东吴水泥(00695) - 2024 - 中期业绩

I. Corporate Information and Financial Summary Company Profile This is the unaudited interim results announcement of Dongwu Cement International Limited for the six months ended June 30, 2024, prepared by the Board of Directors - This is the unaudited consolidated results announcement of Dongwu Cement International Limited (Stock Code: 695) for the six months ended June 30, 2024[1][2] Financial Summary The Group's revenue decreased by 24.2% year-on-year to HK$106.6 million, gross profit margin turned negative to -7.3%, and loss attributable to owners of the Company widened to HK$35.9 million Key Financial Indicators Comparison for H1 2024 | Indicator | H1 2024 (HK$'000) | H1 2023 (HK$'000) | Change (HK$'000) | Change Rate (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 106,613 | 140,576 | (33,963) | -24.2% | | Gross Profit Margin | -7.3% | 1.8% | -9.1% | - | | Loss attributable to owners of the Company | (35,874) | (17,433) | (18,441) | 105.8% | II. Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income The Group's H1 2024 revenue decreased by 24.2% year-on-year, gross profit turned to a loss, operating loss widened, and loss for the period increased to HK$40.0 million Condensed Consolidated Interim Statement of Profit or Loss and Other Comprehensive Income (Summary) | Indicator | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Revenue | 106,613 | 140,576 | | (Gross loss)/gross profit | (7,813) | 2,517 | | Operating loss | (28,903) | (20,179) | | Loss before income tax | (27,841) | (15,826) | | Loss for the period | (39,981) | (18,418) | | Loss for the period attributable to owners of the Company | (35,874) | (17,433) | | Loss per share from continuing and discontinued operations (basic and diluted) | (0.065) | (0.032) | Condensed Consolidated Interim Financial Position Statement As of June 30, 2024, the Group's total assets slightly decreased, with an increase in non-current assets and a decrease in current assets, while total liabilities increased, leading to a reduction in net assets Condensed Consolidated Interim Financial Position Statement (Summary) | Indicator | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Total non-current assets | 388,227 | 370,899 | | Total current assets | 728,574 | 782,803 | | Total current liabilities | 336,156 | 337,310 | | Total non-current liabilities | 200,460 | 179,653 | | Net assets | 580,185 | 636,739 | | Total equity | 580,185 | 636,739 | - Financial assets at fair value through profit or loss under non-current assets increased from zero at the end of 2023 to HK$53,470 thousand[7] - Short-term bank deposits under current assets decreased from HK$450,385 thousand at the end of 2023 to HK$315,473 thousand[7] Condensed Consolidated Interim Statement of Changes in Equity As of June 30, 2024, total equity attributable to owners of the Company decreased from HK$534,855 thousand at the beginning of the year to HK$485,065 thousand, mainly due to the loss for the period and exchange differences Changes in Equity Attributable to Owners of the Company (Summary) | Indicator | January 1, 2024 (HK$'000) | June 30, 2024 (HK$'000) | | :--- | :--- | :--- | | Total equity attributable to owners of the Company | 534,855 | 485,065 | | Loss for the period | (35,874) | (35,874) | | Exchange differences | - | (13,916) | Condensed Consolidated Interim Statement of Cash Flows In H1 2024, the Group's net cash used in operating activities increased significantly, net cash from investing activities slightly decreased, and net cash from financing activities turned from negative to positive, resulting in an increase in cash and cash equivalents at the end of the period Condensed Consolidated Interim Statement of Cash Flows (Summary) | Indicator | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Net cash used in operating activities | (57,479) | (16,117) | | Net cash generated from investing activities | 23,635 | 25,616 | | Net cash generated from financing activities | 37,715 | (11,357) | | Net increase/(decrease) in cash and cash equivalents | 3,871 | (1,858) | | Cash and cash equivalents at end of period | 25,676 | 5,630 | - Net cash used in operating activities increased significantly from (HK$16,117) thousand in H1 2023 to (HK$57,479) thousand in H1 2024[10] - Net cash generated from financing activities turned from (HK$11,357) thousand in H1 2023 to HK$37,715 thousand in H1 2024, mainly due to increased proceeds from borrowings[10] III. Notes to the Financial Statements General Information Dongwu Cement International Limited, incorporated in the Cayman Islands, is primarily engaged in cement production and sales, magnetic materials production and sales, and trading businesses, with its principal place of business in Wujiang City, Jiangsu Province, China - The Company is an investment holding company, with principal businesses including cement production and sales, production and sales of magnetic materials and other application products, and trading