Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
Asia Cement (China) Holdings Corporation
亞 洲 水 泥（中 國）控 股 公 司
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 743)
ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
FINANCIAL HIGHLIGHTS
Revenue decreased by 29% to approximately RMB4,314.0 million (2019: approximately RMB6,043.4 million).
Profit attributable to owners of the Company was RMB878.4 million (2019: Profit attributable to owners of the Company was approximately RMB1,510.4 million). The decrease in profit attributable to owners of the Company was mainly attributable to the decrease in the sales volume and selling price of the Company's products.
Basic earning per share amounted to RMB0.561 (2019: Basic earning per share RMB0.964).
- 1 -
INTERIM RESULTS
The board (the "Board") of directors (the "Directors") of Asia Cement (China) Holdings Corporation (the "Company"), together with its subsidiaries (collectively, the "Group") hereby announces the unaudited condensed consolidated interim results for the six months ended 30 June 2020 together with comparative figures for the corresponding period in 2019. These interim condensed consolidated financial statements for the six months ended 30 June 2020 have not been audited, but have been reviewed by the Audit Committee of the Company.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the six months ended 30 June 2020
Six months ended 30 June | |||||
2020 | 2019 | ||||
Notes | RMB'000 | RMB'000 | |||
(unaudited) | (unaudited) | ||||
Revenue | 3 | 4,314,031 | 6,043,385 | ||
Cost of sales | (2,527,874) | (3,400,137) | |||
Gross profit | 1,786,157 | 2,643,248 | |||
Other income | 5 | 132,466 | 112,980 | ||
Other gains and losses | 6 | (58,724) | (19,526) | ||
Distribution and selling expenses | (178,617) | (221,299) | |||
Administrative expenses | (250,670) | (241,638) | |||
Share of profits of joint ventures | 4,239 | 4,017 | |||
Share of losses of associates | (3,108) | (1,585) | |||
Finance costs | (95,184) | (142,656) | |||
Profit before tax | 1,336,559 | 2,133,541 | |||
Income tax expense | 7 | 426,947 | (585,004) | ||
Profit for the period | 8 | 909,612 | 1,548,537 | ||
Profit for the period attributable to: | |||||
878,414 | |||||
Owners of the Company | 1,510,397 | ||||
Non-controlling interests | 31,198 | 38,140 | |||
909,612 | 1,548,537 | ||||
RMB | RMB | ||||
Earnings per share: | 10 | ||||
Basic | 0.561 | 0.964 | |||
- 2 -
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2020
As at | As at | ||||
30 June | 31 December | ||||
2020 | 2019 | ||||
Notes | RMB'000 | RMB'000 | |||
(Unaudited) | (Audited) | ||||
NON-CURRENT ASSETS | 7,802,823 | ||||
Property, plant and equipment | 11 | 8,077,172 | |||
Quarry | 12 | 936,682 | 964,761 | ||
Right-of-use assets | 809,310 | 819,682 | |||
Investment properties | 121,067 | 82,420 | |||
Goodwill | 554,241 | 554,241 | |||
Other intangible assets | 4,305 | 3,571 | |||
Interests in joint ventures | 60,730 | 56,491 | |||
Interests in associates | 722,014 | 725,122 | |||
Restricted bank deposits | 3,428 | - | |||
Deferred tax assets | 97,574 | 82,222 | |||
11,112,174 | 11,365,682 | ||||
CURRENT ASSETS | |||||
726,255 | |||||
Inventories | 13 | 674,380 | |||
Trade and other receivables | 14 | 2,366,684 | 3,962,640 | ||
Amount due from an associate | 10,052 | 15,959 | |||
Amount due from a joint venture | 5,005 | 10,014 | |||
Restricted bank deposits | 9,854 | 14,503 | |||
Bank balances and cash | 9,156,644 | 7,942,576 | |||
12,274,494 | 12,620,072 | ||||
CURRENT LIABILITIES | |||||
1,246,115 | |||||
Trade and other payables | 15 | 2,174,123 | |||
Amount due to a joint venture | 18,102 | 5,563 | |||
Tax payables | 152,365 | 555,414 | |||
Borrowings - due within one year | 4,591,785 | 4,770,215 | |||
Lease Liabilities | 5,639 | 4,512 | |||
