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Consumer Daily News (Reporter Lu Yue) Recently,Blue Sail MedicalCo., Ltd. (hereinafter referred to as "Lanfan Medical") disclosed its 2024 semi-annual performance forecast, showing that it expects a net loss of 200 million to 140 million yuan attributable to shareholders of the parent company during the reporting period, compared with a loss of approximately 237 million yuan in the same period last year.

Blue Sail Medical started out mainly with PVC gloves and is the leader in the domestic PVC glove industry. In 2020, the severe shortage of PVC gloves in China led to a sharp rise in product prices. In that year, Blue Sail Medical achieved a net profit attributable to shareholders of 1.758 billion yuan, a year-on-year increase of 258.66%.

However, after the tide receded, Blue Sail Medical began to suffer continuous losses, with a loss of 372 million in 2022 and another loss of 568 million in 2023. If the first half of this year is included, the company's cumulative losses in the past two and a half years have exceeded 1 billion. At the same time, Blue Sail Medical's sales expenses and debt problems have also triggeredShenzhen Stock ExchangeInquiries.

1

Glove business may cause losses of more than 1.1 billion yuan in recent years

On July 9, Bluesail Medical, which has been losing money for two consecutive years, disclosed its 2024 semi-annual performance forecast, showing that its performance in the first half of this year was in the red again. It is expected that the net profit attributable to the parent company will be a loss of 140 million to 200 million yuan in the first half of 2024; the non-net profit will be a loss of 170 million to 230 million yuan; the basic earnings per share will be -0.14 yuan/share to -0.2 yuan/share. Although the net profit loss has narrowed year-on-year, the company's loss trend has continued for two and a half years and has not yet turned losses into profits.

As the leader in the PVC glove industry, Bluesail Medical was once "glorious".

In 2020, affected by the supply and demand relationship, there was a serious shortage of PVC gloves in China, resulting in a substantial increase in the price and sales of the product. At that time, Bluesail Medical's operating income was approximately RMB 7.869 billion, a year-on-year increase of 126.42%; net profit attributable to the parent was approximately RMB 1.758 billion, a year-on-year increase of 258.66%. Among them, the company's health protection business with PVC gloves as its core product achieved revenue of approximately RMB 6.753 billion, an increase of more than 300%.

In 2021, after setting aside nearly 1.7 billion yuan in goodwill, Blue Sail Medical's net profit attributable to the parent company was still as high as about 1.156 billion yuan. However, as the global PVC glove production capacity has become oversupplied, Blue Sail Medical's net profit has also fallen "precipitously".

In 2022 and 2023, Lanfan Medical achieved operating income of approximately RMB 4.9 billion and RMB 4.927 billion, respectively, year-on-year growth of -39.56% and 0.54%; net profit attributable to shareholders of the parent was approximately RMB -372 million and -568 million, respectively, year-on-year growth of -132.22% and -52.66%.

It is worth noting that against the backdrop of declining gross profit margins of Bluesail Medical's health protection products and overcapacity in global PVC gloves, it plans to introduce Thai industrial investor Hua Kee Co. by increasing capital and expanding shares. The latter will invest US$200 million in cash to increase capital in Shandong Bluesail Health Technology (hereinafter referred to as "Bluesail Health"), Bluesail Medical's largest nitrile glove production base.

According to the announcement released by Bluesail Medical on June 20, the above-mentioned capital increase will be used for the construction of various glove production capacity and energy projects, innovative product development, marketing network construction and new business layout of Bluesail Health. However, Bluesail Health's net profit in 2023 is still negative, about -14.03 million yuan. As of the end of the first quarter of 2024, its unaudited net profit was about -8.87 million yuan, and its unaudited total liabilities had reached about 605 million yuan.

In addition, Lanfan Medical disclosed in its semiannual report that during the reporting period, its subsidiary Beijing Lanfan Baisheng Medical Technology Co., Ltd. introduced a total of 1 billion yuan in strategic investment from four companies including Capital Healthcare Industry (Beijing) Fund (Limited Partnership). Since the potential repurchase obligation is recognized as a financial liability at the consolidated level, the company's headquarters is required to make additional financial expenses of approximately 27 million yuan (not involving cash outflows) during the reporting period; the company's headquarters also bears related management expenses, interest expenses, exchange gains and losses, and fair value changes, all of which have a certain impact on the company's profits.

2

Sales expenses and debt issues lead to regulatory inquiries

Affected by the obstruction of the PVC glove business, Blue Sail Medical has focused on developing cardiovascular and cerebrovascular business in recent years as the company's second growth curve. The 2023 annual report shows that Blue Sail Medical's cardiovascular and cerebrovascular business unit achieved revenue of approximately 981 million yuan, a year-on-year increase of 28.37%.

However, during the same period, the company's sales expenses also increased significantly, which attracted regulatory attention. Financial data showed that in 2023, Blue Sail Medical's sales expenses were about 449 million yuan, a year-on-year increase of 21.10%; management expenses were about 340 million yuan, a year-on-year increase of 2.53%; and financial expenses were about 124 million yuan, a year-on-year increase of 266.84%.

On May 20, the Shenzhen Stock Exchange issued an annual report to Bluesail Medical.Inquiry letterThe Shenzhen Stock Exchange requires it to explain the reasons and rationality for the substantial increase in sales expenses in this period while the operating income is basically the same as that of the previous year, based on the industry background, business expansion, performance, number of employees, office needs, etc.

Blue Plate Medical responded that the company's sales expenses increased by 78.193 million yuan in 2023, mainly from the cardiovascular and cerebrovascular business unit, an increase of about 75.16 million yuan, an increase of about 26%, which matches the sales revenue growth of the cardiovascular and cerebrovascular business unit in 2023. It also stated that the increase in sales expenses mainly came from sales staff salaries, marketing expenses and travel expenses.

Corresponding to the increase in its sales expenses is the decrease in R&D expenses. The 2023 annual report shows that the company's R&D expenses were approximately 291 million yuan, a decrease of 17.51% from 352 million yuan in the same period.

In addition, data shows that the balance of Bluesail Medical's short-term loans is 543 million yuan, an increase of 254.90% year-on-year; the balance of long-term loans due within one year is 1.366 billion yuan, an increase of 1.174 billion yuan from the beginning balance of 192 million yuan. By the end of 2023, the company's interest-bearing liabilities will be approximately 4.04 billion yuan.

Source: Blue Sail Medical's response to the Shenzhen Stock Exchange's annual report inquiry letter

The Shenzhen Stock Exchange asked Blue Sail Medical to explain whether the "high deposits and loans" characteristics at the end of the year are significantly different from the financial status of previous years and whether there are significant differences in the same industry. In response, Blue Sail Medical stated in the inquiry letter that the ratio of its monetary funds to interest-bearing liabilities was 76.11%, 63.82% and 31.74% from 2021 to 2023, indicating that the company's "high deposits and loans" signs have eased.

However, Bluesail Medical's debt problem still has a certain impact on its operating performance. From 2021 to 2023, the company's interest expenses were approximately 133 million yuan, 130 million yuan, and 182 million yuan, respectively. The reason why its financial expenses in 2023 increased by 266.84% to approximately 124 million yuan was due to the increase in interest expenses during the reporting period and the decrease in exchange gains due to exchange rate fluctuations.

Lanfan Medical's cash flow level has also been under pressure. Financial data show that from 2022 to the first quarter of 2024, Lanfan Medical's operating cash flow was approximately 494 million yuan, -72.89 million yuan and -44.51 million yuan, respectively.

We will continue to pay attention to Lanfan Medical's losses and sales expenses in recent years.