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EQS Newswire / 26/04/2024 / 13:17 UTC+8 Press Release (For immediate release)
China XLX Announces 2024 1Q Results Stepped-up promotion of differentiated products to ensure steady growth in gross profit margins of core products
2024 1Q Results Highlights:
(25 April 2024, Hong Kong) 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 recorded consolidated revenue of approximately RMB 5,750 million for the three months ended 31 March 2024 (the “Period”), representing a decrease of 8% YoY. The income attributable to owners of the parent decreased by 15% YoY to approximately RMB 282 million.
During the Period, the Group’s overall gross profit declined due to lower product prices. In response, it strengthened product innovation and technological R&D, and increased the promotion of high-efficiency fertilisers and differentiated products to ensure the stabilisation and growth in gross profit margin. While the gross profit margin of the core urea product remained stable, the gross profit margins of compound fertilisers and chemical products showed an upward trend. In order to further enhance its market competitiveness, the Group has strengthened the construction of research platforms and R&D systems, laying a solid foundation for implementing the strategy to promote differentiated fertilisers. These efforts led to an increase in R&D investment as well as marketing and promotional expenses. Consequently, the Group’s consolidated net profit decreased by 17% YoY to approximately RMB 383 million.
During the Period, the Group’s urea revenue increased by 2% YoY to approximately RMB 1,994 million, . mainly due to a 26% YoY increase in urea sales volume. The successful commissioning of the 700,000-ton urea project at the Xinxiang Production Base led to a 19% YoY increase in production and boosted the sales volume to 965,000 tons. The urea sales gross margin for the Period was 30%, which stayed flat when compared to the same period last year. As for the urea solution for vehicles, , the Group proactively reduced the production of urea solution for vehicles to enhance its ability to withstand market risks. By reducing production and putting more effective production capacity on the exploration and development of new products to meet the market development needs, it enhanced profitability and strengthened its long-term competitiveness.
Revenue from compound fertilisers decreased by 8% YoY to approximately RMB 1,434 million, mainly due to approximately an 8% decrease in the sales volume. The gross margin of compound fertilisers for the Period increased by approximately 3 percentage points YoY to 14.7%. The increase was firstly due to 11% YoY decrease in average product cost resulting from low raw material costs. Secondly, as the gross margin of high-efficiency compound fertilisers was 4 percentage points higher than that of traditional compound fertilisers, the Group intensified the promotion of high-efficiency compound fertilisers, resulting in a 3% YoY increase in sales volume.
Revenue from methanol was approximately RMB 632 million, up 20% YoY mainly attributable to 26% YoY increase in methanol sales volume. As demand for basic chemical products in downstream markets gradually recovered, the Group utilized the flexible adjustment mechanism to adjust the proportion of methanol and dimethyl ether output, resulting in a 24% YoY increase in methanol production and higher sales volume. The gross margin of methanol increased by approximately 8 percentage points to 7% from negative 1% for the same period last year. The improvement was attributable to a 12% YoY decrease in average production costs of methanol due to the decline in feedstockl coal prices.
Revenue from melamine was approximately RMB 213 million, up 8% YoY mainly due to approximately 20% YoY increase in the sales volume. As the Group further expanded into international markets, its export volume increased by 39% YoY, resulting in sales volume growth. Meanwhile, in order to ensure the smooth operation of the melamine production line, the Group successfully completed maintenance and repairs on some equipment in the first quarter of this year, resulting in a 19% YoY increase in production capacity recovery. As for the DMF business, driven by a 37% YoY increase in sales volume, the revenue from DMF grew by 12% YoY to approximately RMB 290 million. Revenue from medical intermediate was approximately RMB 111 million, down 23% YoY. With an aim to maximize the profitability, the Group flexibly adjusted the product structure of this segment based on market conditions and development trends. It decisively suspended the production of acrylonitrile, which had weaker profit potential at the current stage, to maximize resilience against market risks.
Looking ahead, as the second quarter is the peak season for summer fertilisation and spring plowing approaches, agricultural demand will be released, hence boosting the sales of nitrogen-based fertilisers. Additionally, the window for fertiliser export is open, which will help alleviate the supply glut, improve the market sentiment, enhance the supply and demand condition and facilitate the stable and positive development of fertiliser prices. As for chemical products, underpinned by the steady recovery of domestic economy, the demand and supply of basic chemical products will tend to become balanced along with stabilization of product prices. In view of a pickup of domestic economy, it is expected that there is a relatively large room for chemical market to grow.
In terms of project construction, while ensuring stable cash flow, the Group will seize the opportunities arising from the consolidation of existing market capacity and the upgrading of the fertiliser industry to further increase its market share. The Group will expand the production capacity, extend the industrial chain, strengthen the R&D capability, and advance the construction of new production bases. It is expected that the Phase I compound fertiliser project at the Guangxi Production Base will be completed and put into operation by the end of this year. The project will be developed into the most competitive demonstration base for integrated production of fertilisers and chemicals in South China, thereby laying a solid foundation for the Group to expand into the Southeast Asian market.
Mr. Liu Xingxu, Chairman of China XLX, said, “The Group is always committed to the ’low cost + differentiation’ strategy. While continuing to push for high-quality development, we will strive hard to retain cost efficiency through technological research, promote product differentiation through product development efforts, and sharpen our core operational competency through continual enhancement of high-end R&D. At the same time, we will accelerate the transformation of marketing models, make use of the big data technology in marketing as the starting point, attach greater importance to large-scale farmers, and enhance integrated service capabilities through team collaboration to adapt to the future trend of land-intensive agricultural development.”
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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 R&D, manufacturing and selling of related differentiated products such as urea, compound fertiliser, methanol, dimethyl ether, melamine, furfuryl alcohol, furfural, 2-methylfuran and pharmaceutical intermediates. The Company adheres to the development strategy of “retaining overall cost leadership with competitive differentiation”. While reinforcing the core fertiliser business, the Company leverages the resources in Xinxiang, Xinjiang and Jiangxi to extend the product line to upstream new energy and new materials. Its shares are traded on the main board of the Hong Kong Stock Exchange (stock code: 1866.HK).
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26/04/2024 Dissemination of a Financial Press Release, transmitted by EQS News. Media archive at www.todayir.com |