Q2 2026 China Coal Energy Co Ltd Earnings Call
Speaker #1: Do you invest as an analyst? Good afternoon. I'm Zhang Qun, board secretary of China Coal Energy. Welcome to our results presentation. Present at today's meeting are Mr. Gao Shigang, Deputy Secretary of the Party Committee, Executive Director of the company.
Speaker #1: Mr. Zhang Yanjing, independent Executive Director; Mr. Cai Xiaoling, Chief Financial Officer; as well as responsible heads and relevant staff from the securities affairs department, planning and development department, finance department, corporate department, chemical business department, power business department, and marketing management office.
Speaker #1: I would like to express our happiness for our long-term care and support for the company. Now, I will present China Coal Energy's operating results for the first half of 2026, and our key work arrangement for the second half.
Speaker #1: Unless otherwise specified, all figures below are calculated under the Chinese accounting standards for business enterprises. Number 1, operating results and key features for the first half.
Speaker #1: In the first half, China Coal Energy resolutely implemented decisions and arrangements of the CPC Central Committee and the State Council deeply pursue the development philosophy of enhancing efficiency from existing assets and positioning through incremental growth.
Speaker #1: Actively responded to various risks, challenges, and operating pressures. Our production and operations maintained a sound momentum under the Chinese accounting standards. We achieved operating revenue of 73.13 billion, total profit of 12.46 billion, up 4.4% year on year.
Speaker #1: Net profit attributed to shareholders was 8.4 billion, up 5.8%. Basic earnings per share was 0.61, up 5.2%. Net cash flows from operating activities were 9.86 billion, and increase of 2.193 billion, or 28.6% year on year growth.
Speaker #1: Continuing to maintain a sound profitability level and cash generation capability. Under international financial reporting standards, we achieved operating revenue of 73.13 billion and profit before tax 12.42 billion, up 7.1%.
Speaker #1: Profit attributed to shareholders was 8.192 billion, up 11.8%. Basic earnings per share were 0.62, up 12.7%. The company's production operations in the first half featured the following: first, stable and orderly production and operations.
Speaker #1: In the first half, our core business overcame challenges such as changing conditions, and greater production organizational difficulties in some mining areas. We have achieved a commercial co-production of 61.95 million tons, with further strength in the production sales coordination mechanism.
Speaker #1: Seized the window of a rising coal prices, deepened flexible implementation, and market segmentation and made every effort to increase sales and create value, achieving commercial coal sales of 119.7 million tons, of which self-produced commercial coal sales amounted to 61.4 million tons, our coal chemical business facility operation and maintenance management focused on a lean production and product differentiation, and achieved production of major coal chemical products of 3.01 million tons.
Speaker #1: We actively expanded sales channels, strengthened production coordination, carried out targeted marketing by category, and achieved a sales of major coal chemical of 3.235 million tons, with efficiency and profitability remaining industry-leading.
Speaker #1: Number 2, steady recovery in prices of major products. In the first half, the prices of major products, including coal and chemicals, rose with market strength.
Speaker #1: The average selling price of a self-produced commercial coal was 524 per ton, up 54 per ton, or 11.5%. Among these, the selling price of a thermal coal was 494 per ton, up 58 per ton, or 13.3%.
Speaker #1: The selling price of a cocaine coal was 1,017 per ton, up 132 per ton, or 14.9%. The selling price of a 14 trading coal was 549 per ton, up 77 per ton, or 16.3% year on year.
Speaker #1: The selling price of a polyelephant was 7,017 per ton, up 336 per ton, or 5%. The selling price of a urea was 1,828 per ton, up 76 per ton, or 4.3%.
Speaker #1: The selling price of a methanol was 1,868 per ton, up 98 per ton, or 5.5% year on year. The selling price of ammonium, nitrate, was 1,902 per ton, up 19 per ton.
Speaker #1: Basically flat. Number 3, tapping potential improving quality and efficiency. In the first half, we dynamically adjusted our product mix in response to market demand.
Speaker #1: Increasing the average calorific value of the thermal coal by nearly 200 ccal per ton, we continuously improved our refined management level, and steadily enhanced the overall quality and efficiency.
Speaker #1: The unit sales cost of a self-produced commercial coal was 285.69 per ton, up 22.72 per ton, or 8.6%, mainly due to higher fixed costs from lower output, higher labor costs from converting some outsourced teams to self-operated teams.
