Original title: relying on government subsidies, two shareholders reduce their holdings of "milk powder first share" BeinmeiHow to get out of the quagmire? Source: Phoenix New Media Finance and Economics
Article / Zhu Liu
Once the "first share of milk powder" is still stuck in the "quagmire". Shenzhen Stock Exchange 13 asked Beinmei not long ago, first, the board of directors on behalf of Fonterra, the second largest shareholder, withdrew from the board, and then Fonterra personally took the stage to reduce its stake in Beinmei. At a time when the differences between the two sides are irreconcilable, Fonterra seems to have run out of patience with Beingmei, reducing its stake by 8 per cent since the third quarter of 2019.
Beinmei, which lost the support of two shareholders, the proportion of government subsidies to net profit in the first quarter has reached 60%. At the same time, the asset-liability ratio has been high year after year, a number of loans are about to mature, and more than half of the monetary funds are limited. Can Beinmei bear the pressure of debt repayment? In addition, can Beinmei, which is expected to be pleased by the China News, be able to maintain positive growth in its performance after leaving government subsidies for non-recurrent profits and losses?
Rely on government subsidies
Recently, Beinmei disclosed a half-year performance forecast for 2020, which shows that Beinmei is expected to have a net profit of 30 million yuan to 45 million yuan belonging to shareholders of listed companies in the first half of this year, compared with-122 million yuan in the same period last year.
Phoenix New Media financial inquiry found that in the first quarter of 2020, Beinmei achieved operating income of 714 million yuan, and the net profit attributed to shareholders of listed companies was 12.9537 million yuan, an increase over the same period last year. It is worth noting that the government subsidy of Beinmei included in the current profit and loss in the first quarter was 8.1359 million yuan, accounting for 62.81% of the net profit, which played a certain supporting role in the net profit. According to the first quarterly report, Beinmei's net profit after deducting non-recurring gains and losses was 1.0645 million yuan, down 65.04 percent from the same period last year.
According to the performance forecast, Beinmei's government subsidies included in the current profit and loss in the first half of the year accounted for at least 18% and 27% of the net profit.
In fact, the "report card" handed out by Beinmei in recent years is not satisfactory and relies heavily on government subsidies. From 2016 to 2019, Beinmei's net profit was-781 million yuan,-1.057 billion yuan, 41 million yuan and-102 million yuan respectively, and only made a profit in 2018 in four years, while the government subsidy included in the current profit and loss in that year was 106 million yuan, accounting for 257.87% of the net profit. Without the support of this government subsidy, Beinmei's performance in 2018 would still be difficult.
The Shenzhen Stock Exchange paid attention to this and asked whether Beinmei was heavily dependent on non-recurrent profits and losses such as government subsidies. Beinmei said that she would receive a varying number of special subsidy funds from the government every year. The company adjusts its business strategy according to the development situation, invigorates idle assets and disposes of inefficient assets, and has achieved positive results. The above income is essentially closely related to the operation. In addition, in the second half of 2019, the deduction of non-net profit was positive. As a result, Beinmei believes that there is no significant reliance on non-recurring gains and losses such as government subsidies.
Under the background that the performance is mired in the "quagmire", Beinmei has lost blood year after year. From 2016 to 2019, the net cash flow generated by Beinmei's business activities was-423 million yuan,-153 million yuan, 291 million yuan and-50 million yuan, respectively.
In the same period, Beinmei's asset-liability ratio was 51.6%, 62.76%, 63.38% and 60.48%, respectively. China Feihe Limited, a peer listed company, has an asset-liability ratio of 49.37%, 48.88%, 51.19% and 43.36%, while Yashili International has an asset-liability ratio of 28.43%, 26.1%, 28.03% and 24.37%, respectively. Australia's asset-liability ratio is 59.49%, 65.36%, 50.29% and 51.29%, respectively.
