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China Coal Energy Co Ltd
Earnings Call Analysis
Q3-2023 Analysis
China Coal Energy Co Ltd
Amidst an environment of declining coal prices and a warm winter potentially impacting sales, the company reported varied operational data for Q3. Commercial coal production increased by 10%, while production of in-house coal rose 8.5%, contributing to a total of 99.67 million tonnes. Commercial coal sales also grew by 5.7%. However, the average sales price for commercial and buyout coal decreased significantly, by 17.4% and 10.9% respectively.
The company emphasized the stability of the coal supply, underscoring a 13% year-on-year increase in coal imported, totaling 347 million tonnes. The production cost of coal has risen marginally by 3%, reflecting a modest increase in expenses. Looking ahead, the company expects the coal market, notably in Q4 and into 2024, to exhibit a weaker fluctuation than previous years. They predict a balanced demand and supply situation with prices maintaining stability around CNY 700, despite influences such as international conflicts and U.S. interest rate hikes.
The company reassured investors of their commitment to a dividend policy consisting of a 20% dividend by cash in the long run, alongside exploring resource opportunities in Xinjiang. Although the production contribution from Xinjiang is minor at present, the company's initiatives there are still in progress, indicating potential future growth once capacity increases.
Despite some disruptions to production in September due to external factors, the company expects stable production going into October. They have managed debt prudently, ensuring a reasonable debt ratio and maintaining sufficient cash reserves for business operations and future investments. There is currently no plan to repay debts early or engage in an equity stimulus through share buybacks. The major sources of growth for 2024 are expected to come from noteworthy mining projects expected to conclude by 2025.
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[Interpreted] So hello, all the investors and shareholders, good afternoon. I am Chong Shuing from China Coal. Welcome you to participate in this 2023 Q3 press release. Here, I would like to thank you for this long-term care and support for China Coal. So we also have with us this CFO, Mr. Chai Qiaolin, and we also have the company's security department and petrochemical business department coal, business department electricity and new energy. And now I'm going to report to you Q3's performance in the Q4 key management. And now I'm going to say the data. These are all according to the Chinese accounting rules. First of all, I would like to say this first 3 quarters operation. And for this year, China Coal has stick to this seeking for development with stability to be maintained to have this improvement of the efficiency of the existing market and then try to improve the quantity and transformation. We have already scientifically organized this guarantee of the production and sales to improve the stability of the price and to also deepen this lean management to have already got these multiple measures to deal with the downward market. And then for the Q3, we have already exceeding our budget. And it has already laid a solid foundation for the realization of this annual targets compared with the same time last year. So for this production and sales of the main products have already kept the growth. However, they have already been influenced by this price decline. So for the profitability is already like not as good as before. First of all, I would like to say this major production and operational data for Q3. So the first one is we have already actively got this commercial coal production. And then for the commercial coal is up by 10%. And for this coal, that is actually having by 4.1%. And then we also have seen this up by 8.5%. For this in-house coal production is CNY 99.67 million. And then for the buyout commercial core sales is CNY 109 million, up by 5.7%. So for the commercial coal is average sales price is about CNY 603 per tonne is reduced by CNY 127 per tonne, so down by 17.4% for the buyout coal is in average price of CNY 660 per tonne. So it is down by CNY 152 per tonne highly efficient. So for these major products, it's actually like poll lever is about CNY 1.12 million tonnes, up by 1.6%. The sales is CNY 1.15 million tonnes. It's up by 3.0%. Urea is CNY 1.52 million tonnes, up by 18.6%. So for the sales is CNY 1.704 million tonnes, up by 20.8%. For muscle alcohol is CNY 1.457 million tonnes, up by 9.5%. For the sales amount is CNY 1.465 million tonnes, up by 12.7% for this ammonia nitrate is CNY 0.41 million tonnes by 17.0%. And we also have seen this sales price per tonne on average for the poll lever is CNY 6,914 and it's down by CNY 600 per tonne, down by 8% for urea is down by CNY 237 per tonne, down by 9% from the previous one to CNY 240 per tonne. So for this metal alcohol is CNY 1,752 per tonne. It's down by CNY 182 per tonne down by 9.4%. For ammonia nitrate is CNY 2,386 per tonne, which is down by 9.7% for the coal devices, we have already got CNY 8.8 billion for these devices is increased by 13.3% for the financial business. We have already got this revenue of CNY 1.788 billion is up by 2.2%. So now I'm going to introduce these major financial indicators. For January to