CITIC Ltd

HKEX:267

Earnings Call Transcript 2020-Q2

[Unknown Executive]

Dear investors and analysts, good afternoon. Affected by the pandemic, today's briefing will be held by means of live webcast and telephone conference. The meeting will be conducted in Mandarin with simultaneous English interpretation.

There is a Q&A session in today's investor briefing. If you want to communicate with the management, please dial in the conference in advance. Please note that the content of this briefing and your questions may be recorded.

Please allow me to introduce the management attending today's briefing. They are Mr. Zhu Hexin, Chairman of CITIC Limited; Mr. Xi Guohua, Vice Chairman and General Manager; Ms. Li Qingping, Executive Director and Vice General Manager; Mr. Liu Zhuyu, Vice General Manager; Mr. Xu Zuo, our Vice General Manager; and Mr. Cao Guoqiang, CFO. We also have Mr. Zhengjun, Chairman of CITIC Mining International, attending the briefing by phone.

Now let's start the investor briefing. First of all, let's welcome Chairman Zhu Hexin.

[Hexin Zhu, executive]

Thank you very much for attending this briefing. The 2020 is a very difficult year. A series of chain effects caused by the pandemic have a huge impact on the global economy, and no company can be immune to it.

In the first half of this year, CITIC Limited registered a net profit attributable to ordinary shareholders of HKD 27 billion. Excluding the exchange rate conversion, the overall profit decreased by 16% year-on-year. The profits of financial/nonfinancial segments have declined to varying degrees. I believe you have read my letter to the shareholders. We are facing unprecedented challenges. The ongoing pandemic have caused heavy losses to many industries. Most of CITIC's businesses are based in China, and the pandemic is under control in China and the economy and production are gradually restored, which provides us with a certain resilience.

The focus of the company in the future is to continue to strengthen cost management, improve risk control system, make full use of the unique platform of CITIC, deepen business collaboration, maintain the stability of the industrial supply chain, strengthen business resilience and strive to open up new prospects in the changing situation.

I will stop here. I would like to give the floor to Mr. Cao Guoqiang, CFO, to explain in details the operating results of various segments and businesses of the company. After that, we would like to welcome you to ask questions. Thank you.

[Guoqiang Cao, executive]

I'm going to introduce you the first half results briefing to you. In the first half of the year, the overall results declined. The revenue was registered as HKD 255.8 billion, a decrease of 7.7% year-on-year. And the net profit was HKD 27 billion, reduced by 19%. The exchange rate conversion affected revenue and the profit by minus 2.4% and minus 3.1%, respectively. Nonfinancial segments contributed 54% to the revenue, and contribution to net profit increased by 1% to 31%.

And on the next slide, I'm going to introduce you the information by segments. I'm not going to dive into details. In the next slide, Page 4, Slide 4, that's the key financials. Apart from the revenue and the after-tax profit, we see the earnings per share is HKD 0.93, down by 19%. In the first half of the year, the dividend per share was HKD 0.1, down by HKD 0.08. And the capital expenditure in the first half of the year was HKD 10.7 billion, down by 6.6%. The total assets was HKD 8.4773 trillion, and the total liabilities was HKD 7.58 trillion, increased by 2.3%.

In terms of the consolidated debt, the consolidated debt is -- has been reduced by 1.7%, reached HKD 952.6 billion. And the liabilities with interest reduced by HKD 16.1 billion due to the decrease of the debt instrument issued by the CITIC Bank. And excluding financial sector, the external liabilities with interest was HKD 280 billion, an increase by HKD 7.6 billion due to the increased borrowing from the headquarters.

And the next page is about the total -- it's about the capital expenditure. The total is HKD 10.7 billion, mainly used by the Special Steel optimization upgrading, HKD 2.3 billion; and HKD 2.3 billion to the consumption; and the HKD 2.3 billion to energy conservation, environmental protection; and HKD 1.1 billion to the self-owned construction by the banks and outbound equity investments, HKD 600 million.

