XD Inc. — Annual Report 2018

Mar 29, 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.

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ANNOUNCEMENT OF ANNUAL RESULTS FOR YEAR ENDED 31 DECEMBER 2018

A. IMPORTANT NOTICE

• 1 This summary of annual report is abstracted from the full text of the annual report. In order to completely understand the operating results, financial conditions and future development planning of Chongqing Iron & Steel Company Limited (the “ Company ”), investors are advised to carefully read the full text of the annual report on the media designated by the China Securities Regulatory Commission (CSRC), such as the website of the Shanghai Stock Exchange.

• 2 The board of directors(the “ Board ”), the supervisory committee and directors, supervisors and senior management of the Company warrant that there are no false representations, misleading statements contained in or material omissions from the annual report and collectively and individually accept full responsibility for the truthfulness, accuracy and completeness of the contents hereof.

• 3

• All directors of the Company attended Board meetings.

• 4 Ernst & Young Hua Ming LLP issued a standard unqualified audit report for the Company.

• 5 The profit distribution proposal or proposal to transfer capital reserve to share capital for the reporting period as considered by the Board

According to the auditing by Ernst & Young Hua Ming LLP, the net profit attributable to shareholders of the Company for 2018 amounted to RMB1.788 billion, and the unappropriated profit as at the end of 2018 amounted to RMB-10.290 billion. As the Company recorded a negative unappropriated profit carried forward, the directors suggested not to make profit distribution or transfer capital reserve to share capital pursuant to the Article 250 of the Articles of Association for 2018.

• 6 The annual results of the Company for the year ended 31 December 2018 have been reviewed by the Audit Committee.

– 1 –

B. BASIC INFORMATION ON THE COMPANY

1 Company Information

Stock Profile

Stock Profile
				Abbreviation
			Abbreviated	before
Stock type	Place of listing		name	Stock code adjustment
A share	Shanghai Stock Exchange		Chongqing	601005 *ST Chongqing
			Iron & Steel	Iron & Steel
H share	The Stock Exchange of		Chongqing	01053 Nil
	Hong Kong Limited		Iron & Steel
Contact		Secretary		Securities
information		to the Board		representative
Name		Meng Xiangyun		Peng Guoju
Correspondence		No. 1 Gangcheng Avenue,		No. 1 Gangcheng Avenue,
address		Changshou	Economic	Changshou Economic
		Development Zone,		Development Zone,
		Chongqing,	the PRC	Chongqing, the PRC
Tel		86–23–6887 3311		86–23–6898 3482
E-mail		IR@email.cqgt.cn		IR@email.cqgt.cn

2 Main Business Profile during the Reporting Period

The Company is mainly engaged in the production, processing and sale of steel plates, steel sections, wire rods, bar materials, billets and thin plates; production and sale of coal chemical products & grain slag, etc. The Company has a production capacity of 8.40 million tonnes of steel per year, with the following production lines: 4,100mm wide and thick plate, 2,700mm medium plate, 1,780mm hot rolled sheet, high speed wire rods, bar materials and steel sections.

The Company’s products are applied in various industries, such as machinery, architecture, engineering, automobile, motorbike, shipbuilding, offshore oil, gas cylinder, boiler and oil and gas pipelines. The Company’s steel products used in hull structure, boilers and pressure vessels were rewarded the title of “Chinese brand products” and four other products were rewarded the title of “Chongqing’s brand products”. The Company successively obtained the following titles of honor: national Labor Day certificate, national implementation of performance excellence model advanced enterprises, Chongqing famous trademark, Chongqing quality benefit enterprise and Chongqing contract-abiding and trustworthy enterprises.

– 2 –

3 Major Financial Data and Financial Indicators of the Company

3.1 Major financial data and financial indicators for the last three years

Unit: RMB’000

			Increase/
			decrease from
	2018	2017	last year	2016
			(%)
Total assets	26,933,351	25,012,459	7.68	36,438,454
Operating income	22,638,957	13,236,840	71.03	4,414,902
Net profit attributable to
shareholders of listed
company	1,787,906	320,086	458.57	-4,685,956
Net profit attributable to
shareholders of listed
company, netting non-
recurring gains and
losses	1,677,588	-1,870,066	n/a	-5,392,375
Net assets attributable to
shareholders of listed
company	18,531,665	16,730,115	10.77	-200,494
Net cash flow from
operating activities	1,338,195	505,815	164.56	-449,021
Basic earnings per share
(RMB/share)	0.20	0.04	400	-0.53
Diluted earnings per share
(RMB/share)	0.20	0.04	400	-0.53
Weighted average return
on net assets (%)	10.14	-1,290.51	n/a	-284.59

– 3 –

3.2 Major financial data by quarter during the reporting period

Unit: RMB’000

	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
	(January-	(April-	(July-	(October-
	March)	June)	September)	December)
Operating income	5,152,412	5,940,487	6,343,961	5,202,097
Net profit attributable to
shareholders of listed
company	350,389	411,571	718,057	307,889
Net profit attributable to
shareholders of listed
company, netting non-
recurring gains and
losses	353,865	382,231	699,210	242,282
Net cash flow from
operating activities	-304,134	-997,054	1,740,322	899,061

Explanation on the differences between quarterly data and disclosed regular reporting data

Applicable ✓ Not applicable

4 Share Capital and Shareholders

4.1 Table of holdings of the number of ordinary shareholders and preferred shareholders with restored voting rights and the top 10 shareholders

	Unit: share
As of the end of the reporting period, the total number of
ordinary shareholders (accounts)	146,983
At the end of the month before the annual report
disclosure, the total number of ordinary shareholders
(accounts)	147,266
As of the end of the reporting period, the total number
of preferred shareholders with restored voting rights
(accounts)	0
At the end of the month before the annual report
disclosure, the total number of preferred shareholders
with restored voting rights (accounts)	0

– 4 –

The top 10 shareholders

	Changes				Pledged	or frozen
	during the	Period-end		Number of
Name of shareholder	reporting	number		restricted			Nature of
(Full name)	period	of stock	Ratio	stock held	Stock Status	Quantity	shareholders
			(%)
Chongqing Changshou Iron & Steel	0	2,096,981,600	23.51	0	Pledged	2,096,981,600	Domestic non-
Company Limited							state-owned
							legal person
HKSCC NOMINEES LIMITED	22,400	531,021,540	5.95	0	Unknown		Foreign legal
							person
Chongqing Qianxin Energy	0	427,195,760	4.79	0	Unknown		Unknown
Environmental Protection Company
Limited
Chongqing Rural Commercial Bank	0	289,268,939	3.24	0	Unknown		Unknown
Co., Ltd.
Chongqing Guochuang Investment and	0	278,288,059	3.12	0	Unknown		Unknown
Management Co., Ltd.
Sinosteel Equipment & Engineering	0	252,411,692	2.83	0	Unknown		Unknown
Co., Ltd.
Bank of Chongqing Co., Ltd.	0	226,042,920	2.53	0	Unknown		Unknown
Industrial Bank Co., Ltd., Chongqing	0	219,633,096	2.46	0	Unknown		Unknown
Branch
Agricultural Bank of China Limited,	0	216,403,628	2.43	0	Unknown		Unknown
Chongqing Branch
China Shipbuilding Industry Complete	0	211,461,370	2.37	0	Unknown		Unknown
Logistics Co., Ltd. (中船工業成
套物流有限公司)

The above shareholders’ connected relationship or acting in concert

There is no connection between Chongqing Changshou Iron & Steel Company Limited, the controlling shareholder of the Company, and the other 9 shareholders, nor are they persons acting in concert regulated in Measures for Management on Information Disclosure of Changes in Shareholdings of Listed Companies’ Shareholders. The Company is also not aware of any connected relationship among the other 9 shareholders or whether they are acting in concert.

Preferred shareholders with restored voting rights and their shareholding

Not applicable.

