南方锰业(01091) - 2024 - 中期业绩

Financial Summary For the first half of 2024, the company's revenue decreased by 25.9% year-on-year to HKD 5.73 billion, with gross profit significantly declining by 56.9%, leading to a turnaround from profit to loss, recording an operating loss of HKD 10.4 million and a loss attributable to owners of the company of HKD 163 million, compared to a profit of HKD 135 million in the same period last year Summary of Financial Performance In the first half of 2024, the company's revenue decreased by 25.9% to HKD 5.73 billion, and gross profit significantly declined by 56.9%, resulting in a turnaround from profit to loss, with an operating loss of HKD 10.4 million and a loss attributable to owners of the company of HKD 163 million, compared to a profit of HKD 135 million in the prior year period 2024 First Half Key Financial Indicators | Indicator | 2024 First Half | 2023 First Half | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | HKD 5.733 billion | HKD 7.733 billion | -25.9% | | Gross Profit | HKD 282 million | HKD 655 million | -56.9% | | Gross Margin | 4.9% | 8.5% | -3.6 percentage points | | Operating (Loss)/Profit | (HKD 10.4 million) | HKD 184 million | Turned from profit to loss | | (Loss)/Profit attributable to owners of the Company | (HKD 163 million) | HKD 135 million | Turned from profit to loss | - Net impairment loss on financial assets significantly increased from HKD 6.7 million in the prior year period to HKD 101 million, contributing significantly to the loss[1] Consolidated Financial Statements This section presents the company's interim condensed consolidated financial statements, including the statement of profit or loss, statement of financial position, and notes to the financial statements Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income In the first half of 2024, the company turned from profit to loss, recording a loss for the period of HKD 178 million, compared to a profit of HKD 134 million in the prior year period, primarily due to a 25.9% decrease in revenue and a significant 56.9% reduction in gross profit, further exacerbated by a notable increase in impairment losses on financial assets to HKD 101 million, resulting in a basic loss per share of HKD 0.0475 Summary of Profit or Loss Statement (For the six months ended June 30) | Item (HKD Thousand) | 2024 (Unaudited) | 2023 (Unaudited) | | :--- | :--- | :--- | | Revenue | 5,733,287 | 7,732,538 | | Gross Profit | 282,068 | 654,960 | | Operating (Loss)/Profit | (10,360) | 184,142 | | (Loss)/Profit before tax | (135,675) | 177,373 | | (Loss)/Profit for the period | (177,534) | 133,552 | | (Loss)/Profit attributable to owners of the Company | (162,783) | 134,903 | - Basic and diluted loss per share was HKD 0.0475, while earnings per share were HKD 0.0393 in the prior year period[4] Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, the company's total assets were HKD 11.326 billion, total liabilities were HKD 8.693 billion, and net assets were HKD 2.632 billion, a decrease from the end of 2023, notably with net current liabilities of HKD 845 million indicating short-term repayment pressure Summary of Financial Position Statement (HKD Thousand) | Item | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | Total non-current assets | 5,006,501 | 5,025,589 | | Total current assets | 6,319,002 | 6,340,431 | | Total current liabilities | 7,164,223 | 7,231,694 | | Net current liabilities | (845,221) | (891,263) | | Total non-current liabilities | 1,529,064 | 1,305,964 | | Net assets | 2,632,216 | 2,828,362 | Notes to the Financial Statements The financial statements are prepared on a going concern basis, as the directors believe the Group has sufficient working capital for the next twelve months despite net current liabilities of HKD 845 million, having successfully renewed or obtained new bank loans after the reporting period, with business operations segmented into manganese ore mining, electrolytic manganese metal and alloy materials production, battery materials production, and other businesses, and no interim dividend is recommended - Going Concern: Despite net current liabilities of HKD 845 million as of June 30, 2024, the directors believe the Group has sufficient working capital to meet its needs for the next twelve months, thus the financial statements are prepared on a going concern basis[7] - The Group's business is segmented into four reportable operating segments: Manganese Ore Mining (China and Gabon), Electrolytic Manganese Metal and Alloy Materials Production (China), Battery Materials Production (China), and Other Businesses (China and Hong Kong)[9] - The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2024[26] Management Discussion and Analysis This section provides an in-depth review of the company's financial performance, business segment results, liquidity, financial resources, risk management, and future outlook Financial Review In the first half of 2024, the average selling price