力量发展(01277) - 2020 - 中期财报

Company Information This report is the 2020 interim report for Power Mining Energy Co., Ltd. (Stock Code: 1277), with Mr. Zhang Li as Chairman and Mr. Ju Wenzhong as CEO - This report is the 2020 interim report for Power Mining Energy Co., Ltd. (Stock Code: 1277), with its principal place of business in Ordos, Inner Mongolia, China, and KPMG as its auditor[4] Chairman's Report The Group achieved stable development despite the COVID-19 pandemic, demonstrating strong crisis response capabilities and maintaining high-quality operations 2020 Half-Year Key Performance Indicators | Indicator | Six Months Ended June 30, 2020 | Year-on-Year Change | | :--- | :--- | :--- | | Revenue | RMB 1,297.0 million | +1.6% | | Profit Attributable to Shareholders | RMB 348.7 million | -8.1% | | Gross Margin | 39.4% | Slight decrease | - Despite the global economic disruption from the COVID-19 pandemic, the Group's overall operational impact was limited due to strong crisis response capabilities, achieving high-quality and stable development[6] - As one of the first coal mines to resume production in Inner Mongolia, Dafanpu Coal Mine effectively implemented epidemic prevention and successfully resumed operations[6] - The Group advanced safe, intelligent, and sustainable mine construction, diversified sales, enhanced efficiency through automated production, and consolidated sales in North and South China, increasing commercial coal sales volume by approximately 7.5% year-on-year[7] - The Group plans to continue promoting intelligent production, seizing market opportunities, and actively expanding quality projects and strategic mergers and acquisitions to enlarge production capacity[8] Management Discussion and Analysis This section reviews the market and business performance, outlines future strategies, and provides a detailed financial overview Market Review In the first half of 2020, China's economy faced challenges due to the pandemic, with GDP declining by 1.6%, leading to a supply-demand mismatch in the coal market and a 31.2% drop in industry profits - China's GDP decreased by 1.6% year-on-year in the first half of 2020 due to the pandemic, with a 6.8% decline in Q1 and a 3.2% increase in Q2[10] - Coal supply saw a 0.6% year-on-year increase in raw coal output and a 12.7% increase in imports, while demand was weak due to a 1.4% decrease in national power generation[10] - Coal prices showed a trend of initial decline followed by an increase, with the average transaction price of 5,000 kcal coal in Qinhuangdao falling by 8.7% year-on-year, and the total profit of the coal mining and washing industry decreasing by 31.2% to approximately RMB 98.5 billion[11] Business Review The Group's total revenue increased by 1.6% to RMB 1,297.0 million, maintaining a high gross margin of 39.4% despite a 7.5% decrease in average selling price, while consolidated net profit decreased by 8.1% 2020 Half-Year Operating Results | Indicator | Six Months Ended June 30, 2020 | Year-on-Year Change | | :--- | :--- | :--- | | Total Revenue | RMB 1,297.0 million | +1.6% | | Average Selling Price | - | Approximately -7.5% | | Gross Margin | 39.4% | Slight decrease | | Consolidated Net Profit | RMB 348.7 million | Approximately -8.1% | | EBITDA | RMB 550.7 million | +1.9% | - Dafanpu Coal Mine, one of the first mines to resume operations in Inner Mongolia, quickly normalized railway transportation and port trade, effectively mitigating the pandemic's impact[13] - Dafanpu Coal Mine has consistently received the "Class A Mine" rating for six consecutive years and holds "National First-Class Safety Standardization Mine" and "National Special-Class Safe and Efficient Mine" honors, demonstrating the Group's commitment to sustainable development[13] Outlook The Group anticipates a stable domestic coal supply and improving demand in the second half of 2020, with full-year coal prices likely remaining below 2019 levels, as it pursues intelligent production and strategic M&A to enhance competitiveness - Domestic coal supply is expected to remain stable in the second half of 2020, with demand gradually improving and coal prices stabilizing and rebounding, though full-year prices may still be lower than in 2019[14] - The Group will maintain an efficient operating strategy, actively promote intelligent production, and seize industry opportunities through strategic mergers and acquisitions to expand capacity and create greater shareholder value[17] Financial Review The period saw stable financial performance with revenue slightly increasing by 1.6% due to higher sales volume, though average selling price declines led to a slight gross margin contraction to 39.4%, resulting in a consolidated net profit of RMB 348.7 million Revenue Revenue increased by 1.6% year-on-year to RMB 1,297.0 million, primarily driven by a 7.5% increase in coal sales volume, partially offset by a 7.5% decrease in average selling price Revenue and Related Indicator Changes | Indicator | Year-on-Year Change | | :--- | :--- | | Revenue | +1.6% | | Coal Sales Volume | +7.5% | | Average Selling Price | -7.5% | Cost of Sales Cost of sales increased from RMB 772.8 million in the prior period to RMB 786.4 million, mainly due to increased sales volume - Cost of