中国石墨(02237) - 2024 - 中期财报

Corporate Information Corporate Information and Governance Structure This section outlines China Graphite Group Co., Ltd.'s corporate governance structure and key contact information, including board members, committees, and registration details - The company's Board of Directors includes Mr. Zhao Liang (Chairman and CEO) and Mr. Li Weihai as executive directors, along with four independent non-executive directors[3] - The company has established an Audit Committee, Nomination Committee, Remuneration Committee, and Compliance Committee to ensure sound corporate governance[3] - The company's headquarters and principal place of business in China are located in Yan Jun Farm, Luobei County, Hegang City, Heilongjiang Province, China, with stock code 2237[3] Definitions Report Terminology Definitions This section defines key terms and abbreviations used in the interim report, ensuring consistent understanding of content, covering financial periods, company entities, mine names, regulatory bodies, and product types - "First Half of 2024" refers to the six months ended June 30, 2024[6] - "Beishan Mine" refers to the graphite mine located approximately 28 kilometers northwest of Luobei County, Heilongjiang Province, for which the company obtained mining rights in 2019[6] - "The Group" or "we" refers to China Graphite Group Co., Ltd. and its subsidiaries[6] Chairman's Statement on 2024 Interim Results Interim Results Performance The Group's total revenue for the first half of 2024 decreased by 22.8% year-on-year, gross profit margin significantly dropped to 8.0%, and a net loss of RMB 16.2 million was recorded, impacted by intensified competition in the new energy vehicle industry, a sluggish downstream market, and graphite export controls 2024 First Half Interim Results Performance | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 36.4 | 47.2 | -22.8% | | Spherical Graphite and By-products Revenue | 10.2 | 34.9 | -70.8% | | Flake Graphite Concentrate Revenue | 25.1 | 11.9 | +110.9% | | Gross Profit | 2.9 | 16.9 | -82.8% | | Gross Profit Margin | 8.0% | 35.8% | -27.8 percentage points | | Net Loss | 16.2 | 3.3 | +390.9% | - Intense competition in the new energy vehicle industry, a sluggish downstream market, and graphite export control measures were the primary reasons for the decline in revenue and profit[14] Production and Operations Under Pressure In the first half of 2024, the Group faced challenges in product sales volume and pricing due to industry shutdown periods, weak downstream demand, and increased market competition, resulting in a significant decrease in spherical graphite sales volume and gross profit margin, though flake graphite concentrate sales volume increased, with the Group responding by focusing on traditional industry sales and expanding refractory material customers - The first quarter of 2024 was a traditional shutdown period for graphite enterprises in Luobei County, exacerbating weak downstream demand and fierce competition in the industry[16] 2024 First Half Major Graphite Product Sales Volume | Product Type | 2024 First Half Sales Volume (tonnes) | 2023 First Half Sales Volume (tonnes) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Spherical Graphite | 923 | 1,899 | -51.4% | | Micro-graphite Powder | 986 | 3,849 | -74.4% | | Flake Graphite Concentrate | 10,109 | 3,689 | +174.0% | 2024 First Half Major Graphite Product Gross Profit Margin | Product Type | 2024 First Half Gross Profit Margin (%) | 2023 First Half Gross Profit Margin (%) | Change (percentage points) | | :--- | :--- | :--- | :--- | | Spherical Graphite Sales Segment | -21.2% (Gross Loss Margin) | 33.0% | -54.2 | | Flake Graphite Concentrate Sales Segment | 20.1% | 44.6% | -24.5 | - The Group increased sales volume of flake graphite concentrate by expanding sales to refractory material customers[16] Prudent Development for Future Growth The Group is actively advancing the development of the Beishan Mine, applying for mining rights below 150 meters above sea level and planning to increase graphite mining volume to over 500,000 tonnes annually, while also constructing new beneficiation and processing plants, and has acquired industrial land in Weihai, Shandong, for future downstream development, maintaining an optimistic outlook on the industry's medium to long-term prospects - The Beishan Mine boasts rich and high-grade graphite resources, and the Group is applying for mining rights for resources below 150 meters above sea level[17] - Plans are underway to increase the graphite mining volume at the Beishan Mine to over 500,000 tonnes annually to ensure graphite supply[17] - Approval has been obtained from the National Forestry and Grassland Administration to use forest land near the Beishan Mine for constructing new beneficiation and processing plants[17] - Successfully acquired industrial land in Weihai City, Shandong Province, preparing for future development of related downstream facilities[18] - The Group remains optimistic about the medium to long-term development of the graphite and downstream anode industry, adjusting its development pace in the second half of the year based on market changes[18] Emphasis on Scientific Research With over two decades of experience in the natural graphite industry, the Group adheres to the philosophy of "deep accumulation for breakthrough innovation," continuously deepening innovation leadership, collaborating with renowned universities and research institutes, holding over 90 patents, and achieving breakthroughs in advanced processes such as flotation column technology, micro-graphite powder processing into graphene, and airless purification - The Group has over twenty years of deep experience in the natural graphite industry, committed to innovation leadership[19] - As of June 30, 2024, the Group holds over 90 patents[19] - Innovatively developed advanced processes including flotation column technology for short-flow graphite beneficiation, micro-graphite powder processing into graphene, and airless purification[19] Corporate Governance The Group upholds principles of openness, transparency, and efficiency in corporate governance, strictly complying with listing rules, and ensuring high-level corporate governance through a diversified board structure, compliant operations, and a robust risk management system - The Group adheres to principles of openness, transparency, and efficiency in corporate governance, strictly complying with listing rules[20] - The diversified board structure, with independent non-executive directors leveraging their experience and expertise, enhances the company's governance structure and decision-making mechanisms[21] - Strengthened compliance management capabilities, focusing