– 5 –

4.2 Chart of equity and the controlling relationship between the Company and the controlling shareholder

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✓ Applicable Not applicable
Chongqing Changshou Iron &
Steel Company Limited
23.51%
Chongqing Iron &
Steel Company Limited
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4.3 Chart of equity and the controlling relationship between the Company and the actual controllers

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✓ Applicable Not applicable
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==> picture [482 x 349] intentionally omitted <==

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Access Star Company Limited East Oak Company Limited
100% 100%
Invesco(IVZ) of the State CouncilState-owned AssetsSupervision andAdministrationCommission 100%in Ningbo EconomicConsulting Co., Ltd.Development ZoneWeijun Investmentand Technical 100%in Ningbo EconomicConsulting Co., Ltd.Huiyong InvestmentDevelopment Zoneand Technical
Xubo Investment Chunyong Investment
100% Aviation Industry Bai Bo Zhang Guojin 77% in Ningbo EconomicConsulting Co., Ltd.Development Zoneand Technical in Ningbo EconomicConsulting Co., Ltd.Development Zoneand Technical
100% Corporation of China39.32% 70% 30% Development Co., Ltd.Zhongmei Lvse Consulting Co., Ltd. in 100%Penghui Investment 100%Runyong InvestmentConsulting Co., Ltd.
China MerchantsGroup Limited AVIC Capital Co., Ltd.100% 100% Technical Development 100%Ningbo Economic and Zone 100%in Ningbo EconomicDevelopment Zoneand Technical
100% AVIC Investment Co., Ltd.28.97%AVIC Trust Co., Zhangjiakou Zhongtai Consulting Co., Ltd.Energy Technology ManagementCenturium Capital Ltd.�HK� Consulting Co., Ltd.Energy TechnologyZhangjiakouChuangyuan Tianjin WeiyuanManagementInvestmentCo., Ltd. Tianjin HaoyongManagementInvestmentCo., Ltd.
Navigation CompanyChina Merchants Steam 100% Ltd. 100% 100% 100% 45% 55%
100% Shenzhen Putai DevelopmentInvestment Co., Ltd. Zhangjiakou Kaixuan Energy Technology Co., Ltd. Consulting Co., Ltd.Beijing Dazheng Management Zhangjiakou LongzeConsulting Co., Ltd.Energy Technology Guaranty CorporationInvestment andChina National Investment Co., Ltd.Tianjin Taiding
100% 100% 100% 81.25% 14.6% 85.4%
Energy TechnologyConsulting Co., Zhangjiakou HuacheLtd. Zhangjiakou Huajie Meirun Energy Technology ConsultingCo., Ltd. Protection FoundationHebei Huamei GreenEnvironmental Zhangjiakou HuaqingConsulting Co., Ltd.Meiyuan EnergyTechnology Zhangjiakou HuapingMei'an EnergyTechnology ConsultingCo., Ltd. (Tianjin) Co., Ltd.Dinghui EquityManagementInvestment Xu Lin
100% 15.45% 14.55% 15.45% 15.45% 14.55% 15.45% 9.09%
of China, Ltd.Ping An LifeInsuranceCompany Holding Co., Ltd.InvestmentShenzhen Financing HoldingInvestmentShenzhenCo., Ltd. Credit InvestmentChina SecuritiesCo., Ltd. Other Limited Partnerships (LP) Zhongmei Lvse InvestmentManagement Co., Ltd.100%
39.00% 8.00% 51.00% 2.00% China Baowu Steel Group Corporation Beijing Zhongmei Lvse and HuayuanInvestment Partinership (LP) 1%GP Management (Beijing) Co., U.S.-China Green Fund Ltd.
100% 99.93% 0.07%
WL ROSS&Co.LLC China Merchants Ping'an AMC Huabao Investment Co., Ltd. U.S.-China Green East InvestmentManagement Co., Ltd.
26% 24% 25% 25%
Siyuanhe Equity Investment Management Co., Ltd. (GP) China Baowu Steel Group Corporation Limited (LP) Sichuan Desheng Group Vanadium & Titanium Co., Ltd. (LP) Other Limited Partnership (LP) Chongqing Yufu Assets Equity Investment Fund Management Co., Ltd. (GP)
Siyuanhe (Chongqing) Iron & Steel Industrial Development Chongqing Strategic Emerging Equity Investment Fund Partnership (Limited
and Equity Investment Fund Partnership (LP) Partnership)
75% 25%
Chongqing Changshou Iron & Steel Company Limited Other Shareholders
23.51% 76.49%
Chongqing Iron & Steel Company Limited
(Chongqing Iron & Steel: 601005.SH/Chongqing Iron & Steel: 01053.HK)
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4.4 The total number of preferred shareholders of the Company and the top 10 shareholders at the end of the reporting period

Applicable

✓ Not applicable

– 6 –

5 Information on Corporate Bond

Applicable

✓ Not applicable

C. MANAGEMENT DISCUSSION AND ANALYSIS

1 Major Operations During the Reporting Period

During the reporting period, the Company achieved stable and smooth production by embracing the production and operation policy of “fullscale production and sell-through rates, low cost and high efficiency”, with significant improvement of major technical-economic indicators, falling costs and beating earnings. The operating income for the year is RMB22.639 billion, representing a year-on-year growth of 71.03%; the gross profit is RMB1.759 billion, representing a year-on-year growth of 449.93%.

1.1 Main business analysis

• 1.1.1 Analysis of changes in certain items from Income Statement and Cash Flow Statement

Unit: RMB’000

		Corresponding
	Current	period
Item	period	last year	Change
			(%)
Operating income	22,638,957	13,236,840	71.03
Operating cost	19,681,846	13,531,607	45.45
Selling expenses	88,057	60,628	45.24
Administrative expenses	795,392	574,502	38.45
R&D expenses
Financial expenses	183,073	512,281	-64.26
Net cash flow from operating activities	1,338,195	505,815	164.56
Net cash flow from investing activities	630,605	6,246,136	-89.90
Net cash flow from financing activities	-868,219	-6,625,239	n/a

(1) The increase of operating income was mainly due to the improvement of production and sales, as well as the increasing steel price.

– 7 –

• (2) The increase of operating cost was mainly due to the improvement of production and sales.

• (3) The increase of selling expenses was mainly due to the improvement of production and sales, as well as the increase of freight charge.

• (4) The increase of administrative expenses was mainly due to the provision of employee incentives.

• (5) The decrease of financial expenses was mainly due to the significant falling of interest expenses caused by the decrease of debts after the judicial reorganisation.

• (6) The increase of net cash flow from operating activities was mainly due to the increase of operating profit.

• (7) The decrease of net cash flow from investing activities was mainly due to the disposal of fixed assets during the judicial reorganisation in 2017.

• (8) The increase of net cash flow from financing activities was mainly due to the debt repayment during the judicial reorganisation in 2017.

1.1.2 Revenue and cost analysis

✓ Applicable Not applicable

Detailed notes to the major changes in the Company’s profits structure or profits sources:

In 2018, the Group realized a total profit of RMB1.759 billion, representing a year-on-year increase of 449.93%, which was mainly due to the following reasons: the selling price of steel products amounted to RMB3,611/tonne, representing a year-onyear increase of 9.56%, and the product portfolio was optimized, achieving an aggregate of an increase of RMB1.901 billion in profit; the increase in prices of raw materials, such as ore, coal, alloy, scrap steel, etc., resulted in a decrease of RMB967 million in profit; the Company implemented the operating principle of achieving full production and sales, improved basic management, realized stable and smooth production and vigorously promoted the cost reduction plan. As a result, critical technical and economic indicators such as the hot strength of coke, tumbler index of sinter, fuel ratio, capacity factor of blast furnace, steel

– 8 –

consumption in steelmaking, yield of rolled steel, etc., were all improved significantly and cost consumption levels were reduced substantially, thus resulting in an increase of RMB2.544 billion in profit from cost reduction in the aspect of process; the year-on-year decrease in the total amount of expenses for the period gave rise to an increase of RMB81 million in profit; and one-off net gain generated from the judicial reorganisation of the Company was RMB2.09 billion in 2017.

In 2018, the Group’s revenue from principal business amounted to RMB22.579 billion, representing a year-on-year increase of 70.90%. In particular, the income from sales of rolled steel billet amounted to RMB21.835 billion, representing an increase of RMB9.654 billion as compared with the same period of previous year. Firstly, the sales volume of rolled steel billet was 6,046,400 tonnes, representing a year-on-year increase of 63.62%, resulting in an increase in the sales income of RMB7.904 billion; secondly, the average sales price of rolled steel billet was RMB3,611/ tonne, representing a year-on-year increase of 9.56%, leading to an increase in the sales income of RMB1.705 billion.

