华润建材科技(01313) - 2023 - 中期业绩

Performance Overview Condensed Consolidated Performance Overview The Group's H1 2023 saw significant declines in revenue and profit attributable to owners, with basic EPS and interim dividends falling and the gearing ratio rising Key Financial Data for H1 2023 (Unaudited) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,172.6 | 16,116.5 | (24.5)% | | Profit Attributable to Owners of the Company | 620.9 | 1,804.5 | (65.6)% | | Basic Earnings Per Share (HKD) | 0.089 | 0.258 | - | | Interim Dividend Per Share (HKD) | 0.041 | 0.12 | - | | Total Assets | 81,656.8 | 80,613.8 (Dec 31, 2022) | 1.3% | | Equity Attributable to Owners of the Company | 48,174.8 | 49,233.4 (Dec 31, 2022) | (2.2)% | | Gearing Ratio | 41.2% | 33.4% (Dec 31, 2022) | 7.8 percentage points | | Net Asset Value Per Share - Book (HKD) | 6.90 | 7.05 (Dec 31, 2022) | (2.1)% | Condensed Consolidated Financial Statements Condensed Consolidated Statement of Comprehensive Income The Group's H1 2023 revenue and gross profit significantly declined, leading to substantial reductions in profit before tax and profit for the period, with profit attributable to owners down 65.6% Condensed Consolidated Statement of Comprehensive Income (For the Six Months Ended June 30) | Metric | 2023 (HKD Thousand) | 2022 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 12,172,621 | 16,116,525 | (24.5)% | | Cost of Sales | (10,270,126) | (12,813,841) | (19.8)% | | Gross Profit | 1,902,495 | 3,302,684 | (42.4)% | | Other Income | 564,232 | 581,555 | (3.0)% | | Selling and Distribution Expenses | (243,897) | (275,955) | (11.6)% | | General and Administrative Expenses | (1,098,808) | (1,233,506) | (10.9)% | | Exchange Gains (Losses) | 1,886 | (67,510) | Significant improvement | | Finance Costs | (295,642) | (171,161) | 72.7% | | Share of Results of Associates | (27,819) | 11,805 | Turned from profit to loss | | Share of Results of Joint Ventures | 32,200 | (26,220) | Turned from loss to profit | | Profit Before Tax | 834,647 | 2,121,692 | (60.7)% | | Taxation | (244,475) | (357,708) | (31.6)% | | Profit for the Period | 590,172 | 1,763,984 | (66.6)% | | Profit for the Period Attributable to Owners of the Company | 620,931 | 1,804,538 | (65.6)% | | Basic Earnings Per Share (HKD) | 0.089 | 0.258 | (65.5)% | Condensed Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets slightly increased, net current liabilities significantly improved, while equity attributable to owners slightly decreased and non-current liabilities rose Condensed Consolidated Statement of Financial Position (As at Period End) | Metric | June 30, 2023 (HKD Thousand) | December 31, 2022 (HKD Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Non-current Assets | 69,931,717 | 70,792,481 | (1.2)% | | Current Assets | 11,725,053 | 9,821,282 | 19.4% | | Current Liabilities | 13,561,875 | 15,306,813 | (11.4)% | | Net Current Liabilities | (1,836,822) | (5,485,531) | 66.5% (Improvement) | | Total Assets Less Current Liabilities | 68,094,895 | 65,306,950 | 4.3% | | Non-current Liabilities | 18,328,367 | 14,466,682 | 26.7% | | Equity Attributable to Owners of the Company | 48,174,845 | 49,233,446 | (2.2)% | | Total Equity | 49,766,528 | 50,840,268 | (2.1)% | Notes to the Financial Statements Basis of Preparation The condensed consolidated financial statements are prepared in accordance with Appendix 16 of the HKEX Listing Rules and HKAS 34 - The condensed consolidated financial statements are prepared in accordance with Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Hong Kong Accounting Standard 34 'Interim Financial Reporting'[7] Principal Accounting Policies The condensed consolidated financial statements are prepared on a historical cost basis, with certain items measured at fair value, and adopted revised standards effective January 1, 2023, with no significant impact - The financial statements are prepared principally under the historical cost convention, except for investment properties, equity investments at fair value through other comprehensive income, and certain trade receivables[8] - The Group has first applied the amendments to Hong Kong Financial Reporting Standards issued by the HKICPA and mandatorily effective from January 1, 2023, including the definition of accounting estimates and deferred tax related to assets and liabilities arising from a single transaction, with no significant impact on the amounts reported or disclosures in the financial statements[8] Segment Information The Group's operating and reportable segments are cement and concrete, with H1 2023 showing significant profit from cement but a loss from concrete, as reviewed by internal management reports - The Group's operating and reportable segments are cement and concrete, with all revenue derived from the sale of goods, recognized upon delivery[9] Segment Results and Revenue (For the Six Months Ended June 30) | Metric | 2023 Cement (HKD Thousand) | 2023 Concrete (HKD Thousand) | 2022 Cement (HKD Thousand) | 2022 Concrete (HKD Thousand) | | :--- | :--- | :--- | :--- | :--- | | External Sales Revenue | 10,497,190 | 1,675,431 | 13,247,514 | 2,869,011 | | Segment Results | 1,325,406 | (87,338) | 2,084,043 | 11,613 | Finance Costs The