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Document No. 1: 2009 Annual Report on the Work of the Board of Directors
2 Document No. 1 for the 2009 Annual General Meeting
Annual Work Report of the Company’s Board of Directors for 2009
Dear Shareholders ：
In 2009, in the face of the global financial crisis and unprecedented market challenges, the company remained firmly focused on its core refrigeration and air-conditioning business, with profitability as its central objective. It leveraged rigorous quality management as a key market entry point, aligned its strategies with national investment trends, and vigorously promoted energy-efficient and environmentally friendly products such as the new series of screw compressors. At the same time, the company undertook comprehensive, quality-driven cost-reduction initiatives, strengthened cash-flow management, and made concerted efforts to ensure “no production stoppages, no workforce reductions, and no salary cuts.” In 2009, the company recorded sales revenue of RMB 139.454 million, representing 103.30% of the 2009 operating plan target of RMB 135.000 million, a year-on-year decrease of 7.86%; total profit amounted to RMB 96.01 million, or 64.01% of the 2009 operating plan target of RMB 150.000 million, down 29.64% from the previous year.
I. Review of the Company’s Operating Performance
1. Overview of the Company’s Overall Operating Performance for the Reporting Year
(1) Principal Business
In 2009, the company fully leveraged the comprehensive specifications, broad cooling capacity range, and rational product distribution of its new series of screw compressors, adopting a strategy that balanced new and existing products while pursuing demand-driven sales, to comprehensively and rapidly introduce models 163, 234, and 324. New screw compressor models, including single-unit two-stage and dual-unit two-stage screw compressor units, have been launched on the market. At the same time, leveraging the national policy to stimulate domestic demand and capitalizing on the trend toward large-scale development in the petrochemical and coal chemical industries, efforts have been intensified to produce 250 The promotional efforts for the aforementioned large-scale screw products have been intensified and have yielded good results.
In 2009, the company focused on quality issues identified through market feedback by strengthening adherence to the “Three Standards and One Specification,” rigorously enforcing quality responsibilities at each job position, enhancing quality control and evaluation of purchased and outsourced components, and comprehensively promoting new processes such as argon arc welding and pipe bending. These measures significantly improved product quality, and throughout the year a total of 67 quality improvement and problem-solving initiatives.
In 2009, in response to the growing volume of large-scale, modular, and customized orders, the company introduced a project-based planning management model within the framework of daily scheduling. By adopting a pull-based planning approach, it implemented schedule management and control across all operational processes—design, procurement, component sourcing, and manufacturing—thereby further deepening and refining its lean production management system. 。
In 2009, the company further strengthened its cash flow management. The sales department adopted a coordinated approach to managing both accounts receivable and advance receipts, achieving significant results. Meanwhile, the supply, production, and finance departments worked in unison to implement bank-accepted payment terms, which not only enhanced the company’s creditworthiness but also increased net cash flow from operating activities by 1.3, while ensuring sufficient funding for normal production operations. 100 million yuan.
(2) Sino-foreign joint ventures
In 2009, the company recognized sales revenue of RMB 617,008 million from its group of equity-method investees in China–foreign joint ventures, a year-on-year decrease of 8.63%. % ; The company’s investment income declined substantially year on year, primarily due to the significant deterioration in the operating performance of Dalian Sanyo Air-Conditioner Co., Ltd. and its subsidiaries, Shenyang Sanyo Air-Conditioner Co., Ltd. and Dalian Sanyo Home Appliances Co., Ltd. 。
During the reporting period, two Sino-foreign joint ventures accounted for more than 10% of the company’s net profit: Dalian Sanyo Compressor Co., Ltd. and Dalian Sanyo Cold Chain Co., Ltd.
During the reporting period, among the company’s equity-method investments in Chinese–foreign joint ventures, nine reported main-business revenue exceeding RMB 100 million, with three of them surpassing RMB 1 billion; four reported net profit exceeding RMB 10 million, including one that exceeded RMB 50 million.
