China Coal Energy Company Limited (1898) Earnings Call Transcript & Summary

Hello everybody, so all the participants are all silent. And now I'm going to read the announcement. So this is faced with all the different investors. We remind all the investors to be careful when you do the investment and you have to take care all the time. So all the distinguished investors and shareholders, good afternoon. I'm [ Tang Shin ], the Board Secretary of China Coal. Welcome you to this company's performance press release in Q1 in 2023. I sincerely thank you for the long-term concern and care. So today we have with us is CFO, Mr. Chai Qiaolin and responsible persons of the country -- of the company's security affairs department and all the different colleagues from the coal sales center, chemical products et cetera. So now I'm going to share with you the company's performance in Q1. Unless otherwise specified, the following data are calculated according to China accounting standards. So since this year, the company has conscientiously implemented the decisions and arrangements made by the CPC Central Committee and the State Council, and the state owned assets supervision and administration commission that adhered to the general tone while striving for progress while maintaining stability, scientifically organized production and sales, paid close attention to improving the quality and efficiency, strengthen the implementation of plans and then to achieve this stable opening and a good start of Q1. So now I'm going to talk about this main operation data. Coal production and sales volume, the output of commercial coal was 33.3 million tonnes, an increase of 2.81 million tonnes or 9.2% Y-o-Y. So the sales volume of commercial coal was CNY 74.77 million, an increase of CNY 5.2 million or 7.5%. Among them the sales volume at our previous call was 32.57 million tonnes Y-o-Y, increase of 5.7%. By our trade the coal sales reached CNY 39.31 million up by 5.7. The sales volume of Asian coal was CNY 2.89 million up by 85.3% above selling price. The average selling price of self-produced a commercial coal is CNY 671 Y-o-Y decrease of CNY 56 per tonne by 7.7%. The average selling price of [indiscernible] trader coal is CNY 735 per tonne down by 12.4%. So the cost of coal products unit sales, cost of the company self-produced commercial coal is down by 12.9% Y-o-Y decrease of CNY 40.5 per tonne, reaching CNY 272.55. So for the production and sales of the major coal chemical products, so polyolefin production was 378,000 tonnes, up 2.4% Y-o-Y. Sales volume was 365,000 tonnes up 10.9% Y-o-Y and urea output was 479,000 tonnes, up by 0.4% Y-o-Y. Sales volume was 645,000 tonnes, up 7.9%. Methanol output was 499 tonnes, down 1.2%. So 5 is the major selling points of main cochemical products. The sales price of polyolefin is CNY 7,056 per tonne, down by 8.4%. Sales price of urea was CNY 2,718 per tonne, increase of 4.7%. The sales price of methanol was CNY 1,832 per tonne. So the sales price of ammonium nitrate was 2,459 per tonne Y-o-Y down by 10%. So the cost of main coal chemical products, the unit sales cost of polyolefin products is CNY 6,556 Y-o-Y decrease of 1.2%. Unit sales price of urea is CNY 1,837 per tonne, up by 7.2%. The unit sales cost of methanol was CNY 2,130, up by 21.6%. The unit sales cost of ammonium nitrate was up by 5.2%. The equipment business, we have achieved the output value of mine equipment was CNY 3.05 billion, up 17.3%. Financial business, after deducting the distributed transactions, the operation income was CNY 427 million, increase by 2.2%. So the other business conditions, mainly including electric power, aluminum processing equipment and accessories import after deducting all the distributed transactions, the operating income was CNY 2.076 billion. So the second part is about the main financial indicators. In Q1, China Coal achieved operating income of CNY 59.2 billion. Total profit was CNY 12 billion and the net profit attributed to the shareholders of the listed company was CNY 7.2 billion a Y-o-Y increase of 5.3%. The basic earnings per share was CNY 0.54, the Y-o-Y increase of 5.9%. The weighted average return on equity was 5.32% so Y-o-Y decrease of 0.4 percentage points. So the asset liability ratio was 49.9%, down by 1.6%. So the main profit increasing factors are, the unit sales cost of self-produced commercial core is reduced and the profit is increased by CNY 1.282 billion. The sales volume of self-produced commercial coal increased by CNY 729 million. The power generation and heat business increased the profit by CNY 312 million. So the financial expense decreases by CNY 1.845 billion. Investment income decreased by CNY 281 million. The taxes and surcharges increased by CNY 271 million. The major coal chemical enterprises reduced their profit by CNY 101 million. The third is about cash flow. In Q1, the company's net cash inflow was CNY 11.098 billion, up by CNY 1.128 billion. So these are all the situation about the operation in Q1 now. I'm talking about the Q2 key work arrangements. In Q2, the company will fully implement the goal of 1 profit in 5 areas of [indiscernible] and strive to achieve effective improvement in quality and reasonable growth. So first, the scientific and reason of our organization and production to ensure the completion of production targets. The second is intensify the marketing efforts and strive to stabilize the sales and anchoring the goal of 0 loss. And fourth is further promote quality improvement and efficiency improvement and further strengthen refined management. The fifth is about continue to deepen the enterprise reform and constantly stimulus the vitality. Sixth is comprehensive strength and the implementation of the plan and accelerate the key work. Seventh is adhere to this innovation-driven development. Eighth is continuously improve the compliance system and stick to the bottom line of legal operation. So in H2, we actually have this vigorous task of steady growth and the management and all the colleagues of the company will overcome all the difficulties and make distant efforts to build a world-class energy enterprise and give back to all the shareholders. So that's all for me. Now let's enter the Q&A session. Welcome you for all the questions.

