Despite price fluctuations, Baotailong expects the coal tar deep processing project to remain unprofitable in 2020

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Amid price fluctuations, Baotailong expects weak profitability for its coal tar deep processing project in 2020. Author/Source: Meihua Ke Date: 2020-04-30 Clicks: 13 Baotailong New Materials Co., Ltd.’s performance in 2019 was significantly affected by the decline in coke market prices and those of coal-based chemical products. The company believes that prices will remain weak in 2020, and profits will continue to come under pressure. The company is actively advancing industrial projects related to new materials such as graphene-based mesophase carbon microballs and needle coke, but profits at present are not significant. Net profit dropped by 76% in 2019, and continued to fall by 90% in Q1. In 2019, Baotailong New Materials Co., Ltd.’s revenue and net profit were 272.5 million yuan and 81 million yuan respectively (a year-on-year decrease of 23% and 76% respectively), with an EPS of 0.04 yuan. In Q1 2020, its revenue and net profit were 636 million yuan and 6.1908 million yuan respectively (a year-on-year decrease of 19.0% and 91.95% respectively). The main reason is that the performance of the coke market and the coal chemical products market fell short of expectations, leading to a gradual decline in the company’s selling prices from the beginning to the end of the year. Sales prices for the coke business dropped by 10%, while sales of needle coke continued to grow at a rapid pace. In 2019, Baotailong New Materials Co., Ltd. sold 1.1978 million tons of coke (a decrease of 15.78% on a year-on-year basis). The unit selling price was 1,661.79 yuan per ton (a decrease of 10.09% year-on-year), while the unit cost was 1,607.51 yuan per ton (an increase of 9.00% year-on-year). This was mainly due to the impact of coal integration policies, which led to an increase in the price of raw coal. In the coal-based chemicals sector, the company’s methanol sales volume was 101,600 tons (a year-on-year increase of 6.71%), with a unit selling price/cost of 1,846.10842.59 yuan per ton (a year-on-year decrease of 21.43%/an increase of 29.02%). The increase in costs was mainly due to the purchase of oxygen from external suppliers. The company’s electricity sales volume was 111.52 million kWh (a year-on-year increase of 43.19%), primarily due to an increase in electricity sold to external parties; the unit selling price/cost was 0.32/0.22 yuan per kWh (a year-on-year change of 2.96%–7.07%). In terms of new materials, the company’s production of needle coke has increased and it has gradually gained recognition; the production and sales volumes were 28,500/13,000 tons respectively (a year-on-year increase of 59.65%/35.56%). The circular economy industry chain, combined with resource advantages to control costs, enables proactive development of new material products to drive industrial transformation. Baotailong New Materials Co., Ltd. is located in the most important region for coking coal and anthracite production in the east. It holds exploration rights for 16.35 square kilometers of forested areas rich in graphite, which enables the company to operate a circular economy chain that includes coal mining and processing, coal coking and gas production, synthesis of methanol from gas, production of stable light hydrocarbons from methanol, production of coal-based products through hydrogenation of coal tar, extraction of needle coke and mesophase carbon microballs as high-grade carbon materials from coal tar, as well as co-generation of heat and electricity from coal sludge and gangue. This setup ensures that the costs associated with the company’s traditional products remain below the industry average, while also allowing it to develop new material industries such as those involving graphene, mesophase carbon microballs, and needle coke. To date, the company has established projects for producing 150 tons of graphene powder, 50,000 tons of needle coke, 300,000 tons of stable light hydrocarbons, and 2,000 tons of mesophase carbon microballs (currently under construction). Although the capacity utilization rate for these projects is currently low, they are expected to become sources of long-term profit growth for the company.