of electrolytic manganese metal products fell by 15.8% due to weak demand from the downstream steel industry, leading to a 40.5% reduction in gross profit contribution, while the trading business incurred a gross loss, and an impairment loss of HKD 109 million was recognized due to the guarantee liability for an associate company, Dushan Jinmeng, with these multiple factors collectively causing the company to turn from profit to loss, resulting in a loss attributable to owners of HKD 163 million - Due to slower economic growth in China caused by reduced real estate development investment, steel consumption stagnated, leading to weak demand for electrolytic manganese metal products and a 15.8% decline in average selling price[31] - Despite the impact of electric vehicle tariffs, the Battery Materials Production segment achieved encouraging results due to its well-established supply chain and cost advantages[31] - The Group recognized an impairment loss of HKD 109 million on receivables from associate company Dushan Jinmeng, as the Group fulfilled its bank financing guarantee for the company[32] - Total revenue decreased by 25.9% to HKD 5.733 billion, primarily due to lower average selling prices of electrolytic manganese metal and alloy products, reduced sales volume of alloy products, and decreased sales revenue from the trading business[34] Business Segment Performance Business segment performance varied, with manganese ore mining revenue increasing by 12.4% due to higher sales volume but gross profit declining, electrolytic manganese metal and alloy segment revenue significantly decreasing by 28.2% and recording a loss due to lower prices and sales volume, battery materials segment revenue decreasing by 13.9% but segment profit growing by 12.2% due to effective cost control, and other businesses (trading) revenue significantly decreasing by 32.3% and incurring a gross loss Manganese Ore Mining Segment Segment revenue increased by 12.4% year-on-year to HKD 654 million due to increased sales volume of Gabon ore amid short-term market supply tightness, however, gross profit decreased by 13.4% to HKD 111 million due to lower average selling prices, while segment profit increased by 7.0% to HKD 80.3 million Manganese Ore Mining Segment Performance (For the six months ended June 30) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Revenue (HKD Thousand) | 654,278 | 581,908 | | Gross Profit (HKD Thousand) | 111,062 | 128,311 | | Gross Margin (%) | 17.0% | 22.1% | - Segment profit recorded HKD 80.3 million, a year-on-year increase of 7.0%[36] Electrolytic Manganese Metal and Alloy Materials Production Segment Segment revenue significantly decreased by 28.2% year-on-year to HKD 1.161 billion, primarily due to a 15.8% decline in the average selling price of electrolytic manganese metal products and a sharp 75.0% reduction in alloy product sales volume due to production suspension, resulting in a loss of HKD 50.7 million for this segment after recognizing a HKD 109 million loss from fulfilling guarantee liabilities for an associate company Electrolytic Manganese Metal and Alloy Materials Segment Performance (For the six months ended June 30) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Revenue (HKD Thousand) | 1,160,859 | 1,615,881 | | Gross Profit (HKD Thousand) | 138,617 | 191,109 | | Segment (Loss)/Profit (HKD Thousand) | (50,664) | 83,950 | - Average selling price of electrolytic manganese metal products decreased by 15.8%; alloy product sales volume decreased by 75.0% due to production suspension[38] Battery Materials Production Segment Segment revenue decreased by 13.9% year-on-year to HKD 798 million, mainly due to slight declines in both the selling price and sales volume of its main product, electrolytic manganese dioxide, however, despite the revenue decrease, segment profit increased by 12.2% year-on-year to HKD 194 million, benefiting from reduced administrative expenses Battery Materials Production Segment Performance (For the six months ended June 30) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Revenue (HKD Thousand) | 797,934 | 926,713 | | Gross Profit (HKD Thousand) | 243,476 | 255,903 | | Segment Profit (HKD Thousand) | 193,992 | 172,874 | - Average selling price of the main product, electrolytic manganese dioxide, decreased by 4.2%, and sales volume decreased by 5.3%[39] Other Businesses Segment Other businesses, primarily trading, saw revenue significantly decrease by 32.3% year-on-year to HKD 3.12 billion and recorded a gross loss of HKD 211 million, mainly due to a decline in manganese ore selling prices Other Businesses Segment Performance (For the six months ended June 30) | Item | 2024 | 2023 | | :--- | :--- | :--- | | Revenue (HKD Thousand) | 3,120,216 | 4,608,036 | | Gross (Loss)/Profit (HKD Thousand) | (211,087) | 79,637 | Liquidity and Financial Resources As of June 30, 2024, the Group held cash and bank balances of HKD 1.631 billion, total borrowings of HKD 5.205 billion, and