September, we have already realized this revenue of CNY 46.85 billion, down by 10.9%. So we have already got this CNY 6 billion. I have to say that for this attributed to the shareholders of the listed company is down by 13.7% with a total of CNY 4.853 billion. And then for this per share profit is CNY 0.37 is down by 13.7%. So for this weighted average net asset profit rate is 3.45%. It's down by 3.54%. So now I would like to say the reason why we have this reduced the profit. You also can see that for this CNY 12.655 billion is about this commercial coal that is produced of ourselves. So we can also see compares last year and it is down by CNY 496 million. So we also can see for this petrochemical, it is up by CNY 690 million for this commercial one. We also have already got this major profit increase. At the same time, we also can see that with this influence of the price so we also can see that it has already led to this CNY 12.16 billion. So it's also because of the market influence and for all those investment revenue is also having a significant decline. And it is also about CNY 376 million for the management fee increases. So these are all the major reasons why we have this reduced the profit. So the second thing is I would like to introduce to you about this Q4 key work arrangements. So for Q4, we will strengthen our judgment about this market situation and try to have all the different works being done. And because since next year, we hope to have a very good preparation for that. The first one is we have to really manage this safety management and to stick to the threshold of that and to guarantee that at the end of this year, we will have no accidents of safety. And the second thing is we also would have this scientific arrangement of this organization of production to guarantee that all the different schedule and time line would all be guaranteed. The third one is to have this guaranteed supply of coal and electricity to answer to this national demand to try to stick to this key timing and a key area and extreme conditions guarantee of the coal supply security. To give full play to the central government as this cornerstone functionality of the stability of the energy. The fourth one is to improve the quality of the operation. And then we also hope to have to deepen about this safe and highly efficient utilization of coal to try organically to at this restructuring and for the industrial chain of co electricity, chemical and new energy. And then the sixth one, we have to understand and remember our starting point and the mission and then to keep looking forward to the future to have this good performance to repay our shareholders and investors and also make due contributions of this healthy development of the capital market. That's all for me, and let's come through the QA session. So I would like to welcome all the investors to propose questions. Thank you.
[Interpreted] [Operator Instructions]. So now let's have 6704 investor to share with us his question. Please tell us where are you from. And what's your name?
[Interpreted] Hello. I am from [indiscernible]. Thank you so much for your introduction. I also would like to congratulate on the Q3's performance is actually quite good. And with this slight increase, I also would like to say about this production and about the data, I have several questions. The first one is about this in-house production of the coal. I have to say that for Q3 for this overall production compared with the last year and compared to Q2, we have about CNY 0.2 million tonnes of increase. However, the sales, it is actually quite a big increase, it's about CNY 2 million tonnes. So for this production and the sales, you can see the sales increase faster. Why is that? And then in Q4, will still be like keeping -- comparing quite fast growth. So this is also having something to do with about this Q4 arrangement of production and sales. And the next thing is, in the past few years, for this security supervision, it is also quite strict. Will it having any influence on us? Thank you.
So for this question, I would like to Mr. Yanjiang from the financial department to answer that.
[Interpreted] I am Mr. Yanjiang Li from the financial department for the question said about this compared with Q2. And then this part of the growth is bigger than the sales, it's just about Q3 for the sales. And therefore, this stock coal is actually quite a lot. So for this basic comparison, it is actually the sales is bigger than the production. Thank you.
So thank you, Mr. Yanjiang. And the next thing is for this production in Q4. Does it have something to do with this influence of this security management? Or are there any plan for this Q4? I would also have Mr. Yanjiang from this business department to answer that because for this production, and we also have already considered about this stock and about this overall procurement.
So we also can see from this January to September, we also will consider all these. And then to say that according to early days of the year, we have about CNY 125 million tonnes and above for Q4 according to this annual plan.
Thank you, Mr. Yanjiang, for the answering. So no more... Thank you all the leaders, and thank you, Mr. Yanjiang. So we will have 6322 investor to propose a question. Please tell us where are you from.
[Interpreted] Hello. Mr. Chai and Mr. Chong, and all the leaders, can you hear me?