Thank you so much for the sharing. So we will first have this telephone question raisers and for those internet ones then you have to wait. [Operator Instructions] So for this internet participants, you can just typing by words or you can just use the button of hand-raising to raise a question. So we will first have the questions being read, okay? So now let's just read all these online questions. So there is one investor asking about like a Q1 for this -- for this coking coal, what is the reason why the production quantity is being lowered? So I cannot hear them very well. I'm sorry. And then as to see the second question. So why methanol is actually the sales quantity is actually up, however, the income is not very increased? And then you also can see it has little to do with that. So you can see that well -- there are some telephone questions here. So we will have [ 6 ] for [ 6.1 ] to raise the question.

Hello, everybody. So I am from Ohio. I would like to ask the question because for this previous speech made by the leaders is not very good. And I don't know, it's actually for this coking coal. So for the kinetic coal and I want to know that for this coking coal, what is the reason why it is actually being lowered? And what is the main reason why the production is lower? The second one is currently for this entire coke price and therefore this market price and it has been lowered a lot. So I would also like to know that currently, for the future 2023 trend of this coke's price and for the inference of the overall profit this year, can you give us a simple prospect of that?

So for [ Mr. Jiang ], we will invite him to talk about that. And then for the price, we will also have some other colleagues to answer that. So for the production of coke, it has this Y-o-Y decrease. There are actually 2 coal mines. And because of their 2 coal mines influences, so the production quantity has been lowered and above price. Now let's welcome another one.

So good afternoon. For coke price, you can see that in Q1, so for coke is actually fluctuating and then going downward, the pace is also quite fast and it's actually under-confident for this market. With this for coke, currently, it's actually hard for us to see this like a very obvious support for the price to go up. And then because of Q2 for this overall economic policy, stimulation and therefore, these significant projects will also be increased. So maybe for some like a low stock and for the demand from this coke steel companies, they may have this peak of demand. And then they may also have this bottom out because of this increase of the demand. So we are also waiting for the afterwards macroeconomic policy and the economic stimulation to see the afterwards results.

Okay, got it. And then the next C is for -- you can also see that Australian coal has been permitted to be export to China. And then for this influence for us, have you got this evaluation for this import, how much they would influence us?

So for this overall coke market, it's still actually a very rare product in the market. Although you can see for the steel companies, they are still maintaining this like a very limited profit and then also even sometimes losing money, so they have the pressure of increasing the efficiency. However, coke is still a very rare product in China domestically, especially they have this very big space of growth in the market. And for the current sales, it's still quite good. So our profitability I still think it's still quite promising.

So for import, what is the situation from Australia?

