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Public company info - Nickel Resources International Holdings Co. Ltd. , 02889.HK
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Nickel Resources International Holdings Co. Ltd., 02889.HK - Company Profile
Chairman Dong Shutong
Share Issued (share) 3,088,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Steel
Corporate Profile Business Summary: The principal activity of the Company is investment holdings. The Group is principally engaged in the manufacturing, sub-contracting and sale of iron and steel products in the PRC and the trading of ore. Performance for the year: In 2018, the turnover of the Group recorded a significant increase of HK$151.8 million, or 51.2%, to HK$448.2 million (2017: HK$296.4 million). The Group’s recorded a gross profit amounted to HK$7.5 million in 2018 (2017: HK$38.9 million). The gross profit margin in 2018 was 1.7% (2017: 13.1%). The Group’s 2018 loss for the year was HK$509.0 million (2017: HK$472.7 million) and the 2018 loss attributable to owners of the Company was HK$509.0 million (2017: HK$472.4 million). Business Review: Project Progress In the PRC Lianyungang City East Harvest Mining Company Limited, a wholly-owned subsidiary of the Company, has constructed a production plant to produce nickel fine powder. The first production line of the production plant started trial production in 2012. The nickel fine powder can be treated as finished product for direct sales; alternatively, it can be treated in a blast furnace and processed into nickel-iron alloy fluid, which becomes a high-quality raw material for the production of stainless steel. The Lianyungang plant applies low carbon metallurgical technology developed by the Group. Ordinary coal, rather than coke used in traditional process, is used in the reduction purification process, under which the consumption of carbon may decrease by up to 40%. In addition, the plant can utilise low grade nickel ore for production, the cost of which is much lower than that used in traditional production process. The project is highly recognised by the local government. Moreover, the plant is situated at the Lianyungang port and benefits from geographical advantages. Ores and other raw materials from overseas can be conveniently transported to the plant, largely reducing the inland transportation costs and logistics pressure. In Indonesia On each of 11 March 2018 and 8 June 2018, the Group entered into a sale and purchase agreement with Mr. Sun, who is an indirect shareholder of the Subscriber, pursuant to which the Group agreed to sell an aggregate 14% equity interest in SEAM to Mr. Sun at an aggregate consideration of RMB420 million (equivalent to approximately HK$479.3 million) conditional upon, amongst others, obtaining approval from shareholders of the Company at an extraordinary general meeting and resumption of trading of the Company’s shares. Along with the disposal of 14% equity interest in SEAM, the Group is actively assessing the available financing sources and considering any possible alternatives, including but not limited to, co-operation with local enterprises or PRC giant steel manufacturer for building up special steel mills in Indonesia. Business Development Ore trading business The Group purchases ores from Indonesia through the EOA at fixed price for self-use or for sale, and has started selling ores to third parties since the end of 2009. The ore trading business had a remarkable contribution to the Group’s profitability and cash flows due to strong demand from the PRC customers in the past. However, the ore trading business of the Group has been suspended upon the Export Ban and it is anticipated that this will have a continuous significant negative impact on the financial and operating results of the Group. It is possible that the relevant mining regulations in Indonesia may be amended but there is no guarantee that the Export Ban will be uplifted in near future. The Directors are considering any possible alternatives, including but not limited to, cooperation with local enterprises or PRC giant steel manufacturer for building up special steel mills in Indonesia. Special steel-making operations For the special steel-making operations of the Group, sales volume increased enormously as compared to the year of 2017 whereas the profit margins lowered during the year. Yongtong Special Steel continued to provide sub-contracting services to external customers by utilisation of its existing production capacity for enhancing its cash flow position and generating stable revenue. During the year, the Group recorded sub-contracting service income amounted to HK$28.0 million. In August 2018, in order to explore different avenues to further enhance the business operation, the Group entered into a strategic cooperation agreement (the “Cooperation Agreement”) with a strategic partner (the “Strategic Partner”), pursuant to which the Group agreed to provide its fixed assets and the Strategic Partner agreed to provide management personnel, technical support and a loan of not more than RMB100 million for production of the steel products by utilising the production plants of the Group. Pursuant to the Cooperation Agreement, the Strategic Partner has undertaken enhancement work on the production plants of the Company in order to strengthen the existing production capacity and its ability, during which the production of certain production facilities has been temporarily suspended. The Group expects while the keen competition in the steel market of the PRC will continue in 2019, the demand for steel products will gradually pick up. Following the Environmental Protection Bureau taking measures to monitor and control the air pollution index since 2016, the Group expects the environmental protection issues will continue in 2019 and the supply of the stainless steel products market may be affected. Therefore, the Group will take this opportunity to produce substantially the stainless steel products in demand in near future. The Group is also proactively developing and launching new high-value-added special steel products and identifying PRC and overseas markets with growth potentials to strengthen the Group’s product portfolio and reduce the market concentration risk. Prospects: The year of 2018 continues to be a challenging year full of uncertainties for both the PRC steel market and the Group. The over-supply situation had not fundamentally improved amid the increasingly fierce competition between similar products in the steel market although the PRC government started to implement certain solutions to mitigate the over-supply situation affecting the iron and steel market. During the year, despite the recent rebound of the PRC steel market, the steel price was persistently weak but fluctuated. In addition, Export Ban which was implemented in early 2014 by the relevant governmental authorities of Indonesia has continuously casted significant doubt on the Group’s financial performance and cash flows in 2018. The continuous development of the high strength stainless structural special steel products by the Group and the success of launching market strategies which would generate higher margin and be less affected by macroeconomic environment for household, electricity, communications, photovoltaic and animal husbandry uses, the Group foresees the Group will launch various new products to the higher margin market in the near future. The Group expects the economy of PRC will continue its healthy growth trend and the demand and profitability of the Group’s steel products will rebound in future. In a longer term, the Group expects PRC will continue its modernisation and urbanisation that the demand of high quality special steel products for public infrastructure and equipment manufacturing will increase steadily. This definitely will bring enormous business opportunities for the Group. The Group believes that after the technology industrialisation and modernization of special steel products, the Group will have a stronger competitive advantage in the industry. The Group believes that upon on the success of implementing all the plans contained in the Resumption Proposal, including the financial restructuring exercises, the Group’s financial position will be substantially improved in the coming future. The Group believes that upon completion of the enhancement works by the Strategic Partner, the production capacity of the Company will be further strengthened and better utilised. The production of steel products under the Cooperation Agreement may bring substantial improvement on the Group’s financial performance and cash flow position. In view of the recent readjustment of the business operations and the proposed financial restructuring of the Group, the Group is confident that the Group will have a stronger position in the industry as well as in the special steel products market.

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