E-Commodities Holdings Limited — Interim / Quarterly Report 2019

Aug 22, 2019

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

==> picture [48 x 51] intentionally omitted <==

==> picture [93 x 42] intentionally omitted <==

E-COMMODITIES HOLDINGS LIMITED 易大宗控股有限公司

(Incorporated in the British Virgin Islands with limited liability)

(Stock Code: 1733)

INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2019

The board of directors (the “ Board ”) of E-Commodities Holdings Limited (the “ Company ”) hereby announces the unaudited condensed consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 30 June 2019 together with comparative figures in 2018.

FINANCIAL HIGHLIGHTS

• Revenue of the Group for the six months ended 30 June 2019 was HK$13,728 million.

• Profit for the six months ended 30 June 2019 was HK$242 million.

• Profit attributable to equity shareholders of the Company for the six months ended 30 June 2019 was HK$238 million.

• Basic earnings per share for the six months ended 30 June 2019 was HK$0.078.

• Diluted earnings per share for the six months ended 30 June 2019 was HK$0.076.

• 1 -

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the six months ended 30 June 2019 – unaudited

(Expressed in Hong Kong dollars)

Note Revenue 4 Cost of sales Gross profit Other revenue Distribution costs Administrative expenses Other operating (expenses)/income, net Reversal of impairment of non-current assets 5(c) Profit from operating activities Finance income 5(a) Finance costs 5(a) Net finance costs Share of loss of associates Profit before taxation Income tax 6 Profit for the period Attributable to: Equity shareholders of the Company Non-controlling interests Profit for the period Earnings per share 7 Basic (HK$) Diluted (HK$)

Six months ended 30 June 2019 2018 (note) $’000 $’000 13,728,344 14,311,490 (13,092,044) (13,560,469) 636,300 751,021 13,271 1,273 (110,548) (69,398) (182,569) (138,002) (18,787) 38,487 15,800 16,456 353,467 599,837 7,871 23,999 (120,858) (112,136) (112,987) (88,137) (10) (1,582) 240,470 510,118 1,037 (31,386) 241,507 478,732 237,747 470,178 3,760 8,554 241,507 478,732 0.078 0.152 0.076 0.137

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 2 -

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the six months ended 30 June 2019 - unaudited

(Expressed in Hong Kong dollars)

Profit for the period Other comprehensive income for the period (after tax and reclassification adjustments): Item that will not be reclassified to profit or loss: Equity investments at fair value through other comprehensive income – net movement in fair value reserve (non-recycling) Item that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive income for the period Attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the period

Six months ended 30 June 2019 2018 (note) $’000 $’000 241,507 478,732 (551) (2,282) (18,225) (27,435) 222,731 449,015 219,145 441,716 3,586 7,299 222,731 449,015

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 3 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 June 2019 - unaudited

(Expressed in Hong Kong dollars)

Note Non-current assets Property, plant and equipment, net 8 Right-of-use assets 3, 9 Construction in progress Lease prepayments 3 Intangible assets Interest in associates Other investments in equity securities Other non-current assets Total non-current assets Current assets Inventories 11 Trade and other receivables 12 Receivables under finance leases Restricted bank deposits 13 Cash and cash equivalents 14 Other current assets 10 Total current assets Current liabilities Secured bank loans 16 Trade and other payables 15 Lease liabilities 3(c) Income tax payable Convertible bonds payables 17 Total current liabilities Net current assets Total assets less current liabilities	At 30 June 2019 $’000 492,642 529,508 83,300 – 106,408 11,316 106,488 13,916 1,343,578 1,171,309 3,876,929 – 1,126,247 744,964 – 6,919,449 2,279,012 2,145,620 39,603 77,416 335,375 4,877,026 2,042,423 3,386,001	At 31 December 2018 (note) $’000 489,933 – 69,486 442,052 110,312 11,371 107,565 – 1,230,719 1,104,851 4,288,313 1,992 443,596 699,361 21,485 6,559,598 2,339,373 1,666,439 16,651 99,917 316,580 4,438,960 2,120,638 3,351,357

• 4 -

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

at 30 June 2019 - unaudited

(Expressed in Hong Kong dollars)

Note Non-current liabilities Secured bank loans 16 Lease liabilities 3(c) Deferred income Total non-current liabilities NET ASSETS CAPITAL AND RESERVES Share capital 18(b) Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	At 30 June 2019 $’000 92,081 41,924 127,996 262,001 3,124,000 5,789,362 (2,547,533) 3,241,829 (117,829) 3,124,000	At 31 December 2018 (note) $’000 92,445 7,973 129,815 230,233 3,121,124 5,797,302 (2,551,921) 3,245,381 (124,257) 3,121,124

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 5 -

NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT

(Expressed in Hong Kong dollars unless otherwise indicated)

1 CORPORATE INFORMATION

E-Commodities Holdings Limited (the “ Company ”) was incorporated in the British Virgin Islands (“ BVI ”) on 17 September 2007 with limited liability under the Business Companies Act of the British Virgin Islands (2004). The Company and its subsidiaries (together referred to as the “ Group ”) are principally engaged in the processing and trading of coal and other products and providing logistics services throughout the commodity supply chain.

2 BASIS OF PREPARATION

The interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, including compliance with International Accounting Standard (“ IAS ”) 34, Interim financial reporting , issued by the International Accounting Standards Board (“ IASB ”).

The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2018 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2019 annual financial statements. Details of these changes in accounting policies are set out in note 3.

The preparation of an interim financial report in conformity with IAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

This interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2018 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for a full set of financial statements prepared in accordance with International Financial Reporting Standards ( “IFRSs ”) issued by the IASB.

The financial information relating to the financial year ended 31 December 2018 that is included in the interim financial report as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that financial year but is derived from those financial statements.

• 6 -

3 CHANGES IN ACCOUNTING POLICIES

The IASB has issued a new IFRS, IFRS 16, Leases , and a number of amendments to IFRSs that are first effective for the current accounting period of the Group.

Except for IFRS 16, Leases , none of the developments have had a material effect on how the Group’s results and financial position for the current or prior periods have been prepared or presented in this interim financial report. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

IFRS 16, Leases

IFRS 16 replaces IAS 17, Leases, and the related interpretations, IFRIC 4, Determining whether an arrangement contains a lease , SIC 15, Operating leases – incentives , and SIC 27, Evaluating the substance of transactions involving the legal form of a lease . It introduces a single accounting model for lessees, which requires a lessee to recognise a right-of-use asset and a lease liability for all leases, except for leases that have a lease term of 12 months or less (“ short-term leases ”) and leases of low value assets. The lessor accounting requirements are brought forward from IAS 17 substantially unchanged.

The Group has initially applied IFRS 16 as from 1 January 2019. The Group has elected to use the modified retrospective approach and has therefore recognised the cumulative effect of initial application as an adjustment to the opening balance of equity at 1 January 2019. Comparative information has not been restated and continues to be reported under IAS 17.

Further details of the nature and effect of the changes to previous accounting policies and the transition options applied are set out below:

• 7 -

(a) Changes in the accounting policies

(i) New definition of a lease

The change in the definition of a lease mainly relates to the concept of control. IFRS 16 defines a lease on the basis of whether a customer controls the use of an identified asset for a period of time, which may be determined by a defined amount of use. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtain substantially all of the economic benefits from that use.

The Group applies the new definition of a lease in IFRS 16 only to contracts that were entered into or changed on or after 1 January 2019. For contracts entered into before 1 January 2019, the Group has used the transitional practical expedient to grandfather the previous assessment of which existing arrangements are or contain leases.

Accordingly, contracts that were previously assessed as leases under IAS 17 continue to be accounted for as leases under IFRS 16 and contracts previously assessed as non-lease service arrangements continue to be accounted for as executory contracts.

(ii) Lessee accounting

IFRS 16 eliminates the requirement for a lessee to classify leases as either operating leases or finance leases, as was previously required by IAS 17. Instead, the Group is required to capitalise all leases when it is the lessee, including leases previously classified as operating leases under IAS 17, other than those short-term leases and leases of low-value assets. As far as the Group is concerned, these newly capitalised leases are primarily in relation to offices, vehicles and railway platforms.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the lease payments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability is measured at amortised cost and interest expense is calculated using the effective interest method.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises the initial amount of the lease liability plus any lease payments made at or before the commencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, discounted to their present value, less any lease incentives received.

The right-of-use asset is subsequently stated at cost less accumulated depreciation and impairment losses.

• 8 -

The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain to exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

(iii) Lessor accounting

The Group leases out a number of properties as the lessor of operating leases. The accounting policies applicable to the Group as a lessor remain substantially unchanged from those under IAS 17.

(b) Transitional impact

At the date of transition to IFRS 16 (i.e. 1 January 2019), the Group determined the length of the remaining lease terms and measured the lease liabilities for the leases previously classified as operating leases at the present value of the remaining lease payments, discounted using the relevant incremental borrowing rates at 1 January 2019. The weighted average of the incremental borrowing rates used for determination of the present value of the remaining lease payments was 7.14%.

To ease the transition to IFRS 16, the Group applied the following recognition exemption and practical expedients at the date of initial application of IFRS 16:

• the Group elected not to apply the requirements of IFRS 16 in respect of the recognition of lease liabilities and right-of-use assets to leases for which the remaining lease term ends within 12 months from the date of initial application of IFRS 16, i.e. where the lease term ends on or before 31 December 2019; and

• 9 -

The following table reconciles the operating lease commitments as at 31 December 2018 to the opening balance for lease liabilities recognised as at 1 January 2019:

Operating lease commitments at 31 December 2018 Less: commitments relating to leases exempt from capitalisation: – short-term leases and other leases with remaining lease term ending on or before 31 December 2019 Add: lease payments for the additional periods where the Group considers it reasonably certain that it will exercise the extension options Less: total future interest expenses Present value of lease payments, discounted using the incremental borrowing rate at 1 January 2019 Add: finance lease liabilities recognised as at 31 December 2018 Total lease liabilities recognised at 1 January 2019

1 January 2019 $’000 41,346 (148) 563 (11,643) 30,118 24,624 54,742

The right-of-use assets in relation to leases previously classified as operating leases have been recognised at an amount equal to the amount recognised for the remaining lease liabilities, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the statement of financial position at 31 December 2018.