Group's H1 2023 total finance costs significantly increased by 72.7% year-on-year, primarily due to higher interest on bank loans and asset acquisition payables Breakdown of Finance Costs (For the Six Months Ended June 30) | Item | 2023 (HKD Thousand) | 2022 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Interest on bank loans | 288,395 | 177,068 | 62.9% | | Interest on loans from an indirect holding company | - | 13,516 | (100.0)% | | Interest on loans from non-controlling shareholders | 5,441 | 5,680 | (4.1)% | | Environmental restoration provision | 15,584 | - | - | | Payables for acquisition of assets | 37,634 | 13,300 | 183.0% | | Lease liabilities | 5,515 | 5,511 | 0.1% | | Subtotal | 352,569 | 215,075 | 63.9% | | Amount capitalized as property, plant and equipment | (56,927) | (43,914) | 29.6% | | Total Finance Costs | 295,642 | 171,161 | 72.7% | Profit Before Tax In H1 2023, the Group's profit before tax significantly decreased, positively impacted by reduced impairment losses on bad debts, but offset by increased staff costs, depreciation, and decreased interest income Adjustments to Profit Before Tax (For the Six Months Ended June 30) | Item | 2023 (HKD Thousand) | 2022 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total staff costs | 1,487,670 | 1,449,261 | 2.6% | | Impairment losses on bad debts | 82,789 | 183,653 | (54.9)% | | Reversal of impairment losses on other receivables | (28,312) | - | - | | Amortisation of mining rights | 150,392 | 114,080 | 31.8% | | Depreciation of property, plant and equipment | 1,078,261 | 987,675 | 9.2% | | Depreciation of right-of-use assets | 114,103 | 99,388 | 14.8% | | Short-term lease payments | 9,465 | 13,623 | (30.5)% | | Variable lease payments - motor vehicles | 152,375 | 257,788 | (40.9)% | | Gain on disposal of a subsidiary | - | (239,072) | (100.0)% | | Interest income | (49,297) | (80,600) | (38.8)% | Taxation The Group's H1 2023 total taxation decreased by 31.6% year-on-year, mainly due to reduced PRC corporate income tax and deferred tax, with the effective tax rate significantly rising to 29.3% Breakdown of Taxation (For the Six Months Ended June 30) | Item | 2023 (HKD Thousand) | 2022 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Current tax | 351,108 | 667,229 | (47.4)% | | Hong Kong profits tax | 8,554 | 9,710 | (11.9)% | | PRC corporate income tax | 342,554 | 657,519 | (47.9)% | | Deferred tax | (106,633) | (309,521) | 65.5% (Decrease) | | Hong Kong deferred tax | 274 | (956) | Turned from negative to positive | | PRC deferred tax | (106,907) | (308,565) | 65.3% (Decrease) | | Total Taxation | 244,475 | 357,708 | (31.6)% | | Effective tax rate | 29.3% | 16.9% | 12.4 percentage points | | Adjusted effective tax rate | 27.7% | 19.5% | 8.2 percentage points | - Hong Kong profits tax is calculated at a rate of 16.5%, while PRC corporate income tax is calculated at 25%, including a 5% dividend withholding tax and deferred tax on estimated distributed profits[16] Earnings Per Share Basic earnings per share attributable to owners of the Company decreased by 65.5% year-on-year due to a significant decline in profit Basic Earnings Per Share Calculation (For the Six Months Ended June 30) | Metric | 2023 (HKD Thousand) | 2022 (HKD Thousand) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Profit Attributable to Owners of the Company | 620,931 | 1,804,538 | (65.6)% | | Weighted average number of shares | 6,982,937,817 | 6,982,937,817 | 0.0% | | Basic Earnings Per Share (HKD) | 0.089 | 0.258 | (65.5)% | - Diluted earnings per share is not presented as the Company has no unissued potential ordinary shares[17] Trade Receivables As of June 30, 2023, the Group's total trade receivables increased by 14.3% year-on-year, with a significant increase in the 0-90 day aging category Breakdown and Aging Analysis of Trade Receivables | Item | June 30, 2023 (HKD Thousand) | December 31, 2022 (HKD Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade receivables from third parties | 3,174,983 | 2,806,745 | 13.1% | | Trade receivables from related parties | 141,351 | 93,915 | 50.5% | | Total Trade Receivables | 3,316,334 | 2,900,660 | 14.3% | | Aging Analysis | | | | | 0 to 90 days | 2,151,923 | 1,371,303 | 56.9% | | 91 to 180 days | 190,183 | 425,260 | (55.3)% | | 181 to 365 days | 505,213 | 582,207 | (13.3)% | | Over 365 days | 469,015 | 521,890 | (10.2)% | - The Group grants customers an average credit period of 0 to 60 days from the invoice date[18] Trade Payables As of June 30, 2023, the Group's total trade payables decreased by 7.8% year-on-year, with a slight decrease in the 0-90 day aging category Breakdown and Aging Analysis of Trade Payables | Item | June 30, 2023 (HKD Thousand) | December 31, 2022 (HKD Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade payables to third parties | 2,883,007 | 3,134,309 | (8.0)% | | Trade payables to related parties | 103,806 | 107,498 | (3.4)% | | Total Trade Payables | 2,986,813 | 3,241,807 | (7.8)% | | Aging Analysis | | | | | 0 to 90 days | 2,821,425 | 3,037,448 | (7.1)% | | 91 to 180 days | 70,515 | 119,481 | (41.0)% | | 181 to 365 days | 71,068 | 74,628 | (4.7)% | | Over 365 days | 23,805 | 10,250 | 132.2% | - The Group typically obtains