business[12] - The Group's principal place of business is located in the Fenhu Economic Development Zone, Wujiang City, Jiangsu Province, China[12] Basis of Preparation and Significant Accounting Policies The condensed consolidated interim financial information is prepared in accordance with HKAS 34 and the Listing Rules, using the historical cost method, and has adopted amendments to HKFRSs effective January 1, 2024, with no material impact on financial performance - The financial information is prepared in accordance with Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants and the Listing Rules of the Stock Exchange of Hong Kong[13] - The financial information has been prepared under the historical cost convention, except for certain financial instruments which are measured at fair value[14] - The amendments to Hong Kong Financial Reporting Standards effective January 1, 2024, had no material impact on the Group's financial performance and position[15] Use of Judgements and Estimates Management is required to make significant judgements, estimates, and assumptions in preparing the financial information, and actual results may differ from these estimates, with key sources of estimation uncertainty remaining the same as in the 2023 annual consolidated financial statements - In preparing the financial information, management is required to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses[20] Financial Risk Management The Group is exposed to foreign exchange risk, cash flow interest rate risk, credit risk, and liquidity risk, managing its liquidity needs through working capital, bank borrowings, and shareholder support, with no significant changes in contractual cash outflows for financial liabilities - The Group's activities expose it to foreign exchange risk, cash flow interest rate risk, credit risk and liquidity risk[21] - The Group manages its liquidity needs through working capital, bank borrowings and financial support from its equity holders[22] Segment Reporting The Group's continuing operations include cement production and sales, magnetic materials production and sales, and trading, while the biotechnology R&D segment has been discontinued; in H1 2024, the cement segment revenue was HK$92.7 million, the magnetic materials segment revenue was HK$13.9 million, and the trading business revenue was HK$58 thousand - The Group's reportable operating segments include cement production and sales, production and sales of magnetic materials and other application products, trading business (continuing operations), and biotechnology research and development (discontinued operation)[23] Segment Revenue and Results for H1 2024 | Segment | Revenue (HK$'000) | Results (HK$'000) | | :--- | :--- | :--- | | Cement production and sales | 92,689 | (12,353) | | Magnetic materials and other application products | 13,866 | (11,784) | | Trading business | 58 | (287) | | Biotechnology research and development (discontinued operation) | – | (13,439) | Revenue In H1 2024, the Group's total revenue from continuing operations was HK$106,613 thousand, with cement production and sales contributing HK$92,689 thousand, magnetic materials contributing HK$13,866 thousand, and trading contributing HK$58 thousand, with revenue primarily recognized at a point in time Revenue Analysis from Continuing Operations for H1 2024 | Revenue Source | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Cement production and sales | 92,689 | 140,576 | | Production and sales of magnetic materials and other application products | 13,866 | – | | Trading business | 58 | – | | Total | 106,613 | 140,576 | - In H1 2024, revenue from contracts with customers was primarily recognized from the transfer of goods at a point in time, amounting to HK$102,895 thousand[27] - Contract liabilities, mainly related to advance payments from customers, increased to HK$25,504 thousand as of June 30, 2024, from HK$17,206 thousand as of December 31, 2023[29] Other Income and Other Net Gains In H1 2024, the Group's other income and other net gains were HK$2,668 thousand, a significant increase from the same period last year, mainly due to a substantial rise in government grants Other Income and Other Net Gains Comparison | Item | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Government grants | 1,950 | 61 | | Net exchange loss | (69) | – | | Others | 737 | 325 | | Gain on disposal of property, plant and equipment | 50 | – | | Total | 2,668 | 386 | - The significant increase in government grants was mainly for encouraging biotechnology development, energy conservation, emission reduction, and R&D of magnetic application products[30] Income Tax Credit In H1 2024, the Group received an income tax credit of HK$1,299 thousand, primarily due to an increase in deferred tax credit; Chinese subsidiaries are subject to a 25% corporate income tax rate, with high-tech enterprises enjoying a preferential rate of 15% Income Tax Credit Comparison | Item | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Current