[Company Overview](index=1&type=section&id=Company%20Overview) [Company Basic Information and Development Strategy](index=1&type=section&id=Company%20Basic%20Information%20and%20Development%20Strategy) China XLX Fertiliser Ltd. outlines its 'fertilizer first, chemical and fertilizer combined' strategy, focusing on clean coal chemical upgrades and team dedication - Company Name: **China XLX Fertiliser Ltd.**[1](index=1&type=chunk) - Stock Code: **1866**[1](index=1&type=chunk) - Development Strategy: Focus on upgrading clean coal chemicals, ensuring leadership in the fertilizer business, and moderately developing new energy and material chemical products to form a 'fertilizer first, chemical and fertilizer combined' industrial structure[3](index=3&type=chunk)[4](index=4&type=chunk) [Corporate Information](index=4&type=section&id=Corporate%20Information) [Board of Directors and Management](index=4&type=section&id=Board%20of%20Directors%20and%20Management) This section lists the company's board members, committee compositions, key executives, auditors, legal advisors, and principal bankers - Chairman of the Board: **LIU Xingxu**[7](index=7&type=chunk) - Chief Executive Officer: **MA Tongsheng**[8](index=8&type=chunk) - Chairman of the Audit Committee: **ONG Kian Guan**[7](index=7&type=chunk) - Auditor: **Ernst & Young LLP**[8](index=8&type=chunk) [Registration and Contact Information](index=5&type=section&id=Registration%20and%20Contact%20Information) The company's registered office is in Singapore, with its principal place of business in Xinxiang Economic Development Zone, Henan Province, China - Registered Office: **80 Robinson Road 02-00, Singapore 068898**[8](index=8&type=chunk) - Head Office and Principal Place of Business in China: **Xinxiang Economic Development Zone, Henan Province, China**[9](index=9&type=chunk) - Company Website: **www.chinaxlx.com.hk**[9](index=9&type=chunk) [Management Discussion and Analysis](index=7&type=section&id=Management%20Discussion%20and%20Analysis) [(I) Business Review](index=7&type=section&id=%28I%29%20BUSINESS%20REVIEW) In H1 2021, the company achieved significant performance growth with total revenue up **53%** to **RMB 7.573 billion** and net profit up **237%** to **RMB 889 million**, driven by economic recovery and new production capacity 2021 H1 Key Financial Indicators | Indicator | 2021 H1 (RMB thousands) | 2020 H1 (RMB thousands) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Consolidated Revenue | 7,573,000 | 4,940,000 | 53% | | Consolidated Net Profit | 889,000 | 264,000 | 237% | | Total Comprehensive Income Attributable to Owners of the Parent | 646,000 | 180,000 | 259% | Key Product Sales Performance (2021 H1 vs 2020 H1) | Product | Revenue (RMB millions) | YoY Growth (%) | Sales Volume Change (%) | Average Selling Price Change (%) | Gross Margin (2021) | Gross Margin (2020) | Gross Margin Change (percentage points) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Urea | 2,074 | 32% | 8% | 23% | 35.4% | 26.8% | +8.6 | | Automotive Urea Solution | 236 | -8% | Slight decrease | Not applicable | 35.8% | 37.6% | -2 | | Compound Fertilizer | 1,981 | 13% | 5% | 8% | 15% | 17.4% | -2.4 | | Methanol | 733 | 355% | 190% | 57% | 19.7% | -2.3% | +22 | | Dimethyl Ether (DME) | 618 | 79% | 45% | 24% | 23.2% | 5.7% | +17.5 | | Melamine | 535 | 69% | 1% | 67% | 62.1% | 30.9% | +31.2 | | Furfuryl Alcohol | 335 | 48% | 1% | 46% | 13.4% | 13.1% | +0.3 | | Pharmaceutical Intermediates | Not applicable | No comparable data | Not applicable | Not applicable | Not applicable | Not applicable | Not applicable | Key Expense Changes (2021 H1 vs 2020 H1) | Expense Category | 2021 H1 (RMB millions) | 2020 H1 (RMB millions) | Change (RMB millions) | Change Rate (%) | | :--- | :--- | :--- | :--- | :--- | | Other income, net | 34 | 80 | -46 | -58% | | Selling and distribution expenses | 383 | 301 | +82 | +27% | | General and administrative expenses | 407 | 317 | +90 | +28% | | Finance costs | 282 | 202 | +80 | +40% | | Income tax expense | 191 | 58 | +133 | +229% | | Profit for the period | 889 | 264 | +625 | +237% | [(II) Financial Review](index=13&type=section&id=%28II%29%20FINANCIAL%20REVIEW) As of June 30, 2021, the Group's gearing ratio was **74.66%**, a slight decrease from year-end 2020, aligning with the company's policy to maintain it below **90%** Gearing Ratio | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Net Debt | 14,312,754 | 12,932,245 | | Total Capital | 4,858,525 | 4,330,126 | | Capital and Net Debt | 19,171,279 | 17,262,371 | | Gearing Ratio | 74.66% | 74.92% | - The Group's policy is to maintain the gearing ratio below **90%**[20](index=20&type=chunk)[22](index=22&type=chunk) [(III) Material Acquisition and Disposal](index=14&type=section&id=%28III%29%20MATERIAL%20ACQUISITION%20AND%20DISPOSAL) As of the end of the reporting period, the Group did not undertake any material acquisition or disposal activities - As of the end of the reporting period, the Group had no material acquisitions or