Sanhua Intelligent Controls plans to conduct a 200 million yuan futures hedging business involving multiple commodities, including copper and zinc.

[Finance News] On March 23, Zhejiang Sanhua Intelligent Controls Co., Ltd. (Stock Code: 002050, Stock Abbreviation: Sanhua ZhiKong) announced that to hedge against raw material price fluctuations, the company plans to conduct futures hedging activities, with a total margin deposit of no more than 200 million RMB. The proposal has been approved by the 14th meeting of the company’s 8th Board of Directors and is subject to shareholder approval.

The announcement states that the futures hedging activities will focus on commodities related to the company’s production and operations, including futures contracts traded on domestic and international exchanges such as copper, zinc, nickel, aluminum, stainless steel, gold, and the European shipping index. The company indicated that this move aims to effectively lock in raw material costs and reduce operational risks by buying (selling) futures contracts that are opposite in trading direction to the spot market, with quantities roughly matching.

According to the disclosed information, the implementation period for this hedging activity will be from the date of shareholder approval this year until the next year’s shareholder meeting. The funds will come from the company’s own resources, and the entities responsible for implementation will be the company or its controlling subsidiaries.

The company emphasizes that this hedging activity is strictly aimed at avoiding price fluctuation risks and does not involve speculative or purely arbitrage trading. To control risks, the company has formulated the “Management Measures for Futures Hedging Operations” and will strengthen internal controls through measures such as rational fund allocation, strict scale control, and establishing abnormal situation reporting mechanisms.

The announcement also highlights related risks, including price volatility risk, credit risk, operational risk, technical risk, and legal risk. The company stated that it will implement strict risk controls when signing hedging contracts and opening/closing positions to ensure the business proceeds in a compliant and orderly manner.

Regarding accounting treatment, the company will strictly follow relevant standards such as “Enterprise Accounting Standard No. 22 - Recognition and Measurement of Financial Instruments” and “Enterprise Accounting Standard No. 24 - Hedge Accounting” to standardize the accounting for the futures hedging activities.

Market analysts pointed out that as a leading global provider of thermal management solutions, Sanhua ZhiKong’s main products require metals like copper and aluminum, which account for a high proportion of production costs. Recent volatility in commodity prices has prompted the company to use futures hedging tools to lock in costs, which is beneficial for enhancing operational stability and laying a foundation for long-term development.

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