So the impact proposed by the Australian one. So for Q1, it's still like having a big fluctuation. And we also can see it doesn't have a very big impact. And for the current demand is still quite big.

Okay, got it. And there is another question, because previously, we have just got a report, we have about CNY 20 billion of the investment. I would like to know that actually for such a large amount of investment, what is the concern? Because in the last meeting, we said that about this dividend issuance is actually about 30%. We may have a very big CapEx in the future. So for our asset liability, can you share with us what do you want to keep your asset liability ratio because of central enterprises? So they also have some requirements and the KPI regarding that. So for this lower our asset liability ratio and to increase our ROE, what is the overall thing that we want to do to improve these. Can you share with us?

So you mean that actually for the current investment disclosure [indiscernible] for this Phase 2 of this coal chemical industry. Now we have about 0.6 million tonnes of this coal chemical plant in [indiscernible] and we have already got a very good ROE. And for this investment in this Phase 2 of Yulin project has already been this further extension of our long-term strategy of extending this supply chain to have this clean and highly efficient operation method of the company. And this project has already been done for many years. It's just for the overall national documents. This is also proposed by the central government, General Secretary, Mr. Xi's for [indiscernible] and this project has been proposed. So it has utilized this a mature project construction and experiences of that and it has further expanded the scale of that. We hope to have about 0.9 million tonnes of equipment. And then we also hope to have a very good realization of that. So this is the overall investment method. And then we also can see -- we will have Ms. [ Tachoun ] to answer that.

So for our liability rate, it has already been lowered while it's maintaining a stable level. And you also can see, we have this very big CapEx. With this CapEx, we definitely would have about like 56%, 57% of this reliability rate. We wouldn't say that because of the investment, we will have this very big boost of our liability rate.

Okay. The last question is whether we have this kind of like stock ownership incentive, do you have any considerations of that?

We hope that maybe you could refer to that because you can also see that for [indiscernible] and they all have different ones. They have already started doing that. And for some local SOEs have already started doing that.

Thank you so much for your questions. That's all. And maybe later for this general meeting of stockholders with AGM, maybe I will come and have another check. So now let's have the next investor.

I am from [indiscernible] Securities. Because -- since Q2, for -- the spot price of coke is actually lowered significantly. For Q1, the price was about CNY 1,700. And for Q2 compared with the Q1, what are the changes?

We still have [ Mr. Dong ] to answer you the question -- [ Ms. Dong ] to answer you the question.

So for the stock of the cokes, is still being accumulated for this import of coal. And then it's also like having this very big complement. And then we also can see, as I said before, with the overall macro policy and then to have this stimulation and for the steel industry, for infrastructure and then to have this new starting of construction projects, we are still quite positive about the market. We think this is definitely going to bottom out. We are still quite positive about the market in the future.

Okay. Got it. I just want to know that because for this spot price since April, it has a significant decrease. So for Q1, the overall average price is still maintained at a high level. I don't know, for Q2 compared with the Q1's average price, so what is the change? What's the price difference?

So just now Madam Dong has already answered you the question. We think for this price on average would go down. However, generally speaking, you may have this trend of the bottoming out. And for our price of this coke -- coal, it depends on this market demand.

I have something to add. So what do you have paid attention to this production of this coke's production being lowered, and then in Q2, because of these 2 construction sites being finished, so for this overall cokes will come to the normal level. So it's just like the quarterly temporary change. And for this annual target will not change.

I have another question. And then for this kinetic coal for the price because I think that for -- this year, Q1 is about CNY 576 Q1 price, so for Q2 last year, it's about CNY 659 and CNY 660 for that for the kinetic coal, it's actually mainly depending on this like long-term contracts, why the price fluctuation is still very big although it's based on this long-term contracts mainly? So we will have [ Mr. Jung ] from financial department.

So for kinetic coal on the one hand, it's actually vulnerable to the market change. And second one, the price is actually including the freight price. So for this 2 years, there's a freight price would also influence this average price.

Now let's have 4772. We will first have him to share with us his name and where he's from? It's a she, sorry.