Speaker #1: Our coal chemical business remained focused on the goal of a safe, stable, and long-cycle full-load and excellent operation. We have strengthened equipment management, optimized the facility operations, and recently controlled cost expenditures keeping unit sales cost.
Speaker #1: Major coal chemical products within reasonable range. Among them, the unit sales cost of a polyelephant was 5,674 per ton, down 657 per ton, or 11.8%, mainly because the polyelephant facility underwent planned major maintenance in the same period last year.
Speaker #1: The unit sales cost of urea was 1,280 per ton, up 17 per ton, or 1.6%, mainly affected by higher purchase prices of raw coal and fuel coal.
Speaker #1: The unit sales cost of methanol was 1,370 per ton, up 66 per ton, or 5.1%, mainly affected by higher purchase prices of raw coal and fuel coal.
Speaker #1: The unit sales cost of ammonium, nitrate, was 1,893 per ton, up 509 per ton, or 46.8%, mainly affected by the planned major maintenance of the ammonia nitrate facility in this period.
Speaker #1: Number 4, steady and sound operating performance. Against the backdrop of a lower coal output and rigid cost increases, we adopted multiple measures to hedge against the cost pressures and achieve total profit of 12.46 billion.
Speaker #1: The main profit change factors were as follows: first, major profit-increasing factors: higher selling prices of self-produced commercial coal increased profit by 3.3 billion. Second, chemical business increased profit by 878 million.
Speaker #1: Third, the power business increased profit by 172 million. Fourth, investment income and other income increased by 60 million. The profit-reducing factors: first, higher unit sales cost of self-produced commercial coal.
Speaker #1: By 1.36 billion. Second, lower sales volume of self-produced commercial coal reduced profit by 1.17 billion. Third, non-operating income expenses reduced profit by 483 million.
Speaker #1: Fourth, higher taxes surcharges and periodic expenses reduced profit by 459 million. Fifth, the equipment and financial business reduced profit by 425 million. Number 5, accelerated construction of key projects.
Speaker #1: In the first half, all project units of the second phase coal chemical project in the Yuling, Sanshi, with an annual polyelephant capacity of 900,000 tons, have been mechanically completed.
Speaker #1: The liquid sunshine demonstration project of Yijing Coral Energy Chemical has entered the trial operation stage. The 2 by 660 megawatt coal power integration project in Wushen Biners has fully moved into the equipment installation stage.
Speaker #1: The 100 megawatt wind power project in Yuyang, Sanshi, undertaken by Sanshi Company has commenced the construction, and Shanghai Energy Company completed the 100% equity acquisition of a 400 megawatt fishery solar complementary PV project in Lepsi Sea area of Qidong.
Speaker #1: Number 6, interim dividend to reward shareholders. Since our existing, the company's total cash dividends have exceeded 46 billion, striking the best of possible balance between interest of all shareholders and the company's sustainable development.
Speaker #1: We have implemented interim dividends for 3 years in a row, for 2026 interim period, with planned distributed cash dividend of 2.44 billion, or 0.184 per share.
Speaker #1: The above dividends are expected to be distributed before the end of October 2026. Two, key work arrangement for the second half. The company will thoroughly implement the decisions and arrangement of the CPC and the council, adhere to the general principle of pursuing progress while ensuring stability.
Speaker #1: And the leveraged implementation of the 15 five-year plan to deepen and state-owned enterprise reforms, as key drivers of high-quality growth. First, we will adhere to the coal power chemical new energy multi-industry coupled development pathway, coordinate intelligent green and integrative development.
Speaker #1: Second, we will continue benchmarking against the world-class standards strengthening intelligent decision-making, deepen production sales coordination, go all out to improve quality and efficiency. Third, we will persist in driving development through reform and innovation, actively carry out reforms of management and operating mechanisms, deeply advance key core technology breakthroughs, and build a high-level innovation system.
Speaker #1: Fourth, we will uphold a systematic thinking and bottom-line thinking, give full play to the penetrating supervision role of the intelligent control platform, and strengthen work safety as well as the environmental protection and energy conservation.
Speaker #1: Number 5, we'll continue to deepen market value management and continuously improve corporate governance and information disclosure quality. The investors and analysts, the company's management and all products will stay focused on our goals, remain confident, take proactive actions, and force ahead with determination.