So far as the impact of the adoption of IFRS 16 on leases previously classified as finance leases is concerned, the Group is not required to make any adjustments at the date of initial application of IFRS 16, other than changing the captions for the balances. Accordingly, instead of “obligations under finance leases”, these amounts are included within “lease liabilities”, and the depreciated carrying amount of the corresponding leased asset is identified as a right-of-use asset. There is no impact on the opening balance of equity.

The Group presents right-of-use assets and lease liabilities separately in the statement of financial position.

• 10 -

The following table summarises the impacts of the adoption of IFRS 16 on the Group’s consolidated statement of financial position:

	Carrying
	amount at	Capitalisation	Carrying
	31 December	of operating	amount at
	2018	lease contracts	1 January 2019
	$’000	$’000	$’000
Line items in the consolidated statement
of financial position impacted by the
adoption of IFRS 16:
Property, plant and equipment, net	489,933	(35,469)	454,464
Right-of-use assets	–	508,630	508,630
Lease prepayments	442,052	(442,052)	–
Total non-current assets	1,230,719	31,109	1,261,828
Trade and other receivables	4,288,313	(991)	4,287,322
Total current assets	6,559,598	(991)	6,558,607
Lease liabilities (current)	16,651	12,607	29,258
Total current liabilities	4,438,960	12,607	4,451,567
Net current assets	2,120,638	(13,598)	2,107,040
Total assets less current liabilities	3,351,357	17,511	3,368,868
Lease liabilities (non-current)	7,973	17,511	25,484
Total non-current liabilities	230,233	17,511	247,744
Net assets	3,121,124	–	3,121,124

• 11 -

(c) Lease liabilities

The remaining contractual maturities of the Group’s lease liabilities at the end of the reporting period and at the date of transition to IFRS 16 are as follows:

	At 30 June	2019	At 1 January 2019	At 1 January 2019
	Present value of		Present value of
	the minimum lease	Total minimum	the minimum lease	Total minimum
	payments	lease payments	payments	lease	payments
	$’000	$’000	$’000		$’000
Within 1 year	39,603	44,170	29,258		30,632
After 1 year but within 2 years	18,540	21,412	16,263		17,273
After 2 years but within 5 years	17,607	20,810	4,640		5,602
After 5 years	5,777	11,888	4,581		12,878
	41,924	54,110	25,484		35,753
	81,527	98,280	54,742		66,385
Less: total future interest expenses		(16,753)			(11,643)
Present value of lease liabilities		81,527			54,742

(d) Impact on the financial result, segment results and cash flows of the Group

After the initial recognition of right-of-use assets and lease liabilities as at 1 January 2019, the Group as a lessee is required to recognise interest expense accrued on the outstanding balance of the lease liability, and the depreciation of the right-of-use asset, instead of the previous policy of recognising rental expenses incurred under operating leases on a straight-line basis over the lease term. This results in a positive impact on the reported profit from operations in the Group’s consolidated statement of profit or loss, as compared to the results if IAS 17 had been applied during the year.

In the cash flow statement, the Group as a lessee is required to split rentals paid under capitalised leases into their capital element and interest element. These elements are classified as financing cash outflows, similar to how leases previously classified as finance leases under IAS 17 were treated, rather than as operating cash outflows, as was the case for operating leases under IAS 17. Although total cash flows are unaffected, the adoption of IFRS 16 therefore results in a change in presentation of cash flows within the cash flow statement.

• 12 -

The following tables may give an indication of the estimated impact of adoption of IFRS 16 on the Group’s financial result, segment results and cash flows for the six months ended 30 June 2019, by adjusting the amounts reported under IFRS 16 in these interim financial statements to compute estimates of the hypothetical amounts that would have been recognised under IAS 17 if this superseded standard had continued to apply to 2019 instead of IFRS 16, and by comparing these hypothetical amounts for 2019 with the actual 2018 corresponding amounts which were prepared under IAS 17.

		2019	2019		2018
			Deduct:
			Estimated
			amounts related
		Add back:	to operating	Hypothetical	Compared to
		IFRS 16	leases as if	amounts for	amounts reported
	Amounts reported	depreciation and	under IAS 17	2019 as if	for 2018
	under IFRS 16	interest expense	(note 1)	under IAS 17	under IAS 17
	(A)	(B)	(C)	(D=A+B+C)
	$’000	$’000	$’000	$’000	$’000
Financial result for the six months
ended 30 June 2019 impacted
by the adoption of IFRS 16:
Profit from operations	353,467	5,239	(6,488)	352,218	599,837
Net finance costs	(112,987)	2,269	–	(110,718)	(88,137)
Profit before taxation	240,470	7,508	(6,488)	241,490	510,118
Profit for the period	241,507	7,508	(6,488)	242,527	478,732
Reportable segment profit
(adjusted EBITDA) for the six
months ended 30 June 2019
(note 4(b)) impacted by the
adoption of IFRS 16:
– Processing and trading of coal and
other products	375,465	7,508	(6,488)	376,485	517,764
– Logistics services	10,919	–	–	10,919	17,821

• 13 -

		2019		2018
		Estimated
		amounts related
		to operating	Hypothetical	Compared to
		leases as if	amounts for	amounts reported
	Amounts reported	under IAS 17	2019 as if	for 2018
	under IFRS 16	(notes 1 & 2)	under IAS 17	under IAS 17
	(A)	(B)	(C=A+B)
	$’000	$’000	$’000	$’000
Line items in the condensed consolidated cash flow
statement for the six months ended 30 June 2019
impacted by the adoption of IFRS 16:
Other adjustments	36,935	(8,241)	28,694	11,811
Net cash generated from/(used in) operating activities	996,918	(8,241)	988,677	(1,355,952)
Capital element of lease rentals paid	(15,470)	6,488	(8,982)	(7,942)
Interest element of lease rentals paid	(2,460)	1,753	(707)	(416)
Net cash (used in)/generated from financing activities	(171,269)	8,241	(163,028)	1,350,828

• Note 1: The “estimated amounts related to operating leases” is an estimate of the amounts of the cash flows in 2019 that relate to leases which would have been classified as operating leases, if IAS 17 had still applied in 2019. This estimate assumes that there were no differences between rentals and cash flows and that all of the new leases entered into in 2019 would have been classified as operating leases under IAS 17, if IAS 17 had still applied in 2019. Any potential net tax effect is ignored.

• Note 2: In this impact table these cash outflows are reclassified from financing to operating in order to compute hypothetical amounts of net cash generated from operating activities and net cash used in financing activities as if IAS 17 still applied.

4 REVENUE AND SEGMENT REPORTING

The Group is principally engaged in the processing and trading of coal and other products and providing logistics services throughout the commodity supply chain. Revenue represents the sales value of goods sold, net of value added tax and other sales taxes and is after any trade discounts, and revenue from rendering of logistics services.

• 14 -

(a) Disaggregation of revenue

Disaggregation of revenue from contracts with customers by major products or service lines and geographical location of customers is as follows:

Revenue from contracts with customers within the scope of IFRS 15 Disaggregated by major products of service lines – Coal – Petrochemical products – Iron ore – Nonferrous metals – Rendering of logistics services – Coke – Others Disaggregated by geographical location of customers – The PRC (including Hong Kong, Macau and Taiwan) – Turkey – Korea – India – Poland – Indonesia – United States – Others	Six months ended 30 June 2019 2018 $’000 $’000 11,385,892 11,916,813 1,369,498 1,371,836 676,492 793,003 201,381 156,344 57,526 67,924 28,320 – 9,235 5,570 13,728,344 14,311,490 11,688,794 13,001,089 671,972 604,225 638,567 238,247 497,107 350,425 154,405 – 77,080 – – 114,751 419 2,753 13,728,344 14,311,490	Six months ended 30 June 2019 2018 $’000 $’000 11,385,892 11,916,813 1,369,498 1,371,836 676,492 793,003 201,381 156,344 57,526 67,924 28,320 – 9,235 5,570 13,728,344 14,311,490 11,688,794 13,001,089 671,972 604,225 638,567 238,247 497,107 350,425 154,405 – 77,080 – – 114,751 419 2,753 13,728,344 14,311,490
		14,311,490
		13,001,089 604,225 238,247 350,425 – – 114,751 2,753
		14,311,490

For the six months ended 30 June 2019, among the Group’s revenue from the trading of coal and other products, $969,787,000 (six months ended 30 June 2018: $1,461,954,000) was traded under framework contracts signed with certain third party companies pursuant to which those third party companies act as agents of the Group to sign sale and purchase contracts with customers and suppliers whilst the Group is responsible for identifying customers and suppliers and negotiating and determining the price, quantity of the commodities and transportation and payment terms with customers and suppliers, respectively.

• 15 -

(b) Information about profit or loss, assets and liabilities

Disaggregation of revenue from contracts with customers by timing of revenue recognition, as well as information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance for the period is set out below.

For the six months ended 30 June Disaggregated by timing of revenue recognition Point in time Over time Revenue from external customers Inter-segment revenue Reportable segment revenue Reportable segment profit (adjusted EBITDA) Interest income Interest expense Depreciation and amortisation Reversal of impairment of non-current assets (Provision)/Reversal of provision for impairment losses on trade and other receivables Shares of loss of associates Additions to non-current segment assets during the period As at 30 June/31 December Reportable segment assets Reportable segment liabilities	Processing and trading of coal and other products 2019 2018 $’000 $’000 13,670,818 14,243,566 – – 13,670,818 14,243,566 – – 13,670,818 14,243,566 375,465 517,764 7,521 2,531 (95,359) (98,094) (47,062) (27,889) 15,800 16,456 (139) 79,536 – – 107,472 144,965 8,351,761 7,888,489 4,995,542 4,504,549	Logistics services 2019 2018 $’000 $’000 – – 57,526 67,924 57,526 67,924 15,123 1,191 72,649 69,115 10,919 17,821 350 190 – – (1,501) (1,529) – – (15) (2,322) (10) (1,582) 2,353 747 185,286 175,129 351,405 349,399	Total 2019 2018 $’000 $’000 13,670,818 14,243,566 57,526 67,924 13,728,344 14,311,490 15,123 1,191 13,743,467 14,312,681 386,384 535,585 7,871 2,721 (95,359) (98,094) (48,563) (29,418) 15,800 16,456 (154) 77,214 (10) (1,582) 109,825 145,712 8,537,047 8,063,618 5,346,947 4,853,948

The measure used for reporting segment profit is “adjusted EBITDA” i.e. “adjusted earnings before interest, taxes, depreciation and amortisation”, where “interest” is regarded as including investment income and “depreciation and amortisation” is regarded as including reversal of impairment of non-current assets and reversal of provision for impairment losses on trade and other receivables.

