China Coal Energy Company Limited

Distinguished guests, dear shareholders, dear investors, good afternoon. This is Jiang Quan, Board Secretary of China Coal Energy. Welcome to our first quarter results announcement for 2025. And thank you for your long-term... support and commitment to our company. In attendance today, we have Zhao Rongzhe, Executive Director and President of the company, Ms. Zhang Yanjing, Independent Non-Executive Director, Mr. Chai Qiaolin, Chief Financial Officer, and representatives from Department of Securities Affairs, Planning, Development, Finance, Coal Business, Coal Chemical, Power & New Energy, and Marketing Office. Now let me move on to introduce to you Q1 results. and all following figures are calculated under Chinese accounting rules. In the first quarter, despite declining prices for coal and coal chemical products, the company achieved a stable operation start by scientifically organizing production and sales, strengthening safety management, and intensifying efforts to enhance quality and efficiency. key financial data in terms of coal. Facing a challenging market, the company strengthened production coordination, optimized the supply-demand synergy. For commercial coal production, 33.35 million tons, up to 620,000 tons, or 1.9% year-on-year. Commercial co-sales volume 64.14 million tons up 270,000 tons or 0.4% year-on-year self-produced commercial co-sales, 32.68 million tons up 370,000 tons or 1.1% year-on-year. and proprietary coal trading, 31.2 million tons, up 1.47 million tons. Import, export, domestic agency coal sales, 260,000 million tons, down 1.5, 7 million tons, or 85.8% year-on-year. and ASP. ASP of self produced commercial coal 492 yuan per ton down 160 yuan per ton. ASP proprietary coal trading 486 yuan per ton down 125 yuan per ton. And coal production costs. In Q1, the company optimized production planning and strengthened cost management. For unit sales cost of self-produced commercial coal, it's 269.82 yuan per ton down RMB 21.15 yuan per ton. mainly because we lowered material costs, reduced overburden removal volume at open pit mines and tunneling footage at underground mines, and decreased maintenance expenses, efficient use of special funds. And for coal chemical products, polyolefins production 378,000 tons, down 3.6%, sales 355,000 tons, down 4.8%. Urea production, 528,000 tons, up 11.2%, sales 600,000 tons, up 8.9%. Methylene production, 514,000 tons, up 24.8% sales. 529,000 tons, up 33.6%. Ammonium nitrate production, 139,000 tons, up 6.9%. Sales, 141,000 tons, up 8.5%. Key Coal Chemical Products Selling Prices Polyolefin ASP 6,876 yuan per ton, up 28 yuan Urea ASP 1,702 yuan per ton, down 535 yuan per ton Methylene 1,794 yuan per ton, up 119 yuan Ammonium nitrate, 1,861 yuan per tonne, down 390 yuan per tonne. Production costs of major cochemical products. Polyolefins unit cost 5,775, down 124. Urea... unit cost 1,342 yuan per ton down 290 yuan. Methylene unit cost 1,414 yuan per ton down 327 yuan. Ammonium nitride unit cost RMB 1,475 yuan per ton down 40 yuan per ton. Coal mining equipment operations performance Output value RMB 2.42 billion down 16.6% year-on-year. Financial operations performance net profit RMB 324 million down RMB 54 million year-on-year. Now let me move on to key financial indicators. In the first quarter, we recorded operating revenue 38.4 billion, down 15.4%. Total profit 6.2 billion, down 28.4% year-on-year. Net attributable profit RMB 4.0 billion. down by 20%, basic earnings per share, 3 yuan RMB, down 18.9%, weighted average ROE 2.58%, debt-to-asset ratio 44.8%. Key factors affecting profit changes, profit increasing factors include decrease in the unit sales cost of self-produced commercial coal, contributing an additional profit of 690 million, reduction in tax by 160 million, decrease in financial expenses by RMB 130 million, and increase the sales volume of self-produced commercial coal, contributing an additional profit of RMB 110 million, year-on-year reduction in management and sales expenses by RMB 20 million. and profit decreasing factors include decline in the price of self-produced commercial coal, reducing profit by RMB 3.46 billion, and also decrease in profit from major coal chemical enterprises by RMB 60 million. and reduction in profit from financial operations by RMB 54 million, largely due to declining market interest rates and year-on-year decrease in deposit absorption volume. So that's the factors affecting our profit. Now let me move on to talk about a key worker plan for Q2. Despite the challenging coal market environment and increasing operational pressure this year, the macroeconomic landscape is showing signs of improvement with favorable factors gradually emerging. So we must accurately assess the current situation, maintain a clear-headed approach to address the challenges. So we are going to do the following. First, strengthen marketing efforts to consolidate and expand market share, ensure safe production to steadily increase profitable output, enhance production sales coordination to continuously optimize product mix, intensify cost reduction and efficiency improvement, improve operational quality by strictly controlling business risks, and then deepen enterprise reform