股份代號：1133
INTERIM REPORT 2007
Stock Code: 113
CONTENTS
Page(s)
REPORT OF THE DIRECTORS 1
REVIEW REPORT ON INTERIM FINANCIAL INFORMATION 8
CONDENSED CONSOLIDATED INCOME STATEMENT 9
CONDENSED CONSOLIDATED BALANCE SHEET 10
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY 12
CONDENSED CONSOLIDATED CASH FLOW STATEMENT 13
NOTES TO THE CONDENSED FINANCIAL STATEMENTS 14
INFORMATION ON THE COMPANY 25
1
REPORT OF THE DIRECTORS
To all shareholders:
The Board of Directors of Harbin Power Equipment Company Limited (the
“Company”) is pleased to announce the results of the Company and its subsidiaries
(the “Group”) for the six months ended 30th June, 2007, which were prepared in
accordance with accounting principles generally accepted in Hong Kong. Such
results have not been audited but have been reviewed by Yuehua Certified Public
Accountants Company Limited.
RESULTS
For the six months ended 30th June, 2007, the Group recorded net consolidated
profit of Rmb615.05 million, an increase of 72.98 per cent over the same period
last year. Profit per share recorded Rmb0.458, an increase of 64.16 per cent over
the same period last year. The net assets at the end of the term recorded
Rmb6,328.11 million, an increase of Rmb1,496.64 million over the beginning of
the year. Net assets per share recorded Rmb4.60, an increase of Rmb0.81 over
the beginning of the year.
INTERIM DIVIDEND
The Board does not recommend an interim dividend for the period ended 30th
June, 2007.
BUSINESS REVIEW
In the first half of 2007, according to initial accounts by the National Bureau of
Statistics of China, China’s macro-economy continued to develop steadily and
rapidly with a GDP growth of 11.5 per cent, which is 0.5 per cent faster over the
same period last year. The contradiction between supply and demand kept on to
ease up in the first half of the year. There was a growing demand for large power
generators with high-level parameters and low-pollution settings as well as new
type environmental power generation equipments. The business results of the
Company are obviously improved, with all economic indicators remarkably raised.
2
NEW CONTRACTS
During the first half of the year, new orders secured by the Group totaled Rmb22.1
billion, an increase of 73 per cent over the same period last year. Among these
new orders, thermal power main units accounted for 80 per cent, an increase of
20 per cent over the same period last year. Hydro power main units account for
1 per cent, a decrease of 1.5 per cent over the same period last year, showing
that the orders of power generation equipment market are more centralized during
the first half of the year.
PRODUCTION AND SERVICES
As orders at hand being delivered, the Group’s output during the first half remained
relatively high. The output in utility boilers was 13,160MW (30 units), an increase
of 19.10 per cent over the same period last year. The output in power plant
turbine was 12,060MW (38 units), an increase of 3.07 per cent over the same
period last year. The output in power plant turbine generator was 9,237MW (23
units), a decrease of 23.06 per cent over the same period last year. The output in
hydropower turbine generator units was 2,325MW (11 units/sets), an increase of
68.23 per cent over the same period last year.
TURNOVER AND COST
For the first half of 2007, the Group recorded a turnover of Rmb11,964.67 million,
an increase of 2.3 per cent over the same period last year. Among which, turnover
from thermal power main units was Rmb9,532.05 million, an increase of 1 per
cent over the same period last year, turnover from hydropower main units was
Rmb747.86 million, an increase of 2.1 per cent and turnover from power plant
engineering and services was Rmb1,056.93 million, an increase of 10.3 per cent.
And turnover from power plant auxiliaries and parts was Rmb169.53 million, an
increase of 52.8 per cent. The turnover from AC/DC motor and other products
and services was Rmb458.30 million, an increase of 3.7 per cent over the same
period last year. The increase in turnover was caused by remarkable delivered
equipments during the period.
During the period under review, the export sales of the Group was Rmb1,399.69
million, represented 11.7 per cent of the Group’s total turnover. The main export
destinations were countries in Asia and Africa.
3
GROSS PROFIT AND PROFIT MARGIN
During the period under review, the Group’s gross profit of sales was Rmb1,515.51
million, an increase of 25.8 per cent over the same period last year. The profit
margin was 12.7 per cent, an increase of 2.4 per cent over the same period last
year.
