China Coal Energy Co Ltd

SSE:601898

Earnings Call Analysis

China Coal's Steady Production Amid Pricing Pressures and Future Growth Outlook

In the first three quarters of 2024, China Coal Energy produced 102 million tonnes of coal, slightly up 1.1% year-on-year, despite a decline in sales volume of 205 million tonnes, down nearly 10%. Revenue stood at CNY 140 billion, a 10.1% decrease, and net profit reached CNY 14.6 billion, reflecting a 12.7% drop in earnings per share to CNY 1.10. The average selling price of self-produced coal decreased by CNY 32 to CNY 571 per tonne. Looking ahead, China Coal plans to control costs and focus on safe production to ensure stable operations and is on track for a revenue growth target of approximately 5% in 2025.

Performance Overview

In the first three quarters of 2024, China Coal Energy displayed a mixed performance, with operating income being CNY 140 billion, a decline of 10.1% year-on-year. The decline in revenue was attributed to fluctuating coal prices and a reduction in sales volume, which fell by approximately 9.9 million tonnes. Despite lower revenue, the net profit attributable to shareholders reached CNY 14.6 billion. The company reported a basic earnings per share of CNY 1.10, reflecting a decrease of 12.7% from the previous year.

Cost Management and Efficiency

A significant focus of management has been on cost control, evidenced by a decrease in unit sales costs for self-produced coal to CNY 286 per tonne, down CNY 8.19 year-on-year. Overall, China Coal managed to reduce various costs, leading to an increased profit margin despite declining sales prices. For the fourth quarter, costs are expected to rise due to seasonal maintenance and safety investments, yet management believes they can control the overall expenses within a reasonable range.

Price Trends and Market Outlook

The company acknowledged that the average selling price for self-produced commercial coal fell to CNY 571 per tonne, which is a 5.3% decline year-on-year. The management anticipates stable demand for coal, with market prices expected to stabilize around CNY 270 per tonne. Although reports indicated pressures on coal pricing, management remains optimistic given steady demand dynamics.

Future Guidance and Strategic Initiatives

Looking ahead, China Coal outlined plans for capital expenditure amounting to approximately CNY 15 to 20 billion annually over the next few years, focusing on coal chemical projects and power generation. Additionally, while the company is open to merger and acquisition opportunities, no specific plans are currently being pursued. The management emphasized their commitment to high-quality development and efficient operation.

Dividend Policy

In terms of returns to shareholders, China Coal committed to maintaining a dividend payout ratio between 20% and 30% of net profits. This commitment aligns with the company’s long-term strategy to ensure consistent returns while navigating operational challenges.

Earnings Call Transcript 2024-Q3

[Operator]

Welcome the investors, and welcome to the Q3 China Coal briefing and this briefing is open to investors, and the main speakers will also leave you some more time for Q&A. So let's hear from the management of China Coal.

[Jiang Qun, executive]

Distinguished shareholders, dear investors, this is the Board Secretary of China Coal, Jiang Qun. Welcome to the Q3 briefing of China Coal. I sincerely thank you for your long-term attention and the support. And present on today's meeting, we have Executive Director and President, Zhao Rongzhe; Independent Director, Zhan Yanjing; Chief -- CFO, Chai Qiaolin, and also our colleagues and partners from different department business units, including the coal business unit, coal chemical business unit and power and new energy business unit.

And let me brief you on the performance of China Coal for the first 3 quarters 2024. Firstly, an overview of the performance in the first 3 quarters. Since the beginning of this year, China Coal Energy has fully implemented the development idea of improving efficiency and incremental transformation.

And we have actively stabilized the production and supply, deepening the lean management, striving to improve quality and efficiency. So we have had a quite stable production in the previous 3 quarters. Production, sales and total profit of China Coal have exceeded the budget which has laid a good and solid foundation for the whole year of 2024.

The main production and operation data. Coal production and sales in the first 3 quarters, cumulative output is 102 million tonnes, up 1.14 million tonnes, and 1.1% year-on-year. Advanced the production capacity of coal mines, such as Pingshuo East Open Pit and [ Shaanxi Shahe hydro ] was actively released, and we've also achieved like 205 million tonnes of sales volume of commercial coal, down 9.9 million tonnes. The self-produced commercial coal sales was 100 million tonnes, increasing at 710,000 tonnes.

And selling price of coal products. The average selling price of self-produced commercial coal is CNY 571 per tonne, year-on-year decrease of CNY 32 per tonne, down 5.3%. Average selling price of buyout trade coal is CNY 598 per tonne, and down by 9.4%.

