南方锰业(01091) - 2020 - 中期财报

Company Information CITIC Dameng Holdings Limited, listed on HKEX, primarily engages in investment holding, with subsidiaries involved in manganese mining, processing, and related trading in China and Gabon - CITIC Dameng Holdings Limited is a Bermuda-incorporated company listed on the Main Board of the Hong Kong Stock Exchange (stock code: 1091). Its principal business is investment holding, with subsidiaries engaged in manganese mining, ore processing, downstream processing (manganese alloys and battery materials), and related raw material trading in mainland China and Gabon[3][19] Financial Performance Financial Statement Summary In H1 2020, revenue decreased by 32.4% to HKD 2.12 billion due to reduced trading and lower product prices, resulting in a net loss attributable to owners of HKD 8.11 million despite improved gross margin and operating cash flow 2020 H1 Key Financial Data Summary (Unit: HKD Thousand) | Indicator | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | Consolidated Income Statement | | | | | Revenue | 2,123,141 | 3,140,900 | -32.4% | | Gross Profit | 270,165 | 363,120 | -25.6% | | Operating Profit | 15,905 | 90,921 | -82.5% | | (Loss)/Profit for the period | (17,325) | 66,420 | Turned from Profit to Loss | | (Loss)/Profit attributable to owners of the parent | (8,107) | 86,261 | Turned from Profit to Loss | | Basic (Loss)/Earnings per share (HKD) | (0.0024) | 0.0252 | Turned from Profit to Loss | | Financial Position Statement | As of June 30, 2020 | As of December 31, 2019 | Change from Year-End | | Total Assets | 9,074,620 | 8,767,405 | +3.5% | | Total Liabilities | 6,296,742 | 5,929,235 | +6.2% | | Total Equity | 2,777,878 | 2,838,426 | -2.1% | | Net Current Liabilities | (286,757) | (1,173,197) | -75.6% | | Cash Flow Statement | | | | | Net cash flows from operating activities | 391,488 | 203,782 | +92.1% | | Net cash flows used in investing activities | (238,486) | (140,589) | +69.6% | | Net cash flows from financing activities | 299,623 | 188,489 | +59.0% | Notes to Interim Condensed Consolidated Financial Statements The notes detail accounting policies, segment operations, and significant transactions, including a bargain purchase gain from Ningbo Dameng acquisition and a deemed disposal loss from Xinsheng Mining, while addressing net current liabilities through operational adjustments and loan renewals - As of June 30, 2020, the Group's net current liabilities were HKD 287 million. Directors believe the financial statements are appropriately prepared on a going concern basis, considering future liquidity and measures like product portfolio restructuring, cost control, and bank loan renewals[20][21][22] 2020 H1 Segment Results (Unit: HKD Thousand) | Business Segment | External Sales | Segment Result | | :--- | :--- | :--- | | Manganese Ore Mining (China & Gabon) | 46,903 | 26,471 | | Electrolytic Manganese Metal & Alloy Materials Production (China) | 1,518,711 | 97,028 | | Battery Materials Production (China) | 323,335 | 115,902 | | Other Businesses (China & Hong Kong) | 234,192 | (97,344)* | - The loss in the Other Businesses segment primarily includes a non-cash loss of HKD 92.38 million from the deemed disposal of partial equity in an associate (Xinsheng Mining)[37][49] - On March 31, 2020, the Group further acquired a 65.17% interest in Ningbo Dameng, making it a wholly-owned subsidiary. This acquisition resulted in a bargain purchase gain of HKD 69.41 million[101][103][104] Management Discussion and Analysis Financial and Business Review H1 2020 saw revenue decline by 32.4% and operating profit by 82.5% due to COVID-19 and lower EMM prices, but the company strategically acquired Ningbo Dameng, controlled capital expenditure, and optimized debt structure, resulting in a net loss of HKD 8.1 million after significant non-cash items - Due to COVID-19, the electrolytic manganese metal market remained unfavorable since Q4 2019, with average selling price decreasing by 21.0% to HKD 10,700 per tonne in H1 2020, and gross margin falling to 15.4%[148] - The company continued to expand its battery materials business, completing the acquisition of Ningbo Dameng in March 2020, making it a wholly-owned subsidiary, aiming to shift its product portfolio towards higher-margin battery materials[149] - The company implemented various measures to address the severe situation, including strict control over capital expenditure, optimizing loan structure to increase the proportion of long-term loans, implementing production cost reduction plans, and continuing R&D for battery materials products[151][152] - Two significant one-off non-cash items were recorded during the period: 1) a deemed disposal loss of approximately HKD 92.4 million due to dilution of equity from not participating in the rights issue of associate Xinsheng Mining; and 2) a bargain purchase gain of HKD 69.4 million from the further acquisition of Ningbo Dameng[154] Segment Performance Analysis Segment performance varied, with manganese ore mining and EMM segments experiencing revenue and profit declines due to lower prices, while the battery materials segment saw significant sales and profit growth driven by the Huayuan Manganese acquisition, and other businesses sharply reduced trading - Manganese Ore Mining segment: Revenue decreased by 23.4% to HKD 46.9 million and segment profit decreased by 29.1% to HKD 26.5 million due to lower manganese ore selling prices caused by the pandemic[161][162] - Electrolytic Manganese Metal and Alloy Materials segment: Despite a 77.3% increase in ferrosilicon manganese alloy sales, the average selling price of electrolytic manganese metal, the main product, fell by 21.0%, leading to a 28.9% decrease in segment gross profit contribution to HKD 172 million and a 41.8% decrease in segment profit[164][165] - Battery Materials Production segment: Benefited from the acquisition of Huayuan Manganese factory, sales of electrolytic manganese dioxide significantly increased by 82.5%, driving a 10.2% increase in segment gross profit contribution to HKD 79.9 million. Coupled with the bargain purchase