to sustainably stimulate vitality. So that's all for the performance of the company. Now let's open the floor for questions. Thank you. Hello, everyone. If you would like to ask questions from participants, please press the start key followed by number one. Online participants, you may submit your questions in the chat box or click the raise hand button. Thank you. Once again, hello everyone. If you have any questions from participants, please press the star key followed by the number one. Online participants, you can use the chat box or click the raise hand button. Thank you. First investor, please go ahead. Hello, everyone. Good afternoon. Thank you for organizing this. This is John Chun Ling. I have two questions to ask the management. The first question is about the cost of a self-produced commercial coal. It's down by 21 yuan. So this caused the reduction in coal cost. And I would like to understand, are there any other factors resulting in the reduction of the cost? And what is the cost outlook for the whole year 2025? For net operating cash in Q1, it's down to 376 million yuan. Maybe this is because of the impact of account payables. We would like to understand the reasons behind the reduction of the net operational cash. Thank you. Ms. Xu, would you like to answer the question? Sure. About your first question, other costs, let me see. We have coordinated the use of phones. like safety coal production fund. It's very well used to reduce the cost. And going forward, there will be further cost management measures. First, we are going to increase the production in order to make sure the cost will be amortized. And then we are going to improve the production efficiency to reduce the cost. Coal Energy Company Limited Coal Energy Company Limited It's down quite a lot in the first quarter this year for several reasons. First, the net profit of our company in Q1 went down quite significantly. That's the first reason. The second reason is the settlement. account payables because in the middle of March and by the end of March we sold more so the payments are not made yet. They will be paid in the second quarter so this resulted in the reduced cash in Q1. and also depreciation and amortization will also have some additional impact on the cash position of the company. Thank you. Mainly three reasons. Thank you very much. I would like to ask a follow-up question. I remember when you published your 2024 annual results, the special funds went down by $1.1 billion, more or less. But in Q1 this year, I think the special funds utilization were also quite active. So they are the same, right? Yes, they are the same. The utilization of special funds. But your special fund reserve or balance is quite stable by the end of Q1. We make a provision and then we utilize the fund. So that is why the balance is rather stable. I see, I see. Thank you very much. Let me add a few words for you. This is a year-on-year comparison. So we made use of more specialty funds than last year. But in terms of the balance, it's stable compared to the end of last year because we are making provision on a rolling basis. So one is the utilization of the fund and the other one is the balance of the special funds. I think this can answer your question. It's just that the utilization of the special fund this year is more active than last year. It's more. About the cost, in terms of the cost trained, to be honest, I think our company has been working very well to manage the cost in order to address the price declining trend on the market. So this is the challenge of our company. We are working hard on it, but we cannot make a promise to our investors about how much it can go down. I can assure you that we have been doing cost control work in the past several years, and it's also one of the highlights of our company compared to our peers. So you can stay tuned to see how much we can achieve out of this. Thank you. Thank you very much for your answer. It's very clear. Thank you. I have no further questions. Thank you very much. Now let's move on to the second question. Please identify yourself first before asking questions. Thank you very much for your time in the afternoon. Congratulations on the very good performance in Q1. This is from Guosheng Securities. My name is Liu Yueyue. In terms of the sales of coal, I see coking coal. Coking coal price has been fluctuating quite a lot. The flexibility is very big. So I would like to ask you about the ASP in April for coking coal and also the inventory level. I would like to ask you further whether you have plans to do asset injection or M&A. Thank you. I will ask our general manager, Mr. Li, from the marketing office to answer your first question. Sure. About coking coal, our coking coal is priced against the market. Our production is also market-oriented. Coking coal price has been going down. In Q1 this year, the price has been quite stable. Our production, sales, and inventory are managed against the market conditions. So the price fluctuation didn't have any big impact on our sales and the inventory. So the inventory level is more or less the same as before. We see the cooking coal price is stabilizing. And for long-term contract thermal coal price, it went down by 2%. From the end of