Unit sales cost of coal products. The unit sales cost of company self-produced commercial coal is CNY 286 per tonne, down CNY 8.19 per tonne. And the transportation, logistics have also been actually reducing. So we've actively allocated and also paid benefits and the compensation so that the overall influences like energy has actually been reduced by 2.2%.

And the first 3 quarters and the cumulative output of major coal chemical products. Polyolefin was 1.14 million tonnes, increasing 32,000 tonnes, and the cumulative output of urea was 1.312 million tonnes, which was mainly affected by the planned overhaul of [indiscernible] plant in August with a year-on-year decrease of 220,000 tonnes.

A cumulative sales of urea reached 1.51 million tonnes, including consensualized sales of 89,000 tons of urea from Lingshi Chemical, a subsidiary of China Coal Group. A cumulative maximum output was 1.213 million tonnes, decreasing 244,000 tonnes, mainly due to the planned overhaul of the devices of the [indiscernible] plant. And the cumulative sales of methanol is 1.2 million tonnes, decreasing 259,000 tonnes. Cumulative output of ammonium nitrate was 423,000 tonnes, increasing 11,000 tonnes.

The selling price of main coal chemical products are as follows: average selling price of polyolefin is CNY 6,971 per tonne, increasing by CNY 57 per tonne. For urea, the sales price was CNY 2,134 per tonne; and the methanol, the sales price was CNY 1,767 and the ammonium nitrate was CNY 2,101 per tonne.

The unit sales cost of main coal-chemical products due to the comprehensive influence of factors such as the reduction of raw coal cost, unit sales cost of polyolefin was CNY 6,015 per tonne, year-on-year decrease of CNY 56. Unit sales cost of urea is CNY 1,527 and that of methanol was CNY 1,781, and that of ammonium nitrate was CNY 1,288 per tonne. Equipment business output with coal mined equipment was CNY 7.72 billion, down 12.3%. Our financial business, the profit was CNY 1.078 billion, up by 11.3%.

The main financial indicators next. In the first 3 quarters of 2024, we have achieved operating income of CNY 140 billion, decreasing by 10.1%. And the net profit attributable to shareholders was CNY 14.6 billion, and CNY 15.63 billion under international accounting standards.

The net cash flow was CNY 21.7 billion, down CNY 1.47 billion. Basic earnings per share was CNY 1.10, down 12.7%. And the asset liability ratio was 47.1%, down 0.6%.

Main profit increase and decrease factors. Main profit increasing factors in the first 3 quarters. Firstly, the unit sale cost of self-produced commercial coal decreased, profit increased by CNY 821 million, and also the self-produced commercial coal decreased by CNY 8.19 per tonne. And financial expenses decreased and profits increased by CNY 414 million.

So the other factor is something like CNY 97 million. So given the pricing influences, I think that's the main variable affecting our profitability. And the investment -- the earning has also down and the impairment losses is somewhere CNY 200 million something. And for the coal machine profit degrowth is RMB 215 million. So that's the first 3 quarters, the key financial indicators.

Next, the fourth quarter key arrangements and actions. China Coal will continue to thoroughly study and implement the spirit of the third plenary session of the 20th CPC Central Committee focusing on high-quality development, continuing to strengthen management and constantly improving the quality and efficiency.

We will focus on the following tasks. Firstly, we need to deliver a good job in safety management and safe production. So we need to scientifically and reasonably organize production, overhaul, repair, conditioning, orderly arrange maintenance, strengthening equipment and maintenance. And we also need to respond to national policies to meet peak and also fluctuated demand in winter.

And also, we need to play the full role to central enterprises objectives as largest sourcing energy supply and price stability, further improving the quality of operation, maintaining good momentum of cost control, controlling unproductive power costs and expenses, speeding up the collection of accounts and coloring the two funds.

So the management will focusing on safe and efficient development to deliver the objectives and targets we set out for 2024. So that we would also like to build up a solid foundation for next year's operations. So that's all for the brief introduction of the previous 3 quarters.

Let's go into QA next. Let's see if you have any questions.

[Operator]

[Operator Instructions]

[Unknown Attendee]

Congratulations. And I think for the whole year 2024, you still managed to register a quite good performance. So I think from the coal industry, when we look at the dynamics, I think comparing to 2023, we had seen some very possible pricing dynamics. So what's your view on the pricing trend? And also, we see your efforts on cost reduction on expenses, especially around financial expenses, it has also driven forward the gross margin. So what's the plan for further cost reduction for next year?

