[中报]海尔智家(600690):海尔智家股份有限公司2022年半年度报告（英文版）
原标题:海尔智家:海尔智家股份有限公司2022年半年度报告（英文版） I. The Board of Directors, the Board of Supervisors, directors, supervisors and senior management of Haier Smart Home Co., Ltd. (the “Company”) are individually and collectively responsible for the content set out therein and hereby assure that the content set out in the interim report is true, accurate and complete, and free from any false record, misleading representation or material omission. II. All directors attend the Board of Directors. III. The interim report is unaudited. IV. Li Huagang (legal representative of the Company), Gong Wei (chief financial officer of the Company) and Ying Ke (the person in charge of accounting department) hereby certify that the financial report set out in the interim report is true, accurate and complete. V. Proposal of profit distribution or proposal of converting capital reserves into share capital for this reporting period resolved and passed by the Board No VI. Disclaimer in respect of forward-looking statements √ Applicable □ Not Applicable Forward-looking statements such as future plans, development strategies as set out in this report do not constitute our substantial commitment to investors. Investors are advised to pay attention to investment risks. VII. Is there any fund occupation by controlling shareholders and their related parties for non-operational purposes No VIII. Is there any provision of external guarantee in violation of prescribed decision-making procedures? No IX. Are there more than half of the Directors could not warrant the truthfulness, accuracy and completeness of the interim report disclosed by the Company No X. Important risk warnings For the possible risks which the Company may encounter, please refer to the relevant information set out in the section of “MANAGEMENT DISCUSSION AND ANALYSIS” in this report. XI. Others □ Applicable √ Not Applicable — SECTION I DEFINITIONS 4 — SECTION II GENERAL INFORMATION OF THE COMPANY AND KEY FINANCIAL INDICATORS 6 — SECTION III MANAGEMENT DISCUSSION AND ANALYSIS 11 — SECTION IV CORPORATE GOVERNANCE 46 — SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES 50 — SECTION VI SIGNIFICANT ISSUES 61 — SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS 76 — SECTION VIII RELEVANT INFORMATION OF PREFERRED SHARES 84 — SECTION IX RELEVANT INFORMATION OF CORPORATE BONDS 85 — SECTION X FINANCIAL REPORT 88
Unless otherwise stated in context, the following terms should have the following meanings in this report: DEFINITION OF FREQUENTLY USED TERMS CSRC China Securities Regulatory Commission SSE Shanghai Stock Exchange The Company, Haier Smart Haier Smart Home Co., Ltd, its original name is “Qingdao Haier Co., Ltd.”, Home and the original short name is “Qingdao Haier” Four Major Securities China Securities Journal, Shanghai Securities News, Securities Times, Securities Newspapers Daily Haier Electronics, 1169 Haier Electronics Group Co., Ltd. (a company originally listed in Hong Kong, stock code: 01169.HK), a subsidiary as accounted for in the consolidated statement of the Company. Haier Electronics has been privatized by way of H shares issuance on 23 December 2020 and became a wholly owned subsidiary of the Company since then. GEA GE Appliances, household appliances assets and business of General Electric Group, have currently been owned by the Company. FPA Fisher & Paykel Appliances Holdings Limited (Chinese Name: 斐雪派克) was established in 1934 and is known as the national appliance brand of New Zealand, the global top-level kitchen appliance brand and the famous luxury brand of the world. It has products including ventilator, gas stove, oven, dishwasher, microwave oven, built-in freezer, washing machine, clothes dryer and etc. Its business covers over 50 countries/regions across the world. FPA is wholly-owned subsidiary of the Company. Candy Candy Group (Candy S.p.A) is an international professional appliances manufacturer from Italy. Since its establishment in 1945, it has been committed to enabling the global users to enjoy a higher quality of life through innovative technologies and quality services. Candy Group has been prestigious in the global market with users all over the world via its ten self- owned professional household appliance brands. In January 2019, Candy became a wholly-owned subsidiary of the Company. CMM China Market Monitor Co., Ltd., as an authoritative market research institute in Chinese home appliances area, was established in 1994 and has been focusing on research of retail sales in China consumption market ever since. Euromonitor Euromonitor, established in 1972, is the leading strategic market information supplier and has over 40-years of experience in respect of publishing market report, commercial reference data and on-line database. They create data and analysis on thousands of products and services around the world. All View Cloud All View Cloud (AVC) is a big data integrated solution provider to the smart home field, providing enterprises with big data information services, regular data information services and special data services. IEC The International Electrotechnical Commission. Founded in 1906, it is the world’s first organization for the preparation and publication of international electrotechnical standardization and is responsible for international standardization for electrical engineering and electronic engineering. The goals of the commission include: to effectively meet the needs of the global market; to ensure that the standards