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

Hello, everyone. Thank you very much for coming to the Interim Meeting of the [Audio Gap] So now let me give you a disclaimer. We are going to present to the investors. And please take precaution. And there will be a Q&A session after this meeting. Thank you.

Distinguished investors and analysts, good afternoon, everyone. My name is Jiang Qun, Secretary of the Board of Directors of China Coal. Welcome to this briefing and sincerely, thank you for your long-term care and support for the company. Now I would like to talk to you about the China Coal's performance in first half 2024, the completion of the key tasks and the main work arrangements for the second half of the year. The following figures I'm going to quote are calculated in accordance with the Chinese Business Accounting Standard, unless otherwise stated. In the first half, China Coal resolutely implemented the decisions by the CPC Central Committee and the State Council focused on high-quality development, as practiced the philosophy of efficiency improvement for existing business and transition for new business and steadily pushed forward our operations. According to the Chinese Business Accounting Standard, operating revenue was RMB 92.98 billion, down by 15% year-over-year. Operating cost was RMB 68.79 billion, down by 16.7% year-over-year. Overall selling price of self-produced commercial coal was RMB 584 per tonne down 6.4%, year-over-year. The unit cost of sales of self-produced commercial coal was RMB 292.9 per tonne, 2.7% up and total profit was RMB 16.2 billion, down 17%. Net profit attributable to listed company, [ listco, ] shareholders was RMB 9.79 billion, down 17.3% year-over-year. Basic earnings per share was RMB 0.74, down 16.9% year-over-year. According to IFRS revenue was RMB 92.98 billion, a year-over-year decrease of 15%. Tax was RMB 71.63 billion, a year-over-year decrease of 16.1%. The unit cost of sales of self-produced commercial coal was RMB 332.3 per tonne, a year-over-year increase of 2.4%. Pretax profit was RMB 17.98 billion, it will be a decrease of 15.1% and the profit attributable to shareholders was RMB 10.7 billion, year-over-year decrease of 16%. Basic earnings per share was RMB 0.81, down 15.6% year-over-year. We scientifically organized the production and sales and already unlocked the advanced coal production capacity. In the first half of the year, the company continued to unlock high-quality production capacity, increase the supply of high-quality coal and ensured the supply of coal energy. We leveraged the increasing capacity of high-quality capacity mines such as Dahaize Coal Mine, and the East Open Pit Coal Mine, while maintained and strengthened the production succession of other mines in an effort to stabilize output. Our raw coal productivity was at 34.7 tonnes per worker, which is leading in the industry. As of the end of the track record period, the company had accumulated -- cumulatively had 13 coal mines past the intelligent acceptance and has still 66 intelligent coal mining faces and 43 intelligent tunneling faces, and coal mine safety and security and high-efficiency production capacity continued to improve. In the first half, the company completed the production of 66.5 million tonnes of commercial coal, basically flat year-over-year. In the first half, the company has already implemented the national decision to secure energy supply strengthened production and the sales synergies, enhanced the management of medium and long-term contracts for thermal coal and made every effort to maintain supply and stabilized prices. The company stepped up its business development, actively adjusted marketing strategy, optimized resource flow and investments, accurately understood market trends to effectively respond to the downstream, downward pressure of the market rather and stabilize an increased sales. In the first half of the year, the sale of commercial coal was 133 million tonnes, a year-over-year decrease of 8.9%. The sales of self-produced commercial coal was 66.19 million tonnes, a year-over-year of 2.1%. The main -- in terms of our coal chemicals business, we achieved safe, stable, long-term capacity and optimal. We had the output of main coal chemicals with -- it was 2.927 million tonnes, a year-over-year decrease of 2.5%. And the sales of main major coal chemicals was 3 million tonnes, down 4% year-over-year. We strengthened lean management and took multiple measures to optimize costs. In the first half, the company incurred operating cost up by CNY 68.79 billion, a year-over-year decrease of CNY 13.8 billion, down 16.7%. And each enterprise continued to strengthen production and operating management. Self-produced commercial coal unit cost of sales was CNY 292 per tonne, an increase of CNY 7.71 per tonne. But CNY 14.3 per tonne less than the average level of 2023. Polyolefin unit cost of sales was CNY 5,866 per tonne, a year-over-year decrease of CNY 218 per tonne. The company continues to optimize its debt structure. Total interest paying debt was CNY 69.15 billion, a net decrease of CNY 3.55 billion from the beginning of the year. Financial expenses decreased to CNY 298 million year-over-year. The overall cost of funds was 3.11%, down 14 basis points from the beginning of the year. We strengthened marketing management and the prices of our main products attracted the main market fluctuations. In the first half of the year, the average selling price of self-produced commercial coal was RMB 584 per tonne, a year-over-year decrease of RMB 40 per tonne, and hence 6.4% negative. The sales price of the thermal coal was RMB 511 per tonne, a year-over-year decrease of RMB 37 per tonne or 6.8% down. The sales price of coking coal was RMB 1,371 per tonne, a year-over-year decrease of RMB 41 per tonne, down by 2.9%. And the sales price of proprietary coal trading was RMB 603 per tonne, a year-over-year decrease of RMB 89 per tonne, down 12.9%. Polyolefin's sales price was RMB 6,955 per tonne, increased by RMB 52 per tonne and up by 0.8% year-over-year. The polyethylene sales price was RMB 7,287 per tonne, an increase of RMB 131 per tonne, up 1.8%. The polypropylene sales price was RMB 6,600 per tonne year-over-year decrease of RMB 40 per tonne, 0.6%. Urea sales price was RMB 2,167 per tonne, year-over-year decrease of RMB 317 per tonne, down 12.8%. Methanol sales, RMB 1,773 per tonne, an increase of RMB 83 per tonne, up 0.2% year-over-year. Ammonium nitrate sales price was RMB 2,178 per tonne, year-over-year decrease of RMB 236 per tonne, down 9.8%. Now let's talk about the profit drivers. The main coal chemical enterprises increased profit by CNY 553 million. The increase in sales of self-produced commercial coal brought in CNY 462 million in profit. Financial cost has decreased by CNY 298 million. The financial business brought in CNY 88 million of profits. Our finance company realized a profit of CNY 709 million, an increase of CNY 88 million year-over-year, thanks to short fund management. The major reducing factors are self-produced commercial coal prices fell by CNY 2.66 billion. Second, investment income decreased by CNY 767 million. Third, the increase in unit cost of sales of self-produced commercial coal reduced profits by CNY 677 million. Four, the provision of asset impairment grew by CNY 248 million. And the power generation and heating business reduced profit by CNY 193 million. The admin expenses grew by CNY 179 million. And in 2024, our main CapEx was CNY 16 billion. CNY 5.3 billion was spent so far. We have Antaibao project, it is about to deliver dual commissioning. The construction of the 100 megawatts agricultural photo -- PV complementary product in Pingshuo and subsequent 260 megawatt PV project is accelerating. The Wushenqi 2x 660 megawatts integrated coal power project is being promoted with high quality, essentially using coal chemical Phase 2 is under construction and took 100,000 tonne Liquid Sunshine demonstration project is being implemented at a faster pace. Phase 1 of Shanghai Energy New Energy demonstration base, a 263-megawatt project has been put into operation and achieved the sound economics and Phase 2 has entered the accelerated construction phase. The construction of China Coal Huajin, Libi mine with an annual capacity of 4 million tonnes of Antaibao site is going smoothly. It is scheduled to put into production next year. And now let me talk to you about the dividend payout. The company's cash dividend so far has totaled more than RMB 30 billion. The company started distributing cash dividends of RMB 5,860,214,700. And the company also distributed a special dividend of RMB 1.5 billion to the shareholders amounting to RMB 0.113 per share, and the aforementioned dividends are expected to be fully paid out by August 26, 2024, and special dividends will also be paid out by October 2024. Now let me talk to you about the second half plan. We will deeply study and publicize and implement the third of the third primary session of the 20th century Committee of the party. We will be focusing on high quality development. First, we will focus on the requirements of deepening reform and upgrading, continue to enhance core functions and competitiveness, resolutely accomplish the task with reform deepening and upgrading, especially related to reform tasks proposed by the third primary session. Second, we will focus on the goal of building a world-class energy enterprise accelerated construction of key projects in the development plan, enhance the ability of some energy high and accelerate our green and low-carbon transition. Third, we will adhere to the world-class standards to deepen the quality and efficiency improvement, strengthening management softly and completely the annual production goals. Fourth, we will continue to improve our R&D and accelerate the development of new quality productivity. Five, we will continue to improve the internal control management system and the risk prevention control system to address risks and achieve safety, environment, production, energy conservation and emission reduction. Last, we will enhance information disclosure, strengthen investor communications and maintain a positive image in the capital market. We will continue to work on retaining the maximum returns to the shareholders and investors. Thank you so much for everyone. So that included my presentation. Let's see if you have any questions. We are more than happy to answer your questions. Now let's go into the Q&A session.

