Yankuang Energy Group Company Limited

Ladies and gentlemen, good morning. It is a pleasure to be with everyone again here. Firstly, on behalf of Yan Kuang Energy, I would like to extend a warm welcome to all investors and friends who are participating this morning and to express my heartfelt gratitude for the care, trust and support you have provided for the company for a long time. Now I'm going to introduce our interim results of our group in three parts. Part one, operating review. Over this period, Since the beginning of this year, the global economic situation has been complex and severe, with rapid adjustments in industry supply and demand, and a significant decrease in coal and chemical product prices. Faced with unfavorable macroeconomic and market conditions, we have faced challenges and actively responded, quickly implementing a series of unconventional measures, strengthening lean management to reduce cost and improve quality, accelerated industrial upgrading, scientifically assessing market stability and efficiency, and effectively hedged against adverse impacts. Initial effectiveness of various measures is evident. In Q2, we saw significant increase in production and sales, with significant decrease in cost and expenses, showing a positive development trend, laying a solid foundation for future development. Operating performance, production of saleable coal reached 49.23 million tons, a year-on-year decrease of 2.8%. The quarter-on-quarter increase was 4.17 million tons, or 18.5%. In the second half, production of Inner Mongolia mines has steadily increased, and new M&As have contributed to production capacity. Production of overseas mines has significantly increased, and the incremental potential will be effectively unleashed. Production of chemical products reached 3.73 million tons, up 18.9% year-on-year, and we achieved stable, long-term and optimal operation. Three, sales revenue, 65.4 billion RMB, down 13.1% year-on-year. Shareholders of the company was 10.3 billion RMB, down 44.1% year-on-year. Profitability level of the group remains high, ranking at the front of the industry. As of 30 June, total assets were RMB318 billion. Among them, bank deposits and cash amounted to RMB47.1 billion. Average financing interest rate decreased from 4.2% in 2022 to 3.7%. Two, lean control and collaborative efficiency improvement. and Zhezhuo Wang. All of these companies are working together to improve the quality of their products, and to improve the quality of their products. 9.6% year-on-year. Average price of acetic acid, 2,585 per ton, down 38.4% year-on-year. The prices of major chemical products remain at the industry average level. Second, lean management and cost reduction. Lean cost management system, sound cost reduction and cost control measures and we maximized hedging against the impact of product price decline. For core cost, we have strengthened full process control of production operations. We continued to carry out cost realistic management and conducted in-depth two increases, three decreases and four improvements in activities and rigid assessments. Management efficiency gradually emerged, and sales cost per ton of coal in Q2 was 372.54 per ton, down 9.3% month-on-month. In terms of chemical cost, production organization has optimized. based on product marginal contribution, and potential for consumption reduction and efficiency enhancement was deeply explored. As a result, overall chemical sector reduced cost by RMB216 million. Among them, unit sales cost of methanol was RMB1,864 per tonne, down 3.9% year-on-year. Unit sales cost of acetic acid is RMB2,571 per tonne, down 4.9% year-on-year. Cost reduction effect is significant. 3. Incremental efficiency improvement through industrial collaboration. We fully utilize resource advantages, deepen implementation of internal industrial synergy and create efficiency with collaborative amounts of nearly 10 billion yuan in the first half of the year. One is to strengthen linkage between high-end chemical and coal power industries and collaborate to supply 5.95 million tons of chemical coal and 3.15 million tons of internal electricity coal. Second, adjust the stock of materials and revitalize 100 million yuan. The third is to continuously improve quality of self-produced equipment products by owned enterprises. Strictly compare quality and price and achieve total procurement amount of 800 million to maximize overall benefits. On June 30, 2023, our shareholders' meeting approved acquisition of 51% equity of Luzi Mining and Xinjiang Lenghua for RM26.4 billion. Project delivery is expected to be completed in Q2. The two target companies acquired have coal resources of about 25.6 billion tonnes, recoverable reserves of about 16.5 billion tonnes, and approved annual production capacity of 39.89 million tonnes. It is expected that any production of saleable coal will increase by about 30 million tons after consolidation. After the acquisition is completed, Annual production capacity of the target company can be increased to over 60 million tons within five years, providing strong support for the company to achieve a strategic planning goal of 300 million tons per year. Besides, the target company has superior resource endowment with total deductible net profit of no less than $15.4 billion. 