I'm going to introduce you by different segments. For financial sector, we have realized a revenue of HKD 117 billion in the first half of the year, up by 4.5%. And the after-tax revenue -- the profit is HKD 21.9 billion, down by 14% year-on-year. Exchange rate conversion affected the revenue and the profit by minus 5.4% and minus 4.2%, respectively, affected by the downturn economy and the COVID-19.

The -- we have faced more pressure from nonperforming loans. We see the decline of the profit of CITIC Bank and CITIC Trust. So we have increased our provisions. And for CITIC Securities and the CITIC-Prudential Life, they have realized very good increase. Unless in terms of the subsidiaries, the CITIC Bank realized a revenue of RMB 102 billion, up by 9.7% year-on-year. Net profit, RMB 25 billion, down by 9.8%. And the average size of loans kept growing by 2 digits. Net interest income improved by 5.6%. NIM narrowed by the downturn of the market rate. And the noninterest income increased by 18% to 36.5%, mainly due to the increase of the securities investment income.

In the first half of the year, we see the credit risk has us exposed. The NPL ratio increased. The balance of NPL increased by 17%. Comparing to the beginning of the year, NPL ratio increased by 0.18 percentage to 1.83%. We also increased the provisions this year to enhance the foundation of capital. The provision coverage rate increased by 0.47% to 176%. And the capital adequacy ratio is 12.6%, increased by over the beginning of the year.

For CITIC Trust, the revenue was RMB 3.3 billion, up by 7%. Because of the credit risk and we have improved the provisions, the net profit decreased by 35% to RMB 1.1 billion. In the first half of the year, CITIC Trust improved its management and to improve the proportion of trust asset under active management. Among the newly signed trust business, the active management business accounted for 92%.

For CITIC-Prudential Life, in the first half of the year, realized a profit of RMB 780 million, up by 67%. The AUM return rate improved. The premium income was RMB 12.7 billion, up by 7.4% year-on-year, outperforming the industry. And the Prudential has enhanced the collaboration of business with CITIC Bank. Through the CITIC Bank channels, the APE reached RMB 1.2 billion, outperformed 2019 with an increase of 83% year-on-year.

CITIC Securities realized a revenue of RMB 34.7 billion, and the profit was RMB 8.9 billion. Due to the revived market, they have improved and the key financials outperformed the peers in the industry. The security trading, wealth management, investment banking and asset management are maintaining leading positions in China. Just now, that's for the financial sector.

In terms of the Resources and Energy sector, in the first half of the year, we realized a revenue of HKD 46 billion, down by 3.2%. Profit, HKD 710 million, down by 66% year-on-year due to the shrinking of the demand and the downturn of economy. Apart from the iron ores, the price of the commodities related to the main business of the group have declined sharply. Due to this impact, we see the decline of the results of CITIC Resources. The increased profit of CITIC Metals and the Sino Iron deducted some of the reduction in this sector.

And in terms of the specific subsidiaries for CITIC Resources, in the first half of the year, they registered a loss of HKD 430 million because of the decline of the crude oil by 46%. But last year, we made a profit. But this year, we suffered a loss because we see the sharp decline of crude oil. And also, we see the sharp decline, the price and volume of aluminum and the coal.

For CITIC Metal, in the beginning -- in the first half of the year, the profit was HKD 700 million, up by 18% year-on-year, because we transfer 20% of the stake of China Platinum. So we realized a profit. And the copper mine in Peru, we invested because of the accessibility to the road. So we suffered a lot from -- turning from profit to loss. And because of the exchange rate, the ferroniobium mine in Brazil also see a decline of the profits nearly 80%. The profits from trading business declined due to a decline in the volume and the price of niobium products and the lower trading volume of iron ores.

For Sino Iron, it kept profiting in the first half of the year, benefiting from the increased sales volume of iron ores and the strong price as well as the measures we have adopted to control the costs.