on key areas such as mine exploitation, product R&D, production safety, and product sales, continuously improving compliance review and guidance[21] - Improved risk management system, enhancing risk foresight, and strengthening supervision from mine to factory in key areas to ensure healthy enterprise operations[21] Full Year and Future Outlook Despite intense competition in the graphite industry during the first half, China's new energy vehicle sector retains growth momentum supported by macro policies, and the Group, leveraging its own mines and the low energy consumption of natural graphite, is actively adapting to the competitive landscape, seizing market opportunities, and enhancing operational performance to create shareholder value - In the first half, tariffs imposed by Europe and the US suppressed the development of China's new energy vehicles, prompting Chinese automakers to explore markets in Africa, Southeast Asia, and South America[23] - Domestic policies support the development of new energy vehicles, including trade-in subsidies and gradual removal of purchase restrictions[23] - The Group's own mines ensure natural graphite supply, and natural graphite production has low energy consumption, aligning with national "dual carbon" policy requirements[23] - The Group is striving to adapt to the industry's competitive landscape, seize market opportunities, and enhance operational performance to create value for shareholders[23] Acknowledgements Chairman Mr. Zhao Liang, on behalf of the Board, extends sincere gratitude to all shareholders, customers, communities, and the Group's employees - Chairman Mr. Zhao Liang, on behalf of the Board, expresses gratitude to all supporters and employees[24] Management Discussion and Analysis Exploration, Development and Mining Production Activities In the first half of 2024, the Group primarily focused on mining activities at the Beishan Mine, removing waste rock and extracting unprocessed graphite ore, with total extracted material increasing year-on-year, though unprocessed graphite ore volume slightly decreased, and some mining activities were subcontracted to third parties - In the first half of 2024, the Group did not conduct exploration work at the Beishan Mine, focusing mainly on mining activities and waste rock removal[24] Beishan Mine Extracted Material Volume | Material Type | 2024 First Half (tonnes) | 2023 First Half (tonnes) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Total Extracted Material | 1,385,000 | 982,000 | +41.0% | | Unprocessed Marble and Waste Rock | 1,256,000 | 823,000 | +52.6% | | Unprocessed Graphite Ore | 129,000 | 159,000 | -18.8% | - Some mining production activities (such as blasting, graphite processing, transportation, equipment leasing) were subcontracted to independent third parties, with total costs of approximately RMB 8.4 million[25] Mining Costs Mining costs increased to approximately RMB 10.5 million in the first half of 2024, primarily due to an increase in total extracted material, with blasting services, salaries and benefits, and machinery expenses being the main components Mining Cost Details | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Depreciation | 966 | 1,679 | | Blasting Services | 3,620 | 2,294 | | Fuel Costs | 861 | 758 | | Salaries and Benefits | 1,150 | 1,039 | | Machinery Expenses | 1,880 | 1,534 | | Amortization of Mining Rights | 356 | 458 | | Raw Materials | 977 | 961 | | Repairs and Maintenance | 61 | 42 | | Others | 579 | 403 | | Total | 10,450 | 9,171 | - Mining costs increased by approximately 14%, primarily due to the increase in the total volume of materials extracted in the first half of 2024[26] Financial Review This section provides a detailed review of the Group's financial performance in the first half of 2024, including revenue composition, cost of sales, gross profit, various expenses, and net loss, with total revenue and gross profit significantly declining due to market competition and export controls, leading to an expanded loss 2024 First Half Revenue Composition | Business Segment | 2024 First Half (RMB thousand) | Proportion (%) | 2023 First Half (RMB thousand) | Proportion (%) | | :--- | :--- | :--- | :--- | :--- | | Sales of Spherical Graphite and By-products | 10,233 | 28.1 | 34,867 | 73.9 | | Sales of Flake Graphite Concentrate | 25,107 | 68.9 | 11,939 | 25.3 | | Sales of Unprocessed Marble | 1,097 | 3.0 | 405 | 0.8 | | Total | 36,437 | 100.0 | 47,211 | 100.0 | - Total revenue decreased by approximately 22.8% year-on-year, primarily due to slower market growth in the downstream anode industry, intense competition in the graphite market, and export control measures[31] - Cost of sales increased by approximately 10.6% to RMB 33.5 million, mainly affected by increased depreciation, maintenance expenses, and inventory impairment provisions[33] - Gross profit decreased by approximately 82.8% year-on-year to RMB 2.9 million, with gross profit margin falling from 35.8% to 8.0%, primarily due to lower spherical graphite prices and sales volume, as well as inventory provisions[34] - Other income and other gains increased to RMB 1.3 million, mainly from government subsidies for R&D activities[36] - Selling and distribution expenses increased by approximately 47.1% to RMB 2.5 million, mainly due to increased marketing expenses for product promotion[37] - General and administrative expenses increased by approximately 18.0% to RMB 13.1 million, primarily due to increased office and training expenses and reduced exchange gains[38] - Research and development expenses decreased to RMB 3.2 million due to fewer R&D activities during the period[39] - Net finance costs were RMB 2.6 million, compared to net finance income in the prior period, mainly due to increased interest expenses from higher borrowings[40] - Income tax expense was RMB 0.4 million, primarily due to the reversal of tax credits from 2023 that were denied after reassessment[41] - Loss after tax for the first half of 2024 expanded to RMB 16.2 million, compared to RMB 3.3 million in the prior period[42] Revenue Total revenue for the first half of 2024 was RMB 36.4 million, a 22.8% year-on-year decrease, with spherical graphite and by-products sales revenue significantly declining, while flake graphite concentrate sales revenue notably increased, and unprocessed marble sales revenue also rose 2024 First Half Revenue by Business Segment | Business Segment | 2024 First Half (RMB thousand) | Proportion (%) | 2023 First Half (RMB thousand) | Proportion (%) | | :--- | :--- | :--- | :--- | :--- | | Sales of Spherical Graphite and By-products | 10,233 | 28.1 | 34,867 | 73.9 | | Sales of Flake Graphite Concentrate | 25,107 | 68.9 | 11,939 | 25.3 | | Sales of Unprocessed