disposals[23](index=23&type=chunk) [(IV) Prospects](index=14&type=section&id=%28IV%29%20PROSPECTS) The company anticipates stable urea industry development in H2, with sustained high demand and chemical prices due to rising international energy costs and "dual carbon" policies - Market Environment: New agricultural reform policies and "dual carbon" policies favor industry leaders, while rising international energy and global food prices will drive up urea demand and chemical product prices[23](index=23&type=chunk) - Strategic Focus: Leverage three production bases to strengthen "low-cost + differentiated" competitive advantages, expand development space, and extend the industrial chain while consolidating existing chemical product advantages[23](index=23&type=chunk) - Project Progress: The fixed-bed upgrade projects for the second and third plants are expected to be completed and operational in Q4 this year, further enhancing technological and cost advantages and expanding market share[23](index=23&type=chunk) [(V) Directors' and Chief Executive's Interests in Shares](index=15&type=section&id=%28V%29%20DIRECTORS%27%20AND%20CHIEF%20EXECUTIVE%27S%20INTERESTS%20IN%20SHARES) As of June 30, 2021, this section details the long positions in company shares held by directors and the chief executive, with Mr. Liu Xingxu and Ms. Yan Yunhua holding significant stakes through investment holding companies Directors' and Chief Executive's Interests in Shares (Long Position) | Name | Personal Interest (shares) | Corporate Interest (shares) | Total Interest (shares) | Percentage of Issued Share Capital (%) | | :--- | :--- | :--- | :--- | :--- | | Mr. Liu Xingxu | 600,000 | 413,007,999 | 413,607,999 | 35.30% | | Ms. Yan Yunhua | 300,000 | 276,465,000 | 276,765,000 | 23.62% | | Mr. Ong Kian Guan | 100,000 | – | 100,000 | 0.01% | | Mr. Ma Tongsheng | 8,000 | – | 8,000 | 0.00% | - Mr. Liu Xingxu holds corporate interests through Pioneer Top Holdings Limited and possesses voting rights and daily management control over the company[30](index=30&type=chunk) - Ms. Yan Yunhua holds corporate interests through Go Power Investments Limited and possesses voting rights and daily management control over the company[31](index=31&type=chunk) [(VI) Substantial Shareholders' Interests in Shares](index=17&type=section&id=%28VI%29%20SUBSTANTIAL%20SHAREHOLDERS%27%20INTERESTS%20IN%20SHARES) As of June 30, 2021, Pioneer Top Holdings Limited and Go Power Investments Limited were the company's substantial shareholders, holding **35.25%** and **23.60%** of the issued share capital, respectively Substantial Shareholders' Interests in Shares (Long Position) | Name of Substantial Shareholder | Capacity | Number of Issued Ordinary Shares | Approximate Percentage of the Company's Issued Share Capital (%) | | :--- | :--- | :--- | :--- | | Pioneer Top | Beneficial owner | 413,007,999 | 35.25% | | Go Power | Beneficial owner | 276,465,000 | 23.60% | - Pioneer Top is beneficially owned by Mr. Liu Xingxu (42%) and held in trust for 7 beneficiaries (58%), with Mr. Liu Xingxu holding voting rights in Pioneer Top regarding the company[38](index=38&type=chunk) - Go Power is beneficially owned by Ms. Yan Yunhua (12.74%) and held in trust for over 1,000 beneficiaries (87.26%), with Ms. Yan Yunhua holding voting rights in Go Power regarding the company[38](index=38&type=chunk) [(VII) Supplementary Information](index=19&type=section&id=%28VII%29%20SUPPLEMENTARY%20INFORMATION) This section provides supplementary information on the company's operational and financial risks, contingent liabilities, litigation, asset charges, significant investment plans, share options, audit committee work, corporate governance, directors' securities trading compliance, employee information, and corporate communication policy [1. Operational and Financial Risks](index=19&type=section&id=1.%20OPERATIONAL%20AND%20FINANCIAL%20RISKS) The Group faces market and commodity price risks from fluctuations in product average selling prices, raw material costs, interest rates, and exchange rates, while managing liquidity by adjusting loan structures and securing long-term bank credit - Key Market Risks: Changes in average product selling prices, raw material (primarily coal) costs, interest rates, and exchange rates[39](index=39&type=chunk) - Liquidity Risk: As of June 30, 2021, approximately **55.48%** of debt matures within one year; the Group is adjusting its loan structure and has secured sufficient long-term bank credit[40](index=40&type=chunk) - Gearing Ratio Risk: As of June 30, 2021, it was **74.66%**, a **0.3 percentage point** decrease from December 31, 2020, meeting the policy target of below **90%**[42](index=42&type=chunk) [2. Contingent Liabilities](index=21&type=section&id=2.%20CONTINGENT%20LIABILITIES) As of June 30, 2021, the Group had no material contingent liabilities - As of June 30, 2021, the Group had no material contingent liabilities[42](index=42&type=chunk) [3. Material Litigation and Arbitration](index=21&type=section&id=3.