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CF Energy Corp. — Management Reports 2025
May 29, 2025
46218_rns_2025-05-28_322e1025-5e05-4319-b542-68fe77bb54d2.pdf
Management Reports
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CF ENERGY CORP.
Management's Discussion and Analysis
for the three-month periods ended
March 31, 2025 and 2024
Dated May 28, 2025
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 2
Advisory
This Management's Discussion and Analysis ("MD&A") provides an analysis to enable readers to understand the financial position and operations of CF Energy Corp. (hereafter referred to as "CF Energy", "we" or the "Company") and its subsidiaries (collectively referred to as the "Group" or "our Group") as at and for the three-month period ended March 31, 2025. This information should be read in conjunction with the Company's unaudited condensed interim consolidated financial statements and related notes for the three-month periods ended March 31, 2025 and 2024 and the audited consolidated financial statements and related notes for the year ended December 31, 2024. "CF Energy" includes CF Energy Corp. and its subsidiaries, unless otherwise indicated. Additional information related to CF Energy is available on SEDAR+ at www.sedarplus.com or on its website at http://www.cfenergy.com.
The preparation of the audited consolidated financial statements in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IASB") (collectively, "IFRS Accounting Standards") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosed contingent assets and liabilities at the date of the financial statements, and reported amounts of sales and expenses during the reporting period. CF Energy bases its estimates on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
This MD&A contains certain non-IFRS Accounting Standards ("non-GAAP") financial measures to assist users in assessing the Company's performance. Non-GAAP financial measures do not have any standard meaning prescribed by IFRS Accounting Standards and may not be comparable to similar measures presented by other issuers. These measures are identified and described under the section "Non-GAAP Financial Measures".
Amounts are stated in Renminbi (RMB), the official currency of the People's Republic of China (the "PRC" or "China") and the functional currency of the principal operating subsidiaries of the Company in the PRC, and Canadian dollars (CAD) unless otherwise indicated.
Caution Regarding Forward-Looking Information
Certain statements in this MD&A may constitute "forward looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group, or the industry in which they operate, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this MD&A, the words "estimate", "believe", "anticipate", "intend", "expect", "plan", "may", "should", "will", the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements. Such forward looking statements reflect the current expectations of the management of the Company with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed or implied by those forward looking statements, such as significant changes in market conditions, the inability of the Company to realize sales and the inability of the Company to attract sufficient financing and the risk factors summarized below under the heading "Risks and Uncertainties". New risk factors may arise from time to time and it is not possible for management of the Company to predict all of those risk factors or the extent to which any factor or combination of factors may cause actual results, performance or achievements of the Company to be materially different from those expressed or implied in such forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this MD&A are based upon what management believes to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained in this MD&A speak only as of the date hereof. The Company does not undertake or assume any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Overview
CF Energy is a Canadian public company currently listed on the TSX Venture Exchange ("TSX-V") under the stock symbol "CFY". CF Energy is primarily involved in natural gas distribution and sustainable energy utilization, serving residential, commercial and industrial users as well as electric vehicle battery swap services in the PRC.
For reporting purposes under IFRS8 Operating Segments, our operating business model is grouped and presented under three main reportable segments:
(i) Gas distribution utility segment, which comprises natural gas transmission and sales, including:
(a) Pipeline Natural Gas ("PNG") sales and Liquified Natural Gas ("LNG") supply distribution sales and related service pipeline installation and connection sub-segments; and
(b) Natural gas direct transmission;
(ii) Integrated smart energy segment, which comprises the integrated smart energy system and integrated district energy distribution; and
(iii) Smart mobility segment, which comprises the operation of electric vehicle ("EV") battery swap stations and trading of EV to designated customers.
Gas Distribution Utility Segment
Pipeline PNG Sales and LNG Supply Distribution Sales
Major pipeline PNG sales projects are based in Sanya City, Hainan Province, and Pingxiang City, Jiangxi Province. The Company has been granted a 30-year exclusive concession right (2007 to 2037) in Sanya City to operate the PNG sales as well as the construction and maintenance of the required facilities and pipelines which makes the Company the dominant participant in the Sanya PNG gas distribution market. The Company also distributes PNG to users in the ceramic industry base of Xiangdong District, Pingxiang City, Jiangxi Province under a 30-year distribution right (2010 to 2040) granted to its 40% owned associate.
Natural Gas Direct Transmission
This is the transportation of natural gas via the Company's 2.0 kilometers (1.4 miles) pipeline connecting the provincial natural gas trunk lines to the Gaoyao Combined Heat, Power and Cold Natural Gas Power Plant owned by Guangdong Datang International Zhaoqing Heat & Power Co., Ltd. in Zhaoqing City, Guangdong Province.
CNG Vehicle Refueling (suspended operations in 2023)
The Company used to operate two refueling stations in Sanya City, Hainan Province, and Changsha City, Hunan Province respectively which provided both CNG and LNG refueling services for vehicles such as household cars, taxicabs, buses and trucks. The operations of the Sanya City refueling station were forced to suspend as the location of the station being too close to the intended location for the construction of certain government property resulting in it no longer meeting the safety regulation requirements, while the operations of the Changsha City station were terminated as it no longer aligned with the future business strategies of the Group with major focus on clean energy solutions with high growth potentials. As a result of the suspension, the operations of the CNG Vehicle Refueling segment were accounted for as discontinued operations in the consolidated financial statements.
Integrated Smart Energy Segment
Currently, there are two projects under this segment, namely the integrated smart energy project (the "Haitang Bay Integrated Smart Energy Project") and the integrated district energy distribution project (the "Meishan Project").
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 4
The Haitang Bay Integrated Smart Energy Project
The Haitang Bay Integrated Smart Energy Project, which combines the use of multiple clean energy sources, including solar, hydro, electricity and natural gas (CCHP/Co-Gen), is to supply cooling, heating, as well as hot water to the hotels, shopping centers and households in the Haitang Bay area of Sanya City, Hainan Province, the PRC. This project is conducted through the Group's 70% held (30% held by the EDF Group) subsidiary company, EDF Changfeng (Sanya) Energy Co., Ltd. ("EDF CF") with an authorized capital of RMB119.1 million fully paid up in 2021. Under a 30-year concession right agreement (2017 to 2047), EDF CF has the right to build, own and operate the project in Haitang Bay, Hainan Province.
The Project has been recognized as a low-carbon energy utilization project in the tropical resort city of Sanya, Hainan Province, to provide air-conditioning with reduced emissions for public facilities in the Haitang Bay area. The Project will have four (4) central energy stations with 30km of district cooling and heating distribution networks when fully developed. Once fully implemented, the system will distribute cooling, heating and hot water to serve 3.5 million square meters of cooling space for commercial customers, including large-scale hotels, shopping malls, entertainment parks and buildings, hospitals and other commercial complexes. The Project uses an optimized multi-energy integration program to distribute cooling, heating and hot water to customers. The system will apply many advanced technologies, i.e. multi-level compressed high-efficient refrigeration units, "ice battery" technology, hydro heat pump technology, distributed photovoltaic technology and AI data management to provide a more efficient energy supply. The Project integrates advanced energy-saving technologies, such as ice storage and water-source heating pumping. It is expected to save about 30,000 tons of standard coal and reduce about 100,000 tons of carbon dioxide, sulfur dioxide and nitrogen oxide emissions every year once fully implemented.
