兴业合金(00505) - 2023 - 中期业绩

Consolidated Statement of Profit or Loss and Other Comprehensive Income This section presents the Group's financial performance, including profit or loss and other comprehensive income, for the interim period Consolidated Statement of Profit or Loss For H1 2023, Group revenue decreased by 12.8%, profit for the period was down 9.8%, and basic EPS was RMB 12.13 cents Consolidated Statement of Profit or Loss Key Data (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------- | :------------------ | :------------------ | | Revenue | 2,809,295 | 3,222,331 | | Cost of sales | (2,523,454) | (2,946,403) | | Gross profit | 285,841 | 275,928 | | Other income | 14,027 | 11,246 | | Distribution expenses | (21,042) | (30,833) | | Administrative expenses | (151,541) | (158,599) | | Other gains and losses, net | (6,335) | 41,335 | | Operating profit | 120,950 | 139,077 | | Finance income | 23,087 | 14,461 | | Finance costs | (18,979) | (18,655) | | Net finance income/(costs) | 4,108 | (4,194) | | Profit before tax | 125,058 | 134,883 | | Income tax expense | (17,172) | (15,317) | | Profit for the period | 107,886 | 119,566 | | Attributable to equity holders of the Company | 107,726 | 119,447 | | Attributable to non-controlling interests | 160 | 119 | | Basic earnings per share (RMB cents) | 12.13 | 13.36 | | Diluted earnings per share (RMB cents) | 12.13 | 13.36 | Other Comprehensive Income Total comprehensive income for H1 2023 decreased to RMB 109,135 thousand, primarily due to lower profit for the period Other Comprehensive Income Key Data (For the six months ended June 30) | Indicator | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--------------------------------- | :------------------ | :------------------ | | Profit for the period | 107,886 | 119,566 | | Exchange differences on translation of financial statements of overseas operations | 1,249 | 2,170 | | Total comprehensive income for the period | 109,135 | 121,736 | | Attributable to equity holders of the Company | 108,975 | 121,617 | | Attributable to non-controlling interests | 160 | 119 | | Total comprehensive income for the period | 109,135 | 121,736 | Consolidated Statement of Financial Position As of June 30, 2023, total assets increased by 9.5% to RMB 4,608,128 thousand, with net current assets at RMB 859,400 thousand Consolidated Statement of Financial Position Key Data | Indicator | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Non-current assets | | | | Property, plant and equipment | 981,608 | 922,420 | | Right-of-use assets | 64,895 | 67,007 | | Deposits for purchase of property, plant and equipment | 61,432 | 24,900 | | Deferred tax assets | 20,015 | 23,859 | | Other non-current assets | 7,490 | 7,490 | | Total non-current assets | 1,135,440 | 1,045,676 | | Current assets | | | | Inventories | 1,257,705 | 1,229,301 | | Trade and other receivables | 581,158 | 546,898 | | Derivative financial instruments | 2,946 | 935 | | Restricted bank deposits | 967,957 | 720,133 | | Bank deposits with original maturity over three months | 178,309 | 311,683 | | Cash and cash equivalents | 484,613 | 316,859 | | Total current assets | 3,472,688 | 3,125,809 | | Current liabilities | | | | Trade and other payables | 1,386,757 | 1,456,706 | | Interest-bearing borrowings | 1,195,588 | 745,050 | | Derivative financial instruments | 4,517 | 10,599 | | Lease liabilities | 1,200 | 1,999 | | Income tax payable | 25,226 | 8,079 | | Total current liabilities | 2,613,288 | 2,222,433 | | Net current assets | 859,400 | 903,376 | | Total assets less current liabilities | 1,994,840 | 1,949,052 | | Non-current liabilities | | | | Interest-bearing borrowings | 73,301 | 117,739 | | Lease liabilities | 615 | 995 | | Deferred income | 31,405 | 38,788 | | Deferred tax liabilities | 6,000 | 6,000 | | Total non-current liabilities | 111,321 | 163,522 | | Net assets | 1,883,519 | 1,785,530 | | Capital and reserves | | | | Share capital | 80,774 | 80,774 | | Reserves | 1,799,840 | 1,702,011 | | Total equity attributable to equity holders of the Company | 1,880,614 | 1,782,785 | | Non-controlling interests | 2,905 | 2,745 | | Total equity | 1,883,519 | 1,785,530 | Notes to the Unaudited Interim Financial Results This section provides detailed notes and disclosures supporting the unaudited interim financial results Reporting Entity and Background Information Xingye Alloy Materials Group Limited, incorporated