and conformity assessment programs are applied globally in a prioritized manner and to the greatest extent; to assess and improve the quality of products and services involved in its standards; to create conditions for the common use of complicated systems; to improve the effectiveness of the industrialization process; to improve human health and safety, and to protect the environment. IEEE The Institute of Electrical and Electronics Engineers, an international association of electronic technology and information science engineers, is currently the largest non-profit professional technology society in the world. It is committed to the development and research of electrical, electronic, computer engineering and science-related fields, and has now developed into an international academic organization with great influence in terms of the fields of space, computer, telecommunications, biomedicine, power and consumer electronics. Model of Rendanheyi The concept of “Achieving win-win via Rendanheyi ( 人 单 合 一 ) “is the (人单合一) guarantee of Haier’s sustainable operation and the driving force of the Company featuring a self-motivated and empowering corporate culture. “Ren” is an employee who has the spirit of entrepreneurship and innovation; “Dan” is to create value for users. The “Rendanheyi (人单合一) “management model encourages employees to create value for users with an entrepreneurial mindset, and to achieve self-value in line with the those of the Company and its shareholders. “1+3+5+N” Whole House Whole House Intelligence All-Scenario Solutions: 1: Smart Home APP; 3: Intelligence All-Scenario solutions including whole-house air, water, intelligence; 5. five intelligent spaces Solutions including balcony, living room, kitchen, bathroom and bedroom; N: various personalized intelligent scenario experience. Company and Key Financial Indicators I. INFORMATION OF THE COMPANY Chinese name 海尔智家股份有限公司 Chinese short name 海尔智家 English name Haier Smart Home Co., Ltd. English short name Haier Smart Home Legal representative Li Huagang II. CONTACT PERSON AND CONTACT INFORMATION Secretary to Representative of Company Secretary the Board securities affairs (D/H shares) Others Name Liu Xiaomei Liu Tao Ng Chi Yin, Trevor Global Customer Service Hotline Address Department of Department of Room 3513, 35/F, / Securities of Haier Securities of Haier The Center, 99 Smart Home Co., Smart Home Co., Queen’s Road Ltd. Haier Ltd. Haier Central, Central, Information Information Hong Kong Industrial Park, No. Industrial Park, No. 1 Haier Road, 1 Haier Road, Qingdao City Qingdao City – – Tel 0532 88931670 0532 88931670 +852 2169 0000 4006 999 999 – – Fax 0532 88931689 0532 88931689 +852 2169 0880 / Email [email protected] [email protected] [email protected] / III. SUMMARY OF THE CHANGES IN GENERAL INFORMATION Registered address Haier Industrial Park, Laoshan District, Qingdao City Historical change of the Prior to the Company’s listing in 1993, the registered address of the registered address Company was No.165 Xiaobaigan Road, Sifang District, Qingdao City, Shandong Province, and has changed to the current address since 1994, during which the address name was adjusted in line with the change of name of the industrial park but the actual site remains unchanged. Business address Haier Information Industrial Park, Laoshan District, Qingdao City Postal code of the 266101 business address Website https://smart-home.haier.com/cn/ Email [email protected] Query index for any Not applicable changes during the reporting period IV. MOVEMENT OF PLACE FOR INFORMATION DISCLOSURE AND DEPOSIT Designated newspaper for Shanghai Securities News, Securities Times, China Securities Journal, information disclosure Securities Daily Website for publishing www.sse.com.cn interim report Other websites for annual https://smart-home.haier.com/cn/, www.xetra.com, www.dgap.de, report disclosure https://www.hkexnews.hk Deposit place of interim Department of Securities of Haier Smart Home Co., Ltd. report Haier Information Industrial Park, No. 1 Haier Road, Qingdao City Query index for any Not applicable changes during the reporting period V. SUMMARIZED INFORMATION OF SHARES OF THE COMPANY Stock Short Stock Exchange of Stock Short Name Before Type of Shares Shares Listed Name Stock Code Variation A share Shanghai Stock Haier Smart 600690 Qingdao Haier Exchange Home D share Frankfurt Stock Haier Smart 690D Qingdao Haier Exchange Home H Share Hong Kong Stock Haier Smart 6690 / VI. OTHER RELATED INFORMATION □ Applicable √ Not Applicable VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY (I) Key accounting data Unit and Currency: RMB Increase/decrease for the reporting period compared with the For the reporting corresponding period period of last year Key accounting data (January-June) The corresponding period of last year (%) After adjustment Before adjustment Operating revenue 121,857,522,462.22 111,727,756,211.06 111,618,822,064.73 9.07 Net profit attributable to shareholders of the listed Company 7,949,084,472.70 6,858,902,854.55 6,852,271,812.97 15.89 Net profit after deduction of non-recurring profit or loss attributable to shareholders of the listed Company 7,490,693,705.38 6,269,906,406.72 6,269,906,406.72 19.47 Net cash flows from operating – activities 5,964,247,657.22 8,442,195,160.31 8,423,823,726.89 29.35 Increase/ decrease as at the end of the reporting period As at the end of compared the reporting As at the end of reporting period of last with that of period year last year (%) After adjustment