China Coal Energy Company Limited

The Investors and Analysts Good afternoon. I am Jiang Qun, former secretary of China Coal Energy. Welcome to our results presentation. Present at today's meeting are Mr. Gao Shigang, deputy secretary of the party committee, the executive director and president of the company, Mr. Zhan Yanjing, and defendant and executive director, Mr. Zhai Xiaoling, Chief Financial Officer, as well as responsible heads and relevant staff from the Securities Affairs Department, Planning and Development Department, Finance Department, Coal Business Department, Chemical Business Department, Power Business Department, and Marketing Management Office. Let's express our heartfelt thanks for our long-term care and support for the company. Now, I will present China Coal Energy's operating results for the first half of 2026 and our key work arrangement for the second half. Unless otherwise specified, all figures below are calculated under the Chinese accounting standards for business enterprises. Number one, operating results and the key features for the first half. In the first half, Finaco Energy resolutely implemented the decisions and arrangements of the Safety Central Committee and the State Council deeply pursued the development philosophy of enhancing efficiency for existing assets and positioning through incremental growth, actively responded to various risks, challenges and multiple operating pressures, Our production and operations maintain a sound momentum. Under the Chinese accounting standards, we achieved operating revenue of $73.13 billion, total profit of $12.46 billion, up 4.4% year-on-year. Net profit attributed to shareholders was $8.14 billion, up 5.8%. Basic earnings per share was $0.61, up 5.2%. Net cash flows from operating activities were $9.86 billion, an increase of $2.193 billion, or 28.6% year-on-year growth, continuing to maintain a sound profitability level and cash generation capability. Under the International Financial Reporting Standards, we achieved operating revenue of $73.13 billion and profitable tax $12.42 billion, up 7.1%, Profit attributed to shareholders was at $8.192 billion up 11.8% Basic earnings per share were $0.62 up 12.7% The company's production operations in the first half featured the following First, stable and orderly production and operations In the first half, our coal business overcame challenges such as changing geological conditions and greater production organizational difficulties in some mining areas. achieved a commercial coal production of 61.95 million tons. We further strengthened the production sales coordination mechanism and seized the window of providing coal prices, different product segmentation, and market segmentation, and made every effort to increase sales and produce value, achieving commercial coal sales of 119.7 million tons. of which self-produced commercial coal cells amounted to 61.4 million tons. Our coal chemical business strengthened its operation and maintenance management, focused on the lean production and product differentiation, and achieved production of major coal chemical products of 3.01 million tons. We actively expanded sales channels, strengthened the production sales coordination, carried out targeted marketing by category, and achieved a sales of major coal chemical of 3.235 million tons, with efficiency and profitability remaining industry-leading. Number two, steady recovery in prices of major products. In the first half, the prices of our major products, including coal and chemicals, rose with market trends. The average selling price of the self-produced commercial coal was 524 per tonne, up 54 per tonne or 11.5%. Among these, the selling price of the thermal coal was 494 per tonne, up 38 per tonne or 13.3%. The selling price of the cooking coal was 1017 per tonne, up 132 per tonne or 14.9%. The selling price of the boating trading coal was 549 per tonne, up 77 per tonne or 16.3% year-on-year. The selling price of polyelephants was $7,017 per tonne, up $336 per tonne, or 5%. The selling price of urea was $1,828 per tonne, up $76 per tonne, or 4.3%. The selling price of ethanol was $1,868 per tonne, up $98 per tonne, or 5.5% year-on-year. The selling price of ammonium nitrate was $1,902 per tonne, up $19 per tonne, In the first half, we dynamically adjusted our product mix in response to market demand, increasing the average calorific value of the thermal coal by nearly 200 kcal per ton. We continuously improved our refined management level. and steadily enhanced the overall quality and efficiency. The unit sales cost of self-produced commercial coal was at 285.69 per ton, up 22.72 per ton, or 8.6%, mainly due to higher fixed costs from lower output, higher labor costs from converting some outsourced teams to self-operated teams. Our coal chemical business remained focused on the goal of a safe, stable, and long cycle full load and excellent operation. We have strengthened equipment management, optimized the facility operations, and reasonably controlled cost expenditures, keeping UNICEF's cost of major coal chemical products within reasonable range. Among them, the UNICEF's cost of the polyelephants was 5,674 per ton, down 757 per ton, or 11.8%, mainly because the polyelephant facility underwent plant-based maintenance in the same period last year. The unit sales cost of urea was of 1,280 per ton, up 17 per ton, or 1.3%, mainly affected by higher purchase prices of wool, coal, and fuel coal. The unit sales cost of methanol was 1,370 per tonne, up 66 per tonne, or 5.1%, mainly affected by higher purchase prices of raw coal and fuel coal. The unit sales cost of