StockCode:200986 StockName:HuaxinPackaging-B AnnouncementNo.2019-012 FOSHANHUAXINPACKAGINGCO.,LTD. ANNUALREPORT2018(SUMMARY) PartIImportantNotes ThisSummaryisbasedonthefulltextofthe2018AnnualReportofFoshanHuaxinPackagingCo.,Ltd.(togetherwithitsconsolidatedsubsidiaries,the“Company”,exceptwherethecontextotherwiserequires).InorderforafullunderstandingoftheCompany’soperatingresults,financialpositionandfuturedevelopmentplans,investorsshouldcarefullyreadtheaforesaidfulltext,whichhasbeendisclosedtogetherwiththisSummaryonthemediadesignatedbytheChinaSecuritiesRegulatoryCommission(the“CSRC”). Objectionsraisedbyanyofthedirectors,supervisorsorseniormanagementagainstanycontentsinthisReportoritssummary: Name Officetitle Objectionandexplanationofwhy Statementofobjection: Exceptforthefollowingdirectors,alltheotherdirectorsattendedinpersontheBoardmeetingforthereviewofthisReportanditssummary. Name Officetitle Reasonfornotattendingthe Proxyentrustedtoattendthe meetinginperson meeting ZhangWenjing IndependentDirector Forthereasonofwork LiJun Independentauditor’smodifiedopinion: □Applicable√Notapplicable Board-approvedfinalcashand/orstockdividendplanforordinaryshareholders: □Applicable√Notapplicable TheCompanyhasnofinaldividendplan,eitherintheformofcashorstock. Board-approvedfinalcashand/orstockdividendplanforpreferredshareholders: □Applicable√Notapplicable ThisReportanditssummaryhavebeenpreparedinbothChineseandEnglish.Shouldtherebeanydiscrepanciesormisunderstandingsbetweenthetwoversions,theChineseversionsshallprevail. PartIIKeyCorporateInformation 1.StockProfile Stockname HuaxinPackaging-B Stockcode 200986 Stockexchangeforstocklisting ShenzhenStockExchange Contactinformation BoardSecretary SecuritiesRepresentative Name DingGuoqiang ShiHui 2/F,Block7,3KeyangRoad,LuogePark, 2/F,Block7,3KeyangRoad,LuogePark, Address ChanchengEconomicDevelopmentZone, ChanchengEconomicDevelopmentZone, NanzhuangTown,ChanchengDistrict, NanzhuangTown,ChanchengDistrict, Foshan,GuangdongProvince,P.R.China Foshan,GuangdongProvince,P.R.China Fax 0756-8666922 0756-8666922 Tel. 0756-8666975 0756-8666978 Emailaddress dinggq@htrh-paper.com shih@htrh-paper.com 2.PrincipalActivitiesorProductsintheReportingPeriod TheCompanyspecializesintheR&D,productionandsalesofhigh-endcoatedivoryboard,chemicalsforpapermakingandcolorprintingproducts.Thebusinessesaredescribedasfollows: A.High-endcoatedivoryboard TheivoryboardisaproductoftheCompany’smainbusiness,asacategoryofivoryboard,iswidelyappliedinvariousfieldssuchascigarettepackaging,foodpackaging,medicinepackaging,cosmeticpackagingandlivingsuppliespackaging,whichisanimportantsourceoftheCompany'smajorbusinessincome.TheR&D,productionandsalesoftheivoryboardismainlyundertakenbyZhuhaiHongtaRenhengPackagingCo.,Ltd.andZhuhaiHuafengPaperCo.,Ltd.HongtaRenhengisthecorehigh-endpackagingboardplatformunderHuaxinPackagingwhichisbasedindomesticandoverseashigh-endpackagingmarketsofcigaretteandfoodandprovides"personalized"productsandservicesforcustomerswith"differentiation"businessstrategy.TheCompanynowhasthreecoatedivoryboardproductionlines,andtheannualproductioncapacityaround600,000tons.TheCompany'sproductscanbedividedintothefollowingcategories: a.Coatedivoryboardforcigarettepackagingofcompany’sdominantproduct,iswidelyusedinthehigh-endcigarettepackagingmarket.ThecoatedivoryboardforcigarettepackagingproducedbyHongtaRenhengtakesupadominantpositioninthedomesticcigarettepackagingfield.ItrepresentsthehighestlevelofcoatedivoryboardqualityinChina.IthaswonaGoldenAwardatChina’sInternationalPaper&PaperProductBrandsExhibition,andthetopawardoftheChinesescienceandtechnologycommunity―thefirst-classStateScienceandTechnologyAdvancementAward.Theanti-counterfeitcoatedivoryboardwithcolorfiberandtrue-colorfiberetc.