China XLX Announces 2024 Interim Results

Quality Improvement, Cost Reduction and Efficiency Enhancement Contributing to Profit Growth

2024 Interim Results Highlights:

• The Group's revenue increased by 0.02% YoY to approximately RMB 12.061 billion;

• Profit attributable to owners of the parent surged by 26% YoY to approximately RMB 687 million;

• Debt-to-asset ratio has decreased for four consecutive years, and the financial condition has improved year by year. Gearing ratio reducing to 62.7% and finance costs dropping by 18% YoY.

HONG KONG, CHINA / ACCESSWIRE / August 25, 2024 / China XLX Fertiliser Ltd. ("China XLX" or the "Company", together with its subsidiaries collectively known as the "Group") (HKSE:01866.HK) announced that the Group's revenue for the six months ended 30 June 2024 (the "Period") increased by 0.02% YoY to approximately RMB 12.061 billion. Profit attributable to owners of the parent amounted to approximately RMB 687 million, surged by 26% YoY.

In the first half of 2024, despite the concentrated release of agricultural demand, demand and supply mismatch in the fertilizer industry still exist. The price of raw materials on the supply side has fluctuated downward, weakening price support for coal chemical products, which has in turn affected the prices of the Group's fertilizer and fine chemical products. However, with the stable operation of the domestic economy, downstream demand is continuously recovering, leading to significant increases in the Group's urea, compound fertilizer, and methanol sales. The Group has continued to optimize production processes, strictly control energy consumption indicators, and ensure stable long-term operation. Through quality improvement, cost reduction and efficiency enhancement, the Group has achieved the leading energy efficiency in synthetic ammonia production for thirteen consecutive years. With the decline in raw material costs, the overall gross profit increased by 12% year-on-year ("YoY"), contributing to profit growth for the Group.

Revenue derived from the sales of urea increased 9% to approximately RMB3,834 million. This was mainly due to a 25% YoY increase in urea sales volume, but this was partially offset by a 13% YoY decrease in the average selling price. As production capacity released, the output of urea increased by 24% YoY, which helped boost sales volume. Gross profit margin of urea increased by approximately 2 percentage points from approximately 29% in 1H2023 to 31% for 1H2024, benefiting from a 15% decrease in the average sales cost of urea. On one hand, the decline in the price of coal led to a 10% YoY decrease in procurement costs. On the other hand, through the transformation and upgrade of the production lines, production consumption indicator was effectively reduced by 6% YoY.

Revenue derived from the sales of compound fertilisers increased by 6% to approximately RMB3,410 million, mainly due to a 13% YoY increase in compound fertilisers sales volume, but partially offset by a 6% YoY decrease in average selling price. The release of new production capacity at the Group's Northeast base led to a 15% YoY increase in output. At the same time, the continued optimization of the marketing model, and precise marketing strategy for each region and crop, as well as pre-orders through conference marketing, helped boost sales volume. Gross profit margin of compound fertilisers increased by approximately 6 percentage points from approximately 12% in 1H2023 to 18% in 1H2024. With the continuous decline in international potash prices, the Group's potash procurement price decreased by 18% YoY, resulting in a 12% YoY reduction in average cost of sales. Additionally, as high-efficient compound fertilisers better meet the needs of modern agriculture, with a gross profit margin of 19%, 4 percentage points higher than ordinary fertilisers, the Group increased the proportion of high-efficiency compound fertiliser sales by 23% YoY, effectively improving the gross profit.

Revenue derived from the sales of methanol increased 32% to approximately RMB1,291 million. The increase was mainly due to a 1% YoY increase in the average selling price of methanol and a 31% YoY increase in sales volume. In the first half of the year, the domestic economy has steadily advanced with notable progress, and the manufacturing sector has shown significant improvement, which has driven increased demand for methanol in downstream industries. At the same time, our group continued to expand its methanol trading activities and enhanced market competitiveness by providing supporting logistics services. As a result, new trade orders increased by 18% compared to the previous year. The gross profit margin of methanol increased by 10 percentage points from negative 2% in 1H2023 to 8% in 1H2024. Affected by the decline in raw material prices, the average methanol cost of sales decreased by 9% YoY.