tax | 38 | – | | Deferred tax | (1,337) | (224) | | Income tax credit | (1,299) | (224) | - The corporate income tax rate for Chinese subsidiaries is generally 25%, while high-tech enterprises enjoy a preferential rate of 15%[32] Loss Before Income Tax The Group's loss before income tax for H1 2024 was HK$27,841 thousand, mainly affected by the cost of inventories sold, depreciation and amortization, employee expenses, and loss from discontinued operations; the biotechnology R&D business (Hengkang Group) has been classified as a disposal group held for sale, and a provision for goodwill impairment has been recognized Loss Before Income Tax from Continuing Operations The loss before income tax from continuing operations was mainly composed of the cost of inventories sold, depreciation of property, plant and equipment, and employee expenses; in H1 2024, the cost of inventories sold was HK$107,426 thousand, and total employee expenses were HK$15,906 thousand Major Expense Components of Continuing Operations | Item | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Cost of inventories sold | 107,426 | 137,788 | | Depreciation of property, plant and equipment | 12,574 | 12,451 | | Employee expenses (Total) | 15,906 | 12,617 | Discontinued Operation / Disposal Group Classified as Held for Sale The Group has decided to dispose of its biotechnology R&D business (Hengkang Group) and has classified it as a disposal group held for sale; in H1 2024, this discontinued operation generated a loss of HK$13,439 thousand, which included a goodwill impairment provision of HK$12,411 thousand - On May 22, 2024, the Group decided to dispose of the Hengkang Group (biotechnology R&D business) and classified it as a disposal group held for sale[34] Loss for the Period from Discontinued Operation | Item | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Administrative expenses | (1,056) | (2,989) | | Provision for impairment of goodwill | (12,411) | – | | Loss for the period from discontinued operation | (13,439) | (2,816) | - As of June 30, 2024, the total assets of Hengkang Group classified as held for sale were HK$5,424 thousand, and total liabilities were HK$1,754 thousand[37] Property, Plant and Equipment As of June 30, 2024, the carrying amount of the Group's property, plant and equipment was HK$234,110 thousand, with additions of HK$32,713 thousand and depreciation of HK$13,065 thousand during the period; certain land use rights and property, plant and equipment were pledged to secure bank borrowings Changes in Carrying Amount of Property, Plant and Equipment | Item | H1 2024 (HK$'000) | | :--- | :--- | | Carrying amount at January 1, 2024 | 220,625 | | Additions | 32,713 | | Depreciation | (13,065) | | Carrying amount at June 30, 2024 | 234,110 | - As of June 30, 2024, certain land use rights and property, plant and equipment were pledged to secure the Group's bank borrowings of HK$156,346 thousand[39] Goodwill As of June 30, 2024, the carrying amount of the Group's goodwill was HK$47,563 thousand, with an impairment loss of HK$12,411 thousand recognized during the period due to the classification of the Hengkang cash-generating unit as held for sale Changes in Carrying Amount of Goodwill | Item | H1 2024 (HK$'000) | | :--- | :--- | | Carrying amount at January 1, 2024 | 61,589 | | Impairment loss | (12,411) | | Classified as held for sale | (103) | | Exchange differences | (1,512) | | Carrying amount at June 30, 2024 | 47,563 | - The goodwill attributable to the Hengkang cash-generating unit has been classified as an asset held for sale, resulting in a goodwill impairment loss[42] Intangible Assets As of June 30, 2024, the carrying amount of the Group's intangible assets was HK$14,420 thousand, with amortization of HK$1,842 thousand during the period and a reduction of HK$5,219 thousand due to classification as held for sale Changes in Carrying Amount of Intangible Assets | Item | H1 2024 (HK$'000) | | :--- | :--- | | Carrying amount at January 1, 2024 | 22,046 | | Amortisation | (1,842) | | Classified as held for sale | (5,219) | | Exchange differences | (565) | | Carrying amount at June 30, 2024 | 14,420 | - Intangible assets mainly refer to technical knowledge, which is amortized on a straight-line basis over an estimated useful life of 10 years[45] Investment in Associates As of June 30, 2024, the carrying amount of the Group's investment in associates was HK$33,003 thousand, primarily including investments in Dongtong Environmental Technology (43.2% interest) and Zhuhai Huiyin Huiheng Equity Investment Fund Management Co, Ltd (30% interest); Dongtong Environmental Technology recorded a loss of HK$2,208 thousand in H1 2024 Carrying Amount of Investment in Associates | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Cost of investment | 30,964 | 30,964 | | Share of post-acquisition results of associates, net of dividends received | 2,039 | 3,834 | | At end of period/year | 33,003 | 34,798 | - The