Contract Liabilities | 16 | 184,755 | 185,525 | ||
6,198,761 | 7,695,352 | ||||
NET CURRENT ASSETS | 6,075,733 | 4,924,720 | |||
TOTAL ASSETS LESS CURRENT LIABILITIES | 17,187,907 | 16,290,402 | |||
- 3 -
As at | As at | |||
30 June | 31 December | |||
2020 | 2019 | |||
Notes | RMB'000 | RMB'000 | ||
(Unaudited) | (Audited) | |||
NON-CURRENT LIABILITIES | 2,295,273 | |||
Borrowings - due after one year | 1,444,094 | |||
Deferred tax liabilities | 58,483 | 70,555 | ||
Lease Liabilities | 102,624 | 96,025 | ||
Provision for environmental restoration | 41,095 | 36,734 | ||
2,497,475 | 1,647,408 | |||
NET ASSETS | 14,690,432 | 14,642,994 | ||
CAPITAL AND RESERVES | ||||
140,390 | ||||
Share capital | 17 | 140,390 | ||
Share premium and reserves | 14,218,399 | 14,123,411 | ||
Equity attributable to owners of the Company | 14,358,789 | 14,263,801 | ||
Non-controlling interests | 331,634 | 379,193 | ||
TOTAL EQUITY | 14,690,432 | 14,642,994 | ||
- 4 -
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2020
Attributable to owners of the Company | |||||||||||||||||||||
Non- | |||||||||||||||||||||
Share | Statutory | Other | Special | Retained | controlling | ||||||||||||||||
capital | reserves | reserves | reserve | profits | Sub-total | interests | Total | ||||||||||||||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||||||||||||||
At 1 January 2019 (audited) | 140,390 | 1,724,496 | 286,038 | 1,635,906 | 8,301,079 | 12,087,909 | 354,437 | 12,442,346 | |||||||||||||
Profit for the period | - | - | - | - | 1,510,397 | 1,510,397 | 38,140 | 1,548,537 | |||||||||||||
Appropriation | - | 585,850 | - | - | (585,850) | - | - | - | |||||||||||||
Dividends recognised as distribution | - | - | - | - | (971,448) | (971,448) | - | (971,448) | |||||||||||||
Dividends paid to non-controlling | |||||||||||||||||||||
interests | - | - | - | - | - | - | (57,998) | (57,998) | |||||||||||||
At 30 June 2019 (unaudited) | 140,390 | 2,310,346 | 286,038 | 1,635,906 | 8,254,178 | 12,626,858 | 334,579 | 12,961,437 | |||||||||||||
At 1 January 2020 (audited) | 140,390 | 2,310,346 | 286,038 | 1,635,906 | 9,891,121 | 14,263,801 | 379,193 | 14,642,994 | |||||||||||||
Profit for the period | - | - | - | - | 878,414 | 878,414 | 31,198 | 909,612 | |||||||||||||
Appropriation | - | 767,374 | - | - | (767,374) | - | - | - | |||||||||||||
Dividends recognised as distribution | - | - | - | - | (783,426) | (783,426) | - | (783,426) | |||||||||||||
Dividends paid to non-controlling | |||||||||||||||||||||
interests | - | - | - | - | - | - | (78,748) | (78,748) | |||||||||||||
At 30 June 2020 (unaudited) | 140,390 | 3,077,720 | 286,038 | 1,635,906 | 9,218,735 | 14,358,789 | 331,643 | 14,690,432 |
- 5 -
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 June 2020
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(unaudited) | (unaudited) | |||
Net cash from operating activities | 1,519,984 | 2,307,109 | ||
Net cash used in investing activities | (21,295) | (207,329) | ||
Net cash used in financing activities | (284,621) | (230,587) | ||
Net increase in cash and cash equivalents | 1,214,068 | 1,869,193 | ||
Cash and cash equivalents at beginning of the period | 7,942,576 | 5,008,691 | ||
Cash and cash equivalents at end of the period, | ||||
represented by bank balances and cash | 9,156,644 | 6,877,884 |
- 6 -
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2020
-
BASIS OF PREPARATION
The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and with International Accounting Standard 34 ("IAS 34"), "Interim Financial Reporting". - PRINCIPAL ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values, as appropriate.
Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 30 June 2020 are the same as those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2019.
