Financials
First Quarter Results Financial Statement And Related Announcement
Financials Archive
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Profit & Loss
Comprehensive Income
Balance Sheet
Review of Performance
First Quarter Ended 31 March 2013 ("1Q2013") vs First Quarter Ended 31 March 2012 ("1Q2012")
Revenue (excluding all inter-segment transactions)
The Group's revenue increased by approximately RMB324 million from RMB1,441 million in 1Q2012 to RMB1,765 million in 1Q2013. This increase in revenue was mainly attributable to the recognition of deferred revenue which had not been recognised as of 31 December 2012 as well as increase in trading sales of alumina.
The Group's revenue from the smelting segment increased by approximately 11.9% to RMB932 million in 1Q2013 from RMB832 million in 1Q2012. The increase in revenue was due primarily to the recognition of RMB164 million in deferred revenue related to the Group's export sales which had not been recognised as of 31 December 2012.
The Group's revenue from the fabricated segment decreased by approximately 27.5% to RMB87 million in 1Q2013 from RMB120 million in 1Q2012. The decrease in revenue was largely because sales volume of fabricated aluminum products decreased from 10,300 metric tons ("MT") in 1Q2012 to 6,300 MT in 1Q2013. However, profit before taxation for this segment in 1Q2013 was higher than 1Q2012 on a decrease in selling expenses and finance costs in 1Q2013 compared to the previous corresponding period.
The Group's revenue from the trading segment increased to RMB746 million in 1Q2013 from RMB488 million in 1Q2012 mainly attributable to the increase in trading sales of alumina in 1Q2013. After factoring in operating expenses, the Group's trading segment showed a profit before taxation of approximately RMB14 million.
Gross profit and gross profit margin
The Group's gross profit increased by approximately 16.3% to RMB65 million in 1Q2013 from RMB56 million in 1Q2012 and the gross profit margin was largely consistent with the previous corresponding period. The smelting segment incurred a lower margin on lower average selling price of aluminum ingots, which declined from RMB14,100 per MT (without value-added tax "VAT") in 1Q2012 to RMB13,200 in 1Q2013. However, this lower margin of smelting segment was partially offset by the higher trading margin in 1Q2013.
Loss before taxation (excluding all inter-segment transactions)
The Group incurred a loss before taxation of RMB3 million in 1Q2013. The slight increase in loss before taxation was primarily due to losses incurred in the smelting segment that suffered from lower average selling prices of aluminum products. However, this loss from the smelting segment was alleviated by the higher profit from the fabrication and trading segments, and contribution from the share of result in a jointly controlled entity.
Selling and distribution expenses decreased by approximately 16.4% from RMB13 million in 1Q2012 to RMB11 million in 1Q2013. The decrease in selling and distribution expenses was mainly attributable to the decrease in transportation costs in tandem with the decrease in fabrication sales in 1Q2013. Also, some of our customers had opted to pick up the goods using their own transportation in the period under review.
Administrative expenses increased by approximately 15.7% to RMB27 million in 1Q2013 from RMB24 million in 1Q2012. The increase in administrative expenses was mainly attributable to additional expenses incurred for our newly constructed carbon anode plant which commenced full production from December 2012.
Finance costs increased by approximately 23.6% to RMB36 million in 1Q2013 as a result of an increase in the utilisation of notes payable as payment to suppliers.
Other expenses increased by approximately RMB9 million in 1Q2013, mainly attributable to foreign exchange loss incurred compared to the previous corresponding period.
Taxation
Taxation decreased by approximately 55.4% from RMB8 million in 1Q2012 to RMB3 million in 1Q2013. Although the Group was making losses before taxation of approximately RMB3 million, the tax payable was contributed by certain profitable entities within the Group. This lower amount was mainly attributable to lower taxable profits of these entities in 1Q2013.
Review of Statement of Financial Position
Non-currents assets
Non-current assets decreased by approximately 0.5% to RMB4,268 million as of 31 March 2013 from RMB4,289 million as of 31 December 2012. These assets comprised of property, plant and equipment, land use rights, investment in a jointly controlled entity, deferred expenses and deferred tax assets.
Current assets
Inventories increased slightly from RMB832 million as of 31 December 2012 to RMB836 million as of 31 March 2013.
Prepayments increased from RMB678 million as of 31 December 2012 to RMB869 million as of 31 March 2013, mainly attributable to the increase in advance payments made to electricity suppliers and for the purchase of raw materials.