Speaker #1: We'll continue to advance high-quality development and strive to deliver better results. That's all. For my presentation, now opening the floor for Q&A. Thank you.
Speaker #1: Hello everyone. If you have any questions, please click the star key on your phone, and then press number 1. For online participants, you can type in your questions in the live chat box or click the button of the raise your hand.
Speaker #1: Thank you. We are taking the question from investor with the phone number ending in 0151. Please provide your name and institution. Thank you. And to your management, I am Alice Farma Gordon Securities, I am John Jin Ming.
Speaker #1: I have two questions. First, as mentioned earlier by Mr. John, in a cancel province, there were some in-depth cooperation and in July, there was also signed a provincial-level cooperation with the provincial government, involving a large-scale investment.
Speaker #1: So in terms of the collaboration with a cancel province, what's the specific plan for the future, and also what tasks and missions will be carried out by the joint-stock company?
Speaker #1: Thank you. I'd like to ask our strategic planning department colleague to answer the question. Thank you for the question. In a July, the group has signed a strategic cooperation agreement with a cancel province, and planning to build the energy base of the China Coal Yongdong.
Speaker #1: Which are the Tangjiahe Coal Mine and Nantianhe Coal Mine have obtained a geological result of 1.75 billion tons, with an annual production capacity of 9 million tons, at present the company has established a wholly owned subsidiary, the China Coal Gansu Energy, to advance the preliminary work of the project.
Speaker #1: Currently, we have not reached the stage of actual investment, and would close further information. Later. Thank you. I have a follow-up question. In the first half regarding all the cost items, in the first half, the expenses the non-operating expenses are 500 million more than same period last year.
Speaker #1: There may be some specific projects involved, including the payment of the late fees and fines, as well as the taxes and surcharges. And also the resource tax and land use tax, I think, these costs have increased compared with last year.
Speaker #1: So I just wanted to know the reasons behind them, and the outlook for the expenses in the future. Thank you. I'll ask our finance colleague to respond to the question.
Speaker #1: Thank you. In the first half, for a well-known reasons, and also according to requirements of the state taxation administration, we carried out a special tax work.
Speaker #1: So it's true that the non-operating expenses and taxes and surcharges have increased. This tax payment is a result of previous practical standards and its differences against the current practice.
Speaker #1: For example, the identification of high-tech and also there are some differences caused by the division of role coal and water coal, and these led to the increased tax items.
Speaker #1: And we have paid these taxes according to the requirements of the tax bureau. And all of these expenses have been disclosed in an interim results.
Speaker #1: Thank you. Thank you also for my questions. Next question. Investor with the phone number ending in 6322, please provide your name and institution.
Speaker #2: I'm from Nushan Jimmy from City. First, thank you for organizing this event, and I have several questions to go through. The first one is about our production capacity.
Speaker #2: Our capacity in H1 is down a little bit. And of course, there's the Shanxi incident to consider. But my question is, of course, if any accidents happen to other manufacturers, does that affect our production?
Speaker #2: Has it recovered? We have heard that post the accident, the security inspection is stricter than before. And more to come, in the future. So my question is that, do you think the production volume can go back to the pre-incidental?
Speaker #2: And how is recovery going? Thank you. Do you want to go through all your questions? Or is it one by one? One by one.
Speaker #2: Thank you. Okay. My understanding of your first question is that it comes into parts. The first one is the regulatory policy for the whole sector, and also the prospect of all the main coal manufacturing provinces.
Speaker #2: And their capacity. Okay. I will give the floor to our marketing office colleague. And also how the safety inspection policy is going. Okay. Thank you for your question.
Speaker #2: In H1 2026, especially in the second half of May, the Xinliu Shui Coal Mines incident has affected the production of the entire sector. And after that, the competent authorities have initiated the security checks and the inspection on the overproduction conditions.
Speaker #2: And also modifications and rectifications are underway. Based on the current trend, I don't think it will ease up this year. And this year, for the entire coal sector, the impact on the production and overall volume is quite clear.
Speaker #2: And if you consider the numbers from January to June, the total volume was down by 1.7%. Or it's 40 million ton less. And from January to May, the imported coal was down by 10 million ton.
Speaker #2: But after the lower production in June, more imported coal, about 3.8 million tons more. And we have much of our production area in Shanxi.
