中国秦发(00866) - 2023 - 中期业绩

Company Overview and Financial Summary This section provides an overview of the company's interim financial performance, including a profit warning and key consolidated financial statements 1.1 Company Information and Profit Warning Unaudited H1 2023 interim results, following a profit warning, show significant declines in revenue, gross margin, and profits, with no interim dividend recommended - The company released its unaudited interim results for the six months ended June 30, 2023, following a prior profit warning[7][8] - The Board of Directors does not recommend paying any interim dividend for the six months ended June 30, 2023[7] Key Financial Summary for the Six Months Ended June 30 | Indicator | 2023 H1 (RMB) | 2022 H1 (RMB) | | :--- | :--- | :--- | | Revenue | 1,905,900,000 | 2,056,954,000 | | Coal Operating and Trading Volume | 2,700,000 tonnes | 2,575,000 tonnes | | Commercial Coal Production | 2,400,000 tonnes | 2,457,000 tonnes | | Gross Margin | 20.5% | 34.2% | | Operating Profit | 259,300,000 | 615,900,000 | | Profit After Tax | 140,100,000 | 371,200,000 | | Profit Attributable to Equity Holders of the Company | 130,800,000 | 327,400,000 | | Basic Earnings Per Share | RMB 5.14 cents | RMB 13.03 cents | | Diluted Earnings Per Share | RMB 5.01 cents | RMB 12.54 cents | 1.2 Condensed Consolidated Statement of Comprehensive Income Summary For the six months ended June 30, 2023, the company's revenue decreased year-on-year, with increased cost of sales leading to a significant reduction in gross profit; operating profit and profit for the period also declined, while other comprehensive losses primarily stemmed from foreign currency translation differences Key Data from Condensed Consolidated Statement of Comprehensive Income (for the six months ended June 30) | Indicator | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Revenue | 1,905,924 | 2,056,954 | | Cost of Sales | (1,515,776) | (1,353,355) | | Gross Profit | 390,148 | 703,599 | | Operating Profit | 259,335 | 615,864 | | Net Finance Costs | (73,613) | (134,111) | | Profit Before Tax | 185,722 | 481,753 | | Income Tax Expense | (45,621) | (110,567) | | Profit for the Period | 140,101 | 371,186 | | Other Comprehensive (Loss)/Income (after tax) | (15,406) | 3,213 | | Total Comprehensive Income for the Period | 124,695 | 374,399 | Profit for the Period and Total Comprehensive Income Attributable to Equity Holders (for the six months ended June 30) | Indicator | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Profit for the Period Attributable to Equity Holders of the Company | 130,798 | 327,374 | | Profit for the Period Attributable to Non-controlling Interests | 9,303 | 43,812 | | Total Comprehensive Income for the Period Attributable to Equity Holders of the Company | 115,392 | 330,587 | | Total Comprehensive Income for the Period Attributable to Non-controlling Interests | 9,303 | 43,812 | 1.3 Condensed Consolidated Statement of Financial Position Summary As of June 30, 2023, the company's non-current assets slightly decreased, current assets saw a reduction in inventories and trade receivables but an increase in cash and cash equivalents and pledged/restricted deposits; net current liabilities improved but remained negative, while net assets grew Key Data from Condensed Consolidated Statement of Financial Position (as of June 30) | Indicator | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Non-current Assets | | | | Coal Mining Rights | 2,017,520 | 2,367,351 | | Property, Plant and Equipment | 3,623,087 | 3,432,903 | | Total Non-current Assets | 5,680,908 | 5,845,437 | | Current Assets | | | | Inventories | 243,061 | 439,373 | | Trade Receivables | 137,220 | 178,867 | | Prepayments, Deposits and Other Receivables | 438,009 | 387,181 | | Pledged and Restricted Deposits | 370,229 | 143,676 | | Cash and Cash Equivalents | 1,131,141 | 855,997 | | Total Current Assets | 2,319,660 | 2,005,094 | | Current Liabilities | | | | Trade Payables | (501,511) | (387,564) | | Other Payables and Contract Liabilities | (2,019,942) | (1,967,025) | | Borrowings | (3,337,411) | (3,447,453) | | Total Current Liabilities | (6,142,255) | (6,160,933) | | Net Current Liabilities | (3,822,595) | (4,155,839) | | Net Assets | 935,282 | 813,211 | Notes to the Condensed Consolidated Financial Statements This section details the company's background, financial statement preparation, accounting policy changes, segment reporting, and specific financial item breakdowns, including significant borrowings and contingent liabilities 2.1 Company Background and Basis of Preparation This section outlines China Qinfagroup Limited's registration, listing, core business, and financial statement presentation, noting significant net current liabilities and going concern uncertainties, despite management's mitigating actions 2.1.1 General Information China Qinfagroup Limited, registered in the Cayman Islands and listed on the Hong Kong Stock Exchange, primarily engages in coal mining, trading, washing, storage, and blending in China, with its functional currency being HKD but financial statements presented in RMB - The company was incorporated in the Cayman Islands on March 4, 2008, and listed on the Main Board of the Hong Kong Stock Exchange on July 3, 2009[15] - The Group's principal business activities are coal mining, trading, washing, storage, and blending in China[32] - The company's functional currency is HKD, but the condensed consolidated financial statements are presented in RMB[16] 2.1.2 Basis of Preparation and Going Concern The condensed consolidated financial statements are unaudited and prepared in accordance with IAS 34 and HKEX Listing Rules; as of June 30, 2023, the company had net current liabilities of approximately RMB 3.823 billion, raising significant going concern doubts, though management has taken measures and is confident in fulfilling financial obligations within the next 12 months - The condensed consolidated financial statements are prepared in accordance with IAS 34 and the applicable disclosure requirements of the HKEX Listing Rules, and are unaudited[33][34] - As of June 30, 2023, the Group's net current liabilities were approximately RMB 3,822,595,000, indicating a material uncertainty that casts significant doubt on its ability to continue as a going concern[35][36] - Management has implemented several measures to improve financial position and cash flow, including actively negotiating loan renewals with banks, accelerating