In 2009, Dalian Sanyo Compressor focused on developing new energy-efficient compressors, with particular emphasis on R410A DC inverter compressors, intermediate-gas-injection compressors, and high-pressure internal-compression compressors. By aggressively promoting high-efficiency, high-horsepower models and new products such as train-mounted scroll compressors, the company achieved volume shipments to markets in France, Turkey, and other regions. Furthermore, through measures including futures procurement, increased localization of components, expansion of sourcing channels, technological upgrades, and enhanced management, the company comprehensively reduced costs and achieved remarkable results.
In 2009, Dalian Sanyo Cold Chain focused on CO2 compressor units as a key area of development and launched over one hundred new products, including next-generation supermarket display cabinets, commercial kitchen equipment, and low-temperature medical devices. By strengthening design optimization and the application of energy-saving technologies, expanding its product portfolio to capture high-, mid-, and low-end market segments, and implementing differentiated marketing strategies, the company maintained its leading position in market share across its three core business areas: supermarket equipment, commercial kitchen equipment, and beverage display cabinets. 。
In 2009, Dalian Sanyo Refrigeration actively promoted energy-saving products and process-modification solutions such as waste-heat recovery and integrated energy utilization, and launched new products including lithium-bromide heat pumps, flue-gas-utilization units, and ultra-low-grade waste-heat steam units. Its independently developed high-efficiency vacuum boiler passed the national energy-conservation certification and was recognized as an energy-saving product by the Industrial Boiler Association. Furthermore, the company’s domestically first directly fired absorption heat-pump unit achieved successful commissioning on its first attempt at CNOOC Bohai Port Area in Tanggu, Tianjin, setting a benchmark for energy-saving and emission-reduction retrofit projects in oilfield, petrochemical, and other industrial and mining enterprises.
In 2009, Dayang Showa Automotive Air Conditioning seized the rare opportunity presented by the dramatic surge in domestic automobile sales and launched a new series of energy-efficient and environmentally friendly products, including TT evaporators and NRT condensers, tailored for small-displacement vehicles, those made with new materials, and new-energy vehicles. These products were supplied to premium customers such as FAW-Volkswagen, Shanghai Volkswagen, and Guangzhou Honda, resulting in a 68.2% year-on-year increase in sales revenue and a 174.7% year-on-year rise in net profit. 。
2. Analysis of the Company’s Principal Business
(1) Product and Geographical Segments of the Principal Business
All of the company’s main business revenue is derived from refrigeration and air-conditioning products.
The company’s products are manufactured in Dalian and Wuhan and sold throughout China. Overseas sales account for approximately 8% of the company’s main business revenue during the same period.
For details on the industry and geographic distribution of the company’s principal business revenue, please refer to Note 5-31 to the financial statements.
(2) Information on Major Suppliers and Major Customers
The company’s total procurement from its top five suppliers amounted to RMB 172.89 million, accounting for 15.06% of the annual total procurement.
The combined sales to the company’s top five customers totaled RMB 216.75 million, accounting for 15.54% of the company’s total sales.
3. Company Financial Condition
(1) Asset Composition (Unit: RMB 10,000)
|
Project Name
|
2009 year
|
2008
|
Changes
|
||
|
Amount
|
Proportion of total assets
|
Amount
|
Proportion of total assets
|
||
|
Accounts receivable
|
47,004
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17.37%
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48,481
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17.83%
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-3.05%
|
|
Inventory
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27,757
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10.26%
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33,771
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12.42%
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-17.81%
|
|
Investment property
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0
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0.00%
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0
|
0.00%
|
0.00%
|
|
Long-term equity investments
|
One hundred thousand three hundred seventy-nine
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37.09%
|
One hundred one thousand four hundred sixty-five
|
37.31%
|
-1.07%
|
|
Fixed assets
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36,601
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13.52%
|
38,413
|
14.12%
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-4.72%
|
|
Construction in progress
|
715
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0.26%
|
478
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0.18%
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+49.58%
|
|
Short-term borrowings
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6,000
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2.22%
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11,000
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4.04%
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-45.45%
|
|
Long-term borrowings
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0
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0.00%
|
0
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0.00%
|
0.00%
|
|
Total assets
|
270,629
|
100%
|
271,963
|
100%
|
-0.49%
|
Explanation:
① The increase in construction-in-progress is primarily attributable to expenditures on the renovation of mechanical equipment.