Regulators also focused on Beinmei's debt, asking in its annual report whether there were tight capital chains, overdue debt, frozen bank accounts and other assets. Beinmei's note shows that although the company's monetary funds are 665 million yuan, the balance of unrestricted monetary funds is 298 million yuan. In addition, Beinmei obtained the loan amount of 1.519 billion yuan in the form of pledge and mortgage guarantee. As of press time, Beinmei's total debt due in 2020 is 380 million yuan, which may be under pressure in the short term.
Mistakes in decision-making to enter the children's milk market
Beinmei, as one of the few well-known domestic infant formula manufacturers that has not been detected in the melamine storm, has also "braved the wind and waves" in the milk powder market and landed in the capital market in 2011. However, Beinmei's "highlight moment" lasted only two years, and its performance changed greatly in 2014, and it was still in deep trouble until 2020. Why did the former "first share of milk powder" do so?
For the performance has not improved much in recent years, Beinmei explained that it is caused by external factors such as the fake milk powder incident, the fierce market competition, the decline in the number of babies, the increase in the price of lactoferrin, as well as the unfavorable transformation of traditional channels, large investment losses in the Darun factory, limited cost control, handling of temporary powder, and other internal factors.
Since 2016, the price center of milk powder products has moved upward, the consumption structure of milk powder products has shown a new trend, ultra-high-end products have grown rapidly, and middle and high-end products have been squeezed. "most of the company's products are in the mid-to high-end price band, and sales growth is becoming more and more difficult," Beinmei said.
In addition, Beinmei's plight has also been exacerbated by Beinmei's attempt to enter the children's milk market amid shrinking milk powder sales. In 2014, Beinmei announced that it planned to change the fund-raising investment project "Beihai Beinmei Nutrition Food Co., Ltd. with an annual output of 6000 tons of rice noodles" to a "project with an annual output of 3000 tons of rice noodles". The remaining raised funds of 74.1348 million yuan will be invested in the "annual production line technical transformation project of 60, 000 tons of children's milk".
At that time, Beinmei believed that the market for children's liquid milk had developed rapidly in recent years, with an annual consumption of more than 35 billion yuan and an annual growth rate of 30%. The market had great potential, and Beinmei was confident of seizing this market segment. However, it didn't work out, not only did the fundraising program at IPO fail to achieve the expected benefits, but also the new children's milk program in 2014 did not bring much benefit to Beinmei.
Beinmei's "Special report on the Annual Storage and use of the raised funds" shows that in 2019, the Beinmei milk powder project and the rice noodle project achieved benefits of 8.7744 million yuan and 2.4164 million yuan respectively, while there was no income from the children's milk project.
According to the special report on fund-raising from 2016 to 2018, the children's milk project not only failed to achieve benefits, but also brought profits and losses of-11.2508 million yuan,-7.5277 million yuan and-1.701 million yuan to Beinmei respectively. At the same time, revenue from milk powder projects has been declining since 2016, from 88.0702 million yuan in 2015 to 8.7744 million yuan in 2019.
In this regard, Beinmei explained that "with the upgrading of consumption, the demand for children's milk products is slow", "due to industry changes and the overall market environment, the company's milk powder sales declined, taking into account the cost of capital, the company set production on demand and reduce output accordingly."
Subsidiary goodwill was questioned
Prior to this, the Shenzhen Stock Exchange issued a letter of inquiry about the 2019 annual report of Beinmei Co., Ltd., in which the regulator inquired about the growth of the asset group or asset group in which Beinmei Goodwill is located. The asset group is the relevant asset group portfolio of Jilin Beinmei Co., Ltd. (hereinafter referred to as "Jilin Beinmei"). Beinmei acquired a 65 per cent stake in Jilin Beinmei in April 2015 and was included in the consolidated statement in January 2016, with a combined consideration of 117 million yuan, according to Beinmei's note.
