中国天瑞水泥(01252) - 2019 - 年度财报

Company Information Company Basic Information This section provides fundamental information about China Tianrui Group Cement Company Limited, including its listing details on the Hong Kong Stock Exchange, board committee members, principal bankers, registered office, headquarters address, legal advisors, and auditor | Item | Details | | :--- | :--- | | Company Name | China Tianrui Group Cement Company Limited | | Listing Place | The Stock Exchange of Hong Kong Limited | | Stock Code | 1252 | | Chairman of the Board | Mr. Li Liufa (Non-executive Director) | | Auditor | Deloitte Touche Tohmatsu | | Headquarters Address | No. 63 Guangcheng East Road, Ruzhou City, Henan Province, China | Company Overview This section outlines the company's core competencies, shareholding structure, production facility layout, and capacity, highlighting its market leadership in Henan and Liaoning provinces as a key state-supported large-scale cement group with advantages in technology, layout, resources, and management Core Competencies The company has established its core competitiveness in the industry through advanced technological equipment, rational regional layout, abundant resource reserves, and standardized management and brand advantages, with all clinker production lines utilizing advanced NSP technology and waste heat power generation for energy saving and emission reduction, and being among the first Chinese cement companies accepted as a CSI member, committed to sustainable development - All of the Group's clinker production lines utilize advanced NSP technology and are equipped with waste heat recovery power generation technology, effectively saving electricity costs and reducing pollution[8] - The Group's main production facilities are strategically located at the intersection of limestone resources, end markets, and major transportation arteries, with a layout along the 'two vertical and three horizontal' expressways in Henan and along the 'Harbin-Dalian Expressway' and Bohai Rim Economic Zone in Liaoning[8] - Each clinker production line is supported by limestone mines with over 30 years of usable reserves[8] - The company is one of the first three cement companies in China accepted as a member of the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development[9] Corporate Structure As of the end of 2019, the company was indirectly controlled by founder Mr. Li Liufa and his spouse Ms. Li Fengluan through Tianrui Group, holding 69.58% of the shares as the controlling shareholder, with core subsidiaries including Zhongyuan Cement, Tianrui (Hong Kong), and Tianrui Cement managing 26 wholly-owned and 8 non-wholly-owned subsidiaries - As of December 31, 2019, Chairman Li Liufa and his spouse Ms. Li Fengluan indirectly controlled 69.58% of the company's equity through Tianrui Group[11] - The Group manages 26 wholly-owned Chinese subsidiaries and 8 non-wholly-owned Chinese subsidiaries through its wholly-owned subsidiary, Tianrui Cement Group Co., Ltd[12][15] Production Facility Distribution and Capacity As of the end of 2019, the Group's production facilities were primarily located in Henan, Liaoning, Tianjin, and Anhui, maintaining stable total annual clinker capacity of approximately 28.4 million tonnes and cement capacity of 56.7 million tonnes, concentrated in Central China (Henan and Anhui) and Northeast China (Liaoning and Tianjin) | Item | Capacity (million tonnes) | Remarks | | :--- | :--- | :--- | | Total Annual Clinker Capacity | 28.4 | Consistent with 2018 | | Total Annual Cement Capacity | 56.7 | Consistent with 2018 | | Henan Region Cement Capacity | 37.6 | Including Anhui | | Henan Region Clinker Capacity | 20.0 | Including Anhui | | Liaoning Region Cement Capacity | 19.1 | Including Tianjin | | Liaoning Region Clinker Capacity | 8.4 | Including Tianjin | Financial Highlights In 2019, the company achieved robust financial growth with revenue increasing by 20.1% year-on-year, gross profit by 37.7%, and profit attributable to owners of the company surging by 50.0% to RMB 1.819 billion, alongside steady growth in total assets and total equity Key Financial Data For the 2019 fiscal year, the company recorded significant growth across all key financial metrics, with revenue reaching RMB 12.088 billion, a 20.1% year-on-year increase, gross profit rising 37.7% to RMB 4.507 billion, and profit attributable to owners surging 50.0% to RMB 1.819 billion, with basic earnings per share increasing from RMB 0.41 to RMB 0.62, while total assets grew 13.2% to RMB 32.324 billion and total equity increased 