② The decrease in short-term borrowings was due to the company’s repayment of RMB 50 million in loans during the current period.
(2) Expenses and Income Tax Situation (Unit: RMB 10,000)
|
Project Name
|
Fiscal Year 2009
|
Fiscal Year 2008
|
Changes
|
|
Selling expenses
|
9,118
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9,871
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-7.63%
|
|
Administrative expenses
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13,730
|
13,881
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-1.09%
|
|
Financial expenses
|
840
|
940
|
-10.64%
|
|
Income tax
|
829
|
82
|
+910.98%
|
Explanation:
① The increase in income tax is primarily attributable to a decrease in deferred tax assets and an increase in deferred tax liabilities during the current period.
(3) Composition of Cash Flows (Unit: RMB 10,000)
|
Project Name
|
Fiscal Year 2009
|
Fiscal Year 2008
|
Changes
|
|
Net cash flow from operating activities
|
19,810
|
7,120
|
+178.23%
|
|
Net cash flow from investing activities
|
5,478
|
3,397
|
+61.26%
|
|
Net cash flow from financing activities
|
-16,208
|
-3,748
|
-332.44%
|
Explanation:
① The net cash flow from operating activities increased, primarily due to strong sales collections and an increase in the utilization of bank acceptance bills for settling accounts payable.
② The net cash flow from investing activities increased, primarily due to cash received from investment income.
③ The net cash flow from financing activities decreased, primarily because the net amount of loan repayments this year was lower than that in the previous year.
4. Operating Conditions and Performance of Major Holding Companies and Equity-Participated Companies
(1) Major Holding Companies
① Dalian Bingshan Group Refrigeration and Air-Conditioning Installation Company
Our company holds 100% equity in this entity. The company’s registered capital is RMB 20.04 million, and its principal business is the installation and commissioning of complete sets of refrigeration equipment. In 2009, its total assets amounted to RMB 39.47 million, its net assets to RMB 22.71 million, its sales revenue reached RMB 55.95 million, and its net profit was RMB 350,000.
② Dalian Bingshan Group Sales Co., Ltd.
Our company holds a 90% equity interest in the entity. The company’s registered capital is RMB 18 million, and its primary business is the sales of products manufactured by subsidiaries of Dalian Bingshan Group. In 2009, its total assets amounted to RMB 41.71 million, its net assets stood at RMB 21.09 million, it recorded sales revenue of RMB 68.22 million, and its net profit was RMB 0.71 million.
③ Dalian Bingshan Air-Conditioning Equipment Co., Ltd.
Our company holds a 70% equity stake in the entity. The company has a registered capital of JPY 700 million and primarily engages in the manufacturing and sales of air-conditioning terminal equipment, including fan coil units and air handling units. In 2009, its total assets amounted to RMB 129.79 million, with net assets of RMB 68.89 million; it recorded sales revenue of RMB 105.11 million and a net profit of RMB 5.46 million.
④ Dalian Bingshan Lingse Quick-Freezing Equipment Co., Ltd.
Our company holds a 70% equity stake in the entity. The company has a registered capital of USD 1 million and primarily manufactures various types of quick-freezing equipment. In 2009, its total assets amounted to RMB 31.55 million, with net assets of RMB 9.65 million; it recorded sales revenue of RMB 31.67 million and a net profit of RMB 1.01 million.
⑤ Dalian Bingshan Metal Processing Co., Ltd.
Our company holds a 64.25% equity interest in the entity. The company’s registered capital is USD 2.35 million, and it primarily engages in the production of sheet metal and stamped parts as supporting components for our established joint ventures and for our own operations. In 2009, its total assets amounted to RMB 28.77 million, with net assets of RMB 19.86 million; it recorded sales revenue of RMB 40.05 million and a net profit of RMB 1.03 million.