Among which, the gross profit for thermal power main units was Rmb1,287.75
million and the profit margin was 13.5 per cent, an increase of 2.4 per cent over
the same period last year. The gross profit for hydro power main units was
Rmb80.21 million and the profit margin was 10.7 per cent, an increase of 3.5
per cent over the same period last year. The gross profit for power plant engineering
and services was Rmb29.17 million and the profit margin was 2.8 per cent,
basically flat over the same period last year. The gross profit for power plant
auxiliaries and parts was Rmb42.94 million and the profit margin was 25.3 per
cent, an increase of 9.6 per cent over the same period last year. The gross profit
for AC/DC motor and other products and services was Rmb75.44 million and the
profit margin was 16.5 per cent, an increase of 4.5 per cent over the same period
last year. The increase in profit margin was evidence of effectiveness emerged in
the Group’s cost management policies.
EXPENSES DURING THE PERIOD
For the first half of the year, the Group’s expenses from operation and
administration activities amounted to Rmb713.73 million, a slight increase over
the same period last year.
ASSETS AND LIABILITIES
As at 30th June, 2007, the total assets of the Group amounted to Rmb39,383.84
million, an increase of Rmb1,939.29 million and 5.2 per cent as compared to the
beginning of 2007. Among which, the total current assets were Rmb35,882.07
million, representing 91.1 per cent of the total assets. The total non-current assets
were Rmb3,501.77 million, representing 8.9 per cent of the total assets.
The Group’s liabilities totaled Rmb31,957.24 million, an increase of Rmb292.09
million over the beginning of the year. Among which, the total current liabilities
were Rmb26,041.86 million, representing 81.5 per cent of the total liabilities.
The non-current liabilities were Rmb5,915.38 million, representing 18.5 per cent
of the total liabilities. As at 30th June, 2007, the Group’s assets/liabilities ratio
was 81.1 per cent.
4
DEPOSITS AND CASH INFLOW
As at 30th June, 2007, the bank deposits and cash of the Group amounted to
Rmb5,672.89 million. Among which, the time deposits were Rmb1,188.16 million.
During the period, the net cash used in operating activities amounted to
Rmb904.19 million. The net cash from financing activities amounted to Rmb966.48
million and the net cash used in investment activities was Rmb734.82 million.
FUNDING AND BORROWING
The Group’s funding for operation and development mainly has three sources,
they are shareholder capital, customer loans and bank borrowings. The borrowings
of the Group will be arranged according to specific projects. Except for those
special situations, the loans will be separately conducted by subsidiaries under
the Group. However, the capital investment borrowings must be approved by the
Company in advance. As at 30th June, 2007, the total sums of the Group’s
borrowings are Rmb4,378.61 million. The Group’s borrowings are loans from
various commercial banks and the state’s policy banks with interest rates stipulated
by the state. Among which, the Group’s borrowings due within one year were
Rmb378.50 million, a decrease of Rmb122.62 million over the beginning of the
year. The Group’s borrowings due after one year were Rmb4,000.11 million, a
increase of Rmb128.18 million over the beginning of the year. The Group’s
amounts due to customers were Rmb17,507.78 million, a decrease of Rmb80.40
million.
GEARING RATIO
As at 30th June, 2007, the Group’s gearing ratio (computed on non-current
liabilities/total shareholders’ equity) was 0.98:1, as compared to that of 1.16:1 at
the beginning of the year.
INTEREST EXPENSE
During the first half of year, the Group’s interest expense amounted to Rmb38.23
million, an increase of Rmb19.34 million over the same period last year. This
was caused by the increase of loans and exchange loss.
INCOME TAX
For the first half of the year, the Company and its major subsidiaries are subject
to income tax at a rate of 15%.
5
STAFF
As at 30th June, 2007, the employees of the Group totaled 17,765.
PROSPECT
The national economy in 2007 will continue its “rapid and good” development.
The power supply equipment market will remain in high demand, and the
development of environmental friendly, effective, sophisticated new technical
products with a high capacity and parameter will accelerate. The state-developed
nuclear power strategy has commenced, the technical path of the third generation
nuclear power has been established, and the Group has been identified as a
major equipment supplier of the third generation nuclear power. The competition
of the power supply equipment market is entering into a new phase.
