CHINA YUCHAI INTERNATIONAL LTD | CIK:0000932695 | 3

  • Filed: 4/30/2018
  • Entity registrant name: CHINA YUCHAI INTERNATIONAL LTD (CIK: 0000932695)
  • Generator: Donnelley Financial Solutions
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    • ifrs-full:DisclosureOfJointVenturesExplanatory

    6. Investment in joint ventures

     

         31.12.2015      31.12.2016      31.12.2017      31.12.2017  
         RMB’000      RMB’000      RMB’000      US$’000  

    Share of (loss)/profit of joint ventures, net of tax:

    		            

    Y & C Engine Co., Ltd.

    		      (8,978 )       2,039        17,755        2,805  

    Copthorne Hotel Qingdao Co., Ltd. (i)

    		      6,941        (4,465 )       —          —    

    MTU Yuchai Power Co., Ltd.

    		      —          —          (8,487 )       (1,341 ) 

    Other joint ventures

    		      (899 )       (1,642 )       814        129  
      

     

     

    		     

     

     

    		     

     

     

    		     

     

     

    		  
         (2,936 )       (4,068 )       10,082        1,593  
      

     

     

    		     

     

     

    		     

     

     

    		     

     

     

    		  
                31.12.2016      31.12.2017      31.12.2017  
                RMB’000      RMB’000      US$’000  

    Carrying amount of investments:

    		            

    Y & C Engine Co., Ltd.

    		         169,064        122,235        19,312  

    MTU Yuchai Power Co., Ltd.

    		         —          66,513        10,509  

    Other joint ventures

    		         7,287        7,354        1,162  
         

     

     

    		     

     

     

    		     

     

     

    		  
            176,351        196,102        30,983  
         

     

     

    		     

     

     

    		     

     

     

    		  

    Note:

     

      (i) 

    Since February 23, 2016, the investment in Copthorne Hotel Qingdao Co., Ltd had been classified as asset held for sale in view of proposed disposal. The disposal was completed on October 19, 2017. (Refer to Note 22 for details).

     

    The Group has interests in the following joint ventures:

     

    Name of company    Principal activities  

    Place of

    incorporation/

    business

    		     Group’s effective
    equity interest    		  
                   31.12.2016     31.12.2017  
                   %     %  

    Held by subsidiaries

    		         

    Copthorne Hotel Qingdao Co., Ltd. (“Copthorne Qingdao”)

    		   

    Owns and operates a hotel in Qingdao, PRC

    		    

    		 People’s

    Republic of

    China

    		  

     

     

    		     30.1       —    

    HL Heritage Sdn. Bhd.

    		   

    Property development and property investment holdings

    		     Malaysia       30.1       30.1  

    Shanghai Hengshan Equatorial Hotel Management Co., Ltd.

    		   

    Hotel and property management

    		    

    		 People’s

    Republic of

    China

    		  

     

     

    		     24.6       24.6  

    Y & C Engine Co., Ltd (“Y&C”)

    		   

    Manufacture and sale of heavy duty diesel engines, spare parts and after-sales services

    		    

    		 People’s

    Republic of

    China

    		  

     

     

    		     34.4       34.4  

    Guangxi Yineng IOT Science & Technology Co., Ltd.

    		   

    Design, development, management and marketing of an electronic operations management platform

    		    

    		 People’s

    Republic of

    China

    		  

     

     

    		     15.3       15.3  

    MTU Yuchai Power Co., Ltd (“MTU Yuchai Power”) (i)

    		   

    Manufacture off-road diesel engines

    		    

    		 People’s

    Republic of

    China

    		  

     

     

    		     —         38.2  

    Note:

     

      (i) 

    MTU Yuchai Power was incorporated on January 18, 2017. During 2017, Yuchai had invested RMB 75.0 million (US$ 11.8 million) into the joint venture.

    The Group assess impairment of investments when adverse events or changes in circumstances indicate that the carrying amounts may not be recoverable. If the recoverable amount of investment is below its carrying amount, an impairment charge is recognized. The Group performs evaluation of the value of its investment using a discounted cash flows projection or fair value less cost of disposal where appropriate. The projection will be performed using historical trends as a reference and certain assumptions to project the future streams of cash flows.

    In 2015, the Group performed impairment evaluation of its investments in joint ventures. As a result, the Group reversed the earlier impairment of RMB 21.9 million for Copthorne Qingdao. The reversal was made because the fair value less cost of disposal estimated in the latest independent valuation report is higher than the carrying amount and the management had obtained the consent from its joint venture partner to sell the joint venture. The Group estimated the recoverable amounts of investment in Copthorne Qingdao based on its fair value less cost of disposal. The fair value is determined using recognized valuation technique, which is discounted cash flow method. The calculations require the use of key significant unobservable inputs (fair value level 3), which are occupancy rates, room rates, discount rates and gross margins of operating hotel. With regards to the valuation of the recoverable amount of Copthorne Qingdao, management believes that no reasonably possible changes in any of the key assumptions would cause the carrying value of the joint venture to materially exceed its recoverable amount.

