New Hope Liuhe Co., Ltd
2021 Semiannual Report
2021-99
August 2021
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 semiannual
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 legalconsequences.
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 semiannual report is true, accurate and
complete.
All directors of the company attended the board meeting deliberating this
report.
Investors are advised to particularly note that the annual financial budget,
business plan and business objectives of the company for 2021 don’t represent
the profit forecast of the company for 2021 and that whether they can be
realized depends on many factors such as changed market condition and level of
effort of the operating team, with huge uncertainties.
The company shall comply with the d isc losure requirements set forth in
“Shenzhen Stock Exchange’s Industry Information Disclosure Guidance No.
1---Listed Companies Engaged in Livestock, Poultry and Aquaculture
Businesses”.
I. Epidemic and naturaldisaster risks
The animal epidemic disease is the main risk faced in the development of
livestock industry. There are three kinds of risks aris in g out of the occurrence of
epidemic disease. First, the occurrence of epidemic disease is likely to result in
death of livestock, and leads directly to the reduction in yield, rising costs and
drop in prices. Second, the occurrence and prevalence of epidemic disease on a
large scale easily influence the consumer psychology, lead to shrinking market
demand, and 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, animalhealthcare products and live livestock, and the
workers returning to work, and have a great impact on the production and
operation of breeding industry. In addition, the outbreak of infectious epidemic
diseases will force most catering enterprises to close business, some agricultural
product markets to shut down, and consumers to reduce shopping activities
outdoors, resulting in reduced meat demand and consumption. For example, the
African Swine Fever (ASF) with an enormous impact on the entire industry
broke out in 2018. As the ASF is characterized by long latency and high
mortality after onset of the disease, and the effective and reliable vaccine has not
yet been developed successfully, coupled with the fact that it was also the
concentrated outbreak on a large scale in China for the first time, both the
large-scale breeding enterprises and small farmers lacked effective containment
measures at the onset of epidemic, thereby suffering losses to varying degrees.
From the late 2020 to the first quarter of 2021, attenuated ASF virus bounced
back once again, especially hitting Hebei, Shandong, Henan and other places,
and once again causing prevalent effects to farming companies and farming
households in these areas.
The COVID-19 outbreak at the beginning of 2020 also posed daunting
challenges to the livestock and poultry breeding industry in China. The
anti-epidemic measures such as lockdown, delay in return to work, suspension of
live poultry trading, and shutdown of slaughter houses led to unavailability of
feed to farms and livestock farmers, newborn livestock nowhere to sell, inability
to slaughter livestock and poultry, and difficulties to conduct breeding
production activities normally. After entry into 2021, despite the stable epidemic
containment situation in China, scattered episodes of the epidemic across the
country and regional lockdown policies would also cause hindrances to
movement of personneland materials related to business operations.
In terms of the natural disaster risk, the feed and slaughter are closely
related to planting and livestock breeding industry, so the natural disasters such
as temperature anomalies, drought, flood, earthquake, hail, and snow disaster
will all adversely affect the industry operation and development. The natural
disasters 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 flood disasters broke out in
many places of South China in 2020, adversely affecting the planting, breeding,
farm p
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