last year to the end of March, it went down by 2%. But coking coal price went down by 6%. Coal King Coal price is not going down a lot more than thermal coal, unlike last year. That is why our production sales and inventory are quite stable. Thank you. The second question about M&A plans. I will answer your question. China coal... China coal group does have some coal assets. They are also doing the investment of coal power plants. In the long term, it's possible that the controlling shareholders will inject coal-related assets in China Coal Energy. But so far, we do not have a clear plan to do that. In the future, if the plan is formulated, we are going to do the approval procedures following China's laws and regulations and disclose to our investors. Thank you. Thank you very much. I still have one question. I would like to ask you about long-term contract fulfillment in Q1. What was the fulfillment of the long-term contract? The industry introduced some policies to promote the fulfillment of long-term contract. And what is the performance in your company in terms of the fulfillment of long-term contract call? Thank you for your question. Last year, the social inventory of coal went up quite a lot, and coal used in power generation reduced a lot. So the impact on long-term contractor coal was very big. But in 2025, Our contracted volume this year optimized so the total amount contracted reduced a little bit after negotiation with our customers and we signed a lot of contracts with central SOEs and key enterprises of some cities. The fulfillment of the contract has been very good so far and the long-term contract price It's not deviating a lot from the market price. The gap is like 16 yuan, less than 20 yuan. So it's quite okay. That is why the fulfillment in Q1 is also okay. From January to April, the fulfillment rate of the long-term contractor coal... no less than 90% for the whole quarter. So it's compliant with the requirements of NDRC. Just now you mentioned you did some optimization of the long-term contracts. So in 2025, a long-term contract call will be also more than 80% as required by the government. Well, NDRC also made some adjustment for producers, no less than 75%. Before it was 80%, now no less than 75%. That's the adjustment made by NDRC, and we are meeting the requirement. We reduced only a little bit, and now we are compliant with 75% of NDRC. Thank you. Thank you very much. I have no further questions. Thank you. Thank you. Let's move on to the next investor. Please also identify yourself before asking questions. Hello, Mr. Zhao. Hello, everyone. This is Jimmy from HSBC. Congratulations on the performance of Q1, and thank you very much for organizing this conference call for us. I have several questions. I will go one by one. The first question is about cost. The cost is actually beyond our expectation. You explained the reasons behind, and what would be the cost outlook in Q2, Q3, and Q4? How does it compare to Q1? What is the trend? So I would like to ask this first question. Ms. Xu from Financial Department, would you take the question? Sure. Just now, Mr. Jiang already introduced our cost management has always been science-based. We have a lot of rigid cost atoms in our cost structure, so each quarter it can be quite stable, but by the end of Q4... we will do centralized settlement, things like that. So it may change a little bit, but I think it's basically stable from quarter to quarter. A follow-up question, cost went down in Q1. What would be the outlook for the whole year 2025 compared to 2024? I think what we can say now is we can try our best to maintain the very good momentum. I cannot assure you it will definitely go down for the whole year 2025. We are working very hard on cost control, but we cannot say for sure how much the cost can go down in the year 2025. Sure, sure, of course, I totally understand. My second question is about coal chemical. In Q1, GP margin went up quote on quote and year on year. Of course, coal cost went down. That's the major reason. But going forward, what would be your outlook on the GP margin of coal chemical business? Mr. Zhang from Coal Chemical Department, would you like to take the question? Sure. I think in the past two years, the GDP margin has been relatively stable in terms of commodities like polyolefins. The price went down, market price went down, but the coal... Coal Energy Company Limited Coal Energy Company Limited especially natural gas-based urea cost was quite high in the past several years due to the geopolitics. So the profitability was also affected. Now the international landscape was stabilized a little bit. So the urea price went down a little bit. And we do enjoy decent margin for urea. And we are still positive on the GP margin of coal chemical business going forward overall speaking. Thank you, thank you very much. It's very clear. My last question. It's about the projects under construction. Do you have any update for coal and also coal chemical? Do you have any update on, for example, the timetable of the projects? Colleagues from planning department, would you take the question? Everything is progressing very well. We do not have any update on the timetable Would you like us to repeat the timetable? Coal