So I am [ Jan Xi ]. I have several questions. The first one is, I would like to ask that for the afterwards coal mines, do we have some added ones? And for the existing ones, do we have some new things?

So for this afterwards ones and we will have our strategic plan department to do the answering.

So now we are still preparing for that. It's about to be completed within this year. So for [ Angeli ] is about 5 million tonnes. We hope to complete that in 2025. We have already done this site serving and inspection. So for this future progress, we will keep you updated. So stay tuned.

And the second question is, you can also see in Q1, so for this coal cost is lowered significantly. And for Q1, the situation, will it has some increase or something?

So for Q1, the cost of these coal products, I think there are some different changes. And then we will have this financial colleague to share with you.

In Q1 compared with before this price decrease is about 12.9%. There are some objective reasons. The first one is the change of that to lead to this freight cost to be changed. And then second one is about this new safety production methods and they have regarded this Y-o-Y increase of this cost for this safety manufacturing. Except for these, they also have this Q1 of the lower demand. So this has also led to this overall cost reduction in Q1. So annually, I think in Q1, the cost of control cannot be simply copied. In Q2 or even this entire year's one, we will have this moderate increase. So compared with last year, we still hope the cost to be lower. We will keep this general stability.

So the next one is we would like to ask about coal chemical industry. You can see for this coal chemical, the price is going up. However, for some cost for actually methanol, the cost is also rising significantly. In my imagination for methanol, you should actually go together with this coal price. I didn't see this downward trend the same as the coal price. Why is that?

We still have Mr. Jung to answer that.

For the cost, you can see that for this polyolefin and they have this synergy with another site being opened. And for urea because for urea's price range is actually fluctuating. So the overall cost price is going down. And originally, maybe it is not in line with this overall average price. And the second thing is for this urea, for this coal's requirement is actually very demanding. It will also led to this urea cost to have this slight increase.

Okay. Got it. And then looking into the future, so do you think it will be similar with Q1 for this coal chemical cost?

I think for Q1, except for this polyolefin for methanol and urea, the price and the costs are still quite stable. So it still depends on this original situation and the overall market demand.

So the last question is about our trade core because last year for this trade core, so overall quantity is actually downward significantly because we now have some imports. So do we have this significant increase of the trade core?

So we can see from Q1, our currency trade core is still very stable. I should say that Q1 has already set the historical quarterly high. We have seized this business opportunity in the market. For this year -- for trade core, the scale is still like kept about the level of 100 million tonnes. So in the future, this year, we also still will see this opportunity of this southeastern coastal area of this coal import and then to establish this market and then to continue to guarantee the supply of our coke from the coastal area.

Thank you so much for the management team. Now let's have this telephone number ends with 8310 to raise the question. Please tell us who you are and where you're from?

I'm CM Securities, [ Li Yu ]. I have several questions. So I would like to ask that for this KPI focus of our listed company, what are the KPI focuses? What are the indicators?

So according to this SESEC'S new requirement, so for all those companies owned by us, it's the same. Except for this, for coal's production and sales and safety production, we have some KPI-related evaluation related to [Technical Difficulty] our own major business area.

Okay, got it. And I have several -- 2 other questions. The second question is, this year for this production plan of coal, mainly coming from which mines?

They may come from [indiscernible], for this [indiscernible] overall coal contribution. For [indiscernible], for this year's plan is roughly at what level? We hope to have about 14 million to 15 million around this range.

Okay. Got it. And then the third question is, I have already seen that Q1's self-produced coal is actually down by 7.7% Y-o-Y and for trade core is down by 12%. I want to know that for trade core actually the price downward trend is even bigger than the self-produced ones. Why is that?