―atechnologythatisindependentlydevelopedbytheCompanyandhasbeengrantedthenationalinventionpatentofChina―hasbeensuccessfullyappliedinthepackagingofaseriesofcigarettesinthe“HongtaGroup”and“HongyunHongheGroup"brandstocombatcounterfeitingfromthepackagingmaterials,reachingthesignificantanti-counterfeitresultsof“easilyidentifiablebutdifficulttocopy”.Currently,anewtypeofivoryboardforcigarettepackagingisatthestageoftrialproduction. b.TheivoryboardsforliquidfoodpackagingisanimportantdevelopmentdirectionoftheCompany.HongtaRenhengisthefirsttobreaktheforeigntechnologicalmonopoly,byindependentlydevelopingthesterilepaperforpackagingofliquidmilk,fruitjuice,herbalteaandotherdrinks,effectivelysubstitutingimportedproducts.Theseriesoffoodpackagingproductssuchasanti-oilfoodgradecoatedboardandhigh-endpapercuphavebeenrecognizedbywell-knowncateringgroupssuchasMcDonald’saftertheyareputintothemarket. c.Thehigh-endcommercialivoryboardpapersaimtomeetthepersonalizeddemandsofcustomers.Theyarewidelyappliedinthe segmentedpackagingmarketfieldslikethehigh-endmedicine,cosmetics,anddailynecessities.Theanti-counterfeitcoatedivorypaperwithpersonalizedidentificationcodeindependentlydevelopedbytheCompanyandforwhichithasbeengrantedtheinventionpatenthasbeensuccessfullyappliedintheanti-counterfeitpackagingofthehigh-endproductslikehigh-endmedicineandcosmetics,whichdoesnotonlysolvethedifficultiesposedbyimpactfromcounterfeitandshoddyproductsforcustomersatthesource,butalsoeffectivelyreducesthecustomer’santi-counterfeitcostsandfakeproductcrackdownexpansesandwinhightrustfromthemarket.B.Papermakingbusiness Chemicalsforpapermakingisbusinesstoextendthepaper-makingindustrychainbytheCompany,theR&D,productionandsalesofwhicharemainlyundertakenbyZhuhaiJinjiChemicalCo.,Ltd.,asubsidiaryoftheCompany,whichmainlysuppliesthecarboxylicbutadiene-styrenelatex,styrene-acryliclatexandcalciumcarbonateofdomesticallyfirst-classquality. C.Colorprintingbusiness ColorprintingbusinessisanimportantindustriallinkagesupportingbusinessoftheCompany,whichcoversdesigningandmanufacturingpackagingmaterialsandprovidingpackagingsolutionsforcustomers.ThisbusinessismainlyundertakenbyHuaxin(Foshan)ColorPrintingCo.,Ltd..TheCompanynowownstheoffset,flexoandintaglioprintingworkshop.Mainproductsincludecolorboxes,variouslabels(paperlabel,in-moldlabelandsticker),barcodeprinting,brochure,booksandperiodicalsinvolvedinwideterminalconsumptionindustry. 3.KeyFinancialInformation (1)KeyFinancialInformationofthePastThreeYears Indicatebytickmarkwhetherthereisanyretrospectivelyrestateddatuminthetablebelow. □Yes√No Unit:RMB 2018 2017 2018-over-2017 2016 change(%) Operatingrevenue(RMB) 3,683,004,543.50 3,583,157,646.37 2.79% 3,607,758,904.01 Netprofitattributabletothelisted -2,814,965.92 18,637,865.97 -115.10% 61,324,088.11 company’sshareholders(RMB) Netprofitattributabletothelisted company’s shareholders before -36,089,244.17 12,337,519.04 -392.52% 27,820,866.82 exceptionalitems(RMB) Netcashgeneratedfrom/usedin 393,465,394.72 -21,910,921.08 1,895.75% 409,111,111.08 operatingactivities(RMB) Basic earnings per share -0.01 0.04 -125.00% 0.12 (RMB/share) Diluted earnings per share -0.01 0.04 -125.00% 0.12 (RMB/share) Weightedaveragereturnonequity -0.14% 0.94%Downby1.08percen 3.13% (%) tagepoints Changeof31 31December2018 31December2017 December2018over 31December2016 31December2017(%) Totalassets(RMB) 5,794,694,744.15 5,426,368,352.69 6.79% 6,182,737,808.93 Equityattributabletothelisted 1,970,946,820.29 1,982,859,436.21 -0.60% 1,980,395,170.24 company’sshareholders(RMB) (2)KeyFinancialInformationbyQuarter Unit:RMB Q1 Q2 Q3 Q4 Operatingrevenue 791,489,361.74 955,666,979.18 966,386,108.12 969,462,094.46 Netprofitattributabletothelisted -10,204,661.39 -5,095,101.40 5,007,777.78 7,477,019.09 company’sshareholders Netprofitattributabletothelisted company’s shareholders before -11,700,027.27 -7,503,716.60 4,637,788.37 -21,523,288.67 exceptionalitems Netcashgeneratedfrom/usedin 25,982,578.72 42,810,407.39 316,624,480.08 8,047,928.53 operatingactivities IndicatebytickmarkwhetheranyofthequarterlyfinancialdatainthetableaboveortheirsummationsdiffersmateriallyfromwhathavebeendisclosedintheCompany’squarterlyorinterimreports. □Yes√No 4.ShareCapitalandShareholderInformationatthePeriod-End (1)NumbersofOrdinaryShareholdersandPreferredShareholderswithResumedVotingRightsaswellasHoldingsofTop10Shareholders Unit:share Number Numberofpreferred Numberofordinary of shareholders with Numberof shareholders at the preferred resumed voting ordinary 13,422month-endpriortothe 13,367sharehold 0rights at the 0 shareholder disclosure of this ers with month-endpriorto s Report resumed thedisclosureofthis voting Report rights Top10shareholders Nameof Natureof ShareholdingTotalshares Sharesinpledgeorfrozen shareholder shareholder percentage heldatthe Privatesharesheld Status Shares period-end FOSHAN HUAXIN State-owned 65.20%329,512,030 329,512,030 DEVELOPMElegalperson NTCO.,LTD. GUOTAI JUNAN Foreignlegal SECURITIES(person 0.63% 3,192,453 0 HONGKONG) LIMITED WU Foreignnatural 0.51% 2,561,991 0 HAOYUAN person CAIYUJIU Domestic 0.31% 1,570,000 0 naturalperson MIUJUN Domestic 0.30% 1,522,800 0 naturalperson NORGES Foreignlegal 0.27% 1,352,720 0 BANK person ESSENCE INTERNATIO NAL Foreignlegal SECURITIES person 0.24% 1,205,252 0 (HONG KONG)CO., LTD. FOSHAN CHANBEN State-owned DEASSET legalperson 0.23% 1,139,420 1,111,959 MANAGEMEN TCO.,LTD KGIASIA Foreignlegal 0.22% 1,111,959 0 LIMITED person PENG Domestic 0.21% 1,053,239 0 RUIHUA naturalperson Related or acting-in-concertItisunknownwhetherthereisamongtheaboveshareholdersanyrelatedoracting-in-concertpartiesamongtheshareholderspartyasdefinedintheAdministrativeMeasuresfortheAcquisitionofListedCompanies. above Shareholders involved inNone securitiesmargintrading(ifany) (2)NumberofPreferredShareholdersandShareholdingsofTop10ofThem □Applicable√Notapplicable NopreferredshareholdersintheReportingPeriod. (3)OwnershipandControlRelationsbetweentheActualControllerandtheCompany 5.CorporateBonds DoestheCompanyhaveanycorporatebondspubliclyofferedonthestockexchange,whichwereoutstandingbeforethedateofthisReport’sapprovalorwereduebutcouldnotberedeemedinfull? No. PartIIIOperatingPerformanceDiscussionandAnalysis 1.BusinessOverviewoftheReportingPeriod IstheCompanysubjecttoanydisclosurerequirementsforspecialindustries? No. A.MarketEnvironment In2018,affectedbyChina-UStradeconflictsandexchangeratefluctuations,macroeconomicindexfellandthepackagingandpaper-makingindustriesthatarehighlyassociatedwithmacroeconomywereimpactedatdifferentdegrees.Themarketenddemands showedgreatdecreaseandthesupplysidecontinuedthetrendof2017withnewincreasesinsteadofanydecreasein2018.Thecapacitythatcouldbeplacedinmarketincreased,whilethewholeindustrywitnessedoversupply.Asaresult,thepaper-makingindustrytookonanoveralltrendofnarrowedprofitmargins. B.CompanyPerformanceduringtheReportingPeriod