Fosun International Limited (656) Earnings Call Transcript & Summary

Dear investors and analysts both online and offline, good morning. Welcome to Fosun International 2023 Interim Results Announcement. I am the moderator today, the General Manager of the Department of International Relations at Fosun International Limited, Sun Lu. First, let me introduce to you the management team. The Chairman of Fosun International, Mr. Guo Guangchang; Executive Director and Co-Chairman of Fosun International, Mr. Wang Jiping; Executive Director and Co-CEO, Mr. Chen Qiyu; Executive Director, Co-CEO, Mr. Xu Xiaoliang. And we also have Executive Director, Executive President, CFO of the Group, Mr. Gong Ping. Today's announcement session is presented in two halves. In the morning, the management team will present to you our performance and strategies in the first half of 2023. In the afternoon, the 4 heads of our business segments will brief you their performance and their strategies. Since the beginning of this year, we are living in a very complex political and economic situation. But at the same time, we're seeing that the inflation in established economy is moderating. The national government is putting forward many policies to stabilize the economy. First International, on the other hand, is more committed to its strategies of streamlining and embrace agility. As we position ourselves as a Global Family Business Group, we are more steady, we are more committed. Now let's give the floor to Mr. Gong Ping, the CFO of the group, to brief you the financial performance.

Distinguished investors and analysts, good morning. Welcome to Fosun International 2023 interim results announcement. First, let me present to you our financial performance in the first half of this year. In 2023, we witnessed a very complex, ever-changing situation. We have rate hikes environment globally. And after we released all the COVID-19 related restrictions, and we have many favorable policies. However, we are living in a (02:52) [ comfort ] situation. We are dedicated to our main business. In the first half of this year, we stay committed to our strategies and concentrate our main business. Our industrial operation profit is on the rise, and we recorded a total revenue of RMB 97 billion, up by 11%. FTG increased by almost 40% in this revenue. In the first half of this year, those core indicators that reflect our main finance performance such as industrial operation profit were not significantly. If we exclude those profits from disposed companies, we actually increased by 66% compared to the same period last year, because in the same period last year, we had lots of proceeds from disposing some assets. And for that reason, our profit attributable to owners of the parent went down by 40% recorded as RMB 1.36 billion. The overseas revenue is at RMB 44 billion. So if we again exclude the proceeds from anti-disposal, the number went up by 15%. We invested RMB 4.2 billion in technology and innovation. Through synergies inside the group, we grow -- we had achieved a modifying growth. The number of new members is standing at 21.65 million, up by 11%. And the number of consumer members went up by 55%. The 4 main business segments grew very steadily. For Health Group, it went up by 2%, because the COVID-19 related restrictions have been lifted. So tourism and culture increased by a large margin. So the Happiness Group registered a 34.1% growth. Health segment leveled with a minor decrease compared to the same period last year. For Intelligent Manufacturing, it registered a 6.5% growth compared to the same period last year. And all this goes to show our strategies have been effective. The 4 core industries contributed 73% of our total revenue, especially Yuyuan and FTG, both in Happiness Group, they delivered quality growth and they present a sustainable trend. Yuyuan registered RMB 27.4 billion, a 20% increase. Fosun Pharma registered a revenue of RMB 21.3 billion. Fosun Insurance Portugal, RMB 13 billion. As we navigate through this negative cycle, overseas business become a very important driver to our business. Since 2012, after decades of year, now the CAGR of our overseas revenue is now 15%, is over 60%. FFT registered 82% of FFT's revenue come from non-Germany regions. The same with Fidelidade, the non-Portugal business, take up around 30%. And they have both organic and inorganic growth. That made our overseas portfolio commissions more resilient. For example, in Fidelidade, the premium income of Fidelidade went up very steadily after we took over and its premium income is standing at RMB 2.65 billion. But at the same time, Fosun had helped them to expand globally and their international business increased by 19.4% accounted for 30% of total premiums. Club Med also registered record high revenue and bottom line performance. And its Asia Pacific business contributes 1/3 of their total business. Fosun Pharma is also expanding globally. Gland Pharma