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Chairman Statement

Pondering 2019, every employee of the Group demonstrated the exemplar spirit of “quality first” and customer-orientation, continued to epitomize our corporate culture of “integrity, coherence, and excellence”; developed existing projects and committed to the ongoing diversification of the Group’s business, of which we have achieved remarkable results. The performance of cigarette packaging business remained stable and had achieved single-digit percentage point growth. The environmental treatment business, however, had made outstanding breakthrough, symbolizing a colossal success in the Group’s attempt to reshape its business structure and secure a sustainable future.

Business Review

2019 was a period that oversaw the Chinese domestic cigarette industry stabilizing and began to pick up; major brands continued to innovate on new products and experimented new ways of marketing, unequivocally implementing mandates by the Chinese National Tobacco Corporation: “control total cigarette production, maintaining tenable supply and demand relations, maintaining a well-steered growth rate, and pre-empt large volatility.” Based on our assessments of the domestic tobacco market trends, the Group’s core management strategy for the packaging and materials business was to “strive for growth momentum while exercising proper risk-control and maintain stability”, we remained steadfast in our mission to refine our production processes, reduce waste and losses, and upgrading our facilities. We stayed optimistic and steadily responded to all sorts of uncertain challenges, including fierce market competitions.

As for the environmental restoration water treatment industry, 2019 was also a crucial year; solving the pressing issue of “black polluted” water treatment was a major component of China’s 13th Five-Year Plan. The Group rallied to the call-for-action by the Chinese government and environmental protection departments, clearly focused on our work goal of repairing the ecological system using environmental protection and treatment apparatus. The Hongdong Treatment Design and Engineering teams have cooperated candidly and were successful in the treatment of the four urban streams in Shantou City and passed government project acceptance review conducted by relevant departments. We have begun early-stage exploration on other black-water treatment projects in Huizhou Guangdong, including river prospecting, prevention of pollutants entering the waterways, riverbed mud cleaning, ecological restoration and maintenance. We offer a complete range of environmental treatment services and have conducted fruitful experimentations on all sorts of water treatment techniques to improve water quality, and upgraded our enterprise qualifications in order to better service our clients.

Looking into the Future

2020 (the Year of Gengzi) is destined to be extraordinary; the sudden arrival of a global pandemic, a black swan that “rose” out in the eve of the traditional Chinese New Year, caused tremendous shock to the entire world. The Chinese New Year period is known for recording the largest sales volume of cigarette products in the year. The disruption caused by the outbreak has certain repercussions to the cigarette industry. I believe, in the rollout of every large scale “crisis” there are always hidden opportunities to be uncovered. Proactively face-down challenges is the only way to ensure the “blossoming” of the Huaxi brand.

Since the introduction of the Chinese Water Pollution Prevention and Control Action Plan in 2015, the Central Government, local municipal people’s government and relevant departments had stepped up efforts to implement water treatment projects. Environmental treatment, especially water treatment had been elevated to groundbreaking importance in national politics. The year 2020 is first major milestone in the Action Plan, that all regional level cities have to rein in the total area of urban black polluted waters to below 10%, this directive will necessarily stimulate further urgency for local governments to accelerate demand for water treatment services. Gauging the long-term plans and goals stipulated in the Action Plan, the size of market for environmental treatment will continue to be substantial at least for the next decade. This spells both opportunities and challenges for the entire industry, of which Hongdong should take advantage of. We empower our staff to develop a practical and dependable work spirit, and together with effective management, we ensure that our projects are completed in timely manner and qualities assured. At the same time, we are seeking new projects, cultivating medium to long-term growth for the Group.

Finally, the Board would like to extend their most sincere gratitude to the managers and all employees of the Huaxi Group for their contribution. The Board also sincerely thank all the Huaxi’s shareholders, customers and suppliers for their continuing trust and support in the past. I shall emphasize that in light of the recent uncertainty, all stakeholder of Huaxi Group will keep to their posts, demonstrating admirable professional spirit and vehement will. The glory of Huaxi Group stems from your loyal efforts and support!

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