5. Continuous optimization of industrial layout The mining industry should be optimized and strengthened. So one is to fully leverage advantages of scale, efficiency and support and achieve safe, stable and efficient production in 23 domestic and foreign mines. Secondly, we will accelerate construction of smart mines and complete acceptance of five national level intelligent demonstration mines. All these promote the construction of national-level intelligent mines and other mines. In the first half, an investment of RMB720 million was made to build nine intelligent mining phases. Thirdly, new breakthroughs have been made in the handling of mine procedures, and Yinhang Kuang Coal Mine has obtained safety production permits. The fourth is to promote implementation of green backfilling mining, increasing production by 1.2 million tons. High-end chemical new materials, the main body of the Lunon Chemical Caprolactam Energy Carbon Reduction Integrator Project has been completed. It is expected to be completed and put into operation in first half 2024. Lunon Energy Chemicals 100,000 Ton BMMN Project reduces stable and qualified products. Industrial chain cluster of amino and alcohol-based new materials is accelerating its formation. The couple development of new energy industry. Implementation of the 100,000 kilowatt shared energy storage project in the province has been accelerated and the batch of distributed PV projects have started construction, actively exploring offshore wind power projects. The acquisition of new energy indicators such as wind and solar power outside the province has reached 840,000 kilowatts. High-end equipment manufacturing industries gather resources. The first phase of the Lucy Smart Manufacturing Power Project has been basically completed, and three industrial cooperation projects will be put into operation by the end of the year with estimated annual output value of 1.5 billion yuan. We optimize layout of smart logistics industry, complete equity integration of four railway projects, Mengda Menghong, Yutai Huizhou, and Haile Shao. Fully demonstrated the company's value. We continuously improve value creation ability of listed companies, strive to create listed companies that are fully trusted by investors and respected and recognized by society. We adhere to providing generous feedback and sharing value. We distribute a cash dividend of 43... RMB per 10 shares and 5 bonus shares for the year 2022, accounting for 70% of net income. The total dividend amount reached $21.3 billion, setting a new historical high. To ensure that investors receive more stable, generous and predictable value and returns, the group has determined that the dividend policy for the years 2023 to 2025 as follows. Total cash dividend, will account for 60% of the net profit after deducting legal reserves for that year, and amount per share is not less than 0.5 RMB. We adhere to sustainable development and aggregate value. Adhering to ESG's strategic policy of green, low-carbon, compliant, transparent and sustainable development will increase investment in environmental protection, employees, rural revitalization and community care. and we disclosed ESG reports for 15 consecutive years. We are awarded the first enterprise ESG management system certification in China and our sustainable development value continues to enhance and effectively transmitted. Part 2, market analysis of main products. Now I will introduce our group's analysis and judgment about coal, chemical and other markets in the second half of the year. About the coal market, in the first half of the year, energy consumption maintained growth trend. Total coal consumption increased year on year. Domestic high-quality coal production capacity continues to be released. Coal imports have significantly increased. Overall demand and supply is basically balanced. There is a slightly loose pattern. Coal prices have bottomed out and fluctuated. In the second half, macroeconomic situation is complex and severe, but policy regulation continues to exert force. Policies such as restoring and promoting consumption are accelerating, and it is expected that the economy will stabilize and rebound. The domestic coal supply system and supply guarantee capacity continues to improve, but due to seasonal changes, transportation conditions, policy regulation, and medium to long-term coal price mechanisms, it is expected that supply and demand will maintain an overall balance. Market price will fluctuate at medium to high level. The characteristics of China's resource endowment determine the energy structure of coal-based and will not change in the short term. The dominant position of coal in the energy consumption structure and the role of stabilizer remain a solid foundation for ensuring energy security. In terms of the chemical market, it is affected by weak downstream demand and oversupply of product chains. In the first half, the leading products of our group such as methanol and acetic acid were generally weak in operation. In the second half, there will be relatively less new production capacity in methanol, but overseas production capacity will be released Import volume may increase. Supply and demand of acidic exit show a double increase trend. Maintenance of chemical production equipment was relatively concentrated in first half of the year and production capacity would be steadily released in the later stage. It's expected that the chemical market will show a relatively new supply and demand trend in the second half and product price will still be weak and volatile. Third part. Operational measures for the second half. We will adhere to our strategic determination and we will strengthen confidence, overcome difficulties, deepen implementation of targeted measures, effectively improve business efficiency, and ensure that in the second half we will achieve council trend growth and continuous improvement in performance levels of the same caliber. 