completed the acquisition of Cenexi, is European CDMO company. HAL, our German Private Bank, also increased in their revenue, bottom line and ranking in the industry. And before tax revenue also increased by almost 150%. BCP contributed over RMB 1 billion of profits attributable to owners. So there's too many examples for me to raise. But we're also saying that the great performance in the first half year relies on our great financial -- our great funding. We have very stable fundings, both at home and abroad. The group finance in public markets is standing at RMB 16.22 billion. That goes to show that investors have faith in us. At consolidated basis, the amount of cash, bank balances and term deposits is at RMB 114 billion. In the rate hike environment, where the basic rate at [indiscernible] increased by around 400 to 500 basis points, yet our average cost of debt is still maintained at 5.3%. Only 60 bp increase compared to 2022. The adjusted NAV per share is still very resilient, standing at HKD 20.1 per share. And we continue to step up our strategic transformations and deleverage and optimize our debt structure so that we can navigate through this perfect storm. Since 2019, we've been downsizing the real estate business. And at the beginning of 2020, we started the disposal of non-core assets. And we're transforming into asset-light business. And this strategy has been implemented down to portfolio company level. Since the beginning of 2021 because of rate hike, we accelerated restructuring of our assets. So in 2021 and 2020, we struck a balance between divestment and investment. But in 2022, and the first of this year, we have more divestment than we have investment. So to sum up, we continue to optimize those companies, those business that lack competitiveness. So in all we're doing, we're trying to improve our credit rating. In general, we generated a cash inflow over RMB 20 billion. And we also gained RMB 12 billion worth of syndicated loan. Fosun Hi-tech also issued financing vehicles in both January and July. And we also repaid a syndicated loan and bonds on time. And now we don't really have any pressure for maturity. Especially in the next 1 year, we don't really have large-scale U.S. dollar bond. So we don't -- no longer have a problem with debt. Because of that, our credit rating has been upgraded by S&P to Stable. In the past 1 year, the total debt has been continuously on the decline. Since the beginning of the year, we've been publicizing our interest-bearing loan. And our total debt is now at RMB 220.9 billion and the debt maturing at 2nd July has already been paid at the end of June. Looking forward to the second half of the year, we will continue to dispose our non-core assets to further improve our financial performance. Lastly, it's important for us to repay our shareholders through dividend payout. The NAV has been very resilient. In the past 16 years, our dividend payout had been very stable and total amount is at HKD 25.3 billion. That's the end of our financial performance presentation. All-in-all, we navigated through this perfect storm. So in the second half of the year, we'll continue to -- we'll ride on this good momentum. I will leave more time for the 2 co-CEOs for our business and strategies. Now let me turn over to Executive Director and Co-CEO, Mr. Chen Qiyu.

Hello, everyone. Let me report to you our performance in the first half of the year, and I will report to you 4 business segments, including the Health, Happiness and Wealth and Intelligent Manufacturing. For Health segment, we don't have much of change in our health business structure. In the first half of the year, we have reached here over RMB 23 billion in the first half of the year for the total revenue, up by 2% Y-o-Y. Fosun Pharma has contributed over RMB 21 billion in revenue, same as the last year in the same period. However, if we exclude the anti-pandemic related products, Fosun Pharma's revenue increased by 15% Y-o-Y and has reached over RMB 1.7 billion for the profit attributable to owners of the parent, up by 15.69%. If we exclude the anti-pandemic related products, the profit attributable to owners of the parent was RMB 1.3 billion, down by 26.28%. Our R&D investment was RMB 2.884 billion, up by 19.77%. And our operating cash flow was quite healthy, reached RMB 1.81 billion. I think the highlights for the Health segment is that we continue to build our innovative pipelines. As you can see on this slide that we have a very sustainable and innovative product pipelines. Since 2018 and 2019, we have launched different biosimilar drugs. And up until now that we have a very steady progress in launching all the biosimilar drugs, and this has created the added value to our performance, including HANQUYOU and HANSIZHUANG last year, which was the PD-1. And also we have launched YIKAIDA. And also, we have all different innovative drugs that has been launched. So from this year and in the future, we will