In terms of the Manufacturing sector, we realized the revenue of HKD 42.5 billion, the profit of HKD 2.8 billion with a decline by 29%, 20%, respectively, because Dicastal is not in the consolidated statement. And the equity dilution of Dicastal and the Special Steel affected the revenue and profit by minus 24% and minus 14%, respectively. Because ongoing pandemic, the automotive works in Europe and America suspended. So Dicastal and the Special Steel has suffered from the reduction of overseas orders.

For CITIC Pacific Special Steel, it's registered a profit of RMB 2.75 billion, maintaining the same level with last year because of the improvement and optimization of production and process, reduction in the purchase costs. So it has effectively offset the negative impact from the reduction of the price of steel. And also, we improved our resilience to the cycles. The exports reduced by 23%. But Special Steel adjusted the structure of its products and supplementing exports with domestic consumption. The total sales increased by 1.8% against the trend.

CITIC Dicastal realized a profit of RMB 280 million, down by 45% year-on-year. And the overseas orders of aluminum wheels and aluminum casting reduced significantly by expanding the domestic market. The sales of aluminum cast in the first half of the year increased by 11%. Aluminum wheels restored to the pre-pandemic level in May. The overseas plants have restored their production. Our phase 2, 3 million units of aluminum wheels additional capacity in Morocco finished its engineering construction.

In the -- for CITIC Heavy Industries, in the first half of the year, the profit was RMB 170 million, up by 77%, mainly due to the good performance of heavy equipment and associated business by expanding the market and the wind power market. The new effective orders reached the highest in 5 years, up by 48% year-on-year.

Let me talk about the Engineering and Contracting sectors. In the first half of the year 2020, the profit decreased at the outbreak of COVID-19, a due to revenue of HKD 7.7 billion. That is a 2.2% drop year-on-year. This is because the COVID-19 has affected the process of the engineering and constructions. And currently, we have used the governmental support.

And in the first half of this year, we have actually signed up a contract increased by 48% year-on-year. For the domestic projects, we have speed up the work and manufacturing resumptions. And we have also working to release the pressures burdened on the Ziyang industrial new cities and the Wuhan National Network Security Talents. But oversea projects continue to face delays related to the ongoing pandemic, and it actually amounting pressures for the [indiscernible] rules.

So let's talk about the Real Estate sectors. In the first half of the year 2020, the total registered revenues for the Real Estate sector is HKD 2.9 billion. That is a 55% growth year-on-year. And the growth is coming from the Shantou Binhai, the first line -- first year real estate developers. And for the majority of the profit, it's actually coming from 10% of the equity returns of the overseas equities and also some of the rental fees from inland also and also Hong Kong. But there are some of the real estate developed projects. And Hong Kong registered a lower profit, and it actually deducted the profit investment.

For the other different sectors, it actually decreased by 80%. And that is -- generally speaking, that is 1.5x larger compared with last years. And among the attraction, notice that China Management Limited is helping us to achieve a 12% growth. After the treating the CITIC Limited result still holding 10% of the equities of [ DM China ], and it is also going to fully pay the Sinitic rules of both sides.

Affected by COVID-19, the consumption companies, including the DHC (sic) [ DCH ] and also the CITIC Publisher (sic) [ Press ], is facing a decline, while the CITIC Telecom International profits remained flat at HKD 512 million.

This concludes my report. Thank you very much for listening.

[Unknown Executive]

Thank you very much for the general introductions. Now the floor is open for questions. We welcome you for your kind questions. So let me repeat that we are opening up for questions.

[Unknown Executive]

So here, we'd like to invite first people, first investors to ask the first question.

[Xue Yuan, analyst]

I'm Xue Yuan, an analyst. So my first question is directed to Chairman Zhu. So what is your future strategy to develop the fintech?

The second question I want to ask is that with the channels, domestic circulation circles and international circulations, what is your newest measures?

