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NewHopeLiuheCo,.LtdDisclosureStatementoftheEnglishVersionSemiannualReportTheEnglishversionofthesemiannualreportwascarriedoutbythecompany'sOfficeoftheBoardofDirectors,withatotalofmorethan230thousandChinesecharacterstranslated.Asthesemiannualreportinvolvesmanyprofessionaltermstranslationofagricultureindustryandfinancialaccounting,thecompanyhasmadegreateffortstoensuretheaccuratetranslationoftheoriginalcontent,buttheremaystillbesomeinadequacies.ThisreportispreparedinChineseandEnglishrespectively.IncaseofanyambiguityintheunderstandingoftheChineseandEnglishversions,theChineseversionshallprevail.Readersofthisreportarewelcometosendanemailtothecompany'sOfficeoftheBoardofDirectors(000876@newhope.cn)toinquiryandcommunicateifencounteringproblemsorincomprehensiblecontents,andatthesametimehelpthecompanyimprovethetranslationqualityofsubsequentreports.Wesincerelywelcomeyourcriticism,correction,andsuggestions.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd2NewHopeLiuheCo.,LtdSemiannualReport20202020-109August2020Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd3Section1Importantnote,tableofcontentsanddefinitionsTheboardofdirectors,boardofsupervisors,directors,supervisors,andseniormanagersofthecompanywarrantthatthecontentsofthissemiannualreportaretrue,accurateandcompleteandfreeofanyfalserecords,misleadingstatementsormaterialomissions,andtheybearthejointandseverallegalliabilities.Thecompany’sCEOLiuChang,thechiefaccountantWangShuhuaandthechiefofaccountingorganization(accountingsupervisor)ChenJingstatethattheyguaranteetheauthenticity,accuracyandintegrityoffinancialreportinthissemiannualreport.Allthedirectorshaveattendedtheboardmeetingtodeliberatethisreportinperson.The2020annualfinancialbudget,businessplan,andbusinessobjectivesofthecompanydonotrepresenttheprofitforecastofthecompanyfor2020andtheirrealizationdependsonvariousfactorssuchaschangeinmarketconditionsandeffortlevelofmanagementteam,subjecttogreatuncertainties,towhichtheinvestorsareadvisedtopayspecialattention.Thecompanyshallcomplywiththedisclosurerequirementssetforthin“ShenzhenStockExchange’sIndustryInformationDisclosureGuidanceNo.1---ListedCompaniesEngagedinLivestock,PoultryandAquacultureBusinesses”.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd4I.EpidemicandnaturaldisasterrisksTheanimalepidemicdiseaseisthemainriskfacedinthedevelopmentoflivestockindustry.Therearethreekindsofrisksarisingoutoftheoccurrenceofepidemicdisease.First,theoccurrenceofepidemicdiseaseislikelytoresultindeathoflivestock,andleadsdirectlytothereductioninyieldanddropinprices.Second,theoccurrenceandprevalenceofepidemicdiseaseonalargescaleeasilyinfluencetheconsumerpsychology,leadtoshrinkingmarketdemand,andalsoaffectthefeedproductionandoperation.Third,aftertheoutbreakofsomeinfectiousepidemicdiseasesendangeringthepublichealthandsafety,thegovernmentwilltakelockdownandothermeasurestocontainthespreadofepidemicdisease.Theseepidemiccontainmentmeasureswillseriouslyhinderthetransportationoffeed,animalhealthcareproductsandlivelivestock,andtheworkersreturningtowork,andhaveagreatimpactontheproductionandoperationofbreedingindustry.Inaddition,theoutbreakofinfectiousepidemicdiseaseswillforcemostcateringenterprisestostopdoingbusiness,someagriculturalproductmarketstoshutdown,andconsumerstoreduceshoppingactivitiesoutdoors,resultinginreducedmeatdemandandconsumption.Forexample,theAfricanSwineFeverwithanenormousimpactontheentireindustrybrokeoutin2018.AstheASFischaracterizedbylonglatencyandhighmortalityafteronsetofthedisease,andtheeffectiveandreliablevaccinehasnotyetbeendevelopedsuccessfully,coupledwiththefactthatitwasalsotheconcentratedoutbreakonalargescaleinChinaforthefirsttime,boththeFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd5large-scalebreedingenterprisesandsmallfarmerslackedeffectivecontainmentmeasuresattheonsetofepidemic,therebysufferinglossestovaryingdegrees.ThedatareleasedbyNationalBureauofStatisticsshowsthatthemarketableswinelivestockinChinain2019fellby21.6%year-on-year,andtheswinelivestockonhandinChinaattheendof2019fellby27.5%year-on-year.Furthermore,theCOVID-19outbreakatthebeginningof2020alsoposeddauntingchallengestoanti-riskcapabilitiesoflivestockbreedingindustrychainin.Theanti-epidemicmeasuressuchaslockdown,delayinreturntowork,suspensionoflivepoultrytrading,andshutdownofslaughterhousesledtounavailabilityoffeedtofarmsandlivestockfarmers,newbornlivestocknowheretosell,inabilitytoslaughterlivestockandpoultry,anddifficultiestoconductbreedingproductionactivitiesnormally.TheCOVID-19alsoforcedthenewpigfarmsofpigfarmingenterprisestobegenerallyoutofoperationandrenderedfarmerslessmotivatedtorestocklivepigs,ultimatelyhinderingtherecoveryprocessoflivepigproductioncapacityIntermsofthenaturaldisasterrisk,thefeedandslaughterarecloselyrelatedtoplantingandlivestockbreedingindustry,sothenaturaldisasterssuchastemperatureanomalies,drought,flood,earthquake,hail,andsnowdisasterwillalladverselyaffecttheindustryoperationanddevelopment.Thenaturaldisastersoccurringontheproductionbasesofthecompanyandsurroundingareasmaycausesubstantialdamagestoproductionfacilitiesorequipment,andthenaturaldisastersandextremeclimatemayalsodrivethepricesofsomeFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd6feedstuffandmeatsup.Forexample,seriousflooddisastersbrokeoutinmanyplacesofSouthChinainsummerof2016,adverselyaffectingtheplanting,breeding,farmproducelogistics,projectimplementationandmeatpricesalongtheindustrychaintovaryingdegrees;intermsofplanting,continuouscatastrophicfloodshittingsomeareaswillresultindecreasedoutputoffeedstuff,thusimpactingthefeedstuffprices,whileatthesametimedecreasingthequalityofrawmaterials;intermsofbreeding,floodmightcausepathogenicmicroorganismsburiedinthelandsurroundingbreedingfarmstobeexposedinairanddrinkingwater,andwillresultinspreadofpathogenicmicroorganismsandtriggerepidemicdiseases.Inaddition,severalprovinceshardesthitbythefloodsaremajoraquaticbreedingareasinChina,wheretheimpactoffloodsnotonlywoulddestroyfisheryproductionequipmentbutalsoishighlylikelytowashofffish-barringfacilitiesandbringawayfishfriesandadultfishes,causinglossestoeconomicincomeoffarmersandthusaffectingfeedstuffsalesofthecompany;intermsoflogistics,roadsarefloodedandroadbedsandroadsurfacesdestroyedwhereverfloodsweeps,forcingthefreightcostsofrawmaterials,feed,finishedproductsandbreedingpigstoriseandthetransportcapacitydown,causingpressuresonthesupplychainofthecompany;intermsofprojectimplementation,continuousrainstormswillalsocausepartofcapitalinvestmentconstructionprojectsofthecompanytosuffertemporaryshutdown,affectingtheconstructionschedule;intermsofmeatprices,floodwouldalsoimpactthemeatsupplyanddirectlycontributedtotherisingpricesofpigsinFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd7JuneandJuly,whilethegapinmeatpricesbetweenaffectedareasandunaffectedareaswasgrowing,thusleadingtoincreasedallocationandtransportoflivepigs,andresultinginspreadofepidemicandaffectingthesubsequentdelayinrecoveryofthepigcycle.Riskcountermeasures:Inthefaceofanimalepidemics,thelivestockfarmsplannedandconstructedbythecompany’sbreedingbasearenormalizedandstandardizedfarmsstaffedwithprofessionalbreedingtechnologistsandequippedwithstrictanti-epidemicmeasurestoeffectivelypreventandcontroltheoccurrenceofepidemicdiseases.Thecompanyhasalsosummarizedsomeexperienceandmeasuresrespondingtomajorepidemicdiseasesthroughyearsofexplorationandaccumulation,whichallowthecompanytoeliminatestheimpactofvariousepidemicsbyadjustingtheproductmixwhenappropriate,improvingtheproductquality,conductingdeepmarketdevelopmentactivelyandreducingthecosts.Since2014,thecompanyhasbeenguidingtechnicianstobetterservefarmersbyestablishinganimalhealthcarelaboratoriesinvariousareas,creatingthecloud-basedanimalhealthcaresystemandconductingthemonitoringandwarningofepidemicsanddiseasesinrealtime.Inparticular,inviewofASFoutbreakin2018,thecompanyformulatedall-roundandsystem-widepreventionandcontrolmeasures,coveringexistingself-runpigfarms,fatteningfarmsincooperationwithfarmerhouseholds,newpigfarmsofthecompany,pigfeedproductionunitsandinternalanimalhealthcarelaboratories,withaviewtoensuringproperpreventionandcontrolatthesourceFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd8ofanimalnutrition.Atthesametime,thecompanyactivelytakespartinindustrycommunication,andexploredmoreeffectivepreventionandcontrolmethodstogetherwithitspeers.Currently,thebio-safetyandepidemicpreventionsystem,survivalrateoflivepigs,go-to-marketrateandotherindicatorsofthecompanyareamongthetopintheindustry.InresponsetotheCOVID-19,thecompanylostnotimetoestablishanepidemiccontainmentleadershiporsupervisionteam,formulatedandcarriedoutvariouscontainmentpoliciesandconductedemergencydispositioninacoordinatedmanner.Secondly,thecompanyactivelycommunicateswiththegovernmentatalllevels,coordinatesthetransportationofgoodssuchaslivestockproducts,andrawandauxiliarymaterialsoffeedandproducts,securesvehiclepasses,andimplementsthegreenchannelpolicyenactedbythegovernmentatalllevels.Thirdly,thecompanyensuressufficientprocurementfromfeedplantsandproductionsupplythroughregion-widecoordination,strengthensinternalsupportforpoultryindustryintegration,arrangesitsemployeestoreturntoworkrapidlyandorderly,contributestotheadequatesupplyofdailynecessitiesacrossthecountry,adjustsitsfoodindustrystrategyinrealtimeandexpandssalesthroughsupermarketchannelandonlinechannel.Fourthly,inlightofitsbusinesspractices,thecompanycompiledtheepidemiccontainmentmanual,publisheddocumentssuchastechnicalguidanceonemployeepreventionandcontrolandquarantineandguidanceonengineeringcontrolamidepidemics,makestheepidemicpreventionarrangementsinaFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd9targetedmannerandstrengthensemployeesafetyandprotection.Inresponsetonaturaldisasters,althoughunabletoruleoutthepossibilitythatseriousnaturaldisasterswilloccurinareaswhereitssubsidiariesoperate,thecompany’sextensivebusinessportfolioandpresencebothathomeandabroadhelpensurethatthecompany’sbusinessasawholewillnotbemateriallyaffectedwhennaturaldisastersoccurinparticularregions.EspeciallyfortherainstormsandfloodsinsouthChina,whichhaveoccurredfrequentlyintheseyears,thecompanyhasaccumulatedalargewealthofexperience,establishedprovencontingencyplansandmaintainssufficientfloodpreventionsuppliesinstockatalltimes,whichallowthecompanytoflexiblyguidefarmersthroughproductionplanadjustmentswhenthefloodseasonbeginsinpreparationfordisasterrelieftogether.Atthesametime,thecompanycanalsotaketheadvantageofitsnationwidepresencetoallocatefunds,rawmaterials,equipment,andstafftimelyandeffectivelytoresumeproductionassoonaspossibleandreducethelossescausedbynaturaldisasters.II.RiskoffeedstuffpricefluctuationsThecostofmainfeedstuffsforfeedproductionaccountsformorethan90%oftotalcostoffeedproduction.Inthepast,theproportionoffeedbusinessinthecompany’srevenuewaslarge,butasthefeedindustrygenerallyadoptsthecost-pluspricingmethod,thefluctuationsinpricesoffeedstuffscanbepartlytransmittedtothedownstreambreedingoperations,soastorelievethepressurefromtherisingpricesoffeedstuffs.However,withagrowingpercentageofFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd10livestockbreedingbusinessinthecompany’srevenue,therisingpricesoffeedstuffswillhaveagrowingimpactonthecompanyasawhole.Since2018,thecostoffeedstuffshasbeenturbulentandrising,andthedomesticspotmarketofsoybeanmealjumpedbyphaseswithintensificationofmarketfluctuations.Thedomesticcornpricerosebeforefalling,andthepricesofadditive(aminoacid)alsowentdowninazigzagmanner.Theviolentfluctuationsinpriceoffeedstuffscontinuedinto2019,asthedomesticcornpricesfellbeforerisingandthenfellagain,whilethespotmarketpricesofsoybeanmealcontinueddropping.Atthebeginningof2020,theCOVID-19outbreakaffectedtheworkresumptionoffeedadditivemanufacturersanddrovethepricesofsomefeedadditivesupremarkablyinshortterm,whilesoybeanmealpricesalsoroseinshorttermduetothereducedsoybeanexportfollowingtheclosureofportsinresponsetotheCOVID-19outbreakinSouthAmerica.CoupledwiththecontinuoustensionbetweenChinaandUS,whichbringsgreatuncertaintiestothebulkproducetradebetweenthetwocountriesandinternationaltradeoffeedstuffsinthefuture,theriskofpricefluctuationswillexistinthelongterm.Moreover,againstthebackgroundoflongtimeexistenceofASFinChina,thefeedenterpriseswillreducesomehigh-riskfeedstuffsforthesafetyofanimalnutrition,suchasusageofcorn,pigblood,andpigbonemeal,soastomakethedemandforrawmaterialsconcentrateonothertypesofrawmaterials,whichwillalsoleadtoriseinpricesofsuchalternativerawmaterials.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd11Riskcountermeasures:Thecompanyisthelargestdomesticfeedenterprisewiththescaleadvantagesandaconsiderablesayintherawmaterialpurchasing.Thecompanystartedreorganizingandoptimizingitsrawmaterialprocurementsystemin2017,combedthroughitssuppliersystemactively,establishedstrategicpartnershipswithmanydomesticandoverseasbest-runrawmaterialsuppliers,conductedthesupplychainfinancingofvariousformsactively,andoptimizeditspurchasingcostandrelatedfinancialexpenses.In2019,thecompanycontinuedtodrivetransformationsintermsofcentralpurchasingofrawmaterials,strategicpurchasingchanneloptimizationofpartners,acquisitionofcornproducedinnortheastandpurchasingmodelupgrading,realizingagreaterpurchasingvaluedespitethechallenges.TheCOVID-19crisisin2020hascausedphase-wiseimpactonthepricesoffeedstuffandfeedadditives,butastheCOVID-19hasbeencontainedgraduallyathomeinthesecondquarterandcompaniesatupstreamanddownstreamofthefeedindustryresumedproduction,theundersupplyofvastmajorityoffeedstuffandadditiveshasbeeneasedremarkablyandthepriceshavebeenfallingasawhole,withthepriceriskgraduallyreleased.Meanwhile,inthefirsthalfof2020,thecompany’sfeedsupplychainmanagementdepartmentmadegreateruseofhedginginstrumentstocontroltheriskofpricefluctuationsofrawmaterials.DuringresponsetotheCOVID-19,thecompany’sexperienceofcloseinteractionamongtechnology,procurement,productionandsalehasbeensummarizedandappliedinday-to-dayoperationmanagementofthefeedbusiness.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd12III.RiskofpricefluctuationsoflivestockandpoultryThefinishedproductsoflivestockandpoultrybreedingofthecompanymainlyincludebabychick,babyduck,white-featheredchicken,white-featheredduck,breedingpig,piglet,andhog.Especiallysince2015,thepigfarmingbusinessofthecompanyhasbeengrowingrapidly,with3.55millionlivepigssoldin2019andmorethan300millionself-raisedandoutsourcedcommercialgenerationchickenandduckssold,whichallowedthelivestockandpoultrybreedingtocontributegreatertotheentirerevenueandprofitsofthecompany.Alongwiththeexplosivegrowthofbreedingvolumeofthecompanyinthefuture,thepricesoflivestockandpoultrywillaffectthelevelsofrevenueandprofitsofthecompanyevenmoreremarkably.In2019,influencedbyASF,thelivepigpricescontinuedtoriseafterbouncingback,hittinghistorichighsuccessivelyasthepricesskyrocketedinthesecondhalfoftheyear.Intermsofwhite-featheredpoultry,thepricesofbreedingpoultry,non-slaughteredchickenandducksandpoultrymeatremainedhighasawholein2019duetotheinsufficientintroductionofvarieties,coupledwiththedramaticallyincreasedconsumerdemandforporksubstitution.Inthefirsthalfof2020,thepricesoflivepigsandwhite-featheredpoultrybifurcated.Intermsoflivepigs,inthefirsthalfof2020,whentheundersupplyoflivepigsremained,thebreedingstockrecoveredgraduallyandthepigpricesbouncedbackandclimbedgraduallytotheendofJuneafterarapidfallinMayduetotheweakenedconsumerdemand;itispredictedthatthesupplyofliveFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd13pigswillremaintightinthesecondhalfof2020andthepigpriceswillstillstronglysupportedthroughouttheyearalongwiththeseasonalrecoveryoftheconsumerdemand.Intermsofwhite-featheredpoultry,beitnewly-hatchedpoultry,non-slaughteredchickenandducksorpoultrymeat,theirmarketpricesremainedlowasawholeinthefirsthalfof2019duetoseriousoversupply,forexample,theaveragepricesofwhite-featheredbabybroilerchickenfellbymorethan50%year-on-yearinthefirsthalfoftheyearandthepricesofpoultrymeatontheconsumersidewerealsolowastheconsumerdemandofmajorchannelssuchaswholesalemarkets,schools,plantsandmineswasapparentlyinhibitedduetotheimpactofCOVID-19,thereforecompaniesacrosstheentireindustrychainsufferedlossesinthefirsthalfoftheyear;itispredictedthatthesituationfwhite-featheredpoultryindustrywillbecomefavorableinthesecondhalfoftheyearalongwithgradualrecoveryofconsumerdemand,coupledwiththeseasonalgrowthintraditionalconsumerdemand,butthecapacitiesoftheentireindustryremainhigh,meaningthattheroomforrecoveryisestimatedtobelimitedevenifthemarketdemandbouncesback.Forthisreason,thepricesacrossthewhite-featheredpoultryindustrychainmightstillremainsubstantiallylow.Riskcountermeasures:apartfromtheimpactofsporadicepidemics,thefluctuationsinpricesoflivestockandpoultrymainlydependontheperiodicincreaseanddecreaseinbreedingandsupplyquantities.Asaresult,theprocessoflivestockandpoultrypricesgoingdownitselfisaprocessofthesurvivalofFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd14thefittestintheindustry.Againstthisbackdrop,thecompanystillcangeneratemorerevenueorsufferlesslossesthanitsrivalsintheprocessofpricedeclineaslongasitincreasesitsbreedingefficiencyandmakesitsbreedingcostslowerthanitsrivals.Whensomeparticipantsexit,thetotalsupplydeclinesandthepricesriseagain,thecompanymightgainagreatermarketshareandahigherreturnoninvestmentthanbefore.Inrecentyears,thecompanyhasbeencommittedtocontinuouslyincreasingitsbreedingefficiency,andenjoyingindustryleadershipintermsofproductionofhealthyyoungbreedingpoultryandPSYandfullcostofpigbreeding,whichwillensurethatthecompanywillremainhighlycompetitiveduringthepricefalloflivestockandpoultry.Ontheotherhand,unlikemostofagriculturalandanimalhusbandryenterprises,thecompanyalsohasslaughteringandprocessingbusinessesdownstreamofbreedingindustry,whichhappenstohedgeagainstthebreedingbusinessofthecompany.Thepricedeclineoflivestockandpoultrymeansthatthecostofrawmeatintheslaughteringandprocessingbusinessesfallstooanditsprofitmarginwillbeincreased,whichcanalsoeasetheimpactofpricefalloflivestockandpoultryonthecompanyasawholemoderately.IV.ImpactofenvironmentalprotectionpoliciesIn2014,startedimplementingtheRegulationsonPollutionPreventionforLarge-scaleBreedingofLivestockandPoultry,asthegovernmentwasstronglydeterminedtokeeplivestockfarmsinlineandnewregulationswereenactedacrossthecountrytodemolishlivestockfarms,banorrestrictlivestockfarmingFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd15activities.Atthelevelofcentralgovernment,thenew“EnvironmentalProtectionLaw”wasenactedonJanuary1,2015;attheendof2016,theStateCouncilissuedthe“13thFive-Year”EcologicalEnvironmentProtectionProgram”,morespecificallyrequiring“localgovernmentstocloseorrelocatelivestockfarms(communities)andbreedinghouseholdswithinthebannedareasaccordingtolawbytheendof2017”.In2018,thefirstgroupofcentralenvironmentalprotectioninspectorsconductedthe“follow-upreexaminations”,astheeffortstoinvestigatepollutioncausedbylivestockfarmswereintensifiedacrossthecountry,orderingsomebreedinghouseholdstoshutdownforenvironmentalremediationorcloseonceforallduetotheirlivestockfarmingfacilitiesfailingtomeettheenvironmentalstandardsordischargingwastewaterbeyondthesetstandards.Thesepressuresfromtheenvironmentalprotectionpolicieswillforcesomelivestockandpoultryfarmsfailingtomeettheenvironmentalstandardstoexitthemarket,andleadtoreducedbreedingquantities,whichwillproduceacertainimpactonthegrowthoffeedbusinessofthecompanyanditsacquisitionoflivepigsandpoultryforslaughteringbusiness.Somebranchesandsubsidiariesofthecompanyfailtomeettheenvironmentalprotectionrequirementseconomicallythroughhardwaretransformation,ornolongerhavethemarketbasisduetobeinglocatedinthebannedareas,whichwillleadtoshutdownofsomebranchesandsubsidiaries.Inthelongrun,however,theexitoftheseoutdatedcapacitiesforincompliancewithenvironmentalstandardswillallowthebest-runproducersthatremainintheindustrytoacquirehigherFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd16profitability,whichisstillofapositivesignificancetotheentireindustry.Riskcountermeasures:inlightofthechangesofthebreedingmarket,thecompanymakeseveryefforttokeepitsstockundercontrol,establishespoultryandpigbreedingservicecompaniesbychangingitsfeedmarketingmodel,makesfulluseofitsindustrializedsupportingandintegratedservices,andstrengthensitscooperationwithmediumandlarge-sizedfarmsandbreedinghouseholdsthatmeettheenvironmentalstandards.Whileexploringanewwayofbreeding,thecompanyregardsecology,environmentalprotection,efficiencyandsafetyasprimaryconsiderationsinitsprojectdesign,helpsbreedinghouseholdsremodelandbuildshedsandstallsthatmeetthehigherenvironmentalstandards,increasetheprofitabilityofbreedingbusinessandactivelydrivethedomesticlivestockandpoultryfarmingindustrytogrowhealthily.Ontheotherhand,thecompanyactivelygrowsitsinventoriesbycultivatingnewlivestockandpoultryfarmingbasesinenvironmentallysuitableareasthroughconstruction,acquisition,jointventureandcooperationusingitsexistingbusinessportfolioacrossthecountry,thusensuringthestabilityofitsbreedingresources.V.RiskoffoodsafetyincidentsFoodsafetyconcernsthephysicalhealthandlifesafetyofthegeneralpublic,andisanimportantfactoraffectingbusinessreputationandoperation.Asforfoodcompanies,theproductqualityandfoodsafetyareevenamatteroflifeanddeath.Ifafoodcompanyisnegligentinanypartofthebusinessprocess,Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd17resultinginfoodsafetyproblemsoraccidents,itmightfaceclaims,actionsorrelatedpunishmentsinawaythatevenaffectsitsbrandandreputation,therebymateriallyadverselyaffectingitsbusiness,financialcondition,stockpricesorbusinessperformance.Therevised“FoodSafetyLaw”wasofficiallyenactedasofOctober1,2015,alsoknownasthe“moststringentlawofitskindinthehistory”,meaningChinahasbroughtitsfocusonfoodsafetytoanunprecedentedlevel.TheoutbreakofASFin2018raisedevenmoredemandingrequirementsforfoodsafetycontrol.TheASFitselfisnotazoonoticdiseaseandtheporkwithASFvirusisnotharmfulatalltohumansafterconventionalheatingandcooking.However,thereisnotyetfullyeffectivecontainmentmeasureagainstASFatpresent,andtheporkanditsproductsareoneofthemaincarriersofthevirus,somorecostsarerequiredtopreventandcontrolASFduringtheprocessoflivepigrecoveryandslaughter,porktransportationandvending.Riskcountermeasures:thecompanyhasalwaysbeenhighlyconcernedaboutfoodsafetymanagementbymakingfoodsafetyitstoppriorityandimplementingfoodsafetyineverythingitdoes.InFebruary2015,thecompanyestablisheditssafetyandenvironmentalprotectiondepartmenttoensuresafety,healthandenvironmentalprotectionofitsproductsanddrivethelong-term,sustainabledevelopmentoftheorganization.Thecompanyalsoupgradedtheequipmentinits“three-level”testingsystem,added5regionaltestingcenters,expandedthelaboratoriesofitsbranchesandsubsidiariesintermsofhumanFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd18andmaterialresources,guaranteedthescientificityandreasonablenessofallocationandinputoffunds,resourcesandpersonnelacrossthefoodindustrychainandinitiallyestablishedanadvanced,scientific,efficient,safeandsoundenvironmentalmanagementsystem,whichupgradedthefoodsafetyorganizationmanagement,high-endfacilities,processmanagement,andkeyprocesscontrol.,Sofar,thecompanyhascreatedafoodsafetycontrolchainfromfeed,livestockandpoultrybreedingallthewaytodiningtable.In2014,the“Beiyouzi”brandedduckmeatproducedbythecompanywasthefirstintoachieveend-to-endtraceability;in2015,ChengduXiwangFoodCo.,Ltd,asubsidiaryofthecompany,becameoneofthesecondgroupofpilotcompaniesforimplementationofthenationalstandard“foodcoldchainlogisticstraceabilitymanagementrequirements”.Inaddition,thecompanybroughtitssafetyandenvironmentalprotectionsystemmoreinlinewithinternationalbestpricesbypassingthefoodtechnicalstandardcertificationbytheBritishRetailCouncil(BRC)in2016.AtthefirstplenarysessionoftheGlobalFoodSafetyInitiative(GFSI)in2016,thecompanywaselectedtheVicePresidentoftheChinaCouncil,becomingthefirstChineseprivateenterprisetobeselectedasamemberoftheglobalboardofdirectorsofGFSI.InOctober2019,the8thGFSIFocusDayChinaorganizedbythecompanywasheldinChengdu.ItisthefirsttimeaprivateenterpriseorganizedthiseventsinceGFSIbeganholdingtheFocusDayChinain2012,andalsothefirsttimetheGFSIFocusDayChinawasheldinaprovinceotherthanBeijingandShanghai.ThecompanywasselectedFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd19as100MostTrustedModelOrganizationsand20BestCasesofManagementInnovationattheChinaFoodSafetyAnnualConferencein2016and2017,signifyingthatthefoodsafetyeffortsofthecompanyarerecognizedathomeandabroad.Atpresent,allfoodenterprisesundertheflagofthecompanyhavepassedChina-HACCPcertification,andmorethan60foodcompaniesarefinishingtheBRCandGlobal-GAPcertificationsinsuccession.Inaddition,thecompanysystematicallyexplorestheantimicrobial-reducingandantimicrobial-freepossibilitiesincooperationwithmultiplepartiesusingtheGFSIplatformresources,andactivelydrivesthepopularizationofantimicrobial-reducingandantimicrobial-freesuccessfulcases.VI.RiskofexchangeratefluctuationsCurrently,theglobalpurchasingofrawmaterialsforfeedproductionisgoingdeeper,andthefeedenterpriseshavebeenincreasinglyaffectedbytheexchangerateintermsoffeedstuffpurchasingcenteredonforeignsupplysuchascorn,soybean,wheypowder,fishmeal,andDDGS.Atthesametime,thecompanyhaslargerforeignoperationsthanitsChinesepeers,andintheforeigninvestmentandoverseasproductionandoperation,thecross-bordercapitaltransactionandsettlementamountsinvolvedaregrowing,thusmakingthecompanymorevulnerabletoexchangeratefluctuations.Since2019,thebumpyChina-USrelationscausedtheRMB/USDexchangeratetofluctuatefrequently,withtheRMB/USDexchangeratefallingbyabout1.8%incumulativetermsFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd20throughouttheyear.Inthefirsthalfof2020,theChina-USrelationscontinuedworsening,butastheCOVID-19crisishasbeencontainedathomeandtheeconomicactivitiesacrossChinagraduallyrecovered,theChineseeconomyshowedastrongresilienceasawhole,registeringamerely1.5%accumulateddropinRMB/USDexchangerate.Inthesecondhalfof2020,however,astheglobalCOVID-19crisiscontinuedspreadingataquickenedpace,theworldeconomicrecessionhasbecomeasurethingandtheexternalriskscausedbydeterioratingChina-USrelationsfurtheraggravated,makingithighlylikelyforfinancialmarketstofaceviolentturbulences,whichwillproduceaconsiderableimpactontheforeignexchangemanagementofthecompany.Besides,inseveralMiddleEastcountrieswherethecompanyoperates,theexchangerateoflocalcurrenciesagainstUSDdepreciatedremarkablyduetotheCOVID-19,politicalturbulenceandforeignexchangepolicyadjustments,whichalsoproducedanadverseimpactonthecompany.Riskcountermeasures:Inresponsetothegrowingneedsforoverseasrawmaterialpurchasingandinvestmentandoperation,thecompanystartedbuildingitsSingaporeanbranchintoanoverseascommercialandtradingcenterandinvestmentandfinancingcenterin2016,activelyconductedinternationalcentralizedpurchasingofrawmaterials,foreigndirectfinancing,supplychainfinance,foreignexchangeriskmanagementandrawmaterialspurchasingriskmanagementonitsSingaporeanplatform,inordertoreducetheimpactofexchangeratefluctuationsonitscashflowinoverseasoperations.Meanwhile,inFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd21itsoverseasoperations,thecompanyfurtherstrengtheneditscloseconnectionandcommunicationwithoverseasfinancialinstitutions,overseasagenciesoftheChinesegovernmentandhostgovernmentstoidentifythetrendsoflocalcurrencies’exchangeratesinhostcountriesintimeandeasetheadverseimpactofexchangeratefluctuationsbymeansofdirectinvestmentinlocalcurrenciesabroad.Currently,thecompanyisactivelystudying,demonstratingandpreparingrelatedcontingencyplansagainstpossiblescenariosofdrasticallychangedexternalenvironmentsandviolentexchangeratefluctuations,suchthatthecompanywilltakeimmediate,relevantmeasurestoendeavortominimizethelossesoncerelatedcircumstancesarise.VII.RiskofhumanresourcesTheriskofhumanresourcestothecompanymainlyinvolvesthefollowingfouraspects.First,thepigbreedingscaleofthecompanywillrealizetheleapfrogdevelopment.Asatthetimeofdisclosureofthissemiannualreport,thecompany’spigfarmingteamhasexceeded30000persons,butinordertomatchwiththehigherslaughteringtargetsinthefuture,thecompanyisstillunderstaffedinpigindustry,andthecompanywillcontinuetorecruitandexpanditspigfarmingpersonnelatarateofnolessthan10,000-20,000personseachyear.Therefore,therearetremendouspressureandchallengesintermsofrapidlyrecruitingalargenumberofpigraisers,andhowtorapidlycultivateandretainalargenumberofqualifiedpigraisers.Ifthepersonnelrecruitmentandtrainingprovesinadequate,potentialriskswillariseforthesubsequentpigFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd22farmmanagementandoperation;second,asthecompanytransformsfromatraditionalagriculturalandanimalhusbandryenterprisetoanagricultural,animalhusbandryandfoodintegratedenterprise,thecompanywillfacetheriskofinsufficientreserveofhigh-caliberoperationandmanagementpersonnelinnewbusinessdomainsandofpersonnelinfoodretailterminals,Internetplatformandotheremergingfields;third,alongwiththerisinghumancost,employeecompensationhasbecomeanimportantfactorincostincreaseofthecompany;fourth,asaleadingenterpriseinChina’sagriculturalandanimalhusbandryindustry,thecompanyhascultivatedalargenumberofoutstandingemployeesinitsmultiyearhistory,butthecompetitionforhumanresourcesisintensifyingduetotheincreasingcompetitionintheindustryandentryofnewplayersofdifferentbackgroundsintotheindustryoverthepastyears,meaningthebraindrainwillcauselossestothecompanyandsubsequentlyaffectthesustainablecompetitivenessofthecompany.Riskcountermeasures:Inviewofaforesaidrisks,thecompanyhaslookedattalentcultivationandorganizationalactivationasalong-termstrategictaskofthecompany.Intermsofrecruitingtalentedpigfarmers,thecompanyexpandeditsrecruitmentchannelbeyondcollegegraduatesmajoredinagricultureandanimalhusbandrytorecruitnon-specializedcollegegraduatesandveterans.Intermsofpigfarmertraining,thecompanybrokedownitsdailyproductionprocessesaccordingtostandardsandinternalizedthemusingITmeans.Itoffersspecializedcoursesofdifferentlevelsforgeneralmanager,farmFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd23managersallthewaydowntothenewlyrecruitedfrontlineworkersthroughin-housepigfarminguniversitiesandpigindustryresearchinstitutesthatofferhigh-frequencylearning,trainingandteachingpossibilities.Moreover,throughthemodernmentoringsysteminsidepigfarmsandone-to-onementoringandintensificationbysophisticatedemployees,thetimetocultivatenewemployeeshasbeengreatlyshortened.Toretaintheemployeesofitspigfarms,thecompany,orientedtowards“valueastheguidingprinciple,multi-aspectcoordinationandcombinationoflongtermandshortterm”,furtherperfecteditspigindustrytalentmotivationsystem,wherebypersonnelatalllevelsinpigindustrywillreceiveindustry-leadingeconomicreturnbasedontheirvalueoutput.Inaddition,inordertoreducethepressureontalentrecruitmentandcultivationandbetterleadthedevelopmentofChina’slivepigindustry,thecompanyintensifieditseffortstocarryoutprojectssuchaspigraisinginmultistorybuildings,intelligentpigfarmsandthingsofInternet,whichwillsignificantlyincreaseitsefficiencyofpersonnelutilization.Thecompanyalsointensifieditseffortstorecruittalentedpeopleinstrategic,newbusinesses,whileactivelyconductingindustrytrainingandlearningtoenrichtheknowledgestructureandcapabilitystructureofitsexistingpersonnel.Duringitsstrategictransformation,thecompanysetupdevelopmentplatformsformanagers,motivateditsemployeestopursuebusinessventuresandcreatedadiversifiedgrowthplatformforitsemployeesbyincentivizingtheorganization.Moreover,thecompanyrealizedthecontinuousFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd24increaseinpercapitaefficiencybyefficiencyimprovement,leanmanagement,optimizationofindustrychaindesignandorganizationflattening;createdtheprofessionalmanagerdevelopmentchannelwithsurvivalofthefittestbyconstructingthecompetition,selectionandeliminationmechanisms;andcreatesthegrowthcommunityofemployeesandthecompanybyconstructingreasonableevaluationandincentivemechanismsandvaluesharingmechanism.InJuly2019,thecompanyimplementeditsrestrictedstockandstockoptionincentiveplanforthefirsttimetomotivateitskeytechnologistsandpigfarmingteamsmore,thusensuringtherapidimplementationofitsscienceandtechnologystrategyandpigfarmingstrategy.Thecompanyfurtherestablishedandperfecteditslong-termincentivemechanism,gavefullplaytotheinitiativeofseniormanagersandpartofkeypersonnel,andeffectivelycombinedshareholderinterests,corporatebenefitsandpersonalinterestsofitscoreteam,whichwillpromotethelong-termdevelopmentofthecompany.Thecompanyplansnottodistributecashdividendsorallotbonussharesortransferitsprovidentfundtosharecapital.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd25TableofContentsSection1Importantnote,tableofcontentsanddefinitions...........................................................3Section2CompanyProfileandKeyFinancialIndicators...........................................................27Section3CompanyBusinessOverview.........................................................................................31Section4Discussionandanalysisofbusinessoperations.............................................................47Section5Importantmatters...........................................................................................................75Section6Changesinsharesandshareholderdetails.................................................................277Section7Detailsrelatedtopreferredshares...............................................................................283Section8Detailsrelatedtoconvertiblecorporatebonds...........................................................284Section9Detailsofdirectors,supervisorsandseniormanagers...............................................286Section10Detailsrelatedtocorporatedebts..............................................................................287Section11FinancialReport..........................................................................................................288Section12Directoryofdocumentsforreference........................................................................542Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd26DefinitionsTermReferstoDefinitionThiscompany,company,listedcompany,ReferstoNewHopeLiuheCo.,LtdCSRCReferstoSecuritiesRegulatoryCommissionCSRCReferstoSichuanSupervisionBureauofChinaSecuritiesRegulatoryCommissionSZSEReferstoShenzhenStockExchangeCSDCReferstoSecuritiesDepositoryandClearingCo.,LtdNAFMIIReferstoNationalAssociationofFinancialMarketInstitutionalInvestorsCompanyLawReferstoCompanyLawofthePeople’sRepublicofChinaSecuritiesLawReferstoSecuritiesLawofthePeople’sRepublicofChinaNewHopeGroupReferstoNewHopeGroupCo.,LtdSouthHopeReferstoSouthHopeIndustrialCo.,LtdChinaMinshengBankingCorp.ReferstoChinaMinshengBankingCorp.NewHopeChemicalReferstoNewHopeChemicalInvestmentCo.,LtdBeishuoInvestmentReferstoLhasaEconomicandTechnologicalDevelopmentZoneBeishuoInvestmentCenter(LP)FinanceCompanyReferstoNewHopeFinanceCo.,LtdLiuheGroupReferstoShandongNewHopeLiuheGroupCo.,LtdPolarisBayReferstoPolarisBayCo.,LtdHopeGroupReferstoHopeGroupCo.,LtdBenXiangAgriculturalReferstoYanglingBenxiangAgriculturalIndustryGroupCo.,LtdYan’anBenyuanReferstoYan’anBenyuanAgriculturalTechnologyDevelopmentCo.,LtdYanchuanYongxiangReferstoYanchuanYongxiangLivestockDevelopmentCo.,LtdZhidanDingxiangReferstoZhidanDingxiangAgriculturalTechnologyDevelopmentCo.,LtdJinheInvestmentReferstoShaanxiJinheTechnologyVentureInvestmentCo.,LtdFengyiInvestmentReferstoYanglingFengyiEquityInvestmentManagementCenter(LP)XiangyuanInvestmentReferstoYanglingXiangyuanEquityInvestmentManagementCenter(LP)Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd27Section2CompanyProfileandKeyFinancialIndicatorsI.CompanyProfileStockabbreviationNewHopeStockcode000876StockexchangeonwhichstockislistedShenzhenStockExchangeChinesenameofthecompany新希望六和股份有限公司Chineseabbreviationofthecompany(ifany)新希望Englishnameofthecompany(ifany)NEWHOPELIUHECO.,LTD.Englishabbreviationofthecompany(ifany)NEWHOPELegalrepresentativeofthecompanyLiuChangII.ContactpersonsandcontactdetailsBoardsecretarySecuritiesaffairsrepresentativeNameHuJiBaiXuboContactaddress11F,BlockT3A,WangjingSOHOCenter,No.10,WangjingStreet,ChaoyangDistrict,Beijing11F,BlockT3A,WangjingSOHOCenter,No.10,WangjingStreet,ChaoyangDistrict,BeijingTel:(028)82000876(010)53299899(028)85950011(010)53299899Fax:(010)53299898(010)53299898Email:000876@newhope.cnbaixb@newhope.cnIII.Otherdetails1.ContactdetailsofthecompanyWhethertheregisteredaddress,officeaddressandpostcode,corporatewebsiteaddressandemailaddressofthecompanyhavechangedduringthereportingperiod□Applicable√NotapplicableTherewasnochangetotheregisteredaddress,officeaddressandpostcode,corporatewebsiteaddressandemailaddressofthecompanyduringthereportingperiod,asdetailedinthe2019annualreport.2.InformationdisclosureandfilingplaceWhethertheinformationdisclosureandfilingplacehavechangedduringthereportingperiodFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd28□Applicable√NotapplicableTherewasnochangetothenameofinformationdisclosurenewspaperschosenbythecompany,theaddressofthewebsitedesignatedbyCSRCforpublicationofsemiannualreportsandtheplaceoffilingofthecompany’ssemiannualreportsduringthereportingperiod,asdetailedinthe2019annualreport.IV.KeyaccountingdataandfinancialindicatorsWhetherthecompanyneedstoretroactivelyadjustorrestatetheaccountingdataofpreviousyears□yes√noThisreportingperiodThesameperiodofthepreviousyearIncreaseordecreaseinthisreportingperiodcomparedwiththesameperiodofthepreviousyearBusinessrevenue(Yuan)44,696,040,364.0835,294,298,951.2626.64%Netprofitsattributabletoshareholdersofthelistedcompany(Yuan)3,163,865,460.001,561,855,272.77102.57%Netprofitsattributabletoshareholdersofthelistedcompanyafterdeductionofnon-recurringprofitandloss(Yuan)3,283,676,864.541,661,974,908.6497.58%Netcashflowfromoperatingactivities(Yuan)658,593,331.58543,684,173.9421.14%Basicearningspershare（Yuan/share）0.760.38100.00%Dilutedearningspershare(Yuan/share)0.750.3897.37%WeightedaverageROE11.16%7.13%4.03%increaseTheendofthisreportingperiodTheendofthepreviousyearIncreaseordecreaseattheendofthisreportingperiodcomparedwiththeendofthepreviousyearTotalassets(Yuan)91,293,152,010.3464,217,666,883.5542.16%Netassetsattributabletoshareholdersofthelistedcompany(Yuan)29,818,996,048.3826,061,689,948.5614.42%V.AccountingdatadifferenceunderChineseandforeignaccountingstandards1.DifferenceinnetprofitsandnetassetsinfinancialreportsdisclosedunderbothinternationalaccountingstandardsandChineseaccountingstandards□Applicable√NotapplicableThecompanyhadnodifferenceinnetprofitsandnetassetsinfinancialreportsdisclosedunderbothinternationalaccountingstandardsandChineseaccountingstandardsduringthereportingperiod.