in the Cayman Islands and listed in Hong Kong, primarily manufactures copper strips, trades raw materials, provides processing services, and operates online gaming - The Group's principal activities include manufacturing and selling high-precision copper strips, trading raw materials, providing processing services, and developing, publishing, and operating online games[14] Basis of Preparation The condensed consolidated interim financial information is prepared under IAS 34, applying the same accounting policies as the 2022 annual financial statements - Interim financial information is prepared in accordance with IAS 34 'Interim Financial Reporting' and follows the same accounting policies as the 2022 annual financial statements[15] Changes in Accounting Policies Amendments to IFRS, including IFRS 17 and IAS 1, 8, 12, effective this period, had no material impact on the Group's results or financial position - Amendments to IFRS effective for the first time this accounting period had no material impact on the Group's results or financial position for the current or prior periods[17] Revenue and Segment Reporting The Group's revenue primarily derives from copper product-related businesses, with online gaming contributing a smaller portion, operating as a single integrated segment - The Group's principal activities are manufacturing and selling high-precision copper strips, trading raw materials, providing processing services, and developing, publishing, and operating online games[19] - The Group has only one operating segment, which is the integrated operation of copper products and online gaming businesses[27] Disaggregation of Revenue For H1 2023, copper product-related revenue was RMB 2,801,682 thousand, and online gaming revenue was RMB 7,613 thousand, with Mainland China as the primary geographical source Revenue from Contracts with Customers by Major Product or Service Line (For the six months ended June 30) | Product or service line | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--------------- | :------------------ | :------------------ | | Sales of high-precision copper strips | 2,670,276 | 3,037,965 | | Processing service fees | 109,177 | 132,818 | | Trading of raw materials | 22,229 | 47,242 | | Total copper product-related | 2,801,682 | 3,218,025 | | Publishing and operating online games | 2,480 | 4,146 | | Others (online games) | 5,133 | 160 | | Total online gaming-related | 7,613 | 4,306 | | Total revenue | 2,809,295 | 3,222,331 | Revenue by Geographical Location of Customers (For the six months ended June 30) | Geographical location | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------- | :------------------ | :------------------ | | Mainland China | 2,516,118 | 2,746,352 | | Hong Kong, China | 46,428 | 50,565 | | Bangladesh | 32,821 | 48,115 | | South Korea | 32,582 | 62,958 | | Taiwan, China | 27,344 | 64,656 | | India | 17,634 | 33,470 | | Thailand | 15,808 | 24,073 | | Vietnam | 15,702 | 20,219 | | United States | 9,905 | 16,177 | | Other regions | 94,953 | 155,746 | | Total revenue | 2,809,295 | 3,222,331 | - The Group has a diversified customer base, with no single customer contributing over 10% of total revenue[26] Other Gains and Losses, Net For H1 2023, the Group recorded other net losses of RMB 6,335 thousand, compared to net gains of RMB 41,335 thousand in the prior period, mainly due to metal futures contracts shifting from gains to losses Other Gains and Losses, Net (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :--------------------------------- | :------------------ | :------------------ | | (Credit loss allowance)/reversal of credit loss allowance for trade and other receivables | (1,482) | 1,419 | | Loss on disposal of property, plant and equipment | (1,247) | (17) | | Net (loss)/gain on metal futures contracts | (3,071) | 40,029 | | Others | (535) | (96) | | Total | (6,335) | 41,335 | Profit Before Tax For H1 2023, profit before tax was RMB 125,058 thousand, a decrease from RMB 134,883 thousand in the prior period, with net finance income shifting from a cost to income Items Included in/(Deducted from) Profit Before Tax (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------- | :------------------ | :------------------ | | Interest income from bank deposits | 18,042 | 12,854 | | Net foreign exchange gains | 5,045 | 1,607 | | Finance income | 23,087 | 14,461 | | Interest expense on