[Operator Instructions]

Hello. I'm from [indiscernible] Securities. Thank you very much Mr. Jiang for your presentation. I have a few questions for you. Firstly, regarding dividend payout. We saw that starting May this year, there was a special dividend payout. And we can feel that you are giving back more to the small and medium shareholders. And this time around, it's 30% of total profit. So for the whole year, it's about 15% of the total profit, which is the dividend amount. So there will be another less than 30% dividend payout, right? So for your annual payout, could it be -- so for the whole year, could it be about 45% of the profit for the dividends? Will you continue to increase the proportion of the dividends? Or do you have such plans, because in the industry, for some companies, they have promised no less than 60% of the profits for the dividends. What's your take on that? And do you have any plans?

Thank you very much for your question. So actually, we've addressed that in the previous meeting. So our main consideration is, of course, we are trying to strike a balance in between the stable operation and also paying enough to our shareholders. So basically, we paid 30%. And basically, it's all cash dividend, and with the improvement of our performance, the absolute value is increasing very obviously. So you need to look at the ratio as well as the absolute number, so in terms of the development of the interest that makes more sense. And also, you asked about the dividend payout ratio throughout the year. I think, it's like this. We will look at the overall business situation of the company. And then we'll have to look after the need from all sides. So you said that you want more dividend payout, but some of the investors they would say that, yes, for the future, the company has the need for the development. And also, the State Council issued the document on the all-around low-carbon and green transition of the economy, and we also need to carry that out. So they asked, do you need to reserve some funds for that kind of development initiative? So we need to balance all sites and then look at the overall situation throughout the year. But one thing is for sure, for the CSRC, they already said that we need to maintain the continuity of our profit, so that we can have a very good expectation. So I can only answer like that.