Marble | 1,097 | 3.0 | 405 | 0.8 | | Total | 36,437 | 100.0 | 47,211 | 100.0 | Revenue from Sales of Spherical Graphite and By-products In the first half of 2024, revenue from spherical graphite and by-products sales significantly decreased by 70.8% to RMB 10.2 million, primarily due to substantial declines in both sales volume and average selling price for SG-10 and SG-9 spherical graphite models, as well as a significant reduction in micro-graphite powder sales Spherical Graphite and By-products Sales Data | Product Type | 2024 First Half Revenue (RMB thousand) | 2024 First Half Sales Volume (tonnes) | 2024 First Half Average Selling Price (RMB/tonne) | 2023 First Half Revenue (RMB thousand) | 2023 First Half Sales Volume (tonnes) | 2023 First Half Average Selling Price (RMB/tonne) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Spherical Graphite SG-10 | 4,867 | 423 | 11,506 | 10,163 | 638 | 15,929 | | Spherical Graphite SG-9 | 4,204 | 500 | 8,408 | 16,508 | 1,261 | 13,091 | | Subtotal (Spherical Graphite) | 9,071 | 923 | 9,828 | 26,671 | 1,899 | 14,045 | | Micro-graphite Powder | 1,162 | 986 | 1,178 | 8,196 | 3,849 | 2,129 | | Total | 10,233 | 1,909 | | 34,867 | 5,748 | | - Revenue from spherical graphite and by-products sales decreased from approximately RMB 34.9 million in the first half of 2023 to approximately RMB 10.2 million in the first half of 2024[30] Revenue from Sales of Flake Graphite Concentrate In the first half of 2024, revenue from flake graphite concentrate sales increased by 110.9% year-on-year to RMB 25.1 million, accounting for 68.9% of total revenue, with sales volume significantly increasing, particularly for models 194 and 195, despite a decrease in average selling price Flake Graphite Concentrate Sales Data | Product Type | 2024 First Half Revenue (RMB thousand) | 2024 First Half Sales Volume (tonnes) | 2024 First Half Average Selling Price (RMB/tonne) | 2023 First Half Revenue (RMB thousand) | 2023 First Half Sales Volume (tonnes) | 2023 First Half Average Selling Price (RMB/tonne) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 193 | 4,284 | 1,704 | 2,514 | 3,177 | 939 | 3,383 | | 194 | 12,379 | 4,570 | 2,709 | 2,703 | 682 | 3,963 | | 195 | 4,297 | 1,524 | 2,820 | 832 | 201 | 4,139 | | Others | 4,147 | 2,311 | 1,794 | 5,227 | 1,867 | 2,800 | | Total | 25,107 | 10,109 | 2,484 | 11,939 | 3,689 | 3,236 | - Revenue from flake graphite concentrate sales increased from approximately RMB 11.9 million in the first half of 2023 to approximately RMB 25.1 million in the first half of 2024[30] Revenue from Sales of Unprocessed Marble In the first half of 2024, revenue from sales of unprocessed marble increased to approximately RMB 1.1 million, primarily driven by increased demand from construction projects in nearby areas Unprocessed Marble Sales Revenue | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | | :--- | :--- | :--- | | Revenue from Sales of Unprocessed Marble | 1.1 | 0.4 | - The increase in unprocessed marble sales was due to increased demand from certain customers for construction projects in nearby areas[32] Cost of Sales In the first half of 2024, cost of sales increased to approximately RMB 33.5 million, a 10.6% year-on-year increase, mainly affected by increased depreciation, repair expenses, and inventory impairment provisions Cost of Sales Change | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Cost of Sales | 33.5 | 30.3 | +10.6% | - The increase in cost of sales was primarily due to an increase in depreciation of approximately RMB 1.1 million from production machinery and tailings dam improvement projects, an increase in repair expenses of approximately RMB 0.4 million, and an increase in inventory impairment provisions of approximately RMB 1.1 million[33] Gross Profit and Gross Profit Margin In the first half of 2024, gross profit significantly decreased to RMB 2.9 million, and gross profit margin fell to 8.0%, with spherical graphite and by-products shifting from gross profit to gross loss, and flake graphite concentrate also experiencing a notable decline in gross profit and gross profit margin, primarily due to market competition and inventory provisions Gross Profit and Gross Profit Margin Details | Business Segment | 2024 First Half Gross Profit (RMB thousand) | 2024 First Half Gross Profit Margin (%) | 2023 First Half Gross Profit (RMB thousand) | 2023 First Half Gross Profit Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Sales of Spherical Graphite and By-products | (2,172) | (21.2) | 11,519 | 33.0 | | Sales of Flake Graphite Concentrate | 5,040 | 20.1 | 5,328 | 44.6 | | Sales of Unprocessed Marble | 55 | 5.0 | 36 | 8.9 | | Total | 2,923 | 8.0 | 16,883 | 35.8 | - Spherical graphite and by-products shifted from gross profit to gross loss, primarily due to intense competition in the graphite market leading to lower prices and sales volume, and the recognition of inventory provisions of approximately RMB 1.1 million[34] - Gross profit and gross profit margin for flake graphite concentrate decreased, mainly due to a decline in average selling price from RMB 3,236 per tonne to RMB 2,484 per tonne[35] Other Income and Other Gains In the first half of 2024, other income and other gains increased to approximately RMB 1.3 million, primarily benefiting from the recognition of approximately RMB 1.6 million in government subsidies for R&D activities Other Income and Other Gains | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Government Subsidies | 1,598 | - | | Other Income/(Loss) | (257) | 35 | | (Loss)/Gain on Disposal of Property, Plant and Equipment | (23) | 45 | | Total | 1,318 | 80 | - The increase was mainly due to the recognition of government subsidies of approximately RMB 1.6 million related to R&D activities in the first half of 2024[36] Selling and Distribution Expenses In the first half of 2024, selling and distribution expenses increased to approximately RMB 2.5 million, a 47.1% year-on-year increase, primarily due to increased marketing expenses for product promotion Selling and Distribution Expenses Change | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 2.5 | 1.7 | +47.1% | - The increase was mainly due to an increase in marketing expenses of approximately RMB 0.6 million for product promotion in the first half of 2024[37] General and Administrative Expenses In the first half of 2024, general and administrative expenses increased to approximately RMB 13.1 million, an 18.0% year-on-year increase, primarily due to increased office and training expenses and reduced exchange gains General and Administrative Expenses Change | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | General and Administrative Expenses | 13.1 | 11.1 | +18.0% | - This was mainly due to an