So the thing is you can also see for this year for our self-produced coal is mainly supplying this long-term contract, it's a long-term contract price. So for the mid- and the long-term contract price, it has given full play to this anchoring of this market price. Comparatively speaking, it has always been maintained at a very stable level. And from January to March for this average price is CNY 726 compared to last year is up by RMB 3 per tonne. And until May, now we actually are according to this mid- and long-term price is actually CNY 719. Compared with the same period of time last year it has actually remained the same. So this is the reason why we see that the long-term contract markets are quite stable. So for market-based coal, you can also see for this market coal it not only has reflected [Technical Difficulty], it also has got this overall changes of that. So since last year, you can also see from this COVID control and for this coal mine accidents for this spot price of coal has already got some fluctuations. So from January to April, I think for the spot price of kinetic coal is about CNY 1,121 compared to last year, the average price, it was down by RMB 60. So this is about 5.1% of the reduction. And for April the spot price is RMB 1,031. So Y-o-Y, it has down by RMB 107. This is 9.4%. And it has already down by CNY 200 compared with the end of last year. So this could also explain for our market coal for the sales is actually following the trend in the market and purchase [Technical Difficulty].

Now we will have actually any more questions and to communicate with you [Operator Instructions] so we will have the question to be read online. I'm going to read this online question. So the voice is a little bit low. So you could actually get closer and then everybody could hear better.

Can you hear me?

Yes. I can.

So the question is for Q1, so what is the overall performance of that? And then we will have the finance.

So for Q1 [Technical Difficulty], but because of the price is actually slightly lowered and we also have this overall influence. I think it has maintained this quite stable situation, although we have experienced certain influences.

Okay. So any more questions? If no question from the telephone and I will keep reading. So we don't have any more questions from the telephone. And now we were just invite to have this question read and we still got the feedback that the volume is a little bit low. So for this question is, please introduce the [indiscernible] production. So this will have Mr. [ Losan Ping ] from the coal department to do the introduction.

All the investors, hello. So for [indiscernible], so for [indiscernible] current situation and it's about accumulated production is about 3 million because of this geological influences is about 0.9 million tonnes a year for consecutive several years. So for the geological conditions cannot be overcome. So for this production plan has always been very low for that. The first one is that. And then we also can see this is actually all the planned for [Technical Difficulty] 2023 to 2025, and we expect about every year 0.9 million tonnes because of this geological difficulties.

Okay. So do you have any more telephone questions?

We don't have any telephone questions. So we will just have another round of announcement of this telephone question proposing. [Operator Instructions] So please just read the questions online. And now I'm going to read this online question. This investor says for this year, so the major products, price of coal chemical products have already been seen significantly. We also have got this drilling project of the coal chemical products. So I want to know that how do you think about this coal chemical market and the price of the products?

So now let's have with us [ Mr. Wang ] from here.

In 2023, it has been this significant year of this coal chemical market. This whole market is upon the influence of the demand. So the price has declining significantly. We expect that for this situation in May last for a quite long time. And for this year, actually, the fluctuation is huge. For later half of this year, maybe for urea is about 13 million to 14 million tonnes, up by 8%. So we also have about 10% for polyolefin. And we expect -- and you would also go downward for the future [Technical Difficulty] could see this urea price is actually fluctuating, but going downward. So for polyolefin in a short period of time -- for the profitability, we still have limited space. However, with this polyolefin market going to a higher quality and a higher portfolio we expect for the mid and the long run, we still have a very good market prospect.

Okay. I will read another question from the internet. This question is actually with this central enterprises got listed and then to have this deepening of the reform to solve this same industry competition has already been a key. We also can see like a company A and company B have already cleaned and assessed their asset. You can see for your company currently, the cash flow on your book is very abundant. So do you also hope to buy over some high-quality coalmines and then to solve this competition within the same industry?

Thank you so much for the question. First of all, for the company, we highly pay attention to this competition and our shareholder is also considering this horizontal competition significantly. We may consider some other different methods, including procuring all the different ones. And then currently, we haven't got a very accurate disclosed time line. However, we will conscientiously implement the related work to reduce this horizontal competition.

I have another question from the internet, the internet saying that [indiscernible] coal mine, Phase 2, do you have this specific starting point of the construction and the production?

[Indiscernible] Phase 2, we are doing this early stage of preparation and we are still getting the approval and all the series of the procedures and all the preparation work. We haven't got the confirmed date of the starting of the project, but we really are working hard to try to start it as soon as possible. That's it.

So we want to see that any questions from the telephone line? So we will have 1683 to share with us your name and where you're from.