[Unknown Executive]

Can you also rephrase your first question? Are you talking about the overall coal industry, like our summary or analysis?

[Unknown Attendee]

We were talking about the pricing of the coal industry. It has been increasing that we see the trend in 2023. This year, the pricing was under a little bit of pressure. What do you see the pricing trend?

[Unknown Executive]

So you were asking about the market of the coal industry, right? So [ Mr. Lin ] from the marketing business unit, please answer this question.

[Unknown Executive]

I think regarding the coal market in 2024 comparing to 2023, I think that it's going to be quite a normal year for us, although we see some pressures of pricing down. But overall speaking, from the supply and demand in the market and especially the demand wise, it's quite stable. Pricing trend is going down, we see that, but pricing-wise, it's not actually going too pessimistic as somebody analyzed.

So CNY 270 is somewhere like the bottom, but it has never been lower than CNY 270 per tonne. So current pricing, although it's going down a little bit, but still, it's beyond our worst scenario analysis. And I think in 2024 and next few years, I think it's going to be quite stable.

[Unknown Executive]

And regarding cost reduction, I think that this is some of my analysis. Comparatively speaking, it's not about high or low. I think, cost-wise, it's -- I think safe production is the first priority. And given safe production, then we strive to cut costs, to continue to reduce cost to actually register highlights in our performance. From January to September, I think cost wise, it's quite stable.

And the safe production, we've also delivered a very good job. So I think this is our efforts for continuous cost reduction. And given our advanced capacity especially in the major mines that we are releasing more capacities in the market and the production and sales also are very optimistic and so that has underpinned our cost reduction efforts. Secondly, I think with very advanced management, I think we will continue to drive cost down.

[Unknown Executive]

So we also said that in terms of liability and debt and according to our operation and development and within it, you can see a lot of factors. For example, what is our debt of the year and the cash flow and the operation cash for the whole year on the basis of this and when you scientifically arrange and now the fees and the other -- on the costs, for example, like this year, and you have seen that.

So obviously, you can see the liability and -- dropped, decreased. And you have noticed that in the market, and we also launched kind of the bond and the shares and the interest rate is 2.58%. So the interest rate is very low, actually. So we are orderly to arrange the scale of the debt and we optimize the structures of the debt and loans. So because of this, and we clearly see the liability and debt have dropped hugely. So of course, in the future, and we still need to follow these goals because development of the company still rely on resources.

And you can see that and therefore -- and for some auction and for the pricing will be over CNY 10 billion or something. So that's always you need to have certain cash flow for capturing more opportunity certainly in the future. So we are going to optimize the management of your fees and the money and the cash. And on the other hand, we do need to consider about and the launch of the bonds.

So do not consider the standard of this year because we have cost -- we have reduced costs this year, of course, and we will soundly arrange and obvious -- and of course related, given the fact it's including operation and a lot of the other factors, we need to assure safety and assure the stable performance in the market and to achieve the sustainable growth. And all in all, and we need to assure all of this. So that will be more reasonable to us.

[Operator]

Do you have any other questions, [ Mr. Huang ]?

[Unknown Attendee]

No, no.

[Operator]

Okay. So now we are going to invite the other participant. Please provide your name and the organization and then answer the questions.

[Unknown Analyst]

Hello, and all the leaders, good afternoon, and I'm researcher from Citibank, and congratulations and -- on this kind of performance of China Coal. And I have several small questions, and I want to ask these questions one by one.

The first question, and I wanted to ask about the cost. So if we only see the producing cost of coal of Q3 compared with Q2 and the production cost dropped hugely and could you please explain the cost of the -- so in addition to the previous investment call, and can you explain more about the cost of the others?

And secondly, and how about the cost compared with the year before? And how do you look forward the cost of Q4? So this is my first question.

[Unknown Executive]

Okay. So we are going to invite Mr. Chai to answer this question. So we want to invite Mr. Chai from the financial department, I wanted to ask about the changes of the other cost.

[Qaolin Chai, executive]

And we have the special funds and the other cost and service fees and for the producing and special funds and all of this decreases on a year-on-year basis. And in terms of Q4 and how do you forecast changes in Q4, actually, from Q1 to Q3 and compared with the year before and basically, the cost dropped by 8.19%. However, compared with the whole year and of 2023 and the gap is 20.14%. So actually, and for the coal industry, I mean Q4 is more like a transition quarter.

