As of April 30, 2009, all the 864 companies listed on the Shanghai Stock Exchange (SSE) have completed the disclosure of the annual reports of 2008, with the total net profit owned by shareholders of parent company in 2008 of RMB731.52 billion, the earning per share (EPS) of RMB0.35, the return on net assets of RMB12%, a year-on-year decrease of 14%, 18% and 20%, respectively, and the basic earning per share excluding extraordinary profit and loss was RMB0.334. The large-cap blue chips still served as the backbone in terms of profitability.
Centralized Profitability for SSE-listed Companies
According to statistics, among the 864 listed companies, 730 made profits and 134 suffered losses, with 68 more money-losing companies compared with that of 2007. Delisting risk alerts were imposed on 19 companies due to losses for two consecutive years, 5 companies were suspended from listing due to losses for three consecutive years, and other special treatments of shares trading were imposed on 2 companies for insolvency.
The SSE-listed companies saw the total assets of around RMB45,437.9 billion, the net assets of around RMB6,032.4 billion and the business income of RMB9,187.8 billion in 2008, a year-on-year increase of 15%, 6% and 18%, respectively. The earning per share was RMB2.89, almost the same as that of 2007.
PetroChina Company Limited, Industrial and Commercial Bank of China Limited, China Construction Bank Corporation, Bank of China Limited, China Petroleum & Chemical Corporation, Bank of Communications Co., Ltd., China Shenhua Energy Company Limited, China Merchants Bank Co., Limited, China United Telecommunications Corporation Limited and China CITIC Bank Corporation Limited, the top ten profit-making companies on the SSE in 2008, achieved RMB519.5 billion net profit owned by shareholders of parent company in total, accounting for 69% of that of all companies. Companies in the SSE 50 Index outperformed the market in general, with the business income of RMB6,079.906 billion and the net profit of RMB641.276 billion, accounting for 66% and 88% of that of all listed companies, respectively, or up 19% and down 8% than that of 2007, respectively. All this demonstrates that the profitability of SSE-listed companies is relatively centralized, and that the large-cap blue chips are the pillar of the market.
All SSE-listed companies saw the net cash flow from operating activities in 2008 of RMB2,476.71 billion and the net cash flow from operating activities per share of RMB1.196, a year-on-year increase of 45% and 39%, respectively, showing that the cash income from selling commodities or providing labor services has not been so much affected under the backdrop of the financial crisis.
Architecture and Other Industries Bounce Back
The international financial crisis in 2008 had great influence on China's economy in terms of the 13 industry categories classified by the China Securities Regulatory Commission. The general industry, manufacturing industry, whole-sale and retail industry, transportation and storage industry as well as the industry of production and supply of electricity, gas and water suffered losses in the 4th quarter, and 8 industries saw negative growth in the net profits in 2008. The transportation and storage industry, the industry of production and supply of electricity, gas and water, manufacturing industry and general industry suffered a decrease of over 50%, yet their business incomes increased except for the general industry (which saw slight drop in business income), revealing that the phenomenon of increasing income without increasing profits was prominent in these industries. Thanks for the supportive state policies, the agriculture, forestry, animal husbandry and fishery industry as well as the architecture industry bounced back from the 4th quarter and kept the growth momentum.
According to the annual reports of 2008 of SSE-listed companies, 276 or 31.94% listed companies saw gains or losses from change in fair value. Among them, 53 companies saw RMB10.016 billion gains from change in fair value, and 223 companies saw RMB56.795 billion losses from change in fair value, adding up to a net loss of RMB46.779 billion, or 6% of the net profit of all SSE-listed companies. Enterprises in the finance, insurance and airline industries witnessed significant changes in fair value. Ping An Insurance (Group) Company of China, Ltd., China Life Insurance Company Limited, Air China Limited, China Eastern Airlines Corporation Limited and China COSCO Holdings Company Limited saw the losses from change in fair value of RMB17.668 billion, RMB8.316 billion, RMB7.707 billion, RMB6.4 billion and RMB5.204 billion, respectively. The gains from change in fair value of listed companies were RMB22.838 billion in 2007, but the change in fair value of the annual reports of 2008 saw a decrease of RMB69.617 billion in the contribution to the profits of all SSE-listed companies.