have more innovative drugs waiting to launch and also waiting to be approved by the global markets. And our PD-1 is in the clinical trials in the U.S. market and is waiting for the approval in the U.S. market. And also PD-1 has already -- the EMA has already accepted our PD-1 application, and we are waiting for the approval. And the HANQUYOU is in the process of the FDA approvals for BLA. And also, we have all different of the vaccines for different indications. And the second business highlight which is also very important for us is the deepening global business presence. In the first half of the year, our revenue from regions and countries other than Mainland China was RMB 4.786 billion. Total employees in the overseas market was more than 6,000, and we have over 1,000 employees working in the commercialization teams. And also, we have major progress in different countries, including in the U.S., we have already established the team for generic drugs. Our PD-1, is in the clinical trials worldwide. And also we have already established a pre-commercialization team for PD-1. In Africa, we have already established 5 regional distribution centers. And also we are building the Cote d'Ivoire Park integrating drug research and development, manufacturing and the logistics distributions. This will speed up our localized manufacturing and supply capabilities. In India, we're actively driving Gland Pharma's transformation into a biological drug CDMO, with its products transforming into complex formulations and high-difficulty injectables. In Europe, Gland Pharma has already acquired Cenexi and built the localized manufacturing capacity in Europe. For Devices & Diagnostics, we have several -- we have healthy growth in our core businesses in the Devices & Diagnostics brands. For the Medical Cosmetology, Sisram, we have re-worked the whole company. Not only we will have the laser equipment, but also we will have the long-acting botox and injectable fillers and personal care products. As this ramps, Sisram is actively building these direct sales team in the whole world. We have already established direct sales in the U.S. And in the first half of the year, we acquired 1 agency in China to establish our direct sales in China. For Professional Equipment/Supplies intuitive surgical has installed 34 units of the da Vinci surgical robots in China for the first half of the year, over 330 units or YTD. And also we have favorable policies issued in the first half of the year, and we have already reached the consensus with our partners. We will localize the manufacturing of the da Vinci surgical robots. For the Ventilators, our Breas is growing very quickly and also has reached a very healthy progress in the first half of the year. During the pandemic period, we have contributed a lot to the anti-pandemic products and also Breas has speed up its upgrading its businesses. For the Medical Service & Healthcare Management, we are evoluting our models. And we are quite confident because of the 2 reasons. The first is that healthcare service and also management in China, we still think that there are great potential and rooms for the medical insurance and health care management. We have already achieved the advantages in China, because we started this business quite early. We have started very early to build our medical presence in China. And also we have -- we are one of the few that's having the medical professional permit. And also we have a very good experiences in Portugal. Luz Saúde is one of the largest private medical groups in Portugal. And also, we have one of the largest insurance companies in Portugal. Insurance plus medicine business model has been tried in the Portugal and also we have seen great results, which means that we think from the Medical Service & Healthcare Management, we are trying to build the new ecosystems to trying to have the very enhanced offline foundations and fill the online, online -- offline service capabilities. And also we are trying to connecting insurance plus medicine, so that in Chinese market, we will have a stronger product even stronger than the top-tier insurance companies in the world. And also, we have seen the great co-operation between health care and insurance right now. Next, for the Happiness business, actually, the business structure does not have big difference from the past years. So we insist on our business structure. And in first half of the year, we should say the Happiness segment has both significant growth of the revenue and the profit. In total, we have a total revenue of RMB 43 billion, which has a Y-o-Y growth by 34%. And in total, the RMB 770 million net profit attributable to owners of the parent. And mainly thanks to the strong performance of Yuyuan and FTG. For Yuyuan revenue, in total it's RMB 27.44 billion, which has a Y-o-Y growth by 26%. For FTG, the total revenue RMB 8.9 billion, which is up by 38.7% Y-o-Y. And for Lanvin Group revenue, in total RMB 1.697 