FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS For the six months ended December 31, 2020, the company's turnover increased by 49% to HK$223 million, primarily due to new liquor sales, while loss for the period expanded by 52% to HK$78.42 million, resulting in a basic loss per share of 5.39 HK cents Six-Month Financial Highlights Ended December 31, 2020 | Metric | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | Change | | :--- | :--- | :--- | :--- | | Turnover | 223,050 | 149,647 | +49% | | Loss for the period | (78,417) | (51,448) | +52% | | Basic loss per share | (5.39) HK cents | (3.51) HK cents | +54% | | Interim dividend per share | – | – | – | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED INCOME STATEMENT During the period, the company's revenue grew 49% to HK$223 million, but operating loss significantly widened from HK$1.01 million to HK$18.65 million due to increased sales, administrative, and finance costs, leading to a 52% increase in loss for the period to HK$78.42 million Key Data from Condensed Consolidated Income Statement (Six Months Ended December 31) | Item | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Revenue | 223,050 | 149,647 | | Gross profit | 67,983 | 67,963 | | Operating loss | (18,651) | (1,013) | | Finance costs | (61,004) | (48,086) | | Loss before tax | (78,417) | (51,448) | | Loss for the period | (78,417) | (51,448) | | Loss attributable to owners of the Company | (74,286) | (46,768) | CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As of December 31, 2020, the Group's total assets increased to HK$2.237 billion and total liabilities to HK$1.715 billion, with a net current liability of HK$203 million indicating short-term solvency pressure, while total equity rose to HK$522 million Key Financial Position Data | Item | Dec 31, 2020 (HK$ Thousand) | Jun 30, 2020 (HK$ Thousand) | | :--- | :--- | :--- | | Total assets | 2,236,534 | 1,996,824 | | Total liabilities | 1,714,801 | 1,567,539 | | Total equity | 521,733 | 429,285 | | Net current liabilities | (203,124) | (220,130) | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Operating cash flow shifted from a net inflow of HK$28.56 million to a net outflow of HK$62.03 million, while financing activities generated a net cash inflow of HK$104 million, primarily from convertible bond issuance and option exercise, increasing period-end cash balance to HK$34.90 million Key Cash Flow Data (Six Months Ended December 31) | Item | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Net cash from operating activities | (62,025) | 28,563 | | Net cash from investing activities | (16,322) | (11,261) | | Net cash from financing activities | 104,274 | (17,553) | | Net increase in cash and cash equivalents | 25,927 | (251) | | Cash and cash equivalents at end of period | 34,899 | 7,639 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES Notes to the financial statements reveal significant uncertainties regarding the Group's going concern, with net current liabilities of HK$203 million and a loss of HK$78.42 million for the period, prompting management to plan asset sales and cost reductions - As of December 31, 2020, the Group had net current liabilities of approximately HK$203 million and a loss for the period of HK$78.42 million, indicating significant uncertainties that may cast substantial doubt on the Group's ability to continue as a going concern2426 - To address liquidity risks, management plans to dispose of idle right-of-use assets in Mudanjiang City with a carrying value of approximately HK$106 million and a market valuation of approximately HK$237 million, and will implement cost reduction measures within the next twelve months29 4. REVENUE Total revenue increased by 49% to HK$223 million, driven primarily by new liquor sales contributing HK$68.97 million, while core heat supply services revenue remained stable at HK$133 million Revenue Composition (Six Months Ended December 31) | Business Segment | 2020 (HK$ Thousand) | 2019 (HK$ Thousand) | | :--- | :--- | :--- | | Heat supply services | 132,723 | 135,843 | | Electricity supply services | 7,167 | 4,809 | | Sales of lime powder | 14,189 | 8,471 | | Sales of liquor | 68,971 | – | | Total | 223,050 | 149,647 | 5. SEGMENT INFORMATION The Group operates across six segments, with the Heat and Power segment contributing HK$43.24 million in profit and the new Beverage segment adding HK$4.29 million, despite a significant loss of HK$41.09 million from the Calcium Carbide segment impacting overall performance Segment Profit/(Loss) (Six Months Ended December 31, 2020) | Segment | Profit/(Loss) (HK$ Thousand) | | :--- | :--- | | Heat and power | 43,242 | | Calcium carbide | (41,093) | | Beverage | 4,286 | | Other segments | (2,183) | | Unallocated | (82,969) | | Total | (78,417) | 18. EVENTS AFTER THE REPORTING PERIOD Post-reporting period, on February 2, 2021, the company's indirect wholly-owned subsidiary agreed to acquire Beijing Yaolai Longwei Liquor Co Ltd for HK$80 million to accelerate its