17.1% | Metric (Year Ended December 31) | 2019 (RMB '000) | 2018 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,087,532 | 10,060,647 | 20.1% | | Gross Profit | 4,507,370 | 3,273,488 | 37.7% | | EBITDA | 4,867,561 | 3,844,697 | 26.6% | | Profit Attributable to Owners of the Company | 1,819,423 | 1,212,547 | 50.0% | | Basic Earnings Per Share (RMB) | 0.62 | 0.41 | 50.0% | | Metric (As of December 31) | 2019 (RMB '000) | 2018 (RMB '000) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 32,324,304 | 28,553,706 | 13.2% | | Total Liabilities | 19,348,713 | 17,474,586 | 10.7% | | Total Equity | 12,975,591 | 11,079,120 | 17.1% | Management Discussion and Analysis This section provides an in-depth review of 2019 business operations, macroeconomic and industry environment, and financial performance, along with an outlook, where the company achieved dual growth in sales volume and average selling price and significantly enhanced profitability through optimized management and market strategies amidst supply-side reform and stable infrastructure investment, maintaining an optimistic view on future infrastructure demand despite COVID-19 uncertainties, and continuing to advance its intelligent and green development strategies Business Review In 2019, the Group capitalized on opportunities from supply-side reform, achieving both volume and price increases for its products, with cement sales growing 7.0% year-on-year to 31.5 million tonnes and average selling price increasing 14.6% to RMB 354.5 per tonne, while high-grade cement (42.5 grade and above) sales proportion rose to 85.6%, even as clinker sales declined and aggregate sales surged 39.4% | Product | 2019 Sales Volume (million tonnes) | Year-on-Year Change | | :--- | :--- | :--- | | Cement | 31.5 | +7.0% | | Clinker | 2.5 | -12.4% | | Aggregate | 4.4 | +39.4% | | Product | 2019 Average Selling Price (RMB/tonne) | Year-on-Year Change | | :--- | :--- | :--- | | Cement | 354.5 | +14.6% | | Clinker | 275.1 | -4.9% | | Aggregate | 56.8 | +22.3% | - Product structure was further optimized, with the sales proportion of 42.5 grade and above cement increasing from 81.1% to 85.6%[21] Operating Environment and Industry Overview In 2019, China's macroeconomic environment strongly supported the cement industry, with national fixed asset investment growing 5.4% and real estate development investment increasing 9.9%, leading to improved supply-demand dynamics and a record-high industry profit of approximately RMB 180 billion driven by supply-side reform and environmental policies, while national cement output grew 6.1% year-on-year, with Northeast China experiencing the fastest growth at 13.12% - In 2019, national fixed asset investment grew 5.4% year-on-year, infrastructure investment increased 3.8%, and real estate development investment rose 9.9%[24] - The cement industry benefited from supply-side reform, staggered production, and environmental rectification, achieving a record-high industry profit of approximately RMB 180 billion[25] - National cement output was 2.33 billion tonnes, a 6.1% year-on-year increase, the fastest growth in nearly five years; cement output in Northeast China grew 13.12% year-on-year, the fastest growth rate[25][27] Financial Review This section provides a detailed analysis of the 2019 financial performance, where the company's revenue increased 20.1% year-on-year to RMB 12.088 billion, gross margin improved from 32.5% to 37.3%, and profit attributable to owners surged 50.0% to RMB 1.819 billion, driven by higher cement sales volume and prices, while also analyzing changes in costs, expenses, asset and liability positions, and key financial ratios Revenue Analysis Total revenue in 2019 was RMB 12.088 billion, a 20.1% year-on-year increase, primarily driven by cement sales which reached RMB 11.159 billion, up 22.6%, while clinker sales revenue decreased 16.7% due to declines in both volume and price, and by region, Central China and Northeast China revenues grew 21.0% and 17.3% respectively | Revenue Source | 2019 (RMB million) | Year-on-Year Growth | | :--- | :--- | :--- | | Total Revenue | 12,087.5 | 20.1% | | Cement Sales | 11,159.0 | 22.6% | | Clinker Sales | 677.4 | -16.7% | | Central China Region | 9,299.3 | 21.0% | | Northeast China Region | 2,788.2 | 17.3% | Cost of Sales Analysis Cost of sales in 2019 was RMB 7.580 billion, an 11.7% year-on-year increase, mainly due to increased cement production and higher prices for some raw materials, with raw materials, coal, and electricity accounting for 37.8%, 33.3%, and 13.0% of the cost structure