胜利管道(01080) - 2024 - 中期财报

Company Information Victory Oil & Gas Pipeline Holdings Limited is a Cayman Islands-incorporated company listed on the Main Board of the Hong Kong Stock Exchange with stock code 1080, headquartered in Zibo, Shandong Province, China - Victory Oil & Gas Pipeline Holdings Limited is a company incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange with stock code 1080, with its China headquarters in Zibo, Shandong Province[1][3] Financial Highlights The Group's revenue increased by 3.5% to approximately RMB 333.6 million, with gross profit margin significantly improving to 11.0%, leading to a narrowed loss attributable to owners of the Company | Indicator | For the Six Months Ended June 30, 2024 | For the Six Months Ended June 30, 2023 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | Approximately RMB 333,604,000 | Approximately RMB 322,269,000 | Increased by 3.5% | | Gross Profit Margin | Approximately 11.0% | Approximately 4.2% | Increased by 6.8 percentage points | | Loss for the Period Attributable to Owners of the Company | Approximately RMB 23,716,000 | Approximately RMB 57,348,000 | Loss narrowed | | Total Comprehensive Loss for the Period Attributable to Owners of the Company | Approximately RMB 49,305,000 | Approximately RMB 57,348,000 | Loss narrowed | | Basic Loss Per Share | Approximately RMB 0.61 Cents | Approximately RMB 1.48 Cents | Loss narrowed | | Interim Dividend | Not recommended | None | No change | CEO's Report The CEO's report outlines the company's strategic responses to market dynamics, focusing on client collaboration, operational efficiency, technological innovation, and future growth prospects Market Environment and Operating Strategy Despite a complex external environment, the national economy continues its recovery, with the oil and gas sector showing resilience, enabling the company to pursue its annual operating targets - In the first half of 2024, the external environment's complexity, severity, and uncertainty significantly increased, yet the national economy continued its recovery and positive trend[5] - The oil and gas industry faces geopolitical challenges and alternative energy development pressures, but the National Pipeline Network Group's strong operating performance supports industry growth[5] Market Expansion and Client Collaboration The Group strengthened partnerships with key clients like the National Pipeline Network Group and "Three Barrels of Oil" while successfully expanding into new social markets and increasing processing orders to optimize structure and profitability - The Group deepened strategic cooperation with key clients such as the National Pipeline Network Group and the "Three Barrels of Oil," achieving first and second place in bids from PetroChina and Sinopec, respectively[6] - Five new clients were successfully developed, particularly a leading insulation industry enterprise within the province, laying a foundation for stable future cooperation[7] - Increased development of processing orders effectively reduced procurement capital occupation costs and improved processing profit margins[7] Production Operations and Management Efficiency The Group successfully completed major national pipeline projects, enhanced production efficiency through process optimization, and reduced labor costs via flexible employment, while strengthening safety management - Successfully completed supply guarantee tasks for several large pipeline projects, including the National Pipeline Network Group's Hulin-Changchun Natural Gas Pipeline and the Second West-East Gas Pipeline[8] - Adopted a "stable key positions, flexible auxiliary positions" employment principle, gradually reducing fixed employment to effectively lower labor costs[9] - Implemented safety "grid management," establishing a reporting platform with rewards and penalties to achieve comprehensive safety production management[10] Quality Management and Technological Innovation The company achieved significant quality management milestones, including successful API audits and carbon footprint certifications, while advancing technological innovation through equipment upgrades and patent acquisitions - Successfully passed the API 5L monogram and API Spec Q1 annual surveillance audits, and obtained carbon footprint and Type III environmental declaration certifications for spiral submerged arc welded pipes and anti-corrosion steel pipes[11] - Solidly advanced the upgrade and transformation of eight key equipment technologies to enhance production efficiency and quality[12] - During the reporting period, 15 scientific papers were published, one invention patent and one utility model patent were granted, with two additional utility model patents pending application[12] Future Outlook Despite a projected slowdown in global oil demand, China's economy is expected to meet its GDP growth target, with the Group leveraging its capacity and technology as a key supplier to secure more orders and enhance competitiveness - China is expected to achieve its annual GDP growth target of around 5% in 2024, with domestic crude oil and natural