Shunbo Alloy Responds to Private Placement Inquiry, Explains in Detail the Changes in Revenue and Profitability, and the Reasonableness of the Fundraising Projects

Chongqing Shunbo Aluminum Alloy Co., Ltd. (hereinafter referred to as “Shunbo Alloy”) recently issued an announcement detailing their responses to the Shenzhen Stock Exchange’s inquiry letter regarding their application for a private placement of shares to specific investors. The company explained matters related to changes in operating revenue and profits, accounting treatment of trading business, management of accounts receivable and inventories, administrative penalties, and tax payments. They also discussed the necessity and reasonableness of this fundraising project.

Steady Revenue Growth, Profit Fluctuations Influenced by Multiple Factors

During the reporting period, Shunbo Alloy’s operating revenue maintained an increasing trend year by year, reaching 11.066 billion yuan, 11.945 billion yuan, 13.977 billion yuan, and 11.266 billion yuan (January-September 2025). The company stated that revenue growth was mainly due to stable demand from downstream customers and the gradual release of capacity from Anhui Shunbo’s 400,000-ton recycled aluminum project, with aluminum alloy sales increasing from 571,000 tons in 2022 to 782,900 tons in 2024.

Net profit attributable to the parent company, excluding non-recurring gains and losses, showed fluctuations, with figures of 150 million yuan, 94 million yuan, 95 million yuan, and 185 million yuan (January-September 2025). The profit decline in 2023 was mainly due to falling aluminum prices leading to lower gross margins and increased management expenses; in 2024, a one-time tax payment of 127 million yuan related to虚开发票 (fictitious invoicing) to previous suppliers caused a 47.96% year-over-year decrease in net profit before non-recurring items, though net profit after non-recurring items remained roughly flat; the significant profit increase in January-September 2025 was mainly driven by higher sales volume, increased other income, and reduced credit impairment losses.

Trading Business Accounts for Revenue Using Net Method in Accordance with Accounting Standards

Since 2020, the company has engaged in trading of bulk commodities such as aluminum ingots, aluminum liquid, and coal to improve the utilization efficiency of idle funds. During the reporting period, trading business revenue was 33.2239 million yuan, 47.4035 million yuan, 54.5913 million yuan, and 24.3628 million yuan, accounting for a small proportion of total revenue. Because logistics for trading commodities mainly involve direct shipment from suppliers to customers, the company’s control over the goods is momentary, so revenue is recognized using the net method, which complies with relevant accounting standards.

Overall Stable Management of Accounts Receivable and Inventories

As of the end of September 2025, the company’s accounts receivable on the books totaled 3.019 billion yuan, with an allowance for bad debts ratio of 10.43%. Accounts receivable within one year accounted for 92.87%, and the collection rate after the period was 78.84%. The company has established strict policies for bad debt provisions, with a provision rate of 4.52% for receivables within one year and 79.27% for 1-2 years, higher than industry averages. However, during the period, there were cases of insufficient bad debt provisions, such as an understatement of 5.9334 million yuan for other receivables from Guizhou Shiliu Mineral Trade Co., Ltd., which was supplemented in December 2025.

Regarding inventories, the balance at the end of the period was 1.212 billion yuan, mainly raw materials (50.23%) and inventory goods (40.63%). The company’s inventory turnover rate remained high at 15.26 times per year in 2024, significantly above comparable industry companies. During the period, inventory impairment provisions were 4.0872 million yuan, 2.1955 million yuan, 2.789 million yuan, and 2.5955 million yuan, generally sufficient. However, the subsidiary Anhui Shunbo included government subsidies in the net realizable value of inventories, resulting in an understatement of inventory impairment provisions by 3.3144 million yuan.

Administrative Penalties Have Been Rectified, Internal Control System Is Sound

During the reporting period, the company and its subsidiaries received multiple administrative penalties related to safety production, environmental protection, and data statistics, including a fine of 510,000 yuan for the “8.12” scalding accident at Anhui Shunbo and a fine of 276,700 yuan for excessive emissions from Aobo Aluminum. The company has taken rectification measures such as replacing burners, strengthening employee training, and improving environmental protection facilities. Through internal control audits conducted by third-party agencies, it was confirmed that the internal control system is sound and effective. These penalties do not constitute major violations of laws or regulations and are in compliance with relevant regulations.

Tax Payments of 127 Million Yuan Have Been Made, Internal Control Measures in Place

In 2024, due to the虚开发票 (fictitious invoicing) by former suppliers Gezhouba Huanjia and Konka Huanjia, the company paid an additional 127 million yuan in VAT and surcharges, recorded as non-operating expenses. The company has established internal control systems for supplier selection and invoice review, conducting ongoing supplier audits to prevent similar risks. Currently, Shunbo Alloy and Guangdong Shunbo have completed the tax payments, but there is a potential risk that Jiangsu Shunbo may also need to pay corporate income tax and late fees, which could impact investment returns by approximately 33.0338 million yuan.

Fundraising Projects Focus on Core Business with Clear Capacity Utilization Measures

The current private placement aims to raise no more than 369 million yuan, continuing to fund the 630,000-ton aluminum alloy ingot and 500,000-ton aluminum sheet and strip project. The company stated that the previous 600 million yuan fund-raising has been fully utilized, and this financing is to fill project funding gaps without duplication. After reaching full capacity, the project is expected to generate an annual net profit of 342 million yuan, with a gross profit margin of 6.19% for the aluminum sheet and strip products—slightly below the 6.45% of Ming Tai Aluminum Industry but with cost advantages achieved through domestic equipment, reduced depreciation, and increased recycled aluminum usage.

The company plans to expand into East China and South China markets, leveraging existing customer resources and new sales teams to achieve an annual sales target of 400,000 tons of aluminum sheet and strip. After commissioning, the project will add depreciation and amortization expenses of 86.6931 million yuan, accounting for 25.28% of the total profit in January-September 2025, which may impact performance.

Low Proportion of Financial Investments, Reasonable Financing Needs

As of September 2025, the company’s financial investments totaled 30.7895 million yuan, accounting for 0.92% of net assets. These mainly include non-fixed income mixed-type wealth management products and industrial funds, complying with regulatory requirements. Considering available funds, debt repayment, and future capital expenditures, the company’s estimated funding gap over the next three years is about 987 million yuan. The current fundraising scale is reasonable and necessary.

Shunbo Alloy stated that this private placement will further optimize product structure, increase the proportion of deformed aluminum alloys, and strengthen its leading position in the recycled aluminum industry. The intermediary agency verified that the company’s financial indicators and fundraising projects meet regulatory requirements, with no major illegal or regulatory risks.

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