sales primarily includes transportation costs, salaries, materials, fuel and power, depreciation and amortization, and mining surcharges[18] Gross Profit and Gross Margin Gross profit was RMB 510.7 million, with a gross margin of 39.4%, largely consistent with 39.5% in the prior period, with the slight decrease attributed to lower average selling prices of coal products Gross Profit and Gross Margin | Indicator | 2020 Half-Year (RMB million) | 2019 Half-Year (RMB million) | | :--- | :--- | :--- | | Gross Profit | 510.7 | 503.9 | | Gross Margin | 39.4% | 39.5% | Expenses Selling expenses decreased by 10.0% year-on-year to RMB 4.4 million due to enhanced control, while administrative expenses increased to RMB 74.7 million due to higher wage costs - Selling expenses decreased by 10.0% year-on-year, primarily due to enhanced expense control[20] - Administrative expenses increased from RMB 66.1 million in the prior period to RMB 74.7 million, mainly due to increased wage costs[21] Finance Costs Finance costs decreased from RMB 12.7 million in the prior period to RMB 8.2 million, primarily due to a reduction in the Group's total bank loans - Finance costs decreased by 35.4% year-on-year, mainly due to a reduction in total bank loans[22] Income Tax Total tax expense for the period significantly increased to RMB 136.7 million from RMB 87.1 million in the prior period, reflecting a 15% preferential corporate income tax rate for some operations and a 10% withholding tax on dividends - The Group's subsidiaries located in western regions enjoy a 15% preferential corporate income tax rate[24] - For this accounting period, management has provisioned and paid a differential tax of RMB 21 million due to the 10% dividend withholding tax[24] Interim Dividend The Board recommended an interim dividend of HKD 0.015 per share, totaling approximately HKD 126.45 million, consistent with the prior period - A proposed interim dividend of HKD 0.015 per share totals approximately HKD 126 million[27] Liquidity and Financial Resources As of June 30, 2020, the Group held RMB 714.7 million in bank and cash, with its gearing ratio improving to -25.9% (net cash position) from 13.2% in the prior year, and total bank loans of RMB 228.4 million were all secured and due within one year Financial Position Summary | Indicator | June 30, 2020 (RMB million) | December 31, 2019 (RMB million) | | :--- | :--- | :--- | | Bank and Cash on Hand | 714.7 | 497.2 | | Bank Loans (Current) | 228.4 | 357.7 | | Gearing Ratio | -25.9% | 13.2% (June 30, 2019) | - As of June 30, 2020, bank loans totaling RMB 228 million were guaranteed by Mr. Zhang Li and Mr. Zhang Liang[32] Capital Expenditure and Commitments During the period, the Group incurred approximately RMB 7.3 million in capital expenditure, primarily for Dafanpu Coal Mine's construction, with capital commitments of RMB 25.6 million for equipment and an estimated RMB 27.3 million for future relocation compensation - Capital expenditure for the six months ended June 30, 2020, was approximately RMB 7.3 million[35] - As of June 30, 2020, capital commitments totaled RMB 25.6 million, with an additional approximately RMB 27.3 million for future relocation compensation still under negotiation[35] Human Resources and Remuneration Policy As of June 30, 2020, the Group employed approximately 780 full-time staff, with total employee costs of RMB 107.0 million for the first half, and remuneration policies are performance-based, including bonuses, insurance, and training Human Resources Data | Indicator | Data | | :--- | :--- | | Total Employees (June 30, 2020) | Approximately 780 | | Total Staff Costs (2020 Half-Year) | RMB 107.0 million | Exploration, Development and Mining Activities The Group did not engage in exploration activities during the period, with approximately RMB 7.3 million in capital expenditure allocated to development and mining at Dafanpu Coal Mine, where storage and transportation costs constituted the largest portion of sales costs at RMB 527 million 2020 Half-Year Mining Activity Expense Details | Cost Item | Amount (RMB thousands) | | :--- | :--- | | Mining Costs | 151,152 | | Washing Costs | 45,376 | | Government Surcharges | 62,855 | | Storage and Transportation Costs | 526,973 | | Total Cost of Sales | 786,356 | Interim Financial Statements Review Report KPMG, the auditor, reviewed the interim financial report in accordance with Hong Kong Standard on Review Engagements - KPMG, the auditor, has reviewed this interim financial report in accordance with Hong Kong Standard on Review Engagements[47] - Conclusion: Based on the review, the auditor has not noted any matters that cause them to believe the interim financial report is not prepared in all material respects in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting"[47] Consolidated Financial Statements This section presents the Group's consolidated financial performance and position, including statements of profit or loss, financial position, changes in equity, and cash flows Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2020, the Group reported revenue of RMB 1,297.0 million, gross profit of RMB 510.7 million, and a profit for the period of RMB 348.7 million, representing an 8.1% year-on-year decrease, with basic