In the second half of the year, the Group will face even fiercer market competition
and heavier production duties. The Group will respond to market changes, integrate
internal resources and enhance the fullness of market development. While
strengthening the market share of regular products, we will actively seize and
occupy the market of sophisticated new products, as well as explore the
international market.
Following the technical development theme of digesting and absorbing adopted
technical foundation, re-creation and self development, the technological
innovative system will be further perfected. While making effort in exceeding the
advanced international standard, the focus will be the introduction of the third
generation nuclear power technology; digestion, absorption and re-creation of
technologies of large scale turbines, supercritical and ultra-supercritical coal-
fired power, and large scale pumped-storage units; as well as to develop new
power generation equipment such as wind power, coupled with the ability of self
research and development, and the ability of enhancing core competitiveness.
The Group will adopt measures favorable to better management in each aspect.
We will improve our project management, effectively co-ordinate internal and
external resources, pledge to on time delivery of all products; continue to perfect
the quality management system, enhance quality awareness, emphasis on the
quality control during processes, and continue to improve product quality and
the customer satisfaction level; we will focus on the strengthening of project cost
management, to apply the cost control in each part of project implementation so
as to effectively lower the cost and improve cost efficiency; following the “rapid
and good” approach, the implementation of technologically reform projects, as
represented by the second construction phase of Qinhuangdao, will be completed
in good order. A meticulous implementation plan and tighter construction quality
6
control will ensure the operation of the nuclear production base in 2008, as well
as a timely completion of various technological reform projects according to
plans.
The Board will try to create conditions to support the Company’s management to
lead the whole staff to work hard in order to achieve new development. The
board is fully confident
SUBSTANTIAL SHAREHOLDERS
As at 30th June, 2007, the Company’s share capital in issue comprised
1,376,806,000 shares. The major shareholders included:
Percentage
Share Share in total Position of
Shareholder category number share capital shares held
Harbin Power Plant State share 701,235,000 50.93% Long position
Equipment
Corporation
HKSCC Nominees H share 666,458,598 48.41% Long position
Limited
DIRECTOR’S, SUPERVISOR’S AND SENIOR MANAGEMENT’S
INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
As at 30th June, 2007, none of the Directors, Supervisors or senior management,
or any of their associates had any interests and short positions in the shares,
underlying shares and debentures of the Company or any associated corporation
(within the meaning of Part XV of the Securities and Futures Ordinance).
MODEL CODE
After inquiry to the directors, all directors complied with the provisions of the
Model Code set out in Appendix 10 of the Listing Rules during period under
review.
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED
SECURITIES
During the period, neither the Company nor any of its subsidiaries had purchased,
sold or redeemed any of the Company’s listed securities.
7
EQUITY FINANCING
The Company further issued 102.355 million H shares on 2nd March 2007, with
an issue price of HK$10.00 each share, and the listing proceeds amounted to
approximately HK$1 billion. On the same day, controlling shareholders of the
Company remitted 10.235 million shares of state share to National Social Security
Fund and registered as H share.
CODE ON CORPORATE GOVERNANCE PRACTICES
The Company now or at any time during the accounting period has complied
with provisions set out in Appendix 14 Code on Corporate Governance Practices
of the Listing Rules.
AUDIT COMMITTEE
The Board’s Audit Committee has reviewed the 2007 interim results of the
Company.
AUDITORS
The Auditors of the Company are Yuehua Certified Public Accountants Company
Limited. Auditor has reviewed the Company’s 2007 interim results.
SHAREHOLDERS’ MEETING
The Company’s 2006 Annual General Meeting was held on 22nd June, 2007 in
Harbin city, and the result of the meeting has been published on Wenweipo and
China Daily (English version) on 25th June, 2007.
REFERENCE DOCUMENT
The original copies of interim report and audited financial statements for the six
months ended 30th June, 2007 of the Company and the Articles of Association
are available for inspection at Block B, 39 Sandadongli Road, Xiangfang District,
Harbin, PRC.