Yes, I can hear you.
And thank you for the time. I am the researcher from CT. From CT Bank, I would like to congratulate on this good performance of Q3. And I also have several questions about operation data and about finance, I would like to talk about one by one. The first one I still would like to care about the cost because you can also see that in the past 9 months, I can say that these are actually quite good performance of that. And therefore, this overall. [Technical Difficulty].
So I also would like to invite Mr. Yanjiang from finance by 4% about the cost.
As we have our own features. So for Q4, we will also arrange some maintenance and repairments. So for next year, for this preparation of massive will lay a very good foundation for that. So for Q4, for this production, it is -- so we also can see that this is actually quite a high cost. So we are also hoping it because of 2022, it's about 320. So for this year because for next year because all those wells, they're all with high production and high efficiency. So cost wise is actually quite stable. So for next year's cost, we expect that we might have this big fluctuation that's all. We think it will maintain stable.
Okay. And the second question is about finance. And we also can see that -- so we also have already seen the several decrease of that. What is the reason? And then for Q4 and for next year, what is your looking forward to that.
So for this question, it's just because for Q3 and for this profitability of the company because for our small companies under us and for the more wholly owned companies, they have some fluctuations. So we may see some changes for this profitability. It still depends on this overall market [Technical Difficulty]. I have to say that it is actually quite hard to say that. Now who we own the company, can I ask that which companies could actually have a better performance to make it like a profitability to have this lower portion, lower percentage. It's just about environment and about mining resources.
Got it. And I have another question. The last question is, I also would like to ask you about this idea about the market. You also can see for the kinetic coal and for Q4 and next year. [Technical Difficulty]
[indiscernible] sales company to ask for that [indiscernible] from the sales company. So for Q4 and would like to end by that. And you can also see for Q4, it is actually having a like the peak season, the overall consumption. So for the last 3 years of the data, we also can see the quarter, it is about like 11.9% higher and 14.4% higher and 17.1% higher for the first 3 quarters, comparatively speaking. We expect for the sales, it is still having this recovery in Q4. So we also can see from this supply of the cost, we also can see that, generally speaking, for this year's supply, it is still quite use, quite sufficient, especially for our imported coals. This year, we have this quite big growth. So from January to September, accumulatively, we have already got CNY 347 million tonnes to be imported. It is up by 13%. So for the first 9 months for the production of cost, according to statistics, it is about CNY 3.44 billion tonnes. So it is actually up by 3%. So generally speaking, the supply is still quite sufficient. And for Q4, we think with this medium, long-term agreement to be optimized and for this implementation of the high stock of the lower stream and about this governmental departments about the guidance of the core policies. In the past few years, for Q4 surprise is still quite restraint. So I think this high peak of the quarterly ones have been lowered year-by-year. So for this year's Q4, it's still we have this top ceiling, and we have this overall bottom as this fluctuation. So for this overall fluctuation is weaker than before. So this is about Q4. And maybe for next year. So for 2024, the whole situation, we also are like thinking generally speaking, for 2024, when we guarantee the supply for this overall policy as the background for this guarantee of the supply. So the price of the coal is actually quite rational. And then to be based on this 2023 long-term and mid-term agreement signing. So for 2024, the overall demand and supply situation is actually found the balance to be this quite loose aspect. And then for the supposed demand increase and about the release of that and by the fluctuation, they will all have this fluctuation but balanced. So the price of the coal will also be quite stable despite some fluctuations. For the long-term agreement for 2024, they could still like play this anchoring functionality compared with the 2023, the fluctuation is quite limited. So it is still maintained at this about CNY 700 around this level. And then we can also see for this kinetic coal, so our 2024 trend. So for Middle East and the conflict between Russia and Ukraine and the change of this interest increase of U.S. and therefore, this global indicators will still play a role. So for this bulk commodities, high-level fluctuation and about this periodical and long term of a port price and fleet price being uncertainty, we think the stock price in 2024 will also have certain fluctuation. So we also consider that in the past few years, we will still have like this management of this coal price and about policy supervision. So for the stock price of kinetic coal will all be with lower flexibility. And compared with 2023, you will have a certain decline. And for the fluctuation range of the price, we think it will still like come to a lower range of the fluctuation. Thank you. That's all for me.