%20MATERIAL%20LITIGATION%20AND%20ARBITRATION) As of June 30, 2021, the Group was not involved in any material litigation or arbitration - As of June 30, 2021, the Group was not involved in any material litigation or arbitration[42](index=42&type=chunk) [4. Charge on the Group's Assets](index=21&type=section&id=4.%20CHARGE%20ON%20THE%20GROUP%27S%20ASSETS) As of June 30, 2021, the Group had no other asset charges beyond those disclosed in the report - As of June 30, 2021, there were no other charges beyond those disclosed in this report[42](index=42&type=chunk) [5. Significant Investments](index=21&type=section&id=5.%20SIGNIFICANT%20INVESTMENTS) The Group made no significant investments during the six months ended June 30, 2021 - The Group made no significant investments during the six months ended June 30, 2021[42](index=42&type=chunk) [6. Future Plans for Material Investments or Capital Assets](index=22&type=section&id=6.%20FUTURE%20PLANS%20FOR%20MATERIAL%20INVESTMENTS%20OR%20CAPITAL%20ASSETS) As of June 30, 2021, the Group had no other future plans for material investments or capital assets - As of June 30, 2021, the Group had no other plans for material investments or capital assets[43](index=43&type=chunk) [7. Options](index=22&type=section&id=7.%20OPTIONS) The Group has not established any share option scheme - The Group has no share option scheme[43](index=43&type=chunk) [8. Audit Committee](index=22&type=section&id=8.%20AUDIT%20COMMITTEE) The Audit Committee reviewed the Group's accounting principles, standards, internal controls, and reporting matters, and approved the interim results for the six months ended June 30, 2021 - The Audit Committee reviewed the accounting principles and standards adopted by the Group, and discussed and reviewed internal controls and reporting matters[43](index=43&type=chunk) - The Audit Committee reviewed the interim results for the six months ended June 30, 2021[43](index=43&type=chunk) [9. Compliance with the Code on Corporate Governance Practices](index=22&type=section&id=9.%20COMPLIANCE%20WITH%20THE%20CODE%20ON%20CORPORATE%20GOVERNANCE%20PRACTICES) The company complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2021 - The company complied with all code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules for the six months ended June 30, 2021[43](index=43&type=chunk) [10. Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers](index=22&type=section&id=10.%20COMPLIANCE%20WITH%20THE%20MODEL%20CODE%20FOR%20SECURITIES%20TRANSACTIONS%20BY%20DIRECTORS%20OF%20LISTED%20ISSUERS) The Board confirmed that, after inquiry with all directors, all directors complied with the Model Code for Securities Transactions by Directors of Listed Issuers for the six months ended June 30, 2021 - The Board confirmed that, for the six months ended June 30, 2021, all directors complied with the Model Code for Securities Transactions by Directors of Listed Issuers[43](index=43&type=chunk) [11. Compliance with the Written Guidelines for Securities Transactions by Relevant Employees of the Company](index=23&type=section&id=11.%20COMPLIANCE%20WITH%20THE%20WRITTEN%20GUIDELINES%20FOR%20SECURITIES%20TRANSACTIONS%20BY%20RELEVANT%20EMPLOYEES%20OF%20THE%20COMPANY) The company has established written guidelines for employee securities transactions, and no non-compliance was found for the six months ended June 30, 2021 - The company has established written guidelines governing securities transactions by relevant employees who may possess inside information[44](index=44&type=chunk) - For the six months ended June 30, 2021, the company found no instances of non-compliance by relevant employees with the written guidelines[44](index=44&type=chunk) [12. Purchase, Sales or Redemption of the Company's Securities](index=23&type=section&id=12.%20PURCHASE%2C%20SALES%20OR%20REDEMPTION%20OF%20THE%20COMPANY%27S%20SECURITIES) Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities during the six months ended June 30, 2021 - For the six months ended June 30, 2021, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[45](index=45&type=chunk) [13. Change in Directors' Information Under Rule 13.51B(1) of the Listing Rules](index=23&type=section&id=13.%20CHANGE%20IN%20DIRECTORS%27%20INFORMATION%20UNDER%20RULE%2013.51B%281%29%20OF%20THE%20LISTING%20RULES) Since the publication of the company's 2020 annual report, Mr. Li Shengxiao has been appointed as an independent director of Kuaijishan Shaoxing Wine Co., Ltd - Mr. Li Shengxiao has served as an independent director of Kuaijishan Shaoxing Wine Co., Ltd. (a company listed on the Shanghai Stock Exchange) since May 2021[46](index=46&type=chunk) [14. Employees and Remuneration Policy](index=24&type=section&id=14.