Before adjustment Net assets attributable to shareholders of the listed Company 86,251,016,004.21 79,851,734,427.42 79,810,927,325.55 8.01 Total assets 226,652,759,534.60 217,599,384,435.63 217,459,494,212.74 4.16 (II) Key financial indicators Increase/decrease for the reporting period compared with the For the reporting corresponding period period of last year Key financial indicators (January-June) The corresponding period of last year (%) After adjustment Before adjustment Basic earnings per share (RMB/ share) 0.85 0.74 0.74 14.86 Diluted earnings per share (RMB/ share) 0.85 0.73 0.73 16.44 Basic earnings per share after deducting non-recurring profit or loss (RMB/share) 0.80 0.68 0.68 17.65 Weighted average return on net decreased by 0.05 assets (%) 9.24 9.29 9.29 percentage point Weighted average return on net Increased by 0.21 assets after deducting non- recurring profit or loss (%) 8.71 8.50 8.50 percentage point Explanation of the key accounting data and financial indicators of the Company □ Applicable √ Not Applicable VIII. DIFFERENCES IN ACCOUNTING DATA UNDER DOMESTIC AND OVERSEAS ACCOUNTING STANDARDS √ Applicable □ Not Applicable (I) Difference in net profit and net assets attributable to shareholders of the listed company in financial statements as disclosed in accordance with International Accounting Standards and Chinese Accounting Standards □ Applicable √ Not Applicable There is no difference between the net profit and net assets attributable to shareholders of the listed company presented in the consolidated financial statements as disclosed in accordance with International Accounting Standards and Chinese Accounting Standards by the Company. (II) Difference in net profit and net assets attributable to shareholders of the listed company in financial statements as disclosed in accordance with overseas accounting standards and Chinese Accounting Standards □ Applicable √ Not Applicable Apart from the financial statements prepared in accordance with International Accounting (III) Explanation on difference in domestic and overseas accounting standards □ Applicable √ Not Applicable IX. NON-RECURRING PROFIT OR LOSS ITEMS AND AMOUNT √ Applicable □ Not Applicable Unit and Currency: RMB Non-recurring profit and loss items Amount Profit and loss on disposal of non-current assets 33,807,493.39 Government subsidies through the profit and loss, except for government subsidies that are closely related to the Company’s normal business operations, comply with national policies and regulations, and continue to be enjoyed in a fixed amount or fixed quantity according to certain standards 434,830,465.43 Net profit and loss of subsidiaries arising from business combinations under common control of the current period from the beginning of the period to the date of consolidation 4,473,481.70 Profit and loss from fair value changes of financial assets held for trading, derivative financial assets, financial liabilities held for trading and derivative financial liabilities, as well as investment gains arising from disposal of financial assets held for trading, derivative financial assets, financial liabilities held for trading and derivative financial liabilities and other debt investments, except the effective hedging related to the normal operations of the Company 59,249,736.54 Other non-operating income and expenses except the aforementioned items 34,282,312.26 reduction: Effect of income tax 98,050,857.35 Effect of minority equity interest (After Tax) 10,201,864.65 Total 458,390,767.32 Explain the reasons for determination of the non-recurring profit and loss items that are in conformity with the definition of non-recurring profit and loss items as set out in the Explanatory Announcement — on Information Disclosure by Companies Publicly Issuing Securities No. 1 Non-recurring Profit and Loss Items □ Applicable √ Not Applicable X. OTHERS □ Applicable √ Not Applicable Analysis I. INTRODUCTION OF THE INDUSTRY WHERE THE COMPANY OPERATES AND ITS MAJOR BUSINESS DURING THE REPORTING PERIOD Founded in 1984, the Company is committed to being an enterprise of the times. Through relentless innovation and iterations, the Company seized opportunities in the industry by continuously launching new products that steer market development. After more than 30 years, the Company has become a global leader in the major home appliance industry, as well as a pioneer in global smart home solutions. — ? Global leader of the major home appliance industry: According to data from Euromonitor an authoritative market researcher, the Company ranked first in terms of sales volume in global major appliance market for 13 consecutive years. The Company has a global portfolio of brands, including Haier, Casarte, Leader, GE Appliances, Candy, Fisher&Paykel and AQUA. From 2008 to 2021, Haier brand refrigeration and laundry appliances ranked first among major home appliance brands in sales volume for 14 and 13 consecutive years, respectively. ? Pioneer of global smart home solutions: Capitalizing on the Company’s full-range home appliances products, the Company is recognized by Euromonitor as one of the first in the industry to introduce smart home solutions. Leveraging the Company’s connected home appliance products and partners, supported by Haier Smart Home APP and Haier Smart Home Experiential Cloud Platform, with integration of experience centres and franchised stores, the Company provides users with smart home solutions for a variety of application scenarios, satisfying their pursuit for