ammonium nitrate was 1,893 per tonne, up 509 per tonne, or 46.8%, mainly affected by the planned major maintenance of the ammonium nitrate presumably in its period. Number four, steady and sound operating performance. Against the factor of a lower coal output and rigid cost increases, we adopted multiple measures to hedge against the cost pressures and achieve total profit of $12.46 billion. The main profit change factors were as follows. First, major profit-increasing factors. Higher selling prices of self-produced commercial coal increased profits by $3.3 billion. Second, chemical business increased profits by $878 million. Third, the power business increased profits by $172 million. Fourth, investment income and other income increased by $60 million. The profit-reducing factors. First, higher unit sales costs of self-produced commercial coal. by $1.36 billion. Second, lower sales volume of self-produced commercial coal, which is profit by $1.27 billion. Third, non-operating income expenses, which is profit by $483 million. Fourth, higher taxes, surcharges, and period expenses, which is profit by $459 million. Fifth, equipment and financial business, which is profit by $425 million. Number 5 Accelerated Construction of the Key Projects In the first half, all practice units of the second phase coal chemical project in Yulin, Shanxi with an annual poly-elephant capacity of 900,000 tons have been mechanically completed. The Liquid Sunset Demonstration Project of the Heejin Horo Energy Chemical has entered the trial operation stage. The 25660 megawatt coal power integration project in Wushun, China has fully moved into the equipment installation stage. The 100 megawatt wind power project in Yuyang, Shanxi, undertaken by Shanxi Company, has commenced construction, and Shanghai Energy Company completed the 100% equity acquisition of a 400 megawatt fishery solar complementary PV project in the Lezhi Sea area of Qigong. Number six, entering dividends to reward shareholders. Since our listing, the company's total cash dividends have exceeded 46 billion, striking the best possible balance between interest of all shareholders and the company's sustainable development. We have implemented entering dividends for three years in a row. For 2026 entering period, we plan to distribute cash dividends of 2.44 billion or 0.184 per share The above dividends are expected to be distributed before the end of October 2026. Key Work Arrangement for the Second Half The Company will thoroughly implement the decisions and arrangements of the CPC and State Council, adhere to the general principle of pursuing progress for ensuring stability, and the leverage implementation of the 15th five-year plan to deepen the state-owned enterprise reforms as key drivers of the high-quality grid. First, we would adhere to the coal-powered chemical new energy multi-industry coupled development pathway, coordinate intelligent, green, and innovative development. Second, we will continue benchmarking against the world-class standards, strengthen decision-making, see if the production and sales coordination go all out to improve quality and efficiency. Third, we will persist in driving development through reform and innovation, actively carry out reforms of management and operating mechanisms, deeply advance key core technology breakthroughs and build a high-level innovation system. Fourth, we will uphold the systematic thinking and bottom-line thinking, give full play to the penetrating supervision role of intelligent control platform and strengthen work safety as well as environmental protection and energy conservation. 5. Will continue to improve market value management and continuously improve corporate governance and information disclosure quality. Dear investors and analysts, the company's management and all colleagues will stay focused on our goals, remain confident, take proactive actions, and work ahead with determination. We'll continue to advance high-quality development and strive to deliver better results. That's all for my presentation. Now opening the floor for Q&A. Thank you. Hello, everyone. If you have any questions, please click the star key on your phone and then press number one. For online participants, you can type in your questions in the live chat box or click the button of the raise your hand. Thank you. We are taking the question from Investor with the phone number ending in 0151. Please provide your name and institution. Thank you. and peer management. I'm an analyst from Golden Securities. I'm John Jingming. I have two questions. First, as mentioned earlier by Mr. Gunn, in Castle Farbens, there were some in-depth cooperation and in July, you have also signed a provincial level cooperation with the provincial government involving a large-scale investment. So, In terms of the collaboration with Gansu Farbens, what's the specific plan for the future and also what tasks and missions will be carried out by the company? Thank you. I'd like to ask our strategic planning department colleague to answer the question. Thank you for the question. In July, the group has signed a strategic cooperation agreement with Gansu Farbens. funding to build the energy base of the China coal Yongdong, which the Tangjia He coal mine and have obtained a geological resource of about 1.75 billion tons with an annual production capacity of 9 million tons. At present, the company has established a wholly owned subsidiary, the China Coal Gansu Energy, to advance the preliminary work of the project. Currently, we have not reached the stage of actual investment, and we will disclose further information later. Thank you. I