Composition of income from principal businesses:

Type 2018 2017 Amount Percentage Amount Percentage (RMB ’000) (%) (RMB ’000) (%) Plate 6,076,840 26.91 2,356,286 17.84 Hot rolling 11,714,937 51.88 8,110,234 61.39 Bars 2,135,019 9.46 1,102,082 8.34 Profiles 1,908,058 8.45 516,509 3.91 Billet – 0.00 95,637 0.72 Subtotal 21,834,854 96.71 12,180,748 92.20 Other 743,921 3.29 1,030,608 7.80 Total 22,578,775 100.00 13,211,356 100.00	Year-on-year increase in amount (%) 157.90 44.45 93.73 269.41 -100.00
	79.26
	-27.82
	70.90

– 9 –

Sales prices of rolled steel billet:

Item Plate Hot rolling Bars Profiles Billet Subtotal Sales volumes of Item Plate Hot rolling Bars Profiles Billet Subtotal	2018 Sales price 2017 Sales price RMB/tonne RMB/tonne 3,802 3,275 3,505 3,255 3,663 3,512 3,652 3,678 – 3,142 3,611 3,296 rolled steel billet: Sales volume for 2018 Sales volume for 2017 (Ten thousand tonnes) (Ten thousand tonnes) 159.85 71.94 334.26 249.14 58.28 31.38 52.25 14.04 – 3.04 604.64 369.54	Year-on-year growth Income increase (%) (RMB ’000) 16.09 841,502 7.68 834,047 4.30 88,209 -0.71 -13,815 -100.00 – 9.56 1,749,943 Year-on-year growth Income increase (%) (RMB ’000) 122.20 2,879,053 34.17 2,770,656 85.72 944,728 272.15 1,405,364 -100.00 -95,637 63.62 7,904,164	Year-on-year growth Income increase (%) (RMB ’000) 16.09 841,502 7.68 834,047 4.30 88,209 -0.71 -13,815 -100.00 – 9.56 1,749,943 Year-on-year growth Income increase (%) (RMB ’000) 122.20 2,879,053 34.17 2,770,656 85.72 944,728 272.15 1,405,364 -100.00 -95,637 63.62 7,904,164
			7,904,164

– 10 –

(1) Main business by sectors, products and regions

Unit: RMB’000

Main operations by sectors

				Year-on-	Year-on-
				year	year
				increase/	increase/	Year-on-
				decrease in	decrease in	year increase/
By	Operating	Operating	Gross	operating	operating	decrease in
sectors	income	cost	margin	income	cost	gross margin
			(%)	(%)	(%)	(%)
Iron and	22,578,775	19,651,712	12.96	70.90	45.47	Increase
steel						by 15.21
						percentage
						points

Main operations by products

				Year-on-	Year-on-
				year	year	Year-on-
				increase/	increase/	year
				decrease in	decrease in	increase/
By	Operating	Operating	Gross	operating	operating	decrease in
products	income	cost	margin	income	cost	gross margin
			(%)	(%)	(%)	(%)
Rolled	21,834,854	18,977,424	13.09	79.26	51.18	Increase
steel						by 16.14
billet						percentage
						points
Other	743,921	674,288	9.36	-27.82	-29.51	Increase
						by 2.18
						percentage
						points

– 11 –

Main business by regions

By regions Southwest Other regions Total	Operating income 19,750,243 2,828,532 22,578,775	Operating cost 17,190,865 2,460,847 19,651,712	Gross margin (%) 12.96 13.00 12.96	Year-on- year increase/ decrease in operating income (%) 50.67 2,644.83 70.90	Year-on- year increase/ decrease in operating cost Year-on- year increase/ decrease in gross margin (%) (%) 28.10 Increase by 15.34 percentage points 2,671.52 Decrease by 0.84 percentage points 45.47 Increase by 15.21 percentage points	Year-on- year increase/ decrease in operating cost Year-on- year increase/ decrease in gross margin (%) (%) 28.10 Increase by 15.34 percentage points 2,671.52 Decrease by 0.84 percentage points 45.47 Increase by 15.21 percentage points
						Increase by 15.21 percentage points

• (2) Table of production and sales volume analysis ✓ Applicable Not applicable

Unit: Ten thousand tons

				Year-on-
				year		Year-on-	Year-on-
				increase/		year	year
				decrease in		increase/	increase/
Main	Production	Sales		production	decrease in		decrease in
products	volume	volume	Inventory	volume	sales volume		inventory
				(%)		(%)	(%)
Plate	162.28	159.85	4.61	122.51		122.20	200.33
Hot rolling	335.38	334.26	4.87	33.77		34.17	220.18
Bars	60.24	58.28	2.52	88.43		85.72	338.26
Profiles	53.18	52.25	1.42	266.00		272.15	188.03

– 12 –

Explanations on production and sales volume:

As the sales price of steel decreased on a monthly basis in the fourth quarter of 2018, the Company adjusted its sales strategy in a timely manner to cope with market changes, resulting in an increase in the inventory of steel products.

(3) Cost analysis table

Unit: RMB’000

By sectors

					Percentage
					of the
			Percentage		amount
			of the	Amount	for the
			amount	for the	corresponding
		Amount	for the	corresponding	period of	Year-on-
By	Cost	for the	period in	period of	last year in	year
sectors	component	period	total costs	last year	total costs	change
			(%)		(%)	(%)
Iron and	Raw	14,282,976	72.68	7,380,111	54.63	93.53
steel	material
Iron and	Energy	1,679,213	8.55	1,330,279	9.85	26.23
steel
Iron and	Labor and	3,689,523	18.77	4,798,742	35.52	-23.11
steel	other costs

By products

					Percentage
			Percentage		of the amount
			of the	Amount	for the
			amount	for the	corresponding
		Amount	for the	corresponding	period of	Year-on-
By	Cost	for the	period in	period of	last year in	year
products	component	period	total costs	last year	total costs	change
			(%)		(%)	(%)
Rolled steel	Raw material	18,977,424	96.57	12,552,551	92.92	51.18
billet	and energy
	costs
Other	Raw material	674,288	3.43	956,581	7.08	-29.51
	and energy

costs

– 13 –

(4) Major buyers and major suppliers

✓ Applicable Not applicable

The sales attributable to the five largest buyers amounted to RMB10,043,947,400, representing 44.37% of the total sales for the year, of which the sales attributable to related parties amounted to nil, representing 0% of the total sales for the year.

The purchase amount attributable to the five largest suppliers amounted to RMB9,417,887,500, representing 48.37% of the total purchase amount for the year, of which the purchase amount attributable to related parties amounted to nil, representing 0% of the total purchase amount for the year.

1.1.3 Expenses

✓ Applicable Not applicable

Unit: RMB’000

		Amount
	Amount	for the	Year-on-
	for the	previous	year
Item	period	period	change
			(%)
Selling expenses	88,057	60,628	45.24
Administrative expenses	795,392	574,502	38.45
Financial expenses	183,073	512,281	-64.26

– 14 –

1.1.4 R&D investment

Table of R&D investment

Table of R&D investment
✓Applicable Not applicable
	Unit: RMB’000
Expensed R&D investment for the period	491,092
Capitalized R&D investment for the period
Total R&D investment	491,092
Percentage of the total R&D investment in
operating income (%)	2.17
Number of R&D personnel of the Company	900
Percentage of R&D personnel in total number
of employees (%)	12.02
Percentage of capitalized R&D investment in
total R&D investment (%)	0
Cash flow
✓Applicable Not applicable

1.1.5 Cash flow

– 15 –

Items from cash flow statement

Unit: RMB’000

	Current	Corresponding	Main reasons
Item	period	period	for changes
Net cash flow from	1,338,195	505,815	Increase in operating
operating activities			profit
Net cash flow from	630,605	6,246,136	Disposed of fixed assets
investing activities			during the judicial
			reorganisation in 2017
Net cash flow from	-868,219	-6,625,239	Repaid debts during the
financing activities			judicial reorganisation
			in 2017
Net increase in cash and	1,100,581	123,515
cash equivalents