Speaker #2: Also, it's a huge impact on us. But the upside is that for China Coal, we are sticking to our overall production schedule, and we're trying to make adjustments according to our whole year's production plan.
Speaker #2: From Mr. Jiang Chun, about our company's production volume in H1, it's down by 3.39 million ton year over year, down by 8%. As Mr. Li has said, it's affected by the tightening rules about safety inspection.
Speaker #2: And also for some of the mining areas, we have complicated geological conditions. And it's harder to organize production. So that also played a part.
Speaker #2: And in the second half, we plan to stick to our original production plan and try to catch up here. But frankly speaking, since the inspection for safety has tightened, and we are strictly compliant with the safe production for each month.
Speaker #2: So while we try to meet our annual production target set at the beginning of this year, but for the actual result at the end of the year, it comes down to our actual execution.
Speaker #2: That's what I wanted to add. Do you have any other questions? Okay. I have two more questions I will cover them both. So our in-house product selling price was up to almost the market average.
Speaker #2: And it grew more than the LTA products. I wonder why. That is. And then about our costs, what's your outlook for the H2 costs?
Speaker #2: Because costs were up a little bit for the first half of the year. And I wonder how the costs would be in second half of the year.
Speaker #2: On a year-over-year basis. Thank you. Answer? Okay. For our self-developed coal selling price changes, from Ms. Hsu, from finance department. Okay. The price is at 524 RMB, up by 54 RMB per ton.
Speaker #2: For the power for the fuel coal, up by 58 RMB per ton. And it's because we have optimized the ping. For product mix, the average calorific value is up by 200 kilocalories.
Speaker #2: And also the LTA pricing in the market has gone up, also lifting our selling price. And thirdly, Shanghai Datun Mei is also a part of the fuel coal.
Speaker #2: And it is also sold in combo with the cooking coal. The price has gone up by 82 RMB per ton. So much for the reasons.
Speaker #2: As for the cost trend in second half of the year, it goes to our chief finance officer, Mr. Chai. Okay. It's a good question.
Speaker #2: We have covered this question before. We have already told our investors that it's normal to have about minus plus 10% of the cost fluctuations.
Speaker #2: And we are a modernized, highly efficient mining-based production. Type of manufacturer. And since we have strengthened the unified procurement, better management there, and we introduced the digitalized intelligent technology, and we have got more of the innovative operational cost control and better management there, yielding good results.
Speaker #2: And in H1, our cost was up by 22 RMB, up by 8.6%. Well, for various reasons, our overall production volume was down. And of course, that affects our costs.
Speaker #2: For example, 6 RMB that went into depreciation and amortization. But for the operational expenses, it has a lot to do with the sales method.
Speaker #2: Some of the coals we have to pay for the shipping fee if it comes in a larger volume than the overall cost. And also it has a lot to do with how we spend our dedicated funds we have a timetable for it.
Speaker #2: And in H1, the production volume was down. So this year, we have to use less of the dedicated fund. And relative to the same period last year, we spend for 70 million RMB more and so that means the cost would be higher than before.
Speaker #2: Well, it has a lot to do with the coordinated production schedule and the changing production volume. And also, you have the remuneration and social security payment for our employees.
Speaker #2: And since we have reduced the outsourced labor and we have more in-house labor use, that has increased our costs too. Those are all normal.
Speaker #2: As for H2, I would say the costs are all controllable. We are looking at some of the improvement. And also, production volume in H2 would be better than H1 because we're trying to catch up with utilization of the regulations.
Speaker #2: And for our own management and administration, it will only be more optimized. But as for the whole year's costs, is it really on par with last year or even better than last year?
Speaker #2: Not necessarily. Because we want to prioritize the profitability, not the overall expenses. I hope that answers the question. Okay. Thank you, Mr. Chai and Mr. Zhang.
Speaker #2: I have no other questions. Thank you. The floor goes to the participant whose phone number ends in 2948. Please name yourself and your institution.
Speaker #2: Thank you. I am from Changjiang, Securities. Congratulations on your good interim results. I have only one question. Because in H1 this year, the profitability of the chemicals has been improved.
Speaker #2: For example, for urea and polyolefin with the outlook for H2 and for the next year. Because we're also onboarding some new projects, right? Are we looking at a better profile?