billion, which has a Y-o-Y growth by 6.4%. Fosun Sports revenue, RMB 924 million. And Baihe Jiayuan, the total revenue RMB 530 million. Especially after the pandemic is over, the wedding business has been growing significantly. Next, about the Yuyuan business. Indeed, in the first half of the year, we had very solid operations and our revenue has been increased to RMB 27.44 billion. Also profit attributable to owners of the parent, which has an increase by 225.8% and especially our consumer business has contributed a lot and has made a much larger contribution. In particular, our food and beverage, our jewelry and fashion, those consumption business has been developing rapidly. And for the jewelry business, it accounts for 90%, the revenue account for 90% of the consumer industry. And let's take a specific look of the jewelry fashion business. We have a 35% growth Y-o-Y to RMB 211 million. Especially, we have been witnessed a steady growth of the number of our stores, which have expanded steadily. Year-by-year, we have over 600 store expansion. And also in the first half of this year, we have an increase of 325. So, that's how the expansion of our store and the jewelry fashion business are growing and expanding steadily. Next, about the liquor business, we have a revenue growth by 16.6% in first half of the year, especially on the one hand, we are destocking, and on the other hand, we are driving our business growth, especially by seizing the opportunity after the pandemic and the boosting confidence. On the one hand, since the pandemic is over, so the market is rebounding. On the other hand, we're also deploying our business extensively. And we have F&B business recovered by which has an increase by 160% in first half of this year. Next, the Grand Yuyuan. We are proactively building it into a global fashion culture show with Charm Of Oriental Lifestyle Aesthetics. Especially, we have conducted a series of commercial activities, which are very popular checkup points in Shanghai. And all of those campaigns and activities have been recognized and welcomed extensively, especially, for example, we have Yuyuan Garden Summer Fair and also we have the Bund Art Festival. Next is the FTG's business. We should say it suffered the most during the pandemic in the past several years. However, this year, in H1, FTG has a significant profitability turnaround and also the revenue growth. For example, its revenue has been growing to RMB 8.9 billion. Also, the adjusted EBITDA, now it has reached RMB 2,300 million, which has an increase by 92%. And also, the profit or loss attributable to owners of the parent company has been turned around dramatically, which has an increase by 340%. So we have shown our resilience. It's just that we suffered from the pandemic and such kind of resilience hasn't been reflected. However, now after the pandemic is over, since we have been deeply rooted in China's market and also our momentum has been fully reflected and released. Also Club Med is a globalized brand and business. We have a revenue with 20% higher than the pre-pandemic and also the situation. And also the EBITDA and operating profit increased significantly. At the same time, we have the Sanya Atlantis, which has hit a record high of its business revenue. In particular, the adjusted EBITDA has reached 123% Y-o-Y growth versus last year. At the same time, we are also pushing smoothly the Lijiang project. Next, about our fashion business, which is also growing and developing steadily in all kinds of channels and networks and in all dimensions. We continue to optimize our product portfolio and upgrade different product lines. And when it comes to Wealth segment, because of asset management and insurance. In the first half of this year, the revenue is at RMB 25.44 billion, a slight decrease mainly due to the asset disposal we had last year. We had less in the gains this year. Among them, Fidelidade registered EUR 2.65 billion of premium revenue, it is consolidated its leading position in Portugal. And at the same time, it expanded globally. The premium income from its global business increased by 20%. The HAL, our German Private Bank also delivered a 24% growth. The AUM is at EUR 13.3 billion. Millennium BCP, our Commercial Bank in Portugal registered a revenue of EUR 1.2 billion. And its profit attributable to owners of the parent was at EUR 4.2 billion. For our Asset Management segment, the revenue is at RMB 6.99 billion, a 1% slight decrease. It also consists our Fosun Hive asset management business. In our insurance business, we can basically split them into our international business and Chinese business. Apart from Fidelidade, we also have PeakRe reinsurance company based in Hong Kong. In the first half of this year, apart from achieving their revenue targets, Fidelidade has also increased their profitability. Their net profit attributable to Fosun is now at EUR 84.2 million. PeakRe also increased both the top line and bottom