a better life. Over the years, the Company has established three business segments, namely the Smart Home Business in China, the Overseas Smart Home Business, and Other Business. Smart Home Business in China The Company provides a full range of home appliance products and value-added services in China market through online Haier Smart Home APP, supplemented by the Company’s offline experience centres, in order to cater for users’ needs for different lifestyle scenarios. Smart Home Business in China comprises Household Food Solutions (Internet of Food), Household Clothing Solutions (Internet of Clothing), Household Air Solutions (Internet of Air), and Household Water Solutions (Internet of Water). ? Household Food Solutions (Internet of Food): The Company provides users with refrigerators, freezers, kitchen appliances and other products through domestic market sales and exports. Leveraging the connectivity amongst products, the Company is able to provide users with value- added dietary solutions featuring a combination of products and services including smart cooking and nutrition planning in order to meet users’ demands for convenience, wellbeing and taste. ? Household Clothing Solutions (Internet of Clothing): The Company provides users with washing machines, dryers and other products through domestic market sales and exports. Leveraging the connectivity amongst the Company’s smart products, the Company is able to provide users with value-added laundry solutions featuring a combination of products and services in order to meet users’ demands for washing and caring of apparels. ? Household Air Solutions (Internet of Air): The Company provides users with residential air- conditioners, commercial air-conditioners, purifiers, ventilation systems and other products through domestic market sales and exports. Leveraging the connectivity amongst the Company’s smart products, the Company is able to provide users with smart air solutions in order to meet users’ demands for temperature, humidity, cleanliness and freshness. ? Household Water Solutions (Internet of Water): The Company provides users with electric water heaters, gas water heaters, solar water heaters, heat pump water heaters, POE water purifiers, POU water purifiers, water softening equipments and other products through domestic market sales and exports. Leveraging the connectivity amongst the Company’s smart products, the Company is able to provide users with smart water solutions in order to meet users’ demands for water purification, softening and heating. Overseas Smart Home Business In addition, the Company also manufactures and sells a comprehensive portfolio of home appliance products and provides value-added services in more than 160 countries and regions, including North America, Europe, South Asia and Southeast Asia, Australia and New Zealand, Japan, Middle East, and Africa. In the overseas market, the Company has been manufacturing and selling proprietary appliance products catering for local users’ demands for more than 20 years. During the time, a number of acquisitions contributed to the Company’s growth including acquisition of Haier Group Corporation’s overseas white goods business (Sanyo Electric Co., Ltd.’s white goods business in Japan and Southeast Asia) in 2015, home appliances of GE in the US in 2016, Fisher&Paykel in 2018, and Candy in 2019. The development of the Company’s overseas smart home businesses has been fuelled by synergies among its self- developed business and acquired businesses. At present, the overseas smart home business of the Company has entered a stage of promising growth, having achieved a multi-brand, cross-product, and cross-regional presence on a global basis. According to Euromonitor, the Company’s share of the global market (retail volume) for major home appliances in key regions in 2021 is as follows: ranked first in Asia with a market share of 20.4%; ranked second in America with a market share of 15.1% and ranked second in Australia and New Zealand with a market share of 11.6%. The Company ranked third in Middle East and Africa with a market share of 7.4% and ranked fourth in Europe with a market share of 8.1%. Other Businesses Building on its established smart home businesses, the Company has also developed parts and components, small home appliances, channel distribution and other businesses. In particular, the parts and components business mainly involve procurement, production, and sales of upstream ancillary components for home appliances. The small home appliance business primarily involves small home appliances designed by the Company, produced by outsourced third-party manufacturers and sold under the Company’s brands and products serving to enrich the Company’s smart home solutions. The channel distribution business primarily offers distribution services for products such as televisions and personal electronics products for Haier Group or third-party brands, which leverages the Company’s sales network. During the reporting period, the Company was once again listed among the Top 500 World’s Companies by Fortune Magazine in 2022. The Company was named as the ‘2022 World’s Most Admired Companies’ by the Fortune Magazine. The Company was the only company being selected in Europe and Asia in the home appliances industry and was the only selected company incorporated outside the US. Meanwhile, the Company is also the world’s only Internet-of-Things (IoT) ecosystem TM brand being named again as BrandZ Top 100 Most Valuable Global Brands in 