respectively, and unit cement production costs showing increases in raw material and electricity costs, while coal costs decreased | Cost Composition Per Tonne of Cement | 2019 (RMB) | Change vs. 2018 (RMB) | | :--- | :--- | :--- | | Raw Materials | 74.6 | +10.2 | | Coal | 65.9 | -2.2 | | Electricity | 25.7 | +0.6 | Gross Profit and Profitability Analysis Gross profit increased 37.7% year-on-year to RMB 4.507 billion in 2019, with gross margin improving from 32.5% to 37.3%, primarily because the increase in cement selling prices outpaced cost increases, while profit attributable to owners surged 50.0% year-on-year to RMB 1.819 billion, and net margin rose from 12.1% to 15.1% - Gross margin increased from 32.5% in 2018 to 37.3% in 2019, primarily due to the increase in cement selling prices exceeding the increase in unit cost of sales[30] - Profit attributable to owners of the company was approximately RMB 1.819 billion, a 50.0% year-on-year increase; net margin increased from 12.1% to 15.1%[37] Financial and Liquidity Position As of the end of 2019, the company's financial position was robust, with total borrowings and debt financing instruments increasing to RMB 12.315 billion, while the gearing ratio decreased from 61.2% to 59.9% and net gearing ratio from 57.9% to 52.0%, indicating an optimized capital structure, and both current and quick ratios improved - Trade and other receivables increased from RMB 4.424 billion to RMB 7.306 billion, mainly due to increased sales and purchases leading to higher bills receivable and prepayments[38] - Total borrowings and debt financing instruments amounted to approximately RMB 12.315 billion, an 18.5% increase from the previous year[38] | Financial Ratio | End of 2019 | End of 2018 | | :--- | :--- | :--- | | Gearing Ratio | 59.9% | 61.2% | | Current Ratio | 1.2 | 1.0 | | Quick Ratio | 1.1 | 0.9 | | Net Gearing Ratio | 52.0% | 57.9% | Outlook Looking ahead to 2020, despite uncertainties from the early COVID-19 pandemic, the nation is expected to increase infrastructure investment to stabilize the economy, thereby stimulating cement demand, while strict environmental policies will continue to support stable supply and high prices, and the Group will further advance its 'smart factory', ultra-low emission, and 'green mine' initiatives, and develop its aggregate business to maintain regional competitive advantages - Infrastructure investment growth is expected to rebound in 2020, and real estate investment will remain resilient, providing support for cement demand[51] - The early COVID-19 pandemic brought uncertainties, but government policies to stimulate the economy are expected to offset initial impacts and even stimulate greater demand for building materials[51] - The Group will continue to advance 'smart factory', ultra-low emission, and 'green mine' construction, and develop its aggregate business to increase revenue and gross margin[51] Directors and Senior Management This section introduces the background and resumes of the company's Board of Directors and senior management team, with the Board comprising eight members including four executive directors, one non-executive director (Chairman), and three independent non-executive directors, and the senior management possessing extensive experience in cement industry production, sales, finance, and capital operations Board of Directors The Board of Directors is led by Mr. Li Liufa, Chairman and Non-executive Director, who is the Group's founder, with executive directors including Ms. Li Fengluan, Mr. Ding Jifeng, Mr. Xu Wuxue (Chief Financial Officer), and Mr. Li Jiangming, and three independent non-executive directors, Mr. Kong Xiangzhong, Mr. Wang Ping, and Mr. Du Xiaotang, who possess expertise in industry, finance, and law | Name | Position | | :--- | :--- | | Li Liufa | Non-executive Director and Chairman of the Board | | Li Fengluan | Executive Director | | Ding Jifeng | Executive Director | | Xu Wuxue | Executive Director and Chief Financial Officer | | Li Jiangming | Executive Director and Joint Company Secretary | | Kong Xiangzhong | Independent Non-executive Director | | Wang Ping | Independent Non-executive Director | | Du Xiaotang | Independent Non-executive Director | - Mr. Li Liufa is the Group's founder, with extensive experience in the cement industry, and serves as a representative to the 13th National People's Congress; Ms. Li Fengluan is his spouse[53] Senior Management The senior management team comprises experienced professionals in the cement industry, including Vice Chairman Yang Yongzheng, General Manager Ding