    In 2016 and 2017, the Group performed impairment evaluation of its investments in joint ventures, no impairment was required.

     

    The summarized financial information of the joint ventures, based on their IFRS financial statements, and reconciliation with the carrying amount of the investment in consolidated financial statements are set out below:

     

         31.12.2015  
         Y & C    

    Copthorne

    Qingdao

    		     Total  
         RMB’000     RMB’000     RMB’000  

    Revenue

    		      356,697       50,971       407,668  

    Depreciation and amortization

    		      (23,453 )      (12,079 )      (35,532 ) 

    Interest expense

    		      (19,612 )      (8,599 )      (28,211 ) 

    Loss for the year, representing total comprehensive loss for the year

    		      (19,952 )      (20,311 )      (40,263 ) 
      

     

     

    		    

     

     

    		    

     

     

    		  

    Proportion of the Group’s ownership

    		      45 %      60 %   
      

     

     

    		    

     

     

    		    

    Group’s share of loss

    		      (8,978 )      (12,187 )   

    Depreciation arising from fair value adjustment during purchase price allocation

    		      —         (2,804 )   

    Reversal of cumulative impairment loss

    		      —         21,932    
      

     

     

    		    

     

     

    		    

    Group’s share of (loss)/profit of significant joint ventures

    		      (8,978 )      6,941       (2,037 ) 
      

     

     

    		    

     

     

    		    

    Group’s share of loss of other joint ventures, representing the Group’s share of total comprehensive loss of other joint ventures

    		          (899 ) 
          

     

     

    		  

    Group’s share of loss for the year, representing the Group’s share of total comprehensive loss for the year

    		          (2,936 ) 
          

     

     

    		  
         31.12.2016  
         Y & C     Total  
         RMB’000     RMB’000  

    Non-current assets

    		      616,397       616,397  

    Current assets

    		     

    - Cash and bank balances

    		      99,014       99,014  

    - Others

    		      215,246       215,246  
      

     

     

    		    

     

     

    		  

    Total assets

    		      930,657       930,657  
      

     

     

    		    

     

     

    		  

    Non-current liabilities

    		      (60,382 )      (60,382 ) 

    Current liabilities

    		     

    - Interest-bearing loans and borrowings

    		      (68,800 )      (68,800 ) 

    - Others

    		      (425,777 )      (425,777 ) 
      

     

     

    		    

     

     

    		  

    Total liabilities

    		      (554,959 )      (554,959 ) 
      

     

     

    		    

     

     

    		  

    Equity

    		      375,698       375,698  
      

     

     

    		    

     

     

    		  

    Proportion of the Group’s ownership

    		      45 %   
      

     

     

    		    

    Group’s share of net assets

    		      169,064    
      

     

     

    		    

    Carrying amount of significant joint ventures

    		      169,064       169,064  
      

     

     

    		    

    Carrying amount of other joint ventures

    		        7,287  
        

     

     

    		  

    Carrying amount of the investment in joint ventures

    		        176,351  
        

     

     

    		  

     

         2016  
         Y & C    

    Copthorne

    Qingdao*

    		     Total  
         RMB’000     RMB’000     RMB’000  

    Revenue

    		      553,878       3,674       557,552  

    Depreciation and amortization

    		      (22,087 )      (2,797 )      (24,884 ) 

    Interest expense

    		      (14,012 )      (1,337 )      (15,349 ) 

    Profit/(loss) for the year, representing total comprehensive loss for the year

    		      4,531       (6,664 )      (2,133 ) 
      

     

     

    		    

     

     

    		    

     

     

    		  

    Proportion of the Group’s ownership

    		      45 %      60 %   
      

     

     

    		    

     

     

    		    

    Group’s share of profit/(loss)

    		      2,039       (3,998 )   

    Depreciation arising from fair value adjustment during purchase price allocation

    		      —         (467 )   
      

     

     

    		    

     

     

    		    

    Group’s share of profit/(loss) of significant joint ventures

    		      2,039       (4,465 )      (2,426 ) 
      

     

     

    		    

     

     

    		    

    Group’s share of loss of other joint ventures, representing the Group’s share of total comprehensive loss of other joint ventures

    		          (1,642 ) 
          

     

     

    		  

    Group’s share of loss for the year, representing the Group’s share of total comprehensive loss for the year

    		          (4,068 ) 
          

     

     

    		  

     