Construction of the first energy station and the 31.318km of a doubled-lined pipeline for the integrated smart energy network has been completed and commenced commercial operation in September 2021. The first group of commercial customers includes the Sanya Edition Hotel, Fairmont Sanya Haitang Bay, Westin Sanya Haitang Bay Resort and China Taiping Qube Hotel. The Company has signed up sixteen (16) commercial customers in Haitang Bay as of the date of this MD&A. The first phase of the first energy station can provide services to 400,000 square meters of cooling space. Currently, first phase has not reached its maximum capacity hence the construction of other phases has not commenced.
The Meishan Project
The Meishan Project is a joint investment, construction and operation of an integrated district energy distribution project in the New Economic Development Zone of Meishan City, Sichuan Province (the "Meishan New Economic Development Zone") to be operated by Meishan Hengtai Tianzhiyuan Energy Limited ("Meishan Hengtai"), a company which the Group holds an effective interest of 72%. The Meishan New Economic Development Zone, situated next to the central urban area of Meishan City, Sichuan Province, with a planned development area of 50.5 square kilometers, is to be the hub for manufacturers of drugs, supplements, medical equipment and other medical-related supplies. The year-round constant demand for steam is necessary to produce drugs which makes the Meishan New Economic Development Zone an ideal platform for integrated district energy distribution.
The Meishan project commenced operation in mid-May 2021 and has signed up sixteen (16) customers with thirteen (13) customers under service as of the date of this MD&A. Pipelines for the remaining three (3) customers are either under construction or construction completed and pending installation of the customers' own equipment.
The project is expected to benefit from cost efficiency while significantly improve the district's energy consumption efficiency and reduce local air pollution in line with state policy as more customers connect to the program.
Smart Mobility Segment
EV Battery Swap Stations
The EV battery swap station business is a segment of the Group to build and operate battery swap service for electric vehicles. Two (2) EV battery swap stations in Sanya City commenced operation in August 2020 and January 2021 respectively to serve BAIC Qingxiang Technology Co., Ltd.'s ("BAIC QX") 200 swap-battery EVs for its network taxi hiring business (the "Network Taxis") currently operating in Sanya City and additional 200
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 5
EV Network Taxis planned for Hainan Province in the near term with Blue Valley Smart (Beijing) Energy Technology Co., Ltd. ("Blue Valley"). In September 2020, the Company and EDF (China) Holding Ltd. ("EDF (China)") jointly established Hainan EDF Huapu Smart Mobility Company Limited ("EDF Huapu SM"), a 70% owned company of the Group which signed an 8-year exclusive co-operating agreement with BAIC QX and Blue Valley to provide EV battery swap services in Haikou City, the provincial capital of Hainan Province.
On September 14, 2023, Hainan Huapu Green Energy Investment Co., Ltd. ("Huapu Green Energy"), a wholly-owned subsidiary of the Group acquired the remaining 30% equity interest in EDF Huapu SM with a consideration of RMB13.2 million, determined based on negotiation and with reference to an independent valuation performed by an independent valuer. As a result, the Group's effective interest in EDF Huapu SM increased from 70% to 100%. Upon completion of acquisition, the name of EDF Huapu SM was changed to Hainan Huapu Smart Mobility Co., Ltd.
Following the acquisition of a 70% equity stake in the local Beihai City EV battery swap station operator, Beihai Brighton Road New Energy Ltd. (the "Beihai Company") in Beihai City, Gangxi Province in October 2022, the Beihai Company currently operates two (2) EV battery swap stations and has 373 registered active taxis as its EV battery swap users by the end of the second quarter of 2024. There is a total of 600 taxis in Beihai City and our clientele accounts for approximately 62% of the market. All of the taxis in Beihai City are battery swap cars, only Beijing Electric Vehicle Co., Ltd. and Dongfeng Electric Vehicle Co., Ltd. are within the government's supplier list for taxis.
Results for the three-month period ended March 31, 2025
Continuing operations
For the three-month period ended March 31, 2025, the Group reported a net profit from continuing operations of RMB1.6 million, a decrease of RMB8.3 million from a net profit of RMB9.9 million for the three-month period ended March 31, 2024. On a comparable basis, there was an adjustment on a non-recurring government financial assistance of RMB0.2 million from the local government of Beihai City, Gangxi Province to subsidize infrastructure of EV station in the city in 2025 (2024: RMB nil), the non-GAAP adjusted net profit from continuing operations for the three-month period ended March 31, 2025 was RMB1.4 million, a decrease of RMB8.5 million, from a non-GAAP adjusted net gain of RMB9.9 million as reported for the same period in 2024.
Discontinued operations
Loss from discontinued operations for the three-month period ended March 31, 2025 was RMB0.1 million, a decrease of RMB0.2 million from a loss of RMB0.3 million for the three-month period ended December 31, 2024.
Major Highlight for the period ended March 31, 2025 and up to the date of this MD&A
Gas Selling Price Adjustment
The Group's natural gas business is a price-regulated industry in China, where its business and operations are susceptible to risks associated with government pricing policy and regulation changes. The Group needs to enter into discussions and negotiations with local governments on pricing from time to time. Over the past years, the Group had been able to increase the selling price several times. In July 2020, as the government natural gas price regulating body in Sanya City, the Sanya City Development and Reform Commission ("SYDRC") finalized the City's natural gas utility pricing formula adjustment (the "Pricing Formula"), which is based on and adjusted with reference to the pricing formula adjustment of the gas purchase price (the "Gas Purchasing Price") plus gas distribution cost became the guideline for the Group to follow on its gas selling prices starting from August 1, 2020 for both residential and commercial customers.
As Gas Selling Price adjustments generally take effect from April 1 each year, the weighted average Gas Selling Price each year may not fully reflect the price adjustments pronounced by the SYDRC for that year.
On March 28, 2025, SYDRC informed the Company by way of a notification letter that the 2024 Gas Selling Price for commercial customers has been recalculated according to the previously adopted Pricing formula (the "2025 Gas Selling Price"). With effect from the April 2025 meter reading cycle, the 2025 Gas Selling Price per m³ to commercial customers increased from RMB4.43 in 2024 to RMB4.54 in 2025, while the gas selling price
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 6
for the other remaining categories of customers remains unchanged, including the third level price to residential customers remained at RMB4.41.
The Pricing Formula is part of the pricing control strategy of the SYDRC for the whole of China. Going forward, as the pricing control policy is being further implemented by the SYDRC, the Group expects the New Gas Selling Price would significantly and adversely impact the profitability of its natural gas distribution business segment.
Change of CFO
Ms. Ling Cao, Chief Financial Officer of the Company ("CFO") tendered her resignation as CFO with effect from May 12, 2025 and she has continued to serve the Group at the subsidiary level. After careful consideration, the board of directors of the Company (the "Board") has appointed Mr. Yongqiang (Shawn) Shan as the new CFO with effect from May 12, 2025.
Company Outlook
The natural gas industry faces a variety of challenges ranging from regulatory impacts to market dynamics, and in the competitive and shifting landscape, we must evolve to embrace the changes and plan ahead.
Distributed Smart Energy Ecosystem – What We Achieved:
CF Energy has developed from a traditional natural gas company into a comprehensive energy solutions provider that aims to incorporate its smart energy system and battery swapping network via energy storage technology to create a highly integrated and efficient framework for sustainable energy management.
CF Energy's Haitang Bay integrated smart energy project and Meishan project are examples of standalone distributed energy system with advanced grid technologies that enable real-time monitoring and responsive energy distribution based on demand and supply conditions. Through ice storage technology, the Haitang Bay integrated smart energy system was founded.
We have entered the field of electrochemical energy storage for cost reduction and energy conservation through the mode of battery swapping in new energy vehicles. The CF Energy battery swap station network in Sanya already successfully provides an energy storage and distribution network for the EV taxis in Sanya city.