By order of the Board
Gong Jing-kun
Chairman
Harbin, PRC, 10th August, 2007
8
REVIEW REPORT ON INTERIM FINANCIAL INFORMATION
TO THE BOARD OF DIRECTORS OF
HARBIN POWER EQUIPMENT COMPANY LIMITED
(A joint stock company established in the People’s Republic of China with limited liability)
INTRODUCTION
We have reviewed the interim financial information set out on pages 9 to 24,
which comprise the condensed consolidated balance sheet of Harbin Power
Equipment Company Limited (the “Company”), its subsidiaries (together, the
“Group”) as at 30th June 2007 and the related condensed consolidated income
statement, condensed consolidated statement of changes in equity and condensed
consolidated cash flow statement for the six-month period then ended, and a
summary of significant accounting policies and other explanatory notes. The
Main Board Listing Rules Governing the Listing of Securities on
SCOPE OF REVIEW
We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410, “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified
Public Accountants. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with Hong Kong Standards
on Auditing and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe
that the interim financial information is not prepared, in all material respects, in
accordance with HKAS 34 “Interim financial reporting”.
Yuehua Certified Public Accountants Company Limited
Certified Public Accountants
Hong Kong, 10th August, 2007
HENG KWOO SENG
Practising Certificate Number: P01087
9
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
Six months ended
30.6.2007 30.6.2006
Notes Rmb’000 Rmb’000
(unaudited) (unaudited)
Revenue 3 11,964,667 11,692,246
Cost of sales (10,449,153) (10,487,275)
Gross profit 1,515,514 1,204,971
Other income 128,137 108,652
Distribution costs (143,148) (143,236)
Administrative expenses 4 (570,584) (563,932)
Finance costs (38,233) (18,897)
Share of results of associates 8,821 1,834
Profit before taxation 900,507 589,392
Income tax expense 5 (134,899) (120,508)
Profit for the period 6 765,608 468,884
Attributable to:
Equity holders of the parent 615,048 355,561
Minority interests 150,560 113,323
765,608 468,884
Dividends 7 123,913 77,742
Earnings per share – basic 8 45.81 cents 27.90 cents
10
CONDENSED CONSOLIDATED BALANCE SHEET
AT 30TH JUNE, 2007
30.6.2007 31.12.2006
Notes Rmb’000 Rmb’000
(unaudited) (audited)
NON-CURRENT ASSETS
Property, plant and equipment 9 2,634,850 2,661,786
Investment properties 294,818 303,075
Prepaid lease payments 357,031 361,412
Patents 9 68,294 73,626
Interests in associates 104,756 168,448
Available-for-sale investments 42,022 30,947
3,501,771 3,599,294
CURRENT ASSETS
Inventories 12,615,138 11,503,691
Trade debtors 10 7,988,846 6,577,935
Other debtors, deposits and
prepayments 5,563,125 6,366,065
Prepaid lease payments 10,589 10,589
Amounts due from customers for
contract work 3,954,277 3,541,262
Amounts due from fellow subsidiaries 44,045 54,741
Restricted bank deposits 12,000 12,000
Pledged bank deposits 21,154 40,500
Bank deposits 1,188,159 581,209
Cash and cash equivalents 4,484,733 5,157,262
35,882,066 33,845,254
11
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
AT 30TH JUNE, 2007
30.6.2007 31.12.2006
Notes Rmb’000 Rmb’000
(unaudited) (audited)
CURRENT LIABILITIES
Amounts due to customers for
contract work 554,340 687,187
Trade creditors 11 6,902,658 6,539,743
Other creditors and accrued charges 1,869,747 1,470,850
Deposits received 15,817,246 16,077,384
Amount due to holding company 249,186 274,551
Amounts due to shareholders 60,907 1,071
Amounts due to fellow subsidiaries 57,428 12,952
Advance from holding company 8,580 3,000
Tax liabilities 143,268 490,976
Borrowings-due within one year 12 378,500 501,117
26,041,860 26,058,831
NET CURRENT ASSETS 9,840,206 7,786,423
TOTAL ASSETS LESS CURRENT
LIABILITIES 13,341,977 11,385,717
CAPITAL AND RESERVES
Share capital 13 1,376,806 1,274,451
Reserves 4,951,305 3,557,016
Equity attributable to equity holders
of the parent 6,328,111 4,831,467
Minority interests 1,098,491 947,931
TOTAL EQUITY 7,426,602 5,779,398
NON-CURRENT LIABILITIES
Deferred taxation 1,134 –
Deposits received 1,690,536 1,510,798
Borrowings-due after one year 12 4,000,105 3,871,921
Advance from holding company 223,600 223,600
5,915,375 5,606,319
13,341,977 11,385,717
12
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