2022. (I) Industry overview for the first half of 2022 1. The Chinese market In the first half of 2022, demand was sluggish in the domestic home appliance market due to economic slowdown, weakened consumer confidence, real estate market downturn, and pandemic containment measures which impacted offline sales, distribution, and installation. Data from CMM showed that the retail sales of the China’s home appliance market (excluding 3C & digital products) in the first half of 2022 was RMB397.951 billion, down 9.89% year-on-year. At the same time, high commodity prices have dragged down industry’s profit margins. Retail sales declined year-on-year in refrigerators, washing machines and air conditioners, while emerging categories including tumble dryers continued to grow. (1) Retail sales of the refrigerator and washing machine industries reached RMB43.667 billion and RMB32.671 billion in the first half of 2022, down 5.26% and 8.34% year-on- year, respectively. Instead of competing over prices, leading players’ focus on user experience and R&D-driven product innovation has contributed to a steady increase in average prices, in particular in offline channels. According to CMM, average retail price of refrigerator and washing machine across online and offline channels have surged 12.87% and 9.99% respectively. In addition, benefiting from the rise in consumer demand for food storage during the pandemic, retail sales of freezer increased 12.12% to RMB7.394 billion. (2) Air conditioner industry was impacted by the real estate market slowdown and lower temperature in May and June, retail sales reached RMB84.24 billion in the first half of 2022, down 14.09%. After the price war in 2019, competitions have become more rational, and average prices of the industry rose 7.46% year-on-year. (3) Traditional kitchen appliances such as range hoods and gas stoves recorded negative growths impacted by the cooling real estate market, increasing penetration and competition from integrated stoves. Data from CMM showed that in the first half of 2022, retail sales of range hood and gas stove dropped 14.95% and 9.41% year-on-year respectively to RMB16.754 billion and RMB10.999 billion. ② Retail sales of integrated stoves amounted to RMB11.783 billion, representing an increase of 6.54% year-on-year. (4) The water heater industry was impacted by the downturn of the real estate market, retail sales in the first half of the year amounted to RMB27.327 billion, down 13.90% compared to the same period in 2021. (5) Emerging categories such as tumble dryers, dishwashers and residential central air conditioners continued to grow. According to data from CMM, retail sales of dishwashers reached RMB5.567 billion in the first half of 2022, a growth of 7.43% year-on-year. Retail sales of tumble dryers amounted to RMB4.361 billion, a surge of 41.08% over the same period in 2021. (6) Small kitchen appliances are consumer discretionary in nature with high penetration, industry demand is cooling. According to AVC, retail sales of such products reached RMB26.38 billion in the first half of 2022, down 4.9% year-on-year. Although demand remains suppressed in the short term, industry upgrade continues to happen on health, smart, and green energy. According to AVC, retail sales of refrigerators above RMB10,000 per unit, washing machines above RMB10,000 per unit and air conditioners above RMB15,000 per unit have grown against the headwind by 10%, 12% and 17% respectively in the first half of the year. For instance, (1) consumers increasingly favoured large-size refrigerators and “refrigerator + freezer” combos, with features of freshness preservation, sterilization, and odour control. According to CMM, for the first half of the year, 500 litre refrigerators accounted for 62.3% of the industry’s total retail sales offline, up 7.5 percentage points year-on-year; and accounted for 41.6% of total retail sales online, a year-on-year increase of 5.7 percentage points. Market demand for self-cleaning, disinfection cabin and fresh air features of air conditioners were on the rise too. (2) Consumer demand for effective space utilization, consistency in design and smart technologies continued to grow, with increasing attention on design and installation of home appliances and decorations. On one hand, this has promoted the rapid growth of new categories such as “built-in refrigerators, built-in washing machines, residential central air conditioners” and according to statistics of China IoL, residential central air conditioners’ output reached RMB18.853 billion in the first half of 2022, representing a year-on-year growth of 7.78%. On the other hand, this has contributed to the growth in suite products. In addition, young consumers in their twenties and thirties are less willing to engage in complicated home furnishing, resulting in a growing demand for one-stop solutions of home furnishing, home improvement and home appliances. Leading player continued to capture market shares by leveraging technological innovation, brand, and extensive distribution network. Industry concentration continued to increase. According to AVC, the combined offline shares of the top three players in refrigerator, washing machine, air conditioner, water heater and range hood reached 70%, 80%, 84%, 60% and 65% respectively. Those equipped with superior R&D, design, and distribution capabilities for suite products were better positioned to acquire and convert user traffic, increase user value, and accumulate goodwill. Online retail sales