%20EMPLOYEES%20AND%20REMUNERATION%20POLICY) As of June 30, 2021, the Group had **8,690** employees, with remuneration determined by market conditions and individual performance, including medical insurance, life insurance, and discretionary bonuses - As of June 30, 2021, the Group had **8,690** employees (June 30, 2020: **7,728** employees)[49](index=49&type=chunk) - Employee remuneration is determined considering market conditions and individual performance, with benefits including medical insurance, life insurance, and discretionary bonuses[49](index=49&type=chunk) [15. Disclosure on the Websites of the SEHK and the Company](index=24&type=section&id=15.%20DISCLOSURE%20ON%20THE%20WEBSITES%20OF%20THE%20SEHK%20AND%20THE%20COMPANY) This interim report has been published on the websites of The Stock Exchange of Hong Kong Limited and the company - This report is published on the SEHK website (http://www.hkexnews.hk) and the company's website (http://www.chinaxlx.com.hk)[49](index=49&type=chunk) [16. Corporate Communications](index=24&type=section&id=16.%20CORPORATE%20COMMUNICATIONS) The company has confirmed shareholders' preferences for the language version and receipt method of corporate communications, offering free printed copies and allowing shareholders to change their choices at any time - The company has confirmed shareholders' preferences for the language version (English and/or Chinese) and receipt method (printed copy or website) of corporate communications, including annual reports and interim reports[49](index=49&type=chunk)[51](index=51&type=chunk) - Shareholders may request printed copies of corporate communications or change their language and receipt method choices at any time[50](index=50&type=chunk) [Condensed Consolidated Statement of Comprehensive Income](index=26&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) [2021 H1 Condensed Consolidated Comprehensive Income](index=26&type=section&id=2021%20H1%20Condensed%20Consolidated%20Comprehensive%20Income) For the six months ended June 30, 2021, the company's revenue significantly increased by **53%** to **RMB 7.573 billion**, gross profit doubled to **RMB 2.118 billion**, profit for the period surged by **237%** to **RMB 889 million**, and basic and diluted earnings per share were **RMB 55.1 cents** Condensed Consolidated Statement of Comprehensive Income (For the six months ended June 30) | Indicator | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 7,573,047 | 4,939,764 | | Cost of sales | (5,455,087) | (3,877,460) | | Gross profit | 2,117,960 | 1,062,304 | | Other income, net | 34,455 | 79,962 | | Selling and distribution expenses | (383,218) | (301,242) | | General and administrative expenses | (406,912) | (316,774) | | Finance costs | (281,902) | (201,949) | | Profit before tax | 1,080,383 | 322,301 | | Income tax expense | (190,952) | (58,033) | | Profit for the period | 889,431 | 264,268 | | Profit attributable to owners of the parent | 645,561 | 180,143 | | Earnings per share (RMB cents) | 55.1 | 15.38 | [Condensed Consolidated Statement of Financial Position](index=27&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) [2021 H1 Condensed Consolidated Financial Position](index=27&type=section&id=2021%20H1%20Condensed%20Consolidated%20Financial%20Position) As of June 30, 2021, the company's total assets increased to **RMB 23.416 billion**, with property, plant, and equipment being the largest component; total current liabilities were **RMB 10.725 billion**, resulting in a net current liability of **RMB 5.621 billion**, and total equity increased to **RMB 7.163 billion** Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | **Assets** | | | | Total non-current assets | 18,311,418 | 16,775,969 | | Property, plant and equipment | 16,612,862 | 15,000,465 | | Total current assets | 5,104,292 | 4,179,123 | | Total assets | 23,415,710 | 20,955,092 | | **Liabilities** | | | | Total current liabilities | 10,725,223 | 8,557,366 | | Total non-current liabilities | 5,527,404 | 5,973,352 | | Total liabilities | 16,252,627 | 14,530,718 | | **Equity** | | | | Total equity | 7,163,083 | 6,424,374 | | Net current liabilities | (5,620,931) | (4,378,244) | [Condensed Consolidated Statement of Changes in Equity](index=30&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) [2021 H1 Condensed Consolidated Changes in Equity](index=30&type=section&id=2021%20H1%20Condensed%20Consolidated%20Changes%20in%20Equity) For the six months ended June 30, 2021, the Group's total equity increased from **RMB 6.424 billion** at the beginning of the year to **RMB 7.163 billion**, primarily due to profit for the period of **RMB 889 million**, partially offset by dividends paid of **RMB 117 million** Condensed Consolidated Statement of Changes in Equity (For the six months ended June 30) | Indicator | June 30, 2021 (RMB thousands) | January 1, 2021 (RMB thousands) | | :--- | :--- | :--- | | Share capital | 1,194,686 | 1,194,686 | | Statutory reserve | 200,307 | 200,307 | | Other reserves | 2,217,760 | 2,217,760 | | Specific reserve | 4,599 | 4,599 | | Retained profits | 1,441,480 | 913,081 | | Equity attributable to owners of the parent | 5,058,832 | 4,530,433 | | Non-controlling interests | 2,104,251 | 1,893,941 | | Total equity | 7,163,083 | 6,424,374 | | Profit for the period | 889,431 | Not applicable | | 2020 final dividend