Okay. So the second question for the coal sector. We saw that for the company in terms of the performance, the growth of the coal sector is pretty high. And for the company in the future, is there any possibility for the coal sector to further grow? Because from the announcement, you said that there is Libi, and Huajin and Dahaize coal mines. So do we have any other new mining rights for the new coal mines to expand our scale? Or do we have like any capital injection to increase our volume? Do we have any plans like that?

So I will ask Mr. Zhang Feng from Coal to talk about that.

So for the company, we always have this overall planning for the coal business. First, we will look at the incremental volume of the resource. So that means, we will get involved in the bidding for the resource. And second, we would look at the producing mines. There is still some potential to increase our capacity, and we are communicating with the national authorities to try to release our existing capacity.

Okay. So I have a third question about the coal chemical sector. So we saw that for the coal and chemical integration in terms of their deployment, it's very well done. I remember in '22 or in '23, when coal chemical projects are under heavy surveillance, we got the Shaanxi Yulin's Phase 2 project approved, 900,000 tonne capacity. So I just wanted to ask about the future deployment plan for the coal chemical, any new projects and for the overall coal chemical deployment. For example, in the [ 15th ] of your plan. How many new projects will we build and commission?

I will ask our Chief Expert, [ Mr. Zhang Wen ] to talk about it.

Okay. So last year, we did the process for the Phase 2, and we are in full swing in construction. And the next phase in coal chemical, there is still new opportunities in the future. We're planning for the 15 5-year plan, for example, in Shuozhou, Shanxi province, the olefin big base, and we also have coal chemical projects in other places in their pre-work phase.

Okay I have another question, a follow-up question. So in other places, if we want to build coal chemical projects, for example, in Shanxi, then is it matching the [ Shuozhou ] coal mine project? Or are we getting a stand-alone mine to build the coal chemical project?

So I think we are still relying on the coal from Shuozhou. And we will build this national level demonstration project because in Shuozhou, the coal chemical is still a blank space. So building a big coal chemical base is very significant for the country as well as our group. So for the coal, we will still use our existing coal resource via a big surface coal mine.

I want to add something. Currently, for the coal chemical project in Shanxi, it is still in the pre-phase. We are not undergoing the decision-making process. So when we have finished that decision-making, we will disclose to the capital market. We are still in the FSR, the Feasibility Study Phase.

Okay. So for the coal chemical, I have another follow-up. For the coal cost, for the coal chemical, in terms of the coal feedstock, do we consume the long-term contract? Or do we use spot?

So it's all a market price.

It's always market price, right?

Yes. It's purchased at market price.

Okay. Got it. So I have nothing else.

Please speak with your name, please.

I'm from Citic. My name is Gu Guopeng. So I want to ask about the cost. So I think in the interim report, we saw a 7% rise on the cost. So compared to last year, actually, it's down a bit because I remember that in the latter half of the year, last year, the cost went gradually up. So I just wanted to ask about the pace of cost control in this year. Will it be like there's a clear increase in the latter half of the year compared to the first half? And second, we talked about the Phase 2 project in Shaanxi, the tax rate is up a bit. So what is the impact on that for the Q2?

Well, I want to ask Mr. Qiaolin from Finance to answer that. Mr. Qiaolin to answer that.

So I will answer your first question. For the commercial coal sales cost increased. I think first thing is due to the rise of the cost, because the surface combined there is some geological condition changes. And the second is about labor cost increase. So we looked at the overall business, and we also released some of the salary and that caused some cost up. And also, the depreciation and write-off that was down a bit, that created some impact. And then we are also paying the mining right return or income tax for the next 30 years. So the base number is up. So also the depreciation went a bit lower. And the third thing is the usage of the fund, the cost also went down. So that's for the cost. The second thing is about the resource tax. As we all know, for the Resource Act, it was released in April in Shaanxi Province. And there was an adjustment. So for the coal, the tax rate was up from 8% to 10%. And then from the business, it can create some impact. That's it. And also the beneficiation was up a bit.

Okay. [indiscernible] I want to add something. As I understand, your question is about the cost. So we are trying to write-off the annual impact in advance in the first half of the year to maintain a quite smooth performance. But of course, it's not ended. We cannot guarantee that the cost will not change. But cost is pretty rigid, but we are trying to reduce the fluctuation of the cost. We can always say that.

8104, please provide your institution and the name.

My name is [indiscernible]. Congratulations on your interim results. And we saw that among all the coal sector, you were pretty outstanding. So I have two questions for the years. First, in Q2, we saw the comprehensive price for the first half of the year on a year-on-year basis or for the Q2 quarter-on-quarter basis, the decrease is pretty minimal. So that showed our stability in such a fluctuating market. So could you shed some light on the relatively small change? What is the reason behind it? Is it because of the high ratio of our long-term contract or is it because of our sales structure, which has changed from last year? That is the first thing. And the second question is for the group. We're interested in the asset or the CapEx in the future, because we do have a lot of good resources in coal as well as the power and new energy. So in the first half of the year, the valuation is already over 100x fee. So it's more capital operation. So for the group, do we have any detailed plans or specific plans for the new capital investments?

