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Public company info - China XLX Fertiliser Ltd. , 01866.HK

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China XLX Fertiliser Ltd., 01866.HK - Company Profile
Chairman Liu Xingxu
Share Issued (share) 1,172,000,000
Par Currency
Par Value -0.0
Industry Fertilisers & Agricultural Chemicals
Corporate Profile Business Summary: The principal activities of the Group are mainly manufacturing and trading of urea, compound fertiliser, dimethyl ether (DME), methanol, liquid ammonia, melamine, furfuryl alcohol and ammonia solution. Performance for the year: Revenue decreased by RMB267 million or approximately 3% from RMB9,195 million in the financial year ended 31 December 2018 (“FY2018”) to RMB8,928 million in the financial year ended 31 December 2019 (“FY2019”). The profit for the year decreased by RMB241 million or approximately 36.79% from RMB655 million in FY2018 to RMB414 million in FY2019. Business Review Urea Revenue derived from the sales of urea decreased by RMB236 million or approximately 7% year on year (“YoY”) to approximately RMB3,313 million in FY2019 from RMB3,549 million in FY2018 due mainly to a decrease in the sales volume and average selling price of urea. Urea sales volume decreased by approximately 5% YoY to approximately 1,906,000 tons resulted from the closure of Plant I during the relocation of the Group’s Xinxiang production facilities in FY2019. The average selling price of urea decreased by approximately 2% due to the increase in the supply of urea in the industry. Gross profit margin of urea of the Group decreased to approximately 28.1% in FY2019 from approximately 30.8% in FY2018. The decrease was due to a combination of a 2% decrease in the average selling price and a 2% increase in the cost of goods sold. The decrease in the average selling price was the result of recovery of supply from urea industry. The increase in the cost of goods sold was mainly caused by the increase in the sales volume of high efficient urea with higher cost of goods sold. Compound fertiliser Revenue derived from the sales of compound fertilisers increased by RMB45 million or approximately 2% YoY to approximately RMB2,852 million in FY2019 from RMB2,807 million in FY2018, due mainly to the increase in average selling price by approximately 3% as a result of a higher percentage of high-efficient fertilisers sold. Gross profit margin of compound fertilisers of the Group increased marginally by 1% to approximately 15.8% in FY2019 from approximately 14.9% in FY2018. The increase was mainly due to the increase in average selling price of approximately 3% YoY, as a higher percentage of high efficient fertiliser was sold. Methanol Revenue derived from the sales of methanol decreased by RMB283 million or approximately 79% YoY to approximately RMB74 million in FY2019 from RMB357 million in FY2018, mainly because the Group chose to further process methanol products into dimethyl ether products which enjoyed a higher profit margin. As a result, sales volume of methanol decreased by 73% to approximately 40,000 tons in FY2019, as the Group only produced to maintain relationship with the most strategic customers. In line with the weakened international energy prices, the average selling price of methanol decreased by 23% YoY. Gross profit margin of methanol of the Group decreased to approximately -0.1% in FY2019 from approximately 15% in FY2018, mainly due to a 23% decline in the average selling price and reduced scale of production. The declined average selling price was in line with the weakened international energy prices. Dimethyl ether (DME) Revenue derived from the sales of DME decreased by approximately RMB224 million or approximately 20% from approximately RMB1,142 million in FY2018 to RMB918 million in FY2019. The decrease was due mainly to a decrease in the average selling price of DME by 21.8% YoY which was in line with the weakened international energy prices. The impacts of the decrease in DME price was partially offset by an increase in the sales volume of 2% YoY to 320,000 tones for FY2019. As a result of a 21% decrease of average selling price of DME, the gross profit margin of DME decreased from 23.5% in FY2018 to 5.1% in FY2019. As an alternate to liquid natural gas (LNG), the decline in average selling price of DME was in line with the weakened global energy prices. Melamine Revenue derived from the sales of melamine increased by approximately RMB96 million or 17% from approximately RMB561 million in FY2018 to RMB657 million in FY2019 mainly due to the increase in sales volume by 59%. In July 2018, the Group’s melamine project Phase II in Xinjiang Plant V with an annual production capacity of 60,000 tons successfully commenced operation, enabling the Group’s total annual melamine production increase to 120,000 tons. The increase in sales volume was partially offset by a decrease in average selling price of melamine by approximately 26% YoY due to the weakened demand in domestic chemical products. Gross profit margin of melamine decreased from approximately 52.3% in FY2018 to 35.6% in FY2019. This was due mainly to a 26% decrease in the average selling price resulting from the weakened demand in domestic chemical products. Furfuryl alcohol Revenue derived from the sales of furfuryl alcohol decreased by approximately RMB115 million or 22% from approximately RMB522 million in FY2018 to RMB407 million in FY2019. The decrease was mainly due to the decrease in the average selling prices of furfuryl alcohol by approximately 28% YoY as a result of the recovery of supply in the market followed by the more flexible environment control in PRC. This was partially offset by the increase in sales volume of approximately 8% YoY to approximately 42,000 tons for FY2019. Gross profit margin of furfuryl alcohol increased from approximately 8.5% in FY2018 to 15.3% in FY2019. This was due mainly to (1) the decline in cost of raw materials and (2) reduction of wastage of raw materials during production through research and development. Other income and gains Other income and gains increased by approximately RMB48 million from approximately RMB112 million in FY2018 to RMB160 million in FY2019. The increase was mainly due to (1) the increase of RMB35 million in gains from disposal of fixed assets and right of use assets; (2) the increase of RMB10 million in gains from sales of by-products and the sale of water, steam and electricity; (3) an increase of RMB10 million of interest received from banks; and (4) an increase of RMB8 million of the penalties from suppliers for non-compliance of supply contract. The increase was partially offset by the RMB34 million fair value change of derivative financial instruments and fair value change of financial instruments through profits and loss from a gain of RMB18 million in FY2018 to a loss of RMB16 million in FY2019. Prospects: Since the outbreak of the novel coronavirus in January 2020, with the strengthening of domestic epidemic prevention and control measures, the markets and demands for fertilizer and chemical products in the PRC have been adversely affected to certain extent, leading to a decline in the prices of the Company’s fertilizer and chemical products. As the epidemic is continuously under control, it is expected that the market demand and selling prices of the Company’s products will gradually recover. The international epidemic situation is expected to affect and reduce exports of fertilizers and imports of grains, and then affect the changes in the demand in the domestic fertilizer market. This also brings challenges and opportunities to the Group’s production and operation. The relocation of the Group’s Xinjiang production facilities will complete and commence production in the 2nd half of 2020, while the Jiangxi production base will complete in the 4th quarter of 2020 and commence production in 2021. The commencement of the new projects will further increase the scale of the Group, and improve the profitability and production flexibility of the Group. Despite the challenging macro-economic environment, the Group will continue to steadfastly implement low cost and product differentiation strategies to further increase sale of highefficient fertilisers, hence elevating the Group’s competitiveness in the market. Furthermore, the Group will leverage on its coal gasification production competitive advantage to further increase its product offerings. The Group is able to flexibly adjust the fertiliser and chemical product mix according to changing market conditions, hence improving overall profitability and its ability to withstand market volatility.

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