In2018,basedonthecoreconceptsof“fournews”and“strictness,practicality,transparencyandrapidness”,theCompanystucktothree“consistencies”,aimedat“fivenewforces”,sought“fourbreakthroughs”andcenteredaround“threedecreases,oneincreaseandonecontrol”tokeepstrengtheningpartybuilding,strivetoexplorestrategicreforms,proactivelyexpandexternalmarkets,fullyenhancetheinternalmanagementlevel,continuetorefinetheinstitutionalreform,increaseR&Dinvestmentandseektheincreaseofoperatingprofits. ThecompetitionwasfiercewithunbalancedsupplyanddemanddevelopmentintheivoryboardindustryinwhichtheCompanyisengagedandrelatedindustries.Theproductionandoperationoftheivoryboardsegmentwerebasicallystable.Inthewholeyear,theproductionreached513,000tons,whichwasanincreaseof15%fromthepreviousyear;thesalesvolumereached483,000tons,anincreaseof2.2%fromthepreviousyear;andthepriceroseby6.63%fromthepreviousyear,whichwasanincreaseagainstthetrend.Inrespectofthecostend,affectedbythepersistentlyhighpriceofrawwoodpulp,productioncostsincreasedsubstantially,resultinginbigYOYdecreaseintheprofitsofthepapersegmentandcausinglosses.Intermsoftheprintingsegment,thetotaloperatingrevenueandprofitsincreasedby15%and561%respectivelyfromthepreviousyearasaresultofproactiveattractiontoexternalqualityresourcesanddiversificationoftheindustrialchain.Inthechemicalindustry,latexsalesvolumeincreasedby3%fromthepreviousyearandrevenueroseby2%fromthepreviousyearduetopersistentoptimizationofproductiontechniques,andtheoperatingbudgetgoalestablishedatthebeginningoftheyearwasachieved.Despitethegoodperformanceoftheprintingandchemicalsegments,thewhole-yearbudgetgoalwasnotachievedbytheCompanyasawholeduetothelossesinthepapersegment.For2018,theCompanyrecordedoperatingrevenueofRMB3,683million,anetprofitattributabletothelistedcompany’sshareholdersofRMB-2.81million,andnetcashgeneratedfromoperatingactivitiesofRMB393.47million.Asat31December2018,totalassetsstoodatRMB5,794.69millionandequityattributabletothelistedcompany’sshareholdersofRMB1,970.95million. C.ManagementMeasuresTakenwithintheReportingPeriod a.Reformtheorganizationstructureandoptimizeremunerationdistributionandtalentpromotionmechanism Aimedat“reducinghierarchies,groupingfunctionsandflatteningmanagement”,theCompanyadjusteditsinternalorganizationstructuretoservethepurposeofmatchingstaffabilitieswithpositionrequirementsandestablishedaperformance-basedpositionperformanceandremunerationsystem.ThereformontheCompany’sexistingremunerationsystemwascarriedoutinaccordancewiththemotivatingdistributionprincipleof“focusingonperformance,awardingdiligenceandpunishinglaziness;encouragingcreationandincreasingprofits”.Thecareerpromotionchannelwasestablishedandacomprehensivereviewonthetechnical,skilledandmanagementprofessionalsateachhierarchywouldbeconductedinproportionannuallytoguidestafftobeconcernedwiththeimprovementintheirskillsandabilities,effectivelymotivateandstabilizethestaffteamandservethefuturestrategicdevelopmentoftheCompany. b.Reformthemarketingsystemandinspirethesalespotential Inaccordancewiththethinkingof“neweraandnewmarketing”,theCompanycarriedoutanall-roundreformonitsmarketingsystemtohighlightthecorefunctionofmarketing.Abrandnewperformanceappraisalsystemwasimplementedtoinspirestaffto developneworders;anewmechanismofbottomout,awardingdiligenceandpunishinglazinesswasestablishedtokeepimprovingcorporatecompetitiveness. c.Practicetheconceptof“fournewness”andstrictlycontrolperiodcosts Centeringaroundtheconceptof“fournewness”of“newmeasuresforreforms,newmethodsformanagement,newthinkingforoperationsandnewmechanismsforactivation”,theCompanyimplementedtheoutsourcingofwarehousingandlogisticsinitsfactoryareatosaveandreducelogisticscoststhroughaprofessionalwarehousingandlogisticsoutsourcingservicemode.TheCompanyexpandedfinancingchannelsandfinancingmodestoincreasethefundutilizationefficiencyandcontroltheriskofexchangeratefluctuations,resultinginanobviousYOYdecreaseinfinancialcosts. d.Persistintechnology-orientationandintensifythecreationofprofitsthroughR&D TheCompanyadjustedtheorganizationoftheTechnicalR&DDepartmenttomakethefunctionofnewproductdevelopmentandthefunctionofroutineprocessmaintenancerunindependently.Itpersistedinthegoaloftechnology-orientation,intensifiedthecorefunctionoftechnicalR&Dandmotivatedthevitalityofinnovationandprofitscreation.Sofartherehavebeenmorethantentypesofnewproductprojectsbeingdeveloped,withbreakthroughsmadeinsomeproducts. 