Group holds a 43.2% interest in Dongtong Environmental Technology, which is principally engaged in environmental technology R&D and services[46] Financial Summary of Dongtong Environmental Technology (Group's Share) | Indicator | H1 2024 (HK$'000) | | :--- | :--- | | Revenue | 1,325 | | (Loss)/profit for the period | (2,208) | | Total comprehensive income for the period | (4,119) | Financial Assets at Fair Value Through Profit or Loss As of June 30, 2024, the Group held unlisted fund investments of HK$53,470 thousand, which are classified as non-current assets and are expected to be realized more than twelve months after the reporting period Financial Assets at Fair Value Through Profit or Loss | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Unlisted fund investments | 53,470 | – | - During the period, the Group invested in a trust under a trust agreement with Guomin Trust, a non-listed fund in China, which is classified as a non-current asset[50] Inventories As of June 30, 2024, the Group's total inventories amounted to HK$214,901 thousand, a slight increase from the end of 2023, primarily consisting of raw materials Composition of Inventories | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Raw materials | 178,460 | 179,623 | | Work in progress | 19,263 | 15,149 | | Finished goods | 17,178 | 16,808 | | Total | 214,901 | 211,580 | Trade and Other Receivables As of June 30, 2024, the Group's total trade and other receivables amounted to HK$135,577 thousand, with the current portion being HK$135,088 thousand, a significant increase from the end of 2023 mainly due to a substantial rise in other receivables Composition of Trade and Other Receivables | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Net trade receivables and bills receivable | 27,943 | 30,851 | | Prepayments and deposits | 46,272 | 48,140 | | Other receivables | 61,506 | 8,872 | | Total trade and other receivables | 135,577 | 87,686 | - Approximately HK$53,470 thousand of other receivables were advanced to raw material suppliers, which are unsecured, interest-free, and repayable within three months[57] - The provision for impairment of trade receivables decreased from HK$330 thousand at the end of 2023 to HK$196 thousand as of June 30, 2024[58] Trade and Other Payables As of June 30, 2024, the Group's total trade and other payables amounted to HK$154,096 thousand, a decrease from the end of 2023, primarily consisting of trade payables and bills payable Composition of Trade and Other Payables | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Trade payables | 31,819 | 43,611 | | Bills payable | 64,057 | 70,715 | | Accrued payroll and bonus | 2,554 | 5,215 | | Amounts due to related parties | 5,989 | 8,222 | | Total | 154,096 | 178,210 | - The credit period granted by the Group's major suppliers is 30 to 90 days, and most trade and other payables are denominated in Renminbi[59] Borrowings As of June 30, 2024, the Group's total borrowings were HK$299,652 thousand, an increase from the end of 2023, with secured bank borrowings of HK$156,346 thousand pledged by subsidiary equity, land use rights, and property, plant and equipment Composition of Borrowings | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Bank borrowings (unsecured) | 116,565 | 114,025 | | Bank borrowings (secured) | 156,346 | 137,916 | | Other loans (unsecured) | 26,741 | 10,700 | | Total | 299,652 | 262,641 | - Secured bank borrowings are pledged by the equity of the Company's subsidiaries, land use rights, and property, plant and equipment[63] - Other loans include loans from third parties bearing fixed annual interest rates of 4% to 9%[64] Deferred Income As of June 30, 2024, the Group's deferred income was HK$21,305 thousand, mainly consisting of government grants received from local government authorities in China to support the R&D activities of its subsidiaries Changes in Deferred Income | Item | H1 2024 (HK$'000) | | :--- | :--- | | Carrying amount at January 1, 2024 | 23,278 | | Refund to government | (254) | | Credited to profit or loss | (1,115) | | Exchange differences | (604) | | Carrying amount at June 30, 2024 | 21,305 | - Deferred income represents government grants received from local government authorities in China to support the R&D activities of subsidiaries[64] Deferred Tax As of June 30, 2024, the Group's net deferred tax liabilities amounted to HK$28,102 thousand; unused tax losses were approximately HK$41,807 thousand, of which HK$20,689 thousand has been recognized as a deferred tax asset Net Deferred Tax | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Deferred tax assets | 5,172 | 5,313 | | Deferred tax liabilities | (33,274) | (35,540) | | Net | (28,102) | (30,227) | - The Group had unused tax losses of approximately HK$41,807 thousand, of which approximately HK$20,689 thousand has been recognized in deferred tax assets[67] Share Capital As of June 30, 2024, the Company's issued and fully paid-up share capital was HK$5,520 thousand, divided