line. In China, we have Pramerica Fosun Life Insurance and also Fosun United Health Insurance. For Pramerica, is more associated with our senior CAD scenarios. In the first half of this year, we did a very strong growth because of our continued investment in the past 2 years. Through community policies, the premium revenue increased by 289%. For Fosun United Health, is also closely associated their integrations into our healthcare scenarios and it registered a 14% increase in its premium income. Then when it comes to our asset management business. We first have a global footprint, but at the same time, we continue to try to create synergies with other industries. So that we can continue to build our capacities. The total AUM is at RMB 2.2 trillion. And includes HAL, Naga in Germany and also Guide and Rio Bravo in Brazil. Also in the Greater China region, we have Fosun RZ, Fosun Capital, Fosun Health Capital and so on. Now speaking of our Fosun Hive asset management platform. We also can split it into our international and Chinese business. For Fosun Hive China, our sellable asset is at RMB 134.3 billion. For AUM, is now at RMB 300 billion. For Fosun Hive overseas, and its AUM is at USD 14.1 billion. You can see we have a very even spread across America, Europe and China -- and Asia. And IDERA was also launched. It's a listed company in Japan. Also PAREF is also another listed entity in Europe. Lastly, I want to talk about smart manufacturing business. Actually, NISCO is our biggest business. However, it is not included in our consolidated balance sheet in the first half of this year. And currently, in total, we have 4 business sectors under the Intelligent Manufacturing landscape. One is new functional materials, since we have Wansheng. Second is industrial automation and digitization with Easun Technology being the entity. And the third thing is the electrification and intelligent cars. Since under this business sector, we have the JEVE and Fusionride. And the last one is the Green Resource Industry, green low-carbon resources with Hainan Mining as well as the ROC Oil under the management of Hainan Mining to build its green low-carbon industry layout and also some iron ore resources and oil and gas resources. So in future, these 4 business sectors will be our major footprint and layout under the Intelligent Manufacturing segment. In total, the revenue is RMB 5.46 billion with an increase by 6.5% Y-o-Y, but currently, it hasn't consolidated Wansheng. And for Hainan Mining, in H1, in total, the revenue is RMB 2.4 billion, down by 12.63% Y-o-Y. Mainly that's due to the downward price of the iron ore and the oil and gas, which has affected our revenue and profitability in first half of this year. But still, we believe in the competitiveness of Hainan Mining. Easun Technology and total operating income in H1 was RMB 3.1 billion, an increase of 27% Y-o-Y, benefiting from the acceleration of electrification and smart intelligence globally also. Our orders have been growing significantly from last year to this year. At the same time, the quality of those order placement has been much better, and we continue to promote our global integrated operation to optimize our global R&D and procurement and sales. Next is Wansheng. Since it is a leading player in the flame retardant business industry, in H1 also affected by the global market downturn. So the piece price and the gross profit has been down to a certain extent. The revenue is RMB 1.425 billion, down by 20% Y-o-Y, mainly affected by the circumstances. And now under Wansheng, the major focus is the research and development to create new product lines and growth opportunities. Next, Hainan Mining. In the past 3 to 5 years, since we have replanned our layout business -- layout and business structure. In the past, we simply had only the iron ore business line. But this time, we have a dual engine driven by both the iron ore and the crude oil, the oil and gas, especially our lithium hydroxide project is ongoing. And since we have already released some announcement of the Mali project. And I believe that after these 2 projects have been put in place, we're going to be even more competitive in the new racetrack. And also the iron ore mining is affected by the fluctuated price in the global market. So now we are still building our business structure to become more resilient. Next is Wansheng, which is also the world's leading new functional materials enterprise. In the past, it's mainly specialized in the flame retardant. But still, as it is shown on this slide, we are also exploring other racetracks of different businesses like the additives and catalysts. Since we have our second research and development center opened in Shanghai this year, hoping to rolling out more projects and more products to further upgrade our Wansheng business. So that's all for the work and performance of our different business sectors. Next, our Xu will take you through the strategies.