gas production maintaining growth[13] - The Group will leverage its production capacity and technological advantages as a main supplier to the National Pipeline Network Group to secure more project orders and actively plan for the second-half framework agreement bidding[14] - The company will continue to deepen strategic adjustments, optimize its business structure, and promote product and technology upgrades to enhance core competitiveness[14] Management Discussion and Analysis This section provides an in-depth review of the Group's market performance, operational achievements, and financial results for the period, including detailed insights into revenue, profitability, assets, liabilities, and liquidity Market Overview In the first half of 2024, China's economy continued its recovery with a 5.0% GDP growth, while the oil and gas sector saw increased production despite softening demand for refined oil products due to rising new energy adoption - In the first half of 2024, China's GDP was approximately RMB 61.7 trillion, growing by 5.0% year-on-year[15] - National crude oil output from industrial enterprises above designated size increased by 1.9% year-on-year, and natural gas output grew by 6.0% year-on-year, reaching a historical high for the same period[15] - The increasing penetration of new and alternative energies led to weak demand in the domestic refined oil market, with the share of clean energy consumption increasing by 2.2 percentage points year-on-year[15] Business Review The Group, a leading SAWH pipe manufacturer in China, primarily serves the National Pipeline Network Group and major state-owned oil companies, with an annual production capacity of approximately 0.8 million tonnes of SAWH pipes - The Group is a major SAWH pipe manufacturer in China, with key clients including the National Pipeline Network Group and large state-owned enterprises such as Sinopec, PetroChina, and CNOOC[17] Production Capacity | Capacity | Value | | :--- | :--- | | Annual SAWH Pipe Production Capacity | Approximately 0.8 million tonnes | | Annual Anti-Corrosion Production Line Capacity | Approximately 4.8 million sqm | | Annual Insulation Pipe Production Line Capacity | 110 km | - During the reporting period, the Group participated in several large-scale projects, including the National Pipeline Network Group's Hulin-Changchun Natural Gas Pipeline Project and the Second West-East Gas Pipeline Project[18] Financial Review The Group's total revenue increased by 3.5% to RMB 334 million, driven by growth in anti-corrosion treatment and new trading business, resulting in a significant 169.0% increase in gross profit and a narrowed comprehensive loss Revenue Total revenue for the reporting period was approximately RMB 334 million, a 3.5% year-on-year increase, primarily driven by a substantial 70.5% growth in anti-corrosion treatment income and new trading business, despite a 3.7% decrease in SAWH pipe sales | Revenue Item | 2024 H1 (RMB) | 2023 H1 (RMB) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Revenue | 333,604,000 | 322,269,000 | +3.5% | | SAWH Pipe Sales | 293,963,000 | 305,226,000 | -3.7% | | Anti-Corrosion Treatment | 28,947,000 | 16,973,000 | +70.5% | | Insulation Treatment | 0 | 70,000 | -100% | | Trading Business | 10,694,000 | 0 | N/A | Gross Profit Gross profit for the reporting period was approximately RMB 36.79 million, a substantial 169.0% year-on-year increase, with the gross profit margin rising from 4.2% to 11.0%, mainly due to a higher proportion of national pipeline and anti-corrosion treatment businesses which have higher margins | Indicator | 2024 H1 | 2023 H1 | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Gross Profit | Approximately RMB 36,794,000 | Approximately RMB 13,677,000 | +169.0% | | Gross Profit Margin | Approximately 11.0% | Approximately 4.2% | +6.8 percentage points | Operating Expenses During the reporting period, sales and service costs decreased due to cost compression, and administrative expenses also declined, while selling and distribution costs increased primarily due to higher transportation fees - Sales and service costs decreased by approximately 3.8% year-on-year to RMB 297 million, mainly due to the Group's efforts to compress various cost expenditures[20] - Selling and distribution costs increased to RMB 18.91 million, primarily due to increased transportation expenses borne by subsidiaries[23] - Administrative expenses decreased to RMB 39.76 million, as the Group rationally planned and compressed various expenditures[24] Total Comprehensive Loss for the Period The Group's total comprehensive loss for the period narrowed from RMB 57.94 million in the prior year to RMB 49.70 million in the current reporting period | Indicator | 2024 H1 (RMB) | 2023 H1 (RMB) | | :--- | :--- | :--- | | Total Comprehensive Loss for the Period | Approximately 49,695,000 | Approximately 57,944,000 | Assets, Liabilities and Capital Expenditure As of June 30, 2024, the Group's total assets, total liabilities, and net assets all decreased compared to the end of 2023, with net current assets also declining, while capital