interest-bearing borrowings | (18,880) | (19,406) | | Interest on lease liabilities | (49) | (98) | | Less: Capitalized interest expense | 860 | 849 | | Net interest expense recognized in profit or loss | (18,069) | (18,655) | | Loss on forward foreign exchange contracts and option contracts | (910) | – | | Finance costs | (18,979) | (18,655) | | Net finance income/(costs) | 4,108 | (4,194) | | Cost of inventories | 2,520,220 | 2,945,004 | | Research and development expenses | 84,870 | 105,836 | | Depreciation – property, plant and equipment | 49,878 | 50,907 | | Depreciation – right-of-use assets | 1,323 | 1,740 | | Government grants | 13,799 | 9,559 | - For the six months ended June 30, 2023, borrowing costs were capitalized at an annual rate of 3.2% to 4.3% (2022: 4.3%)[35] Income Tax For H1 2023, income tax expense was RMB 17,172 thousand, with a consolidated effective tax rate of 14%, up from 11% due to increased taxable profit from a Chinese subsidiary Income Tax Expense (For the six months ended June 30) | Item | 2023 (RMB thousand) | 2022 (RMB thousand) | | :------------------- | :------------------ | :------------------ | | Current tax | | | | Provision for the period | 17,651 | 39,556 | | Over-provision in prior years | (4,323) | (9,917) | | Total current tax | 13,328 | 29,639 | | Deferred tax | | | | Origination and reversal of temporary differences | 3,844 | (14,322) | | Total income tax | 17,172 | 15,317 | - The Group's consolidated effective tax rate for the six months ended June 30, 2023, was 14% (2022: 11%), primarily due to increased taxable profit from a Chinese subsidiary[39] Earnings Per Share For H1 2023, basic earnings per share were RMB 12.13 cents, with diluted EPS being identical due to no dilutive potential shares Earnings Per Share Data (For the six months ended June 30) | Indicator | 2023 | 2022 | | :------------------- | :------------------ | :------------------ | | Profit attributable to ordinary equity holders of the Company (RMB thousand) | 107,726 | 119,447 | | Weighted average number of ordinary shares outstanding (shares) | 887,732,926 | 893,872,173 | | Basic earnings per share (RMB cents) | 12.13 | 13.36 | | Diluted earnings per share (RMB cents) | 12.13 | 13.36 | - As of June 30, 2023, diluted earnings per share were the same as basic earnings per share due to no dilutive potential shares during the period[42] Inventories As of June 30, 2023, total inventories were RMB 1,257,705 thousand, an increase from 2022 year-end, with a RMB 7,536 thousand provision for inventories below net realizable value Inventories Composition (As at reporting date) | Inventory category | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------- | :------------------------- | :-------------------------- | | Raw materials | 211,294 | 143,959 | | Work in progress | 779,576 | 836,733 | | Finished goods | 266,611 | 248,387 | | Others | 224 | 222 | | Total | 1,257,705 | 1,229,301 | - As of June 30, 2023, a provision of RMB 7,536 thousand was made for inventories where net realizable value was below carrying amount (December 31, 2022: RMB 15,289 thousand)[43] Trade and Other Receivables As of June 30, 2023, total trade and other receivables increased to RMB 581,158 thousand, with the aging of trade receivables and bills receivable primarily within three months Trade and Other Receivables Composition (As at reporting date) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :--------------------------------- | :------------------------- | :-------------------------- | | Trade receivables and bills receivable, net of credit loss allowance | 434,303 | 407,977 | | Deposits for metal futures contracts | 67,725 | 88,577 | | Receivables under metal futures contracts | 2,959 | – | | Other receivables, net of credit loss allowance | 1,957 | 649 | | Recoverable VAT | 34,674 | 25,042 | | Prepayments | 39,540 | 24,653 | | Total | 581,158 | 546,898 | Aging Analysis of Trade Receivables and Bills Receivable (As at reporting date) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Within 3 months | 406,244 | 396,685 | | Over 3 months but less than 6 months | 24,300 | 10,727 | | Over 6 months but less than 1 year | 3,299 | 110 | | Over 1 year | 460 | 455 | | Total | 434,303 | 407,977 | - The Group grants credit periods to customers ranging from 7 to 90 days[49] Trade and Other Payables As of June 30, 2023, total trade and other payables decreased to RMB 1,386,757 