Speaker #2: Sorry. Your question well, your voice was a bit choppy. So let me check with you. You are asking about okay. Let me clarify. I'm putting on a headpiece.
Speaker #2: Okay. Would you mind repeating your question? Of course. Of course. I'm from Changjiang, Securities. I'm Song Chu. First, congratulations on your excellent interim results.
Speaker #2: And in H1, the chemical sector has received a lot of attention. And your business here has grown on a year-over-year basis. So for second half of the year and also for next year, what's your outlook of your chemicals business?
Speaker #2: And what's your expectation for the costs and profitability? Thank you. Okay. The floor is yours, Mr. Xu, from the chemical department. Okay. Thank you for your question.
Speaker #2: For the chemicals business in H2 and in next year, let's first talk about our production. In H2, we're not looking at much growth. The only growth is coming from phase two of Yulin.
Speaker #2: It will go online in H2, but it will only contribute incremental volume in next year. And next year, we're looking at 900,000 ton more of polyolefin because if it goes online this year, next year, it will start producing more.
Speaker #2: As for our other businesses, other capacity, they are staying at current level. No incremental growth. Secondly, for the profitability, the overall chemical sector is keeps a good margin, especially for the polyolefin business.
Speaker #2: We do not have a clear read on the market now, but I would say for second half of the year, polyolefin would fluctuate within a band at the higher level.
Speaker #2: At a highly weighted level. And the overall margin in H2 would be on par with H1. And next year, with more incremental growth, we are looking at a higher margin.
Speaker #2: Thank you. Okay. As for clear, thank you. And I wish you more success in the future. Thank you. The floor goes to the participant whose phone number ends in 8130.
Speaker #2: Please name yourself and your institution. Thank you.
Speaker #1: Dear management, good afternoon. I'm analyst from Orient Securities. I have a question regarding the Tacoma in waste flow and the Libby seems that there are some delays.
Speaker #1: Can you share more details about that? I would address this question. So to an coal mine construction project, one in Libby and one in a waste goal, so we have adjusted the timing and entering report, and they are two reasons for that.
Speaker #1: At the beginning of this year, during the construction process, there were some incidents one for each leading to the shutdown. As you know, now the safety and supervision is a very strict so that has affected the project schedule.
Speaker #1: For the leading coal mine, the incident was due to the exploration of gas so the gas that's explored is quite different from the actual gas content and this has also led to the delay.
Speaker #1: At present, one could expect a one-year delay roughly for each coal mine. So for the leading coal mine, the production is likely to start in 2028.
Speaker #1: And for the waste goal coal mine, the production will start to the end of '27. We would update you on any further progress of the project.
Speaker #1: Thank you. I have another question so in the first half, the proportion of self-produced coal going by railway transportation and the port handling expenses has increased.
Speaker #1: So I'd like to know from a sales structure point of view, what is the company's current idea? Is this a structure sustainable? Okay. I would engage from marketing office to address this question.
Speaker #1: Thank you for the question. The sales mix for the joint stock has not changed much. But in our daily operation and management, we would make some minor adjustment corresponding to the market prices to the stock market.
Speaker #1: So the amount of sealed coal in the first half is slightly higher, including some logistic costs are slightly higher. Because of that, the sales of the water sealed coal has also increased.
Speaker #1: And also the contractual volume for the water sealed coal has also increased. But this change in the sales mix was not that much. Looking onward, I think the overall mix will remain stable.
Speaker #1: That's all. I see. Thank you. I don't have any further questions. Next. The floor goes to our investor with the phone number ending in 6402.
Speaker #1: Please provide your name and institution first. Thank you. The investment at the management, I am from a Zhuhai Mingsheng Securities. I'm an analyst. I also have a question about taxation.
Speaker #1: Regarding the tax payment in the first half, are they done? Are there any additional taxes to be paid later? Including the land tax as part of the tax surcharges.
Speaker #1: Or will this proportion stay the same? And my second question is about the selling price of the company's thermocol. So the thermocol price has increased by 90 year on year, and the price of the thermocol in the company increased by 58 year on year.
Speaker #1: So considering the proportion of the company's relatively high in the long run, what's the reason behind this? Okay. I would engage Ms. Sao to answer the question about tax in the first half, the tax work has been basically completed.
Speaker #1: But as to whether there will be additional tax work in response to state taxation administration, so requirement, this is still to be seen. And your second question is about the land use tax, correct?