Jifeng, Executive Vice General Manager Jing Xianyu, Chief Financial Officer Xu Wuxue, Vice General Manager Gao Yunhong, Vice General Manager of Capital Operations Li Jiangming, and Deputy Financial Controller Lu Xing, who are respectively responsible for the Group's daily operations, production, sales, finance, and capital market functions - Senior management members all possess extensive experience in the cement industry, covering key areas such as production, sales, finance, and capital operations[61][62] Directors' Report This report outlines the company's principal activities, annual results, dividend policy, share capital structure, shareholdings of directors and major shareholders, connected transactions, share option scheme, and compliance matters, noting stable business operations during the reporting period with no final dividend declared, and detailing continuing connected transactions with the controlling shareholder and its associates, confirming compliance with relevant regulations Principal Activities, Results, and Dividends The Group is primarily engaged in limestone quarrying, and the production and sale of clinker and cement; the 2019 annual results are detailed in the financial statements, and the Board did not recommend a final dividend for the year ended December 31, 2019 - The Group is principally engaged in limestone quarrying, and the production, sale, and distribution of clinker and cement[65] - The Board did not recommend the declaration of a final dividend for the year ended December 31, 2019[65] Directors' and Major Shareholders' Interests in Shares, Underlying Shares, and Debentures As of the end of 2019, controlling shareholders Mr. Li Liufa and Ms. Li Fengluan jointly held 69.58% of the company's shares through controlled corporations; the report also disclosed shareholdings of other major shareholders, such as The Export-Import Bank of China and China Huarong Asset Management Co., Ltd., and noted that controlling shareholder Yukuo Limited pledged part of its shares (30.60% of total share capital) to financial institutions for loans - Mr. Li Liufa and Ms. Li Fengluan are deemed to be interested in 2,044,484,822 shares held by Yukuo Limited, representing 69.58% of the share capital[69][70] - Controlling shareholder Yukuo Limited has pledged 899,247,000 shares (representing 30.60% of total share capital) to obtain loans[70][82] - Other major shareholders include The Export-Import Bank of China (10.72%) and China Huarong Asset Management Co., Ltd. (14.32%)[80] Connected Transactions During the reporting period, the company engaged in several continuing connected transactions, primarily including the purchase of clinker from associate Ruiping Shilong (annual cap RMB 800 million, actual transaction RMB 610 million), mutual guarantees with controlling shareholder Tianrui Group, and deposit and financial services agreements with Tianrui Finance, covering deposits (daily maximum balance RMB 940 million) and credit facilities (daily maximum balance RMB 1.65 billion), with all transactions having complied with regulatory procedures - Purchases of clinker from associate Pingdingshan Ruiping Shilong Cement Co., Ltd. amounted to RMB 610.4 million in 2019, not exceeding the annual cap of RMB 800 million[89][90] - Mutual guarantees with controlling shareholder Tianrui Group; as of the end of 2019, the company provided guarantees of RMB 1.582 billion to Tianrui Group, and Tianrui Group provided guarantees of RMB 2.263 billion to the company[91][94] - Deposit and financial services with associate Tianrui Finance; in 2019, the daily maximum deposit balance with Tianrui Finance was RMB 942 million, and the daily maximum unsecured loan balance obtained from Tianrui Finance was RMB 1.65 billion[95][101] Corporate Governance Report This report outlines the company's corporate governance framework and practices, confirming adoption and compliance with the Listing Rules' Corporate Governance Code, and detailing the Board's responsibilities and composition, the operations of its specialized committees (Audit, Nomination, Remuneration), risk management and internal control systems, and shareholder rights and investor relations policies, with all committees holding meetings and fulfilling their duties during the reporting period, indicating a well-functioning governance structure Board Operations The Board of Directors is responsible for formulating the Group's strategy and overseeing management; in 2019, the Board comprised 8 directors with a diverse structure, holding 7 meetings during the year to deliberate on significant