So the first question, Zhang Feng. Mr. Zhang will answer that from the company.

So let me explain to you the first thing. Yes. For the cost of -- price of the coal compared to last year on a year-on-year basis, there's not much change. So actually, it was explained a bit before. For the coal sales, 80% is long-term contract. So, of course, our own ratio is higher. So in the spot market, the spot doesn't account for a big percentage, and also for the long-term contract price this year compared to last year from January to July, there is just a minor change with not a big change. So for the market price, it's also going down a bit. But with the same heat value, the ratio is not down that much compared to the nominal. That's my answer.

So the second question will be answered by me. So thank you for giving us such long-term attention. So I believe that you've noticed that we've been developing coal power or thermal power at full swing. So it is also a response to the call of the government. And in the last 2 to 3 years in coal chemical -- in coal power, we invested a lot. So the growth rate was pretty high for the coal power of our company. But up to now, we don't really have a clear plan to enter the capital market for the coal power sector. So we should say, in the long term, for the coal power asset or for the other coal asset that we own, we are not ruling out the possibility of entering the capital market when there are optimal conditions. But which company we should release those into or in what forms is not decided yet. So our coal power plants are still being built. Once we have achieved the economies of scale, the group will study these possibilities and feasibility. So right now, we don't have any conclusions, but there is a possibility.

6332, please start with your name and affiliation, please.

I have a few questions here. I'll go one by one. Regarding the RMB 250 billion of impairment, what caused that for the first half? And what's your prospect for your outlook for the second year.

So [ Mr. Xu ] will take that question.

So regarding impairment, so we provisioned about RMB 200-something million of impairment according to the accounting standard, based on the losses. So we did an impairment test on relevant assets. And for the second half of this year, we will use the same set of standard and be looking at the existing projects to evaluate the quality of the assets. If the conditions were met, then we will continue to do the impairment to keep increasing the quality of our assets.

Can I ask a follow-up? So when you said existing assets or stocks, which are you referring to? So for coal, the costs are pretty low -- the costs are pretty low rate, so which inventories are that we impair on?

So we have some geological changes to some of the coal mines. There are some disruptions in the geology, so that led to some of the impairments.

Understood. So you're saying that there are some situations where sales prices were lower than cost, right? Got it. So second question is regarding costs, if we were to look out to the costs for the whole year, year-over-year, could you do a year-over-year comparison. And if you look forward beyond 2024, then how is the cost of self-produced commercial coal trending?

So we already talked about the cost breakdown. So I'm going to talk to you about compared to last year, can we at least stay flat in terms of cost. All of our mines are automated and the technologies are quite advanced, and we can effectively control the costs. At the same time, we are enhancing our efforts in safety, security environmental protection and automation to beef up our competitiveness and sustainability. So the increasing cost on those fronts is -- it also needs to be considered, but we will continue to drive up production and sales. So there will be more output that can spread the costs thinner. So there won't be too much fluctuation in terms of cost, it will be maintained within a reasonable range.

My last question is this. So for the first half, in terms of thermal coal, how much was the long-term thermal coal? And what's the percent for the second half of this year?

I'll take this question. So for long-term coal -- long-term contract coal, technically speaking, it's part of the national policy. From '21 to now, we are all focused on securing supply and stabilizing prices. Of course, under those circumstances, we have ensured that the stable development of players along the value chain. So long-term contract coal is a very useful tool for the market. So in my presentation -- or when I was answering one of the questions, -- so again, this is part of the policy. And according to the policies, it needs to be 80% of the total coal. So from the beginning of this year and on a monthly basis, it's pretty smooth and flat for us for the first half and second half across all 4 quarters. The percentage of long-term contract coal is pretty even and stable.

Next, 8549. Please state your name and affiliation before you ask a question.

Thank you very much, company management for giving us so much returns, giving us shareholders so much return. I'm [indiscernible] I have two questions. Interpreter cannot hear the answer -- the question. So the output of steel and cement declined, would that impact the long-term coal prices? And what's your current debt level? How much it will get down, by when?

Sorry, you were breaking up. Could you repeat your first question?

Sure. So steel and cement prices and output are going down, will that impact your coal market prices and long-term contract prices?

And your second question? Were you asking about the liability ratio of the company?

Yes.

Okay. I will take the first question. So in terms of the long term price versus spot price, China is such a vast country. So there's so much -- so many factors impacting the prices. So you can't really pinpoint which factor led to what results. But in the short term, there's some factors that are more prominent. But over the long term, it's primarily determined by supply and demand dynamics. In terms of the long-term prices, long-term contract prices, so the entire supply and demand is pretty balanced right now. Of course, supply is slightly excessive, and in terms of prices, they are within the normal rational range. And so it's normal to have market fluctuations price-wise. And overall, we believe that the prices are within the range, that is within our expectation and is acceptable by us.

