, Xinyi Glass is a major manufacturer in the global glass industry chain. Since its listing, Xinyi Glass has developed a number of glass production businesses, such as high-quality float glass, automotive glass and architectural engineering glass, and has grown into a green manufacturing group including Xinyi Solar Energy, Xinyi Energy and Xinyi Power Storage.
In recent years, the profit of Xinyi Glass has steadily increased, and it is gradually in the leading position in the cyclical fluctuations of the glass industry. With the boom of float glass, the net profit of Xinyi Glass is even more brilliant, which is behind the steering of Liu Xiyuan's team. As the secretary and chief financial officer of Xinyi Group
since 2003, Liu Xiyuan has been responsible for the strategy and operation of the Group's financial management and cost accounting, tax treasury and investor relations for nearly 20 years. Liu Xiyuan, CFO of Xinyi Glass, won the honor of "Main Evaluation" in the evaluation of "China CFO Elite 100 Listed in Hong Kong and the United States" in the Chinese edition of Barron Weekly in 2022. Recently, the Chinese edition of Barron's conducted an exclusive interview with Liu Xiyuan. During the communication, Liu Xiyuan shared his experience in financial management of the listed group's business.
At the same time, Xinyi Glass is also actively looking for high-quality financing projects. Despite being in a high energy-consuming industry, Xinyi Glass has successfully reduced its energy efficiency by virtue of its own process iteration, and has also applied for a green financial loan of HK $10 billion. Among them, Liu Xiyuan's team contributed a lot to the active communication with banks and rating agencies.
In Liu Xiyuan's eyes, business diversification is also equivalent to risk diversification. He said that the risk of unstable business will also bring excess returns, while the risk of stable products can provide stable growth of the company, can supplement the cycle of unstable business, so as to form a synergistic effect between upstream and downstream enterprises.
As the CFO of a listed group company in a traditional industry, Liu Xiyuan describes his company and business more realistically. In his view, the market value management of listed companies is to control costs well, build products well, keep investors informed of the company's performance and long-term planning, and maintain timely and close communication.
The following is an edited version of the dialogue between the Chinese edition of Barron's and Liu Xiyuan:
The Chinese edition of Barron's: Xinyi Glass has split up many businesses for listing for so many years. How do you internally judge whether some businesses can be listed? What are your considerations when splitting up these businesses for listing? In 2019, Xinyi Energy was separated from Xinyi Light Energy. Now Xinyi Glass is the single largest shareholder of Xinyi Solar Energy, accounting for about 23%, Xinyi Glass holds about 6% of Xinyi Energy, and there is no direct holding for Xinyi Power Storage.
Why did you think of splitting up the business? In the regulations, the business is required to operate independently from the main body, which is a prerequisite. Then look at their own situation, Xinyi glass itself has float glass, automobile glass, building glass, solar glass, we see that solar glass is the first to meet the conditions.
Second, do we have the demand to split Xinyi Light? In addition, we also have the same idea of splitting power storage, so that enterprises have more room for development and improve the value of shareholders'equity. Chinese edition
of Barron's: You joined Xinyi Glass in 2003 and have been in charge of the company's business for a long time. You have also experienced several business spin-offs and listings. How do you balance the listed business and the balance sheet of the parent company? Therefore, in terms of operation, there are independent teams to operate, and there are independent financial teams to do it. Of course, we are all Lutheran, and we will share some market information and cooperate with each other. In the disclosure of
our financial statements, there will be some related party transactions, which are in line with the objective situation of the operation of the companies on both sides and the listing regulations. For example, we will buy raw materials from Xinyi Guangneng, buy them at the market price, and make relevant disclosures. All of these processes are transparent and follow the listing rules. Of course, we will also go through the examination and approval of the independent director. This is probably the case. Chinese edition
of Barron's: In 2019, Xinyi received HK $10 billion in green financing, and the company's financing level is also leading in the industry. Do you have any unique experience in financing? For example, financing is with bank loans, first of all, we need to understand what the needs of banks are.
In 2019, we saw a new opportunity, that is, green financing. At that time, the state promoted green financing in the Great Bay Area, and there were some incentives in the middle. Both Hong Kong Bank of China and other overseas banks are very interested in this green loan, and they will also have some additional green channels for approval. When we see this opportunity, we also see whether we meet this condition. Ordinary investors or the outside market will think that glass enterprises should belong to high energy consumption and high emission industries, how can they meet the conditions of green financing?
In addition, we have used many environmentally friendly methods in our production process. To make float glass, we are one of the earliest manufacturers of natural gas in the industry, which is the most environmentally friendly method now. On the other hand, green financing needs to be approved by a third-party certification body, and many aspects of our production process are green and environmentally friendly. The architectural glass produced by the company conforms to the international standard of energy saving. So we took the initiative to introduce these contents to banks and institutions for key promotion, and eventually applied for about HK $10 billion in green loans.
"Barron's" Chinese edition: The glass industry is a relatively long upstream and downstream industrial chain industry, Xinyi is how to do a good job of account management? Float glass is mainly sold in the mainland, and automobile glass is mainly sold overseas. We will set credit limits and credit periods for customers according to different industries, and each enterprise has different standards to control the collection period.
For example, float glass is different from automobile glass. Float glass is mainly sold in the mainland, and automobile glass is mainly sold overseas. Therefore, we will set a credit limit and credit period for our customers according to different business sectors. Just like banks give us loans, we have different standards for each enterprise. We will set a credit limit and credit period according to the information provided by customers and public information, so as to control our collection period. This is a good way to manage the accounting period.
The Chinese edition of Barron's: Do you have any experience or can you share with us about the security boundary of corporate cash flow? Last year, when the market was relatively depressed, the collection may be slower. In addition, we should strive to get the bank's credit line, so that we will have a security guarantee in the middle of the turnover. Even if the payment is a little slower, there is bank credit to use.
Of course, we also need to have a budget plan for the annual operation and basic expenses. On the other hand, we will pay employees in time and guarantee payment to suppliers and banks, so that banks can give more quotas, suppliers have more confidence in the company, and can give better prices and conditions, so in terms of cash flow, we have a better grasp of different aspects, forming a safety net.
"Barron's" Chinese edition: The glass industry is a typical cyclical industry, in the process of industry cycle changes, Xinyi's gross margin and other indicators still maintain a steady and positive trend, will the company smooth the financial report? We feel that health and seeking truth from facts are better for investors and banks. What is good is good, and what is bad is not good. We will disclose it according to the actual situation.
Why can we be smooth? Continuously optimize the cost and product structure, rely on optimizing the production process, develop high-quality products to enhance added value to enhance profits. We think this is more realistic.
"Barron's" Chinese version: From the company's point of view, how to do market value management? First of all, do a good job of their own performance, performance is not good to say what market value management. It's not good for investors to see you lose money every year and do market value management. Do a good job in basic work and do a good job in their own performance, this is the first point.
The second point is that after we do well in ourselves, we should also introduce the core values of the company, as well as the development plan and future prospects. Investors will buy shares of companies when they see that they meet their investment objectives. I think in a word, do yourself well, seek truth from facts, and communicate with investors. We think this will be simpler.
"Barron's" Chinese edition: In recent years, Xinyi has been laying out upstream and downstream industrial chains and new businesses, and the diversification of enterprises has made the overall plate bigger and bigger, bringing more risks and benefits. As the chief financial officer of the company, how do you view the risks and advantages of the company's diversified business? Conversely, it can also be said that diversification is risk diversification. There may be some difficulties in one product market in a certain year, but we have other products that do well, so that we can balance the revenue. Investment and operation have a balance of medium risk, high risk and low risk. For us, the glass industry depends on the long-term development plan. We are doing globalization of automobile glass, which is a product with relatively stable risks. Such products can provide stable growth and stable cash flow. Float glass has a cycle, like last year's policy problems have some difficulties, but in the past few years, the performance is very good, a record high. Therefore, different products can guarantee the growth of performance, and automobile glass can make up for the cycle of float glass.
Of course, it also depends on the long-term plan. We are now going upstream to develop and buy some placer mines for our own use to stabilize the cost. Because if we can control the low cost, the gross profit margin can be relatively stable, so the upstream and downstream also look at the synergy effect. Diversification has the advantage of risk diversification, even if the cycle is high or low, it is good to control costs upstream and take the initiative to control the sale of products downstream.
Barron's Chinese Edition: From the perspective of the financial profession, do you think the financial management post needs to be rotated to the front line of the company? And as a financial manager, what kind of resume do you think is the most important to continue to rise? How to get to the front line depends on practice. You don't have to sit there for a whole month. First of all, go to the front line to understand the actual operation of production, and then you can see how to improve data analysis.
In addition, what is the best experience for financial managers? Because we get a lot of data back, how can we analyze it to get a good conclusion and then tell the manager? Chinese edition
of Barron's: What qualities do you think a good financial manager should have? First, it is sensitive to data. When you see a lot of data, how do you look at it? If you are sensitive to the data, you can get some ideas immediately. Second, analytical ability, how to analyze these data and get some useful information. The third point is communication skills. If you don't have good communication skills, you may not be able to get effective information when you go to the front line. After getting these data, we need to turn these useful data into conclusions and tell managers. Fourth, to understand the market changes and policies, we also need to understand the external changes, so that we can make the statements or future development plans more suitable for the development of the market.
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