credit periods of 30 to 90 days from its suppliers[21] Dividend Policy Interim Dividend The Board declared an interim dividend of HKD 0.041 per share for H1 2023, a significant decrease from the prior year, with shareholders having the option to receive it in HKD or RMB cash Interim Dividend Overview | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Interim Dividend Per Share | HKD 0.041 | HKD 0.12 | | Total Amount | Approx. HKD 286,300,000 | Approx. HKD 838,000,000 | | Payment Date | October 27, 2023 | - | | Dividend Currency Option | HKD (default) or RMB (RMB 0.03764284 per share) | - | - Shareholders must submit the dividend currency election form by 4:30 p.m. on October 13, 2023, otherwise they will automatically receive the dividend in HKD[23] Closure of Register of Members To determine interim dividend entitlements, the Company will suspend share transfer registration from September 18 to 22, 2023, requiring shareholders to complete transfers by September 15, 2023 - The register of members will be closed from Monday, September 18, 2023, to Friday, September 22, 2023[24] - To qualify for the interim dividend, all share transfer documents, accompanied by the relevant share certificates, must be lodged with the Company's share registrar no later than 4:30 p.m. on Friday, September 15, 2023[24] Business Environment and Industry Analysis Business Environment In H1 2023, China's economy recovered with 5.5% GDP growth, increased fixed asset and infrastructure investments, a stabilizing real estate market despite declining sales, and proactive government policies for urban renewal and rural revitalization H1 2023 China Macroeconomic Indicators | Metric | H1 2023 | Y-o-Y Change (%) | | :--- | :--- | :--- | | Gross Domestic Product | RMB 59.3 Trillion | 5.5% | | National Fixed Asset Investment (excluding rural households) | RMB 24.3 Trillion | 3.8% | | National Infrastructure Investment (excluding electricity, heat, gas, and water production and supply) | - | 7.2% | | National Fixed Asset Investment in Highways and Waterways | Approx. RMB 1.5 Trillion | 9.8% | | National Fixed Asset Investment in Railways | RMB 304.9 Billion | 6.9% | | National Commercial Housing Sales Area | 600 Million Sqm | (5.3)% | | National Commercial Housing Sales Value | RMB 6.3 Trillion | 1.1% | | National Real Estate Development Investment | RMB 5.9 Trillion | (7.9)% | | New Housing Construction Area | 500 Million Sqm | (24.3)% | | Housing Completion Area | 340 Million Sqm | 19.0% | - The Chinese government adhered to the general principle of seeking progress while maintaining stability, accelerated the construction of a new development pattern, promoted high-quality development, and saw an overall economic recovery[25] - The government increased fiscal policy efforts, issuing new special bonds of RMB 3.8 trillion, with approximately RMB 2.17 trillion issued in H1, prioritizing support for major national strategies and project construction[27] - The People's Bank of China lowered the reserve requirement ratio by 0.25 percentage points and reduced the Loan Prime Rate (LPR) to lower financing costs for the real economy and promote stable and healthy development of the real estate market[27] Industry Overview In H1 2023, national cement output increased by 1.3%, with varied regional production and new clinker capacity, while the government continued to promote green transformation, energy efficiency, industrial restructuring, and new building material R&D H1 2023 National and Key Regional Cement Output | Region | Cement Output (Ten Thousand Tons) | Y-o-Y Change (%) | | :--- | :--- | :--- | | National | Approx. 950 Million Tons | 1.3% | | Guangdong | 6,670 | 0.5% | | Guangxi | 4,780 | 3.3% | | Fujian | 3,790 | (5.1)% | | Hainan | 730 | (6.8)% | | Yunnan | 4,740 | 3.1% | | Guizhou | 2,710 | (3.8)% | | Shanxi | 2,090 | (4.1)% | | Hunan | 3,600 | 1.5% | - Nine new clinker production lines were added nationwide, increasing annual clinker capacity by approximately 12.9 million tons, primarily in Guangxi, Guizhou, and Hunan[28] - The Chinese government is promoting ultra-low emission upgrades in the cement industry, targeting 50% of clinker capacity in key regions to complete upgrades by end of 2025, and striving for 80% nationwide by end of 2028[28] - The 'Guidance on Building a Carbon Peak and Carbon Neutrality Standard System' and 'Energy Efficiency Benchmark and Baseline Levels for Key Industrial Sectors (2023 Edition)' were issued, requiring 25 key sectors, including cement, to complete energy efficiency upgrades by end of 2025[29] - The 'Notice on Regulating and Improving Sand and Gravel Mining Management' was issued, requiring the maintenance of good mining order and promotion of green development of mineral resources[30] - The 'Outline for Building a Quality Power' proposes accelerating R&D and application of new building materials such as high-strength, high-durability, recyclable, and green environmental materials, vigorously developing green building materials[30] Business Operations and Transformation Transformation and Innovation The Group, guided by its '14th Five-Year Plan' strategic blueprint, reorganized its business into four segments, achieving breakthroughs, increasing