accounting for 53.8% of total sales. Offline chain retailors were challenged as foot traffic and store expansions were restricted by pandemic containment measures. Appliance sales in home improvement channels achieved rapid growth benefitting from user traffic during home renovation and the capability of providing one-stop solutions integrating appliances with home furnishing. As user’s time is becoming increasingly fragmented, traffic has gradually migrated to content platforms such as TikTok, Kuaishou, Xiaohongshu, bilibili, and Zhihu, who have become vibrant sites for product promotion. In addition, consumption preferences continued to differ, high-end products gain significance offline while consumers tend to look for value-for-money items online, leading to faster growth in mid to low-end markets. The government issued policies to promote home appliance consumption and upgrade. Incentive programmes targeting home appliance consumption have been launched by several municipal governments in the second quarter of 2022. In July 2022, the Ministry of Commerce issued the “Notice on Several Measures to Promote the Consumption of Green and Smart Home Appliances”, which introduced measures to encourage consumption upgrade of green and smart home appliances, including launching a nationwide home appliances “trade-in” campaign, promoting green and smart home appliances in villages and townships, expanding consumption scenarios to enhance consumption experience, and optimizing the supply of green and smart home appliances. According to statistics from General Administration of Customs, China’s total exports of home appliances in the first half of 2022 amounted to RMB283.3 billion, down 8.2% year- on-year. Refrigerator exports amounted to RMB28.6 billion, down 11.8% year-on-year; washing machine exports reached RMB8.8 billion, down 13.2% year-on-year; air-conditioner exports totalled RMB34.1 billion, down 1.6% year-on-year. Such reduction was also due to an extent, the higher base of China’s home appliances exports in the corresponding period in 2021. 2. Overseas markets In the first half of 2022, consumption volume was weakened by high inflation with consumer confidence reduced by economic slowdown overseas. The University of Michigan’s Consumer Sentiment Index dropped from 68.30 in December 2021 to 47.50 in June 2022. In the second quarter of 2022, shipment of core appliances in European and U.S. home appliance markets recorded a single-digit decline year-on-year. The rise of product prices has contributed to growth in the industry’s retail sales. (1) The U.S.: In the first half of 2022, the home appliance industry was challenged by supply chain shortages and high inflation. According to AHAM (Association of Home Appliance Manufacturers), the total shipment of the U.S. home appliance market fell 6.5% year-on-year in the first half of 2022, with the shipment of core appliances down 5.3%. However, total shipment value of home appliances increased 3.8% while core appliances’ shipment value grew 4.2%. (2) Europe: Influenced by inflation and rising energy prices, products with class A energy- efficiency were more favoured by consumers. Sales volume remained flat year-on-year as consumer confidence in Western Europe declined. According to GFK, to cover the cost inflation caused by rising commodity prices, average unit prices of white goods have increased by 9%, and retail revenue of the industry has grown 4.9% year-on- year. Record level temperatures this summer also contributed to the robust revenue growth of air conditioners. (3) South Asia: In India, GDP began to rebound in the second quarter of 2022. Health- conscious and large-size products remained popular and high-end demand was robust. The overall retail sales in Pakistan have tumbled by 8% in the first half of the year, with – sales volume dropped by more than 10%. Average prices have hiked 5% 10% to mitigate the pressure brought about by currency fluctuations and rising raw material costs. (4) Southeast Asia: According to GFK: Thailand’s home appliance industry was sluggish due to inflation and currency depreciation. Sales volume of refrigerator fell 9.3% in the first half of the year. Sales volume of residential air conditioner dropped 9.9% in the first half of the year due to economic downturn and an early monsoon season, which also resulted in 30% volume decline in second quarter. Market demand continued to polarize with mid to low-end consumers focused on meeting their basic needs, while mid-to high-end market opted for variable-frequency air conditioners, large-capacity refrigerators and washing machines. Retail volume in the Indonesian market grew 8.7% year-on-year. (5) Australia & New Zealand: According to distributor’s data, sales revenue of home appliance industry in Australia has grown 10% year-on-year. High inflation, escalating shipping cost and supply chain shortages caused the average unit price to surge 20%. GDP fell 0.2% in New Zealand in the first half of 2022, lower consumer confidence and rising food and fuel prices have forced consumers to cut back on big ticket items such as home appliances. Distributors’ data estimated that industry sales revenue have dropped by 2.7% (6) Japan: The industry was challenged by the sharp depreciation of the yen, escalating prices of energy and food, and the decline in disposable income. According to GFK, the combined sales volume and sales revenue of freezer, refrigerator and washing machine increased by 1% and 4% respectively in the first