Good morning, both online and offline investors and analysts. Our CFO and Co-CEO, Mr. Gong Ping and Mr. Chen Qiyu has given you a very detailed reports of the -- our financial results and for segments. I'll report to you our strategic development. This is our 31 -- the 31st year of Fosun. So for the past 30 years, we have experienced different phases, including China drivers to the global operation and global drivers to the China operation. So during the whole process, we focused on 2 things. The first is change. The second is not changed. I'll first report to the not changed -- what's not changed. We still insist on our values, self-improvement, teamwork, performance and contribution to societies. And we are trying to support global families to become happier and healthier. We focused on 4 core businesses: Health, Happiness, Wealth and Intelligent Manufacturing. So with all the things that we persist in, how can we navigate through different phases? I think for different phases, we have different strategies to adopt -- to adapt to changes. I think for the first -- for this year, we have reported like 3 different -- 3 changes. The first is we will streamline our businesses, which means that we will be more focused on our core assets and core industries, and we will insist on divest non-core businesses. And also, we will strengthen our core businesses to lead the industries. This is one of the change we will streamline our business to adapt to the change in the environment. The second change and strategic focus, which would be the asset-light strategy and cooperation with the key partners. We will enhance our operation capabilities in the global areas, and we will cooperate with the key partners in China and also in the global markets. The third strategic focus would be the balanced investment and divestment. We will divest from the non-core businesses, which means that we will focus our capabilities into our core businesses. And also we were leveraging investment to boost our industrial operation. These 3 would be our strategic focus for the future. And as you can see in our 4 segments, we will have key directions for our 4 segments for the Health segment. We will keep focusing on innovative drugs. We will increase investments in R&D pipelines and also we will strengthen global footprint. And also, we will try to expand the high-end medical services and also to connect with our high-end customers. In the Happiness BG, not only we will increase our product lines and enhance product capabilities, we will also promote our traditional culture. We will combine the traditional culture with the fashion, we will promote our Chinese aesthetics to the world. And also, we will leverage our experiences in our existing benchmarking projects. We will try to build the complex, including culture, retail and tourisms. In the Wealth segment, we will consolidate existing advantages and expand overseas businesses. Fidelidade will focus in the Portugal markets and expand to other markets. In China, we will create ecological insurance policies. In the Intelligent Manufacturing, we will expand to other areas in consultations and build the advantages in agriculture and chemicals. One should not only you will focus on fine chemicals, but also you will find the second curve drivers. We are -- so if we want to power the future, we need to have 4 core capabilities 4 pillars to power our development. These 4 core capabilities, including Profound Global Operations, FC2M Ecosystem, Innovation-driven capabilities and as well as FES systems. I will elaborate you on these 4 core capabilities. The first is Profound Global Operations. At present, we are operating in over 35 countries and regions. We have over 39 global brands and companies. Over 44,000 people are working in our global markets, and our revenues has reached over RMB 44 billion from our overseas revenues. We have seen the great -- we have seen the -- for Easun Technology, it's overseas orders with high gross margin has increased significantly. For Sisram, it has already established its new direct sales office in Dubai and has opened the first experience center in Chicago in June. And for Fidelidade has entered the new markets in South America and has seen great growth in its revenues. Club Med is also expanding. And Club Med will open the first Urban Oasis in China in the second half of the year. In the FC2M ecosystems, we want to empower more species. We will focus on family industries. And also, we hope all the industries in Fosun is FC2M. We will have customer systems with different levels. And we hope that our product will be innovative and with high gross margin. And also, we hope that our supply chain would be more flexible and resilient and its foundation would be digitalization. No matter in vertical or horizontal level, we hope the whole system is building upon the smart digitalization. And we are upgrading our FC2M systems. For the first half of the year, our customer members have grown 55% Y-o-Y; user operation was -- has reached RMB 740 million; and we have reduced the cost by 16.1%. For the technology innovation, which is also one of the main core capabilities, we insist on investing in R&D to build better products. For the first half of the year, we have invested RMB 4.2 billion in innovation technology. Hence, the self-developed innovative anti-PD-1 monoclonal antibody HANSIZHUANG has been approved. And Fidelidade has launched its online APP and has new registered users over 1.4 million, which is more than 13% of the total population of the more Portugal, and digital claims increased to 60% of the total claims. The functional ingredients of flame retardants, antioxidants from Wansheng from a synergetic formula to provide customers with the overall solutions. The fourth, we have learned from our past experiences, and also we have paid the tuition fees in the past. We keep drawing lessons from our past experiences and empower our portfolio companies. That's why we're continuously building the FES systems. We proposed these ideas in first in 2021, and we keep upgrading our FES systems. We have already improved over 1,000 projects and over 40 activities have been optimized in each of the next 3 years. And EPS has been improving the -- our operation. And I think all of the core capabilities relies on our organizational development. We have 5 top management committees. We have different BGs and BUs and POs from the vertical points, we have already built a web in our organizational development. For our global operation, we have established 10 regional committees. And France and Portugal is our top regional committees. And all of our -- we're also pushing our functional lines to build their sharing centers, so that all the functions can be shared by our portfolio committee -- by our portfolio companies. We are trying to build an agile, flexible and efficient organization just like water, because