2.SignificantChangetoPrincipalActivitiesintheReportingPeriod □Yes √No 3.ProductCategoryContributingover10%ofPrincipalBusinessRevenueorProfit √Applicable □Notapplicable Unit:RMB Operating Grossprofit YoYchangein YoYchangein YoYchangein Productcategory revenue Operatingprofit margin operatingrevenueoperatingprofit grossprofit (%) (%) margin(%) Ivoryboard 2,948,225,373.27149,605,735.68 5.07% 5.72% -57.08% -7.43% Presswork 300,249,287.80 66,689,633.12 22.21% 17.48% 80.41% 7.75% Latex 340,511,671.17 82,087,112.39 24.11% -0.87% 52.93% 8.48% 4.BusinessSeasonalitytowhichSpecialAttentionshouldBePaid □Yes √No 5.SignificantYoYChangesinOperatingRevenue,CostofSalesandNetProfitAttributabletotheListedCompany’sOrdinaryShareholdersorTheirCompositions □Applicable √Notapplicable 6.PossibilityofListingSuspensionorTermination □Applicable √Notapplicable 7.MattersRelatedtoFinancialReporting (1)YoYChangestoAccountingPolicies,AccountingEstimatesorMeasurementMethods √Applicable □Notapplicable 1)TheCompanyprepared2018FinancialStatementsinaccordancewiththeNotesoftheMinistryofFinanceonRevisingandPrintingtheFormatof2018GeneralEnterprisesFinancialStatement(CK[2018]No.15)andtheinterpretationofitandtherequirementsoftheAccountingStandardsforEnterprises.Retroactiveadjustmentwasadoptedforthechangesintheaccountingpolicy.Thesignificantlyaffecteditemsandamountsin2017FinancialStatementsareasfollows: Itemandamountinoriginalfinancialstatement Itemandamountinnewfinancialstatement Notesreceivable 430,699,664.45Notesandaccounts 1,160,829,887.51 Accountsreceivable 730,130,223.06 receivable Interestreceivable 141,388.09Otherreceivables 20,249,531.23 Otherreceivables 20,108,143.14 Notespayable 8,530,196.41Notesandaccounts 349,777,358.80 Accountspayable 341,247,162.39payable Interestpayable 7,865,380.83Otherpayables 50,811,351.70 Dividendspayable 12,116,789.76 Otherpayables 30,829,181.11 Administrativeexpense 125,476,808.28Administrative 120,342,343.74 expense R&Dexpense 5,134,464.54 Cashgeneratedfromother 66,763,328.29Cashgeneratedfrom 81,627,128.29 operatingactivities[Note] other operating activities Cashgeneratedfromother 735,773,715.83Cashgeneratedfrom 720,909,915.83 investingactivities[Note] other investing activities [Note]:thepresentationofactuallyreceivedGovernmentsubsidyofRMB14,863,800.00relatedtoassetsincashflowstatementshallbeadjustedfrom“cashgeneratedfromotherinvestingactivities”to“cashgeneratedfromotheroperatingactivities”. 2)TheMinistryofFinancein2017announcedtheInterpretationtotheAccountingStandardsforEnterprisesNo.9-RegardingtheAccountingTreatmentofNetInvestmentLossesundertheEquityMethod,InterpretationtotheAccountingStandardsforEnterprisesNo.10-RegardingtheDepreciationMethodBasedontheUseofIncomesGeneratedfromFixedAssets,InterpretationtotheAccountingStandardsforEnterprisesNo.11-RegardingtheAmortizationMethodBasedontheUseofIncomesGeneratedfromIntangibleAssetsandInterpretationtotheAccountingStandardsforEnterprisesNo.12-RegardingWhethertheProviderandtheReceiverofKeyManagementPersonnelServiceAreRelatedParties.TheCompanyhasimplementedtheaforementionedinterpretationstotheaccountingstandardsforenterprisessince1January2018andtheimplementationdoesnothaveanyeffectontheopeningfinancialdataoftheCompany. (2)RetrospectiveRestatementsduetoCorrectionofMaterialAccountingErrorsintheReportingPeriod□Applicable √Notapplicable Nosuchcases. (3)YoYChangestotheScopeofConsolidatedFinancialStatements √Applicable □Notapplicable KunshanFocaiPackaging&PrintingCo.,Ltd.hasbeenliquidatedandde-registeredduringtheReportingPeriod,andhasthusno longerbeenincludedintheconsolidatedfinancialstatements.