Trade and other receivables increased from RMB717 million as of 31 December 2012 to RMB1,067 million as of 31 March 2013. The increase in trade and other receivables was primarily attributable to: (i) recognition in 1Q2013 of deferred revenue which had not been recognised as of 31 December 2012; and (ii) the increase in other receivables relating to VAT refund from China's tax authority.
Amount due from a jointly controlled entity decreased from RMB477 million as of 31 December 2012 to RMBnil as of 31 March 2013, as the Group had received aluminum ingots from the jointly controlled entity during the period under review.
Secured short term deposits increased from RMB943 million as of 31 December 2012 to RMB1,077 million as of 31 March 2013, mainly attributable to the additional notes payables drawn down for the period under review.
Current liabilities
Loans and borrowings increased from RMB3,317 million as of 31 December 2012 to RMB3,390 million as of 31 March 2013, mainly attributable to the additional notes payables drawn down for working capital purposes.
Trade and other payables increased from RMB527 million as of 31 December 2012 to RMB642 million as of 31 March 2013. This was mainly attributable to the increase in trade payables for the carbon anode plant, which is not due as of the balance sheet date.
Advances from customers decreased from RMB1,036 million as of 31 December 2012 to RMB546 million as of 31 March 2013. This decrease was primarily attributable to the supplemental agreement entered on 20 March 2013 with a customer to defer the repayment of such advances amounting to RMB480 million and this amount has been reclassified to non-current liabilities as of 31 March 2013.
Payables arising from acquisition of a jointly controlled entity decreased from RMB1,130 million as of 31 December 2012 to RMB320 million as of 31 March 2013. The decrease was mainly due to: (i) repayment of approximately RMB54 million during the period under review; and (ii) a supplemental agreement entered on 20 March 2013 with Wealth Checker Limited to defer the last two installment payments of RMB756 million relating to the acquisition of 21% equity interest in a jointly controlled entity to 31 December 2014; this amount had been reclassified to non-current liabilities as of 31 March 2013.
Non-current liabilities
Non-current liabilities increased by RMB1,239 million from RMB169 million as of 31 December 2012 to RMB1,408 million as of 31 March 2013. The significant increase in non-current liabilities was primarily due to reclassification of advances from a customer and payables arising from acquisition of a jointly controlled entity as above mentioned.
Review of Statement of Cash Flows
The Group generated net cash inflows in operating activities of approximately RMB111 million in 1Q2013. This was mainly attributable to the decrease in deferred expenses and amount due from a jointly controlled entity as well as the increase in trade and other payables. However, the overall increase was partially offset by the increase in prepayments, trade and other receivables and decrease in deferred revenue.
There was a net cash outflow of RMB62 million from investing activities in 1Q2013, which was mainly attributable to: (i) payment of land used rights; (ii) prepayment for purchase of property, plant and equipment; and (iii) payment made in respect of the acquisition of a 21% stake in China Leading International Group Limited during the period under review.
Financing activities resulted in net cash outflows of RMB61 million in 1Q2013 compared with net cash inflows of RMB15 million in 1Q2012. The decrease was mainly attributable to an increase in secured short-term deposits of RMB134 million and the repayment of loans and borrowings.
Cash and cash equivalents decreased from RMB198 million as of 31 December 2012 to RMB177 million as of 31 March 2013 for the reasons discussed above.
Commentary On Current Year Prospects
For 1Q2013, weak aluminum prices continued to impact the earnings of aluminum producers worldwide. With uncertainties abounding in the major developed economies and the projected economic slowdown worldwide, we expect aluminum prices to remain soft and volatile for FY2013.
At XinRen, the Group was able to hold gross margin largely unchanged as the onstream of our carbon anode plant from December 2012 helped to cut production costs and enhance its cost structure. This led to a 16.3% rise in its gross profit to RMB64.9 million for 1Q2013.
Given the weaker aluminum prices in 1Q2013, XinRen incurred a marginal after tax loss of RMB6.8 million, which was lower than the after tax loss of RMB10.1 million recorded in 1Q2012. This marginal loss was largely supported by the share of profit generated by our 21%-owned entity, China Leading International Group Limited, which in turn owns 100% of the Xinjiang Plant.
Xinjiang Plant will continue to contribute positively to the Group's bottom line and help to buffer its performance this year as the plant ramps up its production to installed capacity as planned.