I'm from Shandong Railway Development, [ Tiu Yun Quin ]. I want to know that for this partner of a corporation, you have used which technology from which company? Is this still this [indiscernible] one?

So I will have our -- Mr. Wang to answer this.

Yes. The answer is yes. Yes, we still -- this original technology you have asked. My understanding is actually for [indiscernible] Coal Chemical Institute has already been like globally leading. Do you have some afterwards with [ Italian ] chemical industry do have some deeper cooperation, including like [ Hongsheng ] coal chemical technology has also been very well. And then do you also have some different cooperation plans with this Italian chemical institute?

Because, first of all, we have maintained a quite close cooperation with Italian chemical institute. And in the future about this new energy development -- for our [ chloromen ] is also being implemented. And based on our next step of business development, we will consider future cooperation with Italian chemical research institute.

So now let's read another round of the way to propose questions. [Operator Instructions] So please read another question. We don't have any online questions. So now I'm going to read another question from the online participants. This participant says that for Shaanxi Yulin deep cooperation project, is this actually going together [indiscernible] Phase 2 and for self-produced coal production, it takes what percentage? And we expect how long we will realize the target. So we'll have Mr. Wang to answer the question.

So for Yulin Phase 2 -- for this deep processing, it's actually implementing the strategy of our group. We hope to have this differentiating and premium level of coal chemical products. We hope to have this integrated soon [indiscernible] development is one important project. So previously, for this raw material coal, we definitely have used this Dahaize coal, this self-produced ones.

I have something to add here. So the previous investors have talked about the Dahaize Phase 2. And I have to tell you that now it's about 15 million tonnes and Dahaize Phase 2 will expand the production to about 20 million tonnes and we think it still requires a certain time to realize that. And then when it reaches 20 million tonnes for Dahaize Phase 1 is already like almost 20 million tonnes. And for September, we will just realize this approval and assessment. So for Phase 1 and Phase 2 that clarified the concept for September. This year, Dahaize will have about 20 million tonnes for Dahaize [indiscernible]. So for this future capacity increase, we haven't mentioned the specific discussion and specific time lines have not been stipulated yet.

So we have no more telephone questions. So for Madam [indiscernible], you could just keep reading the questions. There is an investor asking that for Q1 for the cost is significantly reduced for China Coal. Can you break it down why is that?

First of all, the structure has been changed. So the freight fee has been reduced. And second one, about this new management methods about the safety production. It has also led to this additional cost of the management. And you also can see that for this material and labor costs have also been lowered because of this non-staff production and for the maintenance fee has also been reduced.

Okay. Got it. Mr. Jung, thank you. Now there is another question from the online participants. This investor says Q1 2023 for new energy, how do you think about the market and for this new energy market prospect in the future?

And we will have this new energy department, [ Mr. Chen ] for 2023 Q1 -- so sorry. So actually, the volume is actually quite low. So maybe it's hard for the interpreter to interpret. So wait a sec. Now let's adjust on the microphone. So with the [indiscernible] and way phones, it has already been seen significantly. So we also have this overall like 61 hours. So for solar energy, because of the solar energy is about 303 hours, it's up by 3 hours compared with last year. So this is a Q1 because of this no wind or like a little wind situation. The solar energy is not very good. So from the overall market situation, we will just stick to this green energy transformation. So for PV and solar energy will have this as a significant development. We expect that for this new installation for this nonfossil fuel and electricity generation will have a faster speed, very fast speed. This is how I want to answer that.

So now let's have host to propose the question of telephone line and for online staff. [Operator Instructions] No question from the telephone line. And we will just end today's meeting.

Thank you all the participants. Thank you all for the participants and investors. I hope you could keep a close eye on China Coal. If there are some future questions that you haven't got the chance to answer, you could still contact us and to have our department of Investor Relationship to contact with you because we actually have another viewing and it's actually the repeated questions. So we would not just take your time to just read all the questions. If you feel interested, you could just listen to our replay in the future. So this is what I want to add. So thank you so much.

Thank you so much for the management team. Thank you so much for the participation. So wish you a happy life. Thank you. Bye-bye.