Thank you so much for the detailed answer. And I also would like to say this is very clear and helpful.
And please wait is that I have something to add here. So for market judgment just represent the current projection from the company perspective. This is not just our own perspective. Please keep rationale, okay? So we are just like a company's prediction. It doesn't represent our like absolute judgment.
So then thank you so much from the management team. So this is a return question from this online channel. So the question is, for this in-house coal, what is the proportion? Is this about like 80% to 85% of this long-term coal supply?
[Interpreted] Indeed -- so I'm [indiscernible ] from the sales company. So previously, for China Coal, we are definitely implemented this mid- and long-term agreement signed and stipulated by this NDRC. So we will definitely stick into this mid- and long-term agreement. And for this long-term agreement for the proportion of this in-house production code, it is still like according to the Chinese government's stipulation is above 80%. That's all for me.
The next question is, is it possible that I could also ask you to introduce about petrochemical and about the cost attribution to this net profit, please give me some answers.
[Interpreted] So for all the different proportions contributed to this different net profit, we haven't disclosed this information. However, for our operation is actually quite stable. So this is to keep the same level of this interim report. So it has already been having a detailed explanation and disclosure in this interim report. So that's all for me.
And he has to probe here for 2023, the target of the net profit? Or how much is that...
So this still depends on next year about this market fluctuation because currently, we are also adjusting this year. For 2023, we are still adjusting. I have to say that for 2023, we just keep stable 2023 [Technical Difficulty]
Do you need to have some other voice questions... [Technical Difficulty]
[Interpreted] [indiscernible] Capital. I have several questions now for company leaders [Technical Difficulty] the profit has been greatly impacted than us I would like to ask [indiscernible] arrangement according to many forecast in Q2 and Q3 or -- the performance of the company is lower than our expectations in [Technical Difficulty] -- so the average price for coal is a CNY 57.6 in Q1 and increasing of CNY 51.9 and the decline has been higher than the market average. So the question was also asked in the second [indiscernible] in the first half of the year on the price content such a decline in trend you've provided more explanation.
Yes, I will ask my colleague, financial department to take your question… I feel the price some fluctuations and apart from the declining of price in the market, for example, and my forecast about Q3, the price business should be around 509, which seems to be more reasonable and then I would like to also to have a check on the price and revised condition –
[Interpreted] Let me take your first question about the price drop higher than the market average. In Q3, as we know, there is a sectoral decline of the coals. And on one hand, the market price is declining and also the power of coal structures and is under adjustment -- adjustment. So that's why the price has dropped down.
And then what about the price and differences and for price -- price at the ports 5,500. When there will be such a price -- revised price structure.
The port supply [indiscernible]. We can then -- when there are fluctuations -- major fluctuations that take place in the market as we know, apart from a shipment to the port, there are still additional fees that charge than that. Therefore, while price is fluctuations on time, then the price won't be different from the port price. So only when major situations that take place in the market and will the price be revised.
Well, [indiscernible] price in 570 and then plus 220 some shipments shipping fees then only when adding this together, if the price reaches 790 at the port and then the price would not be lower. Well, actually such a calculation. -- sales and expenditures was 946 and then. But now we are seeing us achieve rise in the sales part or administrative cost. What's the reason?
On one hand, there are some byproducts a price and a fluctuation this year. And on also, as for the mine nitrate and currency, there are some maintenance and work ongoing at the moment.
Now let's invite other then. [Operator Instructions].
[Interpreted] Everyone, I'm Tianjin from Hasan Securities. I would like to answer as the pin asset gross profit for Poland.
Let me take this question. Well, with some technical support, we have reduced the cost of comprehensively. Base, the coal structures have been adjusted in many of the companies and have those enough to use in our own code. And then secondly, capacity has been increased fixed cost have been diluted. And the energy consumption is being reduced. And thirdly, with the technical improvement and more waste in were recycled and reused in them and the firstly accessory for -- the spare parts and have been well prepared. Therefore, profit of polyolefin has maintained the flag of basically.
What's the interest number for the data or profit?
Margin during our presentation that we have shared with you about the sales price, and you can now check those data…
Let's welcome the next speaker…
I have a question. In 2023, you plan to produce some CNY 1.25 trillion calls and now is approaching [indiscernible] CNY1 trillion tonnes now -- [indiscernible] so what's the plan for Q4?