So that's why we need to reasonably arrange a lot of things, including the maintenance of the equipment devices, and we need to invest in the safety, safe manufacturing, and we still need to prepare and the cost of the operation for next year. So basically, the cost in Q4 of each year will be higher than the other quarters. However, in general, we will control the cost within a certain range.

[Unknown Analyst]

Okay. Understood. And another question is that, and you can clearly see that there are huge fluctuations of different quarters, right? And for other costs, end of Q4, probably maybe it is difficult to forecast another Q4 and other cost. So because for the cost of Q3 and we clearly see that there is a huge drop of the other cost and for the whole year's cost of 2024 compared with the whole year of 2023. So if we look from this perspective and the cost of Q4 compared with Q3, do you mean cost will increase? So I mean is that -- so how do you forecast the overall cost of year 2024?

[Qaolin Chai, executive]

So actually, I've already said and for the whole year's cost, we will control this and within a more reasonable range. And I believe there will be no big differences. And in terms of Q4 compared to Q3, and there might be growing. So as I said, right, for the investment of the safety and the manufacture of next year and the appropriation of next year. So that's a competitive Q3 and there will be some growth of the cost in Q4.

[Unknown Analyst]

Okay. Understood. And my second question goes to -- related to about asset. So do you have any plans and likely any asset from the mother company into the other company? And do you have any purchase opportunities for the other coal assets? So how to think about the coal asset purchase from your company? So can you share more about the details?

[Unknown Executive]

So I'm going to respond to this question. Actually for now and for other company, so of course and according to national and policy standards and mother company basically adopted this, and we have certain assets. And in terms of the asset acquisition, so we are still in the process of doing this but for now, we basically haven't got any detailed plan. Of course, in the future, everything is possible. I could only say this. Possibly in the future, but in terms of asset acquisition, for now, we don't have solid plans.

[Unknown Analyst]

Okay. Understood. So in terms of the external coal assets, any opportunities, so how do you think about this in terms of the external assets?

[Unknown Executive]

Actually, and as the coal resource company corporate, of course, we actively capture and get more coal assets and to ensure the sustainable deployment in the market. And we have seen a lot of the leading and the coal assets and resources. But for now, we haven't got any detailed results. Of course, we will follow up those results in the market.

[Unknown Analyst]

Okay, understood. And my final question is related to about the volume. And so how about the Dahaize coal and growth of next year and then Lingshi coal of next year. So how about the volume -- production volume of the other -- of the mine and compared with this year, so Lingshi and Dahaize coal contribution and in terms of manufacturing volume of next year.

[Unknown Executive]

Okay. So we are going to invite Mr. Li from the coal unit.

[Unknown Executive]

So basically, for the '25, in terms of the output and there will be no big changes. And you already mentioned and by now, the growth basically comes from Dahaize and Lingshi. Of course, next year, we will have the manufacturing and the increment of Lingshi.

[Operator]

Thank you so much, and we are going to invite the third participant. So please provide your name and the name of the organization and ask your questions.

[Unknown Analyst]

Okay. I'm from [ Guosen Securities ]. My name is [indiscernible] and thank you so much for organizing this report and this performance brief, and I have a couple of questions to follow up. And I wanted to ask more detailed answers from all the leaders.

So first of all, so I wanted to ask some question related to production and sales volume and from Q1 to Q3. And we see another trend of the -- Q2 of the market, right? And we don't see big changes for Q3. So in terms -- so it seems that -- and we can see that and some huge drops and some huge changes of the sales and of some cost and the reasons behind this. This is my first question.

The second question is more related to the resources. And the question I want to go to ask [indiscernible] for the Q2 and the progress and including Antaibao and the latest update and the planning, and we know these results of Antaibao after increasing the resources and the future. So is it possible to improve the -- increase the output? And if the output is increased and can you share more about the details of the fees and maybe some forecast?

[Jiang Qun, executive]

Okay. So in terms of this ratio, we are going to ask -- invite [ Ms. Li ].

[Unknown Executive]

Okay. Thank you very much. And for 2024 on the China Coal. So the resource rate is no less than 80% according to the signing requirement, so 80% -- so at least 80% and of keeping appointment. And actually, according to the statistics and basically all this country fulfillment and meet the requirement, and for the signing ratio and there are no big changes. And of course, for this signing contract and fulfillment and we must follow rules from the state government concerning the selling price of the coal, and we are going to ask to Ms. Li to answer this question.

[Unknown Executive]

So Q3, so the average selling price of coal dropped to CNY 20 per tonne, and compared -- and with -- and compared with the previous month. And so due to the changes of the types of the coal. So in terms of Dahaize expansion, so we are going to invite Ms. Li from the coal unit to answer this question.

