New Hope Liuhe Co., Ltd.
2022Annual Report
2023-33
April 29, 2023
2022Annual Report
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 that they will be jointly and severally
liable for the legal consequences.
The company’s board chairman Liu Chang, chief accountant Chen Xingyao
and the person in charge of accounting organization (accountant in charge) Su
Xiaodan 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.
I. Animal disease and natural disaster risks
Animaldiseaseisthemainriskfacedinthedevelopmentoflivestockindustry.
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,
directly leading to reduction in yield, increased costs and drop in prices. Second,
the occurrence and prevalence of animal disease on a large scale easily influence
the consumer psychology, lead to shrinking downstream market demands and
affect the feed production and operation. For example, the first outbreak of
African Swine Fever (ASF) in China in middle 2018 caused a significant shock to
the whole industry. Although the industry initially explored the prevention,
control and treatment methods of comprehensive bio-safety prevention and
control combined with precise elimination in 2019 and 2020, ASF experienced a
weakened mutation at the transition from winter and spring between the end of
2020 and beginning of 2021, making it more spread channels, longer incubation
periods, and more difficult to detect and eliminate. In recent years, ASF has
gradually become prevalent, especially in winter and early spring when the
temperature is low, the impact is particularly severe in the north of China.
In terms of the risk posed by natural disasters, the feed and slaughter are
closely related to planting and livestock breeding industry. Therefore natural
disasters such as temperature anomalies, droughts, floods, earthquakes,
hailstorms, and snow disasters can all have adverse effects on industry operations
and development. Natural disasters occurring in the production bases of the
company and surrounding areas may cause substantial damages to production
facilities or equipment. Additionally, these natural disasters and extreme climate
conditions can also drive up the prices of certain feed ingredients and meats. For
example, the continuous high temperature and low rainfall in many provinces in
Southwest China in middle 2022 led to the continuous development of drought in
some regions, which led to the "power shortage" in many provinces in South
China, and had various degrees of impact on planting, breeding and other links
in the industrial chain. Regarding planting, the drought in certain regions
reduced the production of feeds crops, which can impact the price of feed
ingredients and decrease the quality. Regarding breeding, for example,
aquaculture exposed to hypoxia caused by high temperature, which affected the
feeding and growth of fish, shrimp and crabs, and led to production decrease.
Additionally, due to the drought, water shortages and power limitions, the
utilization of breeding facilities and equipment was limited to a certain extent,
resulting losses for breeding enterprises and farmers. These factors also impacted
the feed sales of the company.
Risk countermeasures: to address the risk of animal disease, the livestock
farms plannedandconstructed by the company’s breedingbaseare standardized
and regulated farms. They are staffed with professional breeding technologists
and equipped with strict anti-epidemic measures to effectively prevent and
control the occurrence of epidemic diseases. Over the years, the company has
accumlated valuable experience and developed measures to respond to major
animal diseases. These include adjusting the product structure when necessary,
improveing product quility, actively engaging in extensive market development
and reudcing costs to eliminate the impact of animal disease. Since 2014, the
company has been guiding technicians to better serve farmers by establishing
animal healthcare laboratories in various areas, creating the cloud-based animal
healthcaresystem,and conductingthemonitoringandwarningofanimaldiseases
in real time. In view of ASF outbreak in 2018, the company formulated
comprehensiveandsystematicpreventionandcontrolmeasures,coveringexisting
company-owned pig farms, fattening farms in cooperation with farmers, pig feed
production plant and internal animal healthcare laboratories, with a view to
ensuring proper pre
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