paid | (117,162) | Not applicable | [Condensed Consolidated Statement of Cash Flows](index=31&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) [2021 H1 Condensed Consolidated Cash Flows](index=31&type=section&id=2021%20H1%20Condensed%20Consolidated%20Cash%20Flows) For the six months ended June 30, 2021, net cash generated from operating activities significantly increased to **RMB 1.293 billion**, net cash used in investing activities was an outflow of **RMB 1.681 billion** primarily for property, plant, and equipment, and net cash generated from financing activities was **RMB 529 million**, with cash and cash equivalents at period-end of **RMB 823 million** Condensed Consolidated Statement of Cash Flows (For the six months ended June 30) | Cash Flow Category | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Net cash generated from operating activities | 1,293,023 | 583,940 | | Net cash used in investing activities | (1,681,465) | (2,019,920) | | Net cash generated from financing activities | 529,033 | 1,742,425 | | Net increase/(decrease) in cash and cash equivalents | 140,591 | 306,445 | | Cash and cash equivalents at end of period | 822,632 | 1,190,893 | - Expenditure on property, plant and equipment items amounted to **RMB 1.676 billion**[66](index=66&type=chunk) - Proceeds from loans and borrowings were **RMB 4.186 billion**, and repayment of loans and borrowings was **RMB 3.334 billion**[66](index=66&type=chunk) [Notes to the Condensed Consolidated Interim Financial Information](index=33&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Interim%20Financial%20Information) [1. Corporate Information](index=33&type=section&id=1.%20CORPORATE%20INFORMATION) This note reiterates the company's Singapore incorporation and HKEX listing, with its primary business being investment holding and its subsidiaries engaged in manufacturing and trading differentiated products like urea, compound fertilizers, and methanol - The company was incorporated in Singapore on July 17, 2006, and its shares are listed on the Main Board of the Hong Kong Stock Exchange[70](index=70&type=chunk)[72](index=72&type=chunk) - Its principal business is investment holding, with subsidiaries primarily engaged in the production and sale of differentiated products such as urea, compound fertilizers, methanol, melamine, dimethyl ether, furfuryl alcohol, and pharmaceutical intermediates[70](index=70&type=chunk)[72](index=72&type=chunk) [2.1 Basis of Preparation](index=33&type=section&id=2.1%20BASIS%20OF%20PREPARATION) The financial statements are prepared in accordance with Singapore Financial Reporting Standards (International) and International Financial Reporting Standards, using the historical cost convention and presented in RMB - The financial statements are prepared in accordance with Singapore Financial Reporting Standards (International) and International Financial Reporting Standards[71](index=71&type=chunk)[73](index=73&type=chunk) - They are prepared on a historical cost basis, except for equity investments at fair value through profit or loss which are measured at fair value[71](index=71&type=chunk)[73](index=73&type=chunk) - The financial statements are presented in RMB, with all amounts rounded to the nearest thousand[71](index=71&type=chunk)[73](index=73&type=chunk) [2.2 Changes in Accounting Policies and Disclosures](index=34&type=section&id=2.2%20CHANGES%20IN%20ACCOUNTING%20POLICIES%20AND%20DISCLOSURES) The Group adopted amendments to IFRS 16 'Leases' (COVID-19-Related Rent Concessions) and related amendments to IFRS 9, IAS 39, etc., with no significant impact expected on the financial statements - Adopted amendments to IFRS 16 'Leases': COVID-19-Related Rent Concessions (early adoption), effective from April 1, 2021[75](index=75&type=chunk) - Adopted related amendments to IFRS 9 'Financial Instruments' and other standards: Interest Rate Benchmark Reform – Phase 2, effective from January 1, 2021[75](index=75&type=chunk) - The directors expect that the adoption of these other standards and interpretations will not have a significant impact on the financial statements in the period of initial application[75](index=75&type=chunk) [3. Operating Segment Information](index=35&type=section&id=3.%20OPERATING%20SEGMENT%20INFORMATION) The Group is organized into eight reportable operating segments by product, including urea, compound fertilizer, methanol, melamine, furfuryl alcohol, dimethyl ether, automotive urea solution, and pharmaceutical intermediates, with segment results including directly attributable and reasonably allocated items, but assets and liabilities are not disclosed by segment due to allocation difficulties - The Group has eight reportable operating segments: urea, automotive urea solution, compound fertilizer, methanol, melamine, furfuryl alcohol, dimethyl ether (DME), and pharmaceutical intermediates[77](index=77&type=chunk) - Segment results include items directly attributable and allocated on a reasonable basis, while unallocated items primarily include other income, expenses, selling and distribution expenses, general and administrative expenses, finance costs, and income tax expense[77](index=77&type=chunk) 2021 H1 Segment Revenue and Profit | Segment | Revenue (RMB thousands) | Segment Profit (RMB thousands) | | :--- | :--- | :--- | | Urea | 2,074,145 | 734,642 | | Compound Fertilizer | 1,981,427 | 296,880 | | Methanol | 733,016 | 144,084 | | Melamine | 535,472 | 332,747 | | Furfuryl Alcohol | 335,303 | 44,997 | | Dimethyl Ether | 618,177 | 143,526 | | Automotive Urea Solution | 236,026 | 84,419 | | Pharmaceutical Intermediates | 267,479 | 61,545 | | Others | 792,002 | 275,120 | | Total | 7,573,047 | 2,117,960 | [4. Revenue and Other Income/(Expenses), Net](index=37&type=section&id=4.