[Unknown Executive]

So in terms of this number to cover Dahaize, so basically, we are still in the preparation stage -- at the preparation stage. So because we are clear that for development of the coal mine, so we needed to have a very clear procedure, including the contracts and planning a lot of things. So when everything is ready and then we were going to start under this Dahaize project.

So basically, and by the end of 2025, and everything will be ready, and we are going to start under the Phase 2 expansion, concerning about the expansion. So there are 2 factors. One is about, and we needed to consider the procedures. So the procedures, and we still need to comply and -- with the industry rules. And we needed to comply with the recognition from industry.

So in general, so everything is in the right order, and we are proceeding this. So -- and we still needed to consider about approval procedures or something. So that's why -- and for the procedures, and we cannot control the time for approval and in terms of the output. So if all these procedures are approved by the province and then we can soon start the work and we will have a very detailed plan, because we still need to consider different procedures. And in terms of producing volume under the arrangement and then we will reveal to the investors at real time.

[Unknown Analyst]

Okay. I have a follow-up question. So in terms of expansion, so any news on the fees related to the coal mining rights?

[Unknown Executive]

Actually in the past, we didn't pay that fees to the government. We still need to rely on the evaluation from the government and then under this the fees can be known. So there are still a lot of uncertainties.

[Operator]

Next investor, please.

[Unknown Attendee]

Can you hear?

[Operator]

Yes, yes, we can hear. Please.

[Unknown Attendee]

I have a question about cost. Another investor asked a similar question on Q4 costs and the Q3 cost. Is there any other cost reduction like opportunities forward? And therefore, the designated fund, it has decreased a little bit. Looking forward for this designated fund, these changes, will that be quite a lot in next year and forward?

So the second question is that our sales structure, and we see that in the first 3 quarters, the self-produced coal sales is more than like 41 million tonnes. And with more projects and also capacity release, I think -- what is actually the incremental capacity that will be released in 2025 onwards?

So the question is cost. So I think for the special fund, Q3's special fund actually has increased in our utilization for the safe production investment and the sustainability and ESG investment that has increased in Q3. So we will continuously invest in safe production. There is a scope and range. So that's the reduction or like increase, it's quite within the range. It's reasonable.

Second question, you were talking about the Phase 2 project of Huajin, right, and the Phase 2 project of another project. Yes. and also Antaibao, the 350,000 KW power plant. Let me give you some heads-up on Antaibao power generation plant and the coal consumption is 1.88 million tonnes per year. [indiscernible] Phase 2 and the coal consumption is about 4 million tonnes.

So for these 2 projects and 2 phases, in total Phase 1, Phase 2 in total, and you were talking about the 1.88 million more and 4 million more. That is net 6 million more coals needed for these Phase 2 projects. There are 2 actually. But to really hit the production capacity for coal, chemical, is it the uptime ratio up to our target, that was still our assumption. So 6 million net incremental like capacity that was just a theory.

The next investor, please.

[Unknown Analyst]

And this is Lee from [ Fuxing Fund ], and I'm really honored to be invited to this call. I think I have two questions. One is that the coking coal pricing mechanism, can you let us know more about that? In Q3, the coking coal pricing range comparing to Q2 has decreased CNY 200 per tonne. And so for your coking coal sales price I assume that it's RMB 100 per tonne decline. So what are the differences of the CNY 200 versus CNY 100 in terms of the pricing decline?

[Unknown Executive]

For the coking coal, I think our pricing mechanism, there are 3, one is the long-term contract pricing. Another pricing is the regional pricing that we benchmark comparing to the local market pricing, the transportation mode, the logistics and also key accounts. And the third mechanism is purely market-oriented decided by the supply and demand. So it's like an auction, that's the third pricing mechanism. So that was the main 3 pricing mechanisms that we are operating.

[Unknown Analyst]

So Q3, the pricing change, especially the pricing down, can you elaborate on that?

[Unknown Executive]

For coking coal, coking coal average price is RMB 1,300, down by RMB 60 per tonne, less than RMB 60 per tonne, which is lower than average market decline. So that was some coal structural issues. So the price decline was less than RMB 60 per tonne.

[Unknown Analyst]

And also for the coking coal of China Coal, how much was in the long-term contract that you are selling to your long-term customers?

[Qaolin Chai, executive]

We do not disclose that kind of ratio as of coking coal and its proportion in long-term contracts.