gain, segment profit increased by 108.2% to HKD 116 million[168][169] - Other Businesses segment: To monitor credit risk, the company significantly reduced its trading business, leading to an 80.2% year-on-year decrease in segment revenue[170] Liquidity and Financial Resources As of June 30, 2020, the Group's net current liabilities significantly reduced to HKD 287 million from HKD 1.17 billion, improving liquidity ratios, while total borrowings stood at HKD 4.57 billion, with a net gearing ratio of 110.4%, supported by bank loan renewal commitments Key Financial Ratios | Ratio | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Current Ratio | 0.93 | 0.76 | | Quick Ratio | 0.80 | 0.66 | | Net Gearing Ratio | 110.4% | 107.7% | - Net current liabilities significantly decreased from HKD 1.173 billion at the end of 2019 to HKD 287 million, primarily due to the company's efforts to improve its borrowing structure with more long-term bank loans[194] - To address liquidity risk, the Group has obtained written confirmations from several Chinese banks agreeing to renew short-term loans totaling HKD 844 million[203] Future Development and Outlook The Group plans to consolidate its leading position in battery materials, cautiously increase Gabon ore production, focus on long-term financing to improve capital structure, and prioritize liquidity management amidst a challenging business environment - Consolidate its leading position in battery materials production, continue technology R&D, and expand product application in electric vehicles and other power tools[214] - Prudently increase Gabon ore production, leveraging opportunities from reduced market supply due to border closures in some supplier countries, ensuring stable production and export[216] - Financing strategy will focus more on long-term financing to improve liquidity and capital structure, and consider equity financing to reduce the gearing ratio[217] - The business environment is expected to remain severe for the next one to two years, and the Group will place extreme emphasis on liquidity management to ensure ample working capital for business operations[218] Human Resources Report Employee Profile and Training As of June 30, 2020, the Group employed 7,090 staff, primarily in mainland China, with a stable turnover rate of 3.16%, and emphasized comprehensive training programs for all levels to enhance employee quality and foster mutual growth Employee Profile | Metric | June 30, 2020 | June 30, 2019 | | :--- | :--- | :--- | | Total Employees | 7,090 | 7,407 | | Employee Turnover Rate | 3.16% | 2.85% | - The company values employee training, providing various training programs for all levels of employees in H1 2020, with 85% of senior management trained and an average of 47 hours of training per employee[227][228] Environmental, Social and Governance Report ESG Overview and Key Performance The Group integrates ESG management into its operations, with the Board responsible for ESG strategy, focusing on safety, environmental protection, employee development, and social welfare, reporting 6 work-related injuries and HKD 513,000 in donations in H1 2020 2020 H1 Key ESG Performance Indicators | Key Area | Key Performance Indicator | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | | Safety Production & Labor Protection | Fatalities | 0 | 1 | | | Work-related Injuries | 6 | 4 | | Energy Saving & Environmental Protection | Total Electricity Consumption (Thousand kWh) | 1,132,671 | 891,935 | | | Total Water Consumption (Tonnes) | 2,479,022 | 2,222,289 | | | Total GHG Emissions (Tonnes) | 25 | 16 | | Establishing Excellent Operating System | Number of Product Complaints Received | 0 | 4 | | | Number of Corruption-related Whistleblower Cases | 0 | 0 | | Social Welfare | Donation Amount (HKD) | 513,000 | 523,355 | - The Group categorizes significant ESG management matters into four aspects: safety production and labor protection; energy saving and environmental protection; establishing an excellent operating system, employee training and growth; and social welfare, living base, and cultural and artistic development[231] Manganese Ore Resources and Reserves Summary Resource Reserves and Mining Activities As of June 30, 2020, the Group's total manganese ore resources were 115.49 million tonnes and reserves were 90.53 million tonnes, slightly reduced by mining, with increased overall mining output and downstream production of EMM, ferrosilicon manganese alloy, and EMD Manganese Ore Resources and Reserves Summary (As of June 30, 2020) | Category | Tonnes (Million Tonnes) | | :--- | :--- | | Total Manganese Ore Resources | 115.49 | | Total Manganese Ore Reserves | 90.53 | 2020 H1 Main Mine Mining Output (Thousand Tonnes) | Mine Area | 2020 H1 | 2019 H1 | | :--- | :--- | :--- | | Daxin Manganese Mine | 928 | 854 | | Tiandeng Manganese Mine | 227 | 60 | | Changgu Manganese Mine | 97 | 84 | | Bembélé Manganese Mine | 845 | 795 | 2020 H1 Main Downstream Product Output (Thousand Tonnes) | Product | 2020 H1 | 2019 H1 | | :--- | :--- | :--- | | Electrolytic Manganese Metal | 94.2 | 88.8 | | Ferrosilicon Manganese Alloy | 90.2 | 51.9 | | Electrolytic Manganese Dioxide | 43.0 | 40.8 | Other Information Corporate Governance and Shareholder Equity The company largely complied with corporate governance codes, with a noted deviation where Mr. Guo Aimin holds both Chairman and CEO roles, and disclosed major shareholder CITIC Group's 43.46% indirect stake, with no listed securities purchased, redeemed, or sold during the period - The company deviated from Corporate Governance Code provision A.2.1, where Mr. Guo Aimin holds both Chairman and Chief Executive Officer positions. The Board believes this arrangement is optimal for the company during challenging times and will continuously review it[326][327] - As of June 30, 2020, CITIC Group Corporation Limited indirectly held 1,490,026,000 shares, representing 43.46% of the issued share capital, through a series of controlled corporations[333][334] - The Audit Committee has reviewed the unaudited interim results for the period and has no disagreements[340]