Ms. [ Xi ] will take the second question.

Regarding liability ratio, as of the June 30, this coal's debt ratio was about 48%, 3 percentage points up compared to the same period last year, and that was primarily thanks to the larger dividend payout. So that caused the liability. Regarding the RMB 300 billion -- with the RMB 300 billion, 48% of liability is pretty healthy and sound. So we will continue to maintain that level of healthiness in terms of the liability. Thank you.

Next, number ending 990, name and affiliation, please.

I'm from Citic. I have two questions for you. Firstly, I would like to follow up on the cost of China coal. Mr. Zhang talked about how this year you might want to lower the labor wages and to fend off the impacts from Q4. So traditionally, Q4 cost was RMB 30 something higher than Q3. So does that mean that all else being equal, Q4 labor cost, Q-over-Q change would be smaller than previous years?

Thank you very much for your question. So we try to smooth over or stabilize labor costs. But in Q4, there were used to be things like bonuses and incentives. So the chances of it being higher than other quarters are higher. So we will try to spread the incentives and bonuses across different quarters so that the spike will not be as much. But of course, it depends on the actual performance. So we're trying to smooth things out and spread the incentives and bonuses across the year.

Second question is, could you take stock of this for us as of the first half of this year. So after the impact of restricted funds, how much cash do you have on hand? And how much debt do you have?

So our colleague from the Finance department will take that question.

I will take this question. At the end -- as of the -- we have RMB 94 billion cash as of the end of June, and close to RMB 30 billion of debt. So I would say RMB 50 billion of funds is what we have. And considering some 1-year maturity debts and the interests, so let's call, the cash balance liquidity is about RMB 10 billion. And for our debt, it's about RMB 69-something billion, which is pretty healthy.

1683, name and affiliation before your question.

So I'm from [ Shandong ] [indiscernible]. We are always optimistic about China Coal, and we are a firm long-term shareholder. So I just want to congratulate you on your performance in the last few years and also for the liability and also for the dividend payout and the market response was good. So I have several small questions about some details. So the first is that I saw the announcement in July, the production was up a lot year-on-year. And compared to last month, the month-on-month was pretty big. So where is that increase come -- where does that increase come from?

So for the coal production, it's related to the geological condition under the well. And the other factor is that we have this kind of periodical work. And it can cause some changes month-on-month -- month-to-month.

So in Shaanxi, is there more increase in July for Shaanxi Province?

Generally speaking, for your question, as I said, for the surface mines or for the wells, it's related to the geological condition and also for our process. So for our company, it's mostly from Shaanxi Province and Mongolia. For the production on both sides throughout the year, we can maintain very stable. But if we talk about different seasons, well, in different months and different seasons for Shaanxi and for Mongolia, there can be some fluctuations.

I want to add something. I understood where your question comes from. So just now Mr. Li Yanjiang talked about the production coal, coal production capacity is related to the turnaround and also the deployment and also the deployment of different workplaces and the logical conditions, which are pretty normal. So in the half of year, our production was already over the production guideline for the half year. And for the incremental volume. Well, of course, compared to last year, it was breakeven and maybe there is a minor decrease. But for the places with big incremental that's for [ Shaanxi and Dahaize. ] And actually, they contributed much more than 2023. And you are interested in Shaanxi from our company. I think the condition there is pretty normal, and we're going as planned.

And then compared to the whole nation productivity, well, is it a big impact?

Well, it depends. So the production decrease in Chinese will not necessarily impact on the whole company.

So the second question is, I saw that for Shuozhou work report in the first half of the year, they mentioned about some key works, for example, the approval work of the mining zone, that was one of the key initiatives. So what is the progress of that approval? So if we get the approval, how much time do we need to take for commissioning?

So currently, for that mine, in order to maintain smooth operation and production, the current production is somehow suppressed. And when it comes to the expansion and also the processes, we are actively cooperating with the provincial and municipal government with their authorities. And we are trying to go through the relevant processes. And when the things are done, then we will apply for the expansion. And as for the overall process, we still need to communicate with the government. So we don't have a specific time line, but we will have active interaction with the government and try to accelerate the approval process of the expansion. So we expect to basically get it done by the end of this year or maybe the beginning of next year.

So I have the last question. So for Dahaize Phase 2, what is the process like for approval? And when do we expect to pass?

So just now you asked a strange question, so I want to correct something for Dahaize coal mine. For the expansion, this is the so-called Phase 2, right? But I think you wanted to know about, after the breakdown of the mining right, we are trying to get the #2 well of the Dahaize. Right? So it involves the breakdown of the mining right and things are under rapid progress. So it is very detailed work. It involves different disciplines, different departments and different authorities. And there is still also some of the regulatory limits. And this is one of our key works in our group. So we would like to accelerate the pre-project processes.

6461, please ask your question, please inform us of your institution and your name.