coal production, controlling costs, and seeking new financing sources, and believes it can meet its financial obligations within the next 12 months[37][53] Borrowings and Accrued Interest Due for Immediate Repayment as of June 30, 2023 | Indicator | June 30, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Borrowings Due for Immediate Repayment | 1,302,136,000 | 1,330,634,000 | | Accrued Interest (including overdue interest) | 221,007,000 | 219,718,000 | 2.2 Changes in Accounting Policies and Critical Accounting Estimates During this interim period, the Group adopted new and revised IFRS standards issued by the IASB, which had no material impact on its financial position or performance, and management's judgments on accounting policy application and key estimation uncertainties remained consistent with the prior year - New and revised International Financial Reporting Standards, including IFRS 17, amendments to IAS 8, and amendments to IAS 12, were adopted for the first time during this interim period[39][55] - The newly adopted changes in accounting policies had no material impact on the Group's financial position, performance, and/or disclosures for the current and prior periods[1][55] - Management's significant judgments in applying accounting policies and key sources of estimation uncertainty in preparing the condensed consolidated financial statements are consistent with those for the consolidated financial statements for the year ended December 31, 2022[4][41][56] 2.3 Segment Reporting The Group operates a single reportable segment, the coal business, primarily in China, generating substantially all its revenue; the CEO monitors this segment based on operating profit, assets, and liabilities, but no detailed geographical or segment asset/liability analysis is presented - The Group has only one reportable segment, the coal business, which primarily operates in China and generates substantially all its revenue from external customers in China[57] - The Chief Executive Officer reviews internal management reports for each strategic business unit monthly, using "operating profit" and consolidated results to assess segment performance and allocate resources[2][43][57] Reportable Segment Revenue and Profit Before Tax (for the six months ended June 30) | Indicator | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Revenue from External Customers (Coal Business) | 1,905,924 | 2,056,954 | | Reportable Segment Profit Before Tax | 258,462 | 624,530 | Reportable Segment Assets and Liabilities (as of June 30) | Indicator | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Reportable Segment Assets | 7,624,186 | 7,649,342 | | Reportable Segment Liabilities | (5,932,694) | (5,960,443) | 2.4 Revenue The Group's revenue primarily derives from coal sales, recognized upon goods delivery; for the six months ended June 30, 2023, coal sales revenue was RMB 1,905,924,000, a year-on-year decrease - Revenue primarily derives from coal sales, with performance obligations satisfied and revenue recognized upon delivery of goods[189] Revenue from Contracts with Customers by Service Type (for the six months ended June 30) | Revenue Source | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Coal Sales | 1,905,924 | 2,056,954 | 2.5 Other Income, Gains and Losses For the six months ended June 30, 2023, total other income, gains, and losses amounted to RMB 22,242,000, a significant decrease from the prior year, primarily due to the absence of loan restructuring gains this period, while net exchange gains increased and government grants decreased - Government grants are primarily awarded by local Chinese governments as financial subsidies for business development, with related conditions met[190] Other Income, Gains and Losses (for the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Net Exchange Gains | 18,072 | 12,284 | | Government Grants | 3,131 | 5,112 | | Gain on Significant Modification of Loan Restructuring | – | 11,321 | | Net Gain on Non-significant Modification of Loan Restructuring | – | 31,203 | | Others | 1,088 | 733 | | Total | 22,242 | 61,531 | 2.6 Net Finance Costs For the six months ended June 30, 2023, the Group's net finance costs significantly decreased to RMB 73,613,000 year-on-year, primarily due to increased capitalized borrowing costs and reduced interest expense from discounting liabilities - The decrease in net finance costs was primarily due to an increase in capitalized borrowing costs during the period (from RMB 2,006 thousand in 2022 to RMB 23,342 thousand in 2023) and a reduction in the discounting of liabilities[96][207] - Finance costs are capitalized at an annual rate of 6.53% (2022: 6.79%)[207] Net Finance Costs Composition (for the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Interest Income | (6,185) | (7,600) | | Interest on Borrowings | 58,425 | 63,708 | | Interest Expense on Discounting | 44,715 | 80,009 | | Less: Capitalized Interest | (23,342) | (2,006) | | Net Finance Costs | 73,613 | 134,111 | 2.7 Profit Before Tax and Income Tax Expense For the six months ended June 30, 2023, profit before tax significantly decreased to RMB 185,722,000 year-on-year, with a corresponding reduction in income tax expense, primarily comprising PRC Enterprise Income Tax and deferred tax credits - PRC Enterprise Income Tax is provided at the statutory rate of 25%; Hong Kong and Indonesian subsidiaries did not incur income tax provisions due to the absence of assessable profits[194][211][212] Profit Before Tax Deductions (for the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Depreciation of Property, Plant and Equipment | 224,198 | 168,574 | | Depreciation of Right-of-Use Assets | 2,751 | 4,064 | | Amortization of Coal Mining Rights | 350,412 | 334,358 | Income Tax Expense (for the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | PRC Enterprise Income Tax | 113,995 | 139,438 | | Deferred Tax Credit | (68,374) | (28,871) | | Income Tax Expense | 45,621 | 110,567 | 2.8 Earnings Per Share For the six months ended June 30, 2023, both basic and diluted earnings per share attributable to ordinary equity holders of the company significantly decreased year-on-year, primarily due to reduced profit for the period; no outstanding share options were assumed to be exercised in diluted EPS calculation as their exercise price exceeded the average market price - No unexercised share options were assumed to be exercised in the calculation of diluted earnings per share because their adjusted exercise price was