thousand, with the aging of trade payables and bills payable primarily within three months Trade and Other Payables Composition (As at reporting date) | Item | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Trade payables and bills payable | 1,234,833 | 1,279,053 | | Employee benefits payable | 53,812 | 73,961 | | Payables for purchase of property, plant and equipment | 34,155 | 39,036 | | Accrued expenses and others | 24,359 | 34,657 | | Contract liabilities | 39,598 | 29,999 | | Total | 1,386,757 | 1,456,706 | Aging Analysis of Trade Payables and Bills Payable (As at reporting date) | Aging | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Within 3 months | 1,181,995 | 1,141,499 | | Over 3 months but less than 6 months | 41,371 | 15,235 | | Over 6 months but less than 1 year | 2,824 | 106,777 | | Over 1 year | 8,643 | 15,542 | | Total | 1,234,833 | 1,279,053 | Interest-bearing Borrowings As of June 30, 2023, total interest-bearing borrowings were RMB 1,268,889 thousand, mostly short-term, with secured bank loans bearing interest at 0.30% to 5.79% and unsecured at 3.05% Repayment Schedule of Interest-bearing Borrowings (As at reporting date) | Category | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Current | | | | Short-term secured bank loans | 239,968 | 227,200 | | Unsecured bank loans | 70,000 | 50,000 | | Bank advances under discounted bills | 831,570 | 467,850 | | Current portion of non-current secured bank loans | 54,051 | – | | Total current | 1,195,588 | 745,050 | | Non-current | | | | Secured bank loans | 73,301 | 117,739 | | Total | 1,268,889 | 862,789 | Repayment Term Analysis of Interest-bearing Borrowings (As at reporting date) | Term | June 30, 2023 (RMB thousand) | December 31, 2022 (RMB thousand) | | :------------------- | :------------------------- | :-------------------------- | | Within 1 year | 1,195,588 | 745,050 | | Over 1 year but less than 2 years | 27,526 | 80,500 | | Over 2 years but less than 5 years | 45,775 | 37,239 | | Total | 1,268,889 | 862,789 | - Secured bank loans bore interest at annual rates ranging from 0.30% to 5.79% (December 31, 2022: 0.30% to 5.65%), while unsecured bank loans bore interest at 3.05% per annum (December 31, 2022: 3.85%)[54] Share Award Scheme The Company adopted a share award scheme in 2016 to reward employees, with the trustee having purchased 42,651,000 shares at a total cost of HKD 44,608,000 as of June 30, 2023 - The Company adopted a share award scheme on April 18, 2016, to recognize and reward eligible employees for their contributions to the Group's business growth and development[55] Share Award Scheme Held Shares Details | Item | June 30, 2023 | December 31, 2022 | | :------------------- | :------------ | :------------- | | Average purchase price (HKD) | 1.05 | 1.02 | | Number of shares held | 21,265,000 | 9,937,000 | | Value (RMB thousand) | 20,743 | 9,597 | - As of June 30, 2023, the trustee had purchased 42,651,000 Company shares at a total cost of HKD 44,608,000 (equivalent to RMB 38,684,000)[55] Dividends For the six months ended June 30, 2023, the Company neither declared nor paid dividends, and the Board decided not to pay any interim dividend - For the six months ended June 30, 2023, no dividends were declared or paid, and the Board decided not to pay any dividend for the interim period[67] Management Discussion and Analysis This section provides management's perspective on the Group's performance, market conditions, business developments, and financial position Market and Industry Review In H1 2023, the global economy faced high inflation, geopolitical conflicts, and trade disputes, with major economies experiencing weak recovery, impacting the copper market and domestic copper strip industry - In H1 2023, the global economy encountered multiple challenges including high inflation, geopolitical conflicts, and trade disputes led by China and the US, with major Western economies still in a tightening cycle and economic recovery remaining weak[63] - The LME three-month copper average price in June 2023 was USD 8,391/tonne, a 7.1% decrease year-on-year but a 1.6% increase month-on-month; the H1 average was USD 8,721/tonne, down 10.5% year-on-year[71] - Domestic copper prices generally followed international trends but were stronger due to RMB depreciation, fluctuating between RMB 62,680 and RMB 70,500/tonne in H1[71] Copper Processing Business Market Review In