• 16 -

(c) Reconciliations of reportable segment profit or loss

Reportable segment profit Share of loss of associates Depreciation and amortisation Net finance costs Reversal of impairment of non-current assets (Provision)/Reversal of provision for impairment losses on trade and other receivables, net Consolidated profit before taxation	Six months ended 30 June 2019 2018 (note) $’000 $’000 386,384 535,585 (10) (1,582) (48,563) (29,418) (112,987) (88,137) 15,800 16,456 (154) 77,214 240,470 510,118

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 17 -

5 PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Net finance costs

Interest income Changes in fair value on derivative financial instruments Finance income Interest on lease liabilities Interest on secured bank loans Interest on discounted bills receivable Interest on convertible bonds_(note 17) Total interest expense Bank charges Foreign exchange loss, net Changes in fair value on derivative financial instruments (note 17)_ Finance costs Net finance costs	Six months ended 30 June 2019 2018 (note) $’000 $’000 (7,871) (2,721) – (21,278) (7,871) (23,999) 2,269 – 30,033 22,493 39,601 55,414 23,456 20,187 95,359 98,094 14,442 10,194 7,219 3,848 3,838 – 120,858 112,136 112,987 88,137

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 18 -

(b) Staff costs

Salaries, wages, bonus and other benefits Contributions to defined contribution retirement plan Long-term incentive program granted	Six months ended 30 June 2019 2018 $’000 $’000 103,054 131,180 3,815 3,571 – 7,846 106,869 142,597	Six months ended 30 June 2019 2018 $’000 $’000 103,054 131,180 3,815 3,571 – 7,846 106,869 142,597
		142,597

(c) Other items

Amortisation and depreciation – property, plant and equipment – right-of-use assets – lease prepayments – intangible assets Provision/(Reversal of provision) for impairment losses – trade receivables – other receivables – bills receivable Reversal of impairment of non-current assets – property, plant and equipment – loan to a third party Cost of inventories	Six months ended 30 June 2019 2018 (note) $’000 $’000 27,980 20,289 16,942 – – 6,051 3,641 3,078 578 (75,583) – (427) (424) (1,204) (15,800) – – (16,456) 13,057,961 13,519,382

• Cost of inventories included $21,495,000 (six months ended 30 June 2018: $21,283,000) and $17,527,000 (six months ended 30 June 2018: $14,307,000) for the six months ended 30 June 2019 relating to staff costs, depreciation and amortisation which amount was also included in the respective total amount disclosed separately above or in note 5(b) for each type of these expenses.

• ** Upon the adoption IFRS 16, depreciation of finance lease assets was reclassified from “property, plant and equipment” to “right-of-use assets”, and amortisation of lease prepayments were reclassified from “lease prepayments” to “right-of-use assets”.

• Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

• 19 -

6 INCOME TAX

Current tax – Hong Kong Profits Tax Provision for the period Current tax – Outside of Hong Kong Provision for the period (Over)/Under-provision in respect of prior years_(note)_	Six months ended 30 June 2019 2018 $’000 $’000 10,515 15,995 6,733 14,271 (18,285) 1,120 (1,037) 31,386	Six months ended 30 June 2019 2018 $’000 $’000 10,515 15,995 6,733 14,271 (18,285) 1,120 (1,037) 31,386
		31,386

• Note: The Group’s subsidiary E-Commodities Holdings Private Limited (“ E-Commodities Singapore ”) was incorporated in Singapore. During the six months ended 30 June 2019, local tax authorities confirmed that E-Commodities Singapore is eligible for the Global Trader Program Incentive which allows E-Commodities Singapore to benefit from a preferential income tax rate of 10% on its qualifying income for the year ended 31 December 2018 (statutory tax rate: 17%). Therefore, the Group reversed income tax payable of $16,249,000 during the six months ended 30 June 2019.

Pursuant to the rules and regulations of the BVI, the Group is not subject to any income tax in the BVI.

The provision for Hong Kong Profits Tax is calculated at 16.5% (2018: 16.5%) of the estimated assessable profits for the period.

The provision for PRC current income tax is based on a statutory rate of 25% (2018: 25%) of the assessable profit as determined in accordance with the relevant income tax rules and regulations of the PRC.

According to the High-tech Enterprise Certificate No. GR201815000227 issued by Inner Mongolia Provincial Department of Science and Technology, Inner Mongolia Provincial Department of Finance and Inner Mongolia Provincial State Revenue, Urad Zhongqi Yiteng Mining Co., Ltd., a subsidiary of the Group, was entitled to High Tech Enterprise qualification and benefit from a preferential tax rate of 15% from 1 January 2018 to 31 December 2020.

According to Article 2 of Notice on Issues Concerning Tax Policies on Further Implementing the Strategy of Western Development issued by the Ministry of Finance, General Administration of Customs and State Administration of Taxation [Cai Shui (2011) No.58], Erlianhaote Haotong Energy Co., Ltd., a subsidiary of the Group, is an enterprise under the preferred industry set up in the western region, which was entitled to a preferential tax rate of 15% from 1 January 2018 to 31 December 2020.

Taxation for other overseas subsidiaries is charged at the appropriate current rates of taxation ruling in the relevant countries.

• 20 -

7 EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of basic earnings per share for the six months ended 30 June 2019 is based on profit attributable to equity shareholders of the Company of $237,747,000 (six months ended 30 June 2018: $470,178,000) and the weighted average number of ordinary shares of 3,055,074,000 (six months ended 30 June 2018: 3,088,228,000 shares) in issue during the six months ended 30 June 2019, calculated as follows:

Weighted average number of ordinary shares (basic):

Issued ordinary shares at 1 January Effect of purchase of own shares_(note 18(b)(i))_ Effect of shares held by the employee share trusts* Weighted average number of ordinary shares (basic) as at 30 June	Six months ended 30 June 2019 2018 ’000 ’000 3,066,723 3,157,299 (19,285) (35,424) 7,636 (33,647) 3,055,074 3,088,228	Six months ended 30 June 2019 2018 ’000 ’000 3,066,723 3,157,299 (19,285) (35,424) 7,636 (33,647) 3,055,074 3,088,228
		3,088,228

• The shares held by the employee share trusts are regarded as treasury shares.

(b) Diluted earnings per share

• (i) Profit attributable to ordinary equity shareholders of the Company (diluted):

Profit attributable to ordinary equity shareholders Effect of potential ordinary shares – convertible bonds Profit attributable to ordinary equity shareholders (diluted)	Six months ended 30 June 2019 2018 $’000 $’000 237,747 470,178 27,115 3,346 264,862 473,524	Six months ended 30 June 2019 2018 $’000 $’000 237,747 470,178 27,115 3,346 264,862 473,524
		473,524

• 21 -

• (ii) Weighted average number of ordinary shares (diluted):

Weighted average number of ordinary shares as at 30 June Effect of potential ordinary shares – convertible bonds Weighted average number of ordinary shares (diluted) as at 30 June	Six months ended 30 June 2019 2018 ’000 ’000 3,055,074 3,088,228 432,222 361,021 3,487,296 3,449,249	Six months ended 30 June 2019 2018 ’000 ’000 3,055,074 3,088,228 432,222 361,021 3,487,296 3,449,249
		3,449,249

8 PROPERTY, PLANT AND EQUIPMENT, NET

(a) Acquisitions and disposals

During the six months ended 30 June 2019, the Group acquired items of property, plant and equipment with the amount of $33,412,000 (six months ended 30 June 2018: $57,646,000). On the other hand, items of property, plant and equipment with a net book value of $5,786,000 were disposed of during the six months ended 30 June 2019 (six months ended 30 June 2018: $9,268,000), resulting in a loss on disposal of $1,565,000 (six months ended 30 June 2018: loss on disposal of $4,392,000).

(b) Transfer from construction in progress

During the six months ended 30 June 2019, construction in progress with a cost of $21,989,000 (six months ended 30 June 2018: $7,324,000) has been transferred into property, plant and equipment.

• (c) As at 30 June 2019, property ownership certificates of certain properties of the Group with an aggregate net book value of $7,368,000 (31 December 2018: $7,949,000) are yet to be obtained.

• (d) As at 30 June 2019, property, plant and equipment of the Group of $24,021,000 (31 December 2018: $nil) have been pledged as collateral for the Group’s bills payable (see note 15).

As at 31 December 2018, property, plant and equipment of the Group of $25,272,000 have been pledged as collateral for the Group’s borrowings (see note 16). During the six months ended 30 June 2019, such collateral have been released.

• 22 -

9 RIGHT-OF-USE ASSETS

Cost: At 1 January 2019 Additions Exchange adjustments At 30 June 2019 Accumulated amortisation and impairment losses: At 1 January 2019 Charge for the year Exchange adjustments At 30 June 2019 Net book value: At 1 January 2019 At 30 June 2019	Land $’000 558,312 41 (2,202) 556,151 (116,260) (5,695) 418 (121,537) 442,052 434,614	Others $’000 71,476 40,060 (569) 110,967 (4,898) (11,247) 72 (16,073) 66,578 94,894	Total $’000 629,788 40,101 (2,771) 667,118 (121,158) (16,942) 490 (137,610) 508,630 529,508

The right-of-use assets represents the lease on land, offices, vehicles and railway platforms.