have a follow-up question in the first half regarding all the cost items. In the first half of the expenses, The non-operating expenses are 500 million more than 10 years last year. There may be some specific parties involved, including the payment of the late fees and fines, as well as the taxes and surcharges, and also the resource tax and land use tax. I think these costs have increased compared with the last year. So I just wanted to know the reasons behind them and the outlook for the expenses in the future. Thank you. I'll ask our finance colleague to respond to the question. Thank you. In the first half, for well-known reasons and also according to requirements of the State Taxation Administration, we carried out special tax work to show that the number of operating expenses and taxes and surcharges have increased. This tax payment is a result of previous practical standards and its differences against the current practice. For example, the identification of high tech and also there are some differences caused by the division of raw coal and water coal and these led to the increase in tax items and we have paid these taxes according to the requirements of the tax bureau. All of these expenses have been disclosed in the interim results. Thank you. Thank you, that's all for my questions. Next question, investor with the phone number ending in a 6322, please provide the name and institution.

from City. First, thank you for organizing this event. And I have several questions to go through. The first one is about our production capacity. Our capacity in H1 is down a little bit. And of course, there's the Shanxi incident to consider. But my question is, of course, if any accidents happen to other manufacturers, does that affect our production? Has it recovered? We have heard that post the accident, the security inspection is stricter than before and more to come in the future. So my question is that do you think the production volume can go back to the pre-incident level and how is recovery going. Thank you. Do you want to go through all your questions or is it one by one? One by one, thank you. Okay, my understanding of your first question is that it comes in two parts. The first one is the regulatory policy for the whole sector and also the prospect of all the main coal manufacturing provinces and their capacity. Okay, I will give the floor to our marketing office colleague and also how the safety inspection policy is going. Okay, thank you for your question. In H1-2026, especially in the second half of May, the Xinliushui coal mines incident has affected the production of the entire sector and after that the competent authorities have initiated the security checks and the inspection on the overproduction conditions and also modifications and rectifications are underway. Based on the current trend, I don't think it will ease up this year. And this year for the entire coal sector, the impact on the production and overall volume is quite clear. And if you consider the numbers from January to the June, the total volume was down by 1.7% or it's 40 million ton less. And from January to May, the imported coal was down by 10 million ton. But after the lower production in June, more imported coal, about 3.8 million tons more. And we have much of our production area in Shanxi as well, so it's a huge impact on us. But the upside is that for China coal, we are sticking to our overall production schedule and we're trying to make adjustments according to our whole year's production plan. From Mr. Jiangchun, about our company's production volume in H1, is down by 3.39 million tons year over year, down by 8%. As Mr. Lee has said, it's affected by the tightening rules about safety inspection. And also for some of the mining areas, we have complicated geological conditions and it's harder to organize production. So that also played a part. And in the second half, we plan to stick to our original production plan and try to catch up here. But frankly speaking, since the inspection for safety has tightened and we are strictly compliant with the safe production for each month, So while we try to meet our annual production target set at the beginning of this year, but for the actual result at the end of the year, it comes down to our actual execution. That's what I wanted to add. Do you have any other questions? Okay, I have two more questions. I will cover them both. our in-house product selling price was up to almost the market average, and it grew more than the LTA products. I wonder why that is. And then about our costs, what's your outlook for the H2 costs? Because costs were up a little bit for the first half of the year, and I wonder how the costs would be in second half of the year. on a year-over-year basis. Thank you. Answer. Okay, for our self-developed coal's salium price changes. From Ms. Xu from finance department. Okay. The price is at 524 RMB up by 54 RMB for the power for the fuel coal up by 58 RMB per ton and it's because we have optimized the Pingshuo product mix. The average calorific value is up by 200 kilocalories and also the LTA pricing in the market has gone up, also lifting our selling price. And thirdly, Shanghai Datun Mei is also a part of the fuel coal, and it is also sold in convo with the cooking coal. The price has gone up by 82 RMB per ton, or so much for the reasons. As for the cost trend in second half of the year? It goes to our Chief Finance Officer, Mr. Chai. Okay, it's a good question. We have covered this question before. We have already told our investors that it's normal to have about minus plus 10% of the cost fluctuations. And we are a