Profit Increase 40% Private Coal-to-Olefin Leader First Semi-annual Report

Recently, Ningxia Baofeng Energy Group Co., Ltd. (hereinafter referred to as "Baofeng Energy") released its first periodic report since its listing. The report shows that in the first half of 2019, the company realized revenue of 6.520 billion yuan, an increase of 9.72% over the previous year, and realized net profit of 1.889 billion yuan belonging to shareholders of listed companies, an increase of 38.14% over the previous year. Baofeng Energy is the leading private enterprise in the field of coal-to-olefin in China. It has been vigorously developing the coal-to-olefin industry and exploring a new way to replace coal with petroleum to produce high-end chemical products. This is not only in line with China's energy structure characteristics of "rich coal, lack of oil and less gas", but also an inevitable choice to ensure China's energy strategic security. Baofeng energy products are mainly divided into four parts: (1) methanol production from coal, coke and coke oven gas; (2) coke production from raw coal after washing; (3) ethylene and propylene production from methanol, and then polyethylene and polypropylene production by polymerization; (4) modified asphalt, pure benzene, MTBE, industrial naphthalene, anthracene oil production, etc. Fine chemical products. The data shows that in the first half of 2019, the output of polyethylene, polypropylene and coke of Baofeng Energy Company increased by 16.91%, 20.38% and 10.59% respectively. In addition, the company realized a significant increase in net profit in the first half of the year compared with the same period of last year due to the decrease in coal mining costs both inside and outside the reporting period. It is worth mentioning that the gross profit rate of Baofeng Energy reached 43.34% in the first half of 2019, an increase of 0.22 percentage points over the same period last year.

The company adopts the self-produced and self-sold business model. In terms of product production, the annual and monthly product production plans are formulated according to the national macro-control policy and industry policy orientation, combined with market forecast, and the production plans and product structure are optimized and adjusted monthly according to market demand. In product sales, the company has a sales department to unify external sales. The selling price is determined by referring to the domestic and foreign spot and futures market prices, and the price is adjusted flexibly and timely according to the inventory. Except modified asphalt, other products adopt the mode of "first payment, then goods" in payment settlement. In raw material procurement, nearly half of the main raw coal is produced by the company itself, and the remaining part is mainly purchased around. According to the actual situation, payment in advance and cash on delivery are adopted for payment of goods. At the performance presentation held in Shanghai, Liu Yuanguan, president of Baofeng Energy, said that Baofeng Energy realizes the close link of industrial chain by building a circular economy industrial cluster of coal-based new materials. The products of the former unit directly become the raw materials of the next unit, thus ensuring the stable supply of raw materials and the full load of production facilities. Operation can reduce energy consumption, logistics cost, management cost and operation cost.

In April 2019, the company's new MTO catalyst was successfully tested. The yield of diene (ethylene and propylene) reached 33.68%, which was 0.51 percentage points higher than the average 32.89% in the previous quarter. The unit consumption of methanol was reduced to 2.97 and the cost was reduced by 922,000 yuan. In the first half of 2019, the power consumption of self-made MTO methanol decreased by 30.55 degrees/ton compared with the same period last year, saving 13.74 million yuan of electricity, and the unit consumption of steam decreased by 0.47 yuan, reducing the cost by 37.88 million yuan. The data of 2018 show that the unit cost of coal-to-olefins in Baofeng Energy is 4629 CNY/ton, which is 1453 CNY/ton and 942 CNY/ton lower than that of medium coal energy and Shenhua Ning coal of the same scale in the same industry. According to Liu Yuanguan, the implementation plan of Baofeng Energy Circular Economy Industrial Cluster is divided into three phases. The first phase of the project is put into operation, and the financial statements are all contributed by the first phase of the project. The start-up time of the second phase project is basically determined, and the preparatory work for the third phase project is carried out in an all-round way. Reporter understands that the second phase projects under construction include 2.2 million tons/year coke gasification methanol plant, 600,000 tons/year methanol olefin plant, 300,000 tons/year polyethylene plant, 300,000 tons/year polypropylene plant, 3 million tons/year raw coal, 200,000 tons/year fine chemical industry.

At present, 600,000 tons/year olefin project has been completed and is expected to be put into operation in August this year. In addition to doubling olefin production capacity on the existing basis, product specifications and models are more complete, and some high-end products such as metallocene polyethylene will be added. The 2.2 million tons/year coke gasification methanol plant will be completed and put into operation by the end of this year.

In addition, the 2.4 million tons/year project of Hongsi Coal Mine of Baofeng Energy has been approved by the State Energy Administration in June this year, and Dingjialiang Coal Mine of 600,000 tons/year is waiting for relevant approval. After the approval, the two coal mines are expected to increase the total production capacity of raw coal by 3 million tons per year, and increase the annual output of raw coal by 60% on the existing basis.

According to the previous prospectus of Baofeng Energy, the second phase project will become the main growth point of Baofeng Energy's future performance after putting into operation. It is estimated that annual business income will increase by 5.767 billion yuan and net profit will increase by 1.183 billion yuan.

In accordance with the overall plan, the company will make every effort to pursue high-end and differentiated development strategy. It will also plan and build three-stage olefin projects, including "1.8 million tons of olefins per year, 900,000 tons of polyethylene, 900,000 tons of polypropylene, 6 million tons of methanol, 700,000 tons of fine chemical industry", continuously expand the industrial scale, extend the industrial chain and optimize products. Structure. At present, planning and design are being carried out to start construction at the end of the year. After the completion of the project, the company will realize the full coverage of the brand name of dual polymer products (polyethylene, polypropylene), the profit space and anti-risk ability will be greatly improved, and become the largest high-end coal-based new materials and chemicals production enterprise in the world.

For the future development prospects of coal-based olefin industry, Liu Yuanguan said that polyolefin, as the leading product of high-end coal-based new materials, has huge market demand in the future.