• 23 -

10 OTHER CURRENT ASSETS

Loan to a third party	At 30 June 2019 $’000 –	At 31 December 2018 $’000 21,485

In 2009, the Company agreed to provide a loan to Moveday Enterprises Limited (“ Moveday ”) to purchase additional vehicles to meet with the increasing volume of coal procured by the Group in Mongolia, and Moveday agreed to use the trucks purchased through financing provided by the Company for the provision of transportation services to the Group during the term of the agreement. Pursuant to a loan agreement entered into on 10 April 2010 (as subsequently amended by a supplemental deed on 15 September 2010) and the strategic alliance agreement, the Company agreed to lend Moveday up to United States dollars (“ US$ ”) 40 million solely for the purpose of purchasing vehicles for transporting coal purchased by the Group in Mongolia. The loan to Moveday was provided on an unsecured basis, at an interest rate of LIBOR plus 3% and repayable over five years in equal annual installments of US$8 million, commencing from 18 months after the receipt of the loan (being 31 December 2012) by Moveday, with interest payable semiannually in arrears. The entire loan amount was fully drawn down in 2010. As Moveday is a third party and the loan to Moveday was an unsecured loan, the Group did not have an interest in or control over the cash flows or other assets of Moveday other than in accordance with the terms of the loan agreement (as amended).

In 2013, the Group entered into another supplemental agreement with Moveday to modify the repayment terms of the remaining outstanding principal of US$32 million. Pursuant to the supplemental agreement, the remaining outstanding principal was repayable on 31 December from 2013 to 2015 with an amount of US$4 million plus a floating repayment amount. The floating repayment amount was calculated based on the volume of coals transported (maximum of 12 million tonnes) by Moveday for the Group and up to US$6 million during each year. Apart from the repayment terms, all the other terms of the loan were not changed and Moveday was obliged to repay the entire outstanding principal on or before 31 December 2016.

In October 2015, Moveday informed the Group that they could not repay the outstanding principal and interest as scheduled in the above-mentioned supplemental agreement due to the financial difficulty encountered.

For the year ended 31 December 2015, the Group made an impairment provision of $120,189,000 against the remaining outstanding loan balance as at 31 December 2015 based on the communication with management of Moveday about the adverse financial and operating circumstances of Moveday in 2015.

On 30 April 2016, the transportation agreement entered into by the Group and Moveday expired and the Group determined not to renew such agreement and engaged another third party company to provide such transportation services to the Group (the third party company may use Moveday as sub-contractor for transportation at its discretion).

• 24 -

During the year ended 31 December 2017, the Group recovered loan principal of US$5.34 million (equivalent to approximately $41,692,000) from Moveday, including an offsetting of the outstanding loan principal of US$0.73 million (equivalent to approximately $5,770,000) against the Group’s payables.

During the year ended 31 December 2018, the directors of the Company continued their efforts to negotiate with Moveday for the repayment of the outstanding loan. As at 30 June 2018, the Group had recovered a further US$2.10 million (equivalent to approximately $16,162,000) of loan principal and during the second half of 2018 the Group recovered a further US $5.32 million (equivalent to approximately $41,726,000). As at 31 December 2018, in view of the continuous repayments from Moveday during the year, the directors of the Company believed that the outstanding loan balance of US$2.74 million (equivalent to approximately $21,485,000) as at 31 December 2018 could be fully recovered and therefore reversed the remaining balance of the impairment provision. As a result of these events, in total a gain of $79,373,000 was recognised in the consolidated statement of profit or loss for the year ended 31 December 2018. In January 2019, the Group has recovered all of the remaining loan principal of US$2.74 million (equivalent to approximately $21,485,000).

In June 2019, the Group has mutually agreed with Moveday that the outstanding loan interest in aggregate is US$1.43 million (equivalent to approximately $11,183,000) and this amount has been recognised in other revenue for the six months ended 30 June 2019. In July 2019, the Group has recovered such outstanding loan interest of $11,183,000.

11 INVENTORIES

Coal Petrochemical products Others	At 30 June 2019 $’000 1,115,803 9,813 45,693 1,171,309	At 31 December 2018 $’000 1,086,224 1,632 16,995 1,104,851

At 30 June 2019, inventories of the Group of $49,485,000 (31 December 2018: $nil) have been pledged as collateral for the Group’s borrowings (see note 16).

• 25 -

12 TRADE AND OTHER RECEIVABLES

As of the end of the reporting period, the ageing analysis of trade debtors and bills receivable (which are included in trade and other receivables), based on the invoice date and net of loss allowance, is as follows:

Within 3 months 3 to 6 months 6 to 12 months Trade debtors and bills receivable, net of loss allowance Other debtors Financial assets measured at amortised cost Deposits and prepayments Other tax recoverable Derivative financial instruments*	At 30 June 2019 $’000 2,375,157 422,756 22,849 2,820,762 36,132 2,856,894 867,604 121,668 30,763 3,876,929	At 31 December 2018 (note) $’000 2,282,307 1,146,438 55,214 3,483,959 26,969 3,510,928 617,158 155,564 4,663 4,288,313

• As at 30 June 2019 and 31 December 2018, derivative financial instruments represented the fair value of commodity futures contracts entered into by the Group.

Note: The Group has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach. Under this approach, comparative information is not restated. See note 3.

All of the trade and other receivables are expected to be recovered or recognised as expenses within one year.

The credit terms for trade debtors are generally within 90 days. The credit terms for receivables from import agents can be as long as one year, which are comparable to the credit terms for payables to import agents as granted to the Group. Bills receivable are normally due within 180 days to 360 days from the date of issuing.

At 30 June 2019, bills receivable of the Group of $461,243,000 (31 December 2018: $652,720,000) together with restricted bank deposits of $379,062,000 (31 December 2018: $102,717,000) have been pledged as collateral for the Group’s borrowings (see note 16).

At 30 June 2019, bills receivable of the Group of $1,097,826,000 (31 December 2018: $1,282,687,000) have been discounted to banks with recourse (see note 16).

• 26 -

At 30 June 2019, trade receivables of the Group of $15,413,000 (31 December 2018: $nil) have been pledged as collateral for the Group’s borrowings (see note 16).

At 30 June 2019, trade receivables of the Group of $170,520,000 (31 December 2018: $nil) together with bills receivable of the Group of $23,304,000 (31 December 2018: $nil), land use rights of $289,894,000 (31 December 2018: $56,954,000) and property, plant and equipment of $nil (31 December 2018: $25,272,000) have been pledged as collateral for the Group’s borrowings (see note 16).

At 30 June 2019, bills receivable of the Group of $89,954,000 (31 December 2018: $nil) together with restricted bank deposits of $105,905,000 (31 December 2018: $nil) have been pledged as collateral for the Group’s bills payable (see note 15).

At 31 December 2018, bills receivable of the Group of $23,134,000 together with land use rights of $238,803,000 and restricted bank deposits of $46,014,000 have been pledged as collateral for the Group’s borrowings (see note 16) and bills payable (see note 15). During the six months ended 30 June 2019, such collateral have been released.

13 RESTRICTED BANK DEPOSITS

The Group has pledged bank deposits of $944,700,000 (31 December 2018: $148,731,000) as at 30 June 2019 as collateral for the Group’s borrowings (see note 16) and banking facilities in respect of issuance of bills and letters of credit by the Group (see note 15).

14 CASH AND CASH EQUIVALENTS

Cash at bank and in hand	At 30 June 2019 $’000 744,964	At 31 December 2018 $’000 699,361

At 30 June 2019, cash and cash equivalents of $628,618,000 (31 December 2018: $566,375,000) was held by the entities of the Group in form of RMB in the PRC. RMB is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restriction imposed by the PRC government.

• 27 -

15 TRADE AND OTHER PAYABLES

As of the end of the reporting period, the ageing analysis of trade and bills payables, based on the invoice date, is as follows:

Within 3 months More than 3 months but less than 6 months More than 6 months but less than 1 year More than 1 year Total trade and bills payable Prepayments from customers Payables in connection with construction projects Payables for purchase of equipment Payables for staff related costs Payables for other taxes Dividend payables Others	At 30 June 2019 $’000 884,394 465,905 105 5,747 1,356,151 310,555 27,940 16,461 17,462 108,804 222,473 85,774 2,145,620	At 31 December 2018 $’000 883,505 31,596 88 9,970 925,159 229,220 32,573 25,104 169,809 172,465 4,320 107,789 1,666,439

At 30 June 2019, bills payable amounting to $307,066,000 (31 December 2018: $nil) have been secured by restricted bank deposits with an aggregate carrying value of $92,206,000 (31 December 2018: $nil), property, plant and equipment with an aggregate carrying value of $24,021,000 (31 December 2018: $nil) and land use rights with an aggregate carrying value of $952,000 (31 December 2018: $nil).

At 30 June 2019, bills payable amounting to $377,639,000 (31 December 2018: $nil) have been secured by restricted bank deposits with an aggregate carrying value of $367,527,000 (31 December 2018: $nil).

At 30 June 2019, bills payable amounting to $386,055,000 (31 December 2018: $nil) have been secured by restricted bank deposits with an aggregate carrying value of $105,905,000 (31 December 2018: $nil) and bills receivable with an aggregate carrying value of $89,954,000 (31 December 2018: $nil).

At 31 December 2018, bills payable amounting to $180,461,000 together with bank loans amounting to $45,652,000 have been secured by restricted bank deposits with an aggregate carrying value of $46,014,000, land use rights with an aggregate carrying value of $238,803,000 and bills receivable with an aggregate carrying value of $23,134,000. During the six months ended 30 June 2019, such collateral have been released.

• 28 -

16 SECURED BANK LOANS

(a) The secured bank loans comprise:

Short-term loans Long-term loans The interest rates per annum of bank loans were: Short-term loans Long-term loans (b) The secured bank loans are repayable as follows: Within 1 year After 1 year but within 2 years	At 30 June 2019 $’000 2,279,012 92,081 2,371,093 At 30 June 2019 2.73%-10.45% 10.45% At 30 June 2019 $’000 2,279,012 92,081 2,371,093	At 31 December 2018 $’000 2,339,373 92,445 2,431,818 At 31 December 2018 3.03%-10.45% 10.45% At 31 December 2018 $’000 2,339,373 92,445 2,431,818

At 30 June 2019, bank loans amounting to $829,643,000 (31 December 2018: $682,843,000) have been secured by bills receivable with an aggregate carrying value of $461,243,000 (31 December 2018: $652,720,000) and restricted bank deposits with an aggregate carrying value of $379,062,000 (31 December 2018: $102,717,000).

At 30 June 2019, bank loans amounting to $1,097,826,000 (31 December 2018: $1,282,687,000) have been secured by bills receivable with recourse an aggregate carrying value of $1,097,826,000 (31 December 2018: $1,282,687,000).