R&D, promoting green and digital transformation, and gaining industry recognition - The Group's business was re-segmented into four major business sectors: basic building materials, structural building materials, functional building materials, and new materials, actively seizing opportunities to enter new regions such as Hunan, Hubei, and Shandong[31] - In basic building materials, the Group successfully bid for mining rights to the Longmashan Limestone Mine in Nanning, Guangxi, and the Maoping Mining Area Limestone Mine for cement in Meizhou, Guangdong, expanding aggregate and cement limestone resources[31] - In structural building materials, the Group has 6 precast concrete component projects, with a designed annual production capacity expected to reach approximately 1.4 million cubic meters upon full completion[31] - In functional building materials, the Group optimized its artificial stone business, established a standardized product system, and expanded its inorganic artificial stone production line[31] - The Group continued to increase R&D investment, advancing clinker production line grate cooler upgrades, optimizing high-efficiency pre-decomposition systems, applying raw material grinding aids, conducting solid waste trials and alternative fuel projects, and promoting photovoltaic power generation[32] - Actively promoting the application of pure electric mining vehicles, autonomous driving, and digital mines to advance green mine construction[32] - Awarded first, second, and third prizes in the first 'State-owned Enterprise Digital Scene Innovation Professional Competition' organized by the Chinese government, and the artificial stone project won the Gold Award for Quality Stone Decoration Engineering at the 6th 'Huabiao Cup'[32] Production Capacity In H1, the Group added limestone resources in Hunan and increased cement capacity, while total annual concrete capacity remained unchanged, but capacity utilization rates for cement, clinker, and concrete all decreased - Hunan Liangtian Cement Co., Ltd. won mining rights, adding 36.3 million tons of limestone resources, and increased annual cement production capacity to approximately 2.1 million tons through technological upgrades[33] - One concrete mixing plant was newly commissioned, two were suspended, and total annual production capacity remained consistent with end-2022[33] Capacity Utilization Rate (For the Six Months Ended June 30) | Product | H1 2023 | H1 2022 | Change (Percentage Points) | | :--- | :--- | :--- | :--- | | Cement | 63.6% | 69.9% | (6.3) | | Clinker | 78.9% | 87.1% | (8.2) | | Concrete | 21.3% | 28.8% | (7.5) | Cost Management In H1, the Group focused on 'systematic reshaping and high-quality development,' deepening operational excellence, implementing energy-saving and carbon reduction initiatives, and effectively lowering coal procurement and logistics costs through optimized procurement and logistics management - The Group comprehensively deepened operational excellence, built a 'grand operation management system,' steadily implemented energy-saving and carbon reduction action plans, and promoted the application of new technologies and innovative achievements[35] - In mine management, safety and intelligent automation levels were enhanced through controlled blasting, slope management, pure electric mining vehicles, autonomous driving, and digital mine applications[35] Coal Procurement and Cost Data (For the Six Months Ended June 30) | Metric | H1 2023 | H1 2022 | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Total coal procurement | Approx. 4.6 million tons | Approx. 4.3 million tons | 7.0% | | Average coal procurement price | HKD 1,152 per ton | HKD 1,166 per ton | (1.2)% | | Average calorific value of coal | 5,195 Kcal per Kg | - | 0.2% | | Unit coal consumption per ton of clinker produced | 134.2 Kg | 140.9 Kg | (4.7)% | | Average coal cost per ton of clinker produced | HKD 154.5 | HKD 164.3 | (6.0)% | - Overall logistics costs showed a downward trend, achieved by optimizing shipping tender plans, introducing multiple logistics providers for competition, and calculating two-way vehicle and bulk cement transportation costs[37] - The Group has an annual transportation capacity of approximately 38.6 million tons in the Xijiang River basin, controls 35 transit warehouses with an annual transit capacity of approximately 31.9 million tons, consolidating its leading position in South China[37] Marketing In H1, the Group continued to promote specialized products, increased brand investment to enhance 'Runfeng' brand coverage, and expanded into the functional building materials market with the 'Runpin' brand - Continuously and deeply promoting specialized products such as nuclear power cement, road Portland cement, and medium-low heat cement, leveraging differentiated competitive advantages[38] - The 'Runfeng' brand's terminal coverage rate increased by 2 percentage points year-on-year to 92%, and customer appreciation events were upgraded to feature both 'Runfeng' and 'Runpin' brands[39] - 'Runpin,' as a unified brand for functional building materials, expanded brand exposure by participating in professional exhibitions, operating the 'Runpin Hui' showroom, and