[Unknown Analyst]

My second question is that from your Q3 report, and the revenue of coal, chemicals, costs and also profit in the first 3 quarters. The coal chemicals gross margin is something like CNY 2.3 billion. Last year, it was CNY 2.2 billion. So in like Q3, that means that the Q3 gross margin, coal chemical is just RMB 100 million. Is my assumption or calculation, right?

[Unknown Executive]

Thank you very much for this question. In Q3, the profit difference is mainly due to the long haul -- the overhaul of the manufacturing facilities. So that has affected our production a little bit. So that was the variable there.

[Unknown Analyst]

And this is from [indiscernible] Securities. I think for buyback of shares and also increasing the shareholding, what is your view? And so that's my questions here.

[Rongzhe Zhao, executive]

So I think, firstly, I think for China Coal and our controlling stakeholders and we give all the importance to the share management. Actually, you can see that our share price compared to last year, it has been quite stable and going up, that was the trend we're seeing. And the controlling shareholder and in certain time ranges in this year they have increased buying more shares.

But for the time being, for now, we do not -- we haven't disclosed any information to further buy back more shares of China Coal. We will let you know when we have announcement.

And also, I want to reiterate here that we are actively seeking the possible M&A subject matter, and if there is nice and good asset that we can buy, and there is possibilities, we might arrange further M&A, but we don't have any plans for M&A now. So we'll let you know when we have announcements on any potential M&As.

Any other questions, Mr. Zhong?

[Operator]

[Operator Instructions] Next, the investor, please.

[Unknown Attendee]

I'm an individual investor. And I think for your core coal project for your self plant core chemical project and comparing to other projects and the cost wise, is there any further space for your core chemical project cost to go further down. And also on renewable energy for your coal chemical is hydrogen and the hydrogen with carbon dioxide that is methanol that you are producing.

So what is the potential market acceptance for your methanol chemical products, for the core chemicals new plant projects?

[Rongzhe Zhao, executive]

I think we are launching some new technologies in the new coal chemical project in the product design. It's all for the advanced and the premium product lineups. So for the new plant capacities of core chemical compared to benchmarking with our peers, I think there is a lot of cost reduction space we can look forward. That's my take on this question.

Secondly, you were talking about -- the core chemical project you were talking about, we used and adopted new technologies. And I think that is some of the integrated projects for like coal and power generation and the coal chemical integrated projects that we are also investing in. So the quite advanced timing, the advanced design and advanced construction.

Given the current budgeting forecast, it's quite lucrative with launch of this integrated project, and we will let you know when we do have actual operations on this new and advanced capacities on coal chemical.

[Jiang Qun, executive]

Next investor.

[Unknown Attendee]

This is [indiscernible]. I have two questions. The coal and coal chemical sectors, I think for pricing and cost for comparison, we have noticed that you have some structural advantages so that the cost goes down a little bit, but that is also offsetting the pricing down trend as well. So my question is that in the future CapEx plan, especially CapEx plans for coal chemical sectors, next year, future a few years, do you have any guidelines for CapEx that you are planning for coal chemical projects? And do -- you were talking about the potential M&A targets for coal. But for coal chemical, do you also plan for some more M&A action?

[Jiang Qun, executive]

Mr. Zhao, please.

[Rongzhe Zhao, executive]

Thank you very much for this question. I think in 2024, the sales and also the product mix, and that is quite aligned with our budget and forecast. And the downstream and the customers and also the product mix related to optimization is quite within our planning. And also the different specifications of coals and we see a little bit of different flows of customers that are receiving our specific core products, but they are not changing that much. But what about CapEx plan for coal chemical? I think, overall speaking, [indiscernible] Phase 2 is some of our focus now.

So including the coal chemical, and this is a very important part of our major business. And our main business includes coal and coal chemical and power and new energy. And in terms of the capital plan, and we have a total about CNY 15 billion and coal chemical is about CNY 15 billion and for Phase 2 project and because there is still and several years to be built up. So for now, an investment is still at a stable stage and in [indiscernible] region. And we also have some plan of the coal chemical projects. But recently, in recent years, maybe we don't have two high expenses for investment.

[Unknown Analyst]

And I wanted to have a follow-up question. And in the future, in terms of the acquisition of assets. So do you still consider coal chemical or coal or any other areas?

[Rongzhe Zhao, executive]

Actually, for the corporate. So for now and the coal chemical products normally come from coal energy. So for the external companies and they are coal chemical assets, basically, we don't need to review something, however, for some projects which have benefits economic benefits, we are still and in the process of following up.