Chemical Phase 2, that project. Yulin Coal Chemical Phase 2 started last year in June 2024, so next year by the end. Production will be operational. At this moment, everything is on track. Everything is progressing very well. We are doing the civil engineering work. We are doing the construction work. and some facilities are being installed at this moment. So overall speaking, Yulin Coal Chemical Phase 2 construction period will be the same as what we have disclosed. So we have no update of the timetable. For liquid sunshine project, The construction period of 24 months. So at this moment, it's still civil engineering period. Everything is progressing very well. Also, no update on the timetable. Thank you. Thank you very much. Thank you for your answer. Very clear. I have no further questions. Thank you. Thank you. Let's move on to the next investor. Please also identify yourself first. Thank you. Hello, Mr. Jiang. Hello, everyone. This is Chen Chen from Guao Securities. I have some questions to ask you. The first one is about the special fund. It's 5.6 billion yuan. and we also have 140 million tons commercial coal production. So what would be the minimum special fund balance required? And for investment income, I understand you have some invested projects also related to coal. Your investment income increased a little bit in Q1. So how do you explain that? What is the reason behind? And I would like to understand a little bit more what are the changes in Q1. Well, let me repeat your questions. You have several questions. The first one, it's about the special funds, the balance, right? Yes, indeed. If it can be reduced, what would be the minimum required? And the second question is about investment return, investment income, positive growth. What is the reason? Okay, I see. About the special fund, what is the minimum requirement? We always make the provision based on the requirements and we do the utilization planning based on the requirements. So it's very hard for us to answer the question what would be the minimum. We always do it according to the rules and requirements. based on the provision requirements and utilization requirements and also the production. We do the planning every year. We will also consider the investment required in upgrades and also safety improvement, things like that. So it's very difficult to say. It's affected by many different factors. Second question about investment income. We invested in some very good companies. In Shanxi province, we have Yulin Energy. The investment income increased and the other company we invested also increased. So that is why our investment income increased as a whole. What's the third question about the shipment of coal? Shipment and production of coal in Q1? Yes. Well, let me answer the question. The coal market is still in downward trend, so coal producers will have to respond to that. We are also doing the same. We ask the coal mines to improve the unit energy production per ton. We have to optimize the product mix. For example, we will try to reduce the low calorific value coal and sell more high CV coal production and shipment. That's the management of the mix. In the current market conditions, it's a better solution. and we can always make the changes in a flexible way according to the market conditions. So at this moment, high CV coal more than low CV coal. I see, I see. It's very clear. Thank you very much. Next question from an internet participant. We'd like to ask you whether you will increase the dividend payout ratio to 45%. Thank you very much for your question. We attach great importance to shareholder return. We try to strike a balance between long-term development of the company and also return to investors. In the past two years, In order to return more to the shareholders, we arranged special dividend payout and also interim dividends last year in 2025. I think we already announced before that the board has decided to be 35% payout ratio for the year 2024. So that's already determined by the board. And also we made it very clear that we are going to do interim dividend this year in 2025. I think this is also in line with the expectation of the shareholders for more cash dividend. So that's the decision made already by the company last year, 35% dividend payout ratio, and there will be interim dividend this year. and we are also taking the suggestions from the investors. We will make sure the management of the company will hear you. Thank you. Next question, also a question from the internet. About the administrative penalty by Ordo's government, so what is the current situation in Inner Mongolia in terms of production? So coal department, would you like to take the question? Yes, in Inner Mongolia, our coal production is rather stable. We are responding to the market to do very good arrangement of the production. So as far as I know, there is no change on the production. It's very stable. Thank you very much for the answer. Once again, If you would like to ask any questions for phone participants, please press the start key followed by number one. Online participants, you can use the chat box in the live streaming box or click the raise hand button next to you. Thank you. If you have any questions from