And my third question is that we all know that CITIC Bank is actually the largest profit revenue generator for the company. The CITIC Bank is actually affecting the performance situation for the company. So since the central government is requiring the banking sectors to giving the profits for the nonfinancial sectors, what kind of measures are we adopting? What do you make of this policy?

[Hexin Zhu, executive]

Thank you very much for your question. You have actually finished the 3 questions, and let me to answer 3 of your questions. But actually, I'm only able to answer the first question from you, and I will direct the later 2 questions to my colleagues.

So yesterday, I have disclosed some of the information about the banking sector. And I believe that my colleague from the banking sector is also going to answer your questions. For the new strategies, I think it should be based on the 14th Five-Year Plan because, currently, we are sticking on the 13th Five-Year Plan. And this year is actually the final year for the 13th Five-Year Plan. And let's conclude and sum up what we have achieved during the 13th Five-Year Plan.

And based on our previous evaluations, we are going to draw up the blueprints for the 14th Five-Year Plan. And we are also going to build our strategies on the national strategies, and we are also going to build our flagship SOEs, trying to streamline and optimize our business structures. And we are also going to be focusing on the competitivity of our company. This is going to help us with a high-quality development.

And in this new era, I believe it has some of the common grounds and it has some of the unique sites. To be specifically, we all know that CITIC is actually a company or a group combining different sectors, especially for the construction sectors and the energy sectors. We are also going to support the state-of-art manufacturing industry. And well, we are promoting the 2 circulation circles, both domestically and abroad. And we believe that we are going to use the national structures as our development trajectories and build on that. We are going to further plan our future developments.

And for these 2 circles, we are going -- based on these 2 circles, we are going to draw up our new plan for the future development. Especially, we are focusing on the development of the Beijing, Tianjin and Hubei region and the Yangtze River Delta region and the Po River Delta region. We have set up the major development strategies for the major subsidiaries in the CITIC Group.

So during the 14th Five-Year Plan, we are going to make it clear for the future development trajectories and the priorities for our development. Inherited with the vast advantages, we are going to fulfill our role to play the integrations and the synergies at the mainstream for the future development. I believe that our CFO has given you a brief introduction for our performance in the year 2020. And I think in his introduction, he has introduced you several different dimensions. A very important dimension is the different industrial layouts. And these multiple industrial layouts is very important generators for our revenues and is also a stabilizer for our general performance.

And so here, I want to show you 2 key words: integrations and synergies. So we are going to keep our industrial leader status, while integrating some of these same players or same sectors, same companies and the same sectors. Based on the current advantages, we are going to build up different platforms for different sectors. I think that you might read some of the details for our performance. There are some of the inactive growth numbers, which means that we have slowed down our growth rate, but our competitiveness in the market has not changed or impacted by the COVID-19.

On the contrary, we become more competitive than before. Especially in the manufacturing sector, you could see the loans. And you will see the profits, and the loans is actually introducing a new state. This is one of the major indicators for our competitiveness. For the loans, in the June, we have a very good performance no matter in the domain -- no matter you compared it in the domestic market or in the international market.

In the first half of this year, we even have a higher growth. And the performance in June, we're actually accounting for 53% of the domestic market. What this number means or indicates? It means that we are quite competitive in the market. For example, CITIC Special Steel, they are still remain to be a world-class special steel manufacturers and also the CITIC Heavy Industry. So why do I mention several different subsidiaries here? I believe that our subsidiaries against this pandemic called COVID-19, they still remain their leading position in the industry.

I think some of you might focus on our financial sector's performance. We have the 2 securities: CITIC Securities, and they have kept their momentum; and also the CITIC Bank, in the first half of this year, they have a quite good performance, I believe. I believe some of you might focusing on the perfect sector or the impact of COVID-19 on the performance of the CITIC Bank. But from long term, I'm confident that we are going to have a better growth.

