Ouhua Energy : Annual Reports And Related Documents

Magnifying Opportunities,

ENHANCING CAPABILITIES

Annual Report 2021

O U R

MISSION

WE BELIEVE IN PROVIDING SAFE AND ENVIRONMENTALLY-FRIENDLY ENERGY, AND SO WE ENVISION TO ESTABLISH AN INTERNATIONALLY RENOWNED ENTERPRISE, AND BUILD AN INTEGRATED ENERGY BRAND FOR A WORLD OF SUSTAINABLE ENERGY.

CONTENTS

01	02	04
Corporate Profile	Chairman's Message	主席致辞
08	10	12
Financial Highlights	Operations Review	Consolidated Statement
of Changes in Equity
16	17

07

Corporate Structure

14

Board of Directors

Senior Management

Financial Contents

Ouhua Energy Holdings Limited ("Ouhua Energy" or the "Company", and together with its subsidiaries, the "Group") is one of the leading importers of liquefied petroleum gas ("LPG") in the People's Republic of China ("PRC") in terms of quantity. Ouhua Energy is strategically based in Chaozhou City, Guangdong Province, the "Ceramics Capital" of the PRC. Production of ceramics relies heavily on LPG.

CORPORATE PROFILE

Ouhua Energy captures about 40% of the local market share. In addition to importing most of the raw materials, namely butane and propane, from overseas suppliers and processing these into LPG, it also directly purchases LPG from domestic refineries for sale to customers across the PRC, and exports to Vietnam, the Philippines and Thailand in Southeast Asia. Ouhua Energy is equipped with a comprehensive suite of production facilities, including over 100,000 cubic metres of LPG storage facilities, and a current annual LPG production capacity of 900,000 tonnes. These facilities are well located in a prime waterfront area supported by wharves that enable the Group to serve diverse markets beyond a geographical radius of 500 kilometres by land and 300 kilometres across the sea.

As a licenced tier-one LPG distributor, the Group is focusing its efforts on developing the LPG retail chain, including the construction of urban gas pipeline system. Moving towards a green, low- carbon emission economy environment, LPG is a clean energy and can be widely used in commercial vehicles. The Group is also committed to exploring the market in LPGfilling gas stations and the production of dimethyl ether ("DME"), to further integrate advanced technology into its operations and extend the product chain which utilises the same raw materials to ensure that it retains a competitive position in imports.

The strong emphasis on product quality, safety, embedded technologies and environmental practices has cemented the Group's distinguished reputation and contributed to a strong customer base. The core values of the business are to seize opportunities which are before us, earn and maintain the trust of our clients, establish a high-value market position, innovate and achieve sustainable development.

OUHUA ENERGY HOLDINGS LIMITED | Annual Report 2021

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CHAIRMAN'S

MESSAGE

DEAR SHAREHOLDERS,

It is my pleasure to present to you the Group's performance for the financial year ended 31 December 2021 ("FY2021"). FY2021 has been another year of living with and adapting to the ongoing Novel Coronavirus ("COVID-19"), as governments around the world roll out vaccination schemes and gradually open up borders in hopes of pushing their economies and businesses towards recovery. Despite the mutation of new variants of the virus continue to be a concern and to pose uncertainties for business operations, we have continued to improve our operational effectiveness throughout the financial year, and I am pleased to report that Ouhua has maintained our trend of improving in our performance from the previous reporting period.

BUSINESS REVIEW

For the financial year under review, our revenue increased by approximately 54.0% or RMB 1,250.2 million from RMB 2,313.3 million in FY2020 to RMB 3,563.5 million in FY2021. This increase was mainly the result of a significant rise in the average price of liquefied petroleum gas ("LPG"), from RMB 3,116 per ton in FY2020 to RMB 4,449 per ton in FY2021, and a relatively stable sales volume of LPG which saw a slight increase from 794,386 tons in FY2020 to 802,660 tons in FY2021 following the recovery of China's market in 1H2021.

In line with the Group's rise in revenue, gross profit surged by RMB 64.8 million or 97.6% from RMB 66.4 million in FY2020 to RMB 131.3 million in FY2021. Similarly, gross profit margin improved from 2.9% in FY2020 to 3.7% in FY2021, spurred by the rise

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CHAIRMAN'S MESSAGE

in demand for clean energy in the Chinese market resulting from the PRC's carbon reduction and carbon neutrality policy. After deduction for costs and taxes, the Group yielded a net profit of RMB 33.0 million for FY2021, compared with the net profit of RMB 10.6 million in FY2020.

As the green economy continues to pick up and drive the demand for low-carbon alternatives, we expect opportunities to arise for us to meet such demands and maintain our competitive edge. In December 2021, our wholly-owned subsidiary, Chaozhou Ouhua Energy Co., Ltd ("Chaozhou Ouhua") entered into a sale and purchase agreement with Chaozhou Huaxin Energy Co., Ltd ("Chaozhou Huaxin") to acquire storage facilities consisting of two sets of heating boilers and one set of heat conduction oil tank and pump equipment. The transaction will increase the capacity of our storage facilities in order to manage the anticipated demand for LPG in the cold season, which coincides with the peak business season. Furthermore, the capital expenditure from this acquisition will reduce the tax burden on Company under the prevailing tax incentive schemes in the PRC, which will in turn benefit our cash position.

OUTLOOK FY2022

Thanks to the continued effectiveness of China's pandemic containment measures, the spread of the virus has largely been brought under control. According to the latest forecast by the International Monetary Fund, China's GDP is expected to grow 4.8% on a year- on-year basis. As the demand for clean energy shows signs of a clear rebound after having been dampened by the pandemic, China has pledged to reduce carbon emissions and achieve carbon neutrality, which we expect will boost the role of and demand for LPG in a green low-carbon economy. Given the direction that

China's economy has been taking towards a green economy, we are optimistic that we can leverage on our LPG trade to improve our profits and achieve stable growth in the Chinese market.

While we are optimistic of the increasing relevance of one of our key products, we are also aware of the continuation of global inflation. Taking geopolitical tensions, including the recent Ukraine crisis, into consideration, we have seen the rise in oil prices in the domestic and overseas market, which will further drive up inflation and negatively impact the global economy while it is in the process of recovering. The challenges to the global economy over the course of the past few years continue to serve as a reminder for us to remain vigilant in order to respond quickly and appropriately in times of crises. In light of such challenges, our management continues to hone our skills in risk management and actively seek out opportunities to diversify our business portfolio to ensure Ouhua's sustainability and longevity.

ACKNOWLEDGEMENTS

On behalf of the Board and management, I would like to express my heartfelt appreciation to our valued staff, customers, business partners and all other stakeholders for their unwavering support, trust and confidence in seeing us through another year. I am confident that our efforts in optimizing our operational efficiency and adjusting our responses to the evolving situation to the best of our ability will see us through any challenges in the future and allow us to deliver continually improving earnings and value.

LIANG GUO ZHAN

Executive Chairman

Ouhua Energy Holdings Limited

OUHUA ENERGY HOLDINGS LIMITED | Annual Report 2021

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