engaging in online media integrated communication[39] New Business Development The Group actively pursued new business opportunities, with rapid growth in aggregate business, continuously increasing asset and revenue contributions. Prefabricated construction progressed steadily, functional building materials enhanced competitiveness, and new material industries like calcium-based and basalt were actively planned - Aggregate business achieved rapid development, with new business asset and revenue contributions continuously increasing, further enriching high-quality aggregate mine resource reserves[40][41] Aggregate Capacity Overview | Item | Resource Reserves (Ten Thousand Tons) | Planned Annual Capacity (Ten Thousand Tons) | Estimated Commissioning Time | | :--- | :--- | :--- | :--- | | Longmashan Limestone Mine, Nanning, Guangxi | Approx. 7.6 million | Approx. 500 thousand | Before end of 2023 | | Anshun Aggregate Concrete Project, Guizhou | - | Approx. 200 thousand | Completed and commissioned | | Maoping Mining Area Aggregate, Meizhou, Guangdong | Approx. 1.2 million | Approx. 130 thousand | End of 2024 | | Operating Annual Aggregate Capacity (Subsidiaries) | - | Approx. 8.34 million | As of June 30, 2023 | | Operating Annual Aggregate Capacity (Share of Associates) | - | Approx. 310 thousand | As of June 30, 2023 | | Controlled Annual Aggregate Capacity Upon Full Completion (Subsidiaries) | - | Estimated 14.64 million | - | | Controlled Annual Aggregate Capacity Upon Full Completion (Share of Associates/Joint Ventures) | - | Estimated 1.36 million | - | - Prefabricated construction business progressed steadily, with Guangdong Zhizhu Jiangmen Precast Concrete Component Project officially in production, designed annual capacity of approximately 50,000 cubic meters. The Group owns a total of 6 precast concrete component projects, with a designed annual capacity expected to reach approximately 1.4 million cubic meters upon full completion[42] - The first phase of the autoclaved aerated concrete block and panel production line project in Fengkai, Guangdong, has commenced trial production, with designed annual capacity of approximately 400,000 cubic meters for panels and 200,000 cubic meters for blocks[43] - In functional building materials, Dongguan Global Classic's expanded inorganic artificial stone production line project has commenced operation, with a planned annual capacity of approximately 1.5 million square meters, enhancing competitiveness through technological innovation and marketing system optimization[44] - New materials business actively planned for calcium-based, basalt fiber, and new energy materials, with Hubei Chongyang Calcium Oxide Project and Guangxi Guigang Calcium-based Project both acquiring mining rights, expected to commence production in 2024[45] Digital Transformation The Group continuously advanced digitalization and intelligent construction, building benchmark smart factories, promoting advanced control systems, and achieving digital transformation in artificial stone, logistics, and marketing to enhance operational efficiency and service quality - Building a benchmark full-process smart factory for the cement industry at the Tianyang District cement production base in Guangxi, and a standardized, platform-based lighthouse factory at the Fengkai County cement production base in Guangdong[46] - The Oracle EBS system for the artificial stone industry was piloted and launched at Dongguan Global Classic, achieving online and refined management of the entire value chain for the stone business[46] - Actively promoting 5G technology applications, advancing China Resources' '5G+Industrial Internet' integrated innovation applications, and developing 1 '5G handheld industrial terminal product'[46] - The all-in-one card smart logistics system was launched across 6 aggregate bases, enabling unattended weighbridges and improving dispatch efficiency and pickup service quality[47] - The digital transformation project for marketing models was fully launched across major regional cement and tile adhesive businesses, achieving 100% coverage, with e-commerce platforms accumulating a total shipment volume of approximately 140 million tons[47] Research and Development and Innovation The Group continuously increased R&D investment, built a professional scientific and technological talent team, developed multiple new technologies and products, particularly advancing in solid waste disposal, energy saving, carbon reduction, and carbon utilization, while actively planning for emerging industries and establishing a comprehensive scientific innovation system - As of end-June 2023, the Group had 329 scientific and technological talents, including 66 full-time R&D personnel and 68 intelligent and digital professionals[48] - Developed a rotary kiln for disposing of heavy, difficult-to-burn, medium-low calorific value solid waste such as municipal solid waste, and a stepping furnace for disposing of light, loose, flammable biomass solid waste[48] - Researched and promoted the application of raw material roller press and cement grinding energy-saving and carbon reduction technologies, developed in-situ CO2 self-enrichment process re-engineering