In the current interim period, the Group has applied, for the first time, the following new and amendments to IFRSs issued by the international Accounting Standard Board that are relevant for the preparation of the Group's condensed consolidated financial statements:
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKFRS, HKAS 39 and HKFRS 7 | Interest Rate Benchmark Reform |
The application of the amendments to IFRSs in the current interim period has had no material effect on the amounts reported in these condensed consolidated financial statements and/or disclosure set out in these condensed consolidated financial statements.
- 7 -
3. REVENUE
An analysis of the Group's revenue for the period is as follows:
Six months ended 30 June
20202019
RMB'000 RMB'000
(unaudited) (unaudited)
Sales of cement products and related products | 4,068,386 | 5,633,638 | |
Sales of concrete | 245,645 | 409,747 | |
4,314,031 | 6,043,385 | ||
4. SEGMENT INFORMATION
The following is an analysis of the Group's revenue and results by reportable and operating segments for the period under review:
Six months ended 30 June 2020 (unaudited)
Cement | Concrete | |||||||||||
business | business | Total | Elimination | Consolidated | ||||||||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||||||||
REVENUE | ||||||||||||
External sales | 4,068,386 | 245,645 | 4,314,031 | - | 4,314,031 | |||||||
Inter-segment sales | 73,862 | - | 73,862 | (73,862) | - | |||||||
Total | 4,142,248 | 245,645 | 4,387,893 | (73,862) | 4,314,031 | |||||||
RESULT | ||||||||||||
Segment result | 1,415,054 | (35,236) | 1,379,818 | - | 1,379,818 | |||||||
Unallocated income | 114,047 | |||||||||||
Central administration costs, Directors' | ||||||||||||
salaries and other unallocated expense | (63,253) | |||||||||||
Share of profits of joint ventures | 4,239 | |||||||||||
Share of losses of associates | (3,108) | |||||||||||
Finance costs | (95,184) | |||||||||||
Profit before tax | 1,336,559 | |||||||||||
- 8 -
Six months ended 30 June 2019 (unaudited)
Cement | Concrete | ||||||||||
business | business | Total | Elimination | Consolidated | |||||||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||||||
REVENUE | |||||||||||
External sales | 5,633,638 | 409,747 | 6,043,385 | - | 6,043,385 | ||||||
Inter-segment sales | 87,335 | 9,891 | 97,226 | (97,226) | - | ||||||
Total | 5,720,973 | 419,638 | 6,140,611 | (97,226) | 6,043,385 | ||||||
RESULT | |||||||||||
Segment result | 2,271,302 | 29,966 | 2,301,268 | - | 2,301,268 | ||||||
Unallocated income | 33,683 | ||||||||||
Central administration costs, Directors' | |||||||||||
salaries and other unallocated expense | (61,186) | ||||||||||
Share of profits of joint ventures | 4,017 | ||||||||||
Share of losses of associates | (1,585) | ||||||||||
Finance costs | (142,656) | ||||||||||
Profit before tax | 2,133,541 | ||||||||||
Segment result represents the profit earned (loss incurred) by each segment without allocation of central administration costs, directors' salaries, share of results of joint ventures and associate, investment income and financial costs. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and performance assessment.
Inter-segment sales were charged at market price or where no market price was available at cost plus a percentage mark-up.
5. | OTHER INCOME | |||
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(unaudited) | (unaudited) | |||
Government grant | 23,864 | 34,205 | ||
Transportation fee income | 639 | 1,019 | ||
Sales of scrap materials | 5,142 | 2,758 | ||
Interest income on bank deposits | 100,413 | 72,035 | ||
Rental income, net of outgoings | 2,408 | 1,385 | ||
Others | - | 1,578 | ||
132,466 | 112,980 | |||
- 9 -
6. OTHER GAINS AND LOSSES
Six months ended 30 June
20202019
RMB'000 RMB'000
(unaudited) (unaudited)
Allowance for doubtful debts, net | (58,019) | (7,164) | |||
Exchange gain (loss), net | 1,228 | (11,724) | |||
Loss on disposal of property, plant and equipment | (1,933) | (638) | |||
(58,724) | (19,526) | ||||
7. | INCOME TAX EXPENSE | ||||
Six months ended 30 June | |||||
2020 | 2019 | ||||
RMB'000 | RMB'000 | ||||
(unaudited) | (unaudited) | ||||
Current tax: | |||||
- PRC Enterprise Income Tax ("EIT") | 444,933 | 574,106 | |||
Withholding tax paid | - | - | |||
Underprovision (overprovision) in prior years | 9,438 | 3,710 | |||
Deferred tax credit | (27,424) | 7,188 | |||
426,947 | 585,004 | ||||
For the six months ended 30 June 2020 and 2019, the relevant tax rates for the Group's subsidiaries in the PRC ranged from 15% to 25% and 15% to 25%, respectively.