Attributable to equity holders of the parent (unaudited)
Statutory
Statutory Statutory public Investment
Share Share capital surplus welfare revaluation Retained Minority
capital premium reserve reserve fund reserve profits Total interests Total
Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000
At 1st January, 2006 1,274,451 1,089,089 709,850 193,188 198,615 16,101 403,334 3,884,628 640,052 4,524,680
Profit for the period – –––––355,561 355,561 113,323 468,884
Transferred to profit
or loss on sale of
available-for-sale
investments – ––––(16,101 ) – (16,101 ) (5,109 ) (21,210 )
Total recognized
income and expense
for the period – ––––(16,101 ) 355,561 339,460 108,214 447,674
Transfers – – – 75,761 – – (75,761 ) – – –
Dividends – –––––(77,742 ) (77,742 ) – (77,742 )
At 30th June, 2006 1,274,451 1,089,089 709,850 268,949 198,615 – 605,392 4,146,346 748,266 4,894,612
Attributable to equity holders of the parent (unaudited)
Statutory
Statutory Statutory public Investment
Share Share capital surplus welfare revaluation Retained Minority
capital premium reserve reserve fund reserve profits Total interests Total
Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000
At 1st January, 2007 1,274,451 1,089,089 709,850 493,639 – 16,101 1,248,337 4,831,467 947,931 5,779,398
Profit for the period ––––––615,048 615,048 150,560 765,608
Gain on fair value
changes of
available-for-sale
investments, recognized
directly in equity –––––11,948 – 11,948 – 11,948
Total recognized
income and expense
for the period –––––11,948 615,048 626,996 150,560 777,556
Issue of share capital 102,355 914,623 –––––1,016,978 – 1,016,978
Share issue expense – (23,417 ) (23,417 ) – (23,417 )
Transfers – – – 71,970 – – (71,970 ) – – –
Dividends –––––(123,913 ) (123,913 ) – (123,913 )
At 30th June, 2007 1,376,806 1,980,295 709,850 565,609 – 28,049 1,667,502 6,328,111 1,098,491 7,426,602
13
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30TH JUNE 2007
Six months ended
30.6.2007 30.6.2006
Rmb’000 Rmb’000
(unaudited) (unaudited)
Net cash used in operating activities (904,187) (1,880,228)
Net cash from investing activities
Purchases of property, plant and equipment (215,646) –
Proceeds from disposal of available-for-sale
investments – 1,391,529
Purchases of available-for-sale investments – (7,500)
Other investing cash flows (519,171) (99,262)
(734,817) 1,284,767
Net cash from financing activities
Increase of borrowings 297,887 751,740
Repayment of borrowings (292,320) (60,649)
Proceeds from issue of shares 993,748 –
Other financing cash flows (32,840) (10,290)
966,475 680,801
Net (decrease)/increase in cash and
cash equivalents (672,529) 85,340
Cash and cash equivalents brought forward 5,157,262 4,595,906
Cash and cash equivalents carried forward 4,484,733 4,681,246
Analysis of cash and cash equivalents
Bank balances and cash 3,305,039 3,989,293
Bank deposits 1,179,694 691,953
4,484,733 4,681,246
14
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30TH JUNE, 2007
1. BASIS OF PREPARATION
The condensed financial statements have been prepared in accordance with
the applicable disclosure requirements of Appendix 16 to the Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited (the
Listing Rules) and with Hong Kong Accounting Standard 34 (HKAS 34)
“Interim Financial Reporting” issued by the Hong Kong Institute of Certified
Public Accountants (the “HKICPA”).
2. PRINCIPAL ACCOUNTING POLICIES
The condensed financial statements have been prepared on the historical
cost basis except for certain financial instruments, which are measured at
fair values.
The accounting policies used in the condensed financial statements are
consistent with those followed in the preparation of the Group’s annual
financial statements for the year ended 31st December, 2006.
In the current interim period, the Group has applied, for the first time, a
number of new standards, amendments and interpretations (“new HKFRSs”)
issued by the HKICPA which are effective for the Group’s financial year
beginning 1st January, 2007.
The adoption of the new HKFRSs had no material effect on the results or
financial position of the Group for the current or prior accounting periods.
Accordingly, no prior period adjustment has been recognised.
15
The Group has not early applied the following new HKFRSs that have been
issued but are not yet effective.