Distributed Smart Energy Ecosystem – What We Are Currently Doing:
The Company is working with partners in the IoT (internet of things), and cloud services field to create an efficient EMS (energy management system) that connects the standalone distributed smart energy systems with various energy storage technologies (including battery storage). - IoT Devices and Sensors are deployed across all components of the energy system—solar panels, energy storage units, battery swapping stations, and consumer endpoints. They collect real-time data on energy production, storage levels, battery health, and consumption patterns. Using historical data and machine learning models, the EMS can predict demand spikes, potential system disruptions, and optimal energy production schedules. This helps in preemptive management, reducing wastage, and increasing system reliability.
Distributed Smart Energy Ecosystem – Vision Moving Forward:
The Company envisions the smart energy centralized cooling for hotels, battery swap stations, and operates as a virtual power plant with active end user participation. The combined energy capacity from the cooling system, battery swap stations, and possibly additional storage units, can act as a virtual power plant, providing grid services such as peak shaving, load balancing, and frequency regulation.
The Company is working to integrate a demand response system where hotels and other end users can opt-in to adjust their energy usage during peak periods in response to incentives. For example, shifting non-essential power usage to off-peak hours. EV owners can charge their vehicles during off-peak hours to benefit from lower rates and reduce grid strain during high-demand periods. Alternatively, V2G (Vehicle to Grid) concept allows EVs to return energy to the grid during peak times, effectively using the vehicle's battery as a grid resource. Furthermore, utilizing a platform for energy trading that allows surplus energy (from renewable sources and stored energy) to be sold back to the grid or shared among participants will add additional revenue stream and encouraging sustainable practices. The integration must connect all components through a smart grid that enables two-way communication between the energy providers and consumers.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Selected Quarterly Financial Information
The following table provides selected financial information for the three-month periods ended March 31, 2025 and 2024 is presented in Chinese RMB. Presentation in Canadian dollars is for information purposes only (Note 2).
| except percentages and per share amounts | RMB'000 | For information purposes | ||||||
|---|---|---|---|---|---|---|---|---|
| Three-month periods ended March 31, | CAO'000 | |||||||
| 2025 | 2024 | Change | % | 2025 | 2024 | Change | % | |
| Continuing Operations | ||||||||
| Revenue | 105,017 | 149,027 | (44,010) | -30% | 20,720 | 27,957 | (7,237) | -26% |
| Gross profit | 24,515 | 32,693 | (8,178) | -25% | 4,837 | 6,133 | (1,206) | -21% |
| % of revenue | 23.3% | 21.9% | 1.4% | 23.3% | 21.9% | 1.4% | ||
| Other income | 1,750 | 2,463 | (713) | -29% | 345 | 462 | (117) | -25% |
| Other gain and losses, net | (10) | (41) | 31 | -76% | (2) | (8) | 6 | -75% |
| Impairment losses (recognized) reversed under expected credit loss model, net | (41) | 876 | (917) | -105% | (8) | 164 | (172) | -105% |
| Selling and marketing expenses | (8,797) | (8,339) | (458) | 5% | (1,736) | (1,564) | (172) | 11% |
| % of revenue | 8.4% | 5.6% | 2.8% | 8.4% | 5.6% | 2.8% | ||
| General and administrative expenses | (10,997) | (9,998) | (999) | 10% | (2,170) | (1,876) | (294) | 16% |
| % of revenue | 10.5% | 6.7% | 3.8% | 10.5% | 6.7% | 3.8% | ||
| Share of results of associates | 4,622 | 1,911 | 2,711 | 142% | 912 | 359 | 553 | 154% |
| Finance costs | (5,022) | (4,472) | (550) | 12% | (991) | (839) | (152) | 18% |
| Profit before tax | 6,020 | 15,093 | (9,073) | -60% | 1,187 | 2,831 | (1,644) | -58% |
| % of revenue | 5.7% | 10.1% | -4.5% | 5.7% | 10.1% | -4.5% | ||
| Income tax expense | (4,428) | (5,168) | 740 | -14% | (874) | (970) | 96 | -10% |
| % of revenue | 4.2% | 3.5% | 0.7% | 4.2% | 3.5% | 0.7% | ||
| Profit for the period from continuing operations | 1,592 | 9,925 | (8,333) | -84% | 313 | 1,861 | (1,548) | -83% |
| % of revenue | 1.5% | 6.7% | -5.1% | 1.5% | 6.7% | -5.1% | ||
| Discontinued operations | ||||||||
| Loss for the period from discontinued operations | (145) | (323) | 178 | -55% | (29) | (61) | 32 | -52% |
| Profit for the period | 1,447 | 9,602 | (8,155) | -85% | 284 | 1,800 | (1,516) | -84% |
| Total comprehensive income for the period | 1,447 | 9,602 | (8,155) | -85% | 284 | 1,800 | (1,516) | -84% |
| Profit (loss) for the period attributed to owner of the Company | ||||||||
| - from continuing operations | 3,392 | 11,557 | (8,165) | -71% | 669 | 2,168 | (1,499) | -69% |
| - from discontinued operations | (87) | (213) | 126 | -59% | (17) | (40) | 23 | -58% |
| 3,305 | 11,344 | (8,039) | -71% | 652 | 2,128 | (1,476) | -69% | |
| Loss for the period attributed to non-controlling interests | ||||||||
| - from continuing operations | (1,800) | (1,632) | (168) | 10% | (356) | (307) | (49) | 16% |
| - from discontinued operations | (58) | (110) | 52 | -47% | (12) | (21) | 9 | -43% |
| (1,858) | (1,742) | (116) | 7% | (368) | (328) | (40) | 12% | |
| 1,447 | 9,602 | (8,155) | -85% | 284 | 1,800 | (1,516) | -84% | |
| Total comprehensive income (expense) attributable to | ||||||||
| - Owners of the Company | 3,305 | 11,344 | (8,039) | -71% | 652 | 2,128 | (1,476) | -69% |
| - Non-controlling interests | (1,858) | (1,742) | (116) | 7% | (368) | (328) | (40) | 12% |
| 1,447 | 9,602 | (8,155) | -85% | 284 | 1,800 | (1,516) | -84% | |
| EBITDA from continuing operations (note 1) | 21,938 | 29,589 | (7,651) | -26% | 4,328 | 5,551 | (1,223) | -22% |
| % of revenue | 20.9% | 19.9% | 1.1% | 20.9% | 19.9% | 1.1% | ||
| Earnings (loss) per share | ||||||||
| From continuing and discontinued operations | RMB | RMB | CAD | CAD | ||||
| -Basic | 0.05 | 0.17 | 0.01 | 0.03 | ||||
| -Diluted | 0.05 | 0.17 | 0.01 | 0.03 | ||||
| From continuing operations | ||||||||
| -Basic | 0.05 | 0.18 | 0.01 | 0.03 | ||||
| -Diluted | 0.05 | 0.18 | 0.01 | 0.03 | ||||
| From discontinued operations | ||||||||
| -Basic | (0.00) | (0.01) | (0.00) | (0.00) | ||||
| -Diluted | (0.00) | (0.01) | (0.00) | (0.00) |
Note 1: EBITDA is identified and defined under the section "Non-GAAP Financial Measures".