No provision for Hong Kong Profits Tax and Singapore income tax has been made in the condensed consolidated statement of comprehensive income as the Group had no assessable profit arising in these jurisdictions for the six months ended 30 June 2020 and 2019.
The Company is not subject to income tax in the Cayman Islands or any other jurisdiction.
8. PROFIT FOR THE PERIOD
Six months ended 30 June
20202019
RMB'000 RMB'000
(unaudited) (unaudited)
Profit for the period has been arrived at after charging:
Depreciation and amortisation | 456,516 | 413,665 |
- 10 -
-
DIVIDENDS
A final dividend of RMB50 cents per share for the year ended 31 December 2019, amounting to RMB783,426,000, was paid during the six months ended 30 June 2020.
The Directors of the Company do not recommend the payment of an interim dividend for the six months ended 30 June 2020 and 2019. - EARNINGS PER SHARE
The calculation of the basic and diluted earnings (loss) per share attributable to the owners of the Company is based on the following data:
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(unaudited) | (unaudited) | |||
Earnings | ||||
Earnings for the purposes of basic and diluted earnings per share (profit | ||||
for the period attributable to owners of the Company) | 878,414 | 1,510,397 | ||
'000 | '000 | |||
Number of shares | ||||
Weighted average number of ordinary shares for the purpose of | ||||
basic earnings per share | 1,566,851 | 1,566,851 | ||
Weighted average number of ordinary shares for the purpose of | ||||
diluted earnings per share | 1,566,851 | 1,566,851 | ||
11. PROPERTY, PLANT AND EQUIPMENT | ||||
Carrying value | ||||
RMB'000 | ||||
At 1 January 2019 (audited) | 8,598,033 | |||
Additions | 54,019 | |||
Depreciation for the period | (391,055) | |||
Disposals | (3,367) | |||
At 30 June 2019 (unaudited) | 8,257,630 | |||
At 1 January 2020 (audited) | 8,077,172 | |||
Additions | 143,420 | |||
Depreciation for the period | (396,842) | |||
Disposals | (20,927) | |||
At 30 June 2020 (unaudited) | 7,802,822 | |||
- 11 -
12. | QUARRY | ||||
Carrying value | |||||
RMB'000 | |||||
At 1 January 2019 (audited) | 163,974 | ||||
Additions | - | ||||
Amortisation during the period | (4,669) | ||||
At 30 June 2019 (unaudited) | 159,305 | ||||
At 1 January 2020 (audited) | 964,761 | ||||
Additions | - | ||||
Amortisation during the period | (28,079) | ||||
At 30 June 2020 (unaudited) | 936,682 | ||||
13. | INVENTORIES | ||||
30 June | 31 December | ||||
2020 | 2019 | ||||
RMB'000 | RMB'000 | ||||
(unaudited) | (audited) | ||||
Spare parts and ancillary materials | 175,823 | 213,591 | |||
Raw materials | 294,625 | 264,050 | |||
Work in progress | 92,124 | 81,192 | |||
Finished goods | 163,683 | 115,547 | |||
726,255 | 674,380 | ||||
14. TRADE AND OTHER RECEIVABLES
30 June | 31 December | |||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(unaudited) | (audited) | |||
Trade receivables | 1,047,239 | 1,337,905 | ||
Less: accumulated allowance | (289,539) | (232,032) | ||
757,700 | 1,105,873 | |||
Bills receivable | 1,244,429 | 2,369,794 | ||
2,002,129 | 3,475,667 | |||
Other receivables | 364,555 | 486,973 | ||
2,366,684 | 3,962,640 | |||
The Group has a policy of allowing a credit period from 30 to 180 days for cement customers and 180 to 365 days for concrete customers whereas longer credit term are occasionally allowed to certain selected customers with good credit histories.