%20REVENUE%20AND%20OTHER%20INCOME%2F%28EXPENSES%29%2C%20NET) The Group's revenue for H1 2021 primarily derived from goods sales, totaling **RMB 7.573 billion**, while other income, net, significantly decreased to **RMB 34.455 million** from **RMB 79.962 million** in the prior period, mainly due to increased losses from the disposal of property, plant, and equipment Revenue and Other Income/(Expenses), Net (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Revenue from sales of goods | 7,573,047 | 4,939,764 | | Total other income | 71,520 | 90,351 | | Total other expenses | (37,065) | (10,389) | | Other income, net | 34,455 | 79,962 | - The decrease in other income, net, was primarily due to a loss of approximately **RMB 24.829 million** from the disposal of property, plant and equipment items, compared to a profit of approximately **RMB 14.092 million** in the prior period[88](index=88&type=chunk) [5. Finance Costs](index=39&type=section&id=5.%20FINANCE%20COSTS) For the six months ended June 30, 2021, the Group's finance costs amounted to **RMB 281.9 million**, primarily consisting of interest expenses on bank loans, bank overdrafts, and other borrowings Finance Costs (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Interest on bank loans, bank overdrafts and other borrowings repayable within five years | 281,902 | 201,949 | [6. Profit Before Tax](index=39&type=section&id=6.%20PROFIT%20BEFORE%20TAX) For the six months ended June 30, 2021, the Group's profit before tax was **RMB 1.080 billion**, after deducting costs of inventories sold, depreciation of property, plant and equipment, depreciation of right-of-use assets, and employee benefit expenses Profit Before Tax Deductions (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories sold | 5,455,087 | 3,877,460 | | Depreciation of property, plant and equipment | 457,440 | 365,229 | | Depreciation of right-of-use assets | 18,743 | 24,098 | | Total employee benefit expenses | 593,423 | 405,610 | [7. Income Tax Expense](index=40&type=section&id=7.%20INCOME%20TAX%20EXPENSE) For the six months ended June 30, 2021, the Group's income tax expense was **RMB 191 million**, a significant increase primarily due to higher profits, with the company subject to a **17%** income tax rate in Singapore and its PRC subsidiaries to **25%**, with ten high-tech enterprises enjoying a preferential **15%** rate - Income tax expense was **RMB 190,952,000**, a significant increase from **RMB 58,033,000** in the prior period, mainly due to increased profit[94](index=94&type=chunk) - The Singapore income tax rate is **17%**[92](index=92&type=chunk) - PRC subsidiaries are subject to an income tax rate of **25%**, with ten high-tech enterprises enjoying a preferential tax rate of **15%**[92](index=92&type=chunk)[93](index=93&type=chunk) [8. Dividend](index=40&type=section&id=8.%20DIVIDEND) For the six months ended June 30, 2021, the company declared a final dividend of **RMB 117 million** for the year ended December 31, 2020, but did not propose or declare any interim dividend - A final dividend of **RMB 117,162,000** for the year ended December 31, 2020, was declared during the six months ended June 30, 2021[94](index=94&type=chunk) - The company did not propose or declare any interim dividend for the six months ended June 30, 2021[94](index=94&type=chunk) [9. Earnings Per Share Attributable to Ordinary Equity Holders of the Company](index=41&type=section&id=9.%20EARNINGS%20PER%20SHARE%20ATTRIBUTABLE%20TO%20ORDINARY%20EQUITY%20HOLDERS%20OF%20THE%20COMPANY) For the six months ended June 30, 2021, basic and diluted earnings per share attributable to ordinary equity holders of the company significantly increased to **RMB 55.1 cents** from **RMB 15.38 cents** in the prior period, with no potential dilutive ordinary shares Earnings Per Share (For the six months ended June 30) | Indicator | 2021 (RMB cents) | 2020 (RMB cents) | | :--- | :--- | :--- | | Basic and diluted earnings per share | 55.1 | 15.38 | - Earnings per share are calculated based on the Group's profit for the period attributable to ordinary equity holders of the company, divided by the weighted average number of **1,171,621,000** ordinary shares outstanding during the period[96](index=96&type=chunk)[98](index=98&type=chunk) - There were no potential dilutive ordinary shares for the six months ended June 30, 2021 and 2020, thus diluted earnings per share are equal to basic earnings per share[96](index=96&type=chunk)[98](index=98&type=chunk) [10. Property, Plant and Equipment, Prepaid Land Lease Payments and Coal Mining Rights](index=41&type=section&id=10.