• 29 -

At 30 June 2019, bank loans amounting to $278,516,000 (31 December 2018: $317,919,000) have been secured by property, plant and equipment with an aggregate carrying value of $nil (31 December 2018: $25,272,000), land use rights with an aggregate carrying value of $289,894,000 (31 December 2018: $56,954,000), trade receivables with an aggregate carrying value of $170,520,000 (31 December 2018: $nil) and bills receivable with an aggregate carrying value of $23,304,000 (31 December 2018: $nil).

At 30 June 2019, bank loans amounting to $102,312,000 (31 December 2018: $102,717,000) have been secured by credit guarantee with a guarantee amount of $102,312,000 (31 December 2018: $102,717,000) provided by subsidiaries of the Group.

At 30 June 2019, bank loans amounting to $11,368,000 (31 December 2018: $nil) have been secured by trade receivables with an aggregate carrying value of $15,413,000 (31 December 2018: $nil).

At 30 June 2019, bank loans amounting to $51,428,000 (31 December 2018: $nil) have been secured by inventories with an aggregate carrying value of $49,485,000 (31 December 2018: $nil).

At 31 December 2018, bank loans amounting to $45,652,000 together with bills payable amounting to $180,461,000 have been secured by restricted bank deposits with an aggregate carrying value of $46,014,000, land use rights with an aggregate carrying value of $238,803,000, and bills receivable with an aggregate carrying value of $23,134,000. During the six months ended 30 June 2019, such collateral have been released.

17 CONVERTIBLE BONDS PAYABLES

At 1 January 2018 Interest charged during the year Repayment Fair value adjustment Exchange adjustment At 31 December 2018 and 1 January 2019 Interest charged during the period (note 5(a)) Repayment Fair value adjustment_(note 5(a))_ Exchange adjustment At 30 June 2019	Liability component $’000 226,122 43,000 (15,630) – 932 254,424 23,456 (7,840) – (659) 269,381	Derivatives component $’000 88,913 – – (26,993) – 61,920 – – 3,659 – 65,579	Warrants $’000 9,554 – – (9,318) – 236 – – 179 – 415	Total $’000 324,589 43,000 (15,630) (36,311) 932 316,580 23,456 (7,840) 3,838 (659) 335,375

• 30 -

On 14 September 2017, the Company issued convertible bonds in the aggregate principal amount of US$40,000,000 together with 118,060,606 units of warrants to Lord Central Opportunity VII Limited (“ Subscriber ”). The convertible bonds bear a nominal interest rate at 5% per annum payable semi-annually. The maturity date of the convertible bonds is 14 September 2022. The convertible bonds are convertible into ordinary shares of the Company at the option of the holders of the convertible bonds at any time after the issue date of the convertible bonds and up to the maturity date at an initial conversion price of $0.862 per share, subject to adjustments. As stated in the Company’s announcement dated 21 September 2018, pursuant to the provision on adjustments to the conversion price set out in the terms and conditions of the convertible bonds, the conversion price was adjusted to $0.72 per share.

At any time after the second anniversary of the issue date until the maturity date, the convertible bondholder may, by issuing a redemption notice in writing to the Company, require the Company to redeem all or part of the outstanding principal amount of the convertible bonds at the redemption amount equal to such amount representing an internal rate of return of 10% on the principal amount of the outstanding convertible bonds to be redeemed (inclusive of interest received but excluding default interest), calculated from the issue date up to the date on which the Company completes the redemption. Interest expenses is calculated using the effective interest method by applying the effective interest rate of 19.64% per annum.

In the meantime, the Subscriber was entitled to 118,060,606 warrants which are exercisable any time from the issue date and up to the fifth anniversary after the issue date, at an initial subscription price of $0.948, subject to adjustments. On 9 July 2018, pursuant to the provision on adjustments to the subscription price set out in the terms and conditions of the warrants, the subscription price was adjusted from $0.948 to $0.908 per share as a result of the declaration by the Company on 22 March 2018 of a final dividend for the year ended 31 December 2017.

At initial recognition the derivative component of the convertible bonds and warrants are measured at fair value and presented as part of derivative financial instruments. Any excess of proceeds over the amount initially recognised as the derivative component and warrants is recognised as the liability component. The fair value of derivative component and warrants is subsequently remeasured at the end of each reporting period.

18 CAPITAL, RESERVES AND DIVIDENDS

(a) Dividends

• (i) Dividends payable to equity shareholders attributable to the interim period

There is no interim dividend declared attributable to the six months ended 30 June 2019 (six months ended 30 June 2018: $nil).

• (ii) Dividends payable to equity shareholders attributable to the previous financial year, approved during the interim period

Final dividend in respect of the previous financial year, approved during the following interim period, of $0.072 per share (six months ended 30 June 2018: $0.034 per share)	Six months ended 30 June 2019 2018 $’000 $’000 218,497 106,144

• 31 -

(b) Share capital

			At		At
			30 June	31	December
			2019		2018
		No. of shares		No. of shares
			’000		’000
Authorised:
Ordinary shares with no par value			6,000,000		6,000,000
	2019			2018
	No. of shares		No. of shares
	’000	$’000	’000		$’000
Ordinary shares, issued and fully
paid:
Existing shares at 1 January	3,066,723	5,797,302	3,157,299		5,849,015
Purchase of own shares (note i)	(20,160)	(7,940)	(90,576)		(51,713)
At 30 June 2019/31 December 2018	3,046,563	5,789,362	3,066,723		5,797,302

(i) Purchase of own shares

During the six months ended 30 June 2019, the Company cancelled in aggregate of 20,160,000 of its own shares which were purchased from the open market.

(ii) Employee share trust

The Group operates a long-term incentive program in 2012 to retain and motivate the employees to make contributions to the long-term growth and performance of the Group, namely Restricted Share Units Scheme (“ RSU Scheme ”). A restricted share unit award (“ RSU Award ”) gives a participant in the RSU Scheme a conditional right when the RSU Award vests to obtain either ordinary shares (existing ordinary shares in issue or new ordinary shares to be issued by the Company) or an equivalent value in cash with reference to the value of the ordinary shares on or about the date of vesting. The Group reserves the right, at its discretion, to pay the award in cash or ordinary shares of the Group.

Employee share trusts are established for the purposes of awarding shares to eligible employees under the RSU Scheme. The employee share trusts are administered by trustees and are funded by the Group’s cash contributions for buying the Company’s shares in the open market and recorded as contributions to employee share trusts, an equity component.

The administrator of the employee share trusts transfers the shares of the Company to employees upon vesting.

• 32 -

During the six months ended 30 June 2019, the Company granted certain RSU Award in respect of an aggregate of 52,484,000 ordinary shares of the Company to certain grantees pursuant to the RSU Scheme. The ordinary shares of the Company underlying the grant of RSU Awards was settled by existing ordinary shares of the Company held by the employee share trusts.

During the six months ended 30 June 2019, the fair value of the granted ordinary shares was $20,666,000 based on quoted price of the Company’s shares on the grant date, of which $24,468,000 was credited to the employee share trusts based on the weighted average cost of the granted ordinary shares, and the balance of $3,802,000 was debited to the other reserve.

In addition, the Company has repurchased on-market own shares in aggregate of 42,792,000 shares (six months ended 30 June 2018: 2,964,000 shares) at a cash consideration of $16,926,000 (six months ended 30 June 2018: $1,998,000) under the RSU Scheme during the period ended 30 June 2019.

• 33 -

EXTRACT OF REVIEW REPORT

The interim results are unaudited, but have been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity , issued by the Hong Kong Institute of Certified Public Accountants.

The below sections set out an extract of the report by KPMG, the auditor of the Company, regarding the interim financial report of the Group for the six months ended 30 June 2019.

Basis for Qualified Conclusion

In our auditor’s report on the Group’s financial statements for the year ended 31 December 2017, we reported a limitation in the scope of our audit relating to an impairment loss provision made against an outstanding loan due from Moveday Enterprises Limited (“Moveday”), as we were unable to obtain sufficient appropriate audit evidence to evaluate the reasonableness of the assumptions adopted by the directors of the Company in estimating the expected timing and amounts of future cash flows arising from the loan. The impairment provision as at 31 December 2017 amounted to US$10.16 million (equivalent to approximately $79,373,000) which represented full provision of the respective outstanding amount due from Moveday as at 31 December 2017.

In our review report on the Group’s financial statements for the six months ended 30 June 2018, given the inherent limitations in the scope of our review, which is by definition substantially less than an audit, and that this matter had not been resolved, we continued to be unable to reach a conclusion as to whether the directors’ judgement in this matter was appropriate and therefore whether the amount of this impairment provision was, or was not, in accordance with the applicable accounting framework. We therefore expressed a qualified conclusion in this regard in our review report dated 23 August 2018. The impairment provisions as at 30 June 2018 amounted to US$8.06 million (equivalent to approximately $63,211,000).

As disclosed in note 10 to the interim financial report, during the year ended 31 December 2018, the directors of the Company recovered an amount of loan principal of US$7.42 million (equivalent to approximately $57,888,000) from Moveday and reversed the remaining impairment provision of US$2.74 million (equivalent to approximately $21,485,000) as at 31 December 2018. In January 2019, the Group recovered the remaining loan principal of US$2.74 million (equivalent to approximately $21,485,000).

• 34 -

As a result of these events during 2018 and early 2019, we were able to satisfy ourselves in respect of the carrying amount of the outstanding amount due from Moveday of US$2.74 million (equivalent to approximately $21,485,000) as at 31 December 2018 and this matter does not have any impact on the consolidated financial position of the Group as at 30 June 2019 and its consolidated financial performance for the current period. However, in the absence of sufficient appropriate audit evidence and the inherent limitations in the scope of our review in connection with the impairment loss provision recognised as at 31 December 2017 and 30 June 2018 respectively, we are still unable to satisfy ourselves that the impairment provisions as at 31 December 2017 and 30 June 2018 were free from material misstatement.

Any change to the impairment provisions as at those dates would affect the profit for the six months ended 30 June 2018. Therefore, had we been able to complete our audit and review of the opening balance and corresponding amounts, matters might have come to our attention indicating that the corresponding amounts for the six months ended 30 June 2018 may not be comparable to the current period.