Speaker #1: That's right. We would follow the laws and regulations and pay our due and this tax and the tax pay this time is mainly about the different definitions of urban land.
Speaker #1: Coming forward, the relevant requirements of tax laws to pay our due. Regarding the pricing issue, it has been addressed by Ministry for Finance, but I would give you a brief answer to it as well.
Speaker #1: So on one hand, we have increased the proportion of self-produced commercial coal in the first half. I mean, a higher value goals. So there are more high-value coals are produced in the first half.
Speaker #1: As responded by our marketing colleague, in the first half, the water sealed coal, the sales mix has also been adjusted. With a more water sealed coal sales.
Speaker #1: Which is also counted as a thermocol or cooking coal. So because of these three reasons, in the first half, the pricing for the self-produced thermocol has increased a lot.
Speaker #1: Okay. That's very clear. Thank you. And all the best for the company. Next, the floor goes to our investor with phone number ending in 1683.
Speaker #1: Please don't forget to leave your name and institution. Thank you. The management, I am generally currently from Shandong Fund. I have a question regarding the JV business.
Speaker #1: In a Q1 and Q2, the investment income is roughly the same. In the second quarter, be it a coal price or the cooking coal price, or the price of the polyelicins, they have increased month on month or quarter on quarter.
Speaker #1: So why the profit level across the Q1 and Q2 is similar is because of production reduction or other reasons. Thank you. Okay. I believe our finance team to address this question.
Speaker #1: Okay. Let me do it. For the JV business, the China Energy Conservation District Business has both a coal business and coal chemical business, right?
Speaker #1: In these two quarters, the cadence of the production are there will definitely be some changes. Also in the Q2, a question was under the inspection from a provincial authority.
Speaker #1: There were some limitations in the production. So that's the situation. Okay. Let me add something this is. For the question cooking coal company. We have a 49% of shares in a China coal and cooking.
Speaker #1: And very soon, the Shaanxi cooking coal will also have their entry in the results announcement. And you can see more statistics from their report.
Speaker #1: Okay. What about looking forward to Q3 or in the second half? What's going to happen because now the cooking coal price has increased? Again, I am particularly interested in and particularly the coal chemical business.
Speaker #1: The coal chemical business started production quite early. Even though that the cost of control measures has to be higher. Then the new coal chemical project.
Speaker #1: So what will be the guidance aspect for the coal business? Firstly, regarding the question cooking coal, and also the production plan for the second half, please refer to the data disclosed by Shaanxi cooking coal because it's also the company and it's not appropriate for us to make comments on their performance.
Speaker #1: Regarding the company limited, the production or the output scale to be frank, it's about a 1.32 million tons. And as mentioned by Mr. Xue, e, the pricing remains high.
Speaker #1: And it's good to likely to fluctuate at a high level. So I think that the economy scale is still there. And I believe it's going to maintain a relatively good profit level.
Speaker #1: But the ultimate results depend on the price fluctuations. Thank you. That's all. Thank you. Next question is from online in text. The chairman mentioned in his previous speech that the company is accelerating the building of a new coal electricity chemical industry chain.
Speaker #1: And in the first half, Shaanxi coal chemical phase two with an annual output of 900,000 tons for the polyelicin project or process equipment has been delivered to the demonstration project.
Speaker #1: Which has entered the trial operation stage. So can you share with us when will these facility start production? And how does the company ensure the profitability of the new production facilities?
Speaker #1: Okay. We'll have Mr. Xue from the coal chemical business unit to answer the question. Regarding these two projects, firstly, for the Shaanxi phase two, it is entered into a comprehensive handover period.
Speaker #1: And of the devices have started debugging and commissioning. And judging by current progress, starting from November, the facility will start will enter the startup period.
Speaker #1: And that is to say, from this year, in starting from December, the production or the output will start to be up and running. But that excludes the EV installation because EVA will start production next year.
Speaker #1: It's one year later than the other devices. Regarding CATL, it will also started the debugging stage, commissioning stage with a plan to start production after December.
Speaker #1: That's the first question, right? The second question is about the phase two of Yuling project. It's mostly polyelicin for the Yuling phase two project.
Speaker #1: But it's different from the existing polyelicin. Phase two is different from phase one. We have a high-density polyelicin for phase two. Regarding the polypolyphen, it's also using a different processes.