Note 2: Canadian dollars were converted from RMB at the respective average rates of RMB1.000 to CAD0.1973 and RMB1.000 to CAD 0.1876 for the three-month periods ended March 31, 2025 and 2024 respectively. In converting RMB to CAD, % in CAD may not be fully aligned with that of RMB.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Result of Operations
Total Revenue and Sales Volume sold
Continuing Operations
Revenue (Summary table)
| Total Revenue (in RMB'000) | Three-month periods ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | Change | % | |
| Gas Distribution Utility | ||||
| - Gas supply | 69,499 | 111,312 | (41,813) | -38% |
| - Pipeline installation and connection | 25,450 | 28,449 | (2,999) | -11% |
| Integrated Smart Energy | 6,781 | 5,619 | 1,162 | 21% |
| Smart Mobility | 3,287 | 3,647 | (360) | -10% |
| Total Revenue in RMB'000 | 105,017 | 149,027 | (44,010) | -30% |
| Total Revenue in CAD'000 | 20,720 | 27,957 | (7,237) | -26% |
Located in an international tourist destination in the PRC's only tropical province, Sanya City, our business is affected by the demand for natural gas generated by tourists in hotel stays and traveling activities such as catering in restaurants.
Total revenue from continuing operations for the three-month period ended March 31, 2025 (the "First quarter in 2025") was RMB105.0 million, a decrease of RMB44.0 million, or 30%, from RMB149.0 million for the three-month period ended March 31, 2024 (the "First Quarter in 2024"). Revenue from gas supply for the First Quarter in 2025 was RMB69.5 million, a decrease of RMB41.8 million, or 38% as compared to RMB111.3 million for the First Quarter in 2024. Revenue from pipeline installation and connection for the First Quarter in 2025 was RMB25.4 million, a decrease of RMB3.0 million, or 11% as compared to RMB28.4 million for the First Quarter in 2024. Revenue from the Integrated Smart Energy segment for the First Quarter in 2025 was RMB6.8 million, an increase of RMB1.2 million, or 21% as compared to RMB5.6 million for the First Quarter in 2024. Revenue from the smart mobility segment was RMB3.2 million for the First Quarter in 2025, a decrease of RMB0.4 million, or 10% as compared to RMB3.6 million for the First Quarter in 2024.
Total revenue for the First Quarter in 2024 included bulk sales of 15.0 million m³ of pipeline gas to a gas supplier of a power plant in the Guangdong Province. Excluding such bulk sales, revenue from gas supply for the First Quarter in 2025 was similar to that of 2024. Decrease in pipeline revenue of installation and connection for the First Quarter in 2025 was mainly attributed to the slowdown of project completion due to the Chinese New Year Holiday in late January to early February 2025.
Sales volume sold
| Gas sales Sales volume sold (m3) | Three-month periods ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | Change | % | |
| Sanya City, Hainan Province | 19,907,012 | 35,431,822 | (15,524,810) | -44% |
| Total gas sales volume (m3) | 19,907,012 | 35,431,822 | (15,524,810) | -44% |
Total sales volume from continuing operations for the First Quarter in 2025 was 19.9 million m³, a decrease of 15.5 million m³, or 44% as compared to 35.4 million m³ for the First Quarter in 2024.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Gas Sales volume by nature of customers
Sales volume sold by nature of customers
| Sanya City, Hainan Province
Gas volume sold (m³) | Three-month periods ended March 31, | | | |
| --- | --- | --- | --- | --- |
| | 2025 | 2024 | Change | % |
| Residential customers | 8,574,884 | 8,642,374 | (67,490) | -1% |
| Commercial customers | 11,332,128 | 26,789,448 | (15,457,320) | -58% |
| Total | 19,907,012 | 35,431,822 | (15,524,810) | -44% |
Gas sales volume of residential customers in Sanya City for the First Quarter in 2025 was 8.6 million m³, similar to the gas sales volume of residential customers for the First Quarter in 2024. Gas sales volume for commercial customers in Sanya City for the First Quarter in 2025 was 11.3 million m³, a decrease of 15.5 million m³, or 58% as compared to 26.8 million m³ in the First Quarter of 2024.
Gas sales volume of commercial customers in Sanya City for the First Quarter in 2024 included gas supply of 15.0 million m³ to a customer which distributes gas onwards to the Gaoming Power Plant in Foshan City, Guangdong Province, while there were no such sales in the First Quarter in 2025. Excluding such bulk sales, gas sales volume of commercial customers for the First Quarter in 2025 decreased 0.5 million m³, or 4% from 11.8 million m³ in the First Quarter in 2024 to 11.3 million m³ for the First Quarter in 2025 on a comparable basis.
As an international tourist destination and the only tropical province in the PRC, Sanya City's traveling activities have a direct impact on gas revenue from commercial customers with traveling activities as a large portion of gas revenue was generated from this sub-segment. According to the Sanya City Bureau of Statistics, the number of overnight visitors to Sanya City was 8.8 million for the First Quarter in 2025, a slight increase of 0.2 million, or 2% as compared to 8.6 million for the First Quarter 2024.
Commercial customers in Sanya City which include non-residential customers such as hotels, resorts and restaurants, contributed approximately 85.0% of the total volume from commercial customers with the remaining 15% contributed from social welfare units such as schools, government facilities, and other not-for-profit organizations.
Gas sales by number of customers
| Sanya City, Hainan Province | Three-month periods ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | Change | % | |
| Customers newly started gas supply | ||||
| Residential customers | 6,234 | 9,157 | (2,923) | -32% |
| Commercial customers | 36 | 44 | (8) | -18% |
| Total customers | ||||
| Residential customers | 352,021 | 329,172 | 22,849 | 7% |
| Commercial customers | 1,667 | 1,546 | 121 | 8% |
The residential sector recorded 6,234 new customers for the First Quarter in 2025, a decrease of 2,923 or 32% as compared to 9,157 new residential customers for the First Quarter in 2024. 36 new commercial customers were obtained for the First Quarter in 2025 as compared to 44 new commercial customers for the First Quarter in 2024.
There was a total of 352,021 residential customers and 1,667 commercial customers as at March 31, 2025, as compared to 329,172 residential customers and 1,546 commercial customers as at March 31, 2024.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Gas sales revenue by customers
| Gas sales revenue by customers | ||||
|---|---|---|---|---|
| Sanya City, Hainan Province | ||||
| Gas sales revenue(in RMB'000) | Three-month periods ended March 31, | |||
| 2025 | 2024 | Change | % | |
| Residential customers | 23,007 | 23,281 | (274) | -1% |
| Commercial customers | 45,370 | 86,278 | (40,908) | -47% |
| 68,377 | 109,559 | (41,182) | -38% | |
| Other cities | ||||
| Gas sales revenue(in RMB'000) | ||||
| Commercial customers | 1,122 | 1,753 | (631) | -36% |
| Total gas sales by customers | 69,499 | 111,312 | (41,813) | -38% |
Gas sales revenue from residential customers in Sanya City for the First Quarter in 2025 was RMB23.0 million, a decrease of RMB0.3 million, or 1%, from RMB23.3 million for the First Quarter in 2024.
In the peak season, seasonal residents from the North will come and stay in Sanya City to catch the warm and comfortable weather in the South which causes a higher demand for natural gas. According to the Sanya City Bureau of Statistics, over 647,000 seasonal residents arrived in Sanya City for the First Quarter in 2025, a slight decrease of 1% as compared to 652,000 seasonal residents for the First Quarter in 2025.
Gas sales revenue from commercial customers in Sanya City for the First Quarter in 2025 was RMB45.4 million, a decrease of RMB40.9 million, or 47%, from RMB86.3 million for the First Quarter in 2024.
Gas sales revenue from commercial customers in Sanya City for the First Quarter in 2024 included gas revenue of RMB40.4 million to a customer which distributes gas onwards to the Gaoming Power Plant in Foshan City, Guangdong Province as mentioned earlier, while there were no such sales in the First Quarter in 2025. Excluding such sales, gas sales revenue of commercial customers for the First Quarter in 2025 decreased by 0.5 million, or 1% from 45.9 million in the First Quarter in 2024 to RMB45.4 million for the First Quarter in 2025 on a comparable basis.