Qualified Conclusion

Except for the adjustments to the corresponding figures in the interim financial report that we might have become aware of had it not been the situation described above, based on our review, nothing has come to our attention that causes us to believe that the interim financial report as at 30 June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34, Interim financial reporting.

• 35 -

MANAGEMENT DISCUSSION AND ANALYSIS

I. OVERVIEW

Revenue (in HK$ million)

==> picture [217 x 110] intentionally omitted <==

----- Start of picture text -----

25,000
20,000
14,311 13,728
15,000
10,000
5,000
0
1H2018 1H2019
----- End of picture text -----

(in HK$ million)

==> picture [212 x 119] intentionally omitted <==

----- Start of picture text -----

3,000
2,000
1,000
479
242
0
1H2018 1H2019
----- End of picture text -----

Total Equity (in HK$ million)

==> picture [212 x 117] intentionally omitted <==

----- Start of picture text -----

4,000
3,121 3,124
3,000
2,000
1,000
0
2018/12/31 2019/6/30
----- End of picture text -----

==> picture [185 x 10] intentionally omitted <==

----- Start of picture text -----

Supply Chain Trading Volume (million tonnes)
----- End of picture text -----

==> picture [202 x 138] intentionally omitted <==

----- Start of picture text -----

10.76 10.44
20
16
12 1.65 1.33
8
9.11 9.11
4
0
1H2018 1H2019
Coal Other
----- End of picture text -----

Total Assets (in HK$ million)

==> picture [217 x 119] intentionally omitted <==

----- Start of picture text -----

12,000
10,000
8,263
8,000
7,790
6,000
4,000
2,000
0
2018/12/31 2019/6/30
----- End of picture text -----

Cash Balance (in HK$ million)

==> picture [206 x 119] intentionally omitted <==

----- Start of picture text -----

900
800 699 745
700
600
500
400
300
200
100
0
2018/12/31 2019/6/30
----- End of picture text -----

• 36 -

II. FINANCIAL REVIEW

1. Revenue Overview

In the first half of 2019, E-Commodities Holdings Limited (the “ Company ” or “ E-Commodities ”) and its subsidiaries (together, the “ Group ”) recorded consolidated sales revenue of HK$13,728 million, a 4.07% decrease compared to HK$14,311 million in the first half of 2018. The decrease primarily resulted from lower average selling price of coal in the first half of 2019. In the first half of 2019, our supply chain trading volume was 10.44 million tonnes, a 2.97% decrease compared to 10.76 million tonnes in the first half of 2018. In the first half of 2019, our supply chain trading revenue for coal products was HK$11,386 million, accounting for approximately 82.94% of our total sales revenue for the first half of 2019.

The Group diversified our product lines from coal products to various products including, among others, petrochemical products, nonferrous metals and iron ore. The diversified product lines allow the Group to better adapt to different market conditions.

In the first half of 2019, approximately 82.94% of sales revenue was generated from the sales of coal, compared to approximately 83.27% in the first half of 2018.

In the first half of 2019, sales revenue generated from the sales of petrochemical products and iron ore represented 9.98% and 4.93% of the total sales revenue, respectively, compared to 9.59% and 5.54%, respectively in the first half of 2018.

	Six months ended	30 June
	2019	2018
	HK$’000	HK$’000
Disaggregated by major products of service lines
– Coal	11,385,892	11,916,813
– Petrochemical products	1,369,498	1,371,836
– Iron ore	676,492	793,003
– Nonferrous metals	201,381	156,344
– Rendering of logistics services	57,526	67,924
– Coke	28,320	–
– Others	9,235	5,570
	13,728,344	14,311,490

In the first half of 2019, the Group also expanded its geographic coverage of business to include Turkey, South Korea, India, Poland, Indonesia and others. Approximately HK$2,040 million of sales were generated from outside of the PRC (including Hong Kong, Macau and Taiwan), a 55.73% increase compared to HK$1,310 million in the first half of 2018.

• 37 -

The PRC (including Hong Kong, Macau and Taiwan) Turkey South Korea India Poland Indonesia United States Others	Six months ended 30 June 2019 2018 HK$’000 HK$’000 11,688,794 13,001,089 671,972 604,225 638,567 238,247 497,107 350,425 154,405 – 77,080 – – 114,751 419 2,753 13,728,344 14,311,490	Six months ended 30 June 2019 2018 HK$’000 HK$’000 11,688,794 13,001,089 671,972 604,225 638,567 238,247 497,107 350,425 154,405 – 77,080 – – 114,751 419 2,753 13,728,344 14,311,490
		14,311,490

In the first half of 2019, the sales revenue from our top five customers accounted for 37.84% of our total sales, whereas the same ratio was 38.46% in the first half of 2018. These customers are mainly large-scale, state-owned steel groups throughout China, and the largest steel company in Turkey, all being leading companies in the industry.

Supply Chain Trading

In the first half of 2019, our supply chain trading business segment contributed the majority of our total revenue, which was HK$13,662 million representing approximately 99.52% of the total sales revenue. This segment generates income by providing supply chain trading services to our end customers, covering diversified commodities including, among others, coal products, petrochemical products, iron ore and nonferrous metals. For the first half of 2019, revenue from supply chain trading also included added value by rendering warehousing and internal logistics services, which is not yet separable from supply chain trading revenue.

Supply Chain Logistics

Our supply chain logistics segment mainly provides warehousing and logistics services for our supply chain trading business and third parties. In the first half of 2019, this segment generated revenue of HK$58 million, which was generated by providing warehousing and logistics services for third parties.

The Group will continue to focus on our current business and will not expand into other new business areas in the foreseable future.

• 38 -

2. Cost of Goods Sold (“COGS”) and Procurement

COGS primarily consists of the purchase price, transportation costs and processing costs. COGS in the first half of 2019 was HK$13,092 million, representing a 3.45% decrease compared to HK$13,560 million in the first half of 2018. The decrease was primarily attributable to the decreased volume of sales in the first half of 2019. The procurement volume and amounts of each commodity are as follows:

Coal Petrochemical products Nonferrous metals Iron ore Coke	Six months ended 30 June 2019 2018 Procurement volume Procurement amounts Procurement volume Procurement amounts ’000 tonnes HK$’000 ’000 tonnes HK$’000 9,038 10,515,378 9,784 11,481,737 254 1,429,858 195 1,444,529 9 199,883 6 146,084 1,078 654,985 1,363 750,527 15 30,312 – – 10,394 12,830,416 11,348 13,822,877

In the first half of 2019, total procurement amount was HK$12,830 million, of which, the procurement amount from top five suppliers accounted for 53.26%. No director of the Company or their close associates (as defined under the Rules Governing the Listing of Securities (the “ Listing Rules ”) on The Stock Exchange of Hong Kong Limited (“ the Stock Exchange ”)), or shareholder of the Company owning more than 5% of the issued shares in the Company, has any interest in suppliers.

3. Gross Profit

The Group recorded a gross profit of HK$636 million in the first half of 2019, compared to a gross profit of HK$751 million recorded in the first half of 2018. The decrease in gross profit was mainly due to, 1) the slightly decreased gross profit of coking coal; 2) our petrochemical business suffering a loss due to the violent fluctuations in the chemical product market prices.

4. Distribution Costs

Distribution costs were HK$111 million in the first half of 2019, representing a 60.87% increase compared to HK$69 million in the first half of 2018. The increase in distribution costs was mainly due to the increased sales volume of Mongolian coal. Distribution costs include fees and charges incurred for supply chain trading and related logistics and transportation costs, which are mainly related to the sales of Mongolian coal.

• 39 -

5. Administrative Expenses

Administrative expenses were HK$183 million in the first half of 2019, an increase of 32.61% over HK$138 million of administrative expenses incurred in the first half of 2018. This was mainly due to the reversal of an impairment loss as a result of repayments of HK$76 million received from customers in the first half of 2018, which lowered the administrative expenses figure for the first half of 2018. Otherwise, the administrative expenses for the first half of 2019 decreased slightly.

6. Net Finance Costs

Net finance costs were HK$113 million in the first half of 2019, an increase of 28.41% compared to net finance costs of HK$88 million in the first half of 2018. The decrease in the finance income was mainly due to the changes in the fair value of the Convertible Bonds from income to loss. The Company suffered a loss of HK$4 million in the first half of 2019 in contrast to a gain of HK$21 million over the same period of 2018.

Interest income Changes in fair value on derivative financial instruments Finance income Interest on lease liabilities Interest on secured bank loans Interest on discounted bills receivable Interest on convertible bonds Total interest expense Bank charges Foreign exchange loss, net Changes in fair value on derivative financial instruments Finance costs Net finance costs	Six months ended 30 June 2019 2018 HK$’000 HK$’000 (7,871) (2,721) – (21,278) (7,871) (23,999) 2,269 – 30,033 22,493 39,601 55,414 23,456 20,187 95,359 98,094 14,442 10,194 7,219 3,848 3,838 – 120,858 112,136 112,987 88,137

• 40 -

7. Net Profit and Earnings Per Share

Our net profit was HK$242 million in the first half of 2019, compared to net profit of HK$479 million in the first half of 2018.

Basic earnings per share was HK$0.078 in the first half of 2019. Diluted earnings per share was HK$0.076 in the first half of 2019.

8. Other Current Assets

Loan to a third party	At 30 June 2019 HK$’000 –	At 31 December 2018 HK$’000 21,485

In 2009, the Company agreed to provide a loan to Moveday Enterprises Limited (“ Moveday ”) to purchase additional vehicles to meet with the increasing volume of coal procured by the Group in Mongolia, and Moveday agreed to use the trucks purchased through financing provided by the Company for the provision of transportation services to the Group during the term of the agreement. Pursuant to a loan agreement entered into on 10 April 2010 (as subsequently amended by a supplemental deed on 15 September 2010) and the strategic alliance agreement, the Company agreed to lend Moveday up to United States dollars (“ US$ ”) 40 million solely for the purpose of purchasing vehicles for transporting coal purchased by the Group in Mongolia. The loan to Moveday was provided on an unsecured basis, at an interest rate of LIBOR plus 3% and repayable over five years in equal annual installments of US$8 million, commencing from 18 months after the receipt of the loan (being 31 December 2012) by Moveday, with interest payable semi-annually in arrears. The entire loan amount was fully drawn down in 2010. As Moveday is a third party and the loan to Moveday was an unsecured loan, the Group did not have an interest in or control over the cash flows or other assets of Moveday other than in accordance with the terms of the loan agreement (as amended).