Speaker #1: We are currently adopting the cutting edge processes for the polypolyphen. So after phase two, our products will be more premium and also differentiated against the competition.
Speaker #1: So the profitability for phase two is likely to be better than a phase one. That's all.
Speaker #2: Thank you for the answer. The next question. It's two-fold. First, when the safety inspection is becoming stricter and many of the miners are using less of the outsourced labor and can you quantify the cost differential between in-house labor versus outsourced labor?
Speaker #2: And once that reaches economy of scale, do you think that you unit cost could come down? The second question is about the rising prices of cooking coal.
Speaker #2: And if and how will your selling price go up? And how much of the profit flexibility do you have there? Okay. The marketing office would take the second question about the pricing of cooking coal first.
Speaker #2: Okay. Thank you for your question. The pricing of cooking coal comes with it's based on two prices. Well, for the raw materials of cooking coal, it's priced on a seasonal basis.
Speaker #2: If there are some violent fluctuations adjustments could be made. So it could trend from quarterly pricing to monthly pricing. And it's quite stable. There are some gap with there is some gap to the market average, but the gap is not huge.
Speaker #2: And the second system is just spot price. And it accounts for very small proportion of our own cooking coal. And so our pricing of the cooking coal is following the market price.
Speaker #2: And since our cooking coal business is scaling up and we have a stabler pool of clients, and our price is well received by the market, we have got a proven track record here.
Speaker #2: And in this sense, when the cooking coal price was poor, earlier this year, our pricing was very robust. And now the pricing market pricing has trending up and we're also following the upward trend.
Speaker #2: And for the overall year, our cooking coal price would go would follow the market trend. It's well synchronized. Okay. The first question goes to Ms. Tao.
Speaker #2: From finance department. Okay. If we shift from outsource to in-house labor, first, it doesn't affect our costs a lot because previously the costs to the outsource labor is factored as other expenses.
Speaker #2: And now since we have shifted to in-house labor, then the cost items are broken into raw materials, human labor. So in this sense, it doesn't really affect our costs here.
Speaker #2: Okay. I am Taijiao Lin. So for your question, the two costs are not really from the same they're not the same metric here. And once we have shifted to the in-house labor, it's, of course, being displayed along with other costs.
Speaker #2: Because here you also have the social security investments and management. And of course, if you use the outsourced labor, there is on the paper it seems cheaper, but there is some discrete compliance risks.
Speaker #2: And if there are any issues penalties, it's to be paid. So you don't consider the procurement cost only. You need to consider the comprehensive cost of the whole life cycle, right?
Speaker #2: So along the same line, when we're shifting to in-house labor, it's conducible to the high-quality healthy sustainable operation. And of course, for the shifting to the in-house labor, the well, based on the industry released data, if you shift to in-house labor, the cost is up by 30 to 80 RMB for SOE.
Speaker #2: And for a private player, unlike the SOEs, they would use the cheaper outsourced labor. So for them, the increased cost would be between 100 to 200 RMB.
Speaker #2: Okay. Thank you for your answer. The next question. Is that in H1, we were also affected by the mining incidence from other manufacturers. And our production was on hold and also we are actively pursuing safety inspection.
Speaker #2: And during the correctional measures and how do you measure the effects here? And the results here? And how do you make sure that we're always compliant?
Speaker #2: Okay. I will give this question to our independent executive, Ms. Zhang. Okay. In this process, our team of independent executive directors have been closely following the safety and environmental compliance issues.
Speaker #2: And we have been monitoring corrections and the company has been putting in more dollars into safety, especially for the digitalization higher digitalized monitoring system.
Speaker #2: Being put into use in our operation will bring the positive effects. As for the bottom line and also for the compliance in environmental and compliance as an SOE, we will fulfill our responsibility and in terms of our investment, supervision, we will follow closely what happens to all our subsidiaries and our associated companies.
Speaker #2: Making sure that if there's anything, we would nip it in the bud. Okay. The next question is about our import and export coal volume has been growing a lot in H1.
Speaker #2: Are there reasons behind this? Thank you. Okay. This one goes to you, Ms. Xu. Answer. much because we have been following the 10 rules about the trading of coals.
Speaker #2: And for the coal trading businesses, what's the term here? Well, for the weekly controlled coal, we are shifting to the distributed coal. So we are shifting the procurement structure.