higher than the average market price of the shares during the period[65] Basic Earnings Per Share Calculation (for the six months ended June 30) | Indicator | 2023 (RMB thousands/shares) | 2022 (RMB thousands/shares) | | :--- | :--- | :--- | | Profit for the Period Attributable to Equity Holders of the Company | 130,798 | 327,374 | | Less: Distribution on Perpetual Subordinated Convertible Securities | (2,624) | (2,427) | | Profit for Basic EPS Calculation | 128,174 | 324,947 | | Weighted Average Number of Ordinary Shares | 2,493,413,985 | 2,493,413,985 | | Basic Earnings Per Share | RMB 5.14 cents | RMB 13.03 cents | Diluted Earnings Per Share Calculation (for the six months ended June 30) | Indicator | 2023 (RMB thousands/shares) | 2022 (RMB thousands/shares) | | :--- | :--- | :--- | | Adjusted Profit | 130,798 | 327,374 | | Adjustment for Perpetual Subordinated Convertible Securities | 118,000,000 | 118,000,000 | | Adjusted Weighted Average Number of Shares | 2,611,413,985 | 2,611,413,985 | | Diluted Earnings Per Share | RMB 5.01 cents | RMB 12.54 cents | 2.9 Coal Mining Rights The Group holds coal mining rights in five mines in China and one in Indonesia, which are significant non-current assets, with some pledged for borrowings; directors believe that expiring mining rights are highly likely to be renewed at minimal cost - The Group owns five coal mines in China and one in Indonesia, with mining rights representing the right to conduct mining operations in these regions[128][217] - As of June 30, 2023, coal mining rights in China with a net book value of approximately RMB 1,983,241,000 were pledged to secure borrowings[248] - Directors believe that expiring mining rights (such as Xinglong Coal Mine) are highly likely to be renewed at minimal cost, and relevant government authorities will re-issue the mining rights certificates[217] Coal Mining Rights Details | Coal Mine Name | Location | Ownership | Expiry Date | | :--- | :--- | :--- | :--- | | Xingtao Coal Mine | Shuozhou, Shanxi, China | 80% | September 14, 2034 | | Fengxi Coal Mine | Shuozhou, Shanxi, China | 80% | January 24, 2034 | | Chong Sheng Coal Mine | Shuozhou, Shanxi, China | 80% | December 14, 2039 | | Xinglong Coal Mine | Xinzhou, Shanxi, China | 100% | November 29, 2019 | | Hongyuan Coal Mine | Xinzhou, Shanxi, China | 100% | July 13, 2030 | | SDE Coal Mine | South Kalimantan, Indonesia | 70% | May 14, 2034 | 2.10 Trade and Other Receivables This section details the company's trade and other receivables, including their composition, aging analysis, and impairment provisions, noting a decrease in net trade receivables, an increase in net prepayments and other receivables, and the impairment of certain amounts related to terminated acquisition transactions 2.10.1 Trade Receivables As of June 30, 2023, net trade receivables amounted to RMB 137,220,000, a decrease from the end of 2022; credit terms typically range from 0 to 60 days, and all trade receivables are expected to be collected within one year - Credit terms granted to customers primarily range from 0 to 60 days; all trade receivables are expected to be recovered within one year from the end of the reporting period[68][218] Trade Receivables (as of June 30) | Indicator | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Gross Trade Receivables | 173,522 | 215,169 | | Less: Provision for Credit Losses | (36,302) | (36,302) | | Net Trade Receivables | 137,220 | 178,867 | Aging Analysis of Trade Receivables (as of June 30) | Aging | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Within 2 Months | 77,903 | 119,550 | | Over 2 Years | 59,317 | 59,317 | | Total | 137,220 | 178,867 | 2.10.2 Prepayments and Other Receivables As of June 30, 2023, net prepayments and other receivables increased to RMB 438,009,000 from the end of 2022, primarily comprising other deposits and prepayments, amounts due from non-controlling shareholders, and other non-trade receivables; some amounts are fully impaired and include deposits for an Indonesian coal mine acquisition, parts of which have been terminated - Other non-trade receivables primarily consist of receivables from government subsidies and recoverable VAT[70] - Amounts due from non-controlling shareholders are unsecured, interest-free, and have no fixed repayment terms, having been fully impaired in prior years[221] - The company had planned to acquire a 70% equity interest in an Indonesian coal mining company and paid a deposit of USD 4 million (approximately RMB 28,903,000) as collateral, but parts of the transaction have been terminated[71][223] Prepayments and Other Receivables (as of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Other Deposits (Non-current) | 28,903 | 27,858 | | Other Deposits and Prepayments (Current) | 212,305 | 119,860 | | Amounts Due from Non-controlling Shareholders | 322,703 | 322,703 | | Other Non-trade Receivables | 248,628 | 289,404 | | Less: Provision for Credit Losses | (345,627) | (344,786) | | Net Amount | 438,009 | 387,181 | 2.11 Trade and Other Payables This section discloses the company's trade payables, other payables, and contract liabilities, including their aging analysis and composition; a high proportion of trade payables are due within one year, and other payables primarily include construction payables and coal mine exploration and mining rights payables 2.11.1 Trade Payables As of June 30, 2023, total trade payables increased to RMB 501,511,000 from the end of 2022, with the majority of amounts due within one year Aging Analysis of Trade Payables (as of June 30) | Aging | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Within One Year | 413,099 | 187,906 | | Over One Year but Not Exceeding Two Years | 5,869 | 79,814 | | Over Two Years | 82,543 | 119,844 | | Total | 501,511 | 387,564 | 2.11.2 Other Payables and Contract Liabilities As of June 30, 2023, total other payables and contract liabilities amounted to RMB 2,019,942,000, slightly higher than at the end of 2022, primarily comprising accrued expenses, contract liabilities, amounts due to an associate, and other payables, with construction payables and coal mine exploration and mining rights payables forming a significant portion - Other payables primarily include construction payables (approximately RMB 650 million) and coal mine exploration and mining rights payables (approximately RMB 240 million)[256] - Amounts due to the ultimate holding company, controlling shareholders, associates, directors, and related parties are unsecured, interest-free, and