But some of you might focus on the group's development strategies. While the major indicator is by being competitive in the market, we are actually a platform on a group, combining the financial sector and nonfinancial sector together. Some of you are really curious about how deep rooted we are in the markets. Sometimes, I believe the evaluations for CITIC Group might be depreciated. Sometimes there are bias in understanding CITIC Limited. But I believe this evaluation is abnormal. We can turn these abnormal numbers back into regular number or normal numbers by our effort. This is actually a very good indication for our integration abilities and also our ability to synchronize different sectors.

This is something that we are going to explore into, and we are thinking about the strategies. Recently, synergy is becoming one of the important keyword in our industry -- in our company. And moving forward, we are going to fully play our roles and advantages of combining the financial sector and nonfinancial sector to deepen the coordinations between these 2 sectors. And we are also going to satisfy the client demand in the coming future. We are acting on it right now. And we are really forming a committee to create synergy with clear plans and precisive targets to be implemented in our company.

So I believe that hard effort is also going to help us to prioritize the synergy into one of the major pillars for a normal company. So during the process, we have also pioneered in the innovation industries. Our innovation strategy is actually in line with national innovation strategy. We hope to dig further in the new opportunities created by the domestic demand and international demand. That is how we achieved a win-win situation.

So compared with the 14th Five-Year Plan and our company's strategy to integrate industry and financial sector, we are definitely going to come back to our edges and fully demonstrate you the values of the CITIC Group. I believe a while later, during the 14th Five-Year Plan, you will better understand our company's strategies.

Thank you very much for your first question. I think I will going to direct the 2 questions -- the later 2 questions that you asked to our colleagues.

[Guoqiang Cao, executive]

Thank you very much for your question. This year, the COVID-19 pandemic do poses some of the challenges to the operations and development from CITIC Group. But from the comprehensive international companies like CITIC, it also brings us new opportunities. So based and focused on the domestic circulations, we have actively adopted the new economic backdrop, and we are using -- utilizing the 2 market internationally and domestically. And when we are transition -- transited from the international market to the domestic market, we are also going to use the CITIC Group as a bridge.

According to the requirement of the Board members committee, we have come up with a 3-year plan. We are also going to form our 14th Five-Year Plan. I believe that in the short future, we could reveal our 14th Five-Year Plan to all the investors and analysts. And in the financial sector, we are going to step up our assistance to the nonfinancial sector. And we are also going to facilitate ourselves, especially in the digital economy. We are also going to enhance our investment in the fintech.

In the security business, we are going to speed up the coverage of the clients. Recently, we have finished the acquisitions, well acquisitions, and I believe that we are integrating all of these different parts. And I believe CITIC Trust is also going to -- came with the tide of the time and also came back to the very nature of the trust. We are also going to upgrade it, the business and the family trust and also insurance trust sector.

For the nonfinancial sector, for the first part, we are going to maintain the internal supplies. We have the Special Steel Co., Ltd. and we also have the Dicastal. We are going to maintain the stabilizations of the industrial chain for the 2 for these companies. We are also going to step up our investment in technology and innovation, cultivating more, had more first-tier companies and work campaigns. Of course, we are also going to pioneer in the domestic market, adjusting the product structure to adapt it to the changes of the market. We have opened up new business models, combining the online and off-line interactions, and the company will enhance our collaboration so that we can form a synergy. And Chairman Hexin is the Head of the Collaboration Committee. And in CITIC-Prudential Life and CITIC Bank, they collaborated with each other, achieving very good results. And in the next step, we are going to replicate such practices.

To sum up, CITIC Limited is a listed company. We are dedicated to creating values for the shareholders. And the management of CITIC Limited is very confident in our future development. We're going to adhere to our market-oriented principle and to control various kinds of risks, enhance our foundation development and to expand investment into technologies, innovate business model and to upgrade the business. And we are going to make use of diversified platforms to enhance collaboration so as to realize good high-quality development of the company. Thank you.