technology and high-carbon sequestration non-autoclaved aerated concrete products, and built a carbon utilization research platform[48] - Actively planning for new industries such as silicon-based materials, basalt materials, energy storage battery materials, perovskite solar cells, and aerogel materials[49] - Organized the 'Runfeng Cup' Innovation Competition and Science and Technology Innovation Forum, formulated incentive mechanisms for scientific research projects, and co-established the 'China Resources Group Energy Saving and Environmental Protection Technology Innovation Alliance' with China Resources Environmental Technology Co., Ltd. and East China University of Science and Technology[49] Employee Information General Information As of June 30, 2023, the Group's total full-time employees numbered 18,351, a slight decrease from end-2022. The management team is predominantly male, mostly holding university degrees or higher, with an average age of approximately 47, and the Group implements a job-value-based compensation mechanism Employee Headcount and Functional Distribution | Item | June 30, 2023 | December 31, 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total full-time employees | 18,351 | 19,046 | (3.6)% | | Hong Kong employees | 350 | 344 | 1.7% | | PRC employees | 18,001 | 18,702 | (3.7)% | | By Function | | | | | Management | 482 | 472 | 2.1% | | Finance, Administration and Others | 2,318 | 2,486 | (6.8)% | | Production personnel | 10,489 | 10,941 | (4.1)% | | Technical personnel | 4,374 | 4,426 | (1.2)% | | Marketing personnel | 688 | 721 | (4.5)% | - Among senior and middle management, 87% are male and 13% are female; 83% hold university degrees or above, with an average age of approximately 47[51] - The Group has established a compensation distribution mechanism based on job value, combined with performance contribution, individual capabilities, and talent development[52] Financial Performance Review Revenue The Group's H1 2023 consolidated revenue decreased by 24.5% year-on-year, primarily due to RMB depreciation against HKD and declines in sales volume and average selling prices of cement, clinker, and concrete products - The Group's functional currency is RMB, with financial data denominated in HKD, and RMB depreciated by approximately 6.3% against HKD during the period[53] Product Revenue, Sales Volume, and Average Selling Price (For the Six Months Ended June 30) | Product | 2023 Sales Volume (Thousand Tons/Cubic Meters) | 2023 Average Selling Price (HKD/Ton/Cubic Meter) | 2023 Revenue (HKD Thousand) | 2022 Sales Volume (Thousand Tons/Cubic Meters) | 2022 Average Selling Price (HKD/Ton/Cubic Meter) | 2022 Revenue (HKD Thousand) | Sales Volume Change (%) | Price Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Cement | 28,521 | 357.1 | 10,185,884 | 30,669 | 406.2 | 12,457,738 | (7.0)% | (12.1)% | | Clinker | 1,023 | 304.3 | 311,306 | 2,041 | 386.9 | 789,776 | (49.9)% | (21.3)% | | Concrete | 3,803 | 440.5 | 1,675,431 | 5,392 | 532.1 | 2,869,011 | (29.5)% | (17.2)% | | Total | - | - | 12,172,621 | - | - | 16,116,525 | - | - | - Approximately 82.8% of cement products were of 42.5 grade or higher (H1 2022: 83.9%), and approximately 29.4% were sold in bags (H1 2022: 27.3%)[55] Cost of Sales In H1 2023, coal's share of the Group's cost of sales increased, but average coal cost per ton of clinker decreased due to lower coal procurement prices and improved unit coal consumption. Electricity costs slightly declined, with cost savings from waste heat power generation Composition of Consolidated Cost of Sales (Excluding Related Party Cement Sales) | Cost Category | H1 2023 Share | H1 2022 Share | Change (Percentage Points) | | :--- | :--- | :--- | :--- | | Coal | 38.3% | 34.1% | 4.2 | | Electricity | 10.8% | 9.7% | 1.1 | | Materials | 24.4% | 31.2% | (6.8) | | Other costs | 26.5% | 25.0% | 1.5 | - The average electricity cost per ton of cement decreased by 0.5% from HKD 36.4 to HKD 36.2, with electricity consumption per ton of cement at 71.7 kWh (H1 2022: 72.1 kWh)[58] - Waste heat power generation equipment generated a total of 711.3 million kWh, accounting for approximately 29.9% of required electricity consumption, saving costs of approximately HKD 415 million[58] - Repair and maintenance costs included in the cost of sales for cement products amounted to HKD 351.9 million, a 39.7% decrease from the prior year[58] Gross Profit and Gross Profit Margin The Group's H1 2023 consolidated gross profit decreased by 42.4% year-on-year, with the consolidated gross profit margin falling by 4.9 percentage points to 15.6%, primarily due to lower product selling prices and sales volumes Gross Profit and Gross Profit Margin (For the Six Months Ended June 30) | Metric | H1 2023 | H1 2022 | Change (Percentage Points) | | :--- | :--- | :--- | :--- | | Consolidated Gross Profit (HKD Million) | 1,902.5 | 3,302.7 | (42.4)% | | Consolidated Gross Profit Margin | 15.6% | 20.5% | (4.9) | | Cement Gross Profit Margin | 16.7% | 22.0% | (5.3) | | Clinker Gross Profit Margin | 7.7% | 21.8% | (14.1) | | Concrete Gross Profit Margin | 10.4% | 13.8% | (3.4) | - The decrease in consolidated gross profit and gross profit margin was primarily due to lower