into 552,000,000 ordinary shares with a par value of HK$0.01 each Share Capital Information | Item | June 30, 2024 | | :--- | :--- | | Number of ordinary shares ('000) | 552,000 | | Par value of ordinary shares (HK$'000) | 5,520 | Loss Per Share In H1 2024, the basic and diluted loss per share attributable to owners of the Company was HK$0.065, comprising a loss per share of HK$0.041 from continuing operations and HK$0.024 from discontinued operations Loss Per Share Comparison | Item | H1 2024 (HK$ per share) | H1 2023 (HK$ per share) | | :--- | :--- | :--- | | Continuing and discontinued operations | (0.065) | (0.032) | | Continuing operations | (0.041) | (0.028) | | Discontinued operations | (0.024) | (0.004) | - Diluted loss per share was the same as basic loss per share as there were no dilutive share options or other dilutive potential ordinary shares outstanding during the period[69] Dividend The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2024 - No dividend was paid or proposed by the Company for the six months ended June 30, 2024[72] Lease Liabilities As of June 30, 2024, the Group's total lease liabilities amounted to HK$1,031 thousand, with a current portion of HK$375 thousand and a non-current portion of HK$656 thousand, mainly related to leased land and buildings Composition of Lease Liabilities | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Current portion | 375 | 83 | | Non-current portion | 656 | – | | Total | 1,031 | 83 | - Lease liabilities increased significantly during the period due to additions of HK$1,153 thousand[72] Related Party Transactions In H1 2024, the remuneration of the Group's key management personnel was HK$2,419 thousand; other payables included an amount of HK$5,989 thousand due to a company controlled by Mr. Jiang; solid waste disposal income from an associate was HK$28 thousand Key Management Personnel Remuneration | Item | H1 2024 (HK$'000) | H1 2023 (HK$'000) | | :--- | :--- | :--- | | Basic salaries and benefits in kind | 2,419 | 2,331 | - Other payables include an amount of HK$5,989 thousand due to a company controlled by Mr. Jiang, which is unsecured, interest-free, and repayable on demand[75] - Solid waste disposal income from an associate amounted to HK$28 thousand[76] Capital Commitments As of June 30, 2024, the Group's capital commitments were HK$151 thousand, mainly for the acquisition of property, plant and equipment, a significant decrease from HK$1,562 thousand at the end of 2023 Capital Commitments | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Acquisition of property, plant and equipment | 151 | 1,562 | Financial Instruments As of June 30, 2024, the Group's total financial assets were HK$520,545 thousand and total financial liabilities were HK$455,816 thousand; financial assets at fair value through profit or loss (unlisted fund investment) were HK$53,470 thousand, classified as Level 3 fair value measurement Carrying Amounts of Financial Assets and Liabilities | Item | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Total financial assets | 520,545 | 549,371 | | Total financial liabilities | 455,816 | 440,357 | - Financial assets at fair value through profit or loss (unlisted fund investment) amounted to HK$53,470 thousand, with its fair value measurement classified as Level 3, using unobservable inputs[81] - The carrying amounts of cash and bank balances, trade and other receivables, short-term bank deposits, pledged bank deposits, trade and other payables, and borrowings approximate their fair values due to their short-term nature[79] IV. Management Discussion and Analysis Industry Overview In H1 2024, the cement industry faced declining demand, low price volatility, and continued losses; investment in the biopharmaceutical segment was suspended; the rare earth segment benefited from the new energy transition with long-term demand growth but faced short-term price fluctuations due to supply-demand dynamics Cement Segment In H1 2024, the cement industry faced challenges of continuously declining demand, low price volatility, and persistent losses, mainly due to adjustments in the real estate sector and a slowdown in infrastructure investment; national cement production decreased by 10% year-on-year - In H1 2024, the cement industry was characterized by "continuously declining demand, low price volatility, and persistent industry-wide losses"[82] - The national cumulative cement production was 850 million tons, a year-on-year decrease of 10%, marking the lowest level since 2011[82] - The average price of PO42.5 bulk cement in the Group's main sales regions (Jiangsu, Zhejiang, and Shanghai) decreased by 4.3% to 6.9% year-on-year[83] Biopharmaceutical Segment The Group believes that the R&D difficulty of CAR-T drugs is much higher than expected, and its development focus has shifted to rare earth and other rare metals, thus investment in the biopharmaceutical segment has been suspended - The Group believes the R&D difficulty of CAR-T