For China Coal, in the last few years, in terms of the reserve, in terms of the dividend payout, in terms of the cost down, you're doing a very good job. So I have several questions. So in this year, I think, I want to ask a detailed price about the cost or the price I want to ask about the coking coal. So for the coking coal, it was down by RMB 41 compared to last year. So it's just a 3% decrease. Compared to the other companies that released their reports with coking coal, the range is pretty small. So I just wanted to ask, is it because some of our company's approach? Why did we have such a good price for coking coal? So that's the first question. And the second is that, starting from January and February, the steel industry was facing a very serious situation. And for the coking coal delivery, it's also going down. So in the latter half of the year, for the coking coal sector, what is the domestic demand like? And what is the price like in terms of trend? So in China Coal environment or in the coking coal delivery margin, will they face more pressure?

So let me answer the question. For coking coal, for our sales price, and I think compared to the market price, we are maintaining very good stability. So the reason is for coking coal, in terms of our national -- our annual sales strategy. So we sell a certain percentage of long-term contract. So in this year, for the long-term contract price of the coking coal, it was always outperforming a bit compared to the spot. So it's more advantageous. And since our customers are long-term strategic customers, so they are very good at fulfillment for the contract. So that is one of the main reasons. And in this year for the coal and coking and for steel, and of course, for the whole industry chain, the steel industry is under a lot of pressure for coking coal. And for coke, basically, that kind of bad situation passed on. And we are still confident about the macro economy of China. In the latter half of the year on the national level, on the policy level, the stimulation of the economy will be even stronger. So if we look at the demand side, and if we look at the supply side, we think that things will still be pretty balanced. And for Shaanxi, we are very strict in safety control, because for the coking coal, the main production base is in Shaanxi. So in the latter half of the year, the downward pressure is very big. But we are still preparing very early for the latter half of the year. So we are very confident.

Okay. So the second question is that for China Coal, about the reserve increase and production increase. So we know that in [ Luang, ] [ Huayang ] they already spent like RMB 10 billion or RMB 6 billion to buy the mining. Right? What Shaanxi is doing some auction. We're bidding for that, but it's pretty expensive. So for China coal, we know that in Shaanxi Province, well, we don't really have that much resource left. So are we participating in those bidding of the mining rights. And for the current market, do we intend to participate? Or what is our take on the price? And also for the big shareholders, do we have any plans to purchase more resource?

So, Zhang Feng from Coal, please answer.

So recently, for in Mongolia or Shaanxi, there were some of the open biddings of resource transfer. So, I think that will be the mainstream way of getting more resource. So for the bidding price of the resource. So it's always based on the per tonne price -- but I wanted to correct your concept. So for the per tonne price, it depends on the scale of the mine and also the coal quality. So for the same resource if the mine is bigger, then the price can be higher, if it's smaller, then the price is smaller. So this is more reasonable this way. It's not like we are looking just at the per tonne price. And the second thing is that it's related to the quality of the coal. So recently, just now you talked about Huayang. And you talked about several other companies. So in Shaanxi market, for those mines, they have a geological advantage and also they are very good quality coal. For example, it's anthracite. And for China Coal -- and China Coal is following up on the bidding situations of the mines. And when we are trying to decide whether we participate, we will look at the situation from different angles, as I said before, and then determine our planned price. And of course, the detail is pretty secret, but we will also talk about if we don't get some of the resource, of course, that's just the existing results, but we will still keep track of the new biddings and try to participate the ones that are favorable.

4090, please ask the question with your name and your institution name.

I'm from [ Wuhai ] Securities. So I'm really glad to have this opportunity. Two questions here. For the first half, the net profit was RMB 3.4 billion for Pingshuo and Shaanxi -- Dahaize Chemicals RMB 2.1 billion. So for your peers, a lot of their profits dropped by 20%. So how did you achieve smooth profits or stable profits for these two subsidiaries?

Sorry, could you repeat your first question?

So for the first question, I would like to understand for Pingshuo, the net profit was RMB 3.4 billion for the first half. It was only down by RMB 80 million, and Dahaize was at RMB 2.1 billion, and it was down by RMB 40 million, and the decline -- both declines were pretty small. So in terms of prices and volumes, how were you able to achieve such a smooth and stable net profit level?

Ms. [ Xi ] will take the first question.

Hello. I will answer this question. So, for Pingshuo, it was indeed net profit, it was indeed very stable. Firstly, the long-term contracted coal prices are pretty stable. And secondly, our costs are pretty stable. As for financial expenses, all of the expenses have come down year-over-year. So that's why we were able to achieve a pretty good net profit, even though we had price fluctuations. For Dahaize Coal Mine, there was an increase. So for Dahaize, it was thanks to smart coal mines, unlocking capacity potential. So volumes or output keeps going up. That's why the net profit was pretty good.

How much was volume up by? How many tonnes? How many tens of thousands of tonnes?

For the first half, it was about 9 million tonnes, something like that for Dahaize.

I would like to add something. So for the increment, it was about 2.8 million tonnes for Dahaize.

Understood. Is that raw coal or commercial coal?

Commercial coal.

Got it. Second question is about the average heat value of the market.

Were you asking about the heat value of our products?

Yes. Specifically, commercial thermal coal.

Our heat value is pretty stable. It varies slightly depending on when and where it is mined, but it's pretty stable for Shaanxi and Inner Mongolia. The heat value is different from that of Shaanxi. For Dahaize, for example, the heat value is pretty high, about over 5,000. And for Pingshuo, heat value is relatively low. So there's no major differences, okay? But it doesn't really make sense to do a complete weighted average that doesn't really work.