Sales revenue in Sanya City was driven by sales volume and gas selling prices based on the Gas Selling Price adjustments pronounced by the SYDRC generally take effect from April 1 of each year.
The weighted average gas selling price per m³ for residential customers in Sanya City was RMB2.7 for the First Quarter in 2025 and 2024.
The weighted average gas selling price per m³ for commercial customers in Sanya City was RMB4.0 for the First Quarter in 2025, an increase of RMB0.8, or 25.0% from RMB3.2 for the First Quarter in 2024 as relatively competitive prices were offered to such power plant customer which commensurate with its large consumption volume in 2024. Excluding such bulk sales, the average selling price for the commercial customers for the First Quarter in 2025 increased RMB0.1, from RMB3.9 for the First Quarter of 2024 to RMB4.0 for the First Quarter in 2025 on a comparable basis.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Pipeline installation and connection
Sanya City, Hainan Province
| Pipeline connection by number of customers | Three-month periods ended March 31, | |||
|---|---|---|---|---|
| 2025 | 2024 | Change | % | |
| Customers newly connected | ||||
| Residential customers | 1,708 | 3,436 | (1,728) | -50% |
| Commercial customers | 17 | 44 | (27) | -61% |
| Total customers connected | ||||
| Residential customers | 418,994 | 395,196 | 23,798 | 6% |
| Commercial customers | 1,797 | 1,670 | 127 | 8% |
| Pipeline connection revenue (in RMB'000) | Three-month periods ended March 31, | |||
| --- | --- | --- | --- | --- |
| 2025 | 2024 | Change | % | |
| Residential customers | 20,392 | 24,557 | (4,165) | -17% |
| Commercial customers | 5,058 | 3,892 | 1,166 | 30% |
| Total | 25,450 | 28,449 | (2,999) | -11% |
Pipeline installation and connection revenue from residential customers for the First Quarter in 2025 was RMB20.4 million, a decrease of RMB4.2 million, or 17% from RMB24.6 million for the First Quarter in 2024.
In recent years, a series of policies to control the housing prices of the real estate market were issued by the PRC government together with the current unfavorable factors and sentiment in the property market in the PRC have significantly hindered the growth of China's real estate market, which in turn affects the business growth of city natural gas operators in Sanya City. Such adverse effect was partially offset by the commencement of a new contract signed in August 2024 with the government of Sanya City for an urban gas pipeline facility renovation project. This urban gas pipeline facility renovation project was undergoing in the First Quarter of 2025 which accounted for 10% of total revenue from residential customers in this quarter.
The decrease in pipeline installation and connection revenue from residential customers for the First Quarter in 2025 was mainly attributable to the slowdown in the completion of projects in the First Quarter of 2025 due to the Chinese New Year Holiday from late January to early February 2025.
New residential customers obtained in 2025 were mainly government projects with the connection of gas supply to the temporary housing for relocating residences of certain old residential areas in the city and the construction of government housing with relatively competitive prices for eligible individuals under the government housing scheme.
A decrease in pipeline installation and connection revenue from residential customers for the First Quarter in 2025 was attributed to a decrease in the number of new residential customers gained in this quarter.
Pipeline installation and connection revenue from commercial customers for the First Quarter in 2025 was RMB5.1 million, an increase of RMB1.2 million, or 30% from RMB3.9 million for the First Quarter in 2024.
There were 1,708 new residential customers and 17 new commercial customers for the First Quarter in 2025 as compared to 3,436 new residential customers and 44 new commercial customers for the First Quarter in 2024. There were 418,994 residential customers and 1,797 commercial customers as at March 31, 2025, as compared to 395,196 residential customers and 1,670 commercial customers as at March 31, 2024.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Integrated Smart Energy
| Integrated smart Energy | ||||
|---|---|---|---|---|
| Integrated Smart Energy System | ||||
| Sanya City, Hainan Province | Three-month periods ended March 31, | |||
| (in RMB'000) | 2025 | 2024 | Change | % |
| Commercial customers | 4,745 | 4,134 | 611 | 15% |
| Integrated district energy distribution | ||||
| Meishan City, Sichuan Province | ||||
| (in RMB'000) | ||||
| Commercial customers | 2,036 | 1,485 | 551 | 37% |
| Total | 6,781 | 5,619 | 1,162 | 21% |
The integrated smart energy segment comprises the Haitang Bay Integrated Smart Energy Project (integrated smart energy system) which commenced commercial operation in September 2021 and the Meishan Project (integrated district energy distribution project) which commenced commercial operation in May 2021. The Haitang Bay Integrated Smart Energy Project is in its implementation stage.
Haitang Bay Smart Energy Project reported a revenue of RMB4.7 million for the First Quarter in 2025, an increase of RMB0.6 million, or 15% as compared to RMB4.1 million for the First Quarter in 2024. Revenue from the Meishan Project was RMB2.0 million for the First Quarter in 2025, an increase of RMB0.5 million, or 37% from RMB1.5 million for the First Quarter in 2024. Revenue of both projects recorded a steady growth in this quarter.
Smart Mobility
| Smart Mobility | ||||
|---|---|---|---|---|
| EV Battery Swap Revenue | Three-month periods ended March 31, | |||
| 2025 | 2024 | Change | % | |
| (in RMB'000) | ||||
| Sanya and Haikou City, Hainan Province | 1,854 | 1,888 | (34) | -2% |
| Beihai City, Guangxi Province | 1,117 | 1,391 | (274) | -20% |
| Other cities | 316 | 368 | (52) | -14% |
| Total | 3,287 | 3,647 | (360) | -10% |
EV battery swap revenue for the First Quarter in 2025 was RMB3.3 million, a decrease of RMB0.3 million, or 10% from RMB3.6 million for the First Quarter in 2024. The smart mobility segment comprises the EV battery swap business and the relatively new EV trading business. As at March 31, 2025, there are a total of seven (7) EV battery swap stations in operation.
Foreign exchange rates
CF Energy reports its financial results in RMB, its functional currency as it earns all its revenues and incurs most of its expenses in RMB. As the Company is listed on TSX-V, certain financial information and/or comparative analysis are also presented in CAD, and fluctuations in the exchange rates between RMB and CAD should also be considered.
The exchange rate between the RMB and the CAD is summarized below.
| One Chinese RMB to Canadian dollars | Q1 2025 | Q1 2024 | % change |
|---|---|---|---|
| Spot rate at the end of the period | 0.1981 | 0.1875 | -5.1% |
| Average rate for the period | 0.1973 | 0.1876 | -0.9% |
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 13
Gross margin
Gross profit from continuing operations for the First Quarter in 2025 was RMB24.5 million, a decrease of RMB8.2 million, or 25%, from RMB32.7 million for the First Quarter in 2024. Gross profit margin for the First Quarter in 2025 was 23.3%, an increase of 1.4 percentage points as compared to 21.9% for the First Quarter in 2024.
Selling of pipeline gas to the Gaoming Power Plant in Foshan City, Guangdong Province in the First Quarter of 2024 was at relatively competitive prices with very low gross margin which had a dilutive effect on the overall gross profit and margin for the First Quarter in 2024.
Excluding the pipeline gas sales referred to above, gross profit from continuing operations for the First Quarter in 2025 decreased RMB7.9 million, or 24%, from RMB32.4 million for the First Quarter in 2024 to RMB24.5 million for the First Quarter 2025 on a comparable basis. Gross profit margin for the First Quarter in 2025 decreased 6.6 percentage points from 29.9% for the First Quarter in 2024 to 23.3% for the First Quarter in 2025 on a comparable basis.