drugs is much higher than expected, and its development focus has shifted to the rare earth and other rare metals segment, so investment in biopharmaceuticals has been suspended[83] Rare Earth Segment Rare earths are widely used in new energy and energy-saving fields, with China being the world's largest producer; in H1 2024, increased supply and weak demand growth led to a downward trend in major rare earth product prices; the Group is actively developing its rare earth permanent magnet material business through the acquisition of Ganzhou Chengzheng Rare Earth New Material Co, Ltd - Rare earths are widely used in fields such as new energy vehicles, energy-saving home appliances, and wind power, with long-term demand showing a growth trend[84][85] - In H1 2024, the prices of major rare earth products fluctuated downwards, with the average selling price of praseodymium-neodymium oxide falling by approximately 26.4% year-on-year[85] - The Group acquired a 62.5% equity interest in Ganzhou Chengzheng Rare Earth New Material Co, Ltd in July 2023, aiming to transition towards the new energy and energy-saving industries to enhance shareholder value[86] - Ganzhou Chengzheng has completed the equipment and technical transformation of its permanent magnet material workshop, achieving full product production capacity and holding 35 patents[86][89] International Trade Segment In H1 2024, the Group launched an international trade business, primarily engaged in the international trade of products such as electrolytic copper - In H1 2024, the Group launched an international trade business, currently engaged in the international trade of products such as electrolytic copper[91] Revenue Analysis In H1 2024, the Group's total revenue was HK$106,613 thousand, a year-on-year decrease of 24.2%; cement segment revenue fell by 34.1% due to intensified market competition, a real estate downturn, and environmental restrictions; the rare earth segment contributed HK$13,866 thousand in revenue, and the international trade segment contributed HK$58 thousand Cement Segment Revenue Analysis by Product Category | Product Category | H1 2024 Sales Volume ('000 tons) | H1 2024 Revenue (HK$'000) | H1 2023 Sales Volume ('000 tons) | H1 2023 Revenue (HK$'000) | | :--- | :--- | :--- | :--- | :--- | | PO 42.5 Cement | 293 | 66,003 | 326 | 105,706 | | PC 42.5 Cement | 91 | 21,897 | – | – | | PC 32.5 Cement | 19 | 4,761 | 118 | 34,703 | | Total Cement | 403 | 92,689 | 444 | 140,576 | - Revenue from cement product sales decreased by approximately 34.0% year-on-year, while sales volume decreased by approximately 9.2% year-on-year[92] - The rare earth segment recorded revenue of approximately HK$13,866 thousand, mainly from motor sales, magnetic material sales, anode material and oxide sales, electroplating processing, and calcination services[94] Gross Profit and Gross Profit Margin In H1 2024, the cement segment recorded a gross loss of HK$5,192 thousand with a gross margin of -5.6%, mainly due to declining market demand and falling prices; the rare earth segment recorded a gross loss of HK$2,679 thousand with a gross margin of -19.3%, due to high unit fixed costs as production and sales have not yet reached scale shortly after the acquisition; the international trade segment recorded a gross profit of HK$58 thousand with a 100% gross margin - The cement segment recorded a gross loss of approximately HK$5,192 thousand and a gross margin of approximately -5.6%, a decrease of 7.4 percentage points from the same period last year[95] - The rare earth segment recorded a gross loss of approximately HK$2,679 thousand and a gross margin of approximately -19.3%, mainly because the short time since the acquisition meant production and sales had not yet reached scale, resulting in high unit fixed costs[95] - The international trade segment recorded a gross profit of HK$58 thousand and a gross margin of approximately 100%[96] Other Income and Other Net Gains In H1 2024, the Group's other income and other net gains were HK$2,668 thousand, a significant year-on-year increase of 591%, mainly due to an increase in government grants - The Group's other income and other gains for the reporting period were approximately HK$2,668 thousand, an increase of about 591% from the same period last year, mainly due to an increase in government grants[97] Distribution Expenses In H1 2024, the Group's distribution expenses were HK$1,695 thousand, with the cement segment's expenses increasing by 14.7% to HK$1,312 thousand, mainly due to higher transportation costs; the rare earth segment's distribution expenses were HK$383 thousand - The Group's distribution expenses were approximately HK$1,695 thousand, with the cement segment's expenses at HK$1,312 thousand, an increase of 14.7% year-on-year, mainly due to higher transportation costs[98] - The rare earth segment's sales and distribution expenses were approximately HK$383 thousand, accounting for about 2.8% of the segment's revenue[98] Administrative