Speaker #2: And from Mr. Jingchen. Okay. In our report, we have disclosed the import and export and also domestic distribution. The main change mainly comes from our domestic distributors.
Speaker #2: Not much change is from the trading. Okay. From Taijiao Lin. The adjustments are like this. This is last year. There has been a lot of pricing changes in coal.
Speaker #2: And although we have been controlling who we sell to and of course, if we have to store coal for a longer time before sales and to prevent such risks, in the contract, we try to pass on such risks to the end clients.
Speaker #2: And in this case, through making adjustments to our contracts, we there is some compliance risk before we can fully recognize the revenue here. In this case, we are converting such business to domestic distributors.
Speaker #2: But even if it's done through distributors, we have full control of the source and the flow of the products. Okay. Next question. In the financial statement, our non-operational expenses was 551 million.
Speaker #2: RMB up by 788%. And dragging down the profits attributable to our shareholders. And for the management team, what's your take with such write downs for the large value assets and also the non-recurring expenses like the late fees and do you have any improvements here?
Speaker #2: Answer. Well, in our statement, we have seen major changes to the non-operational expenses. The main reason is paying the taxes and the late fees.
Speaker #2: It's based on how the tax policies in execution there might be some differences between the understanding of the actual rules and the execution. For us, we are always a compliant taxpayer.
Speaker #2: And internally, we use the refined and digitalized measures to make sure we have refined management of our taxes. And as an independent director, the administration and governance of the company is well in control.
Speaker #2: And for the board to supervise the asset lifecycle of the company and also to prevent the write down of the assets and compliant risks on a quarterly basis and for our internal audit reports, we would pay close attention to those items and in this process, we have also been asking questions about how to get a better read of the regulations and how to better communicate with the competent.
Speaker #2: Authorities in taxes and the regulators. So that we can narrow the gap between our read of the policy and the actual policy. Okay. Thank you.
Speaker #2: The next question. Is in H1, the profit attributable to shareholders was up by 5.8%. But because you had more of the non-operating expenses, the it was dragged down overall.
Speaker #2: So what's your specific measures to give a better shareholder returns from Mr. Jingchen? Okay. About the change of the non-operational expenses, as we have established, it's mainly because of the in H1, the tax authorities, they had the tax inspection.
Speaker #2: Ms. Tao has already given very specific answers and overview here. And personally, my understanding is that the impact has already been fully absorbed in our P&L of this period.
Speaker #2: And the non-operational expenses for this period will no longer be a negative drag to our long-term result. As for our market cap management, China Coal has always set store by the shareholder return and we have robust communication with our investors and we have taken multiple measures to give better returns to our shareholders.
Speaker #2: For example, we have just announced we will continue to deliver the interim payout dividend. And in H1, China Coal as the controlling shareholder of China Whole Energy, we have increased our shareholding of China Coal Energy showing our confidence in China Coal Energy.
Speaker #2: And strengthening the stock price and we have the confidence to continue to improve our operations in the future and to guarantee the strengthened value of the company.
Speaker #2: And we'll keep communicating with our investors and we hope that you will keep in touch with us so that we can altogether maintain the market value of China Coal Energy.
Speaker #2: Okay. One last question. For renewable energy installation target in the longer term and in the next one year. Or two, what is the revenue contribution expected from renewable energy?
Speaker #2: Okay. Question goes to you. Thank you. During the 15th five-year plan, China Coal Group's long-term target is to reach 50 million kilowatt of installation.
Speaker #2: So for each year, it's 8 million kilowatt a year. And with policy number 136, we want long-term healthy sustainable development. And for China Coal Group, we are present in the source grid load storage business.
Speaker #2: And with the more utilization of renewable energy, with better presence of the business and with better management, renewable energy will be a positive lift to our operational results.
Speaker #2: From Mr. Jingchen, we have mentioned that we want 50 million of installation for renewable energy. That's for China Coal as a group. As for China Coal Energies, 15th five-year plan, it is being revealed by the board as we speak once that has been approved we will disclose that.
Speaker #2: Thank you.
Speaker #1: Thank you all. And that's the end for the Q&A session. And let's see if the management has any other sharings. Okay. We don't have any additional sharings.
Speaker #1: Thank all investors for joining this session. If you have further questions, feel free to approach our IR team. We're more than happy to answer any questions you may have.