participants, please press the start key followed by number one. Online participants, you may submit your questions in the chat box or click the raise hand button. Thank you. Once again, if you have any questions for participants, please press the star key followed by number one. Online participants, you may submit your questions in the chat box or click the raise hand button. Thank you. Once again, if you have any questions from participants, please press the start key followed by number one. Online participants, please use the chat box or click the raise hand button. Thank you. One more question online. Would like to ask you the business target, operational target of the company this year. Any adjustment on that? Well, we disclosed our targets and no update so far. We will actively respond to the market changes and attain the targets set. Thank you. Thank you very much for your answer. Let me ask once more if there are any questions online. If not, we will wrap up. If you have any questions from participants, please press the star key followed by number one. Online participants, you may submit your questions in the chat box or click the raise hand button. Thank you. Online question. Would like to ask the management of the company, what is your view on the outlook of the industry? Market has been fluctuating, and it's the result of the change of macroeconomics, but I think coal is the basic energy source in China. In a rather long period of time, it will still be the mainstay for China. At this moment, the energy mix is still with coal as the mainstay. If you look at the production, the production is 4 billion tons, and consumption is more than 5 billion tons, including some imports. So the demand is rather big. So I think coal will still be the primary energy source in China. It will be the mainstay in the future for some time. so we have confidence in our business. We are being very positive and it is always reasonable to see fluctuation of coal price because it's a commodity. And we can always respond to the market changes. The government in the past several years has been improving the supply-demand mix of coal. So at this moment, I think coal required by power generation will be stable going forward. Not sure if my answer is satisfying to you. All right, next question. We'd like to ask you the major drivers of profit growth of the company. Thank you. At this moment, we are focusing very much on our core business. That's coal business. We are making investments in coal mines in Shanxi province, in Xinjiang province, and we are also promoting some other coal-related projects. So in the long term, we are still committed in expanding coal capacity and for coal chemical business. We are dedicating to developing advanced coal chemical business to facilitate the clean and efficient use of coal. We have Yulin Coal Chemical Phase 2 under construction at this moment. We are also considering developing coal chemical projects in some other coal production areas And we are also doing exploration in producing high-end coal chemical products in the future. And for coal power, we have coal plus coal power. We are a subsidiary of China Coal Group. So we are developing projects next to the pits of China Coal in order to be more efficient and offset the declining coal price impact on us. So we are still very much focused on our core business and look for more opportunities to sustain the business development of the company in the long run. Thank you. Next question from a phone participant. Please go ahead. This is He Tinghua. I have several questions to ask you about cost. You mentioned this special fund. What is the mechanism? How much will be provided on an annual basis to this fund, and how do you make the provision? Ms. Xu, would you like to introduce this? Yes. We have a safety fee. We have a maintenance fee in the special fund. And we have standards for coal producers to do the provision. So you can search for coal industry safety fee. provision methodology utilization methodology the same is also true for maintenance fee you can search for the keywords online and you can see the methods it's published by the government very clear let me add a few words on that provision it's always separated from utilization We are doing the provision according to the requirements, and we follow the accounting rules to do the provision, to do the booking of the provision, and utilization, it's separated. The utilization, will follow the rules of utilization against conditions like how many mines you have and what is the production. So it could be the case that we made a lot of provision but we utilized very little or the other way around. Thank you, thank you very much. One more question about cost. I would like to understand further You are taking some cost control measures and the efforts are being paid off as we can see in Q1. So I would like to ask you how many more instruments can you use to control the cost and what is the room for the cost to go down further? We are working very hard, trying everything to control the cost. We don't have anything left in our toolkit. But cost control is a constant work. I cannot say to you about how much the cost will go down this year. I can only assure you that we will keep