half. Consumers have increased demand for large-size, health-conscious and energy-saving products, such as large refrigerators with outstanding freshness preservation performance, a second freezer, and large front-load washers with low noise level. (II) Industry Outlook for the second half of 2022 1. The Chinese Market: In the second half of 2022, stabilizing economy and the implementation of policy incentives will help restore market confidence and propel recovery. Commodity prices have slumped since the second quarter, which is conducive to easing cost pressure and improving profitability. CMM forecasts retail revenue of China’s major home appliance market will grow 3%, reaching RMB320 billion in the second half of 2022. Looking ahead in the second half of 2022, although commodity and shipping costs continue to drop and foreign trade stabilization policies are gradually taking effect, given the high base volume in 2021, the trend of export market is projected to be neutral. 2. The Global Market: In May 2022, the United Nation’s World Economic Situation and Prospects Report lowered the projected growth rate of the global economy from 4% earlier in the year to 3.1%. – Global inflation is expected to jump to 6.7% in 2022, which is twice the average in 20102020. However, there are new opportunities amid challenges. Energy-saving and environmentally friendly home appliances, along with alternative energy heat pumps, have become new growth drivers. The trend of smart connectivity is also catching on in the industry. Chinese home appliance players with comprehensive brand portfolio, advanced R&D and manufacturing capabilities, extensive localized distribution networks, and efficient management are positioned to gain share globally. II. ANALYSIS ON CORE COMPETITIVENESS DURING THE REPORTING PERIOD √ Applicable □ Not Applicable The Company has established a solid strategic presence and competitive advantage in China and overseas markets. In China’s major home appliance market, the Company has long maintained a leading position across all product categories. According to CMM’s report, the Company has established a continued leading market position in key major home appliance categories in 2021. In overseas markets, the Company has adhered to its high-end brand creation strategy, building capacity to create leading sustainable growth, which has continuously improved its market shares. Building on this foundation, the Company will further consolidate its leadership position in the industry by leveraging integrated synergies of its global unified platforms, through efficiency transformations driven by digitalization, and by leveraging its technological strengths and innovative capabilities. As cornerstone for sustainable development, the Company’s ‘Rendanheyi (人单合一）’ Model also provided management guidance to the Company to replicate successful experiences. It is believed that the following advantages will help the Company to continue to strengthen its leading position: (i) Dominance in China’s high-end market; rapid growth of overseas high-end brands Riding the trend of consumption upgrade in China, the Company started to develop the high- end brand Casarte in the Chinese market more than 10 years ago. The creation of high-end brands required not only focus, experience, and patience, but also continuous innovation of technological standards and differentiated service capabilities to fulfil user demand for high-quality experiences. The Casarte brand combined the Company’s global technological strengths, product development capabilities and manufacturing craftsmanship, as well as privilege marketing and differentiation services, and has gradually won the trust of users in China’s high-end market. According to statistics from CMM, the Casarte brand has assumed a definitive leading position in China’s high-end major home appliance market, ranking first in the retail sales of refrigerator, washing machine and air conditioner categories in the high-end segment. In the first half of 2022, in terms of offline retail sales, shares of the Casarte brand of washing machines and refrigerators reached 75.2% and 38.6% respectively in the market with product price above RMB10,000 per unit in China, while its share of air conditioners priced above RMB15,000 per unit in the China’s market reached 31.2%. The Company’s overall average price for refrigerators, air conditioners and washing machines was roughly two to three times the average price of the industry. In the North American market, the Company owns high-end brands such as Monogram, Café, and GE Profile. The Company has enhanced its high-end brand profile through launch of products such as professional gas range, large multi-door refrigerators, ultra-fresh dishwashers with stainless steel interior, Opal ice makers, and automatic espresso machines. CAFé BELLISSIMO Espresso Machine was named in CBS News (a renowned media outlet in the United States) Best Mother’s Gift, GE Profile new Kitchen Hub received 30s Choice Award from NKBA (National kitchen & Bath Association). Through the creation of luxurious, customizable, and smart technology-enabled user experience, high-end Monogram, Café and GE Profile have grown rapidly. In the first half 2022, three high-end brands recorded over 40% revenue growth. (ii) Smart household solutions that continue to expand and upgrade As users continued to demand for higher living quality, coupled with the development of technologies such as Internet of Things, big data, cloud computing and artificial