have no fixed repayment terms[226] Other Payables and Contract Liabilities (as of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Accrued Expenses | 518,646 | 491,066 | | Contract Liabilities | 18,622 | 22,871 | | Amounts Due to an Associate | 215,276 | 215,276 | | Other Payables | 1,241,825 | 1,215,038 | | Total | 2,019,942 | 1,967,025 | 2.12 Borrowings This section details the Group's bank and other borrowings, including their composition, interest rates, maturity profile, collateral, and multiple settlement agreements with asset management companies; the Group faces substantial immediate repayment obligations due to overdue borrowings and is involved in various legal proceedings 2.12.1 Overview of Borrowings and Maturity Profile As of June 30, 2023, the Group's total borrowings amounted to RMB 3,568,384,000, with most classified as current liabilities due within one year or on demand; a significant portion of borrowings are immediately repayable due to covenant breaches or cross-default clauses, and secured borrowings due for immediate repayment are collateralized by coal mining rights and property, plant, and equipment - As of June 30, 2023, approximately RMB 1,302,136,000 of borrowings were immediately repayable due to breaches of loan covenants or cross-default clauses, of which RMB 739,644,000 were overdue[260] - Secured borrowings due for immediate repayment are collateralized by coal mining rights and property, plant, and equipment[78] Total Borrowings and Composition (as of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Bank Loans (Secured) | 234,540 | 74,676 | | Bank Loans (Unsecured) | 562,491 | 590,990 | | Other Borrowings (Secured Loan I) | 1,936,953 | 2,008,380 | | Other Borrowings (Secured Loan II) | 94,756 | 107,070 | | Other Borrowings (Secured Loan III) | 492,444 | 492,444 | | Other Borrowings (Unsecured) | 247,200 | 247,200 | | Total Borrowings | 3,568,384 | 3,520,760 | Borrowings Maturity Profile (as of June 30) | Maturity Period | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Within One Year or On Demand | 3,337,411 | 3,447,453 | | Over One Year but Not Exceeding Two Years | 3,565 | 1,370 | | Over Two Years but Not Exceeding Five Years | 227,408 | 71,937 | | Total | 3,568,384 | 3,520,760 | 2.12.2 Loan I Settlement Agreement The Group entered into multiple settlement and supplemental agreements with an asset management company for Loan I, reducing the original bank loan principal and interest; these agreements involved significant modifications, leading to derecognition of the original liability, recognition of a new liability, and corresponding profit or loss adjustments, with no default events occurring by the reporting date - In 2018, the Group entered into a Loan I settlement agreement with an asset management company, reducing the original bank loan principal and interest by approximately RMB 4.027 billion and RMB 582 million, respectively[79] - The significant differences in the terms of the Loan I settlement agreement led to the derecognition of the original financial liability and recognition of a new financial liability, resulting in a gain of approximately RMB 1.905 billion[79] - The Loan I settlement agreement includes default clauses, requiring repayment of the outstanding balance and accrued interest of the original borrowing if not repaid on time; no default events occurred by the reporting date[81] - As of June 30, 2023, the book value of the Group's borrowings for Loan I was approximately RMB 1,936,953,000[232] 2.12.3 Loan II Settlement Agreement The Group entered into a settlement and supplemental agreement with an asset management company for Loan II, reducing the original bank loan principal and interest; significant differences in agreement terms led to derecognition of the original liability, recognition of a new liability, and an other gain of approximately RMB 239 million, with no default events occurring by the reporting date - In 2021, the Group entered into a Loan II settlement agreement with an asset management company, reducing the original bank loan principal and interest by approximately RMB 295 million and RMB 108 million, respectively[233] - The significant differences in the terms of the Loan II settlement agreement led to the derecognition of the original financial liability and recognition of a new financial liability, resulting in an other gain of approximately RMB 239 million[233] - The Loan II settlement agreement includes default clauses, requiring repayment of the outstanding balance and accrued interest of the original borrowing if not repaid on time; no default events occurred by the reporting date[83] - As of June 30, 2023, the book value of the Group's borrowings for Loan II was approximately RMB 94,756,000[234] 2.12.4 Loan III Settlement Agreement The Group entered into a settlement agreement with an asset management company for Loan III, reducing the original bank loan principal and interest; significant differences in agreement terms led to derecognition of the original liability and recognition of a new liability, but no restructuring gain or loss was recognized; this loan and its interest are classified as current liabilities, and no default events occurred by the reporting date - In 2021, the Group entered into a Loan III settlement agreement with an asset management company, reducing the original bank loan principal and interest by approximately RMB 492 million and RMB 261 million, respectively[235] - The significant differences in the terms of the Loan III settlement agreement led to the derecognition of the original financial liability and recognition of a new financial liability, but no restructuring gain or loss was recognized[235] - As of June 30, 2023, the book value of the Group's borrowings for Loan III, approximately RMB 492,444,000, and related accrued interest, approximately RMB 187,146,000, have been classified as current liabilities[84][268] - The Loan III settlement agreement contains conditional terms, requiring repayment according to the revised plan unless the original borrowing is demanded or timely repayment fails; no default events occurred by the reporting date[236] 2.12.5 Other Borrowings and Legal Proceedings As of June 30, 2023, the Group had RMB 247,200,000 in defaulted borrowings, leading to legal proceedings initiated by banks and asset management companies demanding immediate repayment; the Group continues to negotiate with lenders to renew the terms of outstanding and transferred loans - As