1.2 Explanation on material change in profit due to non-principal business

Applicable ✓ Not applicable

– 16 –

1.3 Analysis of assets and liabilities

✓ Applicable

Not applicable

1.3.1 Assets and liabilities

Unit: RMB’000

				Percentage of
		Percentage		the amount at
		of the amount	Amount at	the end of
	Amount	at the end of	the end of	the previous
	at the end	the period in	the previous	period in	Year-on-year
Item	of the period	total assets	period	total assets	change	Explanation
		(%)		(%)	(%)
Cash and bank	2,764,631	10.26	2,050,538	8.20	34.82	Expanding
balances						scale of both
						production
						and sales,
						strengthened
						fund
						management
						and planning
Financial assets	30,000	0.11		–	n/a	Implementing
held for trading						New Financial
						Instruments
						Standards
Notes and trade	30,340	0.11	167,134	0.67	-81.85	Implementing
receivable						New Financial
						Instruments
						Standards
Prepayments	908,646	3.37	70,022	0.28	1,197.66	Expanding scale
						of production
						and increase in
						purchasing raw
						fuel
Other receivables	10,506	0.04	10,355	0.04	1.46
Inventories	3,192,201	11.85	1,330,469	5.32	139.93	Expanding scale
						of production
						and significant
						increase in
						inventory of
						raw fuel
Other current assets	575,931	2.14	1,128,655	4.51	-48.97	Recovery of funds
						under wealth
						management
						and provision
						for VAT credit

– 17 –

				Percentage of
		Percentage		the amount at
		of the amount	Amount at	the end of
	Amount	at the end of	the end of	the previous
	at the end	the period in	the previous	period in	Year-on-year
Item	of the period	total assets	period	total assets	change	Explanation
		(%)		(%)	(%)
Available-for-sale		0.00	5,000	0.02	-100.00	Implementing
financial assets						New Financial
						Instruments
						Standards
Long-term equity		0.00	124,158	0.50	-100.00	Liquidation and
investments						cancellation
						of associated
						companies
Other equity	5,000	0.02		–	n/a
investments
Property, plant and	16,914,109	62.80	17,595,699	70.35	-3.87
equipment
Construction in	16,593	0.06	8,695	0.03	90.83	Increase in
process						technical
						measures
Intangible assets	2,454,327	9.11	2,521,734	10.08	-2.67
Deferred tax assets	31,067	0.12		–	n/a
Notes and trade	2,946,316	10.94	2,155,294	8.62	36.70	Expanding scale
payable						of production
						and increase in
						purchasing raw
						fuel
Advances from		0.00	187,099	0.75	-100.00	Implementing the
customers						New Revenue
						Standard
Contractual	1,004,280	3.73		–	n/a	Implementing the
liabilities						New Revenue
						Standard
Employee benefits	333,407	1.24	563,547	2.25	-40.84	Payment for
payable						the debts to
						employees
						related to
						the judicial
						reorganisation

– 18 –

				Percentage of
		Percentage		the amount at
		of the amount	Amount at	the end of
	Amount	at the end of	the end of	the previous
	at the end	the period in	the previous	period in	Year-on-year
Item	of the period	total assets	period	total assets	change	Explanation
		(%)		(%)	(%)
Taxes payable	35,733	0.13	13,095	0.05	172.88	VAT payable in
						December
Other payables	354,665	1.32	1,491,912	5.96	-76.23	Payment for
						guaranteed
						debts related
						to the judicial
						reorganisation
Non-current	410,000	1.52	400,000	1.60	2.50
liabilities due
within one year
Other current	160,675	0.60		–	n/a	Implementing the
liabilities						New Revenue
						Standard
Long-term	300,000	1.11	700,000	2.80	-57.14	Repayment of the
borrowings						principal of
						the CDB loans
						of RMB0.4
						billion
Long-term	240,615	0.89	243,190	0.97	-1.06
employee
benefits payable
Provisions		0.00	11,204	0.04	-100.00
Deferred income	40,495	0.15	43,154	0.17	-6.16
Other non-current	2,575,500	9.56	2,400,000	9.60	7.31
liabilities

As at the end of 2018, the Company’s gear ratio decreased to 31.19% from 32.82% as at the end of 2017, which was attributable to the significant increase in the profit of the Company.

– 19 –

1.3.2 Major restricted assets at the end of the Reporting Period

✓ Applicable

Not applicable

Unit: RMB’000

Item Cash and bank balances Notes receivables Property, plant and equipment - houses and buildings Intangible assets Total	Carrying amount at the end of the period 795,088 20,000 1,975,369 2,454,327 5,244,784	Carrying amount at the beginning of the period Note 1,181,576 Note 1 – Note 2 962,898 Note 3 1,405,002 Note 4 3,549,476

• Note 1: As at 31 December 2018, the Group’s ownership of cash and bank deposits with carrying value of RMB795,088,000 was restricted for issuing bank acceptances and letters of credit. As at 31 December 2017, the Group’s ownership of cash and bank deposits with carrying value of RMB1,181,576,000 was restricted for issuing bank acceptances and drawing reorganisation reserves according to the implementation of the reorganisation plan.

• Note 2: As at 31 December 2018, the Group’s notes receivables with carrying value of RMB20,000,000 (as at 31 December 2017: nil) were pledged for issuing bank acceptances.

• Note 3: As at 31 December 2018, the Group’s houses and buildings with carrying value of RMB1,975,369,000 (as at 31 December 2017: RMB962,898,000) were pledged for obtaining bank borrowing and working capital loan facilities.

• Note 4: As at 31 December 2018, the Group’s land use right with carrying value of RMB2,454,327,000 (as at 31 December 2017: RMB1,405,002,000) was pledged for obtaining bank borrowing and working capital loan facilities, and the amortised amount of the land use right was RMB67,407,000 during the current period.

– 20 –

2 Management Discussion and Analysis on Future Development of the Company

✓ Applicable Not applicable

2.1 Industry competition pattern and development trend

✓ Applicable Not applicable

In 2018, the supply side structure reform was deeply promoted by the PRC, which resulted in a significant improvement in the steel industry’s earnings. Highly excessive production capacity is the biggest obstacle for the healthy development of the steel industry. As the leader industry of the supply side structure reform, the steel industry continued to cut overcapacity, overfulfilled the target of cutting 30.00 million tonnes of capacity, and completed the maximum cutting target of 150 million tonnes of steel production as stated in the “13[th] Five-Year Plan” two years in advance.

While the capacity cutting in the steel industry achieved a superior result, there are still many things to be done in the supply side structure reform of the steel industry. Currently, there are still issues in the capacity structure of the steel industry, with pressures resulted from the quick release of the capacity in compliant companies. Meanwhile, there are still issues that distress the development of the industry, such as environment protection problems, irrational layouts and weak innovation.

While consolidating the results of the capacity cutting, the steel industry will be more active in deleveraging, in efforts to reduce capital risks. China Iron and Steel Association (CISA) has proposed that the steel industry should bring the asset to liability ratio down to below 60% in the future 3–5 years, but there are still enterprises in the industry with the ratio above 60%. Therefore, it is necessary to take advantage of the efficiency improvement to deleverage with various measures in 2019.

– 21 –

From a deeper aspect, the steel industry cannot achieve a healthy and sustainable development until it substantially focuses on the improvement of quality and efficiency. In 2018, a research report named China’s Steel Industry Transformation and Upgrading Strategy and Path (《中國鋼鐵工業轉型升級戰略和路徑》), which was published by the industry association, proposed the upgrading strategies for the steel industry and the related main paths, and pointed out that enterprises should research its own strategies and paths for upgrading according to its own characters. It is critical for the steel industry to enhance the capability of independent innovation and increase the technological composition in products in order to achieve the goal of transforming from big to strong.

2.2 Corporate development strategy

✓ Applicable Not applicable

The Company will strive to become the most competitive steel enterprise in Southwest China, the leading green-friendly, transforming and upgrading inland steel factory, becoming the model for the mutual development of the staff and enterprises, and shaping itself to “Be Strong”, “Be Beautiful” and “Be Attractive”.