intelligence, the industry has shown a smart and high-end development trend that prioritized product suites, based upon scenarios, and home appliances integrated with home furnishings. With leading user insights, extensive product coverage and technological accumulation from intelligent AI algorithms, home big data and IoT equipment technology, the Company provided scenario solutions such as food storage and cooking management, clothes laundry and mix-and-match management, whole-house air comfort and purification management, and healthy drinking water management for five major spaces at home, including the living room, kitchen, bathroom, bedroom and balcony, thereby ‘Designing a home, building a home, and serving a home’ for users. Three-Winged Bird stores provided users with scenario solutions that integrates smart home appliances and smart home furnishings, and through having a service steward to attend to the needs of users throughout the process, through coordination and arranging with the internal specialised team, providing users with a whole-process service that comprised design and implementation, building materials selection, as well as installation and fulfilment. For example, the Three-Winged Bird kitchen scenario solution could provide users with a whole-process service from a suite of smart kitchen appliances to cabinet design, delivery, installation, and fulfilment. Based on the Haier Smart Home Brain platform, users could upgrade the functions of smart home appliances, enjoy services such as professional fitness training, recipe recommendations, purchase of ingredients through refrigerator, automatic selection of laundry programs, and personalized scenarios through interfaces including the Haier Smart Home App and the Xiaoyou Speaker. In the future, the Company will continue to address the needs of user experience, and to further improve and enrich the smart home solutions provided by the Company. Through scenario solutions and ecosystem services, the Company will provide lifelong services for users and further enhance users’ loyalty. (iii) Extensive and solid global presence with localized operational capability In addition to success in the Chinese market, the Company also prospered in overseas markets. The Company seeks overseas expansion of its own brands as well as synergies with acquired brands to develop overseas markets. Such business strategy has guided the Company to establish R&D, manufacturing and marketing three-in-one structure across multiple brands, products, and regions, as well as the model of self-development, interconnection and synergized operation. The Company’s extensive global presence depends on its localized business teams as well as its flexible and autonomous management mechanisms established in various overseas markets, which have enabled the Company to gain rapid insights and respond swiftly to local user demands. The Company also proactively integrates into local markets and cultures and has established a corporate image that is recognized by local communities in the overseas regions where the Company operates. In 2021, the Company operated 10 R&D centres, 122 manufacturing centres, and 108 marketing centres around the world, and achieved a coverage of nearly 130,000 points of sales in overseas markets. (iv) A comprehensive portfolio of proprietary brands recognised by users of all tiers Through organic growth and acquisitions, the Company has formed seven brand clusters, including Haier, Casarte, Leader, GE Appliances, Candy, Fisher&Paykel and AQUA. To address the needs of users from different tiers in various markets around the world, the Company has adopted a differentiated multi- brand strategy in different regions that centred around users, so as to achieve an extensive and in-depth user coverage. For example, in the Chinese market: the three brands of Casarte, Haier and Leader achieved the coverage of high-end, mainstream and niche market groups respectively; in the U.S. market, the six major brands such as Monogram, Café, GE Profile, GE, Haier, Hotpoint comprehensively covered all segments of high-end, mid- range and low-end markets, thereby meeting the preferences and needs of different types of users. (v) Cross-border acquisition and synergy realisation capabilities The Company has an excellent track record of acquisition and integration. The Company has acquired Haier Group Corporation’s overseas white goods business, including Sanyo Electric Co., Ltd.’s white goods businesses in Japan and Southeast Asia in 2015, the home appliance business of General Electric in the US in 2016, the New Zealand company Fisher&Paykel (which has been entrusted by the Haier Group since 2015) in 2018, and the Italian company Candy in 2019. The Company’s capability to perform acquisition and integration is reflected in the following: First of all, the Company implements the ‘Rendanheyi (人单合一）’ Model in the acquired companies, which is a value-added sharing mechanism for the whole-process team under a common goal. Such model can motivate the acquired companies and their employees and enable them to generate more value. Secondly, the Company made use of its global platform to empower the acquired companies in terms of strategic planning, R&D, and procurement in order to enhance their competitiveness. Thirdly, the Company’s open and inclusive corporate culture can support the acquired companies in establishing a flexible and autonomous management mechanism, which can easily earn recognition from the acquired （未完）  |