In 2013, the Group entered into another supplemental agreement with Moveday to modify the repayment terms of the remaining outstanding principal of US$32 million. Pursuant to the supplemental agreement, the remaining outstanding principal was repayable on 31 December of each year from 2013 to 2015, inclusive, equal instalments in of US$4 million plus a floating repayment amount. The floating repayment amount was calculated based on the volume of coals transported (maximum of 12 million tonnes) by Moveday for the Group and up to US$6 million during each year. Apart from the repayment terms, all the other terms of the loan were not changed and Moveday was in any event obliged to repay the entire outstanding principal on or before 31 December 2016.

• 41 -

In October 2015, Moveday informed the Group that it could not repay the outstanding principal and interest as scheduled in the above-mentioned supplemental agreement due to the financial difficulties encountered.

For the year ended 31 December 2015, the Group made an impairment provision of HK$120,189,000 against the remaining outstanding loan balance as at 31 December 2015 based on communication with management of Moveday about the adverse financial and operating conditions of Moveday in 2015.

On 30 April 2016, the transportation agreement entered into by the Group and Moveday expired and the Group determined not to renew such agreement and engaged another thirdparty company to provide such transportation services to the Group (the third-party company may use Moveday as sub-contractor for transportation at its discretion).

During the year ended 31 December 2017, the Group recovered loan principal of US$5.34 million (equivalent to approximately HK$41,692,000) from Moveday, including an amount of US$0.73 million (equivalent to approximately HK$5,770,000) payable by the Group in Moveday which was offset against outstanding loan principal.

During the year ended 31 December 2018, the directors of the Company continued their efforts to negotiate with Moveday for the repayment of the outstanding loan. As at 30 June 2018, the Group had recovered a further US$2.10 million (equivalent to approximately HK$16,162,000) of loan principal and during the second half of 2018 the Group recovered a further US $5.32 million (equivalent to approximately HK$41,726,000). As at 31 December 2018, in view of the continuous repayments from Moveday during the year, the directors of the Company believed that the outstanding loan balance of US$2.74 million (equivalent to approximately HK$21,485,000) as at 31 December 2018 could be fully recovered and therefore reversed the remaining balance of the impairment provision. As a result of these events, in total a gain of HK$79,373,000 was recognised in the consolidated statement of profit or loss for the year ended 31 December 2018. In January 2019, the Group has recovered all of the remaining loan principal of US$2.74 million (equivalent to approximately HK$21,485,000).

In June 2019, the Group agreed with Moveday outstanding loan interest of US$1.43 million (equivalent to approximately HK$11,183,000) in aggregate and this amount has been recognised in other revenue for the six months ended 30 June 2019. In July 2019, the Group duly recovered such outstanding loan interest in the amount of HK$11,183,000. The Group has recovered full amount of the loan principal and interest from Moveday.

• 42 -

9. Indebtedness and Liquidity

The total amount of bank loans owed by the Group at the end of June 2019 was HK$2,371 million. Interest rates on these loans range from 2.73% to 10.45% per annum, whereas the range for the same period in 2018 was from 2.38% to 7.84%. The Group’s gearing ratio at the end of June 2019 was 62.19%, which represents an increase compared to 59.94% at the end of December 2018. The Group calculates the gearing ratio on the basis of total liabilities divided by total assets.

==> picture [180 x 137] intentionally omitted <==

----- Start of picture text -----

Indebtedness and Liquidity
800% 8
6.77
600% 6
400% 332.65% 4
200% 2
62.19%
0 0
Liability/ EBITDA/ Debt/
Asset Interest EBITDA
----- End of picture text -----

In the supply chain trading business, acceptance bills and letters of credit are common payment methods. After receiving an acceptance bill and the letter of credit, the Group will carry out the recourse discount or pledge loan, and deposit the full margin into the bank to issue the bills payable. This method has very low risk since these two types of business liabilities use cashable bills and cash pledges, which are regarded as low risk borrowing business. According to applicable accounting standards, although such bills receivable are from sales, the cash received from discounted bills receivable and the pledge loans are classified as financing activities in the cash flow statement and are counted as liabilities in the balance sheet. Therefore, they affect the Group’s gearing ratio on the period end date of financial statement. Excluding the impact of the accounting treatment for the low risk borrowing and loans pledged by corresponding bank deposits, the Group’s adjusted total assets were HK$5,972 million and adjusted total liabilities were HK$2,848 million. The adjusted gearing ratio at the end of June 2019 was 47.69%.

• 43 -

10. Working Capital

In the first half of 2019, our accounts receivable turnover days, accounts payable turnover days, and inventory turnover days were 41 days, 16 days, and 16 days, respectively. As a result, the overall cash conversion cycle was approximately 41 days, which was 10 days shorter than the Group’s cash conversion cycle realised in the first half of 2018.

Working Capital

==> picture [155 x 132] intentionally omitted <==

----- Start of picture text -----

AR Turnover AP Turnover Inventory Turnover
120
100
80
60
43 41
40
20 13 16 16
5
0
1H2018 1H2019
----- End of picture text -----

11. Contingent Liabilities

The Company’s existing subsidiaries, namely Glorious Gold Holdings Limited, Million Super Star Limited, E-Commodities Japan Co., Ltd. (株式会社イー·コモディティーズジャパ ン), E-Commodities Holdings Private Limited, E-Commodities (HK) Holdings Limited, Cheer Top Enterprises Limited, Legend York Star Limited, Color Future International Limited, Standard Rich Inc Limited, King Resources Holdings Limited, Eternal International Logistics Limited, Royce Petrochemicals Limited and E-Commodities International Development(HK) Limited, have provided guarantees for the Convertible Bonds and the 118,060,606 units of warrants (the “ Warrants* ”) issued on 14 September 2017. The guarantees will be released upon the full and final payment and performance of all obligations of the Company under the Convertible Bonds and Warrants.

12. Pledge of Assets

At 30 June 2019, bank loans amounting to HK$829,643,000 (31 December 2018: HK$682,843,000) have been secured by bills receivable with an aggregate carrying value of HK$461,243,000 (31 December 2018: HK$652,720,000) and restricted bank deposits with an aggregate carrying value of HK$379,062,000 (31 December 2018: HK$102,717,000).

At 30 June 2019, bank loans amounting to HK$1,097,826,000 (31 December 2018: HK$1,282,687,000) have been secured by bills receivable with recourse an aggregate carrying value of HK$1,097,826,000 (31 December 2018: HK$1,282,687,000).

At 30 June 2019, bank loans amounting to HK$278,516,000 (31 December 2018: HK$317,919,000) have been secured by property, plant and equipment with an aggregate carrying value of HK$nil (31 December 2018: HK$25,272,000), land use rights with an aggregate carrying value of HK$289,894,000 (31 December 2018: HK$56,954,000), trade receivables with an aggregate carrying value of HK$170,520,000 (31 December 2018: HK$nil) and bills receivable with an aggregate carrying value of HK$23,304,000 (31 December 2018: HK$nil).

• 44 -

At 30 June 2019, bank loans amounting to HK$102,312,000 (31 December 2018: HK$102,717,000) have been secured by credit guarantee with a guarantee amount of HK$102,312,000 (31 December 2018: HK$102,717,000) provided by subsidiaries of the Group.

At 30 June 2019, bank loans amounting to HK$11,368,000 (31 December 2018: HK$nil) have been secured by trade receivables with an aggregate amount of HK$15,413,000 (31 December 2018: HK$nil).

At 30 June 2019, bank loans amounting to HK$51,428,000 (31 December 2018: HK$nil) have been secured by inventories with an aggregate amount of HK$49,485,000 (31 December 2018: HK$nil).

At 30 June 2019, bills payable amounting to HK$307,066,000 (31 December 2018: HK$nil) have been secured by restricted bank deposits with an aggregate carrying value of HK$92,206,000 (31 December 2018: HK$nil), property, plant and equipment with an aggregate carrying value of HK$24,021,000 (31 December 2018: HK$nil) and land use rights with an aggregate carrying value of HK$952,000 (31 December 2018: HK$nil).

At 30 June 2019, bills payable amounting to HK$377,639,000 (31 December 2018: HK$nil) have been secured by restricted bank deposits with an aggregate carrying value of HK$367,527,000 (31 December 2018: HK$nil).

At 30 June 2019, bills payable amounting to HK$386,055,000 (31 December 2018: HK$nil) have been secured by restricted bank deposits with an aggregate carrying value of HK$105,905,000 (31 December 2018: HK$nil) and bills receivable with an aggregate carrying value of HK$89,954,000 (31 December 2018: HK$nil).

At 31 December 2018, bank loans amounting to HK$45,652,000 together with bills payable amounting to HK$180,461,000 have been secured by bank deposits with an aggregate carrying value of HK$46,014,000, land use rights with an aggregate carrying value of HK$238,803,000, and bills receivable with an aggregate carrying value of HK$23,134,000, such collateral have been all released as at 30 June 2019.

As at 30 June 2019, the Company provided credit guarantees for subsidiaries’ domestic banks facilities amounting to HK$496 million.

13. Cash Flow

In the first half of 2019, the Group had an operating cash inflow of HK$997 million compared to HK$1,356 million cash outflow during the same period last year. The net cash inflow from operating activities was mainly contributed from cash profit of HK$352 million and net cash inflow of working capital changes of HK$645 million.

In the first half of 2019, the Group had a cash outflow from investing activities of HK$773 million compared to HK$282 million cash inflow during the same period last year. The cash outflow from investing activities in the first half of 2019 was generated mainly due to an increase in restricted bank deposits for bank credit pledges of approximately HK$683 million.

• 45 -

In the first half of 2019, the Group had a cash outflow from financing activities of HK$171 million compared to HK$1,351 million cash inflow during the same period last year. Domestic banks facilities of the Company’s subsidiaries have remained at a stable level, the front-to-back facilities from oversea banks have increased. The cash outflow from financing activities was mainly attributable to the reduction of discounted bills receivable and pledges of the bills receivable of approximately HK$314 million.

