Summary of New Steel Co. Conference Call Company Overview - **Company**: New Steel Co. (新钢股份) - **Date**: September 18, 2025 Key Points Financial Performance - **Net Profit Growth**: New Steel Co. reported a significant increase in net profit for the first half of the year, reaching 174 million yuan, an increase of 152 million yuan year-on-year [4][2] - **Production and Sales Decline**: The company experienced a 13.93% decrease in production and a 12.04% decrease in sales compared to the previous year, primarily due to a major furnace overhaul in Q1 and increased environmental investment [2][6] - **Profitability Comparison**: Despite the growth in net profit, there remains a gap compared to Q4 of the previous year, attributed to the costs associated with the furnace overhaul and environmental compliance [2][6] Strategic Initiatives - **High-Value Product Focus**: The company is shifting towards producing high-value, high-margin products, with a notable 97.6% increase in high-end hot-rolled products [2][9] - **Cost Management**: New Steel Co. has successfully reduced logistics costs by over 100 million yuan in the first half of the year through increased sea freight and negotiating railway transport discounts [2][6] - **Collaboration with Baowu Group**: The partnership with Baowu Group has enhanced procurement efficiency, particularly in raw materials and auxiliary materials, leading to cost advantages [2][8][16] Market Strategy - **End-Market Development**: The company has focused on maintaining and expanding its end-market presence, particularly in high-strength carbon plates and international markets like the Middle East, achieving a 66.7% focus on key customers [5][10] - **Production Adjustments**: New Steel Co. plans to continue adjusting production based on profitability, with expectations for improved performance in Q3 compared to Q2 [3][17] Investment and Cash Management - **Investment Income**: The company's investment income has decreased due to lower interest rates set by the central bank, impacting returns from long-term financial products [11][12] - **Cash Reserves**: New Steel Co. holds substantial cash reserves (approximately 2-3 billion yuan) for loan repayments, raw material purchases, and technological upgrades [12][13] Environmental and Regulatory Compliance - **Environmental Investments**: Increased spending on environmental projects has impacted costs, but the company is committed to complying with national policies and improving production efficiency [2][9][20] Future Outlook - **Market Trends**: The company anticipates that the profitability trend will continue into Q3, driven by structural adjustments and a focus on high-margin products [3][17] - **Dividend Policy**: New Steel Co. has maintained a high dividend payout ratio exceeding 90%, reflecting its commitment to shareholder returns [18][19] Challenges and Risks - **Loan Pressure**: The company faces pressure from environmental loans, which may limit profit flexibility [2][6] - **Market Volatility**: Fluctuations in raw material prices, particularly coking coal, could impact procurement strategies and overall cost management [14][15] Conclusion New Steel Co. is navigating a challenging environment with strategic shifts towards high-value products, effective cost management, and a strong focus on compliance and market development. The outlook remains cautiously optimistic with expectations for continued profitability improvements in the upcoming quarters.