[Interpreted] I'm Kenjung from Coal Department. You have mentioned that the whole forecast or the plan for the production is CNY1.25 trillion on -- we will maintain this production gold above CNY 1.25 trillion without a major fluctuations from the market.
Because if I see normally Q4 production is lower than that of Q3. Is that now in this year?
[Interpreted] Maintenance will take place at the end of the year. So the production center in Q4 would be lower than quarters. However, maintained on achieving the CNY 1.25 trillion tonnes of cold should be and should be no problem.
Now let's invite the next one to ask a question…
[Interpreted] Leader in your annual report you haven't mentioned about the equity we reserved coal reserves and data. So it's in Shanshan and in Mongolia. I would like to understand what are the reserves in different coveted elimination of the capacities are out of date and also building advantage of capacity is in progress. So for the cost of coal, well, you'll be able to maintain or decline, or make reduce it in the next 3 to 5 years? The first question is, do you want to ask about the reserves... Coal reserves.
We have just closed our reserves. Well, because there are different mine data... I want to get more detailed data -- those coal are fully owned by our subsidiary... Early we really use the way to calculate -- this is not a normal financial ways that we calculate a reserve. We need to consider about the sustainable development of the company. Our capacity is not calculated in such a way. So there is no equity yield used for calculation.
And well, we have seen the cost of coal in the past 5 years. The cost of next year has not been mentioned. Therefore, I would like to get some ideas in about corporate about on your plan for the come in the next 3 to 5 years?
Well, thank you for attention to our company. In a long term, a cost management center is part that we are quite confident in about.
Well, if we look into the long term, the coal price has been impacted by factors different -- there's a rising labor cost and also national policy changes now, whether there will be favorable policies or not.
We can only say that the companies are now dedicated to the long-term cost management and also maintain the cost at a reasonable range...
Now we have questions from online. Recently, in Xinjiang area, the production growth is about 2 digits while other -- in other areas close on single digits, what's your plan in developing your business in Xinjiang...
Our company currently... The contribution on -- from the production in Xinjiang, it does not account for a major part -- we plan to explore resources in Xinjiang -- and currently, we have a small proportion of the production and completed in on progress in engine. It still takes time then to increase our capacity.
And then now we have another question about the dividend. The question is that recently, a company that has been released them about an increase...
Actually, our company is a holding group is increasing the stock share the -- in the long run, we will maintain the 20% dividend and by cash. There's no change. And while for the specific plans of the dividend... Would be considered later and -- but we will maintain at least 30%.
In the Q3 report [indiscernible] see the possibility increase-- the large provision increase in Q4?
So far we don't see major changes in the provision for next quarter if there will be, I will disclose them.
The next question is what's the cost for -- cost of coal in the next 3 to 5 years.
This question has been answered, and please refer to my private answer. In the long run, we dedicated on the continued cost management and maintain it at a reasonable range
The next question is... What would be the investment direction or CapEx of our company? [indiscernible] The cash of the company is CNY 90 billion. How would you spend that in and why you reduced the debt rate?
There's about 60% on a proprietary cash in -- we have some dedicated funds. So 60% can be managed by ourselves. So currently, we have -- we do not have a plan to repay the debt in advance and also [Audio Gap] CNY 0.1 billion compared towards the end -- beginning of the year.
[Interpreted] I'm Jinyong from Beijing. This winter and it's a warm winter, would it have an impact on the sales of your products according to our historical data and experience... [Audio Gap]. And online investors and can tax for messages and whole prices, hands up them to ask us to have a voice conversation. Now the question is... Productions and the sales ratio has been been reduced quite a lot in September. So what about the repositioning in October...
At this time... The production these declined is because of some accidents and take place in the surrounding area, while in October, once those external factors being removed and is now and production so will maintain stable.
Let's welcome the next one.
[Interpreted] Leaders, I have another question. We're also individual investors Therefore... It is very hard to understand the performance that precisely. And previously, you have mentioned the provisions would be reduced -- so would there be another provision for CNY 5 billion or CNY 7 billion this year?
Our CFO to take your questions.
[Interpreted] There is a supply side and our restructuring taking place in the company in the past several years. Overly the debt ratio is a very reasonable, very good level. As the company that has an asset of CNY 34 billion, such a provision is normal, there won't be significant impact.