increase in office and training expenses of approximately RMB 1.2 million and a decrease in exchange gains of approximately RMB 0.8 million from Hong Kong dollar-denominated assets in the first half of 2024[38] Research and Development Expenses In the first half of 2024, research and development expenses decreased to approximately RMB 3.2 million, primarily due to fewer R&D activities conducted during the period Research and Development Expenses Change | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | | :--- | :--- | :--- | | Research and Development Expenses | 3.2 | 8.3 | - Research and development expenses decreased in the first half of 2024 due to fewer R&D activities conducted during the period[39] Net Finance (Costs)/Income In the first half of 2024, the Group recorded net finance costs of approximately RMB 2.6 million, compared to net finance income in the prior period, primarily due to increased interest expenses from higher borrowings and interest expenses incurred from land acquisition Net Finance (Costs)/Income | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Finance Income | 338 | 873 | | Finance Costs | (2,924) | (311) | | Net Finance (Costs)/Income | (2,586) | 562 | - This was mainly due to an increase in interest expenses on borrowings of approximately RMB 1.5 million and interest expenses of approximately RMB 1.1 million incurred from the acquisition of certain land in the first half of 2024[40] Income Tax (Expense)/Credit Income tax expense for the first half of 2024 was approximately RMB 0.4 million, primarily due to the reversal of tax credits obtained in 2023 after reassessment and denial, with the Group's main operating subsidiaries, as high-tech enterprises, enjoying a preferential tax rate of 15% Income Tax (Expense)/Credit | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Current Income Tax | - | (2,277) | | Under/(Over) Provision in Prior Years | 639 | (303) | | Deferred Income Tax | (235) | 1,682 | | Income Tax Expense/(Credit) | 404 | (898) | - The Group's main operating subsidiaries, Yixiang New Energy and Yixiang Graphite, as high-tech enterprises, are subject to a preferential tax rate of 15%[41] - Income tax expense was mainly due to the reversal of tax credits obtained for the year ended December 31, 2023, which were denied after reassessment by the Chinese tax authorities during the period[41] Loss for the First Half of 2024 The loss after tax for the first half of 2024 expanded to approximately RMB 16.2 million, primarily attributable to slower market growth in the downstream anode industry, intense competition in the graphite market, and export control measures leading to a significant decline in revenue and gross profit Loss for the Period | Indicator | 2024 First Half (RMB million) | 2023 First Half (RMB million) | | :--- | :--- | :--- | | Loss After Tax | 16.2 | 3.3 | - The loss was mainly due to slower market growth in the downstream anode industry, intense competition in the graphite market, and graphite export control measures, resulting in a decrease in graphite selling prices and spherical graphite sales volume, with revenue and gross profit decreasing by approximately RMB 10.8 million and RMB 14.0 million, respectively[43] Use of Proceeds from Global Offering The Group has adjusted the use of net proceeds from its global offering, allocating the entire RMB 71.7 million to land acquisition to align with its business focus of increasing graphite mining volume to over 500,000 tonnes annually, and to secure land for the construction of new beneficiation and processing plants - The net proceeds from the global offering were approximately RMB 71.7 million[44] - The Board has shifted its strategic focus from "output-oriented" to "production cost optimization" and adjusted the use of unutilized proceeds[45] - The net proceeds have been fully utilized for land acquisition to increase graphite mining volume to over 500,000 tonnes annually and to construct new beneficiation plants, new processing plants, and tailings ponds[45] Revised Use of Net Proceeds from Global Offering | Business Use Stated in Prospectus | Net Proceeds (RMB million) | Revised Allocation of Net Proceeds (RMB million) | Net Proceeds Utilized as of Report Date (RMB million) | Net Proceeds Unutilized as of Report Date (RMB million) | | :--- | :--- | :--- | :--- | :--- | | Land Acquisition Costs | 23.2 | 71.7 | 71.7 | 0 | | Construction Costs | 22.7 | 0 | 0 | 0 | | Purchase and Installation of Machinery and Equipment | 25.8 | 0 | 0 | 0 | | Total | 71.7 | 71.7 | 71.7 | 0 | - Approximately RMB 71.7 million of the net proceeds has been utilized for the acquisition of forest land costing approximately RMB 86.9 million, with the remaining cost funded by operating cash flow and bank borrowings[45] Liquidity, Capital Resources and Capital Structure The Group's financial position remains sound, but in the first half of 2024, the current ratio and net cash level decreased, with the gearing ratio turning to 6.8%, primarily due to reduced trade receivables and increased borrowings resulting from the graphite market downturn - The Group's operations and growth are primarily funded by cash generated from operating activities and bank loans, maintaining a sound financial position[47] Key Financial Ratios | Indicator | End of 2024 First Half | End of 2023 First Half | | :--- | :--- | :--- | | Net Loss Margin | 44.5% | 7.1% | | Current Ratio (times) | 1.5 | 2.9 | | Gearing Ratio | 6.8% | Not Applicable (Net Cash Position) | - The decrease in the current ratio was mainly due to a reduction in trade receivables and bills receivable of approximately RMB 86.6 million and an increase in borrowings of approximately RMB 60.2 million, resulting from the graphite market downturn and intense competition[49] - As of June 30, 2024, the Group's interest-bearing borrowings were approximately RMB 126.7 million, with unutilized bank facilities of approximately RMB 73.2 million[47] - As of December 31, 2023, the Group was in a net cash position, while the gearing ratio as of June 30, 2024, was approximately 6.8%, reflecting increased borrowing to cope with the competitive environment and support development[49] Treasury Policy The Board will continue to follow a prudent policy in managing cash balances and maintain strong and robust liquidity to meet working capital needs and business expansion - The Board will continue to follow a prudent policy in managing the Group's cash balances and maintain strong and robust liquidity[50] Pledge of the Group's Assets The Group's bank financing is secured by guarantees from controlling shareholders, property, land use rights, mining rights, certain trade receivables, and guarantees from subsidiaries - The Group's bank financing