of June 30, 2023, borrowings with a principal amount of RMB 247,200,000 were in default, and banks and asset management companies have initiated legal proceedings demanding immediate repayment[87] - For the year ended December 31, 2022, an asset management company transferred the Group's overdue loans and interest, which were subject to legal proceedings, to other lenders in China[112] - The Group continues to negotiate with banks and asset management companies/lenders to renew the terms of outstanding and transferred loans[238] 2.13 Dividends and Capital Commitments During this interim period, the company neither paid, declared, nor proposed any dividends; as of June 30, 2023, the Group's unfulfilled capital commitments amounted to RMB 204,300,000, primarily related to the purchase of property, plant, and equipment - No dividends were paid, declared, or proposed during this interim period or prior periods; the directors have determined that no dividend will be paid for this interim period[166][297] - Capital commitments are primarily related to the purchase of property, plant, and equipment[133] Unfulfilled Capital Commitments (as of June 30) | Item | June 30, 2023 (RMB thousands) | December 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Contracted but Not Yet Incurred | 204,300 | 264,400 | 2.14 Contingent Liabilities and Litigation The Group faces multiple pending lawsuits, including claims from non-controlling shareholders, a contract performance lawsuit with Yulin Zhongkuang, and an overdue payables lawsuit with Shanxi Yunxin; additionally, the Group provides loan guarantees for its associate, Tongmei Qinfa; directors believe the Group has reasonable grounds for defense or has made sufficient provisions, and is not involved in other significant litigation or arbitration - The Group faces litigation claims from non-controlling shareholders regarding coal production distributions from Xingtao Coal, Fengxi Coal, and Chongsheng Coal, totaling approximately RMB 706 million[115][170] - Yulin Zhongkuang has filed a lawsuit against the Group, seeking compensation for economic losses related to the suspension of a mining infrastructure construction project, with a claim amount of approximately RMB 10,121,000[90][241] - Shanxi Yunxin has filed a lawsuit against the Group, demanding repayment of overdue payables and penalties, with a total claim amount of approximately RMB 78,432,000[242][273] - The Group provides loan guarantees for its associate, Tongmei Qinfa, with a maximum liability of approximately RMB 259,000,000[180][243] - Directors believe the Group has reasonable grounds to defend against all lawsuits or has made sufficient provisions, and is not involved in other significant litigation or arbitration[91][274] Management Discussion and Analysis This section provides an in-depth analysis of the Group's business operations, market environment, financial performance, and future outlook, including details on coal mine operations, safety, environmental initiatives, and financial liquidity 3.1 Business Overview and Market Environment The Group, a leading non-state-owned thermal coal supplier in China, operates an integrated coal supply chain and has expanded internationally; in H1 2023, national policies ensured a relatively loose coal supply, with significant increases in raw coal production and imports, leading to a decrease in average coal selling prices - The Group is a leading non-state-owned thermal coal supplier in China, operating an integrated coal supply chain and having expanded its business overseas[276] - In H1 2023, the national policy of stabilizing prices and ensuring supply proved effective, with raw coal production increasing by 4.4% year-on-year and coal imports increasing by 93.0% year-on-year, leading to a relatively loose energy supply[124] - For the six months ended June 30, 2023, coal operating and trading volume increased year-on-year, but the average coal selling price decreased, primarily due to adjustments in thermal coal market prices[94] Average Coal Selling Price and Monthly Operating and Trading Volume | Indicator | 2023 H1 | 2022 H1 | | :--- | :--- | :--- | | Average Coal Selling Price (RMB per tonne) | 705 | 799 | | Average Monthly Coal Operating and Trading Volume (thousand tonnes) | 450 | 429 | 3.2 Financial Performance Analysis This section analyzes the Group's financial performance indicators for the reporting period, including revenue, gross profit, operating profit, net finance costs, and profit after tax, highlighting that the decline in average thermal coal selling prices was the primary cause of the decrease in multiple profitability metrics 3.2.1 Coal Business Revenue and Operating Volume For the six months ended June 30, 2023, coal business revenue was RMB 1,905,924,000, a year-on-year decrease, while coal operating and trading volume increased to 2,702 thousand tonnes - Coal operating and trading volume increased by 4.9% compared to the same period last year[7] Coal Business Revenue and Operating Volume (for the six months ended June 30) | Indicator | 2023 (RMB thousands/thousand tonnes) | 2022 (RMB thousands/thousand tonnes) | | :--- | :--- | :--- | | Coal Business Revenue | 1,905,924 | 2,056,954 | | Coal Operating and Trading Volume | 2,702 | 2,575 | 3.2.2 Gross Profit and Gross Margin For the six months ended June 30, 2023, the Group's gross profit was RMB 390,100,000, with a gross margin of 20.5%, a significant year-on-year decrease primarily due to the decline in average thermal coal selling prices - The decrease in gross margin was primarily due to the decline in the average selling price of thermal coal[7][277] Gross Profit and Gross Margin (for the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Gross Profit | 390,100,000 | 703,600,000 | | Gross Margin | 20.5% | 34.2% | 3.2.3 Operating Profit For the six months ended June 30, 2023, the Group's operating profit was RMB 259,300,000, a year-on-year decrease of 57.9%, primarily impacted by the decline in average thermal coal selling prices - The decrease in operating profit was due to the decline in the average selling price of thermal coal[122] Operating Profit (for the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Operating Profit | 259,300,000 | 615,900,000 | | Year-on-Year Change | Decrease 57.9% | | 3.2.4 Net Finance Costs For the six months ended June 30, 2023, the Group's net finance costs were RMB 73,600,000, a year-on-year decrease of 45.1%, primarily due to increased capitalized borrowing