product selling prices and sales volumes during the period compared to H1 2022[59] Other Income The Group's H1 2023 other income slightly decreased by 3.0% year-on-year Other Income (For the Six Months Ended June 30) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Other Income | 564.2 | 581.6 | (3.0)% | Selling and Distribution Expenses The Group's H1 2023 selling and distribution expenses decreased by 11.6% year-on-year, primarily due to lower sales volume, but increased as a percentage of consolidated revenue Selling and Distribution Expenses (For the Six Months Ended June 30) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 243.9 | 276.0 | (11.6)% | | As a percentage of consolidated revenue | 2.0% | 1.7% | 0.3 percentage points | - The decrease in selling and distribution expenses was primarily due to lower sales volume during the period compared to H1 2022[60] General and Administrative Expenses The Group's H1 2023 general and administrative expenses decreased by 10.9% year-on-year, partly due to reduced impairment losses on bad debts, but increased as a percentage of consolidated revenue General and Administrative Expenses (For the Six Months Ended June 30) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change (%) | | :--- | :--- | :--- | :--- | | General and Administrative Expenses | 1,098.8 | 1,233.5 | (10.9)% | | Decrease in impairment losses on bad debts | 100.9 | - | - | | As a percentage of consolidated revenue | 9.0% | 7.7% | 1.3 percentage points | - The decrease in general and administrative expenses was partly due to a HKD 100.9 million reduction in impairment losses on bad debts compared to the prior year[61] Share of Results of Associates The Group's H1 2023 share of results of associates turned from a profit to a loss year-on-year, primarily impacted by losses from associates in Fujian, Yunnan, and Guangdong Share of Results of Associates (For the Six Months Ended June 30) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Total share of results of associates | (27.8) | 11.8 | Turned from profit to loss | | Inner Mongolia associate | 22.4 | 72.4 | (69.0)% | | Fujian associate | (38.7) | (11.1) | 248.6% (Loss widened) | | Yunnan associate | 24.7 | (30.9) | Turned from loss to profit | | Guangdong associate | (24.1) | (12.6) | 91.3% (Loss widened) | Share of Results of Joint Ventures The Group's H1 2023 share of results of joint ventures turned from a loss to a profit year-on-year Share of Results of Joint Ventures (For the Six Months Ended June 30) | Metric | H1 2023 (HKD Million) | H1 2022 (HKD Million) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Total share of results of joint ventures | 32.2 | (26.2) | Turned from loss to profit | Taxation The Group's H1 2023 effective tax rate significantly increased to 29.3%, with the adjusted effective tax rate also rising Effective Tax Rate (For the Six Months Ended June 30) | Metric | H1 2023 | H1 2022 | Change (Percentage Points) | | :--- | :--- | :--- | :--- | | Effective tax rate | 29.3% | 16.9% | 12.4 | | Adjusted effective tax rate | 27.7% | 19.5% | 8.2 | Net Profit Margin The Group's H1 2023 net profit margin significantly decreased by 6.1 percentage points to 4.8% Net Profit Margin (For the Six Months Ended June 30) | Metric | H1 2023 | H1 2022 | Change (Percentage Points) | | :--- | :--- | :--- | :--- | | Net Profit Margin | 4.8% | 10.9% | (6.1) | Liquidity and Financial Resources Sources of Funds The Group's sources of funds primarily include internal funds, bank loans, loans from related parties, issuance of equity securities, and cash flows from operations - The Group's sources of funds primarily include internal funds, bank loans, loans from related parties, issuance of equity securities, and cash flows generated from operations[64] Bank and Other Borrowings As of June 30, 2023, the Group's total bank and other borrowings increased, with a higher proportion of floating-rate borrowings. The Group holds substantial unutilized bank loan facilities and complies with relevant financial covenants Bank and Other Borrowings Overview | Metric | June 30, 2023 (HKD Thousand) | December 31, 2022 (HKD Thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Bank loans | 19,183,161 | 15,836,585 | 21.1% | | Loans from related parties | 650,737 | 596,678 | 9.1% | | Total Borrowings | 19,833,898 | 16,433,263 | 20.7% | | Fixed-rate borrowings | 5,234,500 | 5,365,400 | (2.4)% | | Floating-rate borrowings | 14,599,400 | 11,067,900 | 31.9% | | HKD denominated borrowings | 2,300,000 | 2,300,000 | 0.0% | | RMB denominated borrowings | 16,165,937 | 12,624,846 | 28.0% | | Repayable within one year | 3,959,986 | 4,548,117 | (12.9)% | | Unutilized bank loan facilities (RMB) | RMB 19.4947 billion | - | - | - The Group's unsecured bank loan facilities amounted to HKD 2.3 billion and RMB 35.0607 billion, of which RMB 19.4947 billion remained unutilized[66][67] - The Group complies with the financial covenants in its bank loan agreements regarding China Resources (Holdings) Company Limited holding no less than 35% of shares and a net gearing ratio not exceeding 180%[68] Pledge of Assets As of June 30, 2023, the Group had not pledged any assets - As at June 30, 2023, the Group had not pledged