is secured by guarantees provided by controlling shareholders, property, land use rights, mining rights, certain trade receivables, and guarantees provided by the Group's subsidiaries[51] Contingent Liabilities As of June 30, 2024, the Directors confirmed that the Group had no significant contingent liabilities and was not involved in any litigation that could materially adversely affect its business - As of December 31, 2023, and June 30, 2024, the Directors confirmed that the Group had no contingent liabilities[51] - The Group is not currently involved in any litigation that could materially adversely affect its business, operating results, or financial position[51] Financial Risks The Group faces interest rate risk, credit risk, liquidity risk, and foreign exchange risk, with management committed to minimizing the impact of these financial risks through prudent policies and monitoring measures - The Group faces interest rate risk, credit risk, and liquidity risk[52] Interest Rate Risk Most of the Group's assets and liabilities are interest-free or bear fixed interest rates, so fair value interest rate risk is not severe, and there is no significant cash flow interest rate risk, thus no interest rate hedging policy is currently in place - Most of the Group's assets and liabilities are interest-free or bear fixed interest rates, so the fair value interest rate risk faced is not severe[53] - The Group does not face significant cash flow interest rate risk and currently has no interest rate hedging policy[53] Credit Risk The Group mitigates credit risk by offering credit terms not exceeding three months, managing customer databases, implementing clear credit policies, and regularly assessing expected credit losses on trade receivables - The Group generally offers credit terms not exceeding three months to customers to mitigate credit risk[54] - The sales team is responsible for managing the customer database and implementing clear credit policies, regularly conducting aging analysis and assessment of expected credit losses on trade receivables[54] Liquidity Risk The Group monitors and maintains adequate levels of cash and cash equivalents and monitors bank borrowings to ensure compliance with loan covenants, with the Directors believing there is no significant liquidity risk currently - The Group monitors and maintains levels of cash and cash equivalents that management deems sufficient to fund operations and mitigate the impact of cash flow fluctuations[55] - Management monitors the utilization of bank borrowings to ensure compliance with loan covenants, and the Directors believe the Group does not have significant liquidity risk[55] Foreign Exchange Risk The Group's assets and liabilities are primarily denominated in RMB, with some HKD-denominated deposits facing foreign exchange risk, but this risk is not significant, thus no foreign currency hedging policy is currently in place - The Group's assets and liabilities are primarily denominated in RMB, with most denominated in the functional currency of transaction-related businesses[56] - Certain HKD-denominated bank deposits face foreign exchange risk, but this risk is not significant to the Group, and there is currently no foreign currency hedging policy[56] Purchase, Sale or Redemption of the Company's Listed Securities In the first half of 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities - In the first half of 2024, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[57] Employees and Remuneration Policy As of June 30, 2024, the Group's total number of employees decreased to 199, primarily due to staff reductions to control costs amidst intense competition in the graphite industry, with the Group recruiting employees based on industry experience, educational background, and job requirements, offering fixed salaries and allowances Employee Count Change | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Employees | 199 | 288 | | Full-time Employees | 150 | 198 | | Mass Outsourcing Service Provider Workers | 49 | 90 | - The decrease in total employees was mainly due to intense competition in the graphite industry, leading the Group to reduce redundant staff to control costs in the first half of 2024[58] - The Group recruits employees based on various factors such as industry experience in graphite mining, educational background, and job vacancy requirements, paying fixed salaries and other allowances according to position and responsibilities[58] Relationships with Suppliers, Customers and Other Stakeholders The Group values good relationships with suppliers, customers, communities, and governments, confirming no significant disputes occurred in the first half of 2024 - The Group recognizes the importance of maintaining good relationships with suppliers, customers, communities, and governments[59] - In the first half of 2024, there were no important or significant disputes between the Group and its suppliers, customers, and/or stakeholders[59] Commitments As of June 30, 2024, the Group had no significant capital commitments - As of June 30, 2024, and December 31, 2023, the Group had no significant capital commitments[60] Interim Dividend The Board does not recommend the payment of an interim dividend for the first half of 2024 - The Board does not recommend the payment of an interim dividend for the first half of 2024 (first half of 2023: nil)[61] Significant Events After the First Half of 2024 Except as disclosed in this report, no significant post-balance sheet events occurred for the Company or the Group after June 30, 2024, and up to the date of this report - Except as disclosed in this report, no significant post-balance sheet events occurred for the Company or the Group after June 30, 2024, and up to the date of this report[62] Major Investments Held, Major Acquisitions and Disposals of Subsidiaries, Associates and Joint Ventures, and Future Plans for Major Investments or Capital Assets The Group has completed the acquisition of equity in Shandong Ruisheng Carbon Material Technology Co., Ltd. and land rights for constructing purification facilities and producing lithium-ion battery anode materials, and has also obtained land use rights in Heilongjiang to increase graphite mining volume and build new beneficiation and processing plants - The Group has completed the acquisition of equity in Shandong Ruisheng Carbon Material Technology Co., Ltd. and land rights located in Weihai City, Nanhai New District, Shandong Province, China, for constructing purification facilities and producing anode materials for lithium-ion batteries[62] - Formal approval has been obtained from the National Forestry and Grassland Administration for the acquisition of forest land use rights in Luobei County, Hegang