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd292.DifferenceinnetprofitsandnetassetsinfinancialreportsdisclosedunderbothoverseasaccountingstandardsandChineseaccountingstandards□Applicable√NotapplicableThecompanyhadnodifferenceinnetprofitsandnetassetsinfinancialreportsdisclosedunderbothoverseasaccountingstandardsandChineseaccountingstandardsduringthereportingperiod.VI.Itemsofnon-recurringprofitandlossandtheiramounts√Applicable□NotapplicableUnit:YuanItemAmountRemarksProfitandlossfromdisposalofnoncurrentassets(includingthecharged-offportionoftheaccruedprovisionforassetimpairment)-94,912,833.48Incomefromdisposalbythecompanyoffixedassets,productivebiologicalassets,long-termequityinvestmentsandintangibleassetsGovernmentsubsidieschargedtocurrentprofitandloss(exceptforgovernmentsubsidiescloselyrelatedtothebusinessoperationsandgrantedaccordingtothenationalunifiedstandardquotaorration)66,064,040.01Incomefromgovernmentsubsidies.Profitandlossonchangesinfairvalueresultingfromholdingofheld-for-tradingfinancialassetsandfinancialliabilities,derivativefinancialassetsandderivativefinancialliabilitiesandinvestmentincomefromdisposalofheld-for-tradingfinancialassetsandliabilitiesandderivativefinancialassetsandliabilities,exceptforvalidhedgingtransactionsrelatedtonormalbusinessoperationsofthecompany-11,235,230.20Incomeacquiredbythecompanyfrompurchaseofheld-for-tradingfinancialassetsReversalofimpairmentprovisionforreceivablesandcontractassetssubjectedtoseparateimpairmenttest10,254,139.72Othernon-businessrevenueandexpenditureotherthantheaforesaiditems.-81,088,155.96Mainlyconsistingofexpenditureonnormaldeathandeliminationoflivestockandpoultry.Otherprofitandlossitemsthatconformtothedefinitionofnonrecurringprofitandloss0.00Minus:effectofincometax4,205,865.93Effectofminorityinterest(aftertax)4,687,498.70Total-119,811,404.54--Fornon-recurringprofitandlossitemsdefinedbythecompanyaccordingtothe“ExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingtheirSecuritiestothePublic–Non-recurringProfitandLoss”,andfordefiningthenon-recurringprofitandlossitemsenumeratedin“ExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingtheirSecuritiestothePublic–Non-recurringProfitandLoss”asrecurringprofitandlossitems,thereasonsshallbeexplained.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd30□Applicable√NotapplicableDuringthereportingperiod,therewasnocircumstanceinwhichthecompanydefinedthenon-recurringitemsofprofitandlossasdefinedandenumeratedinthe“ExplanatoryAnnouncementNo.1onInformationDisclosureforCompaniesOfferingtheirSecuritiestothePublic–Non-recurringProfitandLoss”asitemsofrecurringprofitandloss.Fulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd31Section3CompanyBusinessOverviewI.MainbusinessesofthecompanyduringthereportingperiodThemainbusinessesthatthecompanyconductedincludefeed,white-featheredpoultry,pigfarmingandfood.(I)FeedbusinessFeedcanbeclassifiedintopremixfeed,concentratedfeedandcompoundfeed(orcompletefeed)accordingtothescopeofnutritionalingredientscontained.Premixfeedisthemixtureofvariousnutritionaladditivessuchasvitamin,mineralsubstanceandaminoacid;Theconcentratedfeedisformedafteraddingvariousanimalandvegetableproteinsintothepremixfeed;thecompoundfeedisformedafterfurtheraddingvariousenergyrawmaterialsintotheconcentratedfeed.Intermsofthefinalnutritionalneeds,theamountofnutritionaladditivesusedissmallbutwithhighunitvalue,andtheenergyrawmaterialshavealowunitvaluebutwithlargeamountused,whiletheproteinrawmaterialsarebetweenboth.Among230milliontonsoffeedsnationwidein2019,thepremixfeedonlyaccountedforabout2%,andtheconcentratedfeedabout5%,andthecompoundfeedmorethan92%.Whatisproducedbythevastmajorityoffeedproducersiscompoundfeed.Largecompanieshavelargedemandsforpremixfeedandconcentratedfeedduetotheirlargeoutputsofcompoundfeed,sotheygenerallywouldproducepremixfeedandconcentratedfeedthemselves.Thesmallandmedium-sizedenterprisesonlyproducecompoundfeedduetotheirsmallscale,andpurchaserequiredpremixorconcentratedfeedasneededfromthepremixunitoflargeenterprisesorotherindependentpremixenterprises.Somefarmersofconsiderablescalewouldalsopurchasethepremixorconcentratedfeeddirectly,beforeblendingtheproteinandenergyrawmaterialsintothemforuse.Thefeedbusinessofthecompanycoverspremixandconcentratedfeedaswellascompoundfeed,ofwhichthepremixandconcentratedfeedaresolddirectlytoexternalmarkets,andalsotointernalbatchingplants.Thefeedcanalsobedividedintopoultryfeed,pigfeed,aquaticfeed,andruminantfeedaccordingtotheanimalstobefed.Amongthefeedyieldnationwidein2019,thepoultryfeed,pigfeed,aquaticfeed,andruminantfeedaccountedfor51%,33%,10%and5%respectively.Thefeedproductsofthecompanyincludealltheaforesaidcategories.Asthecompanyhasadownstreambusinessofraisingwhite-featheredpoultryandpigs,thepoultryfeedandpigfeedproducedbythecompanyaremadeavailabletodownstreamcontractfarmersandin-houselivestockfarmsinadditiontobeingsoldtoexternalmarkets.Theaquaticfeedandruminantfeedproducedbythecompanyaresoldtoexternalmarkets.Themainpartsoffeedbusinessincludetechnologydevelopment,rawmaterialprocurement,productionandprocessing,andsalesservice,usuallyreferredtoas“technology,procurement,productionandsales”.Ofthem,theinteractionbetweentechnologyandprocurementistheclosest.Thisisbecausetherawmaterialcostoffeedproductsaccountsfor80-90%ofsellingprice,andacquiringthecheaprawmaterialsisoneofkeysuccessfactors.However,therawmaterialprocurementshouldtakethenutritionalneedsintoaccount,ratherthanonlyconsideringthecost.Therearehundredsofrawmaterialtypes,resultinginthousandsofformulacombinations.Companiesneedtodesignthelowest-costformulathatmeetsthespecificnutritionalneedsaccordingtothenutrientcontentsandcostsofdifferentrawmaterialsatagiventime,thusmakingtheappropriateprocurementdecisions.Afterdefiningtheformulaandpreparingtherawmaterials,theproductionandprocessingpartsmainlyfocusesonproductionefficiencyandproductquality.Thesalesservicepartmainlyfocusesoncustomerdevelopmentandcare,sellstheproductsthatmeetdifferentneedstodifferentcustomergroups,helpsthefarmerhouseholdsenhancethebreedingperformancethroughadditionalservices,optimizesthecostandefficiencyofthedistributionprocess,feedsbackthecustomerneedsandproductproblemstothetechnologyresearchanddevelopmentdepartmentintimetoformgoodinteractions.Inrecentyears,thedomesticfeedindustryhasenteredthematurestage,asthegrowthrateofnationalfeedyieldfrom2014to2019was3.8%,1.4%,4.5%,5.9%,2.8%and-3.7%respectivelyonayear-on-yearbasis.Withthesteadilygrowingtotalquantity,thefeedsfordifferentanimalspecieswouldshowdifferentgrowthtrendsduetodifferentimpactsoflong,intermediateandshortcyclesThelongcyclereferstothecycleofindustrialupgradingandtechnicalprogress,forexample,thepoultryfeedwithahigherdegreeFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd32ofdownstreamlargescalefarming,ahigherpenetrationrateofcompoundfeeandrelativelymorematuretechnologyhassloweroverallgrowththanthepigfeedandaquaticfeedinrecentyears.Theintermediatecyclereferstothecycleofsupply-demandrelationandpricechangesoflivestockandpoultryproducts,astheperiodicincreaseanddecreaseinbreedingquantityofaparticulartypeofanimaldownstreamwillaffecttheincreaseanddecreaseofsalesvolumeofthecorrespondingfeedtypeupstream.Theshortcyclereferstothenaturaldisastersandanimalepidemicsthataffectspecificanimals,suchasH7N9fluthataffectedthepoultryfeedinthefirsthalfyearof2017,rainstormsandfloodsinthesouthChinathataffectedtheaquaticfeedin2017,andASFthathasbeengreatlyaffectingthepigfeedfromthemid-2018uptonow.AccordingtotheChinaFeedIndustryAssociationstatistics,thepigfeedyieldof2019nationwidefellby26.6%year-on-year,duetothedoubleimpactoftroughperiodofregularpigcycleandASFTheporkshortagecausedbyASFdrovethealternativesupplyofpoultrymeatandpoultryeggs,andthendrovethepoultryfeedupby17.1%,buttheincrementofpoultryfeedisinsufficienttooffsettheimpactofpigfeedreduction,sotheannualproductionfellyear-on-yearforthefirsttimeinthepastsixyears.Boththeoverallmaturityoftheindustryandtheimpactoflong,intermediateandshortcyclesmakethecompetitionincreasinglyfierce.Ontheonehand,eachcompanystrivestopursueinnovationonthebasisofexistingbusinessprocesses.Ontheotherhand,theyareextendingacrosstheupstreamanddownstreamoftheindustrychainandoptimizingtheirstrategicpositioning.Intermsoftechnologyresearchanddevelopment,themicrobialfermentationtechnologyspurredthedevelopmentofbiologicalenvironment-friendlyfeed,whileaquaticfeedisbeingupgradedfromsinkinggranulatedfeedtofloatingexpandedfeed,withmoresegmentedfeedtypesemerginginothercategoriesaccordingtothefeedingphases.Intermsofrawmaterialsprocurement,companiescontinuouslyexploremorediversifiednew-typerawmaterials,whilefortheconventionalbulkrawmaterials,theupstreamimportantrawmaterialsbasesaresecuredbymeansofstrategicpartnershipagreement,equityparticipationorself-runoperation,withtheaccuracyofbulkpurchasingenhancedbyusingbigdata,futuresandotherfinancialinstruments.Intermsofproductionandprocessing,moreefficientandconvenientlogisticscansupportthetransportationofalargerradius,thusgivingrisetomoreandmorefeedfactorieswithlargercapacities.Companiesimproveefficiencythroughmorecentralizedlarge-scaleproduction,whileatthesametimeenhancingthequalitythroughspecializedworkshopsorproductionlines.Intermsofsalesservice,companiesprovidemultipleformsofvalue-addedservicestofarmerhouseholdsinadditiontosellingfeedproducts,suchastechnicalguidance,animalhealthcareveterinarian,financingsupport,informationservice,andlivestockandpoultrysalesonacommissionbasis,aswellasstrengthenthecustomerstickiness,shortenthedistributionprocess,increasetheratioofdirectsupply,helpfarmerhouseholdsincreasethebreedingefficiencyandincome.Intermsoftheupstreamanddownstreamextensionofindustrychain,companiesbothextendtorawmaterialplantingandtradeupstreamandreachouttothebreeding,slaughteranddeepprocessingdownstream.Bycontrast,duetothedifferencebetweenpigandpoultry(seethedescriptioninthewhite-featheredpoultrybusinessfordetails),mostofpoultryfeedproducersextendedtothepoultrybreedingandslaughteringdownstreamearlier;pigfeedproducersextendedtothepigbreedingandslaughteringrelativelylate,butinrecenttwopigcycles,suchextensionisbecomingmorecommon,especiallyinthewakeoftheASF.Suchextensiontothedownstreamreflectsthedesireoffeedproducerstocontrolthedownstreambreedingandconsumerneeds,sothattheycangaintheprofitsfromthedownstreamwhileensuringtheupstreamfeedcapacitiescanbefullyutilized.Thereasonbehindthisliesinshiftofsupply-demandrelationacrosstheindustryandgradualscale-upofthedownstreambreedingoperations,asthefocusofindustryvaluegraduallychangesfromthefeedoperationsinthepasttothedownstreambreedingandfoodproduction.Beittheenhancementandinnovationofexistingbusinessorextensionoftheupstreamanddownstreamofindustrychain,theyallneedtobesupportedbythecomprehensivestrengthofcompaniesinallaspects.Duetogreatercomprehensivestrength,largecompaniestendtohaveincreasinglyobviousadvantagesinthecompetitionandgrowingmarketshares,thusleadingtogradualincreaseintheindustryconcentration.From2013to2019,thenumberoffeedproducersnationwidedroppedtomorethan7,800frommorethan10,000,whilethenumberofproducerswithannualoutputofmorethan100,000tonsperplantroseto621from460.TheASFin2019evenfurtheracceleratedthereshuffleandconsolidationoftheindustry.Comparedwiththelargecompanies,smallandmedium-sizedfeedproducersareweakintermsoftechnology,bio-safetyandotheraspects,andselltheirproductsmostlytofamilyfarmsandsmall-scalescatteringraisinghouseholds,thelatterofwhicharemoreaffectedbyASF,sothatthesmallandFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd33medium-sizedfeedproducersaremoreaffectedthantheirlargecounterparts.LargecompanieswillfacemoremarketspacesaftersurvivingtheimpactofASF.Afterlong-termdevelopment,thefeedbusinessofthecompanyhasbeenthelargestinthedomesticfeedindustryformanyyears,withthepoultryfeedbusinessrankingfirstnationwide,andpigfeed,aquaticfeedandruminantfeedrankingamongtopthreenationwide.Asanindustryleader,thecompanyleadstheindustrytoembracethechangesbyrelyingonitsleadingpositionalongwiththechangingdynamicsoftheindustry,andstrengthensitsproductpower,purchasingpower,productivityandserviceabilityconstantly,bylaunchingbiologicalenvironment-friendlyfeedandantimicrobial-freefeed,eliminatingtheoutdatedcapacities,andbuildinghigh-outputbenchmarkingplants.Onthisbasis,itactivelypursuesextensionofindustrychainandexplorestransformationandupgradingofitsbusinessmodel.Ontheonehand,wemakefulluseofdownstreamindustrychainfoundationdeployedinthepast,activelydeveloptheintegratedprojectsoffeed–breeding–slaughterthroughnewinvestmentorinternalbusinessrestructuring,activelyinvestinandacquireprojectsrelatedtofoodandsales,andsteadilypromoteourtransformationfromfeedproducertobreederandfoodproducer.Ontheotherhand,ourcompanywasthefirstintheindustrytolaunchtheprojectof“everythingflourishing”(poultryflourishing,pigflourishing,fishflourishing,cattleflourishing,sheepflourishing)toprovidetechnicalandfinancialservicestofarmerhouseholds,aswellasandthemanagedserviceorientedtowardslargepigfarms.Wesetupthebreedingtrainingmanagementcompaniesorbreedingservicecompaniesinthefieldsofpoultrybreedingandpigbreedingtofacilitatethedirectengagementwithlargefarmsorfarmers,meanwhiledevelopingtheguaranteebusinesssteadily,andjointlypromotingthedevelopmentoffeedbusiness.(II)White-featheredpoultrybusinessThewhite-featheredpoultryreferstolargewhite-featheredbroilersandwhite-featheredmeatducks,characterizedbyshortgrowthcycleandhighfeedconversionratio.Morethan4billionwhite-featheredbroilersandabout3billionwhite-featheredmeatducksareslaughteredineveryyear,which,togetherwithmorethan3billionyellow-featheredbroilers,makeupthemainsourceofpoultrymeatconsumptionoftheChinesepeople.Thewhite-featheredpoultrybusinessincludesbreedingpoultrypropagation,commercialgenerationpoultrybreeding,poultryslaughter,anddeepprocessingofpoultrymeat.Asthelarge-scaleandindustrialdevelopmentofwhite-featheredpoultryindustrystartedearlyandishighlymatureinChina,coupledwiththefactthatthenumberofsinglebatchofwhite-featheredpoultrybredislarge,itgenerallyneedsmatchingwiththelarge-scaleindustrialslaughter.Therefore,regardlessofwhetherthecommercialgenerationbreedingisconductedbycompaniesaloneinanintegratedmannerorincooperationwithfarmerhouseholds,manycompaniestendtocomeupwiththeindustrychainof“poultryfeed–commercialpoultrybreeding–poultryslaughter”orintegrationmodel.Asmallnumberoflargecompanieswouldalsofurtherextendinthebreedingpoultryupstreamandpreparedpoultrymeatdownstreamrespectively,soastoformamorecompleteindustrychain.Thebreedingpoultrypropagationoperationscanbesubdividedintobreedingandbreedingpoultrycultivation.Breedingreferstoselectivebreedingofhighintergenerationalgoodstock,whilebreedingpoultrycultivationreferstoexpandingpropagationofgoodbreedsselected,andoutputofcommercialgenerationbabychicksandbabyducks.Thebreedingparthasveryhightechnologicalcomplexityandneedslong-termresearchanddevelopmentaccumulation.Atpresent,itismostlycontrolledbyforeignspecializedbreedingpoultrycompanies,althoughsomedomesticleadingcompanieshavemadebreakthroughsinrecentyears,byselectingandbreedingchickensandduckswithproprietaryintellectualpropertyrights.Eventhelowintergenerationalbreedingpoultrycultivationismuchmoretechnologicallysophisticatedthanthecommercialgenerationbreeding,which,coupledwiththehugecapitalinvestmentinbreedingpoultryfarmsandbreedingegghatcheries,meansitisgenerallyaccomplishedbycompaniesinsteadoffarmerhouseholds.Asforthedomesticwhite-featheredpoultryindustry,intermsofbreedingpoultry,greatgrandparentisintroducedmostlyfromforeignspecializedbreedingpoultrycompanies,beforecarryingouttheexpandingpropagationofgrandparentsandparentsinChina,andthenoutputtingthecommercialgenerationbabychicksandbabyducks.However,asforspecificcompanies,itmainlyconsistsoftwocategories.Mostcompaniesstillfocusonthedownstreamoftheindustry,especiallythecommercialgenerationbreedingandslaughter,andextendtheupstreambreedingpoultrycultivationonlytotheparentgeneration,andoutputthecommercialgenerationbabychicksandbabyducksforselfuse,althoughsomeofthemwillfurtherextendtothegrandparentgenerationsforbreeding.AsmallnumberofspecializedbreedingpoultrycompanieslayparticularemphasisontheFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd34upstream,focusonintroducingfinevarietiesfromabroad,andsellthebabychicksandbabyducksafterexpandingpropagationin,withoutgettinginvolvedinthecommercialgenerationbreeding.Therearetwomainmodelsinvolvedinthecommercialgenerationbreeding,i.e.,integratedcompany-runbreedingandbreedingthroughcooperationbetweencompanyandfarmerhouseholds.Theintegrationcompany-runbreedingmeansthecommercialgenerationchickenandduckbreedingisrunbyacompanyitself,whoultimatelyslaughtersandsellsthechickenandducks;thebreedingthroughcooperationbetweencompanyandfarmerhouseholdsmeansacompanyprovidesorsellscommercialgenerationbabychickenandduckstofarmerhouseholdsandultimatelyrecoverstheadultchickensandducksforslaughtering.Accordingtothesettlementmodeandtheownershipofchickensandducksasagreedinthecontract,i.e.whetherchickensandducksareownedbythecompanyorfarmerhouseholds,orwhetherthebabychickenandducksareprovidedorsoldbythecompanytofarmerhouseholds,thecompany-farmercooperativebreedingcanbefurtherdividedintotraditionalcontractbreedingmodelandoutsourcedbreedingmodel.Whetheracompanychoosestorunthecommercialgenerationbreedingonitsownornotisrelatedtothetechnicalattributesofthisoperation.Duetoshortergrowthcycleandfasterturnoverspeedofthepoultrythanthoseofpigs,thebreedingtechnologyforthepoultryislesstechnicallydifficultthanpigbreeding,soisthesingle-farminvestmentthreshold.Thus,thedomesticpoultrybreedingindustrystartedearlierandismorematureandlargerthanthepigbreedingindustry.Asaresult,duringtheprocessofcommercialgenerationbreedingalone,thereisusuallynoobviousdifferenceintechnologyandefficiencybetweencompaniesandfarmerhouseholds.Undergeneralconditions,thebenefitsofcompanieschoosingtooperatecommercialgenerationbreedingaloneliemoreinraisinghigherrequirementsforthedownstreamfoodindustry,i.e.theupstreambreedingoperationsarecontrollablefromthebeginningtoendsoastoensurethefoodsafety.However,inrecentyears,stricterenvironmentalregulationhasbroughtnewvariables,assomecommercialgenerationbreedingcompaniesorfarmerhouseholdshavetolimitorstopproductionactivitiesorevenexittheindustryduetobeinglocatedinbannedareasorincompliancewithenvironmentalstandardsdespitebeinglocatedinareasrestrictedorsuitableforbreeding.Therefore,theexistingparticipantsornewentrantsintheindustrymustfirstensuretheyoperateintheareasrestrictedorsuitableforbreeding,andthenneedtoinputmoreresourcesinthesheds,environmentalprotectionandotheraspects.Inordertoadoptnewenvironment-friendlytechnologiesandsheds,eventhosecompaniesstickingtothe“company+farmer”cooperativebreedingmodelalsoneedtobuildsomesheds,adoptnewtechnologyandthenplayademonstrativerolebyrunningbreedingoperationsthemselvesbeforepopularizingthemtofarmers.Thecapitalinvestmentinthepoultryslaughterpartishugeandisgenerallyaccomplishedbycompanies.Asdescribedearlier,mostpoultryslaughteringplantswouldformtheindustrychaincomplementationwiththeupstreampoultrybreedingandevenpoultryfeedoperations,focusonorpreferentiallyrecoverthecommercialgenerationchickensorducksraisedbythemselvesaloneorincooperationwithfarmerhouseholds,butinsomeareas,thecommercialgenerationchickensorduckscultivatedandsoldbyindependentfarmersinthemarketwouldalsobeflexiblyrecoveredinconsiderationofreducingtherawmaterialcostsandoperatingcostsbasedonthemarketquotations.Atthesametime,therearesomepoultryslaughtercompaniesintheindustrywhopossessnobreedingfacilitiesandfeedupstream,butpurelyrelyonrecoveringthecommercialgenerationchickensorducksinthemarketforslaughtering,thusmakingprofitsbyacquiringatalowpriceandsellingatahighprice,andbytakingadvantageoftheincompletesynchronizationbetweenthequotationsofcommercialgenerationchickenandduckmarketsandthoseofchickenandduckmeatmarkets.Butsuchbusinessmodelisunstable,andmanycompaniesoftensuffergreatlossesduetomisjudgmentofmarketquotations.Inrecentyears,thedomesticwhite-featheredpoultryindustryexperiencedmanyroundsofupsanddownsduetothejointeffectsofinternalandexternalfactors.Theboomingmarketsin2016stimulatedtheincreaseincapacitiesoftheentireindustry.Butfromthebeginningof2017,therapidlyincreasedcapacitiesintheindustrywerehitbytheH7N9flu,soonplungingthemarketquotationsdowntothebottom.Thestrictenvironmentalregulationinsummerof2017,however,removedalargenumberofbreedingshedsforsubstandardenvironmentalprotectionfacilitiesbydelineatingthebannedareasandrestrictedareas,anddrasticallycutdownthecapacitiesofpoultrybreeding,resultinginthecapacityshortageofpoultrybreedingrelativetopoultryslaughter,andtherisingpricesandprofitrecoveryintermsofpoultrybreeding.TheshortageofporkcausedbyASFdrovetheFulltextof2020semiannualreportofNewHopeLiuheCo.,Ltd35alternativesupplyofpoultrymeatsincethebeginningof2019.Althoughthepoultrybreedingquantitieshavebeenatahigherlevelthanthepastyears,andthewhite-featheredmeatpoultrymarketednationwidein2019increasedby12.8%year-on-year,thepoultryindustrywasinaboomingstatewithhighpricesandprofitabilitythroughouttheyear.ButalongwiththegradualstabilizationoftheASFsituation,thelivepigcapacitiesnationwidebouncedbackgradually,which,coupledwiththeweakeneddemandduetotheCOVID-19,causedthepoultrycycletoshowapparentdownwardtrendsfasterthanpigcycle,asthepricesofcommercialgenerationbabychickenandbabyducksstartedfallingremarkablyafterpeakingfornearlyayearinOctoberandNovemberof2019,by77%and76%respectivelyasofJune2020,asopposedtoa25%and31%decreaseinpricesofchickenmeatandadultducksduringthesameperiod.Therefore,thewhite-featheredpoultryindustrystillneedstoimproveitselfinordertoovercometheimpactofcyclicfluctuationsofpoultry.Intheshortrun,theimportantopportunityfortheindustryistoaccommodatetherequirementsofenvironmentalprotectionupgradingandactivelycontrolcommercialgenerationbreedingbasesthatmeettheenvironmentalrequirements,startingwithenvironment-friendlyrenovationsandshedupgrading;inthelongrun,theindustrystillneedsthesynergybetweenbreedingandslaughteringoperations,soastorealizethechannelupgradingonthesalesendandenablehigh-standardinputinthebreedingoperationstoobtainahigher-premiumreturninthepoultrymeatsales.Intermsofbreedingpoultrypropagation,thecompanyisthelargestsupplierofparentalbabyducksandthesecondlargestsupplierofcommercialgenerationbabychicksandbabyducksin,enjoyingindustryleadingtechnologiesespeciallyinthefieldofbreedingduckpropagation.ThecompanycooperateswiththeChineseAcademyofAgriculturalSciences,andelaboratelyselectedandbredthe“Zhongxin”BeijingDuckinviewofthecharacteristicsofdomesticconsumptionofducks.In2018,itsuccessivelypassedthetestsofgrandparents,parentsandcommercialgenerationbythe“SupervisionandTestingCenterforPoultryQualityoftheMinistryofAgriculture”,thevarietycertificationbyAnimalHusbandryBureauofShandongProvince,andtheonsiteappraisalorganizedbyChinaNationalCommissionofAnimalGeneticResources.Itreceivedthecertificateofnewbreedoflivestockandpoultry(completesetline)issuedbyChinaNationalCommissionofAnimalGeneticResourcesinApril2019,followedbyofficialmarketing.In2019,thealternativedemandforpoultrymeattriggeredbytheASFalsodrovethegrowingdemandforupstreambreedingpoultry.Thecompanyseizedthismarketopportunitybypurchasingthebreedingeggsfromotherspecializedbreedingpoultrycompan…