H1 2023, the copper market saw significant price volatility due to high interest rates and weak demand, with the domestic copper strip industry facing intense competition and low capacity utilization - High USD interest rates significantly increased the cost of capital for investors holding copper futures or inventory, also exerting considerable pressure on USD-denominated copper prices[63] - Copper prices showed volatile fluctuations in H1 2023, with the LME three-month copper average price at USD 8,721/tonne, a 10.5% decrease year-on-year[71] - Copper strip capacity utilization was the lowest among other copper sub-industries, highlighting intense industry competition[65] Online Gaming Business Industry Review In H1 2023, China's gaming market sales revenue decreased by 2.39% to RMB 144.3 billion, while the number of game users increased by 0.35% to 668 million China Gaming Industry Report (H1 2023) | Indicator | Data | Year-on-year change | | :--------------- | :----------- | :------- | | Market sales revenue | RMB 144.3 billion | -2.39% | | Number of game users | 668 million | +0.35% | Business Review In H1 2023, the Group's copper strip business saw decreases in production, sales, and revenue, with net profit down 10.7%, while online gaming revenue grew 76.7% and net loss significantly narrowed - The Group's copper strip business achieved a total production volume of 62,879 tonnes and total sales volume of 61,234 tonnes, representing decreases of 9.7% and 8.4% respectively compared to H1 2022[72] - Copper strip business sales revenue reached RMB 2,801.7 million, a 12.9% decrease from H1 2022, with copper business net profit at RMB 108.6 million, down 10.7% year-on-year[72] - Online gaming business achieved total revenue of RMB 7.6 million, a 76.7% increase from RMB 4.3 million in H1 2022, with net loss significantly narrowing to RMB 0.7 million from RMB 2.0 million in H1 2022[79] Copper Processing Business Review In H1 2023, the Group's copper strip business experienced declines in production, sales volume, and revenue, with net profit decreasing by 10.7% year-on-year, mainly due to lower sales volume and copper prices Copper Strip Business Production and Sales Volume (For the six months ended June 30) | Indicator | 2023 (tonnes) | 2022 (tonnes) | Year-on-year change | | :----- | :---------- | :---------- | :------- | | Total production | 62,879 | 69,658 | -9.7% | | Total sales | 61,234 | 66,828 | -8.4% | Copper Strip Business Sales Revenue (For the six months ended June 30) | Revenue category | 2023 (RMB million) | 2022 (RMB million) | Year-on-year change | | :----------- | :-------------------- | :-------------------- | :------- | | Copper product sales revenue | 2,670.3 | 3,038.0 | -12.1% | | Processing service income | 109.2 | 132.8 | -17.8% | | Copper trading income | 22.2 | 47.2 | -53.0% | | Total | 2,801.7 | 3,218.0 | -12.9% | - In H1 2023, the Group's copper business achieved a net profit of RMB 108.6 million, a 10.7% decrease compared to RMB 121.6 million in H1 2022, primarily due to lower sales volume and copper prices[72] Online Gaming Business Review In H1 2023, online gaming total revenue grew 76.7%, and net loss significantly narrowed, primarily due to revenue contributions from the new self-developed game 'Let's Cultivate Immortals' Online Gaming Business Financial Performance (For the six months ended June 30) | Indicator | 2023 (RMB million) | 2022 (RMB million) | Year-on-year change | | :------- | :-------------------- | :-------------------- | :------- | | Total revenue | 7.6 | 4.3 | +76.7% | | Net loss | (0.7) | (2.0) | Loss narrowed | - Revenue growth was primarily driven by the contribution from the new self-developed game project 'Let's Cultivate Immortals'[79] Business Development During the period, the Group optimized its sales and marketing system, advanced production line upgrades, strengthened talent development, completed quality initiatives, and successfully developed 5 new products, with 1 customer-certified - The Group engaged a leading international consulting firm to systematically design and optimize its sales and marketing system, forming a new marketing structure integrating sales, development, service, technical support, market research, and key account management[74] - As of the reporting period, a total of 4 equipment units have commenced trial operation, with remaining equipment in production or installation