[Qingping Li, executive]

I'm going to answer the third question. The state council this year deployed the policy to surrender the profit of RMB 1.5 trillion from the financial industry to the real economy. I believe the policy is dedicated to recover from the pandemic and to push over high-quality developments.

And for our financial sector and financial business, we are going to see more prospective developments in the future because the source of the profit is from the clients. When the clients can develop well, they can have good profit. According to the Policy State Council essay, as the commercial bank with a controlling stake by the state, we are going to do the following work.

First, we are going to guide the reduction of the financing cost. We have reduced the FTP and also to guide the low rate to follow out DP. And we also have the subsidizing and the incentive and to expand the coverage and to provide more support to the private companies. And therefore, we are going to use LPR for the new loans so that we can release the dividends of the policies. In June 2020 comparing to 2019, so for the new public loans -- or the loans to the public -- to the state-owned companies reduced by 69 bps. And for the loans to the micro companies has reduced by 83 bps. And the -- so we have reduced by more than 35 bps than the average.

And we also have started our work of the delayed repayment of principal and interest. We have 9,000 clients benefited from the policy with a total of RMB 160 billion. We also regulated the cost of financing starting from January this year to today when the pandemic had been alleviated to a certain degree. As the -- as of the end of June, so we have reduced the fees to the services to the cash businesses. And the 2 company clients we have exempted 400 million of fees like this. We're going to continue to eliminate some of the items in the payment of fees.

Some of the investor asked that if you surrender the profit, what's your response? In the latter half of the year, we are going to follow the requirements of the state, and we are going to have our actions and the plans in place. First of all, we are going to continue to control the liabilities and to reduce the structural role of deposits because this is the requirement from the regulation because that's the high cost, the deposit. From the end of liabilities, we are going to have more settlements-oriented deposits.

So the -- for the first half of the year, the structural deposits increased by RMB 80 billion. So when we see the release of the financial statements from the others, we can see that. So in our industry, we have a very limited increase for the first half of the year. For the structural deposit, we are going to -- well, we are going to control it further, so in the latter half of the year. So we have opened up our transactional banking services no matter the peak, the talent, development of the system, innovation of products, training of the staff. We have intensified our efforts from different aspects.

And secondly, we are going to control the risk. And we are going to structurally classify the products and the NPL. Disposal has been slowed down in the first half of the year. The latter half of the year, we are going to continue to enhance our disposal of nonperforming assets. We have held the announcement, so you can see from our figures that the provision has been increased by 19 billion, an increase of 13 billion comparing to last year, which means we are preparing for the delayed response -- delayed effects from pandemic. And we are going to continue to maintain the rigid expenditure and to reduce the nonessential and the nonurgent expenditure.

This is also corresponding to the group's efforts to improve efficiency, reducing costs and expenditures. So we have undertaken a lot of the work from the requirements of the group, so the bank is going to reduce the capital risk and also to continue to dispose the nonperforming assets and to increase our revenue. Firstly, we are going to increase the channel's replenishment of the funds. And then we are going to improve the adequacy ratio so to supplement more funds. And in the meantime, we can reduce the cost of our funds. That's all for my answer. Thank you very much.

[Unknown Executive]

Thank you, dear management, for the answer. Thank you. Let's move on to the second people who will ask the question. Let's welcome Yang Haiyang from Citibank (sic) [ HSBC ].

[Haiyang Yang, analyst]

Dear leaders, I have 2 questions I would like to ask. The first, I'd like you to share with us, especially the ongoing pandemic overseas, what's the effect from the overseas pandemic on the business as well as the prospect into the future. And then we see the dividend payout ratio decreased. So do you have any guidance for the dividend payout ratio in the latter half of the year?

[Guohua Xi, executive]

The pandemic affected the overseas business of CITIC Limited in the Dicastal. For Dicastal, the aluminum alloy wheels on the lightweight parts are affected in the German market, Czech and U.S. market because of the halt of the -- because of suspended operation of the manufacturers, the OEMs, the -- from manufacturing, and then we see they have gradually resumed the work and production. That's the situation in the local area. For the business exported directly to overseas market, because of the weakening effect, it has been affected negatively. But for Sino Iron, for our projects in Australia, the development of the mine is performing normally, is performing quite well.

[Hexin Zhu, executive]

I'm going to answer the second question about the dividend payout ratio and our plan for the next step. So we give a lot of attention to the return to our investors because this is the responsibility as a listed company. So our policy of dividend payout is that we need to take into consideration sustainable development and the overall benefit and the interest of the shareholders. So we are improving our profitability and our management and our resources development in 2019.

So the payout ratio is 4.5%, which is higher than the average Hong Kong companies, which means we give a very good return to the shareholders affected by the pandemic. You may notice that. We say that see in the first quarter, no matter our revenue or the profit, we witnessed a very sharp decline. But generally speaking, we outperformed the market in the difficult time. So we didn't cancel the payout of dividend, which has demonstrated our reasonable return to the shareholders. We continued with our payout of dividend. Maybe we didn't reach the expect -- or the expectation of 20%. But in terms of our long-term planning, with our concerted efforts, we are going to perform even better then in the future. We -- in our future development, we can continue to provide very good return to our shareholders so that we can maintain the stability of the payout ratio and the yield sharing and the payout of the dividends.

I believe such a dividend, maybe you see a very sharp decline, but this is for a certain period of time. It's not the decline in the long term. With the resumption of work and production as well as the recovery and the changes in the 2 markets, we are getting more competitive. And our dividend payout will be improved, and we are going to enhance our goal in this respect so that the shareholders will be confident in us. Thank you very much for your question.

[Unknown Executive]

Thank you, leaders. Thank you, Mr. Zhu, Mr. Xi. And we are going to move on to the next question. Let's welcome Ronald Leung from Merrill Lynch.

[Ronald Leung, analyst]

Dear management, I'm from Bank of America. I'm Ronald Leung. So my question is -- my last -- the last question -- so my first question is about the securities industry. In the securities industry, the country is promoting the whole industry to merge and to integrate for CITIC Securities whether it is considering -- whether it is going to make some efforts in the merge and acquisition. For CITIC Limited, in your book, do you have any strategies in this respect?

The second question is about, there are some listed companies, just now the management shared with us that we are going to give or pledge to the good performing businesses so that they can give or pledge to their value. And the 4 -- so going public or getting listed is an approach. Maybe in a year, if we can be listed so they can give more play, give or pledge to its role.

The second is about the nonfinancial sector. Before, one major direction of business is that the nonfinancial business is getting bigger and bigger. Whether we are going to continue with this goal, do you have another goal like in 2 or 3 -- in 1 or 2 years, maybe the percentage will be reduced?

[Hexin Zhu, executive]

Thank you very much for your questions. Let me answer the first question. I think for one part, the development of the capital market is actually within our expectations for the future development. And no matter for the CITIC Limited, CITIC Group or the CITIC Securities, we have acquired impressive result. And the capital market and the -- for the CITIC Securities itself, it has -- adapting to the changes of the capital markets. For example, we have acquired some of the projects and exactly demonstrating our values. And these new acquisitions and mergers is actually quite beneficial for the group's development. I believe that CITIC Securities has disclosed our performance in the previous days, and I believe that this is the answer to your concerns.

The second question is about some of the best assets or best subsidiaries in our group. Are we considering to list it in the market? I think this should be based on our strategic plannings in this new 14th Five-Year period, and we are going to list it some of the best equities in the capital market to demonstrate it values and boost the confidence for the investors. I think we are going to put up some of the best equities in the market in the future. But with some of the equities growing rapidly, and I believe that these handover -- the equities or the project is going to demonstrate its value further.