%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT%2C%20PREPAID%20LAND%20LEASE%20PAYMENTS%20AND%20COAL%20MINING%20RIGHTS) During the period, the Group paid approximately **RMB 1.676 billion** for the acquisition of property, plant and equipment, land use rights, and coal mining rights, and received approximately **RMB 4.386 million** from the disposal of related items Property, Plant and Equipment Related Transactions (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Payments for acquisition of property, plant and equipment, land use rights and coal mining rights | 1,675,569 | 1,903,125 | | Proceeds from disposal of property, plant and equipment items | 4,386 | 16,348 | [11. Prepayments](index=41&type=section&id=11.%20PREPAYMENTS) As of June 30, 2021, the Group's total prepayments amounted to **RMB 729 million**, primarily comprising deposits paid to suppliers, with non-current prepayments reduced to zero Prepayments (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Non-current prepayments (acquisition of plant and equipment) | – | 120,060 | | Current prepayments (deposits paid to suppliers) | 728,748 | 491,662 | | Other prepayments | – | 22,519 | | Total | 728,748 | 514,181 | [12. Equity Investments at Fair Value Through Profit or Loss](index=42&type=section&id=12.%20EQUITY%20INVESTMENTS%20AT%20FAIR%20VALUE%20THROUGH%20PROFIT%20OR%20LOSS) As of June 30, 2021, the Group's total equity investments at fair value through profit or loss amounted to **RMB 22.846 million**, including unlisted Chinese equity investments and listed Singaporean and Hong Kong equity investments Equity Investments at Fair Value Through Profit or Loss (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Non-current unlisted equity investments (China) | 6,708 | 6,708 | | Current listed equity investments (Singapore) | 2,210 | 2,271 | | Current listed equity investments (Hong Kong) | 13,928 | 13,821 | | Total | 22,846 | 22,800 | [13. Inventories](index=42&type=section&id=13.%20INVENTORIES) As of June 30, 2021, the Group's total inventories amounted to **RMB 1.020 billion**, primarily composed of raw materials, components and spare parts, work-in-progress, and finished goods, with provision made for inventory write-downs Inventory Composition (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Raw materials | 411,944 | 431,402 | | Components and spare parts | 230,046 | 167,678 | | Work-in-progress | 25,406 | 16,432 | | Finished goods | 355,306 | 379,753 | | Provision for inventory write-downs | (3,116) | (3,116) | | Total | 1,019,586 | 992,149 | [14. Trade and Bills Receivables](index=43&type=section&id=14.%20TRADE%20AND%20BILLS%20RECEIVABLES) As of June 30, 2021, the Group's total trade and bills receivables significantly increased to **RMB 1.132 billion** from **RMB 743 million** at year-end 2020, with trade receivables typically settled within 30 to 90 days and bills receivables within 90 to 180 days, and no significant concentration of credit risk Trade and Bills Receivables (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Trade receivables | 440,263 | 204,032 | | Bills receivables | 691,470 | 539,360 | | Total | 1,131,733 | 743,392 | Ageing Analysis of Trade Receivables (As of June 30) | Ageing | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Within 1 month | 181,454 | 119,892 | | 1 to 3 months | 201,598 | 31,829 | | 3 to 6 months | 32,692 | 37,092 | | 6 to 12 months | 18,775 | 9,314 | | Over 12 months | 5,744 | 5,905 | | Total | 440,263 | 204,032 | - Trade receivables are interest-free and generally settled within 30 to 90 days; bills receivables are interest-free and generally settled within 90 to 180 days[106](index=106&type=chunk) [15. Cash and Cash Equivalents and Pledged Time Deposits](index=44&type=section&id=15.%20CASH%20AND%20CASH%20EQUIVALENTS%20AND%20PLEDGED%20TIME%20DEPOSITS) As of June 30, 2021, the Group's cash and cash equivalents amounted to **RMB 823 million**, with pledged time deposits of **RMB 868 million**, and most cash and bank balances denominated in RMB and held with reputable banks Cash and Cash Equivalents and Pledged Time Deposits (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Time deposits | 867,980 | 706,035 | | Less: Pledged time deposits | (867,980) | (706,035) | | Bank balances | 822,632 | 682,041 | | Cash and cash equivalents | 822,632 | 682,041 | - As of June 30, 2021, cash and bank balances denominated in RMB amounted to **RMB 692,912,000**[111](index=111&type=chunk) - RMB is not freely convertible into other currencies but is convertible through authorized banks[111](index=111&type=chunk) [16. Trade Payables](index=45&type=section&id=16.