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Public company info - China Vanadium Titano-Magnetite Mining Co. Ltd. , 00893.HK
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China Vanadium Titano-Magnetite Mining Co. Ltd., 00893.HK - Company Profile
Chairman Teh Wing Kwan
Share Issued (share) 2,249,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Steel
Corporate Profile Business Summary: The Group is principally engaged in mining and ore processing, sale of self-produced products, trading of coals and steels, management of strategic investments and providing specialised mining services. Performance for the year: Revenue fell to RMB619.4 million for FY2019 (FY2018: RMB692.9 million). Gross profit sustained at approximately RMB58.2 million for FY2019 (FY2018: RMB58.7 million) despite recorded slightly better gross margin at approximately 9.4% for FY2019 (FY2018: 8.5%). The Group recorded Net Profit of RMB69.2 million for FY2019, reversing a Net Loss of RMB444.0 million for FY2018. Business Review During the Reporting Period, the Group reported lower revenue, which fell by 19.1% to approximately RMB923.6 million for FY2019, mainly caused by non consolidation of Disposal Group's revenue subsequent to 30 July 2019. Specifically Average selling price for low-grade iron concentrates (within the southern region of Sichuan and Panxi Region in particular) increased by approximately 9.8% on average for 7 months in 2019 up to the date of Completion due to global supply decline in the aftermath of the Brazil mining accident in spite of falling demand under the stringent anti-smog policies in China; Average selling price for high-grade iron concentrates rose by approximately 11.1% – given the Group’s focused strategies in improving efficiencies for its High Fe Mines, the mine operations located mainly in the northern region of Sichuan had been able to constantly produce high-grade iron concentrates with an average range of 65% TFe (with an encouraging but small volume of 72% TFe since FY2018); and Smaller proportion of trading activities given the Group’s shift in business direction to progressively reduce its exposure in this segment which requires higher working capital requirements and discretionary change in its trading product mix for improving margins in response to market demand – total purchase and sales volumes of trading activities were approximately 127.0 Kt and 127.0 Kt, respectively, representing a fall of 58.7% and 60.3%, respectively, as compared to FY2018. The production and sales volumes were as follows: high-grade iron concentrates were approximately 99.2 Kt and 91.6 Kt for FY2019, respectively; Ow-grade iron concentrates were approximately 658.5 Kt and 645.0 Kt for the period ended 30 July 2019, respectively; and Titanium concentrates were approximately 109.5 Kt and 106.4 Kt for the period ended 30 July 2019, respectively. The Group recorded slightly lower gross profit of approximately of RMB118.5 million for FY2019 as compared to FY2018 despite higher gross profit margin of approximately 12.8% for FY2019 which was mainly attributable to higher average unit selling price of high-grade iron concentrates. Administrative expenses fell by 38.8% to RMB72.4 million as the Group has ceased to recognise the financial results of the Discontinued Operations from the date of Completion onwards. A oneoff gain on disposal of the Disposal Group amounting to RMB153.0 million was recorded upon the Completion. Given the above, the Group recorded Net Profit of RMB69.2 million for FY2019 reversing a Net Loss of RMB444.0 million for FY2018. Prospects: We had previously highlighted that the epidemic has adversely affected the overall market sentiment, caused short-term uncertainty and posed significant downside risks on the pace of demand recovery given the travel bans, delayed workforces return, production suspension and supply chain disruptions. These are bad news and so, things do not seem to bode well for first quarter of 2020 or potentially, could even bear upon the Group beyond this period. Like many other businesses, the Group is monitoring the current situations very closely. Many factories expect to see their overall capacity far from optimal upon operational over the next few quarters and some could even be struggling to get their production up to speed. In this context, it is expedient for the Group not to think of overzealous plans but to simply mitigate learning curve effects and stabilise the Group's output once production resumes – productivity recovery remains the Group's key priority. In doing so, the Group has made certain key underlying assumptions, empirically and theoretically, that this epidemic will only cause a short-term market slowdown which will not significantly alter the fundamental of the economic growth in China over a longer term. If this guided framework works, the Group hopes to recoup a significant part of the Group's production capacity loss in second half of 2020 but if this theory fails, the Group's financial results for the financial year ending 31 December 2020 will be adversely affected. That said, the pace of such estimated recovery will depend largely on the scenarios for and situations of the coronavirus outbreak containments on which the outcomes are still uncertain. If factories could resume as planned and scheduled, the Group will have to monitor factory productivity very closely and manage potential supply chain issues from time to time which are expected to arise from raw materials shortage, manpower re-organisation and logistical hurdles. Against this backdrop, the Group is definitely not in the mood of seeking acquisitional growth as the mining sector gains little traction in meeting returns expectation which comes with a big valuation gap. From the Group's perspective, the Group has limited resources to pursue such opportunistic swoops for mining assets as well. At the macro level, the Group has seen a growing number of downward adjustments to the global economic forecasts (definitely not those crude vital statistics) making clear calls for an imminent recession with renewed jitters. Sure enough, the Group's team has been watchful on the heightening fears of such risk. As reiterated, the Group needs to strengthen the Group's execution capabilities, be it in managing the Group's existing operations or seeking transformational growth initiatives – more so, under the current stressful state while the global economy is facing headwinds structurally and cyclically.

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