2251, please state your name and affiliation and make your remark. Thank you.

Hello, everyone. I'm from Huatai Securities. I'm a coal analyst. My name is [indiscernible]. Thank you very much for speaking with us. I have a small question. So for your CapEx plan, you only achieved about 33% of your whole year plan for the first half. So for the pursuing CapEx, how is the progress going to be like? Could you maybe detail or break down your CapEx, how much of it is going to be used for maintenance? How much of it is going to be used for expansion?

[ Mr. Zhang ] from the development department will be talking about this.

Thank you for your question. So fiscal 2024 total CapEx was budgeted at RMB 16 billion, and we achieved about 33% from the first half, which was a pretty normal level, because from the whole year's perspective, most of the spend will be realized in the second half, because there was a lot of discussions and study in the first year. So most of the spend happens in the second half. So it's pretty typical compared with the previous years. For the next 3 years, our CapEx will remain around RMB 15 billion. And so we have some new projects, some new energy projects and the coal chemicals projects where most of the CapEx will be spent on.

6402, please state your name, affiliation and your question. Thank you.

Hello, everyone. I'm [indiscernible] from Minsheng Securities. I have three questions. So firstly, you bought 42% of stake from Yihua. What was the consideration behind that deal? Second, somebody asked about asset acquisition, right, but my connection wasn't very good. Do you have any plans regarding equity acquisition? And third question is regarding [indiscernible].

Sorry, your line is not very clear. I got your first question. You were asking about the Yihua shareholder change, right, or equity change?

Yes. For Yihua equity you bought there 42% of their equity. And what was the reason for that? And did you have any plans for increasing your ownership stake?

Mr. Zhang will take that question.

For Yihua acquisition, it's for securing our control, because we don't want others to take the shares or take the equity, so that we might lose the control. Your second question was regarding -- for other equity or other -- so I understand your point. So for other JV equity, do we have any plans to take more of those -- take more equity of those JVs, right?

That's right. For Yihua equity, Mr. Zhang, already explained to you the reason why. So we wanted to maintain the control of Yihua Mine. That's why we acquired the shares. So that was pretty special. For other JVs that are running normally, we don't have any plans to buy more equity. If things go smoothly, we will maintain the shareholder structure. If there's special situations, we will take them case by case. Could you repeat your third question?

Sure. So for the first half, for polyolefin, there was a big increase in your volume. What was the reason for that?

You're talking about gross profit per tonne, okay, and the reason for the increase in that. Mr. Zhang will take that question rather.

So you're saying that for the first half of this year, gross profit per tonne for polyolefin grew year-over-year, right?

Yes. I would like to know the reason why that is?

So several reasons. Firstly, polyolefin price was higher than previous years. That was the major driver. Second, it was due to better management. So we deployed lean management. So all of the expense items, labor, all went down, that's why the gross margin was up.

And I would like to add something said Mr. Zhang.

And our COGS is declining. The cost of unit coal is coming down. So prices are going up. Costs are going down. That's why the gross margins or gross profits are higher.

1611, please state your name and affiliation and make your remark.

I have a few questions. So from your interim report, there's three types of coal. There's firstly is resource volume. Second is volume for extraction. Third is formal volume available for extraction. But the third one is much less than the first two. Why is that? And also in Shaanxi, in Mongolia, you have so much resource there. Do you have any plans to tap into those resources, because you have a lot of resource, but the actual production capacity is at a relatively low level? My second question is your debt -- interest-paying debt grew from RMB 72 billion to RMB 69 billion. Do you have plans to incur more interest-paying debt going forward?

You mentioned something quite technical. So you talked about the resource volume. Second is the resource available for extraction. Third is the formal resource for extraction. So basically, when we disclose our resource, we disclose our resource ownership. So basically, the resource that's in the wells, and we would exclude the extracted volume, and the remaining is the ownership quantities and the amount available for extraction. So during the design and the feasibility study, we would be studying all conditions. And then we would come up with a quantity that's available for extraction. So for coal mine, if the geological situation is good, then that ratio should be 60%. So the extraction availability ratio should be 60%. For Central China, it's about 30% to 40%. So as for the formal amount for extraction, so that is for amount that has been verified as feasible and economical or it makes economic sense. So that is our definition for those three types of quantities.

So I would like to add something. Just because of the formal amount variable for extraction, it doesn't mean that we don't have enough coal to extract. So resource amount is the total amount, right? And it includes coal that has undergone geological exploration, and it has also included coal mines that haven't been fully developed. Even for coal mines where wells have been established, we would have a clear extraction volume. But for the formal extraction volume, it won't necessarily stay the same, because for the formal extraction volume, it takes more geological -- more detailed work. So the formal extraction volume changes year-over-year as well. So you can't simplify and just use the formal extraction volume to sort of map our capacity and to gauge how many more years before we will run out of our resource. And then for the second question. So as I understand, it's about the future situation. So I will ask Ms. [indiscernible] from finance.

So let me answer. So at the end of June, our debt was CNY 69 billion, down by CNY 3.5 billion. So we will look at our current situation and also the long term to try to deploy the over -- the year long financing, and we will try to get the swap of the debt and also look at our funding need. Thank you.