expansion in the liquor business - On February 2, 2021, the company's indirect wholly-owned subsidiary entered into an agreement to acquire the entire equity interest in Beijing Yaolai Longwei Liquor Co Ltd for HK$80 million, payable by HK$5 million in cash and the issuance of a promissory note for HK$75 million116117 MANAGEMENT DISCUSSION AND ANALYSIS Business Review Despite a 49% increase in total revenue to HK$223 million, primarily from the new beverage business, the Group's coal-related chemical operations incurred approximately HK$76 million in losses due to underutilized capacity and increased idle costs from the COVID-19 pandemic, exacerbated by 65% and 21% rises in sales and administrative expenses respectively - Despite economic improvements, the Group was still affected by the pandemic, with underutilized capacity in the coal-related chemical products division leading to idle operating costs and a loss of approximately HK$76 million120124 - Group revenue increased by 49% to HK$223 million, primarily attributable to new revenue streams from the beverage business121127 - Sales and distribution costs increased by 65% due to the expansion of heat supply areas, while administrative expenses rose by 21% due to share option expenses122129 Heat and power division The Heat and Power segment, a core business, maintained stable revenue at approximately HK$140 million, but segment profit decreased by 17% to HK$43 million due to higher maintenance costs, prompting management to focus on operational efficiency to improve profitability Heat and Power Segment Performance | Metric | 2020 H2 (HK$ Million) | 2019 H2 (HK$ Million) | Change | | :--- | :--- | :--- | :--- | | Revenue from external customers | 140 | 141 | -1% | | Segment profit | 43 | 52 | -17% | Coal-related chemical production division This segment was severely impacted by the pandemic, with the Calcium Carbide division's revenue increasing to HK$14 million from lime powder sales, while the PVC and Vinyl Acetate divisions generated no revenue, leading to significant idle costs due to production halts - External customer revenue for the Calcium Carbide division was approximately HK$14 million, a 68% increase year-on-year, primarily from the sale of lime powder, while the PVC and Vinyl Acetate divisions generated no revenue138140 Beverage division The newly launched Beverage segment demonstrated strong performance, generating approximately HK$69 million in revenue and HK$4 million in segment profit during its brief operating period, indicating robust market demand and growth potential - The Group commenced its beverage business through liquor sales at the end of 2020, with this segment recording approximately HK$69 million in revenue and HK$4 million in profit during the reporting period144147 Capital Structure, Liquidity and Financial Resources As of December 31, 2020, the Group's total assets were HK$2.237 billion and total liabilities HK$1.715 billion, with liquidity ratios of 0.6 (current) and 0.5 (quick) and a debt-to-asset ratio of 76.7%, indicating significant liquidity pressure, which the company addressed by issuing HK$100 million in convertible bonds, yielding HK$97.36 million for debt repayment, new business development, and working capital Key Financial Ratios | Ratio | Dec 31, 2020 | Jun 30, 2020 | | :--- | :--- | :--- | | Current ratio | 0.6 | 0.4 | | Quick ratio | 0.5 | 0.4 | | Debt-to-asset ratio | 76.7% | 78.5% | | Debt-to-equity ratio | 362.0% | 417.5% | - The company entered into an agreement on October 28, 2020, to issue zero-coupon convertible bonds with a principal amount of HK$100 million, yielding net proceeds of approximately HK$97.36 million163164 - As of December 31, 2020, approximately HK$84 million of the bond proceeds had been utilized, with HK$37 million for settling liabilities, HK$34 million for the new beverage business, and HK$13 million for general working capital173 PROSPECT Looking ahead, the Group plans to expand its heat and power supply, convert its coal chemical plant to produce high-carbon ferromanganese (delayed by pandemic), and prioritize the beverage business through acquisitions to grow market share, while actively pursuing asset restructuring and non-core asset disposals to enhance shareholder value - The Heat and Power division will continue to be a growth driver for the Group, with management aiming to further expand residential heat supply areas200202 - The Coal-related Chemical Products division plans to convert the plant and equipment of Heilongjiang Longjiang Chemical to produce high-carbon ferromanganese, though this plan has been delayed to 2021 due to the pandemic201203 - The Beverage division will accelerate its development through the acquisition of Beijing Liquor to enhance its customer base and expansion capabilities in the Chinese liquor market206209210 - The Group's strategy involves active asset restructuring, not excluding further acquisitions and disposals of non-core assets to create shareholder value254258
中国天化工(00362) - 2021 - 中期财报