matters such as annual budgets and operating results, with all directors achieving 100% attendance, and the company also adopted a Board Diversity Policy and provided continuous professional training to directors - As of December 31, 2019, the Board of Directors comprised 8 directors, including 4 executive directors, 1 non-executive director, and 3 independent non-executive directors[110] - In 2019, the Board of Directors held 7 meetings, with all directors achieving 100% attendance[113][114] Board Committees The company established three Board committees: Audit, Nomination, and Remuneration; the Audit Committee, composed of three independent non-executive directors, held two meetings during the year to review financial statements and internal controls; the Nomination Committee, responsible for director nominations and evaluations, held one meeting; and the Remuneration Committee, tasked with formulating remuneration policies, also held one meeting, with all committees effectively fulfilling their responsibilities - The Audit Committee, composed of three independent non-executive directors with Mr. Wang Ping as Chairman, held two meetings during the year, with all members attending[121] - The Nomination Committee, composed of two independent non-executive directors and one non-executive director with Mr. Kong Xiangzhong as Chairman, held one meeting during the year[122] - The Remuneration Committee, composed of two independent non-executive directors and one executive director with Mr. Du Xiaotang as Chairman, held one meeting during the year[126] Risk Management and Internal Control The Board of Directors bears ultimate responsibility for the Group's risk management and internal control systems, having conducted an annual review of their effectiveness through the Audit Committee, and the Group has established a three-tier management system encompassing subsidiaries, headquarters functional departments, and the Board level to systematically identify, assess, and respond to various risks - The Group has established a three-tier management system to identify, collect, assess, respond to, evaluate, and improve risk management and internal controls[119] Independent Auditor's Report This section presents the Independent Auditor's Report issued by Deloitte Touche Tohmatsu, where the auditor rendered an unmodified opinion on the company's 2019 consolidated financial statements, deeming them to fairly and truly reflect the Group's financial position and operating results, with the impairment assessment of property, plant, and equipment of a subsidiary specifically highlighted as a key audit matter Audit Opinion and Key Audit Matters Deloitte, the auditor, issued a standard unmodified opinion on the Group's 2019 consolidated financial statements; during the audit, the impairment assessment of property, plant and equipment (PPE) of a subsidiary located in Northeast China was identified as a key audit matter due to the significance of these assets and the substantial management estimates involved, and the auditor performed audit procedures including evaluating valuation methodologies, key assumptions, and data comparisons - The auditor is of the opinion that the consolidated financial statements give a true and fair view of the Group's consolidated financial position as at December 31, 2019, and of its consolidated financial performance and cash flows for the year then ended in all material respects[135] - A key audit matter was the impairment assessment of property, plant and equipment of a subsidiary located in Northeast China, primarily due to the significance of these assets and the substantial management estimates involved in the impairment assessment[136][137] Consolidated Financial Statements and Notes This section contains the company's four core consolidated financial statements for the year ended December 31, 2019: Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, and Statement of Cash Flows, along with detailed notes to these statements, which collectively present the company's detailed financial performance, asset and liability position, equity changes, and cash flow movements during the reporting period Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year 2019, the Group achieved revenue of RMB 12.088 billion and gross profit of RMB 4.507 billion; after accounting for various incomes and expenses, profit before tax was RMB 2.668 billion, and total profit and comprehensive income for the year was RMB 1.935 billion, of which profit attributable to owners of the company was RMB 1.819 billion | Item (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 12,087,532 | 10,060,647 | | Gross Profit | 4,507,370 | 3,273,488 | | Profit Before Tax | 2,667,671 | 1,742,572 | | Profit and Total Comprehensive Income for the Year | 1,934,505 | 1,251,810 | | Profit Attributable to Owners of the Company | 1,819,423 | 1,212,547 | Consolidated Statement of Financial Position As of December 31, 2019, the Group's total assets were RMB 32.324 billion, total liabilities were RMB 19.349 billion, and total equity was RMB 12.976 billion; non-current assets constituted a significant portion at RMB 17.596 billion, primarily comprising property, plant, and equipment, while current liabilities were RMB 12.358 billion, slightly lower than the previous year | Item (RMB '000) | December 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Non-current Assets | 17,595,980 | 16,253,029 | | Of which: Property, Plant and Equipment | 11,112,916 | 11,295,763 | | Current Assets | 14,728,324 | 12,300,677 | | Total Assets | 32,324,304 | 28,553,706 | | Current Liabilities | 12,358,194 | 12,571,661 | | Non-current Liabilities | 6,990,519 | 4,902,925 | | Total Liabilities | 19,348,713 | 17,474,586 | | Total Equity | 12,975,591 | 11,079,120 | Consolidated Statement of Cash Flows In 2019, the Group's net cash generated from operating activities was RMB 2.518 billion, a decrease from RMB 4.104 billion in the previous year, mainly due to a significant increase in trade and other receivables; net cash used in investing activities was RMB 75 million, and net cash used in financing activities was RMB 1.327 billion, resulting in a net increase in cash and cash equivalents of RMB 1.117 billion at year-end | Item (RMB '000) | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 2,518,334 | 4,103,995 | | Net Cash Used in Investing Activities | (74,565) | (2,319,450) | | Net Cash Used in Financing Activities | (1,326,733) | (1,258,581) | | Net Increase in Cash and Cash Equivalents | 1,117,036 | 525,964 | | Cash and Cash Equivalents at Year-End | 1,828,833 | 1,356,708 | Notes to the Consolidated Financial Statements (Selected) The notes to the financial statements provide detailed explanations of accounting policies and specific financial items, with key points including the impact of the first-time application of IFRS 16 Leases on the financial statements, revenue primarily derived from sales of cement, clinker, and aggregates, details of impairment tests for goodwill and property, plant and equipment, and various transactions and guarantees with related parties - IFRS 16 'Leases' was applied for the first time this year, with retrospective adjustments made to right-of-use assets and lease liabilities at the beginning of the period, but comparative figures were not restated[151] - Notes 17 and 22 disclose that an impairment loss of RMB 37.88 million was recognized for certain property, plant and equipment during the year, and an impairment loss of RMB 13.63 million was recognized for goodwill arising from the acquisition of Liaoyang Tianrui[194][234] - Note 50 provides detailed disclosures of transactions with related parties, including purchases of goods, office leases, and various loan guarantees provided by related parties to the Group[297][299] - Note 55 discloses that as of year-end, the Group provided bank financing guarantees totaling RMB 1.582 billion for related parties[330] Five-Year Financial Summary This section provides a summary of the Group's key performance and financial position data for the past five fiscal years (2015-2019), showing significant improvements in revenue and profitability over the last three years, particularly reaching new highs in 2019, with total assets and total equity also demonstrating a continuous upward trend Five-Year Financial Data Trends From the five-year data, the Group's operating performance achieved leapfrog growth between 2017 and 2019, with revenue increasing from approximately RMB 6 billion in 2016 to RMB 12.088 billion in 2019, and profit attributable to owners soaring from RMB 296 million in 2016 to RMB 1.819 billion in 2019, while total assets and total equity also steadily expanded, demonstrating the company's strong development momentum | Item (RMB '000) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 12,087,532 | 10,060,647 | 8,420,551 | 6,008,605 | 6,195,093 | | Profit Attributable to Owners of the Company | 1,819,423 | 1,212,547 | 1,001,764 | 295,812 | 313,079 | | Total Assets | 32,324,304 | 28,553,706 | 25,904,081 | 24,116,401 | 27,090,642 | | Total Equity | 12,975,591 | 11,079,120 | 9,935,771 | 7,639,690 | 7,418,061 |