expenditure was primarily for property, plant, and equipment purchases | Balance Sheet Item | June 30, 2024 (RMB) | December 31, 2023 (RMB) | | :--- | :--- | :--- | | Total Assets | 959,318,000 | 1,083,579,000 | | Total Liabilities | 505,581,000 | 580,147,000 | | Net Assets | 453,737,000 | 503,432,000 | | Net Current Assets | 6,032,000 | 18,868,000 | - Capital expenditure for the six months ended June 30, 2024, was RMB 13.622 million, primarily for the acquisition of property, plant, and equipment[33] Liquidity, Financial Resources and Capital Structure As of June 30, 2024, the Group's cash and cash equivalents significantly decreased to RMB 47.37 million, mainly due to increased inventories and reduced contract liabilities, while total borrowings were approximately RMB 325 million, leading to an increased gearing ratio - Cash and cash equivalents significantly decreased from RMB 137 million at the end of 2023 to RMB 47.37 million, primarily due to increased inventories and decreased contract liabilities[36] | Indicator | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Borrowings | Approximately RMB 325,017,000 | Approximately RMB 329,567,000 | | Gearing Ratio | Approximately 50.1% | Approximately 46.0% | Interim Dividend The Board of Directors does not recommend the declaration of any interim dividend for the six months ended June 30, 2024 - The Board of Directors does not recommend the payment of an interim dividend for 2024, consistent with the same period last year[38] Directors' Report The Directors' Report details the interests of directors and major shareholders in the company's shares, outlines the share option scheme, and confirms compliance with various regulatory requirements Directors' and Chief Executives' Interests The report discloses the interests of directors and major shareholders in the company's shares, with Chairman Mr. Wei Jun holding approximately 16.003% through a controlled corporation, and Mefun Group Limited and LM Global Asset LP being major shareholders - Mr. Wei Jun, Chairman and Non-executive Director, is deemed to be interested in 620,000,000 shares of the Company, representing approximately 16.003% of the issued share capital, through Mefun Group Limited, in which he holds a 65.97% interest[40][41] - Major shareholders Mefun Group Limited and LM Global Asset LP hold approximately 16.003% and 15.486% of the Company's shares, respectively[54][56] Share Option Scheme The company's share option scheme, adopted in 2016 and valid until 2026, had 73.95 million unexercised options as of June 30, 2024, representing 1.9087% of issued share capital, with no new grants, exercises, or lapses during the period - The share option scheme became effective on May 20, 2016, for a period of 10 years[50] - As of June 30, 2024, there were 73,950,000 unexercised share options with an exercise price of HKD 0.10, representing 1.9087% of the issued share capital[53] - The total number of shares available for issue under the share option scheme is 139,443,060 shares, representing approximately 3.5991% of the issued shares as of the report date[52] Other Compliance Matters During the reporting period, the Group had no significant capital commitments, contingent liabilities, or major investments/disposals, maintained its public float, and confirmed no material interests of directors in significant contracts or post-balance sheet events - As of June 30, 2024, the Group's capital commitments for the acquisition of property, plant, and equipment were approximately RMB 17,000[44] - The Group had no contingent liabilities and did not use any financial instruments to hedge its minimal foreign exchange risk[46][47] - The company has maintained a public float of not less than 25% as required by the Listing Rules[59] Corporate Governance This section details the company's adherence to corporate governance standards, including compliance with the Listing Rules and the functions of the Audit Committee Compliance Status During the reporting period, the company adopted and complied with all code provisions of the HKEX Corporate Governance Code, and all directors confirmed adherence to the Model Code for securities transactions - The company has adopted and complied with all principles and code provisions of the Corporate Governance Code in Appendix C1 of the HKEX Listing Rules[65] - All directors have confirmed their compliance with the standards set out in the Model Code throughout the review period[66] Audit Committee The Audit Committee, comprising three independent non-executive directors, is responsible for reviewing and overseeing financial reporting, risk management, and internal control systems, and has reviewed the unaudited financial statements and interim report for the period - The Audit Committee is composed of three independent non-executive directors, with Mr. Chen Junzhu serving as Chairman[67] - The Audit Committee has reviewed the Group's unaudited financial statements and interim report for the review period, and also reviewed the risk management and internal control systems[67][68] Unaudited Condensed Consolidated Interim Financial Statements