costs and reduced discounting of liabilities - The decrease in net finance costs was due to increased capitalized borrowing costs and reduced discounting of liabilities during the period[96] Net Finance Costs (for the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Net Finance Costs | 73,600,000 | 134,100,000 | | Year-on-Year Change | Decrease 45.1% | | 3.2.5 Profit After Tax and Profit Attributable to Company Equity Holders For the six months ended June 30, 2023, profit after tax was RMB 140,100,000, a year-on-year decrease of 62.3%, and profit attributable to equity holders of the company was RMB 130,800,000, a year-on-year decrease of 60.0%, both primarily impacted by the decline in average thermal coal selling prices - The decrease in profit was primarily due to the decline in the average selling price of thermal coal[97][123] Profit After Tax and Profit Attributable to Company Equity Holders (for the six months ended June 30) | Indicator | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Profit After Tax | 140,100,000 | 371,200,000 | | Year-on-Year Change | Decrease 62.3% | | | Profit Attributable to Equity Holders of the Company | 130,800,000 | 327,400,000 | | Year-on-Year Change | Decrease 60.0% | | 3.3 Business Review and Development This section reviews the Group's coal business progress, including the renewal of the Indonesian SDE coal mine's operating license and equipment procurement, investments in production safety and environmental protection, and provides an overview of its coal mines, coal characteristics, reserves, resources, and production data 3.3.1 SDE Coal Mine Operating License Renewal and Equipment Procurement The Group's non-wholly owned subsidiary, SDE, successfully renewed its Indonesian coal mine's operating license until May 14, 2034; to enhance production efficiency and safety, the Group procured approximately RMB 156 million worth of key mining equipment, including shearers, scraper conveyors, and hydraulic supports; the Indonesian project is a significant milestone in the Group's internationalization, with active preparations for production underway - The SDE coal mine's mining operating license has been successfully renewed, valid until May 14, 2034[125] - The Group procured approximately RMB 156 million worth of key mining equipment, including shearers, scraper conveyors, and hydraulic supports, to enhance production safety and technology[100] - The success of the Indonesian project is a significant milestone in the Group's internationalization, with the team diligently advancing preparations for production, aiming to officially commence operations as a new growth engine as soon as possible[172] 3.3.2 Production Safety and Environmental Protection The Group prioritizes production safety, continuously monitoring coal mine safety and investing in intelligent mining; during "Safety Production Month," special inspection and rectification actions and safety contract signing ceremonies were held; concurrently, the Group actively promotes ecological civilization concepts through "World Environment Day" activities to enhance employee environmental awareness - The Group considers its employees its most valuable asset, with production safety being an uncompromising top priority, continuously implementing key supervision of coal mine safety and promoting intelligent mining[101] - During "Safety Production Month," coal mine management teams conducted special inspection and rectification actions, including refining safety objectives, focusing on hazard identification, implementing post responsibilities, conducting emergency drills, and holding safety contract signing ceremonies[283] - The Group organized "World Environment Day" promotional activities, conveying ecological civilization concepts to employees, advocating green and low-carbon lifestyles, and enhancing environmental awareness[102][127] - The Group actively gives back to society and implements national green energy development policies[182] 3.3.3 Coal Mine Overview and Characteristics The Group owns five coal mines in China (Xingtao, Fengxi, Chongsheng, Xinglong, Hongyuan) and one in Indonesia (SDE); the report details each mine's location, ownership, area, production capacity, operational status, and coal quality characteristics, including moisture, ash, sulfur content, and gross calorific value - The Group owns five coal mines in China and one in Indonesia[128] Coal Mine Overview | Coal Mine Name | Location | Ownership | Area (sq. km) | Production Capacity (million tonnes) | Operational Status | | :--- | :--- | :--- | :--- | :--- | :--- | | Xingtao Coal | Shuozhou, Shanxi, China | 80% | 4.25 | 1.5 | Operating | | Fengxi Coal | Shuozhou, Shanxi, China | 80% | 2.43 | 0.9 | Operating | | Chongsheng Coal | Shuozhou, Shanxi, China | 80% | 2.88 | 0.9 | Operating | | Xinglong Coal | Xinzhou, Shanxi, China | 100% | 4.01 | 0.9 | Under Development (Suspended) | | Hongyuan Coal | Xinzhou, Shanxi, China | 100% | 1.32 | 0.9 | Under Development (Suspended) | | SDE Coal | South Kalimantan, Indonesia | 70% | 185 | Not Applicable | Under Development | Coal Quality Characteristics (Selected Coal Mines) | Coal Mine Name | Moisture (%) | Ash Content (db, %) | Sulfur Content (db, %) | Gross Calorific Value (Avg, kcal/kg, net, ar) | | :--- | :--- | :--- | :--- | :--- | | Xingtao Coal | 7–10 | 20–28 | 1.4–1.9 | 4,650–5,200 | | Fengxi Coal | 8–12 | 20–28 | 1.2–1.6 | 4,600–5,150 | | Chongsheng Coal | 8–12 | 20–28 | 1.6–2.5 | 4,600–5,150 | | SDE Coal | 8–11 | 22–25 | 0.18–1.2 | 5,300 | 3.3.4 Operational Data: Reserves, Resources, and Production As of June 30, 2023, the Group's total proved and probable reserves were 330.76 million tonnes, and total resources were 714.77 million tonnes; total raw coal production for the first half of the year was 3.72 million tonnes, and commercial coal production was 3,724 thousand tonnes Reserves and Resources (as of June 30) | Indicator | January 1, 2023 (million tonnes) | June 30, 2023 (million tonnes) | | :--- | :--- | :--- | | Proved Reserves | 8.39 | 8.39 | | Probable Reserves | 326.09 | 322.37 | | Total Reserves | 334.48 | 330.76 | | Resources | 718.49 | 714.77 | | Less: H1 Raw Coal Production | (3.72) | (3.72) | | Resources as of June 30 | 714.77 | 714.77 | Commercial Coal Production (for the six months ended June 30) | Coal Mine Name | 2023 (thousand tonnes) | 2022 (thousand tonnes) | | :--- | :--- | :--- | | Xingtao Coal | 1,593 | 805 | | Fengxi Coal | 1,190 | 1,262 | | Chongsheng Coal | 941 | 1,738 | | Total | 3,724 | 3,805 | 3.3.5 Exploration, Mining, and Development Expenses For the six months ended June 30, 2023, the Group's total exploration, mining, and development expenses amounted to RMB 881,358,000, a decrease from the prior year, with amortization and depreciation being the largest component Exploration, Mining, and Development Expenses (for the six months ended June 30) | Item | 2023 (RMB thousands) | 2022 (RMB thousands) | | :--- | :--- | :--- | | Materials and Consumables | 34,133 | 63,486 | | Staff Costs | 197,012 | 213,196 | | Amortization and Depreciation | 543,160 | 498,929 | | Total | 881,358 | 927,194 | 3.4 Financial Position and Liquidity This section analyzes the Group's capital structure, liquidity, borrowings, cash flow, exchange rate risk, asset pledges, guarantees, and material investment activities; the Group's net current liabilities improved but remain negative, facing challenges from substantial maturing borrowings, and has taken measures to enhance financial flexibility 3.4.1 Capital Structure and Net Current Liabilities The Group's capital primarily consists of ordinary shares and perpetual subordinated convertible securities; as of June 30, 2023, net current liabilities were RMB 3,822,600,000, and the current ratio was 0.38, an improvement from the end of 2022 but still negative - The Group's capital primarily consists of ordinary shares and perpetual subordinated convertible securities[152] - Net current liabilities improved, and the current ratio increased, but it remains negative[106][291] Net Current Liabilities and Current Ratio (as of June 30) | Indicator | June 30, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Net Current Liabilities | 3,822,600,000 | 4,155,800,000 | | Current Ratio | 0.38 | 0.33 | 3.4.2 Borrowings and Bank Facilities As of June 30, 2023, the Group's total bank facilities amounted to RMB 3,568,300,000, with the entire amount utilized; total borrowings were RMB 3,568,400,000, predominantly RMB-denominated, and a significant portion is immediately repayable due to defaults; the Group has taken measures to enhance financial flexibility through a diversified funding base - Approximately RMB 1,302,100,000 of bank and other borrowings are immediately repayable due to breaches of loan covenants and/or default events[108] - Borrowings bear interest at annual rates ranging from 2.5% to 7.8%[108] - The Group enhances financial flexibility through a diversified funding base and has obtained medium-term loans to replace short-term loans[134] Bank Facilities and Total Borrowings (as of June 30) | Indicator | June 30, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Total Bank Facilities | 3,568,300,000 | 3,520,800,000 | | Utilized Facilities | 3,568,300,000 | 3,520,800,000 | | Total Borrowings | 3,568,400,000 | 3,520,800,000 | 3.4.3 Cash and Cash Equivalents and Gearing Ratio As of June 30, 2023, the Group's cash and cash equivalents amounted to RMB 1,131,100,000, a year-on-year increase of 32.1%; the gearing ratio improved to 25.8%, primarily due to the increase in cash and cash equivalents - Cash and cash equivalents are primarily held in RMB, with portions held in USD, HKD, IDR, EUR, and SGD[135] - The gearing ratio improved due to the increase in cash and cash equivalents[185] Cash and Cash Equivalents (as of June 30) | Indicator | June 30, 2023 (RMB) | December 31, 2022 (RMB) | | :--- | :--- | :--- | | Cash and Cash Equivalents | 1,131,100,000 | 856,000,000 | | Year-on-Year Growth | 32.1% | | Gearing Ratio (as of June 30) | Indicator | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Gearing Ratio | 25.8% | 32.1% | 3.4.4 Exchange Rate Fluctuation Risk The Group's cash and cash equivalents are primarily held in RMB and USD, operating expenses are mainly denominated in RMB, overseas purchases are generally denominated in USD, and revenue is typically received in RMB; directors believe the Group does not face significant exchange rate fluctuation risk - The Group's cash and cash equivalents are primarily held in RMB and USD[110] - Operating expenses are mainly denominated in RMB, overseas purchases are generally denominated in USD, and revenue is typically received in RMB[110] - Directors believe the Group does not face significant exchange rate fluctuation risk[110][155] 3.4.5 Asset Pledges and Guarantees The Group's borrowings are secured by various assets, including coal mining rights, property, plant, and equipment, as well as shares held by the controlling shareholder, who pledged approximately 38.06% of the company's issued share capital to guarantee borrowings - Zhenfu International Limited, wholly owned by controlling shareholder Mr. Xu Jihua, pledged 949,000,000 shares of the company, representing approximately 38.06% of the issued share capital, to guarantee approximately RMB 1,936,954,000 in loans[111][156] - Borrowings are secured by coal mining rights, property, plant and equipment, other receivables from related companies, controlling shareholder's property, and Group equity[113][114][271] - As of June 30, 2023, total borrowings of approximately RMB 3,335,845,000 were guaranteed by the company, certain subsidiaries, related parties, and/or Mr. Xu[113] 3.4.6 Material Investments, Acquisitions, and Disposals During the period, the Group did not undertake any material investments, major acquisitions, or disposals of subsidiaries, associates, or joint ventures - During the period, the Group did not undertake any material investments, major acquisitions, or disposals of subsidiaries, associates, or joint ventures[138][176] 3.4.7 Contingent Liabilities and Litigation Except for certain litigation matters disclosed in Note 19 to the interim financial statements, the Group had no other material contingent liabilities at the end of the period - Except for certain litigation matters disclosed in Note 19 to the interim financial statements, the Group had no other material contingent liabilities at the end of the period[157][295] 3.5 Business Outlook The Group anticipates a relatively loose domestic thermal coal market in H2 2023, with coal prices potentially rebounding slightly before returning to an oversupply situation; the SDE coal mine project is progressing well, with preliminary trial production expected within one year; the Group will continue to increase investment in Indonesia, expand cooperation, and focus on local talent development and social responsibility 3.5.1 Market Expectations The domestic thermal coal market is expected to remain relatively