Conch Cement (600585) answered questions of concern to investors on the Investor Relations Platform on May 30.
Investors: How can number of employees in the annual report of 2022 and the semi-annual report of 2022 increase by 5298 against the trend when the sales volume is declining and the price is falling? Shouldn't it be a reduction of staff to improve efficiency? How to explain this?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! The number of people in the company's 2022 annual report increased compared with the number in the 2022 semi-annual report, mainly due to mergers and acquisitions and the establishment of new subsidiaries.
Investor: Hello, Secretary Dong, how much is the coal consumption and electricity consumption of the company in 21 and 22 years respectively?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! The direct energy consumption of the Company in 2022 was 23.443 million tons of standard coal. For details, please refer to the Environmental, Social and Governance Reports disclosed by the Company over the years.
Investor: Hello, Secretary Dong! I would like to ask why your company's stock has been falling in recent years, your company does not intend to buy back shares? Thank you!
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! Influenced by macro factors, the demand for cement has declined in the past two years, and the overall performance of the plate is weak. The Company will continue to focus on production and operation, implement precise and effective investment, strengthen innovation drive, promote low-carbon green cycle development, and continue to create value for the majority of shareholders. The Company will fulfill its disclosure obligations in a timely manner if there is a subsequent share repurchase plan.
Investors: Your company's stock price has not made a substantial breakthrough since February 2022, and the stock price has even fallen below the net asset value per share for nearly a year. Why did the net profit growth rate in the first quarter of 23 years drop by nearly 50% on the basis of the net profit growth rate in the first quarter of 22 years dropping by 15%? How to explain? Faced with the depressed market value of the company, has the company not considered share repurchase?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! Influenced by macro factors, the demand for cement has declined in the past two years, and the overall performance of the plate is weak. Prices in the first quarter of 2022 continued the high level of the previous year, fell in the second quarter, and hovered at a low level in the third and fourth quarters; In January 2023, the cement market continued the price level in the fourth quarter of last year, and the price began to recover gradually in late February. However, the overall price in the first quarter was still low, and the profit in the first quarter declined year on year due to the impact of the high cost side. If the company has a subsequent share repurchase plan, it will fulfill its disclosure obligations in a timely manner.
Investors: Did the company's purchase price of coal in April and May fall compared with the same period last year? How does it compare to the first quarter? If so, by how much per ton?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! Since the beginning of this year, the purchase price of coal of the Company has shown a downward trend, and the purchase price of coal in April and May has decreased year-on-year and compared with the first quarter. The Company will continue to strengthen the analysis and judgment of the coal market, give full play to the advantages of large-scale procurement, coordinate the supply of domestic and international coal markets, and strive to reduce the cost of coal while ensuring the stable operation of production.
Investors: Hello, Dear Secretary Dong. With the slowdown of real estate growth, will Conch Cement's current production capacity also face supply-side pressure? Thanks very much.
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! The decline in the real estate market has led to pressure on the demand side of the cement market. As the industry leader, the Company has a wide range of production capacity layout and strong competitive advantages. In order to cope with the pressure on the supply side, the Company alleviated the pressure on the supply side through the overall planning of different regional markets while implementing peak staggering production. In the future, with the incorporation of the cement industry into the national carbon trading market, the production capacity of the industry will be limited, which is conducive to speeding up the withdrawal of inefficient production capacity, guiding the industry to transform to green and low-carbon, and further alleviating the pressure on the supply side.
Investors: Hello, the company's sales revenue growth in the first quarter of this year, I would like to ask, mainly from the revenue growth of that sector? Is it from the cement trade sector?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! The year-on-year increase in operating revenue of the Company in the first quarter of 2023 was mainly due to the year-on-year increase in trade revenue. The Company carried out upstream and downstream coal, mineral powder and other trade businesses around the industrial chain and supply chain, which increased trade revenue. Its main purpose was to serve end customers, expand the industrial chain and increase revenue and efficiency for the Company.
Investors: I would like to ask, your company's current undistributed profit per share has exceeded the current share price, how do you view this phenomenon? Is this normal? Is there any possibility of capital waste if this phenomenon exists for a long time without distribution to shareholders or re-investment?
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! Influenced by macro factors, the demand for cement has declined in the past two years, and the overall performance of the plate is weak. In recent years, the company has insisted on effective investment, strengthened the main cement industry and upstream and downstream industrial chains, and promoted the coordinated development of environmental protection, new energy, digital and other industries. Capital expenditure such as project construction, energy-saving and environmental protection technological transformation, mergers and acquisitions projects is mainly based on its own funds; At the same time, the company has always attached great importance to the dividend return of shareholders, taking into account the sustainable development. In order to return shareholders, the dividend ratio and dividend rate have increased in recent years. In 2022, despite the impact of the market downturn and the decline in efficiency, the company fully listened to the views of shareholders, and the dividend ratio increased significantly to 50%, an increase of 12 percentage points over the previous year.
Investors: I would like to ask, cement prices fell, why the company, operating income growth of 23%?
Investors: The operating income of the third and fourth quarterly reports was 29.052 billion yuan and 46.693 billion yuan, the gross profit was 5.619 billion yuan and 6.481 billion yuan, and the gross profit rate was 19.34% and 13.88%. Gross profit margin is declining? This is obviously against the law of the market. (Contrast to Tapai Group: revenue and gross profit margin increased in the same direction in the fourth quarter.) This is a hidden profit, not optimistic about the future? Or is the deterioration of competition a reflection of the status quo? Moreover, the net operating cash flow reported in the fourth quarter was only 57 million, indicating that the profit quality of the quarter was very poor. Please explain in detail.
Conch Cement Secretary Dong: Thank you for your attention to Conch Cement! In 2022, the company coordinated the trade business and carried out the trade business around the industrial chain and supply chain. The growth of business income in the fourth quarter was mainly affected by the increase of trade income. Due to the relatively low gross profit margin of trade business, the company's comprehensive gross profit margin in the fourth quarter is lower than that in the third quarter. Net cash flow from operating activities is correlated with operating income and gross profit margin, but it is also affected by accounts receivable, advance receipts, prepayments and other factors.
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