China XLX Announces 2025 Q1 Results

Press Release

(For immediate release)

China XLX’s 2025 Q1 Earnings Remarkably Improved QoQ

Continuing Efforts to Strengthen Cost and Budgetary Control

2025 Q1 Results Highlights:

• The Group’s revenue grew by 1.7% Y-o-Y to approximately RMB 5.85 billion.
• Net profit attributable to owners of the parent amounted to approximately RMB 198 million as compared to a loss in previous quarter.
• Operating results of compound fertiliser business steadily improved as the Group leveraged its competitive edges in humic acid feedstock to boost compound fertiliser sales.
• The Group grasped the opportunities from interest rate cuts to make early repayment and replacement of high-interest loans and lowered the average lending rate by 0.7 percentage points from a year ago.

(18 May 2025, Hong Kong) China XLX Fertiliser Ltd. (“China XLX” or the “Company”, together with its subsidiaries collectively known as the “Group”) (HKSE: 01866.HK) announced that the Group’s revenue for the three months ended 31 March 2025 (the “Period”) grew by 1.7% Y-o-Y and 2.4% Q-o-Q to approximately RMB 5.85 billion. Net profit attributable to owners of the parent for the Period reached approximately RMB 198 million, as compared to a loss of approximately RMB 74.64 million for the fourth quarter of last year.

In the first quarter of 2025, the fertiliser market staged a comeback after subdued performance. Dragged by a mismatch between market supply and demand, the price weakness of coal chemical related products lingered in the first two months. However, the urea prices remarkably rebounded in March on the demand for spring farming coupled with growing expectations for export resumption, leading to a strong recovery in the prices of urea-based downstream products. The overall gross profit margin for the Period climbed by 3 percentage points to 14% from the previous quarter. Besides, the revival in agricultural demand along with the commencement of new compound fertiliser production facilities bolstered the sales of the Group's core products.

The gross profits of the Group’s urea products and urea solution for vehicles retreated as their selling prices declined at a faster pace than their costs due to weakened support for urea prices resulting from lower prices of feedstock coal. As a result, its overall gross profit dropped by 23% Y-o-Y. On the other hand, its gross profit surged by 26% Q-o-Q due to the improvement in fertiliser supply and demand condition and a gradual pickup in the prices of different products.

During the period under review, the fertiliser segment generated sales revenue of approximately RMB 3.09 billion, accounting for 53% of the Group’s total revenue and remaining the largest revenue contributor. The revenues of chemicals segment and other segments were approximately RMB 2.46 billion and RMB 290 million respectively, accounting for 42% and 5% respectively of the Group’s total revenue.

In view of growing demand for high-efficiency fertilisers in modern agriculture, the Group leveraged its competitive edges in humic acid feedstock to boost the sales of high-efficiency compound fertilisers, resulting in steady growth of compound fertiliser sales. While the sales volume of compound fertilisers for the Period increased by 6% Q-o-Q, their selling price and gross profit margin grew by 9% and 2 percentage points respectively from the previous quarter. At the same time, the Group continued to deepen the R&D of humic acid feedstock so as to ensure the superior quality and stable gross profit margin of their products. As a result, the gross profit margin of humic acids reached 25% in the period. Meanwhile, with the recovery of downstream demand and the gradual improvement in supply and demand condition, the revenue of methanol products continued to grow and hence effectively enhanced the operating performance of chemicals segment.

As the Group further strengthened cost control, the proportion of selling, administrative and finance expenses (excluding the impact of non-recurrent transactions) came down by nearly 1 percentage point from a year ago. In particular, the finance expenses dropped by 9% Y-o-Y. The Group took advantage of interest rate cuts to make early repayment and replacement of high-interest borrowings, the average lending rate thus reduced by 0.7 percentage point Y-o-Y. With enhanced capital operation, it is in a better position to improve the profitability.

The Group will prudently align its capital expenditures with cash flow and exercise stringent budgetary control. Investments in major projects will be carried out in order according to their input-return ratio so as to better manage the financial risks. Projects under construction will be gradually put into operation in phase in three years, and cash inflow from newly commissioned project will be used in next newly-developed project. The Group’s cash flow pressure will thus be mitigated year by year. Although the Group’s gearing ratio for this year will slightly increase as more financial resources are required to meet the project development needs, the capital expenditures in 2027 are expected to significantly reduce. Therefore, its operating cash flow will become ample and various financial indicators will markedly improve, hence creating a virtuous cycle of investment and return.

In addition to possessing sufficient capital reserves for the development of its projects, the Group kept the average lending rates below the benchmark interest rate. Low-interest project loans with long maturity of 7-10 years are earmarked for all production bases under construction, which effectively cover their construction timelines and funding requirements and thereby ensure the Group’s operational and cash flow stability.

Looking ahead, Mr. Liu Xingxu, Chairman of China XLX, said: “Since the beginning of the second quarter, domestic environmental policies have been further tightened. The market restructuring is gaining momentum as leading fertiliser enterprises proceed with resources consolidation, technological breakthroughs and product upgrades. Demand for high-efficiency fertilisers, including water-soluble fertilisers, controlled-release fertilisers and humic acid-based products, is increasing amid the growing popularity of large-scale farming. This lays a solid foundation for the Group to market its high-end fertilisers. The Group will take advantage of the supportive policies to accelerate the technological advancement. With an emphasis on green and high-efficiency products, it will focus on the strategies highlighting product functionality, customised fertiliser formulation and service differentiation. By upgrading its brand positioning to ‘China’s High-Efficiency Fertiliser Advocate’, the Group aims to promote scientific and precise fertilisation through the use of high-efficiency fertilisers, thereby enabling farmers to apply fertilisers accurately and driving the Group’s sustainable growth.”

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About China XLX Fertiliser Ltd.

China XLX Fertiliser Ltd. is one of the largest and most cost-efficient coal-based urea producers in China. It is principally engaged in developing, manufacturing and selling of urea, compound fertiliser, methanol, dimethyl ether, melamine, furfuryl alcohol, furfural, 2-methylfuran, pharmaceutical intermediates and related differentiated products. The Group adheres to the development strategy of “maintaining overall cost leadership and creating competitive differentiation" while strengthening the core fertiliser operations. With support of the resources in Xinxiang, Xinjiang and Jiangxi, it extends the value chain to upstream new energy and new materials and diversifies into coal chemical related products. The Company’s shares (stock code: 01866.HK) are traded on the main board of the Hong Kong Stock Exchange.

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