The third question is actually about the nonfinancial sector. You might be concerned about the 13th Five-Year Plan. And in this 13th Five-Year Plan, I have talked about the financial sectors and nonfinancial sectors combined with the 13th Five-Year Plan. So calling the general development trajectories for the group, I believe that the very initial essence of the financial industry is to provide the service to the nonfinancial sector. Thank you very much for your question.

[Ronald Leung, analyst]

If it is possible, I also have another question, and it is about the Sino Iron business. This year, do you have any production targets? Are there any further space for the improvements of the Sino Iron's production targets?

[Hexin Zhu, executive]

This is a very interesting question. I believe that we have some colleagues who is connecting through the phone. So let me direct this question to General Manager Zheng.

[Zhengjun Liu, executive]

Let me answer this question. Sino Iron this year, as introduced by General Manager Xu Zuo, has overcome the difficulties of COVID-19 pandemic. The production and the sales is kept flat with our budget. If we estimated the performance in the second half of this year, without any major influence in the second half of this year, we are confident to cap the production volume at 200 million tonnes. Thank you very much. Thank you very much for your question.

[Unknown Executive]

Thank you very much, Manager Zhu and Manager Zheng. Next question, please. Let's welcome Mr. George Choi from Citibank.

[George Choi, analyst]

My question is about Sino Iron, and it's really happy to see the performance of the Sino Iron. Can you tell me what is the actual revenue of Sino Iron this year? So what is the revenue for Sino Iron's production every tonne?

[Hexin Zhu, executive]

And I think these questions should also be answered by Director Zheng.

[Zhengjun Liu, executive]

The performance of Sino Iron and the prediction of Sino Iron, actually, the revenue or the profit is not revealed in our group. But I think from the percentage point of view, as mentioned by our CFO, Mr. Cao, we have a huge growth. The profits this year is much better than last year. It is because of the influence of several different factors. And this -- in the first half of this year, the price of the iron ore is at a high position. Our production and sales went quite modestly. And thirdly, we kept our momentum to lower down the cost and increase the efficiency. And this year, we have achieved a new result.

So the second question is about the cash budget. At the same time, because we have not -- we have encountered some of the long-term sustainable development challenges, some of the operational costs cannot be operated at its best performance. That is the reason why we have not disclosed any representative cash cost. But I can introduce you that from the second half of the year 2016 to the first half of the year 2020, the FOB's cash cost has been reduced by around 30%. That is the reason why Sino Iron becomes profitable last year, and it is also profitable in the first half of this year. Thank you very much for your question.

[Unknown Executive]

Thank you very much, Mr. Lung. Thank you very much, General Manager Zheng. Let's move to the next question. Let's give the floor to Mr. [ Irin ].

[Unknown Analyst]

So I have 2 question. The first question is about the flows of the stock of the CITIC. I heard some of the news from the MOFCOM that they hope that it could lower down the holdings of the capitals. Another question is that under this macro backdrop, do we have any measures to control the overseas risk?

[Hexin Zhu, executive]

Thank you very much for your question. And for the requirement of the MOFCOM, recently, I have no information to disclose in this press conference.

And the second question, I want to demonstrate you is about our strategy. Combined with the 14th Five-Year Plan, we are going to promote it in the second front. And we are going to keep our good momentum and position.

[Unknown Executive]

Let's give the floor to Mr. [ Adwel Tan ].

[Unknown Analyst]

I heard that you have sought some of the equities for -- and China management. Are you going to sell the rest equities? What do you think of the future development strategies in terms of the consumption sectors?

[Hexin Zhu, executive]

Thank you very much for your question. I believe everybody cares about McDonald's. But our sales is actually a pure business maneuver, and we have kept it a good momentum. And I believe that we are going to create synergies in our industry. So I believe that every single business transactions in our companies is actually in line with the very initial strategies to keep the synergies between the different sectors. For the investment in other different sectors, I believe that we should look at the marketing situations and market scenarios and to think about it.

[Unknown Executive]

So for the interest of time, we concluded today's press briefing. Thank you very much for your participation.

[Hexin Zhu, executive]

Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]