Now let's welcome to Moana, finance...
[Interpreted] So will there be major changes in terms of the debt this year, a ratio this year?
We have announced a reasonable range. We can see that, that rate is declining in the past several years. [Audio Gap] We have an... The debt rate is down 43%. And in my personal opinion, I feel it's very reasonable. And -- we also have a bottom line that we need to interest on. We want to guarantee the safety of the operation of a company. So we have a lot of cash. And secondly, will arrange of proper CapEx and also prepare products for the market. Apart from that -- you can see the revenue that the company is now – is more than CNY 200 billion. On the other hand, there are many projects ongoing, the loan rate, loan interest is around 3%. So we are also doing a lot in compliance [Audio Gap]loan interest is around 3% -- so we have about 10 billion cash... And we can have a renewal when it's approaching the expire rate, we have cash source of revenue and also have a sufficient cash to guarantee the proper operation of the company regardless of this year or the past years. Companies have taken a reasonable measures to guarantee a safe operation of our business and also meet the needs of the future. So that is a result of balancing different finance perspectives.
Thank you, Mr. Chai. I want to ask a question regarding buyback... For each share for the company. Would there be any difficulties to have an equity stimulate?
Let me take your question China Coal Energy Group is a buying back. So it's not an – so we are not buying back... There's no buying back plant at the moment. And if there will be, we are going to disclose.
I have a follow-up question. The edge share buyback may have some problems and I would there be some legal issues regarding the buying back for share stimulus?
Our company do not have such plans and the arrangement. So your assumptions and does not have a pre-requisition. We have not considered about buying back from each shares. So a company does not have such a plan to buy and shares and as the equity stimulus.[Technical Difficulty]
I have received your question -- so where -- which mines will generate major growth for the company in 2024?
Well, this year has been quite large enough order and also [indiscernible] project have completed. So the major growth will come from these 2 assets at our projects and ongoing will be completed and the construction will be concluded at the end of 2025.
Meeting secretary, you're here and you here? Now let's welcome the next participant…
[Interpreted] Ask 2 questions. Dear leaders, an individual investor. I would like to ask an -- the coal chemical business as a new business then what products? And then what improvement have you seen from the advancement of the technology and also any room for efficiency improvement and the cost reduction -- can you share with us some new projects of the product and chemical perspective and share with us and the rates the application of new technology
I'm Li Yanjiang from the Coal Chemical Department. Regarding the overall plans for cost improvements and efficiency improvement, cost and reduction -- our goal is to have a synergized development of the hydrogen and coal and now we are also trying to leverage the byproduct and improve the efficiencies of projects and prepare them to against the [indiscernible]. So the major goal is to reduce the carbon emission and also asset deployment on the emerging areas and developing on those core projects with our advantages.
In the past 3 years, with technology improvement that we have been a significant on a customer reduction for one area. So do you see significant changes that will take place due to the advancement of technology in the coal or chemical sector? or you want to see such a significant improvement. And then I have seen some companies that have used green hydrogen centers for a hybrid motor. So such optimization now, what benefit can you see in such migration?
[Interpreted] I'm Yang Lin from Cole Chemical Department. We are developing liquefied project, here on PV and wind and tie make doing power and balance [indiscernible].
Now in time, I'd like to ask the final question. In 2022, what is the pricing strategy for coal?
[Technical Difficulty] For our agreement made -- agreement on a contract in... By NDRC. So the price ranges and coverages and then the effective years of the contract at several orders have been identified very clearly in the instructions of the contract signing by NDRC. And it is a cornerstone for market regulation. It is also a key area for governmental regulation. -- and our companies have quickly implemented and related policies from NDRC in so far, we have not received any further notification from NDRC. So basically, the policies of 2023 will be continued and guaranteed supplier and stable [indiscernible]
That concludes our session. If you have further questions, you're welcome to contact that is our PR department. Now let's move on the leaders to conclude dimension.
Thank you, investors, for your long-term support and attention to China Coal Energy. So 1 hour apart very quickly. If you have any further questions on a technically or nontechnical questions, you're welcome to contact in our department. And hope to see you next time. Thank you.
Thank you dear leaders for your' sharing as well as emanate investors for your questions. And now we conclude the meeting. I wish you have a good day.