Phoenix New Media noted that the subsidiary in question was formerly known as Dunhua Meijian Dairy Co., Ltd. the remaining 35 per cent of the company is 19.95 per cent and 15.05 per cent owned by Zhejiang Meilijian Industrial Co., Ltd and Hangzhou Meijian Investment Co., Ltd., respectively. Tianyan check shows that the major shareholders of these two companies are Meilijian Dairy Group Co., Ltd. (hereinafter referred to as "Meilijian Dairy"), formerly known as Hulunbuir Meilijian Dairy Group Co., Ltd.
Coincidentally, Beinmei's acquisition of a 65% stake in Jilin Beinmei is not the first deal between Beinmei and Beauty Dairy, which was linked in 2009. According to Beinmei's prospectus, Xie Hong and Beinmei Group transferred Anhui Yiyi and its subsidiary Huainan Yiyi to Hulunbuir Meilijian Dairy Group Co., Ltd., in order to eliminate potential competition in the industry.
According to Tianyan check, as of press time, Beautiful healthy Dairy holds a 65% stake in Anhui Yiyi, and Anhui SASAC holds a 35% stake.
Phoenix New Media Finance and Economics found it strange that in 2018, Beinmei had a related party transaction with Anhui Yiyi and its subsidiary Huainan Yiyi, in which Beinmei subsidiary Heilongjiang Beinmei sold materials to Anhui Yiyi and Huainan Yiyi. Anhui Yiyi and Huainan Yiyi then sold this material to Beinmei.
In this regard, Beinmei's explanation is that because Beinmei's shopping guides are more scattered and mobile, the management is more difficult and the management cost is high, Beinmei in Heilongjiang Province will sell the products to Anhui Yiyi and Huainan Yiyi. Anhui Yiyi and Huainan Yiyi then sell the products to the company, which is partly used to pay for the labor expenses of the purchasing guides of the company.
Beinmei said that in view of the fact that Beinmei did not pay the above-mentioned purchase guidance fees to Anhui Yiyi and Huainan Yiyi, in order to ensure the fairness of the transaction, Anhui Yiyi was required to treat the above price increase as a discount, but Beinmei has not received the scarlet letter VAT invoice issued by Anhui Yiyi and Huainan Yiyi. In order to avoid VAT related risks caused by unfair transactions, Beinmei deducted the VAT-input tax payable corresponding to the above price increase, and applied for VAT to be paid to the State Taxation Bureau of Hangzhou High-tech Zone (Binjiang), and completed the VAT payment in June 2009.
Although times have changed, the necessity of a series of related transactions between Beinmei and Anhui Yiyi is still debatable, and in the second year of the deal, Beinmei Group, a major shareholder of Beinmei, quickly cut Anhui Yiyi and sold itself to Beautiful Dairy Industry. It was only in June of the same year that the VAT payment of the transaction was completed, which revealed a touch of "strange" flavor. More coincidentally, four years after the listing, Beinmei acquired a subsidiary from Meilijian Dairy, a buyer who was once a related party.
Ergu Dongheng Natural once again reduced its holdings.
On July 30, Tianyan check data showed that there was a change of equity in Beinmei, and the equity ratio of Fonterra Dairy (Hong Kong) Co., Ltd. (hereinafter referred to as "Fonterra") changed from 12.49% to 10.82%.
On July 8th, Beinmei announced that Johannes Gerardus Maria Priem had resigned as a director, which meant that Fonterra had resigned from its board of directors.
As we all know, the differences between Fonterra and Beinmei have existed for a long time. Jin Zhiqiang, the secretary of Beinmei, said publicly at the 2019 shareholders' meeting that the company's future vision is to be a baby economy, but Fonterra wants Beinmei to do dairy, which leads to strategic differences between the two sides.
Strategic differences are irreconcilable, and Fonterra has been reducing its holdings of Beinmei since the third quarter of 2019. During the initial honeymoon period between the two sides, Fonterra invested about 3.5 billion yuan at a price of 18 yuan to acquire an 18.82 per cent stake in Beinmei, making it its second largest shareholder. As of press time, the share price of Beinmei is about 8 yuan, and Fonterra's book loss is more than 1.5 billion yuan.