Red Square Sells Land for 10.53 Million Yuan to Support Controlling Shareholder's Energy-Saving Retrofit and Help Company Reduce Costs

Reprinted from: Securities Times

Text | Securities Times Li Mingyu

On the evening of March 16, Hong Sifang (603395) announced that the company plans to sell part of the industrial land located east of Longxing Avenue and north of Hongtu Avenue in Hefei Circular Economy Demonstration Park (area of 12,800 square meters), including land use rights and the above-ground buildings (structures). According to relevant valuation results, the transaction price is 10.5264 million yuan. The asset transfer price is based on the valuation approved by the relevant authorities.

Public information shows that Hong Sifang is affiliated with China Salt Group and specializes in the research, production, sales, and service of compound fertilizers and nitrogen fertilizers. It is the operating entity for China Salt Group’s agricultural fertilizer business segment. The company has established a complete R&D, production, sales, and agricultural chemical service system centered on compound fertilizers, with products mainly including conventional compound fertilizers, crop-specific formula fertilizers, new special fertilizers, nitrogen fertilizers, and hundreds of varieties and specifications. The company’s compound fertilizer production and sales rank among the top in China’s industry.

Hong Sifang stated that Hong Sifang Holdings plans to implement a first-phase energy-saving and carbon-reduction upgrade project for the gasification furnace to reduce the comprehensive energy consumption and costs of synthetic ammonia. The company intends to purchase the aforementioned land use rights and ownership of the buildings (structures) from the company. As synthetic ammonia is one of the main raw materials for urea, the company purchases synthetic ammonia from Hong Sifang Holdings on a cost-plus basis. Therefore, this upgrade project will not only help reduce Hong Sifang Holdings’ overall energy consumption and costs for synthetic ammonia but also lower the company’s procurement costs for synthetic ammonia, thereby enhancing profitability.

Hong Sifang Holdings is the controlling shareholder of the listed company. According to relevant regulations, Hong Sifang Holdings is an associated party of the company. This transaction constitutes an associated transaction.

Hong Sifang stated that the assets were acquired in 2021; the buildings were completed between January 2014 and December 2022, and the structures were completed between October 2010 and June 2023. All assets are in normal use and have been depreciated or amortized according to accounting standards.

This related-party transaction aligns with the company’s operational development needs. After the transfer of land use rights, it will facilitate Hong Sifang Holdings’ implementation of the first-phase energy-saving and carbon-reduction upgrade project for the gasification furnace, reducing the overall energy consumption and costs of synthetic ammonia, which will lower the company’s procurement costs for synthetic ammonia and benefit long-term interests of the company and shareholders. The warehouses involved in the buildings (structures) have been arranged in advance, and there will be no adverse impact on the company’s production and operations.

The transaction price is based on an appraisal value, ensuring fair pricing. It follows principles of openness, fairness, and justice, will not affect the company’s independence, nor harm the interests of the company and shareholders, especially minority shareholders. The transaction amount accounts for 0.76% of the company’s most recent audited net assets attributable to shareholders and will not cause significant adverse effects on the company’s financial condition or operating results.

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