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China Minmetals Has the Record-Best Year of 2018: Generating 503.2 bln yuan in revenue and 16.5% of year-on-year profit growth


2019-01-08
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At its annual working meeting, China Minmetals announced operating income of 503.2 billion yuan and a year-on-year profit increase of 16.5% in 2018, setting a new business performance record, with remarkably improved business operation. It has done a great job in fulfilling the requirements of the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council. According to its Chairman and Party Group Secretary Tang Fuping: “In 2018, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the readout of the 19th CPC National Congress, we continued to pursue our mission, actively shouldered responsibilities, made pioneering and enterprising explorations, and took the initiative to align corporate development with national development strategies. While closely following the national development trend and policies, we took effective measures to fully implement deployments and requirements of the Party Central Committee, the State Council and the SASAC, and have made remarkable progress and delivered our best business performance in history."

The year of 2018 marked the third year following the complementary recombination of China Minmetals and the MCC: the two were better integrated into each other and demonstrated more and more complementary benefits. As can be seen from the work report by Guo Wenqing, China Minmetals’ President and Party Group Deputy Secretary, the recombination has created a strong momentum of development for this largest metal mining company in China; the business portfolio covering the whole industrial chain of metal mining brought by the recombination is fueling corporate development, adding to its tenacity and bearing capacity.

In 2018, the operating income of China Minmetals increased steadily to 503.2 billion yuan, exceeding the threshold of 500 billion yuan for the first time, the bulk of which was contributed by its two core principal businesses: metal mining and engineering. Its operating efficiency continued to improve, sales profit margin increased by 0.4 percentage point over the previous year, and the net inflow of operating cash amounted to 35.9 billion yuan, making it the fourth consecutive year with a net inflow of over 30 billion yuan. Its asset structure also continued to improve. By the end of 2018, the assets under management reached 1.86 trillion yuan, up 10.6% year-on-year, of which total assets were 911.5 billion yuan, up 6.6%, and financial assets under management 949.9 billion yuan, up 14.7%. The owner's equity increased 16.7% year-on-year, asset-liability ratio continued to decline, and the yearend interest-bearing liabilities decreased by 19.9 billion yuan from the same period last year.

Guo sang praises for the work done in 2018, "Last year, China Minmetals vigorously pursued high-quality development, successfully overcame challenges from inside and outside, and continuously strengthened and improved pillar business. We delivered again a record-breaking business year, successfully met the requirements of the State Council SASAC, beat the expectation in completing the second step of our three-step development strategy, and saw remarkable improvement in value creation ability, industry ranking and the quality of development."

It's learnt that, in 2018, China Minmetals delivered a prominent performance in its core business such as mineral resources, contract engineering, finance and real estate, which provided strong support for the brilliant performance of the company in 2018.

The contribution of global mines was stable and outstanding. The copper mine in Bonbas, Peru, produced steadily and efficiently throughout the year; Australia's Dugal River Zinc Mine launched commercial production two months ahead of schedule, with a competitive total maintenance cost. The MCC Ramu nickel mine sustained high and stable production, with record-breaking output of nickel and cobalt. Minmetals Mining Holdings Limited and Minmetals Luzhong Mining topped domestic independent iron ore mines in terms of annual iron concentrate output. China Tungsten and Hightech Materials Co., Ltd. topped the world with the tungsten concentrate output of more than 19,300 tons. At present, China Minmetals has 304.2 million tons of copper, 12.7 million tons of zinc, 1.32 million tons of nickel, 1.65 million tons of tungsten and 4.3 billion tons of iron, topping the world with the reserve of tungsten, antimony and bismuth.