modernized, highly efficient mining based production type of manufacturer. And since we have strengthened the unified procurement, better management there, and we have introduced the digitalized intelligent technology, and we have got more of the innovative operational cost control and better management there, yielding good results. and in H1, our cost was up by 22 RMB, up by 8.6%. Well, for various reasons, our overall production volume was down and of course that affects our costs. For example, six RMB that went into depreciation and amortization, but for the operational expenses, it has a lot to do with the sales method. Some of the codes we have to pay for the shipping fee. If it comes in a larger volume, then it affects the overall cost. And also, it has a lot to do with how we spend our dedicated funds. We have a timetable for it. And in H1, the production volume was down. So this year, we'll have to use less of the dedicated fund. and relative to the same period last year, we spend 470 million RMB more and so that means the cost would be higher than before or it has a lot to do with the coordinated production schedule and the changing production volume and also you have the remuneration and social security payment for our employees. And since we have reduced the outsourced labor and we have more of the in-house labor use, that has increased our costs too. So those are all normal. As for H2, I would say the costs are all controllable. we are looking at some of the improvement and also production volume H2 would be better than H1 because we're trying to catch up with better utilization of the regulations. And for our own management and administration, it will only be more optimized. But as for the whole year's cost, is it really on par with last year or even better than last year? Not necessarily. because we want to prioritize the profitability, not the overall expenses. I hope that answers your question. Okay. Thank you, Mr. Chai and Mr. Zhong. I have no other questions. Thank you. The floor goes to the participant whose phone number ends in 2948. Please name yourself and your institution. Thank you. I am from Changjiang Securities. Congratulations on your good interim results. I have only one question because in H1 this year, profitability of chemicals has been improved. For example, for urea and polyolefin, what's the outlook for H2 and her the next year because we're also onboarding some new projects, right? Are we looking at a better margin profile? Sorry, your question, well, your voice was a bit choppy. So let me check with you. You are asking about, okay, let me clarify. I'm putting on a headpiece. Okay, would you mind repeating your question? Of course, of course. and from Chongjiang Securities and Songchul. First, congratulations on your excellent interim results. And in H1, the chemical sector has received a lot of attention and your business here has grown on a year-over-year basis. So for second half of the year and also for next year, what's your outlook of your chemicals of business and what's your expectation for their costs and profitability? Thank you. Okay. The floor is yours, Mr. Hsu from the Chemical Department. Okay, thank you for your question. For the chemicals business in H2 and in next year, Let's first talk about our production. 900,000 tons more of polyolefine because if it goes online this year and next year, it will start producing more. As for our other businesses, other capacity, they are staying at the current level, no incremental growth. Secondly, for the profitability, the overall chemical sector is keeps a good margin, especially for the polyolefin business. We do not have a clear read on the market now, but I would say for the second half of the year, polyolefins would fluctuate within a band at a higher level, at a higher-related level. And The overall margin in H2 would be on par with H1. And next year, with more incremental growth, we are looking at a higher margin. Thank you. Okay. Thank you. And I wish you more success in the future. Thank you. The floor goes to the participant whose phone number ends in 8130. Please name yourself and your institution. Thank you.

Dear management, good afternoon. I'm an analyst from OEM securities. I have a question regarding the coal mines in Wazeco and the Libby. It seems that there are some delay. Can you share more details about that? I would address this question. So for these two coal mine construction projects, one in Libby and one in Wisco, so we have adjusted the timing in the entry report, and there are two reasons for that. At the beginning of this year, during the construction process, there were some incidents, one for each, leading to the shutdown. as you know now the city and supervision is very strict so that has affected on the project schedule for the Levy coal mine the incident was due to the exploration of gas so the The gas that's explored is quite different from the actual gas content, and this has also led to the delay. At present, one could expect a one-year delay roughly for each coal mine. So for the lead coal mine, the production is likely to start in 2028, and for the way-to-go coal mine, the production will start to the end of 2027. We would update you on any further progress of the project. Thank you. I have another question. So in the first half, and the proportion of self-produced coal borne by labor transportation and the port handling expenses has increased. So I'd like to know from a sales structure point of view, what is the company's current idea? Is this structure sustainable? Okay, I would engage colleagues from marketing office to address this question.