⑥ Dalian Bingshan JiaDe Automation Co., Ltd.
Our company holds a 60% equity stake in the entity. The company’s registered capital is GBP 210,000, and it primarily engages in automatic control for the refrigeration and related industries. In 2009, its total assets amounted to RMB 11.73 million, net assets stood at RMB 7.42 million, sales revenue reached RMB 22.31 million, and net profit was RMB 3.19 million.
⑦ Wuhan New World Refrigeration Industry Co., Ltd.
Our company holds a 51% equity interest in the entity. The company’s registered capital is RMB 30 million, and it primarily manufactures and sells screw-type refrigeration compressors. In 2009, its total assets amounted to RMB 353.58 million, with net assets of RMB 107.53 million; it recorded sales revenue of RMB 273.53 million and a net profit of RMB 16.95 million.
(2) Major Equity-Linked Subsidiaries
|
Major Equity-Participated Companies
|
Leading products
|
Principal business revenue
(Ten thousand yuan)
|
Net profit
(Ten thousand yuan)
|
|
Dalian Sanyo Compressor Co., Ltd.
|
Semi-hermetic piston and scroll compressors
|
128,612
|
14,241
|
|
Dalian Sanyo Compressor Co., Ltd.
|
Commercial Freezing and Refrigeration Equipment
|
141,436
|
3,965
|
II. Company Investment Situation
During the reporting period, the Company did not raise any new funds, nor did it carry over the use of funds raised prior to the reporting period into the current reporting period.
III. Daily Operations of the Board of Directors
1. Report Details of the Board of Directors’ meetings and resolutions during the reporting period
(1) The 19th Meeting of the 4th Board of Directors
The fourth session of the Company’s Board of Directors convened its 19th meeting by facsimile on February 24, 2009. The announcement of the resolutions adopted at this board meeting was published in the China Securities Journal and the Wenhui Daily on February 25, 2009.
(2) The 20th Meeting of the 4th Board of Directors
The Company’s Fourth Board of Directors held its 20th meeting on April 22, 2009, in the Company’s Eighth-Floor Conference Room. The announcement of the resolutions passed at this board meeting was published in the China Securities Journal and the Wenhui Daily on April 24, 2009.
(3) The 21st Meeting of the Fourth Board of Directors
The Company’s Fourth Board of Directors convened its 21st meeting by facsimile on May 11, 2009. The announcement of the resolutions passed at this board meeting was published in the China Securities Journal and the Wenhui Daily on May 12, 2009.
(4) First Meeting of the Fifth Board of Directors
The Company’s Fifth Board of Directors held its inaugural meeting on May 20, 2009, in the Company’s Eighth-Floor Conference Room. A notice of the resolutions adopted at this board meeting was published in the China Securities Journal and the Wenhui Daily on May 21, 2009.
(5) Second Meeting of the Fifth Board of Directors
The Company’s Fifth Board of Directors held its second meeting by fax on July 8, 2009. The announcement of the resolutions passed at this board meeting was published in the China Securities Journal and the Wenhui Daily on July 9, 2009.
(6) Third Meeting of the Fifth Board of Directors
The fifth session of the Company’s Board of Directors held its third meeting on July 27, 2009, in the Company’s eighth-floor conference room. The announcement of the resolutions passed at this board meeting was published in the China Securities Journal and the Wenhui Daily on July 28, 2009.
(7) Fourth Meeting of the Fifth Board of Directors
The Fifth Board of Directors of the Company convened its fourth meeting by facsimile on August 19, 2009. At this meeting, the following were reviewed and approved: Company 2009 Annual and Semi-Annual Reports and Their Summaries 。
(8) Fifth Session of the Fifth Board of Directors
The Fifth Session of the Company’s Fifth Board of Directors was convened by fax on October 26, 2009. At this meeting, the following matters were reviewed and approved: Company 2009 Third Quarter Annual Report 。
2. Dong The Board’s Implementation of Resolutions Passed at the General Meeting of Shareholders
The Company’s Board of Directors has effectively implemented all resolutions adopted at the 2008 Annual General Meeting.