- 12 -
The following is an aged analysis of trade receivables net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period:
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
0 - 90 days | 462,626 | 562,510 | |
91 - 180 days | 97,954 | 269,955 | |
181 - 365 days | 165,618 | 144,122 | |
Over 365 days | 31,502 | 129,286 | |
757,700 | 1,105,873 | ||
The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date.
15. TRADE AND OTHER PAYABLES
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Trade and bills payables | 291,991 | 412,453 | |
Other payables and accruals | 954,124 | 1,761,670 | |
1,246,115 | 2,174,123 | ||
Analysed for reporting purposes as: | |||
Non-current liabilities | - | - | |
Current liabilities | 1,246,115 | 2,174,123 | |
1,246,115 | 2,174,123 | ||
- 13 -
The following is an aged analysis of trade and bills payables presented based on the invoice date at the end of the reporting period:
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
0 - 90 days | 234,182 | 375,252 | |
91 - 180 days | 16,760 | 15,900 | |
181 - 365 days | 28,859 | 10,911 | |
Over 365 days | 12,190 | 10,390 | |
291,991 | 412,453 | ||
Trade payables principally comprise amounts outstanding for trade purchases. The average credit period for trade purchases is 30 to 90 days.
16. CONTRACT LIABILITIES | |||
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Receipt in advance of delivery for sales of | |||
cement products and related products | 178,660 | 183,938 | |
Receipt in advance for sales of concrete | 6,095 | 1,587 | |
184,755 | 185,525 | ||
- SHARE CAPITAL
Issued share capital as at 30 June 2020 amounted to RMB140,390,000. There were no movements in the issued share capital of the Company for the six months ended 30 June 2020. - COMMITMENTS
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Capital expenditure in respect of acquisition of property, plant and | |||
equipment and land use rights contracted for but not provided in | |||
the condensed consolidated financial statements | 67,512 | 36,138 | |
- 14 -
19. RELATED PARTY TRANSACTIONS | |||
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | ||
Joint ventures: | |||
Interest income | 199 | 527 | |
Purchase | 8,721 | 10,808 | |
Transportation expenses | 52,802 | 65,464 | |
Associate: | |||
Sale of goods | 7,393 | 15,079 | |
Ultimate holding company: | |||
Sale of goods | - | 14,990 | |
Administration expenses | - | 6,207 | |
The remuneration of Directors was as follows: | |||
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (unaudited) | ||
Short-term employee benefits | 3,368 | 3,313 | |
The remuneration of Directors is determined by having regard to the performance of individuals and market trends.
- 15 -
BUSINESS AND FINANCIAL REVIEW
Economic activities in China currently continue to show signs of recovery, while resuming work and production is in full swing. Since the second quarter, the implementation of epidemic prevention and control measures, as well as the promotion of economic and social development had gradually taken effect. Production and demand continued to recover, and major indicators improved significantly when compared to that in the first quarter. Based on preliminary calculation, China's GDP in the first half of the year was RMB45,661.4 billion, representing a 1.6% year-on-year decrease at comparable prices. The country's GDP in the first quarter dropped by 6.8% year-on-year and in the second quarter increased by 3.2%. With regard to GDP by industry, the value added of the primary industry amounted to RMB2,605.3 billion, representing a 0.9% year-on-year increase; the value added of the secondary industry was RMB17,275.9 billion, representing a 1.9% year-on-year decrease; the value added of the tertiary industry was RMB25,780.2 billion, representing a 1.6% year-on-year decrease. The GDP of China in the second quarter increased by 11.5% when compared to that of the first quarter. From January to June 2020, the national value added of industries above designated size dropped by 1.3% year-on-year. For three consecutive months from April to June, positive year-on-year growth was recorded. From January to June 2020, the national fixed asset investment (excluding rural households) was RMB28,160.3 billion, down by 3.1% year-on- year; the said declining rate had been narrowed by 3.2 percentage points when compared with that of the January to May period. Comparing to May, the fixed asset investment (excluding rural households) in June increased by 5.91%.
From January to June 2020, the national cement production volume amounted to 1 billion tonnes, representing a 4.8% year-on-year decrease; the national clinker production reached 700 million tonnes, representing a 1.4% year-on-year decrease.