any assets[70] Contingent Liabilities As of June 30, 2023, the Group provided bank loan guarantees for associates and joint ventures, a portion of which had been utilized Contingent Liabilities Overview | Item | June 30, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Bank loan facility guarantees granted to associates and joint ventures | 2,740,200,000 | 2,109,200,000 | | Amount of guarantees utilized | 1,466,800,000 | 1,360,300,000 | Future Plans and Capital Expenditure The Group has substantial future capital expenditure plans, primarily for expansion, to be funded through borrowings and internal resources Expected Future Capital Expenditure | Item | Amount (HKD) | | :--- | :--- | | Capital expenditure contracted but not provided for | Approx. HKD 7.9707 billion | | Total capital expenditure payments for H2 2023 | Approx. HKD 2.9377 billion | | Total capital expenditure payments for the year ending December 31, 2024 | Approx. HKD 7.3847 billion | - Future capital expenditure will be funded by borrowings and internally generated funds[71] Strategy and Outlook The Group anticipates China's economy to continue stable progress, with government policies in transportation, real estate, and rural revitalization driving medium-to-long-term demand for the building materials sector. The Company will focus on 'systematic reshaping and high-quality development,' optimizing industrial chain layout, accelerating digital and intelligent transformation, increasing R&D investment, and strengthening its '4+1' core businesses to enhance industry leadership - The Chinese government is accelerating the construction of a strong transportation network, with significant increases in railway, highway, waterway, and airport mileage expected by 2027, driving demand for the building materials industry[72] - Real estate policies will be timely adjusted and optimized to meet rigid and improved housing demands, actively promoting the construction of affordable housing, urban village renovation, and 'dual-use' public infrastructure[72] - The rural revitalization strategy will drive infrastructure construction such as rural roads, water supply, power grids, and dilapidated housing renovation, effectively boosting demand for cement and other building materials[72] - Infrastructure interconnectivity in the Guangdong-Hong Kong-Macao Greater Bay Area will continue to advance, with significant increases in operating and under-construction railway mileage, supporting medium-to-long-term demand for the regional building materials industry[73] - The Group will focus on the annual theme of 'systematic reshaping and high-quality development,' optimizing industrial chain layout, accelerating digital and intelligent transformation, increasing innovation R&D investment, and expediting strategic emerging industry planning[73] - In the future, the Group will strengthen and optimize basic and functional building materials businesses, integrate structural building materials, incubate new materials businesses, focusing on '4+1' businesses: cement, aggregates, concrete, artificial stone, and new materials[73] - Continuously deepening the three core capabilities of 'lowest system cost, regional market leadership, and innovation-driven development,' constantly strengthening operational excellence, enhancing R&D capabilities, accelerating green development, and leading the industry's digital and intelligent transformation[73] Other Information Corporate Governance The Company complied with the Corporate Governance Code provisions in Appendix 14 of the Listing Rules during the reporting period - The Company has complied with the applicable requirements of the code provisions ('Corporate Governance Code') set out in Part 2 of Appendix 14 to the Listing Rules[74] Repurchase, Sale or Redemption of the Company's Listed Securities Neither the Company nor any of its subsidiaries repurchased, sold, or redeemed any of the Company's listed securities during the reporting period - Neither the Company nor any of its subsidiaries repurchased, sold or redeemed any of the Company's listed securities during the period[75] Review of Interim Report The Company's interim report has been reviewed by the Audit Committee - The Company's interim report for the period (with unaudited condensed consolidated financial statements) has been reviewed by the Company's Audit Committee[75] Acknowledgement The Chairman of the Board expressed gratitude to the directors, management team, all employees, shareholders, customers, suppliers, business partners, and other stakeholders for their support to the Group - The Chairman of the Board expressed gratitude for the contributions and hard work of the directors, management team, and all employees, and sincerely thanked shareholders, customers, suppliers, business partners, and other stakeholders for their continued trust and unwavering support[76] Publication of Interim Report on HKEX and Company Website The Company's interim report will be published on the HKEXnews website and the Company's website in due course - The Company's interim report for the period will be published on the HKEXnews website (www.hkexnews.hk) and the Company's website (www.crcement.com) in due course[77]