Friday, March 5, 2021
 
Columnist
Martin Hennecke
 
CHINA QINFA
HKEx Stock Code : 00866 
 
Corporate Profile
Principally engaged in the coal operation business involving purchase and sales, filtering, storage, blending, shipping and transportation of coal.

Business Review - For the year ended December 31, 2012

In 2012, the GDP growth rate of China falls to 7.8%. With the slowdown in economic growth, prices of coal in China faced downward pressure and the demand for shipping transportation in China faced continuous downturn. The Group strived to seize business opportunities, progressed with well-planned steps, strengthened the integrated coal supply chain, and strived to enhance the upstream coal production capacity of the Group. The Group continued to expand its customer base and established and maintained business relationship with new large power plants (such as China Resources Power Holdings Co., Ltd. Henan Branch, China Resources Power Holdings Co., Ltd. Jiangsu Branch, Fujian Huadian Kemen Power Generation Co., Ltd. and Huaneng Jinggangshan Power Plant) and Stated-owned coal suppliers (such as China Coal Energy Limited and Datong Coal Mine Group Co., Ltd.).

In addition, the Group's effort in improving the overall management capability for the Group's fleet and the operation capacity of coal loading stations, lowering finance costs and also with a more stringent internal management system contributed the positive growth in the revenue of the Group in 2012.

In 2012, the Group achieved growth in the coal handling and trading volume as compared with the same in 2011. The coal handling and trading volume of the Group was 22,093,000 tonnes, representing an increase of 38.7% as compared with 2011. The monthly average selling prices of coal during the year ended 31 December 2012 were in the range between RMB451 per tonne and RMB635 per tonne, which were lower than the average selling prices between RMB563 per tonne and RMB677 per tonne in 2011. Profit attributable to the equity shareholders of the Company was RMB257.7 million, representing a decrease of 50.0% from the profit attributable to the equity shareholders of RMB515.5 million in 2011, excluding the bargain purchase gain arising from the acquisition of Shanxi Huameiao Energy Group Limited (¡§Huameiao Energy¡¨) during the year.

Business Outlook - For the year ended December 31, 2012

Despite the slowdown in the PRC economy in 2012, which affected the level of demand for coal, the Directors are cautiously optimistic on the future of the coal industry in the PRC because of the following reasons:

¡E The government of the PRC expects that the GDP of the PRC will achieve a growth of 7.5% in 2013. Hence, the domestic coal market is expected to maintain a positive growth.

¡E Cancellation of the policy for key coal-fired power generation contracts by the National Development and Reform Commission is beneficial to the development of open market for coal in the PRC.

¡E Positive signs of economic recovery shown in the domestic economy in the PRC together with the recovery of the downstream industry have driven the demand for coal.

¡E Rail transport in the PRC is still in the development bottleneck and hence, the logistics advantages are crucial to the coal trading business.

¡ENew energy development has yet to be fully implemented and adopted in the PRC and coal will continue to be the most economical source of energy in China would not be replaced in the near future.

The Group is principally engaged in coal supply chain business of coal mining, procurement, filtering, blending, storage, transportation, sales, shipping and port integration. The Group has four quality coal mines in Shanxi Province, of which the Xingtao coal mine operated by Huameiao Energy was a Grade 1 Safety Demonstration Mine appraised by China National Coal Association. China will gradually raise the lowest operational scale for coal industry and encourages entities to phase out backward production capacity and enhance the industrial concentration through mergers and restructuring. Huameiao Energy has the required operational scale in Shanxi Province, which will be an advantage to the Group's plans for further expansion of upstream resources and acquisition of high-quality coal mines.

Upon successful acquisition of Huameiao Energy, the Group is benefited from the stable coal supply, higher gross profit margin and strong cash flow. With the growing coal production from Huameiao Energy, the Group can provide sufficient coal to meet the demand from customers which require a stable source of coal supply. The Group also operates an integrated logistic network which allows ample absorption and realisation of the coal produced. The Directors expect that the gross profit margin of the Group will continue to improve with the increased proportion of self-produced coal. The strong cash flow of the Group also enables it to improve its working capital position. This vertical integration strategy enhances the Group's competitiveness and further strengthens the relationship between the Group and its customers.

In addition to maintaining the existing well-established business relationship, the Group has proactively taken the initiative to increase the coal sales to new and existing customers. Despite many of the Group's customers are large scale Stated-owned enterprises in China operating power plants in China, the Group's supply to them still accounts for only a small portion for their total demand. Thus, the Group will continue to promote the sales of coal to these existing customers. Moreover, the Group uses Taizhou port, Rugao port and Zhenhai port and Huangpu port in Eastern China, and Nansha port and Zhuhai port in South China as the transit base and further expand the customer base of ¡§sea to river¡¨ (from coastal areas to the river banks of Yangtze River and Pearl River).

In 2013, the Group will enhance the joint and strategic cooperation with large upstream and downstream customers. Benefit from the cancellation of the price intervention of power coal by the National Development and Reform Commission and the emerging opportunity of completing open marketisation of coal trading in the PRC, the Group will fully utilise the opportunity to maintain a rapid and quality growth. The Directors are confident that with their joint efforts, they could bring the Group's operation in 2013 to a new level.

Source: China Qinfa (00866) Annual Results Announcement
Chairman XU Jihua Issued Capital (shares) 2,078M
Par Value HKD 0.1 Market Capitalisation (HKD) 1,309M
 
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