City, Heilongjiang, China, at a cost of RMB 86,922[63] - This forest land will be used to increase graphite mining volume to over 500,000 tonnes annually, and to construct new beneficiation plants, new processing plants, and tailings ponds[63] - As of the date of this report, the Board has not approved any other plans for major investments or additions to capital assets[63] Share Option Scheme In the first half of 2024, no share options were granted, lapsed, exercised, or cancelled under the share option scheme, and there were no outstanding share options - In the first half of 2024, no share options were granted, lapsed, exercised, or cancelled under the share option scheme[64] - As of the date of this interim report, there were no outstanding share options[64] Directors' Interests in Contracts As of June 30, 2024, none of the Company's Directors had any direct or indirect material interest in any contract entered into by the Company or its subsidiaries during the first half of 2024 that had a significant impact on the Group's business - As of June 30, 2024, none of the Company's Directors had any direct or indirect material interest in any contract entered into by the Company, its holding company, its subsidiaries, or any of its fellow subsidiaries during the first half of 2024 that had a significant impact on the Group's business[65] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2024, Mr. Zhao Liang, Chairman and CEO, beneficially owned 75.0% of the Company's issued shares through Sandy Mining Limited, making him the major controlling shareholder, with no other Directors or chief executives holding disclosable interests in shares or underlying shares Directors' and Chief Executive's Interests in Shares | Name of Director/Chief Executive of the Company | Position | Capacity/Nature of Interest | Number of Shares Held | Approximate Percentage of Total Issued Shares of the Company | | :--- | :--- | :--- | :--- | :--- | | Mr. Zhao Liang | Chairman, Executive Director and Chief Executive Officer | Interest in Controlled Corporation | 1,200,000,000 | 75.0% | - Mr. Zhao Liang beneficially owns 75.0% of the issued shares through Sandy Mining Limited and is deemed to have an interest under the Securities and Futures Ordinance[67] - Save as disclosed above, no other Directors or chief executives of the Company had any disclosable interests or short positions in the shares, underlying shares, or debentures of the Company or any of its associated corporations[68] Directors' Rights to Acquire Shares or Debentures At no time during the first half of 2024 did the Company or any of its subsidiaries enter into any arrangements enabling Directors to acquire benefits by purchasing shares or debentures of the Company or any other corporate entity, nor did any Director, their spouse, or children under 18 years of age possess any rights to subscribe for equity or debt securities of the Company or any other corporate entity - At no time during the first half of 2024 did the Company or any of its subsidiaries enter into any arrangements enabling Directors to acquire benefits by purchasing shares or debentures of the Company or any other corporate entity[70] - No Director, nor their spouse or children under the age of 18, had any right to subscribe for equity or debt securities of the Company or any other corporate entity, nor had any such rights been exercised[70] Substantial Shareholders' and Other Persons' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2024, apart from the Directors and chief executive, Sandy Mining Limited, as a substantial shareholder, beneficially owned 75.0% of the Company's issued shares, with no other persons holding disclosable interests of 5% or more Substantial Shareholders' and Other Persons' Interests in Shares | Name of Substantial Shareholder/Other Person of the Company | Nature of Interest | Number of Shares Held | Approximate Percentage of Total Issued Shares of the Company | | :--- | :--- | :--- | :--- | | Sandy Mining Limited | Beneficial Owner | 1,200,000,000 | 75.0% | - Save as disclosed above, the Company was not aware of any other persons (other than the Directors and chief executive of the Company) who had disclosable interests of 5% or more in the shares and underlying shares[72] Compliance with Relevant Laws and Regulations To the best of the Board's and management's knowledge, the Group has complied in all material respects with relevant laws and regulations that have a significant impact on its business and operations, with no serious breaches or non-compliance with applicable laws and regulations in the first half of 2024 - The Group has complied in all material respects with relevant laws and regulations that have a significant impact on its business and operations[73] - In the first half of 2024, the Group had no serious breaches or non-compliance with applicable laws and regulations[73] Compliance with Corporate Governance Code The Company is committed to maintaining a high level of corporate governance and has complied with all applicable provisions of the Corporate Governance Code in the first half of 2024, except for the non-segregation of Chairman and CEO functions (Code Provision C.2.1), which the Board believes benefits Group management and is effectively balanced by independent directors - The Company is committed to achieving and maintaining the highest level of corporate governance that best suits the needs and interests of the Company and its subsidiaries[74] - In the first half of 2024, the Company complied with all applicable code provisions of the Corporate Governance Code, save for code provision C.2.1 of Part 2 of the Corporate Governance Code[74] - Mr. Zhao Liang holds both the positions of Chairman and Chief Executive Officer of the Company, which the Board believes benefits the Group's management and is effectively balanced by experienced senior management and the Board[75] Compliance with Model Code The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules, and all Directors have confirmed their compliance with the Code throughout the first half of 2024 - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules[76] - All Directors have confirmed that they have complied with the required trading standards and conduct guidelines for Directors' securities transactions as set out in the Model Code throughout the first half of 2024[76] Board Committees The Board has established an Audit Committee, Remuneration Committee, Nomination Committee, and Compliance Committee, each operating under terms of reference adopted by the Board to enhance corporate governance and decision-making efficiency - The Board has established an Audit Committee, Remuneration Committee, Nomination Committee, and