The Covid-19 pandemic receded in 2022, because of geopolitical disputes and cross-border health measures, however, the cost of energy, transportation, and raw materials increased sharply, while market demand has declined. In addition, countries have tightened their monetary policies to control inflation. Steep interest rate hikes have hindered economic growth and consumption. Inflation and the Russia-Ukraine war is expected to affect economic activities throughout 2023. Predictions of global GDP growth by World Bank, the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF) are set at 2%, 2.6%, and 2.8% respectively. Chung-Hua Institution for Economic Research also revised its forecast for Taiwan’s growth rate in 2023 to 2.01%, a drop from 3.04% in 2022. About one-third of the world’s economies are facing recession. While economic forecasts are showing a global downtrend, China’s economy is expected to rebound as COVID restrictions are lifted. IMF expects China's economic growth to improve from 4.4% to 5.2%.
After a challenging year full of uncertainties, YFY’s consolidated revenue for 2022 was NT$79.636 billion, the net profit attributable to shareholders was NT$2.17 billion, and the earnings per share was NT$1.31. Regardless of short term challenges to business operation, we continue to diversify, having restructured as an investment holding company in 2012. E Ink generated record high profits, contributing to YFY about NT$ 1.6 billion in investment income. SinoPac Holdings' performance in 2022 remained solid, contributing cash dividends of NT$760 million to YFY. YFY forged ahead, incubating new businesses and fostering cutting edge projects.
Our teams champion Innovation, Circular economy and Sustainability. Our forward-looking perspective affords an ability to meet new challenges and temper a more resilient, competitive operation. YFY continues to implement circular economy, digital transformation, and the Group’s five main directives for long-term development:
1. Renewable Energy and Energy Management
In the interest of energy efficiency, the five factories of YFY in Xinwu, Yangmei, Qingshui, Jiutang, and Yangzhou have introduced the ISO 50001 energy management system. In response to the energy plans of the Industrial Development Bureau of the Ministry of Economic Affairs, Taipower Demand Response Load Management, etc., YFY has taken measures to reduce energy consumption, implement waste heat recovery and promote various energy-saving projects. For many years, we have followed the "zero waste" concept and applied the premise of the "Saccharide Economy" proposed by Mr. Show-Chung Ho as means of material sourcing and energy production to create a fully cyclical economic system. In the future, YFY will use digital technology to move towards "intelligent energy" and "circular economy". This is the mission of the newly established "Carbontech & Management Group".
Intelligent Energy: The Carbontech & Management Group will develop an innovative intelligent energy system aiming to "operate Taiwan's decentralized intelligent green power grid," "construct a regional intelligent energy system," and "establish an industrial carbon credit management platform". The YFY Group will apply its expertise to develop the market layout, and address energy issues together with partners.
Circular Economy: The Carbontech & Management Group will accelerate the coal-replacing strategy that turns waste into resources and energy. As "A Model of Innovative Green Energy and Circular Economy," it is tasked with "Managing Taiwan's Renewable Energy Market," "Developing the Green Electricity and Energy Creation Market," and "Serving the Utility Operations Market," and other such strategies.
We are currently working with the Taoyuan city government to transform the Guishan Water Resource Recycling Center into the first green energy center in Taiwan, a ROT (Rehabilitate-Operate-Transfer) case by Taoyuan city government. The key technology of turning waste into green energy of YFY will not only reduce sludge in the plant by 40%, but also convert industrial waste water into biogas. This clean power system will generate 5 million kWh of green electricity annually, while reducing carbon dioxide emissions by 2,500 tons.
2. Industry 4.1 and Upstream/Downstream Industrial Ecosystems
YFY’s smart manufacturing initiative integrates the Group's technological capabilities. Big data and AIoT technology are used in key production processes. Artificial intelligence was first introduced to the CHP’s Jiutang mill, and its success will gradually be replicated in our other factories. With AI technology, engineers can gain in-depth understanding of cause and effect during the production process. Quality is optimized, efficiency is improved, and production costs are reduced.
