Huaxin Cement: In the future, domestic enterprises with clinker lines may be merged to about 30, or even less.

of April 7, Huaxin Cement released a record of investor relations activities, in which investors exchanged the following main questions:

Question 1: How to view the development trend of the domestic cement industry? In particular, industry integration

Answer: Huaxin has always adhered to the concept of "profit is the goal, income is the foundation.". When the market demand increases, it is understandable to pursue share, but when the market demand declines, we should pursue income and price, otherwise the loss of both volume and price will be more. In

this year's Report on the Work of the Government, it is clearly mentioned again that the involution competition should be rectified, and the relevant ministries and commissions of the state also require strict regulation of the operation of cement production capacity. In addition, the new industrial policy has begun to dilute peak staggering production, and more is to regulate production capacity, energy consumption and emissions.

In the future, the government may introduce relevant support policies to promote industry integration. In 1999, there were about 10,000 cement enterprises with different legal persons in China. At present, there are about 300 enterprises with cement clinker production lines under the same legal person. In the future, the number of enterprises with cement clinker production lines in China may be merged to about 30, or even less.

Question 2: Please introduce the overseas business

of the company Answer: The core concept of Huaxin's overseas development is not to destroy the local market structure and competitive environment, not to defeat competitors, but to seek common development and provide high-quality building materials for the local market. Help the local people improve their lives. When Huaxin prepares to enter an overseas market, decision-makers will not only look at the investment analysis report, but also go deep into the local investigation to see the most real facts and make appropriate decisions.

Question 3: At present, the EBITDA of the Company's overseas business is growing steadily, and the payment collection is relatively clean. If the management radius is further expanded in the future, how to maintain the current control quality?

Answer: With the support of IT and AI technology, there is no concept of distance in the management of Huaxin's overseas business. Regardless of the system of the enterprise before the merger and acquisition, we can migrate to Huaxin's system platform at the fastest speed and control it through the system and process. In terms of cash management, the company tries to reduce the risk of exchange rate fluctuations.

Question 4: From the perspective of the company's capital expenditure investment cycle, what is the current stage of overseas investment? What is the outlook for capital expenditure over the next 2-3 years?

Answer: The company's capital expenditure plan for 2025 is about 13.3 billion yuan. Capital expenditure is divided into three aspects:

First, overseas mergers and acquisitions. Second, the continuation expenditure of the company's investment in aggregate projects in the early stage, including the final payment of mines, etc. Third, investment in technological transformation such as ultra-low emissions.

In 2025, the largest proportion of capital expenditure is the merger and acquisition expenditure of projects in Nigeria and Brazil.

Huaxin currently invests in 13 countries overseas, and its business radiates to 18 countries, covering more countries and regions in the future. The current overseas cement production capacity is 25 million tons, with a medium-term target of about 50 million tons. Huaxin's future development goal is to build a leading multinational building materials group in the world.

Question 5: How does the future competitive landscape of aggregates compare to the cement industry?

Answer: The aggregate business is also under pressure at present, but the competition pattern of the aggregate industry will be stronger than that of the cement industry in the future.

The reasons are: first, the production process of aggregate is different from that of cement. Aggregate belongs to the cold process, which can be produced intermittently, and the production rhythm can be adjusted flexibly according to the order quantity. Cement belongs to thermal technology and pursues continuous production.

Secondly, the cost composition of aggregate and cement is different. The peak period of investment and construction in China's cement industry is from 2000 to 2010. Up to now, most of them have been depreciated for more than 15 years, and the fixed cost of these production lines is lower than that of the production lines invested later. Although

aggregate is also a traditional industry, it has been developing rapidly in the past ten years, so the fixed cost of different enterprises is not very different, and the space for downward price reduction is less than that of cement industry.

Question 6: Compared with cement, the technical transformation space of aggregate may be slightly smaller. How to ensure the return on investment of the project in Brazil?

A: Aggregates is a good and stable business globally. After Brazil hosted the World Cup and the Olympic Games in 2014 and 2016 respectively, the demand for aggregates has declined considerably, and in recent years, the demand for aggregates has returned to normal levels. Huaxin's entry into the Brazilian market at this time point mainly depends on market expectations. In addition, the Brazilian aggregate project also has room for efficiency improvement and cost improvement.

Question 7: How do you view the cost of alternative fuels in the future?

Answer: Huaxin has been engaged in alternative fuels business since 2010, starting from the most difficult time. Huaxin's alternative fuel technology can treat the most difficult waste combustibles on the market. Therefore, if the competition in the alternative fuel market is further intensified in the future, Huaxin will have stronger competitiveness. At present, for the alternative fuel market, we are more concerned about the policy trends related to greenhouse gases and carbon trading.