Meanwhile, the company also accelerated the development of contract engineering and delivered a brilliant performance along the Belt and Road region. Its metallurgical engineering business stably accounted for 60% of the global market and 90% of the domestic market, including almost all the large and medium-sized green steel design and construction projects in the world and all the domestic strategic projects of environmental protection relocation, energy conservation, emission reduction and industrial upgrading. The metallurgical engineering team won project bids of domestic key iron and steel enterprises such as HBIS Group, XuanSteel and Shougang, and overseas bids of green steel projects of Hoa Phat in Vietnam, Dexin Steel of Indonesia and Hebei Xin Wuan Iron and Steel (Group) Company Limited in Malaysia, and the Stage-II coking project of Tata in India. It also signed the feasibility study contract for the LPS 100 billion-ton steel project in Australia. The newly signed contract value increased 41.5% year-on-year, continuing to solidifying the company's absolute advantage in the market. The infrastructure construction team won major overseas project bids such as the Stage-I USD100 billion welfare housing project in Saudi Arabia and the Metro T311 project in Singapore; and undertook domestic high-profile projects such as the National Sliding Centre project - a key venue project of Beijing 2022, Lanzhou Chaijiaxia Yellow River Bridge, and Guizhou Expressway PPP Project. For the budding environmental engineering business, the value of newly signed contracts increased by 140% year-on-year; the integrated utility tunnel business continued to lead the market in terms of market performance, industry standard and patent quantity.

China Minmetals has continued to expand resource trade. In 2018, relying on the integrated development of "resources + trade," China Minmetals greatly expanded mineral products business: the trade volume of copper concentrate exceeded 1 million tons to a historical high, and he overseas sales of antimony ingots increased by more than 200% year-on-year, making it the largest antimony supplier in North America. At the first China International Import Expo, China Minmetals signed long-term procurement contracts with Codelco, KGHM, and Sumitomo Metal Mining, deepening and expanding cooperation with the world's mining giants.

The financial and real estate business made outstanding contributions. In 2018, China Minmetals further optimized and diversified its business layout, improved and accelerated diverse business development, and maintained reasonable and healthy development momentum for financial and real estate business, which has made great contribution to offsetting the fluctuation of mining cycle.

The new projects launched by China Minmetals in 2018 include the MCC Ramu NixCoyMnz precursor project, Changyuan Lithium Technology's lithium-ion battery materials project, the project of extracting lithium for Minmetals Salt Lake, Hunan Nonferrous Metals' Shuikoushan copper-lead-zinc industrial base project, and Minerals Development's Caofeidian International Ore Trading Center project. China Minmetals has become one of the few domestic producers of multiple precursor materials and multiple cathode materials for lithium batteries. It has established presence along the whole industrial chain from resources to technology in advance, with the annual investment of 10.6 billion yuan in new energy and materials.

In terms of technology innovation, 2018 was another bumper harvest year for China Minmetals. By the end of 2018, China Minmetals had 37 state-level key laboratories and R&D platforms, ranking in the forefront of central enterprises; it had applied for 8,383 new patents, with 4,641 granted, and its total number of valid patents reached 27,046, continuing to rank the fourth in central enterprises; it had won three National Science and Technology Awards, 16 Science and Technology Awards of the Chinese Nonferrous Metal Industry and 18 Metallurgical Science and Technology Awards. The project of "Development and Application of Clean and Efficient Coking Technology and Equipment" led by ACRE Coking And Refractory Engineering Consulting Corporation won the First Prize of National Science and Technology Progress Award. It successfully organized and implemented the 2018 voyage exploration of the international seabed contract mining area, led the completed "500m sea test of the polymetallic nodule ore collecting system" and the "2,000m-depth sampling test of cobalt-rich crust" projects, broke a number of core key technology bottlenecks, and reached the world-advanced level.

In 2018, China Minmetals also carried out pilot reforms of the state-owned capital investment company: centering on the corporate orientation, it made efforts to standardize the decision-making scope and process of the headquarters, remolded the management system, institutionalized and developed a list of "rights, responsibilities and powers"; it adjusted the overall layout of directly affiliated enterprises, straightened out the relationship between management rights and equity, implemented the "Double-Hundred Action Plan," established a full-time director and supervisor work system, and further highlighted the company's role as a market player. To meet the needs of recombination and consolidation, it focused on the elimination of technical barriers, promoted talent exchange and consolidation of homogeneous businesses, facilitated the effective allocation of elements and resources, and made substantial progress in recombination and consolidation. "Advancing the pilot reform, recombination and consolidation is our biggest reform project that must be accomplished. In 2018, China Minmetals explored the" Minmetals Model "of deepening the reform of state-owned enterprises in practice," commented Tang Fuping.

