So what about the king of losses? A king is still a king!

Thread Content

So what about the king of losses? A king is still a king! Author/Source: China Fertilizer Network Date: 2020-01-14 Clicks: 51 On the evening of January 11, after Yanchi Salt Lake Co., Ltd. (i.e., *ST Yanchi, hereinafter referred to as “Yanchi”) released its annual report forecast, stock market commentators were overjoyed to come up with various criticisms such as “the new king of losses” and “the biggest loser in history,” as well as claims that the company had lost one-seventh of Qinghai Province’s revenue and more than one year’s worth of general public budget income. Yet the author would like to say: So what if one is the king of losses? A king is still a king! 　　Salt Lake stated that the main reason for the huge losses was the expected losses from the disposal of assets during the bankruptcy reorganization process, which constitutes non-recurring gains and losses. “\"Non-recurring gains and losses\" refer to various revenues and expenses incurred by a company that are not directly related to its business operations; or, although related to such operations, their nature, amount, or frequency affects the accurate and fair representation of the company’s normal profitability. Excluding the one-time gains and losses amounting to 41.735 billion yuan resulting from asset disposals, as well as the impact of loss-making businesses on Salt Lake’s overall performance, Salt Lake’s net profit in 2019 was roughly somewhere between a slight loss and a profit. 　　In accordance with the Rules for the Listing of Stocks on the Shenzhen Stock Exchange, Yanhu only needs to meet eight conditions, including that both the audited net profit and the net profit after deducting non-recurring gains and losses for the most recent fiscal year are positive, the audited ending net assets for the most recent fiscal year are positive, and the audited operating revenue for the most recent fiscal year is not less than 10 million yuan. Once these conditions are satisfied, Yanhu can submit a written application to the Shenzhen Stock Exchange to have its stock listing restored within five trading days after the release of its annual report for 2020. 　　Since the Intermediate People’s Court of Xining in Qinghai Province ruled to accept the case regarding the bankruptcy reorganization of *ST Yanhu, through the online public auction of the asset package belonging to Yanhu Chemical Branch, and up to Qinghai Huixin Asset Management Co., Ltd. stepping in as promised to purchase those assets for 3 billion yuan after six unsuccessful auctions, it can be said that Yanhu has now successfully gotten rid of its burdens and will be able to operate more efficiently in 2020. 　　According to the annual report forecast, excluding the three major portfolios of non-performing assets, Yanchi Lake’s two main business areas, potassium chloride and lithium carbonate, continued to exhibit strong profitability. Especially in the potassium chloride sector, production increased significantly in 2019 compared to 2018, by about 17%, reaching 5.63 million tons, which underscores its stable production capacity and market position ； Although sales volume during the reporting period was 4.53 million tons, a slight decrease compared to the previous year, the selling price increased on a year-on-year basis. Based on the published sales figures, salt lake potash generated revenue of 7.45 billion yuan in 2018; in the first half of 2019, revenue reached 3.916 billion yuan, representing a year-on-year increase of 17.82%, with a gross margin as high as 74.64%. 　　According to data from Zhongfei Net, China’s total physical production of potassium chloride in 2019 was at least 7.32 million tons, with salt lake sources accounting for over 70% of this amount. China’s physical consumption of potassium chloride in 2019 was around 12.65 million tons, of which salt lake-derived potassium chloride accounted for nearly 40%. Therefore, salt lakes are undoubtedly the leaders in this industry and the kings of potassium fertilizers. 　　Although the potassium fertilizer market in 2020, at least for the first half of the year as of now, is not expected to show favorable trends – whether it sees rises followed by falls or a continuous decline – there are few who are optimistic about a sustained improvement. But we believe that Salt Lake, now free from burdens and able to operate with a lighter load, will be better equipped to navigate the market than ever before; by the time its 2020 annual report is released, it will surely show results that demonstrate its return as a leader! 　　(Adu)