The overall drop in gross profit margin for the First Quarter in 2025 as compared to the comparable gross profit margin for the First Quarter in 2024 was mainly attributable to the following unfavorable factors:
The increase in the purchase price of pipeline gas resulting from the renewal of the three-year gas purchase contracts with China National Offshore Oil Corporation which became effective from April 1, 2023. The unit cost of pipeline gas has a 8.5% increase in the First Quarter of 2025 as compared to the same period of 2024.
Government projects with the connection of gas supply to the temporary housing for relocating residences of certain old residential areas in the city generated low profit margin for the First Quarter in 2025. Minimal sales from urban gas pipeline facility renovation project was recognized in the First Quarter of 2024.
Offsetting the above factors, the negative margin of the Integrated Smart Energy segment was marginally narrowed in the First Quarter in 2025 as compared to the corresponding period in 2024 as the number of users and their usage increased during the period.
Operating expenses
Selling and marketing expenses of continuing operations for the First Quarter in 2025 were RMB8.8 million, an increase of RMB0.5 million, or 5% from RMB8.3 million for the First Quarter in 2024. Selling and marketing expenses as a percentage of sales for the First Quarter in 2025 were 8.4%, an increase of 2.8 percentage points as compared to 5.6% for the First Quarter in 2024.
General and administrative expenses of continuing operations for the First Quarter in 2025 were RMB11.0 million, an increase of RMB1.0 million, or 10% from RMB10.0 million for the First Quarter in 2024. General and administrative expenses as a percentage of sales for the First Quarter in 2025 was 10.5%, an increase of 3.8 percentage points as compared to 6.7% for the First Quarter in 2024.
The increase in general and administrative expenses for the First Quarter in 2025 was mainly attributable to the expenses incurred for the celebration gala of the Company's 30's anniversary which was held in March 2025 and certain legal expenses was paid during the period.
Finance Costs
Finance costs for the First Quarter in 2025 were RMB5.0 million, an increase of RMB0.5 million, or 12% from RMB4.5 million for the First Quarter in 2024. Finance costs reflected interests on lease liabilities, short-term bank borrowings, long-term bank financing and other borrowings for financing of the Group's projects under development, net of RMB0.3 million capitalized on projects under development for the First Quarter in 2025.
Share of results of associates
Share of profit of associates was RMB4.6 million for the First Quarter in 2025 as compared to RMB1.9 million for the First Quarter in 2024. The share of results of associates mainly represents the share of profit of the Group's 40% held associate, Pingxiang Xinao Changfeng Gas Co., Ltd. ("Pingxiang Xinao CF"). Pingxiang Xinao CF benefited from the successful connection of gas pipeline to reduce its reliance on LNG, resulting in a net profit situation since the second quarter of 2023.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
EBITDA from continuing operations
EBITDA from continuing operations (non-GAAP measure as identified and defined under section "Non-GAAP Measures") for the First Quarter in 2025 was RMB21.9 million, a decrease of RMB7.7 million, or 26% as compared to RMB29.6 million for the First Quarter in 2024.
EBITDA from continuing operations for the First Quarter in 2025 included a non-recurring government financial assistance of RMB0.2 million from the local government of Beihai City, Guangxi Province, to subsidize the infrastructure of EV stations in the city.
No adjustment on the EBITDA for the First Quarter in 2024, the adjusted EBITDA from continuing operations for the First Quarter in 2025 was RMB21.7 million, a decrease of RMB7.9 million, or 27%, from RMB29.6 million for the First Quarter in 2024.
Profit from continuing operations
The Group generated a net profit from continuing operations of RMB1.6 million for the First Quarter in 2025, a decrease of RMB8.3 million from a net profit of RMB9.9 million for the First Quarter in 2024.
Adjusted net profit for the period from continuing operations (non-GAAP)
| In RMB thousands
(except for % figures) | Three-month periods ended March 31, | | | |
| --- | --- | --- | --- | --- |
| | 2025 | 2024 | Change | % |
| Continuing operations | | | | |
| Net profit for the period from continuing operations | 1,592 | 9,925 | (8,333) | -84% |
| Non-recurring items | | | | |
| Government financial assistance | (232) | - | (232) | 100% |
| Adjusted net profit for the period from continuing operations (non-GAAP) | 1,360 | 9,925 | (8,565) | -86% |
All non-GAAP measures have been identified. On a comparable basis (please refer to the section headed "EBITDA from continuing operations" above for more details), the adjusted net profit of the Group was RMB1.4 million for the First Quarter in 2025, a decrease of RMB8.5 million from a net profit of RMB9.9 million for the First Quarter in 2024.
Earnings per share and adjusted earnings per share (non-GAAP) from continuing operations attributable to owners of the Company
Earnings per share from continuing operations was RMB0.05 (CAD0.01) (basic and diluted) for the First Quarter in 2025 as compared to earnings per share of RMB0.17 (CAD0.03) (basic and diluted) for the First Quarter in 2024.
Adjusted EPS was derived from the adjusted net profit for the period attributable to owners of the Company from continuing operations (non-GAAP) divided by the weighted average number of ordinary shares for the purpose of diluted earnings per share.
No adjusting items are reported for the calculation of EPS from continuing operations for the First Quarter in 2024. Adjusted EPS from continuing operations was RMB0.05 (CAD0.01) per share (basic and diluted) for the First Quarter in 2025 as compared to RMB0.17 (CAD0.03) (basic and diluted) for the First Quarter in 2024.
Loss from discontinued operations
Discontinued operations related to the termination of the operation of Clean Energy and Hunan CF CNPC as part of the Group's policy to realign its future business strategies with major focus on clean energy solutions with high growth potential and suspension of operation of Clean Energy by the order of local government.
Loss from discontinued operations was RMB0.1 million for the First Quarter in 2025 as compared to a loss of RMB0.3 million for the First Quarter in 2024.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Selected quarterly results
The following set out the Company's unaudited consolidated quarterly results for the most recent eight quarters: In thousands of RMB, except per share amounts
| Quarterly data (RMB '000)
except per share amounts | 2025 | 2024 | | | | 2023 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 |
| Revenue | 105,017 | 143,588 | 126,021 | 101,339 | 149,027 | 108,750 | 122,097 | 109,317 |
| Gross profit | 24,515 | 53,043 | 33,282 | 15,603 | 32,693 | 27,120 | 30,500 | 33,483 |
| Profit (loss) for the period from continuing operations | 1,592 | 11,106 | 4,304 | (8,392) | 9,925 | (25,314) | 7,636 | 16,459 |
| Profit (loss) for the period attributed to owners of the Company from continuing operations | 3,392 | 12,615 | 6,572 | (5,997) | 11,557 | (23,941) | 11,995 | 14,883 |
| EPS (loss per share) of continuing and discontinued operations | | | | | | | | |
| - basic (RMB) | 0.05 | 0.20 | 0.09 | (0.09) | 0.17 | (0.51) | 0.16 | 0.27 |
| - diluted (RMB) | 0.05 | 0.20 | 0.09 | (0.09) | 0.17 | (0.51) | 0.16 | 0.27 |
| EPS (loss per share) from continuing operations | | | | | | | | |
| - basic (RMB) | 0.05 | 0.20 | 0.09 | (0.09) | 0.17 | (0.36) | 0.18 | 0.23 |
| - diluted (RMB) | 0.05 | 0.20 | 0.09 | (0.09) | 0.17 | (0.36) | 0.18 | 0.23 |
Selected Financial Data
| (RMB000's) | March 31, 2025 | December 31, 2024 |
|---|---|---|
| Bank balances and cash, fixed term bank deposits | 56,409 | 111,695 |
| Net current liabilities | (260,141) | (239,801) |
| Adjusted working capital (note1) | (101,447) | (76,390) |
| Property and equipment | 878,783 | 885,977 |
| Right-of-use of assets | 100,491 | 104,779 |
| Total assets | 1,293,220 | 1,342,861 |
| Non-current liabilities | 403,679 | 427,245 |
| Total equity | 417,417 | 415,970 |
note 1: This financial measure is identified and defined under the section "Non-GAAP Financial Measures"
Bank balance and cash and fixed-term bank deposits decreased by RMB55.3 million from RMB111.7 million as at December 31, 2024 to RMB56.4 million as at March 31, 2025. The decrease primarily resulted from the net effect of the cash outflow from operating activities of RMB36.5 million, cash used for the acquisition of property and equipment, pipeline for relocation projects and intangible assets of RMB8.8 million and net withdrawal of short-term borrowings and long-term debt of RMB11.5 million for the First Quarter of 2025.