water is agile, flexible and efficient. So in the future, when we are building our organization, the core for our organization would be -- will be more agile. Because the macro environment has been changing frequently. We need to have agile teams to adapt to the changes in the macro economy and the macro environment. And we will have streamlined headquarters and lean sectors. This would contribute to our agility. The second core is flexibility. Fosun is a big conglomerate operating in the whole world. We have different procedures and systems operating every day. However, all the procedures need to be in contribution to our businesses. We need to have agile authorization. We need to have flexible top prioritized battles. And the third core is efficiency. The efficiency relies on our mechanisms, especially the decision-making mechanisms. We have already established talent mechanisms and EMC to decide on different things. And also, we have different meeting mechanisms to improve our organization. In talent sourcing, global partner sourcing and optimizing and talent optimizations, all relies on the mechanisms. Which is why we have 271 mechanisms. We rank different companies, talents and global partners. The efficiency also relies on different sharing mechanisms. We hope to build a really efficient sharing mechanisms that has multiple levels and multiple dimensions. These are the 3 core things to build -- for us to build an agile, flexible and efficient organizations. As you know that we have our values that insist on the self-improvement, teamwork, performance and contribution to societies. That's why we stay true to our mission and continuously enhance our ESG capabilities. For the first half of the year, at the -- every year, we have published the first TCFD report. And also we have included the carbon neutrality into our approval system. As every year, we launched the Rural Doctor Program for the past few years, we have already benefiting over 3 million families. And we have self-produced antimalarial products that has helped a lot of patients. In the G area, we will continuously to optimize FSG system and to have -- to build a bottom to top mechanisms. We keep working on our ESG areas. And also we have seen a lot of the results. We are the only conglomerate in Greater China with the MSCI ESG rating of AA. These are our strategy development. As you know, that the global economy is still in the recovery pace for a company like us. We cannot change the macro environment. We can only persist in our strategy, insist on the things that we cannot change to navigate ourselves in different phases and adapt ourselves 2 different changes. We believe that development can solve the issues in development, and we insist on the longevity, and we are hoping to contribute more values to all different kinds of stakeholders and to help our family to become healthier and happier. Thank you for your support for the past, and I hope that you will have more experiences in our projects. Thank you, everyone.

Thanks for the management for reporting. Next, we will move to the Q&A session. [Operator Instructions]

Hello, everyone. I'm [ Virgo Inchem ] from the Shaw Group. I have a question to Mr. Guo for the first half of the year, the Chinese economy has rebounded. However, in the international market, we have seen the rising interest rates and also differential political issues. What's your view on Fosun's strategy and positioning in the future?

Mr. Guo is speaking. Thank you for your support and also thank you for your questions. I think for the past 3 years during the pandemic period, this is the 31 year of Fosun. Since Fosun has been established yet for 21 years and in the past several decades, we have also experienced a lot of difficulties and also the economic cycles. However, this time, it is the most difficult one, and I think all of you can feel that. So I agree with you that now it's time to rebound. And last time we mentioned that the difficulty is always very tough to get over. However, and also, it's always very tough to pick up to recover from the difficulty. And especially now, the real estate business is having much -- it's having much hardship. And also, we believe that it takes time and patience. So on the one hand, we need to take care of our profitability. And on the other hand, the cash flow, the liquidity as well. So here, it is already very clear that we have already survived in the economic cycle, and we have already well dealt with our cash flow. So now it's time for us to be focused on our advantages businesses, the Health, Happiness, Wealth and Intelligent Manufacturing sectors. So I think the core to self problems of development is to develop -- is development. But of course, we will focus more on building our product and branding our globalization and innovation. So we'll continue to divest from those non-core, those heavy assets. And as a private and enterprise, the financing cost is very high, which is even much higher over 5%. So that's why we're going to continue to divest from those heavy assets to reduce our liabilities to focus on the light-asset strategy and to invest more in the research and development in entrepreneurship and innovation. This is something that's already very clear. Another thing is, I think it's time for us to be brave, to be bold. And also, I'd like to encourage all of you also to encourage ourselves. Since now, we are welcoming a strong rebound after the darkest time. On the one hand, we have witnessed that from the Chinese Government and also some regulatory authorities of securities, they are now being increasingly supportive and to roll out some policies to the private-owned enterprises and the economic market. Also, maybe I dare not to predict that there will be no longer any more interest rate hike, but I think it's already enough. Even though it is hiking rapidly, but I believe that it will also come down in a faster pace, because an interest rate hike is not a long-term solution. It cannot exist in the long run. Also in the medium to long term, since recently, I also visited U.K. and the U.S., I had a lot of communication with them. So I believe in a potential mitigation of the interest rate hike. Globally, I believe you can all feel that the global economy relies on the globalization. So that's why we say the globalization of Fosun is a very important and critical strategy for us. So this year, actually, our overseas or the global business has much better profit and profitability and performance than our domestic business, which is contributed by our globalization capabilities and our long-term globalization strategy. So in future, we will continue to insist in such globalization strategy to be focused and to dig into the core of each business sector and also to be focused in our investment to invest more in our advantages businesses. So thank you for your question. This is my answer.