Okay. So for the company, we do have like a long-term like interest-paying debt planning of a certain plan scale or what -- no, we don't have like a specific number in the plan, but we will look at the need of the business and also for the future development need, and we would look at the swap of the terms of the debt.

Next, a question -- so the question is about the introduction of talents, any plans?

So let me briefly talk about that for China Coal. We highly value the introduction and recruitment of talent and also the fostering of our talent rather. So we're committed in building a high-quality challenge team. In the last few years, our companies used different approaches, including the campus recruitment initiatives as well as the social recruitment initiatives to attract the talents to our company. So that is the overall target. And for our annual report, we also talked about our situation of the talent letter building, and we talked about our talent structure. So the investors are welcome to look at the relevant documents.

The next question is for Anjialing, the service life is still -- there's still 8 to 9 years left. So can we still continue after that?

So it's like this. For Anjialing mine, if we look at the 25 million tonne per year, yes, that's that many years left. But still, there are surrounding regions involved. We can also work with the local government to try to introduce the resource into our company.

The next question. So for Q2 compared to Q1, the revenue was up, but the net profit was down. So compared to last Q2, there was higher margin, lower revenue. So what is the -- why is there such a difference compared to last year?

Ms. [indiscernible] from Finance.

So it's influenced by the price and it's also due to the lower cost. That's it.

Next question about the financial status starting from last year. The payable salary is always RMB 5.5 billion, so RMB 700 billion to RMB 800 million compared to last year. So how do you view that increase? Is it just more temporary provision? Or is it higher labor cost? And is labor cost something that goes up easily, and it's very hard to go down? And if it goes down, can it go down by like 20%?

So for our company, that increase is because of some of the personnel changes, and we would provision according to the comprehensive situation. So every year, we will look at our performance and conduct the provisioning of the wage and salary and release of the salary. So for that 20% number, well, it's hard for me to determine whether yes or no. So let me add something. For the payable wage, so that's hooked with the performance. So if the performance is good, then according to our KPI and performance review costs, of course, we will, of course, provide reward. And if the performance is bad, of course, pay will be influenced, but as for how much, it's related to the actual situation of the business. So for that 20%, well, I don't think it's an accurate measurement of that.

Next question. Currently, for Mongolia, the coking coal production and export was increased a lot, mainly towards North East China and North China. So what is the influence on the China Coal Huajin? And also what is the impact on the main coking coal and the relevant coal?

So let me answer the question. So yes, due to geopolitical reasons for Mongolia, when they export, now they're mostly exporting to our country. So in this year for the coal import, right now, it's not that control, and the coal import hit the historic high. So last year, we created the historic record. And this year, we broke the record. So from January to July, it was already RMB 200 million, up by 13% compared to last year. And of course, there's metallurgical and there's power and there is other types of coal. And this year, the metallurgical accounts for a bigger percentage. And of course, for the coal import for the market and also for China Coal Huajin. Will there be any influence? Of course, there is influence, but we need to look at it from the comprehensive point of view. So every year, for the coal sector in China, for the import and especially for metallurgical. Well, in this year, things are on the rise, but of course, the demand is also higher. We also need to take into account the types of coal that we're importing from other countries. So I meant we need to put this into context. And after the import of coal from Mongolia, so the metallurgical coal is consumed in Northeast China and North China. And actually, they are going down south, because the transportation infrastructure is getting more established and more convenient. But in terms of the volume of import, I think compared to the demand of China, the volume is still limited.

Thank you for the answer. So the next investor has two questions. Let me ask one by one. So the first, self-produced coal, for the labor cost, it's RMB 3.77 billion. Last year, it was RMB 2.6 billion. So it's up by a lot. So the company mentioned that for some of the costs, it will be provisioned in Q4. So this year, we provisioned by quarter. Is that kind of increase related to that? And if so, does it mean that in Q4, the labor cost or there won't be a big provision of the bonus?

For the labor cost increase, well, actually, you already said it, there is some influence from that. And we will orderly give out the wage and bonus. So actually, Mr. [ Zhang ] already said, at the end of the year, there will still be some more new situations coming up. So we have to plan things in an orderly manner. And the actual situation depends on the performance of the end of the year.

The second question is, in the first half of the year, for depreciation, it's RMB 2.9 billion. Last year, it was RMB 3.5 billion. So it's down by a lot. So you explained some, but can you talk more, because we didn't quite understand.

So let me answer this question. So it's about Anjialing Coal Mine. So with the transfer of the mining right, with the document, we confirmed the remaining 30 years of the transfer income. So that means we increased the income of the right transfer and we got more resource. So we need to amortize. So the base number is bigger, so the amortization is smaller.

So just a final notification on the ways to ask questions. [Operator Instructions] Currently, there are no other questions. So maybe the leader can give us a summary.

Yes. So thank you investors and analysts for your attention and support for China Coal. Today, we took more than an hour to review and analyze our performance in the first half of the year. We also answered some of your questions. I do believe that you may have some other questions. And we're willing to connect with you very closely. If you have any other questions, you can talk to our IR further. That's it for today.

Okay. Thank you for participating. That's the end for today. Wish you happy life. Goodbye.