HKAS 23 (Revised) Borrowing Costs
1
HKFRS 8 Operating segments
1
HK (IFRIC)-INT 11 HKFRS 2 – Group and Treasury Share
Transactions
2
HK (IFRIC)-INT 12 Service concession arrangements
3
Note:
1
Effective for annual periods beginning on or after 1st January, 2009
2
Effective for annual periods beginning on or after 1st March, 2007
3
Effective for annual periods beginning on or after 1st January, 2008
The directors of the Company anticipate that the application of these HKFRSs
will have no material impact on the results and financial position of the
Group.
3. SEGMENT INFORMATION
Business segments
The Group operates in five major segments as follows – main thermal power
equipment, main hydro power equipment, engineering services for power
stations, ancillary equipment for power stations and AC/DC motors and other
products.
Principal activities are as follows:
Main thermal power equipment – manufacture of main thermal power
equipment.
Main hydro power equipment – manufacture of main hydro power
equipment.
Engineering services – providing engineering services for
power stations.
Ancillary equipment – manufacture of ancillary equipment
for power stations.
AC/DC motors and others – manufacture of AC/DC motor and
others.
16
Main Engineering Ancillary
thermal Main hydro services for equipment AC/DC
Six months ended power power power for power motors and
30th June, 2007 equipment equipment stations stations others Eliminations Consolidated
Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000
REVENUE
External sales 9,532,045 747,864 1,056,927 169,531 458,300 – 11,964,667
Inter-segment sales 433,665 – – 66,231 68,951 (568,847) –
Total revenue 9,965,710 747,864 1,056,927 235,762 527,251 (568,847) 11,964,667
SEGMENT RESULTS 1,287,751 80,213 29,171 42,943 75,436 – 1,515,514
Unallocated corporate
expenses (585,595)
Finance costs (38,233)
Share of results of
associates ––––8,821 – 8,821
Profit before taxation 900,507
Income tax expense (134,899)
Profit for the period 765,608
17
Main Engineering Ancillary
thermal Main hydro services for equipment AC/DC
Six months ended power power power for power motors and
30th June, 2006 equipment equipment stations stations others Eliminations Consolidated
Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000
REVENUE
External sales 9,448,534 732,734 958,090 110,914 441,974 – 11,692,246
Inter-segment sales 483,863 – – 86,521 48,644 (619,028 ) –
Total revenue 9,932,397 732,734 958,090 197,435 490,618 (619,028 ) 11,692,246
SEGMENT RESULTS 1,053,549 52,530 28,564 17,506 52,822 – 1,204,971
Unallocated corporate
expenses (598,516 )
Finance costs (18,897 )
Share of results of
asociates ––––1,834 – 1,834
Profit before taxation 589,392
Income tax expense (120,508 )
Profit for the period 468,884
Inter-segment sales are charged at prevailing market rates.
4. INCOME STATEMENT CLASSIFICATION/OTHER COSTS
Allowance for irrecoverable trade receivables
Included in administrative expenses is an allowance of Rmb137,507,000
(2006: Rmb137,922,000) for estimated irrecoverable trade receivables, which
is determined based on the difference between the carrying amount of those
receivables and the present value of estimated future cash flows from those
receivables, discounted at the original effective interest rate.
Write-down of inventories to net realisable value
Included in cost of goods sold is an amount of Rmb15,706,000 (2006:
Rmb51,234,000) in respect of the write-down of inventories to their estimated
net realisable value.
18
5. INCOME TAX EXPENSE
The charge mainly represents PRC enterprise income tax calculated at 15%
of the estimated taxable income for the period. Pursuant to a document
issued by the PRC Ministry of Finance and the State Tax Bureau on 29th
March, 1994, taxable income earned by the Group, except for certain
subsidiaries, is subject to an enterprise income tax rate of 15%.
The tax charge for the period can be reconciled to the profit before tax per
the condensed consolidated income statement as follows:
Six months ended
30.6.2007 30.6.2006
Rmb’000 Rmb’000
Profit before taxation 900,507 589,392
Tax charge at the enterprise income tax rate
of 15% 135,076 88,409
Tax effect of share of results of associates (1,323) (275)
Additional enterprise income tax in respect of
the income tax rate of 33% for certain
subsidiaries 5,638 2,138
Tax effect of income not taxable for
tax purpose (15,233) (2,363)
Tax effect of expenses not deductible for
tax purpose 18,003 31,613
Effect of tax exemptions granted to a
PRC subsidiary (12,497) –
Tax effect of tax losses not recognized 4,101 –
Deferred taxation 1,134 –
Underprovision in respect of prior years – 986
Tax charge for the period 134,899 120,508
Deferred taxation are calculated in full on temporary differences under the
liability method using a principal taxation rate of 15% (2006: Nil).