a net gearing ratio of 121.2%, largely consistent with the beginning of the year, and despite net current liabilities of HKD 845 million, the directors believe measures such as bank loan renewals ensure sufficient working capital for the next 12 months, thus the financial statements are prepared on a going concern basis Key Financial Ratios | Ratio | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current Ratio | 0.88 | 0.88 | | Quick Ratio | 0.67 | 0.64 | | Net Gearing Ratio | 121.2% | 121.9% | - As of June 30, 2024, the Group's cash and bank balances (including restricted and pledged deposits) amounted to HKD 1.631 billion, with total borrowings of HKD 5.205 billion[55] - The Group had net current liabilities of HKD 845 million, but the Board of Directors believes the Group has sufficient working capital to meet its needs for the next 12 months, thus the interim condensed consolidated financial statements have been prepared on a going concern basis[61] Risk Management The Group primarily faces credit risk, interest rate risk, and foreign exchange risk, with credit risk concentrated on a single customer A (HKD 232 million in trade receivables, fully provided for) and receivables from associate company Dushan Jinmeng (HKD 321 million, with HKD 108 million impairment recognized), interest rate risk stemming from floating-rate debt, and foreign exchange risk arising from operations across Hong Kong, mainland China, and Gabon, though the Group considers overall risk manageable - Credit Risk: Trade receivables from customer A of HKD 232 million are fully overdue and fully provided for, additionally, receivables from associate company Dushan Jinmeng amount to HKD 321 million, with an impairment loss of HKD 108 million recognized[63] - Interest Rate Risk: The Group faces the risk of interest rate fluctuations on floating-rate debt, and finance costs will increase if the China Loan Prime Rate rises[64] - Foreign Exchange Risk: The Group's operations involve HKD, RMB, USD, and CFA Franc, posing certain foreign exchange risks, especially for USD-denominated purchases and financing in its China operations[65][66] Business Model, Strategies and Outlook The Group is committed to becoming a globally leading integrated manganese industry chain producer, and while the electrolytic manganese metal market faces challenges due to the weak steel industry, the Group remains optimistic about the battery materials production sector, particularly new energy vehicle-related materials, and will continue to focus on cost reduction, efficiency improvement, technological research and development, and seizing green development opportunities - The Group's strategy is to become a globally leading one-stop integrated upstream and downstream manganese ore producer, aiming to achieve this through resource expansion, efficiency enhancement, and strengthening customer relationships[67] - Outlook: The outlook for the electrolytic manganese metal segment is challenging, with the industry advocating for production cuts and technological upgrades, while the battery materials production sector has an optimistic outlook, benefiting from the development of the new energy vehicle industry[69] Other Disclosures This section covers corporate governance, dividend policy, and securities transactions and buybacks Corporate Governance During the reporting period, the company complied with most provisions of the Corporate Governance Code, with one deviation: the roles of Chairman and Chief Executive Officer are held by the same individual, Mr. Li Weijian, which deviates from Code Provision C.2.1, however, the Board believes this arrangement is in the company's best interest during the current challenging period and will continue to review it - The company deviated from Code Provision C.2.1 of the Corporate Governance Code, where the roles of Chairman and Chief Executive Officer are held by the same person, Mr. Li Weijian[70][71] - The Board believes that Mr. Li's simultaneous holding of both positions is the best choice for leading and overseeing the company during this challenging period[71] Dividend Policy The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2024, consistent with the policy for the same period last year - The Board of Directors does not recommend the payment of any interim dividend for the first half of 2024 (first half of 2023: nil)[26][54] Securities Transactions and Buybacks The company has adopted a code for directors' securities transactions, and all directors have confirmed compliance, with no purchases, redemptions, or sales of the company's listed securities by the company or any of its subsidiaries during the reporting period - All directors have confirmed compliance with the required standards of the code for securities transactions throughout the reporting period[72] - During the six months ended June 30, 2024, neither the company nor any of its subsidiaries purchased, redeemed, or sold any of the company's listed securities[73]