And next question.

Thank you for giving me the chance. I am the analyst from Guotai Junan Securities, Mr. Lee. And just now in Chairman Guo's answer, you mentioned that Fosun Group will continue to optimize its asset structure and it's cash flow, it's liquidity. So here, my question is, in the second half of this year and even until next year, for Fosun Group, how you're going to improve your liquidity, your asset and liabilities and also your cash flow would have the specific measures and actions to take. And at the same time against this back shop, what are your major business? And what is your investment development plan into your major businesses?

Thank you for your question. So I'd like -- we'd like to have Co-Chairman, Mr. Wang to answer this question.

Thank you very much for raising this question. And also thank you very much for all the investors and all the people who pay much attention to the business and development of Fosun. Thank you for all the guests and analysts. Indeed, as Chairman Guo, just mentioned, now we are optimizing our asset structure to be focused on our major businesses and advantages business and also to go the light-asset strategy, also to focus on our global assumption to serve the global families. Also to invest in innovation, in globalization, in research and development, along with our development path, indeed, we need to well manage our cash flow. That's very critical for us. And recently, as you may see, that our rating is improved. But currently, this is just the very beginning. And since we become even more steady, and in the following several years, we hope to drive our rating into 3P step by step. But of course, it takes time. We have to achieve it step by step. And focusing on achieving this target and objective in 2022, we divested from those non-core assets. And in total, the signed amount is over RMB 40 billion. And we have a cash inflow collected over RMB 30 billion. And in the first half of this year, as mentioned by Mr. Gong Ping, we insist on the light-asset strategy and asset structure optimization, not just from the perspective of the headquarter, but also our portfolio companies are doing towards this direction. By the end of June this year, for Fosun Group, which includes regarding all our portfolio complaints, in total, we have collected back the cash for over RMB 20 billion. And at the headquarter level, in total, we have recovered and collected back RMB 14 billion. So, so far, we can say that we have already successfully managed the liability issue and survived. For our future development, we'll continue to optimize our asset structure to reduce our liabilities on the consolidated balance sheet since we have already shown you the numbers on our consolidated balance sheet and we have already reduced the liability for around RMB 45 billion. In total, that's around RMB 26 billion approximately. So now we are reducing our liability step-by-step in a steady pace. But at the same time, we'd like to embrace partners in healthy assets and also insist on the light-asset strategies. Along the way, we have to seize the opportunities of the innovation and the research and development in the global market is especially we'd like to have more partnership with those corporate companies and also institutions who have strong advantages. But of course, with all of these strategies, and I firmly believe that under the hard work and efforts of all our teams, on our major businesses, we'll continue to develop. And our advantages businesses will even play a leading role in the global market and also to become more competitive in the global context.

Mr. Wang, for your thorough explanation. Now let's move on to the next question.

Good morning, dear management team. I'm with [indiscernible] the private equity firm. First of all, I'd like to ask 1 question. As we're saying previously, when we talked to the Capital Market, we realized we have less income related to COVID-19. And that's why, Fosun Pharma was under pressure. So do we have any highlights that we can expect going forward?

I'd like to ask Co-CEO, Mr. Chen Qiyu, to answer this question.