and diluted earnings per share of RMB 4.14 cents 2020 Half-Year Statement of Profit or Loss Summary | Item | 2020 Half-Year (RMB thousands) | 2019 Half-Year (RMB thousands) | | :--- | :--- | :--- | | Revenue | 1,297,041 | 1,276,605 | | Gross Profit | 510,685 | 503,850 | | Operating Profit | 482,025 | 466,935 | | Profit Before Tax | 485,407 | 466,465 | | Profit for the Period | 348,664 | 379,319 | | Basic Earnings Per Share | 4.14 cents | 4.50 cents | Consolidated Statement of Financial Position As of June 30, 2020, the Group's total assets were RMB 3,070.4 million, total liabilities RMB 704.8 million, and total equity RMB 2,365.6 million, indicating a healthy liquidity position with net current assets of RMB 367.1 million Statement of Financial Position Summary | Item | June 30, 2020 (RMB thousands) | December 31, 2019 (RMB thousands) | | :--- | :--- | :--- | | Total Non-current Assets | 2,050,799 | 2,125,816 | | Total Current Assets | 1,019,595 | 979,954 | | Total Assets | 3,070,394 | 3,105,770 | | Total Current Liabilities | 652,502 | 796,047 | | Total Non-current Liabilities | 52,303 | 50,860 | | Total Liabilities | 704,805 | 846,907 | | Total Equity | 2,365,589 | 2,258,863 | Consolidated Statement of Changes in Equity As of June 30, 2020, total equity increased from RMB 2,258.9 million at the beginning of the period to RMB 2,365.6 million, primarily due to the profit for the period of RMB 348.7 million, partially offset by dividends paid of RMB 226.5 million - Total equity at the beginning of the period was RMB 2,258.9 million, with total comprehensive income for the period of RMB 333.3 million, and after paying dividends of RMB 226.5 million, total equity at the end of the period was RMB 2,365.6 million[52] Consolidated Interim Condensed Cash Flow Statement In the first half of 2020, the Group generated strong net cash from operating activities of RMB 429.2 million, with net cash outflows from investing activities of RMB 50.9 million and financing activities of RMB 159.5 million, resulting in a net increase in cash and cash equivalents of RMB 218.8 million 2020 Half-Year Cash Flow Summary | Item | Amount (RMB thousands) | | :--- | :--- | | Net Cash from Operating Activities | 429,152 | | Net Cash Used in Investing Activities | (50,942) | | Net Cash Used in Financing Activities | (159,450) | | Net Increase in Cash | 218,760 | | Cash and Cash Equivalents at Beginning of Period | 497,192 | | Cash and Cash Equivalents at End of Period | 714,653 | Notes to the Unaudited Interim Financial Report This section provides detailed notes to the interim financial report, covering segment reporting, dividends, related party transactions, and the impact of the COVID-19 pandemic Note 3: Segment Reporting The Group's entire business is considered a single operating segment, namely the mining and sale of coal products, with all operations located in China, thus no geographical segment information is presented - Management considers the Group to have only one operating segment, which is the mining and sale of coal products, with all operations conducted within China[58] Note 17: Dividends The Board recommended an interim dividend of HKD 0.015 per share, totaling approximately HKD 126.45 million, consistent with the prior period - A proposed interim dividend of HKD 0.015 per share totals approximately HKD 126 million[77] Note 19: Related Party Transactions and Balances During the period, the Group engaged in various related party transactions, including procurement of handling services from Xiaojia Joint Venture, a loan to Guizhou Power Energy Co., Ltd. controlled by Chairman Mr. Zhang Li, and personal guarantees for the Group's bank loans by Mr. Zhang Li and Director Mr. Zhang Liang - The Group paid RMB 50.75 million for handling services to related party Xiaojia Joint Venture[82] - As of June 30, 2020, the loan principal receivable from related party Guizhou Power was RMB 107 million[84] - Chairman Mr. Zhang Li and Director Mr. Zhang Liang provided a joint guarantee for the Group's RMB 228 million bank loans[88] Note 20: Impact of COVID-19 Pandemic Since early 2020, the COVID-19 pandemic has introduced uncertainties to the Group's operations, but proactive measures, including resuming production in early February, have ensured no significant impact on the Group's production - The Group implemented contingency measures to address the pandemic, and as production resumed in early February 2020, the pandemic had no significant impact on the Group's production[89] Other Information This section provides additional information, including disclosures of interests for directors and major shareholders Disclosure of Interests This section discloses the shareholdings of directors and major shareholders, including Mr. Zhang Liang's 62.96% stake through King Lok Holdings Limited and Chairman Mr. Zhang Li's 11.19% beneficial interest, noting no share options were granted during the period Major Shareholder Holdings (June 30, 2020) | Shareholder Name | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Mr. Zhang Liang | Interest in controlled corporation | 5,307,450,000 | 62.96% | | Mr. Zhang Li | Beneficial interest | 943,314,000 | 11.19% | | King Lok Holdings Limited | Beneficial interest | 5,307,450,000 | 62.96% |