This section presents the unaudited condensed consolidated financial statements for the interim period, including the statement of profit or loss, financial position, changes in equity, and cash flows Unaudited Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2024, the Group recorded revenue of RMB 333.6 million and gross profit of RMB 36.79 million, resulting in a pre-tax loss of RMB 24.09 million and a total comprehensive loss of RMB 49.70 million after accounting for fair value changes in financial assets | Item | For the Six Months Ended June 30, 2024 (RMB Thousand) | | :--- | :--- | | Revenue | 333,604 | | Gross Profit | 36,794 | | Loss Before Tax | (24,086) | | Loss for the Period | (24,106) | | Total Comprehensive Loss for the Period | (49,695) | Unaudited Condensed Consolidated Statement of Financial Position As of June 30, 2024, the Group's total assets amounted to RMB 959.32 million, total liabilities to RMB 505.58 million, and net assets to RMB 453.74 million, with net current assets of RMB 6.03 million | Item | June 30, 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Non-current Assets | 555,698 | 579,355 | | Current Assets | 403,620 | 504,224 | | Total Assets | 959,318 | 1,083,579 | | Current Liabilities | 397,588 | 485,356 | | Non-current Liabilities | 107,993 | 94,791 | | Total Liabilities | 505,581 | 580,147 | | Net Assets | 453,737 | 503,432 | Unaudited Condensed Consolidated Statement of Changes in Equity As of June 30, 2024, total equity decreased from RMB 503.43 million at the beginning of the year to RMB 453.74 million, primarily due to a total comprehensive loss of RMB 49.70 million for the period - Total equity decreased from RMB 503,432 thousand as of January 1, 2024, to RMB 453,737 thousand as of June 30, 2024[128] - The change in equity primarily resulted from a total comprehensive loss for the period of RMB 49,695 thousand, which included a loss for the period of RMB 24,106 thousand and other comprehensive loss of RMB 25,589 thousand[128][129] Unaudited Condensed Consolidated Statement of Cash Flows During the reporting period, net cash used in operating activities was RMB 88.82 million, net cash from investing activities was RMB 9.22 million, and net cash used in financing activities was RMB 10.35 million, resulting in a net decrease in cash and cash equivalents of RMB 89.95 million | Cash Flow Item | For the Six Months Ended June 30, 2024 (RMB Thousand) | | :--- | :--- | | Net Cash Used in Operating Activities | (88,819) | | Net Cash From Investing Activities | 9,219 | | Net Cash Used in Financing Activities | (10,352) | | Net Decrease in Cash and Cash Equivalents | (89,952) | | Cash and Cash Equivalents at Beginning of Period | 137,318 | | Cash and Cash Equivalents at End of Period | 47,366 | Notes to the Unaudited Condensed Consolidated Interim Financial Statements This section provides detailed notes to the unaudited condensed consolidated interim financial statements, covering segment information, borrowings, and related party transactions Segment Information (Note 3) The Group's operations are divided into "Welded Pipe Business" and "Trading Business" segments, with the welded pipe business generating RMB 322.91 million in revenue and a loss of RMB 10.70 million, and the new trading business generating RMB 10.69 million in revenue with a loss of RMB 1.65 million, with most revenue derived from China 2024 H1 Segment Performance (Unaudited) | 2024 H1 Segment Performance (Unaudited) | Welded Pipe Business (RMB Thousand) | Trading Business (RMB Thousand) | Total (RMB Thousand) | | :--- | :--- | :--- | :--- | | Segment Revenue | 322,910 | 10,694 | 333,604 | | Segment Result | (10,699) | (1,652) | (12,351) | - Revenue from major customer A accounted for the majority of total revenue, at RMB 250 million[147] Borrowings (Note 16) As of June 30, 2024, the Group's total borrowings were approximately RMB 325 million, slightly lower than the end of 2023, comprising secured bank loans and unsecured other loans, with approximately RMB 219 million due within one year | Borrowing Type | June 30, 2024 (RMB Thousand) | December 31, 2023 (RMB Thousand) | | :--- | :--- | :--- | | Bank Loans – Secured | 276,250 | 280,800 | | Other Loans – Unsecured | 48,767 | 48,767 | | Total | 325,017 | 329,567 | - Bank loans are secured by the Group's property, plant, and equipment with a carrying value of approximately RMB 119 million and right-of-use assets of approximately RMB 69.08 million[171] - Other loans primarily consist of advances from directors, senior management, and employees, bearing a fixed annual interest rate of 5%[172] Related Party Transactions (Note 19) During the reporting period, significant related party transactions primarily involved interest payments on other loans to the company's directors, with outstanding loan balances from directors and key management personnel totaling RMB 1.065 million at period-end - Interest paid on other loans to the Company's directors amounted to RMB 26,000[177] - As of June 30, 2024, the loan balance from directors, chief executive, and other key management personnel was RMB 1,065,000[178]