YFY’s Containerboard and Packaging Business uses industrial internet technology to connect the upstream ecosystem with the downstream. This high-tech link enables real-time customer service, and enhances delivery a win-win situation with supply-chain partners.
In addition, YFY's subsidiaries have partnered with banks to establish the "Blockchain Supply Chain Financial Platform Alliance" which combines the logistics, finance, and information flows of an entire supply chain into one ledger. This solves the problem of fragmented information and transaction authentication in short-chain logistics models, while also reducing paper-based operations and carbon emissions. Since its launch in July last year, more than 280 suppliers have participated and financing reached 800 million in six months, at a rate of 11.4%. This form of responsible supply chain management realizes the ESG goal of sustainable supply chains. The use of blockchain in this platform has been recognized with an ESG Innovation Award.
3. Continuous Development of the Circular Economy
YFY has won the "Taiwan Circular Economy Award" for its efforts in circular papermaking. Energy and resources are used to their fullest. For instance, the by-products of wood dust and sludge from pulp production can be converted into paving materials and agricultural products. In addition, green energy equipment that helps shape the circular economy– such as solar photovoltaic, lignin, and biomass fuel– has been installed at various production sites, reducing carbon emissions. After treatment, the discharged water provides commercially valuable sludge. The remaining material is used for renewable fuel production and further reuse and development.
We are also committed to steam-electricity/co-generation technology, increasing the use of SRF (solid recovered fuel) and lowering the reliance on coal. YFY has become a solution provider for other companies by utilizing its years of practical experience and showing a successful track record in the field of circular economy. This has enabled the company to expand its sources of revenue and amass additional profit.
4. The Saccharide Economy and Development of New Materials
YFY Academy, led by Mr. Show-Chung Ho, endeavors to advance environmentally friendly materials derived from renewable raw materials such as cellulose and starch. Through material technology, the academy proposes to "Saccharide Replacing Petrochemicals".
A prime example is paper yarn. Jointly developed by Chung Hwa Pulp Corporation and Sustainable Carbonhydrate Innovation Co., Ltd., it is an emerging bio-sourced material in the textile industry. This biodegradable fabric simplifies the traditional spinning process, reduces chemical content, and injects sustainable thinking into the fashion industry.
Another example is mulching paper which replaces the plastic used on farms to protect crops. It does not contain heavy metals, and after harvests it can be plowed over, increasing organic matter and carbon storage in the soil. The material has been mass-produced and can now be seen adorning Taiwan’s lush farmland.
The CircuWell was also developed with the goal of replacing plastic. The container does not have a PE coating and can be discarded directly into the paper recycling system. The development of these products offers many benefits, including carbon reduction, plastic reduction, and waste reduction.
5. Recognize Promise Nurture Potential
YFY begins by focusing on its core businesses and then broadens the content of its thematic investments to nurture subsidiary investment firms. With funds gained from capital market operations, YFY Inc. makes the next round of investments, constituting a sustainable value creation cycle. Listed companies under YFY Inc. include TaiGen Biotechnology (4157), Shin Foong Specialty and Applied Materials (6582), and Yuen Foong Yu Consumer Products (6790). Arizon RFID Technology (6863), the world's largest RFID ODM tag manufacturer, has also been listed in 2023. The product’s reach will expand through a cross-industry technology layout, promising fruitful results.
With regard to the 2050 global Net Zero emissions target, YFY – a century-old enterprise – is still vital. We are evolving towards a Saccharide economy, making responsible use of resources for commerce, and operating sustainably in the face of climate change.
In 2023, the YFY management team will continue to evaluate the company from the perspective of talent, capital, environment, and regulations. We will heed changes in international affairs, technological developments, environmental issues, and social patterns. Flexible and resilient, with constant care for ESG, we continue to adapt. YFY is moving with the times and creating reasonable long-term investment value for the shareholders of a century-old enterprise.
Wishing you all good health and prosperity!