1. Industrial upgrading to ensure incremental income growth. We break through key points, resolve constraints, and comprehensively fight the proactive battle of increasing efficiency. Mining sector. Any production capacity of saleable coal has reached 130 million tonnes. Ensure implementation of sales plan of 100 million tonnes per year for existing mines. will comprehensively promote release of advantageous production capacity in domestic coal mines, and ensure the resumption of production and increase in production in Australian mines. Promote accumulation of advantageous resources such as funds and technology to Lucy Mining and Xinjiang Energy Chemical. And it's expected that any sales of saleable coal in incremental mines will be 30 million tons. High-end chemical industry sector will strengthen production organization and process operation management to ensure stable, long-term, and optimal operation. We'll adhere to flexible production, release production capacity towards marketable and high-value added products, and strive to increase annual production of chemical products by more than 10% year-on-year, with high-end chemical products accounting for 20%. New Energy Sector will adhere to the promotion of indicator acquisition and project construction and gradually implement first batch of more than 10 self-owned distributed PV and energy storage projects. High-end equipment manufacturing sector will accelerate the construction of Lucy Smart manufacturing plant ensure that the six industrial cooperation projects in the first phase are put into operation in first half of 2024, and strive to achieve production and efficiency within three years, forming total industrial scale of 4-5 billion. Smart Logistics will fully integrate assets of the logistics sector, accelerate construction of Shanxi Inner Mongolia Railway Special Line project, and Tai An Dongping Inland Port Logistics Park will be put into operation in September. will innovate the integrated business model of production, sales, storage, distribution and delivery integration to deepen the management to achieve potential and efficiency enhancement. We deepen integration management of six refinements and six improvements, carry out two increases, three decreases, and four improvements activities, and focus on improving efficiency, reducing costs, and increasing benefits. We'll promote further breakthrough in cost reduction and free control. Through multiple measures such as budget control process optimization and recycling, we aim to target 10 key cost items and strengthen linkage mechanism between wages and benefits. and strive to reduce annual sales cost of coal per tonne by more than 5% on the same scale. We will actively promote reduction of leverage and debt and strive to reduce financial expenses by more than RM1.5 billion in the same dimensions throughout the year. We will promote further breakthroughs in tapping potential and increasing efficiency, strengthen revitalisation of idle assets, increase disposal of inefficient assets and ensure annual revitalisation of assets of RM1.5 billion Deepen Lean Supply Materials, strive to achieve a social reserve ratio of over 65% and reduce comprehensive procurement costs by 5%. We'll drive further breakthrough in marketing efficiency creation, strengthen analysis of product economic benefits and deeply explore regional markets with high prices, high demand and excellent logistics. A huge strategy of clean coal and customization to ensure that the proportion of clean coal products in the provinces remains about 50% will expand scale of online transactions, expand scope of product customization, and increase economic benefits by 500 million. will enhance our development momentum, adhere to integrity and innovation, strengthen core development and core competitiveness, value creativity and sustainable development, will continuously improve technology, research and development capabilities, Deep and deep integration of industry, academia, and research, strengthen R&D of key core technologies such as intelligent mining and clean and efficient utilization of coal, and strive to increase R&D costs and invention patterns by more than 10% throughout the year. We'll continuously improve capital operation capabilities, adhere to dual drive of industrial operation and capital operation, and plan to acquire a batch of important resources, lay out a batch of key projects, and promote main business, will continuously improve value creation capabilities, implement value management measures such as key business strategies, standardised governance, efficient communication and generous feedback, implement ESG development concepts and measures, and firmly create value for stakeholders such as society, shareholders, customers and employees. Ladies and gentlemen, investors, hard work nurtures development, and hard work achieves dreams. The more we face unfavorable situation, the more we need to maintain a fighting attitude of overcoming difficulties. At special times, confidence is more important than gold. We will continue to make every effort to strengthen management, focus on production, reduce cost, and improve efficiency and safety. We will unswervingly achieve the 2023 goal Thank you very much. Thank you, Chairman, for the presentation.