19
6. PROFIT FOR THE PERIOD
Profit for the period has been arrived at after charging (crediting):
Six months ended
30.6.2007 30.6.2006
Rmb’000 Rmb’000
Depreciation of property, plant and
equipment 163,383 148,662
Depreciation of investment properties 8,257 7,662
Amortisation of prepaid lease payments 4,815 4,804
Amortisation of patents 9,651 4,891
Share of tax of associates (included in
share of results of associates) 118 –
Interest and investment income (70,099) (71,055)
Gain on disposal of available-for-sale
investments – (27,729)
Gain on disposal of property, plant and
equipment (1,143) –
7. DIVIDENDS
Six months ended
30.6.2007 30.6.2006
Rmb’000 Rmb’000
Final dividend declared for 2005 of
Rmb0.061 per share – 77,742
Final dividend declared for 2006 of
Rmb0.090 per share 123,913 –
123,913 77,742
The Directors do not recommend the payment of any interim dividend for
the period (six months period ended 30th June, 2006: nil).
8. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the profit for the
period of Rmb615,048,000 (six months period ended 30th June, 2006:
Rmb355,561,000) and on the weighted average number of shares
1,342,686,000 (30th June, 2006: 1,274,451,000 shares).
20
9. MOVEMENTS IN PROPERTY, PLANT AND EQUIPMENT AND PATENTS
During the period, the Group disposed of certain plant and machinery with
a carrying amount of Rmb2,632,000 for proceeds of Rmb1,489,000, resulting
in a gain on disposal of Rmb1,143,000.
During the period, the Group spent approximately Rmb200 million mainly
on construction in progress and plant and machinery for production process
and to upgrade its manufacturing capabilities.
During the period, the Group mainly acquired a patent related to a boiler
technology.
10. TRADE DEBTORS
The credit terms given to the customers vary and are generally based on the
financial strength of individual customers. In order to effectively manage the
credit risks associated with trade debtors, credit evaluations of customers
are periodically performed.
The following is an aged analysis of trade debtors at the balance sheet date:
30.6.2007 31.12.2006
Rmb’000 Rmb’000
Within 1 year 5,776,358 5,066,049
1 to 2 years 2,114,807 1,409,499
2 to 3 years 84,016 84,295
Over 3 years 13,665 18,092
7,988,846 6,577,935
21
11. TRADE CREDITORS
The following is an aged analysis of trade creditors at the balance sheet
date:
30.6.2007 31.12.2006
Rmb’000 Rmb’000
Within 1 year 5,938,414 4,861,066
1 to 2 years 832,301 1,534,830
2 to 3 years 54,171 63,917
Over 3 years 77,772 79,930
6,902,658 6,539,743
12. BORROWINGS
During the period, the Group obtained new bank borrowings in the amount
of approximately Rmb300 million and made repayment of bank borrowings
in the amount of approximately Rmb290 million. The borrowings bear interest
at market rate and have fixed terms of repayment. The proceeds were used
for working capital of operation.
13. SHARE CAPITAL
30.6.2007 31.12.2006
Rmb’000 Rmb’000
Registered, issued and fully paid:
State owned equity interest shares of
Rmb1 each 701,235 711,470
H Shares of Rmb1 each 675,571 562,981
1,376,806 1,274,451
22
The movements in share capital are as follows:
Number of Issued Share
shares in issue share capital premium Total
Rmb’000 Rmb’000 Rmb’000
At 1st January, 2007 1,274,451,000 1,274,451 1,089,089 2,363,540
Issue of H shares 112,590,000 112,590 914,623 1,027,213
Share issue expenses – – (23,417) (23,417)
Conversion of state owned
equity interest shares (10,235,000) (10,235) – (10,235)
At 30th June, 2007 1,376,806,000 1,376,806 1,980,295 3,357,101
On 2nd March 2007, 112,590,000 of the Company’s H shares of Rmb1 each
were issued at a price of HK$10 (equivalent to approximately Rmb9.915)
per share. Of all the newly issued H shares, 10,235,000 H shares were
converted from the stated owned equity interest shares. The aggregate net
proceeds were approximately HK$1,002,268,000 (equivalent to approximately
Rmb993,748,000) after deducting related expenses for the placing of
approximately HK$23,618,000 (equivalent to approximately Rmb23,417,000).