In the supply chain trading business, acceptance bills and letters of credit are common payment methods. After receiving an acceptance bills and the letters of credit, the Group will carry out the recourse discount or pledge loan, and deposit the full margin into the bank to issue bills payable. This method has very low risk since these two types of business liabilities use cashable bills and cash pledges, which are regarded as low risk borrowing business. According to applicable accounting standards, although such bills receivable are from sales, the cash received from discounted bills receivable and the pledge loans are classified as financing activities in the cash flow statement. Although the bills payable is from procurements, the Group deposits the full margin into the bank to issue the bills payable, which are classified as investment activities in the cash flow statement. Therefore, in order to explain the Group’s business activities more clearly, the impact of the above changes is analysed as follows:

Six months ended 30 June 2019 Adjustments* HK$’000 Cash and cash equivalents at 1 January 699,361 Net cash generated from/(used in) operating activities 996,918 (681,916) Net cash generated from/(used in) investing activities (773,327) 367,5271 Net cash generated from/(used in) financing activities (171,269) 314,3892 Effect of foreign exchange rate changes (6,719) Cash and cash equivalents at 30 June 744,964

Adjusted six months ended 30 June 2019** HK$’000 699,361 315,002 (405,800) 143,120 (6,719) 744,964

• 46 -

Note:

1. Full margin deposit for letter of credit

2. Discounted bills and bill pledged loans

3. Derived from condensed consolidated cash flow statement of the Company’s interim financial report.

4. ** Illustrative purpose only.

III. WORKING CAPITAL AND FINANCIAL POLICY

The Group managed its funds by pre-planning and real-time monitoring measures. The Group raised funds through business activities, discount of notes receivable, factoring of accounts receivable, banking facilities from domestic and overseas banks, and bond financing, so as to ensure the expenditure for business operation, loan repayment and capital expenditure. In the first half of 2019, the Group’s main financing methods were notes receivable, discounted letters of credit and banking facilities.

The Group has always adopted prudent and stable fund management methods. Internally, by managing the amount of funds occupation quota of each business department, we supervised the business departments to reduce the level of inventory, prepaid accounts and receivables, and demanded advance payment from customers when selling products and services, so as to improve the turnover rate of funds and reduce the daily working capital of the business. We actively opened up new financing channels. In the first half of 2019, we increased the factoring amount of accounts receivable. Payment by financing leasing was given priority in capital expenditure.

The main currencies of the Group’s business and operation were U.S. dollars and RMB. For business for which purchases are made in U.S. dollars and sales made in RMB, the Group paid a close attention to the RMB exchange rate. In the trend of RMB devaluation, the Company used foreign exchange derivatives to avoid exchange rate fluctuation risks and lock in business profits.

IV. RISK FACTORS

The operation of the Group involves certain risks, some of which are beyond our control. The risks set out below are those that the Group currently believes may materially affect its performance and/or financial condition. However, this should not be taken as an exhaustive list as there may be additional risks and uncertainties not currently known to the Group, or those which are currently deemed to be immaterial, but may become material in the future and which may adversely affect the Group’s business, results of operations, financial condition and prospects.

• 47 -

1. Volatility of Commodities Prices

The market prices of commodities are volatile and are affected by numerous factors that are beyond our control. These include international supply and demand, the level of consumer product demand, international economic trends, global or regional political events and international events, as well as a range of other market forces. The combined effects of any or all of these factors on commodities prices are impossible for us to predict. There can be no assurance that global and domestic commodities prices will continue to remain at a profitable level. Under the circumstances that our business fails to remain at a profitable level, there would be material and adverse effect on our financial condition.

2. Dependence upon the Steel Industry

The revenue of the Group was mainly generated from supply chain trading services of coking coal products, which is heavily dependent on the demand for coking coal from steel mills and coke plants in China. The steel industry’s demand for metallurgical coal is affected by a number of factors including the cyclical nature of that industry’s business, technological developments in the steel-making process and the availability of substitutes for steel such as aluminum, composites and plastics.

3. Liquidity Risk

Our policy is to regularly monitor the Group’s liquidity requirements and compliance with lending covenants, to ensure that the Group maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. The Group made great efforts to maintain existing financing facilities and expand to new facilities in banks, state-owned companies, and other financial institutions to satisfy capital requirements of the Group in line with its trading businesses.

4. Currency Risk

Over 30.34% of the Group’s turnover in the first half of 2019 were denominated in Renminbi. Over 82.81% of the Group’s purchase costs, and some of our operating expenses, are denominated in US dollars. Fluctuations in exchange rates may adversely affect the value of the Group’s net assets, earnings or any declared dividends as Renminbi is translated or converted into US dollars or Hong Kong dollars. The Group has partially locked the currency risk of related supply chain trading businesses by adopting corresponding exchange rate policies and derivatives method, however, any unfavourable movement in the exchange rate may still lead to an increase in the costs of the Group or a decline in sales, which could materially affect the Group’s results of operations.

• 48 -

5. Fair Value Measurement

Certain of the Group’s financial assets and liabilities are carried at fair value. Fair value of forward exchange contracts of derivative financial instruments held by the Group is determined by discounting the contractual forward price and deducting the current spot rate. The discount rate used is derived from the relevant government yield curve as at the end of the reporting period plus an adequate constant credit spread.

V. HUMAN RESOURCES

Employee Overview

The Group aims to set up a performance-oriented compensation and benefit system while balancing the internal and external market in each different job position. Strictly following the PRC Labor Law and Labor Contract Law, the Group has signed formal employment contracts with all employees in the PRC and pays all mandatory social insurances in full. In Hong Kong, the Group participated in a mandatory provident fund scheme for our employees in accordance with applicable Hong Kong laws and regulations.

As at 30 June 2019, the Group had 271 full-time employees (excluding 824 dispatched workers in the PRC subsidiaries). Detailed figures by category of employees are as follows:

Functions Middle and senior management Front-line production & production support & maintenance Sales & marketing Administrative, finance, human resources and operations, etc. Total	No. of Employee 38 102 68 63 271	Percentage 14% 38% 25% 23%
		100%

Employee Education Overview

Qualifications	No.	of Employee	Percentage
Master & above		51	19%
Bachelor		136	50%
Diploma		48	18%
Middle-school (secondary school) & below		36	13%
Total		271	100%

• 49 -

Training Overview

Training is key to the Group to improve the employees’ working capabilities and management skills. For the six months ended 30 June 2019, the Group held various internal and external training programs amounting to 250 training hours in total, and 1,909 individuals participated in these programs.

Training Overview

Training Courses Safety Management and leadership Professional skill Total	No. of hours 60 94 96 250	No. of participants 1,339 542 28 1,909

VI. HEALTH, SAFETY AND ENVIRONMENT

The Group attaches great importance to the health and safety of employees and understands the importance of environment protection. The Lost Time Injury Frequency Rate (LTIFR), Fatality Incident Rate (FTIR) and Total Recordable Case Frequency (TRCF) are key indicators to measure how we achieve our commitment. No casualties, environmental accidents or occupational health and safety accidents occurred in the first half of 2019.

VII. PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

As at 30 June 2019, the Company had a total of 3,046,562,356 shares in issue. The Company repurchased a total of 20,160,000 shares of the Company on the Stock Exchange during six months ended 30 June 2019 pursuant to the repurchase mandate approved by the shareholders of the Company at the annual general meeting held on 27 June 2018. Such repurchased shares have already been cancelled and the total number of shares in issue were reduced accordingly.

VIII. INTERIM DIVIDEND

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2019.

• 50 -

IX. SIGNIFICANT EVENT AFTER 30 JUNE 2019

Major Transaction – Formation of JV Companies

On 25 July 2019, the Company and Xiamen Xiangyu Joint Stock Company Limited (廈門象嶼 股份有限公司) entered into a cooperation agreement (the “ Cooperation Agreement ”) in relation to, among other things, the formation of a joint venture in Xiamen (the “ Xiamen JV ”) and a joint venture in Singapore (the “ Singapore JV ”, together with Xiamen JV, the “ JV Companies* ”), to further develop Mongolia’s coking coal, thermal coal and domestic coal business. Under the Cooperation Agreement, (1) the registered capital of Xiamen JV shall be RMB2 billion, of which RMB980 million is agreed to be contributed by the Company through its designated subsidiary, representing 49% of the total registered capital of the Xiamen JV; and (2) the Company, through its designated subsidiary, agreed to contribute S$490,000 to subscribe for shares in the Singapore JV representing 49% of the total share capital of the Singapore JV. Upon the formation of JV Companies, each of the Xiamen JV and the Singapore JV will become an associate company of the Company from accounting perspective. For further information on the Formation of JV Companies, please refer to the Company’s announcements dated 25 July 2019.

X. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

Throughout the six months ended 30 June 2019, the Company fully complied with the code provisions under the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules.

XI. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS OF THE COMPANY

The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules (“ Model Code ”) as its own code of conduct for dealing in securities of the Company by the directors of the Company (the “ Directors ”). Having made specific enquiries of all the Directors, each Director has confirmed that he/she has complied with the required standards set out in the Model Code throughout the six months ended 30 June 2019.

XII. REVIEW OF INTERIM RESULTS

The audit committee of the Company has reviewed the interim results of the Group for the six months ended 30 June 2019. The interim results are unaudited, but have been reviewed by KPMG in accordance with Hong Kong Standard on Review Engagements 2410, Review of interim financial information performed by the independent auditor of the entity , issued by the Hong Kong Institute of Certified Public Accountants.

• 51 -

XIII. DISCLOSURE OF INFORMATION ON THE STOCK EXCHANGE’S WEBSITE

This interim results announcement is published on the websites of the Company (www.e-comm.com) and the Stock Exchange (www.hkexnews.hk). The interim report of the Company for the six months ended 30 June 2019 will be dispatched to shareholders of the Company and will be available on the above websites in due course.

By Order of the Board E-Commodities Holdings Limited Cao Xinyi Chairman

Hong Kong, 22 August 2019

As at the date of this announcement, the executive directors of the Company are Ms. Cao Xinyi, Mr. Mr. Wang Yaxu, Mr. Li Jianlou and Ms. Di Jingmin, the non-executive directors of the Company is Mr. Guo Lisheng and the independent non-executive directors of the Company are Mr. Ng Yuk Keung, Mr. Wang Wenfu and Mr. Gao Zhikai.

• for identification purposes only

• 52 -