The Company will implement its cost leadership strategy and leading manufacturing technology strategy. In a market with competition from the homogenization of the steel industry, the cost leadership will become the most important competitive strategy for an enterprise. Since the leading manufacturing technologies can decide the competition pattern, the space of cost reduction in the future lies in whether the relevant technologies are in place. On the premise that the users’ usage standards can be met, the leadership in the manufacturing technologies can help lower manufacturing costs.

– 22 –

2.3 Operating plans

✓ Applicable

Not applicable

In 2019, the Company will continue to implement the production and operation policy of “full-scale production and sell-through rates, low cost and high efficiency”. Its production will be led by financial budgets. The Company will adapt to the changing market conditions with flexibility, enhance the allocation of resources, strengthen process control, proactively implement its cost leadership strategy and leading manufacturing technology strategy, promote the orderly connection among the production, supply and marketing, and ensure the system runs efficiently. The Company will continue to implement the meticulous management, and enhance its product competitiveness by lowering its administrative expenses to shape a more powerful Chongqing Iron & Steel.

The Company plans to produce 5.86 million tonnes of iron, 6.40 million tonnes of steel and 6.13 million tonnes of steel products, and realize sales volume of 6.20 million tonnes of steel products and sales revenue of RMB22.0 billion (tax exclusive) in the year of 2019.

2.4 Potential risks

✓ Applicable Not applicable

First, the cost pressure keeps increasing with higher prices of the raw fuel.

Second, there is still an oversupply in the industry, with the increasing downside pressure on the steel price caused by the weakening demand from the downstream industry.

3 Reasons for the Suspension of Listing

Applicable ✓ Not applicable

4 The Circumstances and Reasons for the Termination of the Listing

Applicable ✓ Not applicable

• 5 The Company’s Analysis and Explanation about the Reasons for and Impact of Changes in Accounting Policy and Accounting Estimates ✓ Applicable Not applicable

– 23 –

(1) Changes in accounting policy

In 2017, the Ministry of Finance issued the revised “Accounting Standard for Business Enterprises No.14 – Revenue” (the “New Revenue Standard”), “Accounting Standard for Business Enterprises No.22 – Recognition and measurement for financial instruments, “Accounting Standard for Business Enterprises No.23 – Transfer of financial assets”, “Accounting Standard for Business Enterprises No.24 – Hedging” and “Accounting Standard for Business Enterprises No.37 – Presentation of financial instruments” (collectively the “New Financial Instruments Standards”). The Group began to implement the accounting treatment according to the above newly revised standards from 1 January 2018. According to the convergence rules, the information for the comparable period will not be adjusted and undistributed profit or other comprehensive income will be retrospectively adjusted by the difference between the implementation of the new standards on the first day and the current standards.

1) New Revenue Standard

The New Revenue Standard establishes a new revenue recognition model for regulating revenue generated from contracts with customers. According to the New Revenue Standard, the way in which the revenue is recognized should reflect the mode in which the entity transfers goods or services to customers. The amount of revenue should reflect the amount of consideration that the entity is expected to receive due to the transfer of such goods and services to the customers. At the same time, the New Revenue Standard also regulates the judgments and estimates required for each aspect of revenue recognition. The Group only adjusts the cumulative impact of contracts that have not been completed on 1 January 2018. For the changes to contracts that might occur before 1 January 2018, the Group adopts a simplified treatment method to identify the performance obligations that have been and have not been fulfilled, determine the transaction price and apportion the transaction price between the fulfilled and outstanding performance obligations for the final arrangement of all contracts under the changes to contracts.

The Group’s revenue was mainly the revenue of selling commodities, and therefore, implementing the New Revenue Standard has no significant impacts on the retained earnings and other comprehensive income as at 1 January 2018.

– 24 –

The impacts of implementing the New Revenue Standard on the consolidated balance sheet items dated 1 January 2018 were as follows:

Unit: RMB’000

Consolidated Balance Sheet Advance from customers Contractual liabilities Other current liabilities Total	Amount on the statement Assumption by the original standard – 187,099 159,914 – 27,185 – 187,099 187,099	Change (187,099) 159,914 27,185 –

The impacts of implementing the New Revenue Standard on the consolidated balance sheet as at 31 December 2018 were as follows:

Unit: RMB’000

Consolidated Balance Sheet Advance from customers Contractual liabilities Other current liabilities Total	Amount on the statement Assumption by the original standard – 1,164,955 1,004,280 – 160,675 – 1,164,955 1,164,955	Change (1,164,955) 1,004,280 160,675 –

The implementation of New Revenue Standard has no significant impacts on the consolidated income statement for 2018.

2) New Financial Instruments Standards

The New Financial Instrument Standards changes the classification and measurement of financial assets and requires three measurement categories: financial assets are measured at amortised cost, at fair value through other comprehensive income, or at fair value through profit or loss. The enterprise needs to consider its own business model and the characteristics of the financial asset’s contractual cash flow to classify its financial

– 25 –

assets. Equity investments shall be measured at fair value through profit or loss. However, the enterprise can elect to irrevocably designate non-marketable equity investments as financial assets at fair value through other comprehensive income at the initial recognition.

Instead of the “incurred loss” model, the New Financial Instrument Standards required the “expected credit loss” model to be used for the measurement of impairments in financial assets, which is applied to the financial assets measured at amortised cost or the financial assets at fair value through other comprehensive income.

The yields of wealth management products held by the Group depend on the yields of the underlying assets. Before 1 January 2018, the Group presented its financial assets at fair value through profit or loss as other current assets. After 1 January 2018, the Group analyzed that its contractual cash flow was not just representing the payment of principal and interest based on outstanding principal, so such wealth management products were classified as financial assets at fair value through profit or loss, presented as financial assets held for trading.

For the purposes of obtaining contractual cash flow and disposition, the Group managed the business model of the aforesaid bills receivable through the endorsement and discount of some bank acceptances during its daily capital management. Therefore, the Group reclassified such bills receivable as financial assets at fair value through profit or loss, presented as other current assets after 1 January 2018.

The Group designated equity investments held by the Group as financial assets at fair value through other comprehensive income, presented as other equity instrument investments after 1 January 2018.

– 26 –

On the first implementation date, the comparison is made regarding the financial assets classified and measured in accordance with the original and revised standards of recognition and measurement for financial instruments is as follows:

Unit: RMB’000

	Pre-amended standards of	Pre-amended standards of	Revised standards of	Revised standards of
	recognition and measurement		recognition and measurement
	for financial instruments		for financial instruments
	Measurement	Carrying	Measurement	Carrying
The Group	category	amount	category	amount
Cash and bank	Amortised cost (loans	2,050,538	Amortised cost	2,050,538
balances	and receivables)
Notes receivables/	Amortised cost (loans	167,134	Amortised cost	44,038
trade receivables	and receivables)		At fair value	123,096
			through other
			comprehensive
			income
Other receivables	Amortised cost (loans	10,355	Amortised cost	10,355
	and receivables)
Equity investments	Amortised cost	5,000	At fair value	5,000
	(available-for-sale		through other
	assets)		comprehensive
			income
			(designated)
Wealth management	At fair value through	650,000	At fair value through	650,000
products	profit or loss		profit or loss
	(marketable)		(required by
			standards)

– 27 –

Unit: RMB’000

	Pre-amended standards	Pre-amended standards	Revised standards of	Revised standards of
	of recognition and measurement		recognition and measurement
	for financial instruments		for financial instruments
	Measurement	Carrying	Measurement	Carrying
The Company	category	amount	category	amount
Cash and bank	Amortised cost (loans	1,961,403	Amortised cost	1,961,403
balances	and receivables)
Notes receivables/	Amortised cost (loans	169,949	Amortised cost	46,853
trade receivables	and receivables)		At fair value	123,096
			through other
			comprehensive
			income
Other receivables	Amortised cost (loans	10,355	Amortised cost	10,355
	and receivables)
Equity investments	Amortised cost	5,000	At fair value	5,000
	(available-for-sale		through other
	assets)		comprehensive
			income
			(designated)