For now, we haven't found any special interest. On the long run, we have the footprint in [indiscernible] region and the coal and electricity, the integration. So we are planning to consider to have about the layout and of the new type and coal projects. But now this is still at a planning stage and for now, we haven't have any formal expenses of the capital. Of course, if it goes to the approval stage and we will review to the public according to the rules and regulations.

[Jiang Qun, executive]

Thank you so much for the leader answers, we are going to invite the next participant to answer, please tell us your name and your organization.

[Unknown Analyst]

So good afternoon, all the leaders. Can you hear me?

[Jiang Qun, executive]

Yes, yes, please. Please ask questions.

[Unknown Analyst]

So actually my name is [indiscernible] and I'm going to State Development and Investment Corporation. I have some follow-up questions. And in terms of the progress of the chemical projects because some of you talk about the gains and profits of the project and Phase 2 project and [indiscernible] the planning, [indiscernible]. And can you give us more details about the schedule and the time for implementation.

The second one is about the capital expenses. So by now, and the -- how about the kind of status of the capital expenditure? And for next year, the overall structures and capital expenditure for next year, so any changes? Are you going to increase expenses in the chemical and power? So these are two follow-up questions from my side.

[Rongzhe Zhao, executive]

So concerning the coal chemical project progress, we are going to invite our colleague from the coal chemical department and capital expenditure, and we have another leader to answer the questions.

[Unknown Executive]

Thank you so much for your answer. So in terms of the core chemical projects, and we already officially started the project in June and it takes about 30 months and it's planned to complete by 2026. And by now, the project has already entered into the overall planning stage and the statistic stage. The [indiscernible] project, we already started the bidding.

So in terms of the capital expenses, Mr. Tan. So in terms of capital expenses, I mentioned that in 2024, so the overall expense is about RMB 60 billion. And we also mentioned about the coal and the coal chemical and the new energies.

And in terms of expense, you basically go to the Phase 2 project, [indiscernible] project. And we have the two coal power projects and the new energy. So basically, the expenses to go to those projects. So in the following 3 years, so for the annual capital expense is about CNY 15 billion to CNY 20 billion in total, roughly. So still from investment on the power and new energy and the coal chemical and the power. So that's all my questions -- That's my answer.

[Unknown Analyst]

And I have a follow-up question. So actually, so in the beginning of the year, I talked to you and you propose -- you mentioned that in [indiscernible] so you are planning and build a kind of industrial chain of tens of billion level, and I wanted to ask any new programs from this project?

[Rongzhe Zhao, executive]

Actually this project, so it is still on the proceedings. So because for now. And according to the national standards, we needed to include the project into the government planning. After that, we will carry forward this projects. So for now, this project is still in the process under the rules and regulations of the government.

[Jiang Qun, executive]

Thank you so much for the answers, and we are going to -- so we have the other questions from the Internet. So there's a question concerning the cash and the dividends. .

[Rongzhe Zhao, executive]

So actually, in terms of dividends, there's kind of the rule of the corporate. So we basically follow the new item 9 and the share dividend of listed companies launched last year. So the dividend is stable and easy to forecast. So because we promised to the market. So the cash dividend is about 20% to 30% and the shareholder, the 30% and when we provide the dividends of this year, of course, and we still need to stick to this commitment. And we actively responded to you on this market. So basically, the investors and they can know and from our performance on one hand, so we make sure that you have the good operation performance and high-quality development and secured sustainable development, and we still care about the investors.

So this is about these factors which is about the dividend to the investors. So of course, the proportion is 30%, no change. However, so in recent years, we have a high-quality response to the shareholders because our performance still are very good. And from January to September this year, the first 3 quarters of this year, you can see that the profits -- the net profit, of course, decreased, reduced compared with the year before, however, and compared to the year 14th 5-year plan.

So in general, you can see the growth is on that track. So that's why for the distributable earnings and dividend we need to consider about the shareholders and we continuously to strengthen our management and improved performance. And on the other hand, we assuring high-quality development to assure the capital and then we can contribute it to the shareholders.

So that's why I already mentioned in the beginning, we have the resources, so the resources and -- the scale of the project in the market are basically from CNY 10 billion and to CNY 20 billion, and we wanted to invest in the new resources in the market. So we need to pay probably maybe under CNY 10 billion. So that's why for these new resources, we wanted to get from the market. So because of this, we do need to have enough stock of the cash. So that's why, we consider these factors, of course, we need to assure the sustainable and secure and stable dividends to shareholders.

[Jiang Qun, executive]

Okay. Thank you so much for your answer.