The Company’s 2008 dividend distribution plan was fully implemented by the Board of Directors in June 2009.
3. Dong Summary Report on the Performance of the Audit Committee of the Board of Directors
The Audit Committee under the Company’s Board of Directors performs its duties in accordance with the Company’s “Detailed Rules for the Implementation of the Board of Directors’ Audit Committee” and the “Annual Report Working Procedures of the Audit Committee,” overseeing the Company’s internal audit system and its implementation, reviewing the Company’s financial information and disclosures, and evaluating the work of external auditing firms.
At the company 2009 During the annual audit, the Audit Committee maintained active communication and effective coordination with the auditing firm, Zhongzhun Certified Public Accountants. Prior to the auditors’ formal engagement, the Committee discussed and reached consensus with the project leader of the auditing firm on matters such as the audit work plan, the schedule, and key issues to be addressed during the audit period. Throughout the audit process, the Committee kept abreast of progress and repeatedly urged the auditing firm to ensure both the quality and quantity of the audit work. Upon completion of the audit, the Committee conducted a thorough review of the Company’s annual financial statements and annual report and concluded that the Company The financial reports are comprehensive and truthful, and the company’s externally disclosed financial reports and other information are objective, truthful, and accurate. It reflects the company’s annual financial performance.
The Audit Committee is of the view that, in providing audit services for the Company for the year 2009, Zhongzhun Certified Public Accountants adhered to the professional standards of independence, objectivity, and impartiality; conducted the audit in strict accordance with the new accounting standards; demonstrated meticulous and well-structured planning; ensured adequate staffing; proactively communicated with the Audit Committee and the independent directors; exercised due diligence and responsibility; and thereby successfully completed the Company’s 2009 audit. Accordingly, the Audit Committee recommends that the Company re-engage Zhongzhun Certified Public Accountants as its auditor for the year 2010.
4. Summary Report on the Performance of the Board’s Compensation and Assessment Committee
The Compensation and Assessment Committee under the Company’s Board of Directors has performed its duties in accordance with the Company’s Implementing Rules for the Board of Directors’ Compensation and Assessment Committee, reviewing the annual compensation of the Company’s directors, supervisors, and senior management. The Committee concludes that the decision-making procedures and remuneration standards for the aforementioned personnel are in compliance with applicable laws and regulations as well as the Company’s internal policies, and that the compensation information disclosed in the Company’s 2009 Annual Report is true and accurate.
IV. 2010 Business Plan
2010 Corporate Business Plan Targets ：
Sales revenue: RMB 142,000 million;
Total profit: RMB 118.5 million.
1. Adhere to a quality-centric approach, focus on quality improvement and enhancement, and comprehensively elevate the enterprise’s overall quality management level. Prioritize the improvement and enhancement of operational quality, product quality, service quality, and work quality in all aspects of our operations. Firmly instill a company-wide sense of quality responsibility that places “quality first.” Establish and refine a robust quality management system.
2. Continue to adhere to the principle of maximizing profitability, closely monitor national macroeconomic policy trends and market dynamics, and pursue efficiency gains by aggressively expanding both domestic and international markets, accelerating product mix optimization, and implementing comprehensive cost-reduction measures.
3. Promote and facilitate technological innovation through institutional and managerial reforms, comprehensively accelerate the enhancement of enterprises’ independent innovation capacity, and strengthen their core competitiveness and capacity for sustainable development. New products that possess technological advantages and market potential should be launched, with cold–hot integration, energy efficiency, environmental protection, and high efficiency as the guiding criteria.
Please review the above report.
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Dalian Bingshan Group Co., Ltd.
Address: No. 106, Liaohe East Road, Dalian Economic & Technological Development Zone
Phone:
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