Due to the intensified losses in the primary coking business and the continued decline in coal prices, the net profit of Shanxi Coking in the first half of the year decreased by 80%; In the first half of the year, Zhongmei Huajin contributed investment income of 1.348 billion yuan to the company, a decrease of 24.48% compared to the same period last year.
Due to weak downstream demand in the industry chain, the overall operation of coke prices in the first half of the year was weak, and the losses in the primary coking business intensified. At the same time, the continuous decline in coal prices led to a decline in the profits of affiliated coal mining companies. In the first half of the year, Shanxi Coking (600740.SH) saw a YoY decrease of 80% in net profit.
After market close today, Shanxi Coking disclosed its semi-annual financial report. In the first half of 2024, the company achieved a total operating income of 3.945 billion yuan, a YoY decrease of 11.48%, and operating costs of 4.697 billion yuan, a YoY decrease of 5.34%. The company incurred a loss of 0.752 billion yuan in its primary coking business, an increase of 0.248 billion yuan compared to the same period last year. However, supported by the profitable coal business of affiliated company Zhongmei Huajin, the company's net profit attributable to shareholders was 0.184 billion yuan, a YoY decrease of 79.92%, and the non-GAAP net profit was 0.173 billion yuan, a YoY decrease of 81.12%.
Shanxi Coking is a large coal chemical enterprise mainly engaged in coal coking, with coke oven gas comprehensive utilization, coal tar and crude benzene deep processing as its backbone. However, the company's profits do not come from its main business. Since 2019, the main business has been continuously loss-making. This year, with weak market demand and downstream price squeeze, the losses in the company's main business have expanded compared to the same period last year.
In recent years, the company's profits mainly come from its affiliated company, Zhongmei Huajin. In 2018, the company acquired a 49% equity stake in Zhongmei Huajin through a major asset restructuring. Zhongmei Huajin has 4 mines with a designed production capacity of 14.2 million tons/year, mainly producing high-quality lean coal and coking coal. Due to the decline in coal prices, Zhongmei Huajin contributed investment income of 1.348 billion yuan to the company in the first half of the year, a decrease of 24.48% compared to the same period last year, which is one of the main reasons for the significant decline in the company's profits in the first half of this year.
In addition, the company's finance expenses in this period amounted to 0.15 billion yuan, an increase of 47.56% YoY, mainly due to the increase in both short and long-term borrowings. In the first half of the year, the company's short-term borrowings increased by 15.38% YoY to 3.44 billion yuan, and long-term borrowings increased by 20.92% YoY to 3.497 billion yuan.
Looking at the operating situation of various departments, the company sold a total of 1.4191 million tons of coke in the first half of the year, with a slight decrease compared to the same period last year. According to brokerage research reports, the average selling price of coke in the second quarter was 1833.52 yuan/ton, a YoY decrease of 6.08% and a QoQ decrease of 9.02%; in terms of costs, the unit procurement cost of coking coal in the second quarter was 1564.12 yuan/ton, a QoQ decrease of 12.6%. The gross margin of products in the first half of the year was -28.06%, indicating continued pressure on the profitability of the coke business. The prices of the company's main chemical products increased both YoY and QoQ, but the gross margin was only 0.45%.
In the second quarter of 2024, the prices of the company's main chemical products all showed an upward trend. Among them, the price of asphalt was 4379.5 yuan/ton, a YoY increase of 19.1% and a QoQ increase of 3.92%; the price of industrial naphthalene was 5000.17 yuan/ton, a YoY increase of 13.48% and a QoQ increase of 0.84%; the price of methanol was 2036.14 yuan/ton, a YoY increase of 7.25% and a QoQ increase of 6.37%; the price of carbon black was 6512.65 yuan/ton, a YoY increase of 12.81% and a QoQ increase of 1.91%; the price of pure benzene was 7660.43 yuan/ton, a YoY increase of 28.48% and a QoQ increase of 11.57%.
At the mid-year conference of "My Steel", a reporter from Cailian News learned from industry insiders that due to the market's expectation of net production capacity in the coking industry in the second half of the year, the overcapacity issue for coking enterprises may worsen, and the industry's profit is unlikely to significantly improve. The market competition remains intense and the outlook for increased production capacity of coking enterprises is not strong. With a decrease in demand for pig iron, the coking industry still faces a rather challenging operating environment in the second half of the year.