In 2008, 109 SSE-listed companies changed the accounting firms due to the merger and name change of accounting firms. Same as that of 2007, the non-standard auditor's opinions were issued on 67 companies' annual reports. Unqualified opinions with stressed issues were issued on 44 companies' audit reports, qualified opinions were issued on 13 companies' audit reports (qualified opinions with stress issues were issued on 4 companies' audit reports), disclaimer of opinion were issued on 10 companies' audit reports, accounting for 65.7%, 19.4% and 14.9% of all non-standard unqualified auditor's opinions, respectively. No company received the audit report of adverse opinion.
In terms of profit distribution, 457 out of the 730 profit-making companies put forward the schemes of dividend distribution, bonus shares and capitalized shares. 366 companies paid cash dividend of RMB209.292 billion in total, accounting for 26% of the net profit owned by parent company realized by the 730 profit-making companies, which was RMB806.664 billion. 91 companies brought forth the profit distribution schemes via bonus shares and capitalized shares, boasting a high proportion of bonus shares or capitalized shares. 45 companies offered more than 5 bonus shares or capitalized shares for every 10 shares, 18 came up with the schemes of 10 bonus shares or capitalized shares for every 10 shares, and Zhongjin Gold Corporation, Limited and V V Food & Beverage Co., Ltd. even raised the record-high schemes of 12 shares capitalized for every 10 shares.
Quality of Information Disclosure Gets Improved
According to the requirements in the notice of annual reports of 2008, the SSE mandated the disclosure of the self-appraisal reports on internal control and the reports on social responsibility for a total of 258 companies of three kinds, i.e. the constituent companies in the SSE Corporate Governance Sector, the companies that issue foreign capital stocks listed abroad and the financial companies. As of April 30, 343 and 288 listed companies had actually disclosed their self-appraisal reports on internal control and reports on social responsibility, respectively. Besides, a number of companies disclosed the aforesaid two kinds of reports voluntarily, among which 194 companies voluntarily engaged accounting firms to issue verification and appraisal opinions on their self-appraisal reports on internal control. Obviously, with several years' efforts, the risk control consciousness and social responsibility awareness of the SSE-listed companies have been further improved.
Besides, the SSE required the listed companies to submit their XBRL instances simultaneously during the disclosure of the periodical reports of 2008 for the first time, and included the aforesaid XBRL instances as part of the mandatory disclosure. As of April 30, all of the 864 companies had disclosed their XBRL instances on the website of the SSE as scheduled. The advantage of XBRL adoption lies in that one input enables infinite usage. Meanwhile, the automatic check on articulation inherent in XBRL avoids the occurrence of the unmalicious false information and errors to a large extent. Together with the interactive characteristic offered by data in XBRL, we can use one information source and make comprehensive analyses and comparisons on the information despite the different needs of regulators, investors, analysts, financial reporters or even enterprises themselves towards financial data. Consequently, the accuracy and creditability of the data get improved from the very beginning, the transparency of the information in the overall capital market is greatly increased, and the operation efficiency of the capital market is promoted. The popularization and use of XBRL will improve the quality of the information disclosure by the listed companies and upgrade the internal governance and internal process efficiency of the listed companies to an unimaginable level.
Relevant official of the SSE also expressed that it was the first time that the periodical reports had all been disclosed as scheduled, which should be attributed to the great importance attached by the listed companies and the construction of the annual report disclosure system. It is learnt that most listed companies have established the annual report system for independent directors and the annual report working rules for Audit Committee. Prior to the disclosure of the annual report, the SSE successively held 4 training classes to provide necessary instructions for the listed companies on the disclosure of the annual reports. During the disclosure of the annual reports, the SSE released 4 memoranda on annual report work in succession to address the problems in the disclosure of the annual reports promptly. As for some significant issues, the SSE communicated with relevant authorities in time to ensure the effective implementation of the new accounting standard.
So far, the SSE has completed the after-action check on some annual reports of the listed companies, and issued 239 letters of opinions on after-action check on annual reports, with other reviews being conducted. It is predicted that the review will be finished at the end of May.
Quarter-on-quarter Performance Surge in 1st Quarter
Moreover, 864 SSE-listed companies disclosed their 1st quarter reports of 2009 before April 30, 2009 as scheduled. According to the statistics, 637 companies made profits and 227 companies suffered losses in the 1st quarter reports of 2009, with the basic earning per share of RMB0.09 and the return on net assets of 3%, both decreasing 25% than the same period of last year, yet a surge compared with the basic earning per share of RMB0.024 and the return on net assets of 0.8% in the 4th quarter of 2008.