– 28 –

On the first implementation date, there were no material impacts on the measurement of the carrying value of financial assets. The carrying value of original financial assets is adjusted to the book value of the new financial assets classified and measured in accordance with the revised recognition and measurement standards for financial instruments, and the adjustments are as follows:

Unit: RMB’000

	Carrying		Carrying
	amount		amount
	presented		presented
	according		according
	to the original		to the new
	financial		financial
	instruments		instruments
	standards		standards
	31 December		1 January
The Group	**2017 **	Reclassification	2018
Financial assets measured by
amortised cost
Cash and bank balances	2,050,538	–	2,050,538
Trade receivables	44,038	–	44,038
Notes receivable
Balance presented according to the
original financial instruments
standards	123,096
Less: financial assets at fair value
through other comprehensive income
(New Financial Instruments Standards)		(123,096)
Balance presented according to the
new financial instruments standards			–

– 29 –

Unit: RMB’000

The Group Other receivables Equity investments Balance presented according to the original financial instruments standards Less: financial assets at fair value through other comprehensive income- equity instrument (designated) Balance presented according to the new financial instruments standards Total financial assets measured by amortised cost Financial assets at fair value through other comprehensive income Equity investments Balance presented according to the original financial instruments standards Add: transferred from available-for-sale assets (original financial instruments standards)(designated) Balance presented according to the new financial instruments standards	Carrying amount presented according to the original financial instruments standards 31 December 2017 Reclassification 10,355 – 5,000 (5,000) 2,233,027 (128,096) – 5,000	Carrying amount presented according to the new financial instruments standards 1 January 2018 10,355 – 2,104,931 5,000

– 30 –

Unit: RMB’000

The Group Notes receivables Balance presented according to the original financial instruments standards Add: transferred (the New Financial Instruments Standards) from loans and receivables (original financial instruments standards) Balance presented according to the new financial instruments standards Total financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Wealth management products Total financial assets at fair value through profit or loss Total	Carrying amount presented according to the original financial instruments standards 31 December 2017 Reclassification – 123,096 – 128,096 650,000 – 650,000 – 2,883,027 –	Carrying amount presented according to the new financial instruments standards 1 January 2018 123,096 128,096 650,000 650,000 2,883,027

– 31 –

Unit: RMB’000

The Company Financial assets measured by amortised cost Cash and bank balances Trade receivables Notes receivables Balance presented according to the original financial instruments standards Less: financial assets at fair value through other comprehensive income (New Financial Instruments Standards) Balance presented according to the new financial instruments standards Other receivables Equity investments Balance presented according to the original financial instruments standards Less: financial assets at fair value through other comprehensive income- equity instrument (designated) Balance presented according to the new financial instruments standards Total financial assets measured by amortised cost	Carrying amount presented according to the original financial instruments standards 31 December 2017 Reclassification 1,961,403 – 46,853 – 123,096 (123,096) 10,355 – 5,000 (5,000) 2,146,707 (128,096)	Carrying amount presented according to the new financial instruments standards 1 January 2018 1,961,403 46,853 – 10,355 – 2,018,611

– 32 –

Unit: RMB’000

The Company Financial assets at fair value through other comprehensive income Equity investments- Available-for-sale financial assets Balance presented according to the original financial instruments standards Add: tr ansferred from available-for- sale financial assets (original financial instruments standards) (designated) Balance presented according to the new financial instruments standards Notes receivable Balance presented according to the original financial instruments standards Add: transferred (the New Financial Instruments Standards) from loans and receivables (original financial instruments standards) Balance presented according to the new financial instruments standards Total financial assets at fair value through other comprehensive income Total	Carrying amount presented according to the original financial instruments standards 31 December 2017 Reclassification – 5,000 – 123,096 – 128,096 2,146,707 –	Carrying amount presented according to the new financial instruments standards 1 January 2018 5,000 123,096 128,096 2,146,707

– 33 –

On the first implementation date, the new loss provision classified and measured under the requirements of revised financial instruments standards did not have significant change as compared to the classification and measurement of the impairment provision for the original financial assets.

3) Changes in the presentation of financial statements

Under the “Notice on the Revision of the Issuance of the Financial Statements of General Enterprises for Year 2018” (Accounting [2018] No. 15), the Group consolidated the “Bills receivable” and “Accounts receivable” to the newly added item “Bills receivable and accounts receivable”, “Interest receivable” and “Dividends receivable” to “Other receivables”, “Disposal of fixed assets” to “Fixed assets”, “Engineering material” to “Construction in progress”, “Bills payable” and “Accounts payable” to the newly added “Bills payable and accounts payable”, “Interest payable” to “Other payables”, and “Special payables” to “Long-term payables” on the balance sheet; on the income statement, the Group added the “R&D expenses” item for presenting the expenses incurred during the process of research and development, split the “Financial expenses” item into “Interest expenses” and “Interest income”; and the Group has made retroactive adjustments to the comparative figures accordingly. This change in accounting policy has no impact on the merger and the Company’s net profit and shareholder interests.

4) Other changes in accounting policy

The Group implemented the Interpretation of Accounting Standards for Business Enterprises No. 9 – Accounting Treatment of Net Loss of Investment under Equity Method, the Interpretation of Accounting Standards for Business Enterprises No. 10 – Depreciation Method based on Revenue Generated from Use of Fixed Assets, the Interpretation of Accounting Standards for Business Enterprises No. 11 – Amortisation Method based on Revenue Generated from Use of Intangible Assets and the Interpretation of Accounting Standards for Business Enterprises No. 12 – Whether the Provider and the Recipient of the Key Management Personnel Service are Related Parties (collectively “No. 9–12 Interpretations”) from 1 January 2018, which were issued by the Ministry of Finance in 2017. Based on the Company’s assessment, the Group’s implementation of No. 9–12 Interpretations did not have material impacts on the financial position and operation results of the Group.

– 34 –

The main effects on the financial statements by the retroactive adjustment arising from the abovementioned changes in accounting policy are as follows:

The Group

Unit: RMB’000

	Carrying			Effects
	amount			of other	Carrying
	presented		Effects	changes	amount
	according	Effects	of New	in the	presented
	to the	of New	Financial	presentation	according
	original	Revenue	Instruments	of financial	to the new
	standards	Standard	Standards	statements	standards
	31 December
2018	**2017 **	**Reclassification **	**Reclassification **	Reclassification 1 January 2018
Notes receivable	123,096	–	(123,096)	–	–
Trade receivable	44,038	–	–	(44,038)	–
Notes and trade receivable	–	–	–	44,038	44,038
Other current assets	1,128,655	–	123,096	–	1,251,751
Available-for-sale financial
assets	5,000	–	(5,000)	–	–
Other equity instrument
investments	–	–	5,000	–	5,000
Notes payable	80,700	–	–	(80,700)	–
Trade payable	2,074,594	–	–	(2,074,594)	–
Notes and trade payable	–	–	–	2,155,294	2,155,294
Interest payable	7,174	–	–	(7,174)	–
Other payables	1,484,738	–	–	7,174	1,491,912
Advance from customers	187,099	(187,099)	–	–	–
Contractual liabilities	–	159,914	–	–	159,914
Other current liabilities	–	27,185	–	–	27,185

– 35 –

Unit: RMB’000

	Before changes		After changes
	in accounting	Changes	in accounting
	policy	in accounting	policy
2017	1 January 2017	policy	1 January 2017
Notes receivable	19,435	(19,435)	–
Trade receivable	256,258	(256,258)	–
Notes and trade receivable	–	275,693	275,693
Notes payable	1,632,710	(1,632,710)	–
Trade payable	9,385,026	(9,385,026)	–
Notes and trade payable	–	11,017,736	11,017,736
Interest payable	117,013	(117,013)	–
Other payables	4,202,381	117,013	4,319,394

