New Hope Liuhe Co., Ltd
2021Annual Report
2022-44
April 2022
Section 1 Important note, table of contents and definitions
The board of directors, board of supervisors, directors, supervisors and
senior executives of the company warrant that the contents of this annual report
are true, accurate and complete and free of any false recordings, misleading
statements or significant omissions and will be jointly and severally liable for the
legal consequences.
The company’s CEO Liu Chang, chief accountant Chen Xingyao and person
in charge of accounting organization (accountant in charge) Chen Jing state that
the financial report in the annual report is true, accurate and complete.
All directors of the company attended the board meeting deliberating this
report.
The company is required to comply with disclosure requirements for
livestock, poultry and aquaculture industries in the “Self-regulatory Guideline
No.3 of Shenzhen Stock Exchange for Listed Companies—Industry Information
Disclosure”.
I. Epidemic and natural disaster risks
The animal epidemic disease is the main risk faced in the development of
livestock industry. There are three kinds of risks arising out of the occurrence of
epidemic disease. First, the occurrence of epidemic disease is likely to result in
death of livestock, reduction in yield, rising costs and drop in prices. Second, the
occurrenceandprevalenceof epidemic diseaseon alarge scale easily influence the
consumer psychology, lead to shrinking downstream market demands, and also
affect the feed production and operation. Third, after the outbreak of some
infectious epidemic diseases endangering the public health and safety, the
government will take lockdown and other measures to contain the spread of
epidemic disease. These epidemic containment measures will seriously hinder the
transportation of feed, live livestock and poultry, and the workers returning to
work. In addition, the outbreak of infectious epidemic diseases will force most
catering enterprises to stop doing business, some agricultural product markets to
shutdown,andconsumers to reduceoutdoorsactivities,resultinginreducedmeatconsumption.Forexample,theAfricanSwineFever(ASF),whichhasbeenlasting
for years, has characteristics such as long latency and high mortality after onset
of the disease. New variants of ASF have been emerged constantly. No effective
vaccines have been developed successfully since its outbreak. Thus ASF has been
producing persistent, enormous impact on the entire industry in recent years. In
late 2021 and early 2022, the attenuated-strain ASF bounced back once again,
especially hitting Hebei, Shandong and Henan. The COVID-19 outbreak at the
beginning of 2020 also posed daunting challenges to the farming and livestock
industries. When sporadic outbreaks of the pandemic occur across the country,
the anti-epidemic measures such as lockdown and delay in return to work led to
unavailability of feed to farms and livestock farmers, newborn poultry and pigs
nowhere to sell, and inability to slaughter livestock and poultry. Lockdown
measures in urban areas would also affect demands for meat consumption.
Intermsofthenaturaldisasterrisk, thefeedandslaughterarecloselyrelated
to planting and livestock breeding industry, so the natural disasters such as
temperature anomalies, drought, flood, earthquake, hail, and snow disaster will
all adverselyaffecttheindustry operationanddevelopment.Thenaturaldisasters
occurring on the production bases of the company and surrounding areas may
cause substantial damages to production facilities or equipment, and the natural
disasters and extreme climate may also drive the prices of some feed ingredients
and meats up. For example, serious rainstorms broke out in many places of
central, east and southwest China in summer of 2021, leading to floods and
landslides. They adversely affected the planting, breeding, farm produce logistics,
project construction and meat prices along the industry chain to varying degrees;
in terms of planting, continuous catastrophic floods hitting some areas will result
in decreased output of feed ingredients, thus impacting the feed ingredient prices,
while at the same time decreasing the quality of ingredients; in terms of breeding,
flood might cause pathogenic microorganisms buried in the land surrounding
breeding farms to be exposed in air and drinking water, and will result in spread
of pathogenic microorganisms and trigger epidemic diseases; floods would also
destroy breeding facilities and equipment, and wash away livestock, poultry or
aquatic products, causing losses to farming enterprises and farmers and thus
affecting feed sales of the company; in terms of logistics, roads are flooded and
roadbeds and road surfaces are destroyed wherever flood sweeps, forcing the
freight costs of raw materials, feed, finished products and breeding pigs to rise
and the transport capacity down, causing pressures on th
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