      *

    On February 23, 2016, the investment in Copthorne Qingdao was classified as asset held for sale. Accordingly, the information presented includes the results of Copthorne Qingdao only for the period from January 1, 2016 to February 23, 2016.
         31.12.2017  
         Y & C     MTU     Total      Total  
         RMB’000     RMB’000     RMB’000      US$’000  

    Non-current assets

    		      734,270       32,015       766,285        121,068  

    Current assets

    		          

    - Cash and bank balances

    		      199,925       113,055       312,980        49,449  

    - Others

    		      367,293       22,775       390,068        61,628  
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Total assets

    		      1,301,488       167,845       1,469,333        232,144  
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Non-current liabilities

    		      (13,543 )      —         (13,543 )       (2,140 ) 

    Current liabilities

    		          

    - Interest-bearing loans and borrowings

    		      (13,500 )      —         (13,500 )       (2,133 ) 

    - Others

    		      (842,765 )      (34,820 )      (877,585 )       (138,652 ) 
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Total liabilities

    		      (869,808 )      (34,820 )      (904,628 )       (142,925 ) 
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Equity

    		      431,680       133,025       564,705        89,219  
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Proportion of the Group’s ownership

    		      45 %      50 %      
      

     

     

    		    

     

     

    		       

    Group’s share of net assets

    		      194,256       66,513       

    Unrealized profit on transactions with joint venture

    		      (72,021 )      —         
      

     

     

    		    

     

     

    		       

    Carrying amount of significant joint ventures

    		      122,235       66,513       188,748        29,821  
      

     

     

    		    

     

     

    		       

    Carrying amount of other joint ventures

    		          7,354        1,162  
          

     

     

    		     

     

     

    		  

    Carrying amount of the investment in joint ventures

    		          196,102        30,983  
          

     

     

    		     

     

     

    		  

     

         31.12.2017  
         Y & C     MTU     Total      Total  
         RMB’000     RMB’000     RMB’000      US$’000  

    Revenue

    		      1,331,823       —         1,331,823        210,419  

    Depreciation and amortization

    		      (20,831 )      (227 )      (21,058 )       (3,327 ) 

    Interest expense

    		      (28,663 )      (343 )      (29,006 )       (4,583 ) 

    Profit/(loss) for the year, representing total comprehensive income for the year

    		      55,982       (16,973 )      39,009        6,163  
      

     

     

    		    

     

     

    		    

     

     

    		     

     

     

    		  

    Proportion of the Group’s ownership

    		      45 %      50 %      
      

     

     

    		    

     

     

    		       

    Group’s share of profit

    		      25,192       (8,487 )      

    Unrealized profit on transactions with joint venture

    		      (7,437 )      —         
      

     

     

    		    

     

     

    		       

    Group’s share of profit of significant joint ventures

    		      17,755       (8,487 )      9,268        1,464  
      

     

     

    		    

     

     

    		       

    Group’s share of loss of other joint ventures, representing the Group’s share of total comprehensive loss of other joint ventures

    		          814        129  
          

     

     

    		     

     

     

    		  

    Group’s share of profit for the year, representing the Group’s share of total comprehensive income for the year

    		          10,082        1,593  
          

     

     

    		     

     

     

    		  

    Note:

    As of December 31, 2017, the Group’s share of joint ventures’ capital commitment that are contracted but not paid was RMB 30,000 (US$4,740) (2016: RMB 10,982).

     

    As of December 31, 2017, the Group’s share of outstanding bills receivables discounted with banks for which Y & C retained a recourse obligation totaled RMB Nil (US$Nil) (2016: RMB 1,440).

    As of December 31, 2017, the Group’s share of outstanding bills receivables endorsed to suppliers for which Y & C retained a recourse obligation were RMB 23,288 (US$3,679) (2016: RMB 5,113).

    Significant restrictions

    The nature and extent of significant restrictions on the Group’s ability to use or access assets and settle liabilities of joint ventures are:

    The Group’s share of cash and cash equivalents of RMB 67,238 (US$10,623) (2016: RMB 26,437) held in the PRC are subject to local exchange control regulations. These regulations places restriction on the amount of currency being exported other than through dividends, trade and service related transactions.

    As at December 31, 2017, the Group’s share of restricted trade receivables of RMB 6,766 (US$1,069) (2016: RMB 34,403) that were factored to large banks in China. The Group’s joint venture have obligation to the banks for its trade receivables with recourse.

    As at December 31, 2017, the Group’s share of restricted cash of RMB 80,452 (US$12,711) (2016: RMB 18,119) which was used as collateral by the banks for the issuance of bills to suppliers.

    As at December 31, 2017, the Group’s share of bills receivables of RMB 12,150 (US$1,920) (2016: RMB Nil) which was used as collateral by banks for the issuance of bills to suppliers.