as planned[74] - The Group successfully developed 5 new products, with 1 product having passed customer certification and secured effective orders, and completed performance improvements or new specification trials for 7 products[75] Outlook Looking ahead to H2 2023, downstream industries related to copper strips are expected to rebound, and the Group's management is confident in seizing opportunities, while the online gaming business will focus on cost reduction and distinctive offerings amid market challenges - In H2 2023, downstream industries related to copper strips, such as consumer electronics, automotive, and home appliances, are expected to experience a sustained rebound[77] - The Group's management believes that despite intense industry competition, by leveraging continuous innovation and improved management capabilities, the Group is confident and capable of seizing this round of opportunities to achieve its operational targets[77] - The Group's gaming business will face severe challenges from a declining gaming market and intensified competition from large gaming companies, thus focusing on cost reduction and offering distinctive products and services[80] Financial Review In H1 2023, total revenue decreased by 12.8%, copper business gross margin rose to 10.0%, other gains shifted to losses, expenses decreased, net finance income turned positive, and profit attributable to shareholders declined - During the reporting period, the Group recorded total sales revenue of RMB 2,809.3 million, a 12.8% decrease compared to H1 2022[82] - The Group's overall gross margin for the copper business increased from 8.5% in H1 2022 to 10.0% in the reporting period, mainly due to lower average copper prices and reduced material input costs per tonne[83] - Profit attributable to company shareholders was RMB 107.7 million, a decrease of RMB 11.7 million from RMB 119.4 million in H1 2022[91] Revenue and Gross Profit Total revenue decreased by 12.8% to RMB 2,809.3 million, with copper business revenue down 12.9% but gross margin rising to 10.0% due to lower copper prices and material costs, while online gaming revenue grew to RMB 7.6 million - The Group recorded total sales revenue of RMB 2,809.3 million, a 12.8% decrease compared to H1 2022[82] - Total revenue from the copper business was RMB 2,801.7 million, a 12.9% decrease compared to H1 2022[82] - The overall gross margin for the copper business increased from 8.5% in H1 2022 to 10.0% in the reporting period, primarily due to lower average copper prices and reduced material input costs per tonne compared to H1 2022[83] Other Income Other income increased by RMB 2.8 million to RMB 14.0 million, primarily due to increased government grants - The Group's other income was RMB 14.0 million, an increase of RMB 2.8 million from RMB 11.2 million in H1 2022, mainly due to increased government grants[84] Other Gains and Losses, Net (Financial Review) The Group recorded other losses of RMB 6.3 million, compared to gains of RMB 41.3 million in H1 2022, primarily due to metal futures contracts shifting from gains to losses - The Group recorded other losses of RMB 6.3 million, compared to other gains of RMB 41.3 million in H1 2022, primarily due to net gains of RMB 40.0 million from metal futures contracts in 2022[86] Distribution Expenses The ratio of distribution expenses to revenue decreased to 0.7%, mainly due to reduced service fees - The ratio of distribution expenses to revenue decreased to 0.7% from 1.0% in H1 2022, primarily due to reduced service fees[87] Administrative Expenses Administrative expenses decreased by 4.7% to RMB 151.5 million, mainly due to reduced research and development expenses - The Group's administrative expenses decreased by 4.7% to RMB 151.5 million from RMB 158.6 million in H1 2022, due to reduced research and development expenses[88] Finance Income/Costs, Net The Group recorded net finance income of RMB 4.1 million, compared to net finance costs of RMB 4.2 million in H1 2022, primarily due to increased bank deposit interest income and net foreign exchange gains - The Group recorded net finance income of RMB 4.1 million, compared to net finance costs of RMB 4.2 million in H1 2022, primarily due to increased bank deposit interest income and net foreign exchange gains[89] Income Tax (Financial Review) Income tax expense was RMB 17.2 million, with a consolidated effective tax rate of 