Pursuant to a resolution at the annual general meeting on 7th December
2006 and approvals from relevant government authorities, during the listing
of the Company’s H shares, certain of the Company’s stated owned equity
interest shareholders converted an aggregate of 10,235,500 state owned
equity interest shares into H shares and offered them in the placement of the
Company’s H shares. Net proceeds of approximately Rmb99,375,000 obtained
from the newly issued H shares were related to such conversion and such
proceeds would be remitted to the National Council for the Social Security
Fund in accordance with the relevant PRC government requirement.
Except for the currency in which dividends are paid and restrictions as to
whether the shareholders can be PRC investors or foreign investors, state
owned equity interest shares and H shares rank pari passu in all respects
with each other.
23
14. CONTINGENT LIABILITIES
30.6.2007 31.12.2006
Rmb’000 Rmb’000
Guarantee given to banks and financial
institutions in respect of general banking
facilities granted to external parties 186,340 186,340
15. CAPITAL COMMITMENTS
30.6.2007 31.12.2006
Rmb’000 Rmb’000
Capital expenditure for the acquisition of
property, plant and equipment and
investment properties:
– contracted for but not provided
in the financial statements 476,625 336,953
16. PLEDGE OF ASSETS
At the balance sheet date, the Group pledged property, plant and equipment
and investment properties having a net book value of approximately
Rmb240,780,000 (2006: Rmb259,890,364) to secure certain of Group’s
trading facilities. There is no any bank deposits to secure certain of Group’s
trading facilities during the year (2006: Rmb40,500,000).
24
17. RELATED PARTY DISCLOSURES
(i) Transactions/balance with ultimate holding company and fellow
subsidiaries
In the current period, the Group made purchases from subsidiaries of
Harbin Power Plant Equipment Group Corporation (“HPEGC”) amounting
to approximately Rmb40,476,000 (2006: Rmb21,450,000). At the balance
sheet date, credit facilities granted by certain banks to the Company
were secured by corporate guarantee given by HPEGC.
(ii) Transactions/balance with other state-controlled entities in the PRC
The Group operates in an economic environment currently predominated
by entities directly or indirectly owned or controlled by the PRC
government (“state-controlled entities”). In addition, the Group itself is
part of a larger group of companies under HPEGC, which is controlled
by the PRC government. Apart from the transactions with HPEGC and
fellow subsidiaries disclosed in section (i) above, the Group also conducts
business with other state-controlled entities. The directors consider those
state-controlled entities are independent third parties so far as the Group’s
business transactions with them are concerned. In establishing its pricing
strategies and approval process for transactions with other state-
controlled entities, the Group does not differentiate whether the counter-
party is a state-controlled entity or not.
Material transactions/balances with other state-controlled entities are as
follows:
Six months ended
30.6.2007 30.6.2006
Rmb’000 Rmb’000
Trade sales 9,416,150 9,353,780
Trade purchases 4,932,330 4,232,450
Amounts due to other state-controlled
entities 19,336,225 21,652,273
Amounts due from other state-controlled
entities 9,855,230 8,539,221
25
INFORMATION ON THE COMPANY
LEGAL REPRESENTATIVE
Gong Jing-kun
AUTHORISED REPRESENTATIVES
Qu Da-zhuang
Ma Sui
COMPANY SECRETARY
Ma Sui
AUDITORS
Yuehua Certified Public Accountants
Company Limited
LEGAL ADVISORS
as to PRC Law
Haiwen Partners
as to Hong Kong Law
Richards Butler
LISTING INFORMATION
H Shares
2301001003796
OFFICE ADDRESS OF THE COMPANY
Block B, 39 Sandadongli Road
Xiangfang District
Harbin
Heilongjiang
PRC
Postcode: 150040
Tel: 86-451-82135717 or 82135727
Fax: 86-451-82135700
PLACE OF BUSINESS IN HONG
KONG
20th Floor, Alexandra House
16-20 Chater Road
Central
Hong Kong
