and cost structure.

Three people in a security accident, a lawsuit with Pacific Insurance

In the previous feedback from the China Securities Regulatory Commission, the first issue was about the company's three security incidents. In July 2014, a contracted worker of the Changjiang Materials Subsidiary, Houjiang Changjiang Production Workshop, seriously violated the company's on-site safety operation procedures, resulting in a production accident, which caused him to die.

In February 2015, a material worker on the No. 2 line of the drying section of the Changjiang production workshop in the post-flag factory violated the safety production regulations and privately entered the No. 1 drying line hopper in the non-work area without telling anyone. Uncovered and buried by sand, causing suffocation and death.

In September 2015, at the pick-up point of the robotic automatic palletizing system of the parent company CJ-A01 coated sand production line, the safety manipulator was accidentally closed and energized, and the robot manipulator claw began to move and one person died.

The Audit Committee requested verification of the establishment of the Yangtze River material safety production system and the effectiveness of the implementation of the safety production system, as well as the results of the above-mentioned safety accidents.

According to the disclosure of the prospectus, the two security incidents in the post-flag Changjiang received the administrative penalty notice for the safety production administrative law enforcement documents of the Kozuoqi Banner Safety Production Supervision Administration (post)
No. 6, the administrative punishment notice for the safety production administrative law enforcement documents (post)
On the 4th, they were fined 100,000 yuan and 350,000 yuan respectively.

The Yangtze River Materials said that the two safety incidents in the Houjiang River did not cause significant economic losses to the company. The Kozuoqi Banner Safety Production Supervision Administration determined that it was not a major illegal act and had no impact on the company's continued operations.

The parent company’s accident was identified as a production safety non-responsible accident. The Chongqing Beibei District Safety Production Supervision Administration issued a certificate that the above acts were not serious violations of laws and regulations and were not subject to administrative penalties.

However, this accident also caused litigation disputes between Changjiang Materials and China Pacific Property Insurance Co., Ltd. Chongqing Beibei Branch. The focus of the dispute lies in whether the RMB 800,000 paid by Changjiang Materials according to the “one-time agreement on compensation for work-related injuries” signed by the family members of workers and workers is the insurance liability of the employer liability insurance contract signed between Changjiang Materials and Pacific Company Beibei Branch.

The first instance of the Chongqing Intermediate People's Court judged that Changjiang Materials required the Pacific Insurance Beijiao Branch Company to compensate the insurance fund of 580,000 yuan without any factual and legal basis and did not support it.

Subsidiary unlicensed mining

The CSRC’s feedback also mentioned that Changjiang Materials’ subsidiary Houjiang Changjiang obtained the Mining License on February 11, 2015, but there was already mining before the license was obtained. Whether there is a situation of illegal mining beyond the scale of the license.

Changjiang Materials said that in June 2010, Changjiang Materials and the People's Government of Kezuoqi signed the “Investment Contract for Annual Production of 500,000 Tons of Silica Sand Deep Processing Project”, stipulating that the company will provide 1,000 acres of mining areas in the form of government expropriation.

In April 2011, the People's Government of Kezuoqi Banner signed the Land Acquisition Agreement with the Habuhacha Village Committee of Ganqika Town, where the mining area is located. In February 2015, the subsidiary Changjiang obtained the mining license issued by the Tongliao Municipal Bureau of Land and Resources (certificate number: C1505002015027130137208). The mining license lists the mining type as natural quartz sand.

Due to the delay in the issuance of the above-mentioned quartz sand mining license, the subsidiary Changjiang River began to be completed and put into operation in May 2011 without the final approval of the quartz sand mining license. The post-flag Yangtze River has the risk of being imposed administrative punishment by the relevant government departments.

However, the prospectus also disclosed that the post-flag Changjiang had obtained the "Certificate" issued by the Bureau of Land and Resources of Kezuoqi Banner of Tongliao City on March 23, 2015: "The sand that has been carried out before the acquisition of the mining license by the Yangtze River in the post-flag The practice of mining will not impose administrative penalties."

Gross profit margin increases year by year

The prospectus of Changjiang Materials disclosed that in 2013, 2014, 2015 and January-June 2016, the company's main business gross profit margin was 24.74%, 26.99%, 31.07% and 33.60% respectively.

During the reporting period, the foundry sand series products accounted for more than 70% of the company's gross profit, which is the company's main source of profit, and the foundry sand products of Changjiang Materials in 2015, 2016 and the first half of this year, the gross profit margin is comparable in the same industry. First place.

This also attracted the attention of the audit committee, requiring the company to analyze the reasons for the difference in gross profit margin during the reporting period based on the business structure, business model, average sales unit price of comparable products, and cost structure.

Changjiang Materials said that due to the different application areas of the listed companies, the gross profit margin is large. Beijing Lear's refractory materials are mainly used in the steel industry. The refractory materials of the company are mainly used in the steel and cement industries. The refractory materials of science and technology are mainly used in the glass, cement and steel industries.

The foundry sand industry of Changjiang Materials was applied to the main casting industry. From 2014 to 2016, due to the decline in the prices of major raw materials and the increase in the proportion of recycled sand to replace the original sand, the gross profit margin of the company's products gradually increased.

The balance of accounts receivable is high, and the lawsuit is used to ask for payment.

As of June 30, 2017, the book balance of Changjiang Materials' accounts receivable was 215,508,800 yuan, accounting for 58.08% of the operating income, and the amount and proportion were higher.

In terms of bad debt provision, the recovery of accounts receivable of the company's diesel engine business has slowed down. At the end of 2016, the provision for bad debts for the diesel engine business accounts for the full amount of RMB 15,959,900, which is estimated to be uncollectible for the foundry sand business. The provision for bad debts has been fully accrued to 10.33.35 million yuan, totaling 26.3312 million yuan.

As of the end of June 2017, the balance of bad debts for accounts receivable of Changjiang Materials was 204.391 million yuan, and the balance of accounts receivable with aging over one year was 104.506 million yuan.

In addition to the high receivables, Changjiang Materials has several lawsuits to recover the purchase price.

On September 12, 2014, Changjiang Materials sued the Sichuan Longsheng Power Technology Co., Ltd. for the payment of the contractual payment to the People's Court of Beibei District of Chongqing Municipality, requesting that the defendant Sichuan Longchuang Power Technology Co., Ltd. pay 2,729,900 yuan. On October 28, 2014, the People's Court of Beibei District of Chongqing Municipality made a first-instance judgment and ordered the defendant Sichuan Longchuang Power Technology Co., Ltd. to pay the company's payment of RMB 2,227,900 within 7 days from the effective date of the judgment. However, as of November 3, Sichuan Longchuang Power Technology Co., Ltd. still owed 2,143,400 yuan of unpaid goods, and the case is currently in the implementation stage.

In addition, on January 13, 2014, Chengdu Changjiang sued Sichuan Sifang Founding Co., Ltd. for the payment of the contractual payment to Sichuan Minxian People's Court, requesting the judgment of the defendant Sichuan Sifang Foundry Co., Ltd. to repay the payment of 1.0524 million yuan, and bear the responsibility Bank interest from December 25, 2013 to February 28, 2014 was RMB 0.76 million. On February 20, 2014, the Sichuan Minxian People's Court made a first-instance judgment and ordered the defendant Sichuan Sifang Foundry Co., Ltd. to pay the purchase price of 1.0524 million yuan and interest within 10 days from the effective date of the judgment. However, Sichuan Sifang Foundry Co., Ltd. has not yet paid the above-mentioned payment of 1.052 million yuan to Chengdu Changjiang.

Patent right on the eve of listing

In addition, Beijing Renchuang Technology Development Co., Ltd. ("Beijing Renchuang") accused in March this year that the products produced by the two subsidiaries of Changjiang Materials infringed on the invention patents of "wet coated sand and its preparation process". Claim for 9.22 million yuan.

On March 14, 2017, Changjiang Materials Subsidiary Kunshan Changjiang received litigation materials from the court. Beijing Renchuang believes that a certain product produced by Kunshan Yangtze River involves infringing its invention patent of “wet coated sand and its preparation process”, requiring Kunshan Yangtze River to immediately stop the infringement and compensate its economic loss of 740,000 yuan.

At the same time, the other wholly-owned subsidiary of Changjiang Materials, Shiyan Changjiang, was also sued by Beijing Renchuang for the same reason, claiming 7,680,600 yuan. At present, the above litigation cases have not been heard, and Changjiang Materials said that it is temporarily impossible to predict the impact of the lawsuit on the company's operations.

According to the prospectus of Changjiang Materials, the company's main products are coated sand. Only a dozen enterprises in the country have output of more than 100,000 tons, including Beijing Renchuang, and Beijing Renchuang is also a company in coated sand. Fracturing proppant products, the main competitor in the field of foundry sand.

In the first half of the year, the capacity utilization rate of major products was less than 60%.

According to the prospectus of Changjiang Materials, the company plans to raise 136 million yuan to invest in “environmental coated sand production and foundry waste recycling recycling resource project”, and 75 million yuan to “environmental coated sand production and recycling sand treatment” "Project", 109 million yuan invested in "new annual production of 72,000 tons of sand core, CCATEK environmentally-coated sand 79,200 tons of projects", 88 million yuan to the "environmental-type coated sand and foundry waste recycling production project", another 5000 The 10,000 yuan plan is used to supplement working capital, raising a total of 458 million yuan.

During the reporting period, the capacity utilization rate of major products of Changjiang Materials was not high. In the first half of 2017, 2016, 2015 and 2014, the capacity utilization rate of foundry sand was 51.43% and 81.92%. 90.05% and 132%. In the same period, the capacity utilization rate of recycled sand was 59.28%, 91.19%, 80.33% and 105.49%.

The capacity utilization rate of small and medium-sized diesel engines is less than 30%. In fact, in the first half of this year, Changjiang Materials' net profit was only 41 million yuan, a year-on-year decline of 14%. The main reason is that the net profit of diesel products decreased by 149% year-on-year.

Since 2014, due to the sluggish demand, emission policies, and agricultural machinery subsidies, the domestic diesel engine market has begun to experience cold, and the income of diesel products of Changjiang Materials has been declining.

Therefore, in June 2017, Changjiang Materials transferred the entire equity of Kaimil Power, a wholly-owned subsidiary of the diesel engine business, to “Xiong Eagle and Xiong Jie” for a price of 21 million yuan. The controlling shareholder and actual controller of the 60.33% equity.

By the end of 2016, Kaimir Power had audited total assets of 220 million yuan, net assets of 73 million yuan, operating income of 110 million yuan and net profit of 8.45 million yuan.

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