14%, up from 11% due to increased taxable profit from a Chinese subsidiary - The Group's income tax expense was RMB 17.2 million (H1 2022: RMB 15.3 million), with a consolidated effective tax rate of 14% (H1 2022: 11%), primarily due to increased taxable profit from a Chinese subsidiary[90] Profit Attributable to Company Shareholders Profit attributable to company shareholders was RMB 107.7 million, a decrease of RMB 11.7 million from RMB 119.4 million in H1 2022 - Profit attributable to company shareholders was RMB 107.7 million, a decrease of RMB 11.7 million from RMB 119.4 million in H1 2022[91] Liquidity, Financial Resources and Capital Structure As of June 30, 2023, net current assets were RMB 859.4 million, with short-term interest-bearing borrowings accounting for 94.2% of the total, and a gearing ratio of 31.1%, indicating sufficient financial resources - As of June 30, 2023, the Group recorded net current assets of RMB 859.4 million, primarily due to increased restricted bank deposits and cash and cash equivalents compared to the prior period[93] - As of June 30, 2023, short-term interest-bearing borrowings accounted for 94.2% of total interest-bearing borrowings[93] - As of June 30, 2023, the gearing ratio (calculated as net debt divided by total capital) was 31.1% (December 31, 2022: 33.0%)[95] Pledged Assets As of June 30, 2023, the Group pledged assets with a total carrying amount of RMB 493.4 million as collateral for bank loans and credit, primarily including inventories, property, plant and equipment, and right-of-use assets - As of June 30, 2023, the Group pledged assets with a total carrying amount of RMB 493.4 million (December 31, 2022: RMB 503.1 million) as collateral for its bank loans and credit[96] Capital Expenditure For H1 2023, the Group invested approximately RMB 105.9 million in property, plant and equipment, primarily funded by internal resources and bank borrowings - For the six months ended June 30, 2023, the Group invested approximately RMB 105.9 million in property, plant and equipment, primarily funded by internal resources and bank borrowings[97] Capital Commitments As of June 30, 2023, the Group had contracted but unprovided future capital expenditure of RMB 466.2 million, primarily for plant construction and capacity expansion in its copper processing business - As of June 30, 2023, the Group had contracted but unprovided future capital expenditure of RMB 466.2 million, primarily for plant construction and capacity expansion in its copper processing business[99] Contingent Liabilities As of June 30, 2023, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had no significant contingent liabilities[100] Market Risks The Group faces price, interest rate, and foreign exchange risks, utilizing futures contracts for copper price hedging and forward foreign exchange contracts for currency risk, but not interest rate swaps - The Group is exposed to various market risks, including price risk, interest rate risk, and foreign exchange risk[101] Price Risk The Group faces raw material price fluctuation risk, hedging copper prices using SHFE and LME futures contracts, and recorded a net loss of RMB 3.1 million from metal futures contracts in H1 2023 - The Group is exposed to raw material price fluctuation risk, with cathode copper, alloy scrap, zinc, tin, nickel, and other metals being key raw materials for its products[102] - The Group uses copper futures contracts on SHFE and LME to hedge against copper price fluctuations[102] - For the six months ended June 30, 2023, the Group recorded a net loss of approximately RMB 3.1 million from metal futures contracts, compared to a net gain of approximately RMB 40.0 million in H1 2022[102] Interest Rate Risk The Group's interest rate risk primarily relates to fluctuations in bank borrowing rates, which lenders may adjust, and the Group has not entered into any interest rate swaps to hedge this risk - The Group's market risk from interest rate changes primarily relates to fluctuations in bank borrowing rates[103] - The Group has not entered into any interest rate swaps to hedge interest rate risk[103] Foreign Exchange Risk The Group's foreign currency-denominated export sales and raw material purchases create foreign exchange exposure, which is hedged using forward foreign exchange contracts and options, resulting in net foreign exchange gains but net losses from hedging contracts in the