Compliance Committee[77] Audit Committee The Audit Committee comprises four members, with Mr. Zhao Zhiqiao, an independent non-executive Director, serving as Chairman, and its primary responsibilities include recommending the appointment of auditors, reviewing financial statements, and overseeing internal control and risk management systems - The Audit Committee comprises four members, with Mr. Zhao Zhiqiao, an independent non-executive Director with appropriate accounting and financial management expertise, serving as Chairman[78] - Its primary responsibilities are to make recommendations to the Board on the appointment, re-appointment, and removal of external auditors; review financial statements; provide important advice on financial reporting procedures; and oversee internal control and risk management systems[78] Remuneration Committee The Remuneration Committee comprises five members, with Mr. Liu Zezheng serving as Chairman, and its primary responsibility is to make recommendations to the Board on the remuneration policy, structure, and terms of Directors and senior management - The Remuneration Committee comprises five members, including four independent non-executive Directors and one executive Director, with Mr. Liu Zezheng serving as Chairman of the committee[79] - Its primary responsibilities are to make recommendations to the Board on the remuneration policy and structure for Directors and senior management, and on establishing formal and transparent procedures for developing remuneration policy[79] Nomination Committee The Nomination Committee comprises five members, with Mr. Zhao Liang serving as Chairman, and its primary responsibilities are to review the Board's structure, size, and composition, and to make recommendations on Director appointments and Board management - The Nomination Committee comprises five members, including four independent non-executive Directors and one executive Director, with Mr. Zhao serving as Chairman of the committee[81] - Its primary responsibilities are to make recommendations to review the Board's structure, size, and composition (including skills, knowledge, and experience); and to review and make recommendations to the Board on matters relating to the appointment of Directors and Board management[81] Compliance Committee The Compliance Committee comprises three members, with Mr. Liu Zezheng serving as Chairman, and its primary responsibilities are to ensure compliance with regulatory matters and to oversee the adequacy and effectiveness of regulatory compliance procedures and systems - The Compliance Committee comprises three members, including two independent non-executive Directors and one executive Director, with Mr. Liu Zezheng serving as Chairman of the committee[82] - Its primary responsibilities are to ensure compliance with regulatory matters and to oversee the adequacy and effectiveness of regulatory compliance procedures and systems[82] Review of Interim Results The Company's Audit Committee has reviewed the Group's interim results for the first half of 2024 and this interim report, concluding that the unaudited interim condensed consolidated financial statements comply with applicable accounting standards and Listing Rules and provide adequate disclosure - The Group's interim results for the first half of 2024 and this interim report have been reviewed by the Audit Committee[83] - The Audit Committee is of the opinion that the Group's unaudited interim condensed consolidated financial statements for the first half of 2024 comply with applicable accounting standards and Listing Rules and provide adequate disclosure[83] Financial Performance Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2024, the Group's total revenue was RMB 36,437 thousand, gross profit was RMB 2,923 thousand, loss for the period and total comprehensive loss was RMB 16,218 thousand, and basic and diluted loss per share was RMB 1.01 cents Summary of Interim Condensed Consolidated Statement of Comprehensive Income | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Revenue | 36,437 | 47,211 | | Cost of Sales | (33,514) | (30,328) | | Gross Profit | 2,923 | 16,883 | | Other Income and Other Gains | 1,318 | 80 | | Selling and Distribution Expenses | (2,531) | (1,721) | | General and Administrative Expenses | (13,093) | (11,129) | | Research and Development Expenses | (3,239) | (8,300) | | Impairment Loss on Financial Assets | 1,443 | (316) | | Operating Loss | (13,179) | (4,503) | | Net Finance (Costs)/Income | (2,586) | 562 | | Share of Loss of an Associate | - | (49) | | Loss Before Income Tax | (15,814) | (4,240) | | Income Tax (Expense)/Credit | (404) | (898) | | Loss and Total Comprehensive Loss for the Period | (16,218) | (3,342) | | Loss and Total Comprehensive Loss Attributable to Owners of the Company | (16,218) | (3,342) | | Loss Per Share — Basic and Diluted (cents) | (1.01) | (0.21) | Interim Condensed Consolidated Statement of Financial Position Interim Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets were RMB 606,435 thousand, total liabilities were RMB 173,844 thousand, and total equity attributable to owners of the Company was RMB 432,591 thousand, with both non-current assets and current liabilities increasing Summary of Interim Condensed Consolidated Statement of Financial Position | Item | June 30, 2024 (RMB thousand) | December 31, 2023 (RMB thousand) | | :--- | :--- | :--- | | Assets | | | | Non-current Assets | 355,062 | 232,635 | | Current Assets | 251,373 | 342,990 | | Total Assets | 606,435 | 575,625 | | Equity | | | | Total Equity Attributable to Owners of the Company | 432,591 | 448,809 | | Liabilities | | | | Non-current Liabilities | 7,268 | 8,926 | | Current Liabilities | 166,576 | 117,890 | | Total Liabilities | 173,844 | 126,816 | | Total Equity and Liabilities | 606,435 | 575,625 | - The increase in non-current assets was mainly due to an increase in property, plant and equipment, right-of-use assets, and prepayments[86] - The increase in current liabilities was mainly due to an increase in borrowings and contract liabilities[87] Interim Condensed Consolidated Statement of Changes in Equity Interim Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2024, total equity attributable to owners of the Company decreased from RMB 270,908 thousand at the beginning of the period to RMB 255,143 thousand, primarily due to a loss for the period of RMB 16,218 thousand Summary of Interim Condensed Consolidated Statement of Changes in Equity | Item | Share Capital (RMB thousand) | Share Premium (RMB thousand) | Statutory Reserve (RMB thousand) | Other Reserves (RMB thousand) | Retained Earnings (RMB thousand) | Total (RMB thousand) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2024 | 1,375 | 303,829 | 15,193 | (142,496) | 270,908 | 447,434 | | Loss and Total Comprehensive Loss for the Period | - | - | - | - | (16,218) | (16,218) | | Transfer to Other Reserves | - | - | - | (453) | 453 | - | | Balance at June 30, 2024 | 1,375 | 303,829 | 15,193 | (142,949) | 255,143 | 431,216 | - A loss for the period of RMB 16,218 thousand was the main reason for the decrease in total equity[89] Interim Condensed Consolidated Statement of Cash Flows Interim Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2024, the Group's net cash from operating activities was RMB 62,640 thousand, net cash used in investing activities was RMB 138,136 thousand, and net cash from financing activities was RMB 58,327 thousand, resulting in a net decrease in cash and cash equivalents of RMB 17,169 thousand Summary of Interim Condensed Consolidated Statement of Cash Flows | Item | 2024 First Half (RMB thousand) | 2023 First Half (RMB thousand) | | :--- | :--- | :--- | | Net Cash from Operating Activities | 62,640 | 66,066 | | Net Cash Used in Investing Activities | (138,136) | (28,833) | | Net Cash from/(Used in) Financing Activities | 58,327 | (24,058) | | Net (Decrease)/Increase in Cash and Cash Equivalents | (17,169) | 13,175 | | Cash and Cash Equivalents at Beginning of Period | 111,918 | 110,182 | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 94,933 | 184 | | Cash and Cash Equivalents at End of Period | 94,933 | 113,434 | - Net cash outflow from investing activities significantly increased, mainly due to the purchase of property, plant and equipment and land use rights[90] - Net cash inflow from financing activities was primarily from proceeds from borrowings[90] Notes to the Interim Condensed Consolidated Financial Information 1 General Information China Graphite Group Co., Ltd. was incorporated in the Cayman Islands and primarily engages in the manufacturing and sale of graphite products, with Mr. Zhao Liang as the ultimate controlling party, and its shares were listed on the Main Board of the Stock Exchange on July 18, 2022 - The Company was incorporated in the Cayman Islands as an exempted company with limited liability on August 3, 2020[92] - The Company and its subsidiaries are principally engaged in the manufacturing and sale of graphite products[92] - The Company's ultimate holding company is Sandy Mining Limited, and the ultimate controlling party is Mr. Zhao Liang[92] - The Company's shares were listed on the Main Board of The Stock Exchange of Hong Kong Limited on July 18, 2022[92] 2 Basis of Presentation This interim condensed consolidated financial information is presented in RMB, rounded to the nearest thousand, approved for publication by the Board on August 28, 2024, is unaudited, and prepared in accordance with Hong Kong Accounting Standard 34 - This interim condensed consolidated financial information is presented in RMB, and all values have been rounded to the nearest thousand[92] - This interim condensed consolidated financial information is unaudited and was approved for publication by the Board on August 28, 2024[92] - This interim condensed consolidated financial information has been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants[92] 3 Accounting Policies The accounting policies applied are consistent with those of the previous financial year, except for estimated income tax and the adoption of certain new and revised standards, which management has initially assessed and expects will not have a significant impact on the Group's financial position and operating results - The accounting policies applied are consistent with those used in the previous financial year and the corresponding interim reporting period, except for estimated income tax and the adoption of the following new and revised standards[92] - The Group has adopted several new or revised standards, but they have no significant financial impact on the interim condensed consolidated financial information[94] - Management has conducted a preliminary assessment and expects that the new and revised standards and interpretations not yet effective will not have any significant impact on the Group's financial position and operating results[94] 4 Significant Accounting Estimates and Judgements The preparation of interim condensed consolidated financial information requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the amounts reported in the financial statements, with the primary sources of estimation uncertainty consistent with those described in the 2023 annual consolidated financial statements - In preparing this interim condensed consolidated financial information, the significant judgments made by management in applying the Group's accounting policies and the primary sources of estimation uncertainty are consistent with those described in the annual consolidated financial statements for the year ended December 31, 2023[95] 5 Financial Risk Management The Group faces foreign exchange risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk, with risk management plans aimed at minimizing potential adverse effects, and risk management policies remaining unchanged since December 31, 2023 - The Group's activities expose it to various financial risks, including foreign exchange risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk[97] - The Group's overall risk management program aims to minimize potential adverse effects on the Group's financial performance due to the unpredictability of financial markets[97] - Risk management policies have not changed since December 31, 2023[97] 5.1 Financial Risk Factors The Group's activities expose it to various financial risks, including foreign exchange risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk, and it is committed to minimizing the potential adverse effects of these risks - The Group's activities expose it to various financial risks, including foreign exchange risk, cash flow and fair value interest rate risk, credit risk, and liquidity risk[97] 5.2 Fair Value Estimation The carrying amounts of trade receivables, bills receivable, deposits, other receivables, cash and cash equivalents, as well as trade payables, accrued expenses, other payables, and borrowings, after deducting impairment provisions, are assumed to approximate their fair values - The carrying amounts of trade receivables and bills receivable, deposits, other receivables and cash and cash equivalents, as well as trade payables, accrued expenses and other payables and borrowings, net of impairment provisions, are assumed to approximate their fair values[98] 5.3 Capital Risk Management The Group manages capital to safeguard its ability to continue as a going concern and maximize shareholder returns, maintaining its capital structure by monitori