Revenue derived from the sales of melamine decreased by 4% to approximately RMB397 million. This was mainly due to a 6% YoY decrease in the average selling price of melamine. In the first half of the year, the domestic real estate-related industries experienced a slow recovery, with weak downstream demand. The addition of new production capacity and a rise in operating rates led to an imbalance between supply and demand, causing melamine prices to come under pressure and declined. To mitigate the adverse effects of domestic supply pressures, the group has actively expanded into international markets, securing new overseas orders in countries such as India and Malaysia. This increase in export volume has driven a 3% YoY increase in sales. The gross profit margin of melamine products decreased by 6 percentage points from 36% in 1H2023 to 30% in 1H2024. This was mainly due to the loose supply and demand situation and the weakening of raw material cost support, which resulted in a 6% YoY decrease in the average selling price of melamine.

The sales revenue of DMF increased 14% to approximately RMB595 million. This was mainly due to a 31% YoY increase in DMF sales volume, while the average selling price decreased by 13% YoY. Since the planned shutdown and maintenance in the first half of last year, the production equipment has maintained stable operation, effectively increasing production by 30%, driving the increase in sales volume. The gross profit margin of DMF increased by 2 percentage points from 11% in 1H2023 to 13% in 1H2024. The increase was due to innovation of production technology and improvement of equipment, which effectively reduced the consumption of steam and electricity, and lowered the average cost by approximately 15% YoY.

The Group has continuously strengthened its production and operations, accelerated capital turnover, reduced working capital occupancy, and enhanced its assets liquidity. At the same time, through various channels and forms of financing, the Group has continued to optimize its debt structure. The debt-toasset ratio has decreased for four consecutive years, and the financial condition has improved year by year. Against the backdrop of a decline in average interest rate, the Group has ensured healthy cash flow while proactively repaying high-interest loans in advance, which effectively reduced the finance costs. During the Period, the Group's finance costs came down by 18% YoY and the gearing ratio dropped from 64.00% as at the end of 2023 to 62.70% as at the end of June.

Looking ahead into the future, Mr. Liu Xingxu, Chairman of China XLX, said, "Against the backdrop of accelerating agricultural productivity improvements, the Group is seizing new trends and opportunities in agricultural services. By utilizing big data and focusing on large-scale farmers, we are restructuring our sales organisation, transforming distributors into service providers. We aim to provide integrated value-added services to end farmers with a focus on "differentiated products + precise services," enhancing brand influence through team collaboration. At the same time, our group continues to align with long-term strategic goals, focusing on core advantages and deepening core competencies. On one hand, we are further enhancing the technical transformation of existing systems to reduce consumption. On the other hand, we are building new projects with the industry's most advanced technology to maximize investment returns. To meet the needs of rapid development, we continuously optimize management models and, leveraging group control, establish an adaptable organizational structure to support the realization of development strategies and competitive strategies."

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About China XLX Fertiliser Ltd.

China XLX Fertiliser Ltd. is one of the largest and most cost-efficient coal-based urea producers in China. It is principally engaged in developing, manufacturing and selling of urea, compound fertiliser, methanol, dimethyl ether, melamine, furfuryl alcohol, furfural, 2-methylfuran, pharmaceutical intermediates and related differentiated products. The Group adheres to the development strategy of "maintaining overall cost leadership and creating competitive differentiation" while strengthening the core fertiliser operations. With support of the resources in Xinxiang, Xinjiang and Jiangxi, it extends the value chain to upstream new energy and new materials and diversifies into coal chemical related products. The Company's shares (stock code: 01866.HK) are traded on the main board of the Hong Kong Stock Exchange.

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