① In the first half of this year, North China's total rare earth revenue and profit only completed 30.21% and 7.77% of the full-year plan, of which Q2 changed from profit to loss year over year; ② The company revealed that since the third quarter of this year, orders in the downstream consumer sector have improved significantly compared to the second quarter, and sales of major products have increased simultaneously; ③ In the later stages, as market conditions improve, the signs of depreciation of the company's products will gradually shrink, and gross margin is expected to improve month-on-month in the third quarter.
Financial Services Association, September 10 (Reporter Wang Bin) On the one hand, production of major rare earth products continues to reach record highs, but on the other hand, the company's performance is declining year by year. Dragged down by falling rare earth prices, the leading light rare earth company, Northern Rare Earth (600111.SH), fell into operating difficulties. Total revenue and profit for the first half of the year only completed 30.21% and 7.77% of the full-year plan, and Q2 results changed from profit to loss.
At the company's semi-annual results briefing held today, Qu Yedong, general manager of the company, told CFA reporters, “Since the third quarter of this year, orders in the downstream consumer sector have improved markedly compared to the second quarter. Sales of the company's main products have increased simultaneously. It is expected that the company's performance will improve month-on-month in the third quarter of this year.”
According to the announcement, Northern Rare Earth plans to achieve operating income of 43 billion yuan or more and a total profit of 4.3 billion yuan or more in 2024. However, in the first half of this year, Northern Rare Earth achieved revenue of only 12.99 billion yuan and total profit of 0.334 billion yuan, with completion rates of 30.21% and 7.77%, respectively; net profit attributable to shareholders of listed companies fell 95.7% year on year to 45.3962 million yuan. Among them, Q2 lost 6.6558 million yuan, changing from profit to loss year-on-year.
Meanwhile, in the first half of this year, net cash flow from the company's operating activities was drastically reduced, gross margin fell sharply, accounts receivable surged, and there were signs of depreciation of products.
Qu Yedong said that the sharp decline in performance was mainly affected by factors related to market supply and demand, such as the growth in downstream demand in the rare earth industry falling short of expectations. Prices of major rare earth products represented by rare earth praseodymium products have generally shown a downward trend since the beginning of the year. The increase in sales volume and production is insufficient to make up for the changes brought about by prices.
However, at present, the company's performance is showing signs of improvement. Qu Yedong explained, “Recently, the overall trend in the rare earth market is improving. Prices of major rare earth products have been rising steadily, and the volume of transactions has expanded. The current order situation of downstream companies has improved markedly compared to the previous two months. Currently, the market price of praseodymium oxide is around 0.44 million yuan/ton, which has basically returned to the price level at the beginning of the year.”
At the same time, Qu Yedong is also optimistic about the short-term rare earth price trend. “With the advent of gold, nine, and silver, and the official implementation of the “Rare Earth Management Regulations” in October, it is expected that the rare earth market supply and demand pattern will be further improved and will support the current prices of major rare earth products.”
Qu Yedong also mentioned that the growth rate of the two batches of rare earth total control indicators in 2024 has slowed sharply compared to previous years and is lower than market expectations. Coupled with a marked year-on-year decline in overseas imports since this year, it is expected to improve the current rare earth market supply and demand pattern and form strong support for the current prices of major products such as praseodymium.
As to whether he is confident of achieving this year's performance targets, Qu Yedong told the Finance Association reporter that the overall price of rare earth products has shown a downward trend since 2024. If sales prices return to the budgeted level, there is still hope that the target of the business plan will be achieved.
In response to the company's Q2 asset impairment loss of 0.17 billion yuan, Qu Yedong said that the company's asset impairment losses were calculated in preparation for inventory price declines. Mainly, inventory products showed signs of impairment due to falling market prices for rare earth products in the first half of the year, and can later be resold as the company's products are sold. Song Ling, financial director of Northern Rare Earths, said that in the later stages, as market conditions improve, signs of depreciation of the company's products will gradually shrink.
Regarding the 41.65 percent year-on-year decrease in gross margin in the first half of this year, Song Ling said that the decline in the company's gross margin was mainly due to a drop in the price of rare earth products, and the company's revenue and gross profit declined at the same time. Recently, prices of major rare earth products have risen, and it is expected that they will improve in the third quarter compared to the previous quarter.
It is worth mentioning that from January to June of this year, production of rare earth rare earth smelting and separation products in the north increased 17.53% year on year, rare earth metal product production increased 43.17% year on year, and rare earth functional materials production increased by about 25.71% year on year. The production of the above three types of products all reached record highs during the same period. Meanwhile, the company's sales of rare earth smelting and separation products increased by 30.64% year on year, sales of rare earth metal products increased by 23.51% year on year, and sales of rare earth functional materials increased by 24.84% year on year.
Also, according to the main business data for the 2024 semi-year disclosed by Northern Rare Earths, the company produced only 7178.54 tons of rare earth oxides in the first half of the year, but sales reached 17424.27 tons. Qu Yedong told the Financial Federation reporter that the higher sales volume than output is mainly due to the company increasing sales efforts, broadening product sales channels, and actively digesting inventory products. Currently, the company's inventory is at a reasonable level.