In the first half of 2020, the sales volume of the Group's cement products (cement + clinker) reached 11.14 million tonnes, representing a decrease of 24.4% or 3.6 million tonnes from
14.74 million tonnes in the same period of 2019. The market situation is as follows:
- Affected by COVID-19, the market recovery in the central and downstream region of the Yangtze River after the Spring Festival had been delayed by one to two months as compared with the past. In May, the market reached an interim peak. In June, being the traditional off-season, rainfall was significantly heavier than in the previous years. Affected by severe floods, market demand had decreased and was expected to return to normal after August and September.
- In Sichuan, under the influence of COVID-19 and the import of low-priced foreign cement, price dropped from January to March. After April, the market recovered and the price had stopped declining. The price is expected to stabilize in subsequent periods.
- 16 -
Revenue
The table below shows the sales breakdown by region during the reporting period:
For the six months ended
30 June 30 June
2020 2019
RMB'000 RMB'000 (unaudited) (unaudited)
Region | 2,235,104 | ||
Southeastern region | 2,799,036 | ||
Central region | 703,509 | 1,170,658 | |
Southwestern region | 1,375,418 | 2,073,691 | |
4,314,031 | 6,043,385 | ||
In the reporting period, the Group's revenue amounted to RMB4,314.0 million, representing an decrease of RMB1,729.4 million or 29% from that of RMB6,043.4 million for the corresponding period of 2019. The decrease in revenue was mainly attributable to decrease in the sales volume and selling price of the Company's products.
In respect of revenue contribution for the six months ended 30 June 2020, sales of cement and related products accounted for 94% (2019: 93%) and the sales of ready-mix concrete accounted for 6% (2019: 7%). The table below shows the sales breakdown by product during the reporting period:
For the six months ended
30 June 30 June
2020 2019
RMB'000 RMB'000 (unaudited) (unaudited)
Cement | 3,667,997 | 5,107,147 | |
Clinker | 231,894 | 346,962 | |
Blast-furnace slag powder | 45,680 | 51,457 | |
RMC | 245,645 | 409,747 | |
Others | 122,815 | 128,072 | |
4,314,031 | 6,043,385 | ||
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Cost of Sales and Gross Profit
The Group's cost of sales primarily includes cost of raw materials, fuel expenses (consisting of coal and electricity), employee compensation and benefits, depreciation and amortization and other overhead costs. During the period under review, the Group's cost of sales was RMB2,527.9 million (2019: RMB3,400.1 million). The decrease in cost of sales was mainly due to the decrease in the sales volume and coal cost.
The gross profit for the six months ended 30 June 2020 was RMB1,786.2 million (2019: RMB2,643.2 million), representing a gross profit margin of 41% on revenue (2019: 44%). The decrease in gross profit was mainly attributable to decrease in the sales volume and selling price of the company's products when compared with that of the corresponding period of the previous year.
Other Income
Other income mainly comprises government grants, transportation fee income, interest income and sales of scrap materials. For the six months ended 30 June 2020, other income amounted to RMB132.5 million, representing an increase of RMB19.5 million or 17% from RMB113.0 million for the corresponding period in 2019. The increase in other income was attributable to the increase in interest income during the period under review.
Other Gains and Losses
Other gains and losses mainly comprise net foreign exchange gain or loss, loss and disposal of property, plant and equipment and allowance of doubtful debts. For the period under review, other losses amounted to RMB58.7 million, representing an increase of RMB39.2 million from the losses of RMB19.5 million for the corresponding period in 2019. The increase in losses was principally attributable to the increase in allowance of doubtful debts.
Distribution and Selling Expenses, Administrative Expenses and Finance Costs
For the six months ended 30 June 2020, the distribution and selling expenses amounted to RMB178.6 million, representing an decrease of RMB42.7 million or 19% from RMB221.3 million for the corresponding period of 2019. The decrease in distribution and selling expenses was attributable to decrease in transportation fees, handling charges and material consumed during the period under review.
Administrative costs, including employee compensation and benefits, depreciation expenses and other general office expenses increase by 4%, to RMB250.7 million from RMB241.6 million for the corresponding period of 2019. The increase was attributable to increase in employee compensation during the period under review.
The finance costs decreased by 33% was mainly due to decrease in borrowing and borrowing interest rate.
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Profit for the Period
In the reporting period, the net profit of the Group amounted to RMB909.6 million, representing an decrease of RMB638.9 million from a net profit of RMB1,548.5 million for the corresponding period of 2019. The decrease in net profit was mainly attributable to decrease in the sales volume and selling price of the company's products when compared with that of the corresponding period of the previous year.