So we are going to have another question. So how do you think about the pricing trend of Q4 of '24 and 2025, and recently is there are any chances for exporting or leasing the exporting policies of urea. So now we are going to invite Mr. Li to answer this question.

[Unknown Executive]

So thank you so much about this question. Concerning a new way of Q4, next year including our lease in the rules of exporting for Q4 due to the newly added productive Q3 and good profit of urea, and actually, in 2024, the productivity producing of urea. And from Q1 to Q3, we clearly see that producing growth almost 80%. And the supply of the market is very -- is enough and sufficient supply and the government has a very strict rules for exporting in urea.

So that's why in terms of the pricing. And basically, we clearly see that the pricing dropped slightly, and it's almost Q4. So because the urea hasn't entered the peak season of the demand, so that's why we are still at the season of the small demand. So there will not be change of demand in the market. Probably, maybe for the H1 of 2025, the demand of new year and will increase.

So although there's RMB 1,000 difference of the China market and the international market. However, for the state government provide security of the agriculture resources. So basically by 2024, maybe there will not be lose policies for exporting urea. So there will not be big changes with demand in terms of the urea.

[Jiang Qun, executive]

Okay. So thank you so much for your answer. So we are going to invite the next participant.

[Unknown Attendee]

So good afternoon all the leaders. I'm an individual investor. I have three questions. The first question concerning September 25, 2024 published the #10, the supervision management of the listed companies from the state government and from institution. And after launch of this new document, we have seen eight companies under the other site owned companies and quickly published the repurchase and plan for the Central Bank and also launched the reloans of the shares.

So the interest rate is only 2.25%, but it also support the shareholders. So for Shanghai Energy, [ 60508 ] Shanghai Energy, I'm not quite sure and whether you're paying attention to that. So for now, the net rate is only RMB 0.72, which means the asset of RMB 1, sell the share with a price of RMB 0.72. For the new policies for those share price is lower than the net asset. So there must be some explanations. So for -- is any possible for your company to support further Shanghai Energy or support Shanghai Energy to have the repurchase of the shares from the market?

[Qaolin Chai, executive]

Okay. Thank you so much for your question. Thank you so much for paying attention to Shanghai Energy on the China Coal. First we have received the new document from China Security Regulatory Commission. We also invite the relevant parties especially the units from Shanghai Energy to respond to our advertise and the feedback to China Securities Regulatory Commission.

Of course, the strengthening the management and strengthening, the payback to the shareholders, always our core to create value to the market and to the shareholders, of course. We needed to do well of the producing and the management to assure the internal value growth. Then we could strengthen the growth potential and then we can further pay back to the shareholders. So this is the goal. So China Coal always make efforts towards that goal.

And in terms of Shanghai Energy and the share structure and the price, I think this is not only related to the repurchase of the shares, but we received your feedback on your other files. Your voices are heard. We'll do some further research and for the added value of the shares and repurchase. By now, we don't have any detailed plan to review to the public now. So if there is any plan, I think we will actually announce and disclose to the market in official channels.

[Unknown Analyst]

And one more question from me that Shanghai like energy and in the coal sector, there are about 20-something listed companies. And Shanghai Energy company, the profitability is quite up in the middle. It's not actually making losses. So I think by the communications of the shareholders to the market and investors was not very good, I think. For the coal sector in China's capital market, they are not the worst performers. And the payout of dividend is okay.

But the market is only giving them like RMB 0.7, something like the PE. So I think there should be a lot more improvement they can make to better communicate with the market, with the investors. I think there should be more instructions and assistance -- instructions given so that their image in the coal sector in China's listed coal companies could be further improved. Maybe you do not have much attention on actually the share prices. But if the share prices does break like the equilibrium, it's not any good thing, right?

[Rongzhe Zhao, executive]

Thank you very much for your instructions and thank you very much. And we do think our share price and performance is something we hold dear to. And we do give a lot of attention and significances.

[Jiang Qun, executive]

So I think that's all for the Q&A. Let's see if we have any wrap-up like final comments from the management.

[Rongzhe Zhao, executive]

Thank you again very much for your support and attention. I think for the interest of time, that's all the time we have for this dial-in call and please feel free to contact us with any of your questions and comments. Let's stay in tune. We would like to answer your questions any time. Thank you. That's all for today's conference call. Thank you very much for your sharing. Thank you for the communication. Thank you. Have a nice day. Bye-bye.

[Jiang Qun, executive]

The meeting has ended. Thank you. Bye-bye.

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