Expenses In H1 2024, the Group's general and administrative expenses were HK$22,063 thousand, remaining stable compared to the same period last year, with the cement and rare earth segments accounting for HK$11,891 thousand and HK$7,020 thousand, respectively - The Group's general and administrative expenses were approximately HK$22,063 thousand, an increase of 0.6% year-on-year, remaining stable compared to the same period last year[99] Income Tax Expense In H1 2024, the Group had an income tax credit of HK$1,299 thousand, a significant increase from the same period last year, mainly due to the net loss before tax incurred during the period - The Group's income tax credit for the reporting period was approximately HK$1,299 thousand, a significant increase from the same period last year, mainly due to the net loss before tax incurred during the period[100] Net Profit Margin In H1 2024, the Group's net profit margin was -37.5%, a decrease of 24.4 percentage points from -13.1% in the same period last year, mainly due to reduced revenue and the provision for goodwill impairment on assets classified as held for sale - The Group's net profit margin for the reporting period was approximately -37.5%, a decrease of 24.4 percentage points from the same period last year, mainly due to reduced revenue and the provision for goodwill impairment on assets classified as held for sale[101] Liquidity and Capital Resources The Group plans to meet its working capital needs through cash flow from operating activities, bank loans, trade and other payables, and proceeds from its initial public offering; as of June 30, 2024, cash and cash equivalents were HK$25,659 thousand, and borrowings were HK$299,652 thousand - The Group plans to meet its working capital needs through cash flow from operating activities, bank loans, utilization of trade and other payables, and proceeds from its initial public offering[102] Key Liquidity Indicators | Indicator | June 30, 2024 (HK$'000) | December 31, 2023 (HK$'000) | | :--- | :--- | :--- | | Cash and cash equivalents | 25,659 | 21,895 | | Borrowings | 299,652 | 262,641 | Cash Flow As of June 30, 2024, the Group's cash and cash equivalents were HK$25,659 thousand, an increase of 17.2% from the end of 2023, mainly due to new borrowings - The Group's cash and cash equivalents were approximately HK$25,659 thousand, an increase of about 17.2% from December 31, 2023, mainly due to new borrowings[104] Borrowings As of June 30, 2024, the Group's bank borrowings increased by 8.3% to HK$272,911 thousand, primarily for financing the rare earth segment; borrowings of HK$156,346 thousand were secured by property, plant and equipment, land use rights, and subsidiary equity - The Group's bank borrowings increased by 8.3% to HK$272,911 thousand compared to December 31, 2023, mainly for financing the rare earth segment during the reporting period[104] - Borrowings of HK$156,346 thousand were secured by the Group's property, plant and equipment, land use rights, and the equity of the Company's subsidiaries[104] Gearing Ratio As of June 30, 2024, the Group's gearing ratio was 92.2%, calculated as debt divided by the difference between total assets and total liabilities - As of June 30, 2024, the Group's gearing ratio was 92.2%[105] Capital Expenditure and Capital Commitments In H1 2024, the Group's capital expenditure was approximately HK$32,713 thousand, a significant increase from the same period last year; capital commitments were HK$151 thousand, mainly for the acquisition of property, plant and equipment - The Group's capital expenditure was approximately HK$32,713 thousand, with HK$966 thousand and HK$5,736 thousand incurred by the cement and rare earth segments respectively, a significant increase from the same period last year[105] - The Group incurred capital commitments of approximately HK$151 thousand, mainly for the acquisition of property, plant and equipment[105] Pledge of Assets As of June 30, 2024, certain property, plant and equipment, land use rights, and subsidiary equity of the Group's rare earth segment were pledged to secure bank borrowings - Certain property, plant and equipment with a carrying value of approximately HK$22,843 thousand, land use rights of HK$2,296 thousand, and subsidiary equity of the Group's rare earth segment were pledged to secure bank borrowings[106] Contingent Liabilities As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group had no significant contingent liabilities[107] Foreign Exchange Risk The Group's operations are mainly in mainland China and denominated in Renminbi, with no significant impact from exchange rate fluctuations, and no hedging measures have been implemented; management will closely monitor foreign exchange risk - The Group's operations are mainly in mainland China, with operating expenses and capital expenditures primarily denominated in Renminbi, and it has not been significantly affected by exchange rate fluctuations[108] - The Group has