%20TRADE%20PAYABLES) As of June 30, 2021, the Group's total trade payables significantly increased to **RMB 1.004 billion** from **RMB 509 million** at year-end 2020, with the majority aged between 1 and 3 months Ageing Analysis of Trade Payables (As of June 30) | Ageing | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Within 1 month | 261,797 | 169,569 | | 1 to 3 months | 629,195 | 109,120 | | 3 to 6 months | 41,516 | 65,384 | | 6 to 12 months | 28,445 | 121,958 | | Over 12 months | 42,852 | 42,947 | | Total | 1,003,805 | 508,978 | - Trade payables are interest-free, typically settled within 30 to 90 days, and denominated in RMB[115](index=115&type=chunk) [17. Interest-Bearing Bank and Other Borrowings](index=46&type=section&id=17.%20INTEREST-BEARING%20BANK%20AND%20OTHER%20BORROWINGS) As of June 30, 2021, the Group's total interest-bearing bank and other borrowings increased to **RMB 10.081 billion** from **RMB 9.348 billion** at year-end 2020, comprising **RMB 5.593 billion** in current borrowings and **RMB 4.488 billion** in non-current borrowings, primarily from bank loans and leasing companies Interest-Bearing Bank and Other Borrowings (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | **Current** | | | | Bank loans (secured) | 97,000 | 283,214 | | Bank loans (unsecured) | 4,833,850 | 3,527,013 | | Loans from leasing companies/finance lease payables | 662,162 | 327,433 | | Total current | 5,593,012 | 4,137,660 | | **Non-current** | | | | Bank loans (secured) | 540,000 | 540,000 | | Bank loans (unsecured) | 3,547,290 | 4,115,925 | | Loans from leasing companies/finance lease payables | 400,800 | 554,134 | | Total non-current | 4,488,090 | 5,210,059 | | **Total** | 10,081,102 | 9,347,719 | - Secured bank loans of **RMB 637 million** are collateralized by certain property, plant and equipment items of the Group[119](index=119&type=chunk) - Bank loans and finance lease payables have maturity dates ranging from within one year to over five years[118](index=118&type=chunk) [18. Major Non-Cash Transaction – Interest Capitalisation](index=48&type=section&id=18.%20MAJOR%20NON-CASH%20TRANSACTION%20%E2%80%93%20INTEREST%20CAPITALISATION) During the review period, the Group capitalized **RMB 38.953 million** in interest expenses to property, plant and equipment Interest Capitalisation (For the six months ended June 30) | Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Capitalized interest expense | 38,953 | 49,545 | [19. Contingent Liabilities](index=48&type=section&id=19.%20CONTINGENT%20LIABILITIES) As of the end of the reporting period, the Group had no material contingent liabilities - As of the end of the reporting period, the Group had no material contingent liabilities[122](index=122&type=chunk) [20. Commitments](index=48&type=section&id=20.%20COMMITMENTS) As of June 30, 2021, the Group's total capital commitments (contracted but not provided for) amounted to **RMB 2.903 billion**, primarily for buildings, plant, and machinery, in addition to other commitments of **RMB 450 million** for raw material purchases Capital Commitments (Contracted but not provided for) (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Buildings | 820,426 | 1,083,528 | | Plant and machinery | 2,068,566 | 2,536,334 | | Coal mines | 14,485 | 12,727 | | Total | 2,903,477 | 3,632,589 | Other Commitments (As of June 30) | Item | June 30, 2021 (RMB thousands) | December 31, 2020 (RMB thousands) | | :--- | :--- | :--- | | Purchase of raw materials | 450,167 | 833,238 | [21. Related Party Transactions](index=49&type=section&id=21.%20RELATED%20PARTY%20TRANSACTIONS) During the period, the Group engaged in transactions with related parties, including sales of utilities and steam, operating lease income, and equipment service fee expenses, and disclosed the total remuneration of directors and key management personnel Related Party Transactions (For the six months ended June 30) | Transaction Type | Related Party | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | | Sales of utilities and steam | Xinxiang XLX Chemical Equipment Co., Ltd. | 168 | 688 | | Operating lease income | Xinxiang XLX Chemical Equipment Co., Ltd. | 158 | 84 | | Purchase of equipment and service fees | Xinxiang XLX Chemical Equipment Co., Ltd. | 29,409 | 32,218 | Remuneration of Directors and Key Management Personnel (For the six months ended June 30) | Remuneration Item | 2021 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | Directors' fees | 525 | 525 | | Salaries and bonuses | 2,864 | 2,792 | | Contributions to defined contribution plans | 204 | 167 | | Total remuneration paid to key management personnel | 3,593 | 3,484 | [22. Seasonality of Operations](index=50&type=section&id=22.%20SEASONALITY%20OF%20OPERATIONS) Sales of compound fertilizers exhibit seasonal fluctuations, typically reaching peak demand during the second and third quarters of each year due to seasonal climate conditions - Sales of compound fertilizers fluctuate seasonally, with demand typically peaking in the second and third quarters of the year[131](index=131&type=chunk)