Adjusted Working Capital
The adjusted working capital (see "Non-GAAP Financial Measures") was negative RMB101.4 million as at March 31, 2025 as compared to the negative adjusted working capital of RMB76.4 million as at December 31, 2024. Adjusted working capital excludes the receipt in advance from customers before the commencement of pipeline installation and connection construction and natural gas sales of RMB63.7 million and short-term bank borrowings totalling RMB95.0 million.
Liquidity and Capital Resources
The Group's principal sources of short-term funding are existing bank and cash balances, operating cash flows and borrowings under its lines of credit and long-term funding such as bank term loan facilities and other borrowings provided to the Group.
The Company's principal sources of liquidity are cash provided from operation, including advance payments from residential and commercial and industrial customers related to construction contracts for gas connection included in contract liabilities, refund liabilities and access to credit facilities and capital resources.
The Company's primary short-term cash requirement is to fund working capital and repay the remainder of its outstanding withdrawals on its lines of credit as they fall due.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
The Company's medium and long-term cash goals are to fund the construction of its pipeline networks and gas distribution facilities and projects under development, to acquire capital and intangible assets for its growth initiatives in China and to repay its long-term loan facilities from banks.
In the short term, management does not expect to face any liquidity problems considering its current bank and cash position, available undrawn bank facilities as at March 31, 2025 and continue to generate cash flows from operations in the short and long term. During the period ended and as at March 31, 2025, the Group was in compliance with all of its debt covenants.
| In RMB thousands
(except for % figures) | March 31, 2025 | December 31, 2024 |
| --- | --- | --- |
| Short-term bank borrowings | 95,000 | 100,000 |
| Current portion of long-term debts | 102,010 | 86,080 |
| Long-term debts | 334,746 | 357,134 |
| Lease liabilities | 1,514 | 1,681 |
| Other borrowings | 8,100 | 8,650 |
| Total debts | 541,370 | 553,545 |
| Less: Bank balances and cash and fixed term bank deposits | 56,409 | 111,695 |
| | 484,961 | 441,850 |
| Total equity | 417,417 | 415,970 |
| Gearing ratio (non-GAAP) | 116.2% | 106.2% |
The net gearing ratio is a non-GAAP measure which is calculated by dividing interest-bearing borrowings, other borrowings and lease liabilities, less bank balances and cash and fixed term deposits, by total equity. The Group's net gearing ratio was approximately $116.2\%$ as at March 31, 2025, an increase of 10.0 percentage points as compared to $106.2\%$ as at December 31, 2024.
In the management of liquidity risk, the Group monitors and maintains levels of cash and cash equivalents deemed adequate by management of the Group to finance the Group's operations and mitigate the effects of fluctuations in cash flows. The Group has given consideration to its future performance and cash flow projection through monitoring the utilisation of bank borrowings and ensuring its ability to renew or refinance the banking facilities upon maturity, to meet its financial obligations, including the capital commitments.
Capital Commitments
As at March 31, 2025, capital expenditure in respect of the acquisition of property and equipment and the construction of pipelines under development contracted for but not provided in the unaudited consolidated condensed financial statements amounted to RMB58.0 million, a decrease of RMB2.2 million as compared to RMB60.2 million as at December 31, 2024. Capital commitments as at March 31, 2025 also included a remaining initial investment of RMB0.8 million for the $2\%$ equity interests in Hainan Shanglian Investment Co., Ltd. Capital commitments are to be financed by existing bank and cash balances, operating cash flows and borrowings under its lines of credit and long-term funding such as bank-term loan facilities and other borrowings provided to the Group.
Share Capital
As at March 31, 2025 and December 31, 2024, the Company has 65,885,155 common shares and 2,050,000 stock options outstanding.
There was no share option granted during the three-month periods ended March 31, 2025 and 2024. The Company has no warrants outstanding as of the date of this MD&A.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Non-GAAP Financial Measures
This MD&A contains certain financial measures that do not have any standardized meaning prescribed by IFRS Accounting Standards. Therefore, these financial measures may not be comparable to similar measures presented by other companies or issuers. Investors are cautioned that these measures should not be construed as alternatives to net income or to cash provided by operating, investing, and financing activities determined in accordance with IFRS Accounting Standards, as indicators of its performance. The Group provides these measures to assist investors in determining its ability to generate income and cash provided by operating activities and to provide additional information on how these cash resources are used. These measures are listed and defined below.
EBITDA from continuing operations
EBITDA is defined herein as earnings before income tax expense, finance costs, depreciation and amortization. EBITDA does not have any standardized meaning prescribed by IFRS Accounting Standards and therefore may not conform to the definition used by other companies or issuers. A reconciliation of net profit from continuing operations to EBITDA and adjusted EBITDA are presented in the MD&A as follows:
| In RMB thousands
(except for % figures) | Three-month periods ended March 31, | | | |
| --- | --- | --- | --- | --- |
| | 2025 | 2024 | Change | % |
| Continuing operation | | | | |
| Net profit for the period from continuing operations | 1,592 | 9,925 | (8,333) | -84% |
| Add: | | | | |
| Finance costs | 5,022 | 4,472 | 550 | -12% |
| Income tax expense | 4,428 | 5,168 | (740) | 14% |
| Depreciation and amortization | 10,896 | 10,024 | 872 | 9% |
| EBITDA for the period from continuing operations (non-GAAP) | 21,938 | 29,589 | (7,651) | -26% |
| Non-recurring/non-operating items | | | | |
| Government financial assistance | (232) | - | (232) | 100% |
| Adjusted EBITDA from continuing operations (non-GAAP) | 21,706 | 29,589 | (7,883) | -27% |
Adjusted working capital
Adjusted working capital is calculated as current assets less adjusted current liabilities. Adjusted current liabilities is calculated as current liabilities, excluding the receipts in advance from customers from pipeline installation and connection construction before commencement and natural gas sales, included in contract liabilities which represented the Group's obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customers. Receipt in advance from customers from pipeline installation and connection will be recognized as income upon the performance obligations are fulfilled and receipt in advance from customers for natural gas sales will be recognized as income upon the consumption of natural gas. Both amounts are deferred income in nature and non-refundable to customers, hence are excluded in the calculation of adjusted current liabilities. Adjusted current liabilities also excluded the short-term bank loan as lines of credit in the PRC are typically renewable when due.
The Group believes that the working capital as a supplemental measure, as adjusted based on the above parameters, provides a more appropriate indication of the Group's ability to settle its debt obligations as they fall due.
