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Supplementary Announcement of Hunan Jiangnan Hongjian Co., Ltd. on 2013 Annual Report
The company and all members of the board of directors guarantee the truthfulness, accuracy and completeness of the contents of the announcement, and there are no false records, misleading statements or major omissions.
The Shenzhen Stock Exchange is concerned about the following issues in the post-event review of our 2013 annual report:
In 2013, Zhongnan Diamond Co., Ltd. (hereinafter referred to as “Zhongnan Diamondâ€), a wholly-owned subsidiary of the company, achieved a net profit attributable to owners of the parent company of RMB 395,634,400 and completed 102.38% of the performance commitments during major asset restructuring. The gross profit margin of Zhongnan diamond products increased compared with the previous year; the balance of inventory goods increased by 46.74% compared with the beginning of the period, reaching 567 million yuan; the inventory was issued using the first-in, first-out method, and the unit inventory cost was higher than the unit sales in the case of falling raw materials and labor costs. Cost, need to explain the rationality; management expenses decreased by 50 million yuan, a decrease of 25%.
According to the requirements, the following supplementary notes are as follows:
1. Description of the increase in the gross profit margin of Central and South diamond products compared with the previous year
The main products of Zhongnan Diamond and its subsidiaries are synthetic diamond, iron-nickel composite board and cubic boron nitride. The increase in gross profit margin of these products compared with the previous year is caused by factors such as production, sales price and unit cost. In 2013, the sales cost of Zhongnan diamond synthetic diamond decreased compared with the previous year, mainly due to the expansion of the scale effect brought by the increase in production, diluting the fixed cost in the unit production cost, and the raw material nickel metal constituting the powder core of the main raw material of synthetic diamond. The procurement cost of powder, metal iron powder and alloy powder decreased; continuous process improvement reduced the consumption of powder core block and top hammer; the automatic upgrade of production line reduced unit labor cost; although the macroeconomic situation continued to be sluggish, terminal demand Weakened, the unit price of synthetic diamonds has declined. However, as the unit production cost decreased more than the unit sales price, the gross profit margin in 2013 increased compared with 2012.
The gross profit margin of iron-nickel composite board increased by 2.24% compared with 2012, mainly due to the increase in average selling unit price and the reduction of unit sales cost.
The gross profit margin of cubic boron nitride decreased slightly compared with that of 2012, but it accounted for a small proportion of the main business income, and had a limited impact on the overall gross profit margin of Central South Diamond. 
Second, the situation of the increase in the balance of inventory goods
As of the end of 2013, the balance of Jiangnan Red Arrow stocks was 567 million yuan, an increase of 181 million yuan from the previous year of 386 million yuan, an increase of 46.74%, of which zhongyang diamond stocks were 496 million yuan, an increase of 162 million yuan from the previous year's 334 million yuan. 48.5%. main reason:
As the macroeconomic situation continues to be sluggish and terminal demand is weakening, sales growth of synthetic diamonds, especially low-grade synthetic diamonds, is slowing. In 2013, the actual production of synthetic diamonds in Zhongnan Diamond increased by 600 million carats compared with the previous year, an increase of 11% year-on-year, but the actual sales volume only increased by 100 million carats. The increase in inventory is the main reason for the change in inventory amount.
The iron-nickel composite board is an accessory product produced during the synthetic diamond synthesis. In 2013, Zhongnan Diamond actually produced 4,366 tons of iron-nickel composite board. As the price of nickel is greatly affected by the economic situation, in order to avoid the loss caused by the sale of iron-nickel composite board in the economic downturn, Zhongnan Diamond has increased the holding of this part of the product, resulting in a year-on-year increase in the end-of-year inventory of iron-nickel composite board. .
Third, the 2013 annual report of the company's inventory issued using the "first in, first out" accounting policy is a clue
The 2013 annual financial statements prepared by Hunan Jiangnan Hongjian Co., Ltd. (hereinafter referred to as “Jiangnan Hongjian Companyâ€) and the notes issued in the notes disclose the accounting policy for the issuance of inventories as “first in, first outâ€. This disclosure is a typo. It should be: “The valuation of raw materials, stocks, and issued commodities in stocks is “weighted average method at the end of the month.†The turnover materials are issued for valuation and are subject to amortization method. They are accounted for at the end of the product period based on the cost of raw materials.â€
This typo has no effect on the financial status, operating results and cash flow of Jiangnan Hongjian Company.
Dahua Certified Public Accountants (Special General Partnership) “Description of the Method of Valuation of Inventory in Notes to the 2013 Financial Report of Hunan Jiangnan Red Arrow Co., Ltd.†(Dahua Hanzi [2014] 002403) believes that the above is true. The accounting policy for the issuance of inventory issued by Jiangnan Hongjian Company is in line with the actual situation of the enterprise and has been consistently implemented. The above accounting policies regarding inventory can objectively, truthfully and accurately reflect the issuance cost and balance cost of the inventory of Jiangnan Hongjian Company.
Fourth, the inventory unit inventory cost is higher than the unit sales cost
The company's inventory commodities are subject to the “weighted average method at the end of the month†to issue the pricing accounting policy. According to the weighted average method at the end of the month, the sales cost of the Zhongnan diamond unit is completely consistent with the unit inventory cost. If the annual sales cost of the unit is used, the unit sales cost is higher than the unit stock cost at the end of the year. Due to the clerical error of the company's inventory accounting policy, a logical error occurs between the relevant project data.
V. Reasons for the significant decrease in administrative expenses compared to the same period of last year
The year-on-year decrease in the management fee of Zhongnan Diamonds in 2013 was mainly due to the decrease in cost-based R&D expenditure and the decrease in repair costs.
In 2013, the expenditure on research and development of diamonds in Central and South China was 41.75 million yuan, a decrease of 33.96 million yuan from the previous year of 75.71 million yuan. The 2012 R&D expenditures are all accounted for in the management expenses due to non-compliance with the capitalization confirmation conditions. In the 2013 R&D expenditures, expenditures eligible for capitalization are included in “intangible assets†and “development expendituresâ€. The above accounting methods have been audited and confirmed by accounting firms.
The cost of repairs was 55.56 million yuan, a decrease of 27.94 million yuan from the previous year's 83.5 million yuan. The main reason was to continuously increase equipment renewal, replacing equipment with high failure rate and high consumption with advanced and intelligent equipment, resulting in equipment spare parts loss and other equipment. Daily maintenance costs are reduced.
Special announcement.
May 30, 2014
Jiangnan Red Arrow: Supplementary Announcement on the 2013 Annual Report
Abstract Stock code: 000519 Securities abbreviation: Jiangnan Red Arrow Announcement No.: 2014-38 Hunan Jiangnan Red Arrow Co., Ltd. Supplementary Announcement on 2013 Annual Report The company and all members of the Board of Directors guarantee the truthfulness and accuracy of the announcement.
Stock code: 000519 Securities abbreviation: Jiangnan Red Arrow Announcement No.: 2014-38 Hunan Jiangnan Red Arrow Co., Ltd. Board of Directors