It's worth mentioning that 2018 was the third year following the recombination of China Minmetals and the MCC. Through effective measures including developing the 100 billion yuan-worth market, China Minmetals has produced remarkable outcomes from integrated development after the recombination: its profitability has been remarkably enhanced, so has its asset quality, the performance appraisal result of its executives has jumped from Grade D to Grade A, and the company's ranking among the world's top 500 went up from the 198th to the 109th. All this has been highly affirmed by competent authorities including the State Council SASAC, which believe that "what China Minmetals has achieved following the recombination has exceeded expectations."

In the work report, China Minmetals also summarized the experience of recombination. According to Guo Wenqing, in the past three years, China Minmetals has always focused on economic development, adhered to the Party leadership, pursued corporate development while increasing income for employees, and put people above everything as required by Chinese President Xi Jinping, successfully fulfilling the tasks assigned by the Party Central Committee, the State Council and the State-owned Assets Supervision and Administration Commission of the State Council. "We have paid off a lot of debts, solved many difficulties, and accomplished a few undertakings. The fundamental improvement in business performance has also optimized the external environment and stimulated internal vitality, bringing profound and pleasant changes to the mentality and outlook of executives and ordinary employees alike," said Guo. Reflecting on the success of the recombination, Guo summarized a few key points: first, always make development the top priority, and speed up development; second, strengthen the leading role of strategies, grasp the general situation, and ride the tide of development; third, firmly promote integration and fusion and produce synergy; fourth, stand up to difficulties and challenges without hesitation; fifthly, focus on discipline strengthening, and be passionate about and loyal to the job.

The meeting put forward the guiding principle for overall management and development in 2019: follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for the New Era and the readout of the 19th CPC National Congress, and thoroughly implement the decisions of the Central Economic Work Conference, fully honor the deployments and requirements of the Party Central Committee and the State Council, strengthen Party leadership, deepen the reform of state-owned enterprises, advance high-quality development, continuously improve the institutional environment, optimize the industrial structure, improve competitiveness, and strive to become a world-class metal mining group by following the plan to improve its development quality in three steps and to double its profits by the end of 2017 and then double again by the end of 2018.

As for 2019, Tang Fuping emphasized the competitiveness enhancement action in all respects. He proposed to establish a market-oriented operation and management mechanism with contractual management as its core, channel external competition pressure into the interior so that competition will be felt both inside and outside, and make sure to orient all behavior and rules toward the market and measure all output outcomes and indicators by competitiveness enhancement." The competitiveness enhancement action is expected to help fairly evaluate subsidiaries, efficiently invest in them, advance internal supply-side structural reform, promote the survival of the fittest inside the company, and optimize resource allocation and industrial structure." According to insiders, contractual management, a key tool to enhance competitiveness, was promoted gradually within China Minmetals in 2018, and will be adopted company-wide from the head office to specialty companies in 2019.

In addition, China Minmetals will actively explore the mixed ownership reform, led by "Double-Hundred Action" enterprises and supported by secondary- and third-tier companies, to draw reform experience that can be promoted and reproduced."

Guo also made arrangements for the work of 2019, and proposed that China Minmetals should continue to firmly follow the three-step strategy and complete the third step for the steady development of the company. He listed seven priorities for the following year: 1. strengthen the operation and development of green mines and make breakthroughs in metal mining; 2. firmly grasp major opportunities and elevate engineering work to a new level; 3. deeply integrate into the opening-up wave and reshape the trade system; 4. pay attention to value creation in financial and real estate markets, and foster new growth points as appropriate; 5. ensure the steady and high yield of newly launched projects and increase the output of new energy and materials; 6. promote the commercialization and application of research outcomes, and show the vitality of technology innovation; 7. resolutely eliminate chronic problems and set a new starting point for high-quality development.

As China's largest metal mining corporation, China Minmetals gave its prediction of the market trend. It believes that the overall global mining demand remains high, with slightly short supply of key mineral products, but affected by increased economic uncertainty, periodic price fluctuation has been intensified, with a widening gap between key products. As to the iron and steel industry, it believes that China's steel industry has entered a critical period of in-depth adjustment: the industry is further concentrated, in urgent need of capacity replacement, green and intelligent development, and international expansion, and that the uneven layout, structure and development of global iron and steel industry also mean huge market opportunities, and raise new and higher demands for technology innovation and operation and service modes.

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