The Company

Unit: RMB’000

	Carrying			Effects of	Carrying
	amount		Effects	other changes	amount
	presented	Effects	of New	in the	presented
	according to	of New	Financial	presentation	according
	the original	Revenue	Instruments	of financial	to the new
	standards	Standard	Standards	statements	standards
	31 December
2018	**2017 **	**Reclassification **	**Reclassification **	Reclassification 1 January 2018
Notes receivable	123,096	–	(123,096)	–	–
Trade receivable	46,853	–	–	(46,853)	–
Notes and trade receivable	–	–	–	46,853	46,853
Other current assets	478,510	–	123,096	–	601,606
Available-for-sale financial
assets	5,000	–	(5,000)	–	–
Other equity instrument
investments	–	–	5,000	–	5,000
Notes payable	80,700	–	–	(80,700)	–
Trade payable	2,123,370	–	–	(2,123,370)	–
Notes and trade payable	–	–	–	2,204,070	2,204,070
Interest payable	7,174	–	–	(7,174)	–
Other payables	1,479,009	–	–	7,174	1,486,183
Advance from customers	185,905	(185,905)	–	–	–
Contractual liabilities	–	158,893	–	–	158,893
Other current liabilities	–	27,012	–	–	27,012

– 36 –

Unit: RMB’000

	Before changes		After changes
	in accounting	Changes	in accounting
	policy 1 January	in accounting	policy 1 January
2017	2017	policy	2017
Notes receivable	19,435	(19,435)	–
Trade receivable	258,568	(258,568)	–
Notes and trade receivable	–	278,003	278,003
Notes payable	1,632,710	(1,632,710)	–
Trade payable	9,429,515	(9,429,515)	–
Notes and trade payable	–	11,062,225	11,062,225
Interest payable	117,013	(117,013)	–
Other payables	4,259,548	117,013	4,376,561

• 5) Accounting policies that are issued but not adopted

The “Accounting Standard for Business Enterprises No.21 – Lease” requires lessees to account for all leases under a single on-balance sheet model. At the commencement date of a lease, a lessee shall recognise the payable rent as a liability and the right to use related assets during the lease term as an asset. For shortterm lease and lease of low-value assets, lessees could choose not to recognise the right-to-use assets and lease liability.

The Group has reappraised all leasing contracts under existing standards. The Group’s existing leasing contracts are short-term operating leases commencing from 1 January 2019 and expiring on 31 December 2019, and the Group will adopt the exemption clause for short-term lease. The new lease standard will not have significant impact on the accounting treatment of the Group’s existing leasing contracts.

• 6 Company’s analysis on the cause and impact of correction of material errors of accounting

Applicable ✓ Not applicable

• 7 The Company shall make specific explanations regarding the changes in the scope of consolidation of financial statements compared to previous year’s financial report.

Applicable ✓ Not applicable

– 37 –

D. RELEVANT DISCLOSURE MADE ACCORDING TO THE RULES GOVERNING THE LISTING OF SECURITIES ON THE HONG KONG STOCK EXCHANGE

1 Compliance of Corporate Governance Code

To the best of knowledge of the Board, the Company had complied with the requirements of the “Corporate Governance Code” as set out in Appendix 14 the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”) during the reporting period, and was not aware of any deviation from the Code.

2 Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules as the code for trading of the Company’s securities by Directors. All directors of the Company confirmed upon specific enquiries that they had complied with the required standards as set out in the Model Code for the year ended 31 December 2018.

3 Purchase, Sale and Redemption of Listed Shares of the Company

During the reporting period, the Company had not redeemed any of its issued securities, nor purchased or sold any of its listed securities.

4 Major Acquisition and Disposal of Subsidiaries and Affiliates

No major acquisition and disposal of subsidiaries and affiliates occurred during the reporting period.

5 Interests or Short Positions

As of 31 December 2018, the Board was not aware of any persons or its associates whose interests or short positions in the shares or underlying shares of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the Securities and Futures Ordinance (“SFO”).

6 Pre-emptive Rights

According to the Articles of Association of the Company and the laws of the People’s Republic of China, there are no pre-emptive rights which would require the Company to issue new shares to its existing shareholders on a pro-rata basis.

– 38 –

7 Public Float of H Shares

As of the date hereof, to the best knowledge of the Board, the Company has maintained sufficient public float as required by the Listing Rules of the Stock Exchange.

8 Circulating Market Capitalisation

Based on the publicly available information, as of 31 December 2018 (the last trading day of 2018 for H Shares), the circulating market capitalisation of H Shares of the Company (circulating H Share capital x closing price of H Shares (HK$1.15)) was approximately HK$619 million; as of 28 December 2018 (the last trading day of 2018 for A Shares), the circulating market capitalisation of A Shares of the Company (circulating A Share capital x closing price of A Shares (RMB1.94)) was approximately RMB16.258 billion.

9 Final Dividend

The Company’s profit distribution policies are set out in detail in the Articles of Association, which provides the principles, forms and conditions of distribution, the justification procedures for distribution scheme and decision-making mechanism, as well as policy adjustments. When determining profit distribution (including dividend payment) and distribution proportion, the Company will follow several major principles including the continuity and stability of profit distribution policies, paying full attention to the reasonable investment return for investors, and considering the longterm interests of the Company, sustainable development and the interests of all shareholders as a whole, and the Board will prepare the proposal for profit distribution according to the operating situations and development, then submit it to the general meetings for approval. Please refer to the profit distribution policies set out in the Articles of Association for more details.

The Company does not have any predetermined dividend distribution proportion or dividend distribution ratio, and the distribution and the amount of dividend will be determined by the Board’s discretion as aforesaid.

According to the auditing by Ernst & Young Hua Ming LLP, the net profit attributable to shareholders of the Company for 2018 amounted to RMB1.788 billion, and the unappropriated profit as at the end of 2018 amounted to RMB-10.290 billion. As the Company recorded a negative unappropriated profit as at the end of 2018, the directors suggested not to make profit distribution or transfer capital reserve to share capital in 2018 pursuant to the Article 250 of the Articles of Association.

– 39 –

Consolidated Statement of Financial Position

As at 31 December 2018

Unit: RMB’000

Items Current assets: Cash and bank balances Financial assets held for trading Notes and trade receivables Prepayments Other receivables Inventories Other current assets Total current assets Non-current assets: Available-for-sale financial assets Long-term equity investments Other equity investments Property, plant and equipment Construction in process Intangible assets Deferred tax assets Total non-current assets Total assets	31 December 2018 2,764,631 30,000 30,340 908,646 10,506 3,192,201 575,931 7,512,255 – – 5,000 16,914,109 16,593 2,454,327 31,067 19,421,096 26,933,351	31 December 2017 2,050,538 – 167,134 70,022 10,355 1,330,469 1,128,655 4,757,173 5,000 124,158 – 17,595,699 8,695 2,521,734 – 20,255,286 25,012,459

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Items Current liabilities: Notes and trade payables Advances from customers Contract liabilities Employee benefits payable Tax payable Other payables Non-current liabilities due within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term borrowings Long-term employee benefits payable Provisions Deferred income Other non-current liabilities Total non-current liabilities Total liabilities Owner’s equity: Share capital Capital reserve Special reserve Surplus reserve Accumulated losses Total equity attributable to owners of the parent Non-controlling interests Total shareholder’s equity Total liabilities and shareholders’ equity	31 December 2018 2,946,316 – 1,004,280 333,407 35,733 354,665 410,000 160,675 5,245,076 300,000 240,615 – 40,495 2,575,500 3,156,610 8,401,686 8,918,602 19,282,147 13,644 606,991 (10,289,719) 18,531,665 – 18,531,665 26,933,351	31 December 2017 2,155,294 187,099 – 563,547 13,095 1,491,912 400,000 – 4,810,947 700,000 243,190 11,204 43,154 2,400,000 3,397,548 8,208,495 8,918,602 19,282,147 – 606,991 (12,077,625) 16,730,115 73,849 16,803,964 25,012,459

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Statement of Financial Position of the Parent Company

As at 31 December 2018

Unit: RMB’000

Items Current assets Cash and bank balances Financial assets held for trading Notes and trade receivables Prepayments Other receivables Inventories Other current assets Total current assets Non-current assets: Available-for-sale financial assets Long-term equity investments Other equity investments Property, plant and equipment Construction in process Intangible assets Deferred tax assets Total non-current assets Total assets	31 December 2018 2,762,442 30,000 29,851 908,523 10,500 3,192,201 575,931 7,509,448 – – 5,000 16,914,084 16,593 2,454,327 31,067 19,421,071 26,930,519	31 December 2017 1,961,403 – 169,949 69,581 10,355 1,330,469 478,510 4,020,267 5,000 835,780 – 17,595,699 8,695 2,521,734 – 20,966,908 24,987,175