Financial Resources and Liquidity
The Group maintained a healthy financial and liquidity position for the six months ended
30 June 2020. The total assets approximately RMB23,386.7 million (31 December 2019: approximately RMB23,985.8 million) while the total equity approximately RMB14,690.4 million (31 December 2019: approximately RMB14,643.0 million).
As at 30 June 2020, the Group's cash and cash equivalents amounted to approximately RMB9,156.6 million (31 December 2019: approximately RMB7,942.6 million).
As at 30 June 2020, the Group's gearing ratio was approximately 37% (31 December 2019: 39%). The calculation of the gearing ratio was based on total liabilities and total assets as at 30 June 2020 and 31 December 2019, respectively.
Borrowings
The maturity profiles of the Group's borrowings outstanding as at 30 June 2020 and 31 December 2019 are summarized as below:
30 June | 31 December | ||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
(unaudited) | (audited) | ||
Within one year | 4,591,785 | 4,770,215 | |
Over second year | 2,295,273 | 1,444,094 | |
6,887,058 | 6,214,309 | ||
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Capital Expenditure and Capital Commitments
Capital expenditure for the six months ended 30 June 2020 amounted to approximately RMB143.2 million (31 December 2019: approximately RMB293.2 million) and capital commitments as at 30 June 2020 amounted to approximately RMB67.5 million (31 December 2019: approximately RMB36.1 million). Both the capital expenditure and capital commitments were mainly related to the purchase of plant, equipment and investment projects. The Group anticipates funding those commitments from future operating revenue, bank borrowings and other sources of finance when appropriate.
Pledge of Assets
As at 30 June 2020, the Group did not have any pledge or charge on assets.
Contingent Liabilities
As at the date of this announcement and as at 30 June 2020, the Board was not aware of any material contingent liabilities.
Human Resources
As at 30 June 2020, the Group had 3,866 employees. The Group participates in retirement insurance, medicare, unemployment insurance and housing funds according to the applicable laws and regulations of the PRC for its employees in the PRC and makes contributions to the Mandatory Provident Fund Scheme of Hong Kong for its employees in Hong Kong. The Group remunerates its employees in accordance with their work performance and experience. The remuneration packages are subject to review on a regular basis.
In addition, the Group also adopted Share Option Scheme, where eligible directors and employees are entitled to various share options to subscribe for ordinary shares in the Company in accordance with their past and potential contribution to the growth of the Group. As at 30 June 2020, no share options have been granted or agreed to be granted pursuant to the Share Option Scheme.
Material Acquisition and Disposals of Subsidiaries and Affiliated Companies
The Group had no significant investment, material acquisitions or disposals for the six months ended 30 June 2020.
Foreign Exchange Risk Management
The Group's sales and purchases during the reporting period were mostly denominated in Renminbi ("RMB").
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The RMB is not a freely convertible currency. Future exchange rates of the RMB could vary significantly from the current or historical exchange rates as a result of controls that could be imposed by the PRC government. The exchange rates may also be affected by economic developments and political changes domestically and internationally, and the demand and supply of the RMB. The appreciation or devaluation of the RMB against foreign currencies may have an impact on the operating results of the Group.
The Group currently does not maintain a foreign currency hedging policy. However, the management monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.
EVENTS AFTER THE REPORTING PERIOD
Save as disclosed above, there was no important event affecting the Group that occurred after 31 December 2019 and up to the date of this announcement.
Prospects
Looking into the second half of 2020, the Group is optimistic about the development of the cement industry, which can be mainly reflected in the following points:
- Affected by COVID-19, China's economy is under increasing downward pressure. To minimize the impact of COVID-19, the State has initiated the "New Infrastructure" plan. Rail transit infrastructure projects have become the key investment areas for local governments. In particular, high speed intercity rail and intercity rail transit will play a greater role as economic pillar. On the whole, the impact of infrastructure will continue to be felt throughout the year, and regional demand (mainly infrastructure demand) is expected to exceed expectations.
- Continued increase in investment in major water conservation projects will stimulate further rise in cement demand. On 13 July, the State Council Information Office of the People's Republic of China held a policy briefing, giving a clear signal that the country will speed up increased investment in major water conservation projects: assign 150 major water conservation projects, with a total investment of approximately RMB1.29 trillion, which is expected to drive both direct and indirect investment of about RMB6.6 trillion.