no significant currency exchange risk and therefore has not implemented any hedging measures[109] Material Acquisitions and Disposals of Subsidiaries and Associates In H1 2024, the Group did not make any material acquisitions or disposals of its subsidiaries or associates - During the reporting period, the Group did not make any material acquisitions or disposals of its subsidiaries or associates[110] Interim Dividend and Closure of Register of Members The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2024 - The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2024[110] Employees and Remuneration Policy As of June 30, 2024, the Group had 316 employees, with total remuneration of approximately HK$15,906 thousand for the period; remuneration levels are determined based on duties, performance, contribution, merit, qualifications, and competence - As of June 30, 2024, the Group had 316 employees, with total remuneration for the period amounting to approximately HK$15,906 thousand[111] - Employee remuneration levels are determined based on duties, performance, contribution, merit, qualifications, and competence[111] Future Prospects The Company will continue to achieve cost reduction and efficiency improvement through enhanced internal management, technological upgrades, facility optimization, brand promotion, and employee training; future focus will be on core businesses, exploring more rare metal varieties (especially in the clean energy sector), and actively developing the rare earth segment to optimize asset structure and enhance profitability - The Company will enhance operational efficiency and effectively achieve cost reduction and efficiency improvement through improved internal management, process optimization, and technological upgrades[112] - It will continue to actively explore more rare metal varieties, especially investment opportunities related to the clean energy sector[112] - It will focus on developing the rare earth segment and exploring business opportunities in other rare metals, as rare earth permanent magnet materials have broad development prospects in new energy vehicles, new energy power generation, and industrial robots[112] V. Other Information Share Capital As of June 30, 2024, the Company's issued share capital was HK$5,520 thousand, divided into 552,000,000 shares with a par value of HK$0.01 each - As of June 30, 2024, the Company's issued share capital was HK$5,520 thousand, divided into 552,000,000 shares with a par value of HK$0.01 each[113] Purchase, Sale or Redemption of the Company's Listed Securities In H1 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[114] Material Litigation and Arbitration To the best of the Directors' knowledge, the Group was not involved in any material litigation, arbitration, or claim during the reporting period - To the best of the Directors' knowledge, the Group was not involved in any material litigation, arbitration, or claim during the reporting period[115] No Material Change There has been no material change in the Company's business since the publication of its latest annual report for the year ended December 31, 2023 - There has been no material change in the Company's business since the publication of its latest annual report for the year ended December 31, 2023[116] Compliance with the Corporate Governance Code The Company has adopted the Corporate Governance Code as set out in Appendix C1 to the Listing Rules and has complied with the code during the reporting period - The Company has adopted the Corporate Governance Code as set out in Appendix C1 to the Listing Rules and has complied with the code during the reporting period[116] Compliance with the Model Code The Company has adopted the Model Code as set out in Appendix C3 to the Listing Rules as the code of conduct for directors' securities transactions, and all directors have complied with this standard during the reporting period - The Company has adopted the Model Code as set out in Appendix C3 to the Listing Rules as the code of conduct for directors' securities transactions, and all directors have complied with this standard during the reporting period[117] Audit Committee The Company's Audit Committee has reviewed the Group's unaudited interim financial report for the six months ended June 30, 2024, and considers it to be in compliance with applicable accounting standards and requirements - The Company's Audit Committee has reviewed the Group's unaudited interim financial report for the six months ended June 30, 2024, and considers it to be in compliance with applicable accounting standards and requirements[118] Events After the Reporting Period As of the date of this announcement, no material events have occurred after the reporting period that would require additional disclosure or could affect the Company - As of the date of this announcement, no material events have occurred after the reporting period that would require additional disclosure or could affect the Company[119]