The calculation of adjusted working capital is provided in the table below.
| In RMB thousands | |||
|---|---|---|---|
| As at | Note | March 31, 2025 | December 31, 2024 |
| Current assets | 211,983 | 259,845 | |
| Less: Current liabilities | (472,124) | (499,646) | |
| Net current liabilities | (260,141) | (239,801) | |
| Add: Receipts in advance from customers | 1 | 63,694 | 63,411 |
| Add: Short-term bank borrowings | 95,000 | 100,000 | |
| Adjusted working capital | (101,447) | (76,390) |
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Note 1: Receipts in advance from customers in respect of pipeline installation and connection projects prior to commencement and natural gas sales are included in contract liabilities.
As at March 31, 2025, the Group's current liabilities exceeded its current assets by RMB260.1 million, an increase of RMB20.3 million in net current liabilities as compared to RMB239.8 million as at December 31, 2024. The increase in net current liabilities was mainly attributed to the decrease in bank balances and cash of RMB55.3 million, offset by a decrease in trade and other payables of RMB40.4 million and a decrease in short-term bank borrowings of RMB5.0 million.
In view of these circumstances, the management of the Group has given consideration to the future liquidity and performance of the Group and its available sources of finance in assessing whether the Group will have sufficient financial resources to continue as a going concern. Management is satisfied that the Group will have sufficient financial resources to meet its financial obligations, including capital commitments. Taking into account the Group's cash flow projections, including the term facility, the Group's ability to renew or refinance the banking facilities upon maturity and the Group's future capital expenditure in respect of its non-cancellable capital commitments, management considers that it has sufficient working capital to meet in full its financial obligations as they fall due for at least the next twelve months from the end of the reporting period and accordingly, the unaudited condensed interim consolidated financial statements have been prepared on a going concern basis.
Related Party Transactions
During the period, the Group entered into the following transactions with related parties:
| Transaction | Three-month periods ended March 31, | |||
|---|---|---|---|---|
| Name of related party | Relationship party | Nature of transactions | 2025 RMB'000 | 2024 RMB'000 |
| Ann Lin | Chief Executive | Rental expenses | - | 150 |
The following balances were outstanding from related party at the end of the reporting period:
| Balances | ||||
|---|---|---|---|---|
| Name of related party | Relationship | Terms | Mar 31, 2025 RMB'000 | Dec 31, 2024 RMB'000 |
| Pingxiang Xiao CF | Associate | Non-trade, unsecured and non-interest bearing (note 1) | 11,000 | 12,423 |
| Sichuan Xiangshu Petrochemical Co., Ltd. | Associate | Non-trade, unsecured and non-interest bearing | 320 | 320 |
| 11,320 | 12,743 | |||
| A director | Director | Unsecured and non-interest bearing (note 2) | - | (37) |
Note 1: The balance represented a loan of RMB11.0 million to Pingxiang Xinao CF. As at 31 December 2024, the outstanding balance is not expected to be repaid within 12 months and therefore the amount is classified as non-current asset.
Note 2: The balance represents staff advances for business purposes and were reimbursed afterwards.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Page 19
Derivative Financial Instrument
In 2007, Mr. Lin, advanced loans in the aggregate amount of RMB40.0 million to the Group pursuant to a subordination and forbearance agreement dated April 27, 2007 (the "Subordination and Forbearance Agreement"). On May 25, 2017, the Group entered into a loan discharge agreement with Mr. Lin ("Loan Discharge Agreement") to repay an aggregate amount of RMB36.0 million and the Group's obligation stated in the Subordination and Forbearance Agreement, has been fully discharged. Accordingly, the remaining RMB4.0 million was recognized as shareholder's contribution.
In addition, the Loan Discharge Agreement provided that if the Initial Public Offering ("IPO") was not completed by June 28, 2019, the Group shall have the right for a period of 90 days following June 28, 2019 to require Mr. Lin, directly or indirectly, to subscribe for common shares of the Company on the TSX Venture Exchange, in the amount of RMB36.0 million or its CAD equivalent (the "Investment"). The subscription price for such common shares shall was the volume-weighted average price of the common shares of the Company in the period of 30 calendar days preceding June 28, 2019 on the TSX Venture Exchange.
The IPO was not completed by June 28, 2019. On July 26, 2019, the Company announced that the Board determined to exercise the Company's option pursuant to the Loan Discharge Agreement to require the estate of Mr. Lin (the "Estate") to subscribe for an aggregate amount of CAD6.862 million (approximately RMB36.0 million) in common shares of the Company at a price of CAD0.68 per common share. Following the subscription, based on the prevailing exchange rate of June 28, 2019, the number of shares to be issued is 10,090,568. The management of the Company considered that the share subscription is a forward contract.
On June 21, 2021, the Company together with CF China filed a contract dispute case (the "Claim") against the Estate in the Sanya Intermediate People's Court, Sanya City, Hainan Province, China (the "Sanya Court") to enforce the execution of the Loan Discharge Agreement and the Investment. The Sanya Court declined to take jurisdiction over the dispute. The Company appealed from that decision to the Hainan Provincial High People's Court, which dismissed the Company's appeal on September 5, 2022. The Company applied for a retrial on the basis of new evidence, and this application was rejected on February 24, 2023. On October 30, 2023, the Company filed the Claim in the Sanya Suburban People's Court, Sanya City. The Claim was dismissed by the Sanya Suburban People's Court on December 7, 2023.
A beneficiary of the Estate (Mingfei He) applied to the court in China for distribution of certain funds from the Estate. The court approved the distribution of funds to Mingfei He and other beneficiaries. The Company is exploring its options, if any, to compel the return of all funds distributed to the beneficiaries of the Estate so that the Estate can comply with the Loan Discharge Agreement. If no reasonable options are available to the Company, the Company will cease to pursue enforcement of the Loan Discharge Agreement.
Notices were sent to the four beneficiaries of the Estate to notify them that the Company previously exercised its option pursuant to the Loan Discharge Agreement and that the Company expected the beneficiaries of the Estate to cause the Estate to comply. Not all beneficiaries of the Estate (the "Dissentient Beneficiaries"), however, have agreed to honor the Investment. The Company has taken into further consideration of the above events in the estimate of fair value of the derivative assets, and considered that these events have undermined the availability of the funds within the Estate, which cast significant doubt as to the fulfillment of the obligations by the Dissentient Beneficiaries under the Loan Discharge Agreement to honour the forward contract. Accordingly, the valuation of the derivative assets as of December 31, 2023 has been determined based on the probability of collection of the funds to honor the Investment which is estimated to be low, and the amount has been fully written down.
In 2024, the counsel representing a shareholder of the Company commenced a petition to the Supreme Court of British Columbia (the "Supreme Court") for leave to prosecute the claim under the Loan Discharge Agreement in the Ontario Superior Court of Justice in the name and on behalf of the Company against the Estate. Having sought advice from its legal counsel, the Company considered it appropriate to oppose against the petition and the petition is now pending hearing by the Supreme Court.
Risks and Uncertainties
The preparation of unaudited condensed interim consolidated financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the nature and amount of changes in estimates of amounts reported in the audited consolidated financial statements ended December 31, 2024.
CF Energy Corp.
Management's Discussion and Analysis
For the three-month periods ended March 31, 2025 and 2024
Amendments to IFRSs that are mandatorily effective for the current three-month period
In the current three-month period, the Group has applied the following amendments to IFRS Accounting Standard issued by the International Accounting Standard Board ("IASB") for the first time, which are mandatorily effective for the annual period beginning on or after January 1, 2025 for the preparation of the condensed interim consolidated financial statements:
Amendments to IAS 21
Lack of Exchangeability¹
¹ Effective for annual periods beginning on or after 1 January 2025.