doing this. There will be fluctuation of the price of raw materials like steel, power, electricity, oil. The price can go down, can go up, and there is a rigid item that is labor cost, which is always on the rise. So we have a lot of rigid cost items. So we are trying everything at this moment to control the cost, to manage the cost, to reduce the cost. In operating a business, We have a statement saying that you can always try to squeeze harder in order to get one more liquid out of the sand. We are doing this kind of thing. I also see Q1 production is bigger than sales. So it's normal for Q1? Or do you think other players are expanding production at this moment in order to control the cost? Sorry, could you repeat your question? I see that our Q1 production is bigger than Q1 sales. And in some other players, I also see Q1 production, positive growth, sales, negative growth. Is it normal because of seasonality in Q1? Or is it a reflection that everyone is trying to expand the production in order to reduce the unit cost? Let me repeat your question. Some players have a bigger production than sales in Q1 and some bigger sales than production? No, older players have a bigger production in Q1 than sales. What is the reason? Is it seasonality? Or it's one of the ways for older players to expand the production in order to lower the unit cost? Seasonality or cost control? Ah, I see, I see. I get your question. Let me ask our marketing office to take the question. There are special conditions this year in 2025, but normally in Q1, no matter it's thermal coal, metal coal, the consumption would be less. It's the off season, so there will be more social inventory in Q1. But last year the production in Shaanxi Province was very low because of the protection of Yellow River and environmental regulations. So a lot of companies ordered more in Q1 this year. That is why the production in Q1 in Shaanxi Province increased quite a lot. I don't think anyone is trying to expand the production in order to reduce the unit cost because coal production is controlled. They have to follow the requirements to do the production. The price is going down. The market demand is not so good. So if they expand the production, it will become inventory. So I think we are just in the process of balancing production, sales, and inventory. There is nothing in this showing that everyone is increasing the production to lower the cost, nothing like that. I see, thank you very much. Next question, online participant. Question is about anti-bar expansion approval. What is the current status? Colleagues from planning department, would you like to take the question? Yes. At this moment, we are promoting the approving procedures. At this moment, we are following the laws and the regulations to do the submission of paperwork. And we are also doing the coordination of provincial government departments to do the review of the paperwork. So hopefully by the end of this year, the approval can be cleared. Next question, what are the different ways for you to sell coal at this moment, and what's the proportion, what's the breakdown in terms of revenue contribution? Thank you. We have several different ways to sell coal. We have sales on the pit and we do export. We use truck transportation. The mix of different ways to sell coal has been very stable in the past several years. In terms of the breakdown, it's also very stable. Maybe we do some manner adjustment based on market conditions to make sure we can achieve the most through sales or co-sales business. Thank you. I see. Thank you very much. Next question would like to ask you the outlook of stable production. In the coming five years, it will be very stable, I think. That's our understanding. It will be very stable in the coming five years. Thank you. Next question about Ping Shuo, 5,500 coal. What is the current production volume and sales volume? Ping Shuo, mine. Thank you. Thank you very much for the question about Ping Shuo Mine. In Q1, commercial coal production, 19 million tons. For 5,500 ones, they are about 20% of the total production. It's my personal estimate because there is this feature in Pingshuo mine. The CV, it's rather low, so not much above 5,500, so only 20%. I see, thank you. Next investor. What is the performance of Q1 in your company compared to our peers? Let me put it this way. We are minding our own business and we are doing very well. We delivered very good results for Q1. Our performance is in line with market expectation. But compared to advanced players, of course, there is room for us to make improvement. Thank you very much for your answer. In the interest of time, we are going to conclude the Q&A session. I will hand over to the management to wrap up. Thank you. Thank you very much to all the shareholders, investors, and analysts for your participation. Maybe you have some more questions to ask us, but in the interest of time, we have to stop over here. But do feel free to get in touch with our investor relations department. We are always here for you to answer your question. Thank you very much once again. Thank you to the management and thank you to all the investors. The call concludes over here. Thank you. Wish you a happy day. Thank you very much. Bye.