loose in H2 2023; while peak summer electricity demand may cause a slight rebound in coal prices, the long-term outlook suggests a return to an oversupply situation - The domestic thermal coal market is expected to maintain a relatively loose fundamental supply in H2 2023[140] - Peak summer electricity demand may cause a slight rebound in coal prices, but after the summer peak, the domestic thermal coal market will return to an oversupply situation[186] 3.5.2 SDE Coal Mine Project Progress and Social Responsibility The SDE coal mine project construction is progressing smoothly, with preliminary trial production expected within one year; the Group actively fulfills its social responsibilities in Indonesia, assisting local community development, fostering regional prosperity, and has already hired over 700 local employees, aiming to create over 3,000 additional jobs in the next three years - SDE coal mine construction, including the main inclined shaft, auxiliary vertical shaft, return air shaft, coal transportation roads, and docks, is progressing smoothly, with preliminary trial production expected within one year[141][159] - The Group actively fulfills its social responsibilities in Indonesia, assisting local community development, fostering regional prosperity, and helping local residents find employment[141] - Currently, over 700 local employees have been hired, with a target to create over 3,000 additional job opportunities in the next three years[141][160] 3.5.3 Internationalization Strategy and Talent Development The Group is deeply committed to its Indonesian coal mining operations, planning to increase investment and strategic deployment, strengthen business exchanges with local enterprises, government departments, and communities to explore cooperation opportunities; concurrently, the Group adheres to a people-oriented approach, integrating employee religious beliefs, cultural integration, and social elements into talent training and development to build a sustainable business - The Group firmly believes in Indonesia's immense development potential and will continue to increase investment and make strategic deployments there, strengthening business exchanges and exploring broader cooperation opportunities[142][162] - Indonesian authorities are actively creating a favorable investment environment and protecting investors' interests[162] - The Group adheres to a people-oriented approach, committed to integrating employee religious beliefs, cultural integration, and social elements into talent training and development, aiming to build a sustainable business and become a benchmark enterprise in Indonesia[161] 3.6 Corporate Governance and Employee Remuneration The Group has an Audit Committee, composed of independent non-executive directors, responsible for reviewing and overseeing financial reporting procedures and internal controls; as of June 30, 2023, the Group employed 3,411 staff, utilizing a performance-based reward system to offer competitive remuneration and participating in social security schemes 3.6.1 Audit Committee The Audit Committee, established on June 12, 2009, comprises three independent non-executive directors, chaired by Mr. Ho Ka Yiu, and is primarily responsible for reviewing and overseeing the Group's financial reporting procedures and internal controls; the company consistently complied with applicable Corporate Governance Code provisions during the reporting period - The Audit Committee was established on June 12, 2009, and its written terms of reference were formulated in accordance with the Corporate Governance Code set out in Appendix 14 of the Listing Rules[162] - The Audit Committee members are three independent non-executive directors: Mr. Ho Ka Yiu (Chairman), Professor Sha Zhenquan, and Mr. Jing Dacheng[162] - The Audit Committee's primary responsibilities are to review and oversee the Group's financial reporting procedures and internal controls[162] - The company consistently complied with the applicable code provisions of the Corporate Governance Code set out in Appendix 14 of the Listing Rules during the six months ended June 30, 2023[163] 3.6.2 Employees and Remuneration As of June 30, 2023, the Group employed 3,411 staff; the Group adopts a performance-based reward system, providing basic salaries and year-end bonuses, and participates in central pension schemes and mandatory provident fund schemes to ensure competitive remuneration - As of June 30, 2023, the Group employed 3,411 employees[164] - The Group adopts a performance-based reward system, which is regularly reviewed, and in addition to basic salaries, year-end bonuses may be offered to outstanding employees[164] - The Group's subsidiaries participate in central pension schemes operated by local municipal governments and pay social insurance contributions for employees monthly; the Hong Kong subsidiary participates in the Mandatory Provident Fund Scheme[165] - The company has adopted a post-IPO share option scheme to incentivize and retain employees, believing that the remuneration packages offered are competitive[178] 3.7 Other Information This section provides information regarding interim dividends, trading of the company's listed securities, and the publication of interim results and reports 3.7.1 Interim Dividend The Board of Directors does not recommend paying any interim dividend for the six months ended June 30, 2023 - The Board of Directors does not recommend paying any interim dividend for the six months ended June 30, 2023[7][166] 3.7.2 Purchase, Sale or Redemption of the Company's Listed Securities For the six months ended June 30, 2023, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities - For the six months ended June 30, 2023, neither the company nor any of its subsidiaries purchased, sold, or redeemed any of the company's listed securities[188] 3.7.3 Publication of Interim Results and Interim Report This interim results announcement has been published on the company's website and the HKEX website; the interim report will be dispatched to shareholders and made available on the websites in due course - This interim results announcement has been published on the company's website (www.qinfagroup.com) and the HKEX website (www.hkex.com.hk)[147](index=147&type=chunk) - The company will dispatch the interim report for the six months ended June 30, 2023, containing all information required by the Listing Rules, to shareholders and make it available on the aforementioned websites in due course[147][167]