- Along with the recovery of market demand, the off-season price adjustment is basically coming to an end. Regions which currently see price decline will see their price gradually rise in the third and fourth quarters.
All in all, the Group believes that with the accelerated implementation of stronger measures, the economic growth is expected to pick up quarter by quarter in the second half of 2020. The Group plans to sell 17.36 million tonnes of cement products (cement + clinker) in the second half of the year and plans to sell 28.50 million tonnes of cement products (cement + clinker) for the whole year. It is expected that the cement prices will stabilize and rise in the third quarter; the overall profitability of the cement industry is expected to look promising by the fourth quarter, which is the traditional peak season.
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In pursuit of innovation and change, the Group will continue to carry out reforms on various management systems. The Group will encourage its staff to improve their work, enhance the Company's operating results and performance, adhere to the operational management direction of increasing efficiency, reducing costs, improving structure, and improving quality. In addition, the Group will continue to meet its environmental protection obligation, proactively respond to and cooperate with government departments to process household waste as well as solid waste using cement kilns and spare no efforts to fulfill its corporate social responsibilities.
CORPORATE GOVERNANCE
The Company has complied with all of the code provisions of the Corporate Governance Code ("the CG Code") as set out in Appendix 14 to the Listing Rules during the six months ended 30 June 2020, except code provision A.1.8.
Code provision A.1.8 of the CG Code requires that the Company should arrange appropriate insurance cover in respect of legal action against its directors. With regular and timely communications among the Directors and the management of the Group, the management of the Group believes that all potential claims and legal actions against the Directors can be handled effectively, and the possibility of actual litigation against the Directors is low. Nevertheless, the Board will review this arrangement from time to time in light of the prevailing circumstances and arrange for appropriate insurance coverage as soon as practicable.
AUDIT COMMITTEE
The Company established the Audit Committee on 27 April 2008 with written terms of reference in compliance with the CG Code as set forth in Appendix 14 to the Listing Rules. The primary duties of the Audit Committee include the review of the financial reporting, risk management and internal control system of the Group. Currently, the Audit Committee comprises Mr. Tsim, Tak-lung Dominic (Chairman), Mr. Hsu, Shu-tong and Mr. Lee Kao-chao, all of whom are non-executive Directors.
The Audit Committee has reviewed the unaudited condensed consolidated financial statements for the six months ended 30 June 2020, and was of the opinion that the preparation of such interim results complied with the applicable accounting standards and requirements and that adequate disclosures have been made.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the six months ended 30 June 2020, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities.
DIVIDENDS
The Board does not recommend payment of any dividend for the six months ended 30 June 2020 (six months ended 30 June 2019: Nil).
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MODEL CODE FOR SECURITIES TRANSACTIONS
The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code") as set forth in Appendix 10 to the Listing Rules as its own code of conduct for dealing in securities by the Directors of the Company. Having made specific enquiry with all Directors, all the Directors confirmed that they have complied with the Model Code throughout the period under review.
PUBLICATION OF INTERIM REPORT ON THE WEBSITES OF THE STOCK EXCHANGE AND THE COMPANY
The Company's Interim Report 2020 for the six months ended 30 June 2020 will be despatched to the shareholders of the Company and published on the websites of Hong Kong Exchanges and Clearing Limited (www.hkexnews.com.hk) and the Company (www.achc.com.cn) in due course.
APPRECIATION
The Board would like to express its sincere gratitude to the management of the Group and all the staff for their hard work and dedication, as well as its shareholders, business partners, bankers and auditors for their support to the Group throughout the period.
By Order of the Board
Asia Cement (China) Holdings Corporation
HSU Shu-tong
Chairman
Hong Kong, 7 August 2020
As at the date of this announcement, the executive Directors are Mr. HSU Shu-ping, Mr. CHANG Tsai-hsiung, Dr. WU Chung-lih, Mr. CHANG Chen-kuen, Mr. LIN Seng-chang and Ms. WU Ling-ling; the non-executive Director and Chairman is Mr. HSU Shu-tong; the independent non-executive Directors are Mr. TSIM Tak-lung Dominic, Mr. WANG Wei, Mr. LEE Kao-chao and Dr. WANG Kuo-ming.
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