period - The Group's export sales and certain raw material purchases are denominated in foreign currencies (primarily USD), thus exposing the Group to foreign exchange risk[105] - The Group uses forward foreign exchange contracts and options to hedge its foreign exchange risk[105] - During the reporting period, the Group recorded net foreign exchange gains of RMB 5.0 million, compared to RMB 1.6 million in H1 2022, while also recording net losses of RMB 0.9 million from forward foreign exchange and option contracts in 2023[105] Other Information This section covers additional disclosures including employee information, corporate governance, and post-reporting period events Employees and Incentive Schemes As of June 30, 2023, the Group employed 1,552 staff, offering competitive compensation and incentives through training and share schemes, with no share options granted or exercised under the 2016 scheme during the period - As of June 30, 2023, the Group employed a total of 1,552 employees (December 31, 2022: 1,457 employees)[114] - Employee benefits include salaries, pensions, medical insurance plans, and other applicable social insurance, with promotions and salary increases based on employee performance evaluations[114] - During the reporting period, no share options under the 2016 share option scheme were granted, exercised, lapsed, cancelled, or outstanding[115] Audit Committee The Company's Board Audit Committee reviewed the Group's accounting policies and practices with management, discussing financial reporting matters, including the interim results and report for the review period - The Company's Board Audit Committee reviewed the Group's accounting policies and practices with management and discussed financial reporting matters, including the interim results and interim report prepared in accordance with relevant accounting standards for the review period[111] Compliance with Corporate Governance Code During the reporting period, the Company consistently complied with the code provisions set out in Part 2 of Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited - During the reporting period, the Company consistently complied with the code provisions set out in Part 2 of Appendix 14 to the Listing Rules of The Stock Exchange of Hong Kong Limited[112] Compliance with Model Code for Securities Transactions Following specific inquiries, all Directors confirmed compliance with the Model Code for Securities Transactions by Directors of Listed Issuers for the six months ended June 30, 2023 - Following specific inquiries to all Directors, they confirmed compliance with the standard requirements set out in the Model Code for the six months ended June 30, 2023[117] Purchase, Sale or Redemption of the Company's Listed Securities For H1 2023, the share award scheme trustee purchased 11,328,000 Company shares for HKD 12,547,000; otherwise, neither the Company nor its subsidiaries purchased, sold, or redeemed any listed securities - For the six months ended June 30, 2023, the trustee of the share award scheme purchased a total of 11,328,000 Company shares on the Stock Exchange for a total consideration of HKD 12,547,000 (equivalent to RMB 11,146,000)[118] - Other than the aforementioned purchases under the share award scheme, neither the Company nor its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[118] Interim Dividend The Company's Board of Directors did not declare an interim dividend for the six months ended June 30, 2023 - The Company's Board of Directors did not declare an interim dividend for the six months ended June 30, 2023 (H1 2022: nil)[119] Events After Reporting Period There were no significant events after the reporting period up to the date of this announcement - There were no significant events after the reporting period up to the date of this announcement[120] Publication of 2023 Interim Results Announcement and Interim Report This results announcement is available on the Company's website and HKEXnews website, and the 2023 interim report will be published and dispatched to shareholders in due course - This results announcement is available on the Company's website (www.xingyealloy.com) and the HKEXnews website (www.hkexnews.hk)[122](index=122&type=chunk) - The Company's 2023 interim report will be published on the Company's website and the HKEXnews website, and will be dispatched to the Company's shareholders in due course[122]