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Items Current liabilities: Notes and trade payables Advances from customers Contract liabilities Employee benefits payable Tax payable Other payables Non-current liabilities due within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term borrowings Long-term employee benefits payable Provisions Deferred income Other non-current liabilities Total non-current liabilities Total liabilities Owner’s equity Share capital Capital reserve Special reserve Surplus reserve Accumulated losses Total shareholder’s equity Total liabilities and shareholders’ equity	31 December 2018 2,945,889 – 1,004,220 333,407 34,741 354,665 410,000 160,675 5,243,597 300,000 240,615 – 40,495 2,575,500 3,156,610 8,400,207 8,918,602 19,313,090 13,644 577,012 (10,292,036) 18,530,312 26,930,519	31 December 2017 2,204,070 185,905 – 563,518 13,113 1,486,183 400,000 – 4,852,789 700,000 243,190 11,204 43,154 2,400,000 3,397,548 8,250,337 8,918,602 19,313,090 – 577,012 (12,071,866) 16,736,838 24,987,175

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Consolidated Statement of Profit or Loss

For the Year ended 31 December 2018

Unit: RMB’000

Items Revenue Less: Cost of sales Taxes and surcharges Distribution and selling expenses General and administrative expenses Finance expenses Including: Interest expenses Interest income Impairment losses on assets Impairment losses on financial assets Add: Other income Investment income/(loss) Including: investment income/(loss) from an associate Gains on disposal of assets Operating profit/(loss) Add: Non-operating income Less: Non-operating expenses Total profit/(loss) Less: Income tax expenses/(credit)	Year ended 31 December 2018 22,638,957 19,681,846 127,675 88,057 795,392 183,073 278,680 99,927 30,728 8,752 2,729 5,455 (1,566) 14,822 1,746,440 19,827 7,534 1,758,733 (29,300)	Year ended 31 December 2017 13,236,840 13,531,607 82,364 60,628 574,502 512,281 528,458 9,244 292,599 – 47,198 2,255 (6,857) (5,009,485) (6,777,173) 7,226,586 129,603 319,810 2

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Items Net Profit/(loss) Breakdown by continuity of operations Net profit/(loss) from continuing operations Breakdown by attributable interests Net profit/(loss) attributable to owners of the parent Non-controlling interests Other comprehensive income after tax Total comprehensive income/(loss) Total comprehensive income/(loss) attributable to owners of the parent Total comprehensive income/(loss) attributable to non- controlling interests Earnings per share: Basic earnings/(loss) per share (RMB/share) Diluted earnings/(loss) per share (RMB/share)	Year ended 31 December 2018 1,788,033 1,788,033 1,787,906 127 – 1,788,033 1,787,906 127 0.20 0.20	Year ended 31 December 2017 319,808 319,808 320,086 (278) – 319,808 320,086 (278) 0.04 0.04

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For the Year ended 31 December 2018

Statement of Profit or Loss of the Parent Company

Unit: RMB’000

Items Revenue Less: Cost of sales Taxes and surcharges Distribution and selling expenses General and administrative expenses Finance expenses Including: Interest expenses Interest income Impairment losses on assets Impairment losses on financial assets Add: Other income Investment income/(loss) Including: in vestment income/(loss) from an associate Gains on disposal of assets/(loss) Operating profit/(loss) Add: Non-operating income Less: Non-operating expenses Total profit/(loss) Less: Income tax expenses/(credit) Net Profit/(loss) Breakdown by continuity of operations Net profit/(loss) from continuing operations Other comprehensive income after tax Total comprehensive income/(loss)	Year ended 31 December 2018 22,633,236 19,681,842 127,627 87,883 800,514 181,402 278,680 98,593 30,728 8,752 2,729 1,826 (1,566) 14,822 1,733,865 19,744 4,846 1,748,763 (31,067) 1,779,830 1,779,830 – 1,779,830	Year ended 31 December 2017 13,142,240 13,437,519 81,967 58,029 558,136 515,593 528,458 2,531 292,447 – 47,198 (8,969) (6,857) (5,009,485) (6,772,707) 7,226,405 127,558 326,140 – 326,140 326,140 – 326,140

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Consolidated Statement of Changes in Equity For the Year ended 31 December 2018

Unit: RMB’000

Items I. Cl osing balances of the preceding year and opening balances of the current year II. Changes in the current period (I) To tal comprehensive income (II) Ow ners’ contribution and decrease in share capital 1. Others (III) Profit Appropriation 1. Di stribution to owners (or shareholders) (IV) Special reserve 1. Am ount established during the period 2. Am ount utilised during the period III. Closing balance for the period

Year ended 31 December 2018 Total equity attributable to owners of theparent Non- controlling interests Total shareholders’ equity Share capital Capital reserves Less: treasury shares Other comprehensive income Special reserves Surplus reserves Accumulated losses 8,918,602 19,282,147 – – – 606,991 (12,077,625) 73,849 16,803,964 – – – – 13,644 – 1,787,906 (73,849) 1,727,701 – – – – – – 1,787,906 127 1,788,033 – – – – – – – (73,513) (73,513) – – – – – – – (73,513) (73,513) – – – – – – – (463) (463) – – – – – – – (463) (463) – – – – 13,644 – – – 13,644 – – – – 20,520 – – – 20,520 – – – – 6,876 – – – 6,876 8,918,602 19,282,147 – – 13,644 606,991 (10,289,719) – 18,531,665

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Year ended 31 December 2017

Items I. Cl osing balances of the preceding year and opening balances of the current year II. Changes in the current period (I) To tal comprehensive income (II) Ow ners’ contribution and decrease in share capital 1. Others (III) Tr ansfers within owners’ equity 1. Tr ansfer to capital (or share capital) from capital reserve (IV) Special reserve 1. Am ount established during the period 2. Am ount utilised during the period III. Closing balance for the period

Total equityattributable to owners of theparent Non- controlling interests Total shareholders’ equity Share capital Capital reserves Less: treasury shares Other comprehensive income Special reserves Surplus reserves Accumulated losses 4,436,023 7,154,203 – – – 606,991 (12,397,711) 93,060 (107,434) 4,482,579 12,127,944 – – – – 320,086 (19,211) 16,911,398 – – – – – – 320,086 (278) 319,808 – 16,610,523 – – – – – (18,933) 16,591,590 – 16,610,523 – – – – – (18,933) 16,591,590 4,482,579 (4,482,579) – – – – – – – 4,482,579 (4,482,579) – – – – – – – – – – – – – – – – – – – – 13,619 – – – 13,619 – – – – 13,619 – – – 13,619 8,918,602 19,282,147 – – – 606,991 (12,077,625) 73,849 16,803,964

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Statement of changes in Equity of the Parent Company For the Year ended 31 December 2018

Unit: RMB’000

Items I. Cl osing balances of the preceding year and opening balances of the current year II. Changes in the current period (I) To tal comprehensive income (II) Special reserve Amount established during the period 2. Am ount utilised during the period III. Closing balance for the period Items I. Cl osing balances of the preceding year and opening balances of the current year II. Changes in the current period (I) To tal comprehensive income (II) Ow ners’ contribution and decrease in share capital 1. Others (III) Tr ansfers within owners’ equity 1. Tr ansfer to capital (or share capital) from capital reserve (IV) Special reserve 1. Am ount established during the period 2. Am ount utilised during the period III. Closing balance for the period	Year ended 31 December 2018
	Share capital Capital reserves Less: treasury shares Other comprehensive income Special reserves Surplus reserves Accumulated losses Total shareholders’ equity 8,918,602 19,313,090 – – – 577,012 (12,071,866) 16,736,838 – – – – 13,644 – 1,779,830 1,793,474 – – – – – – 1,779,830 1,779,830 – – – – 13,644 – – 13,644 – – – – 20,520 – – 20,520 – – – – 6,876 – – 6,876 8,918,602 19,313,090 – – 13,644 577,012 (10,292,036) 18,530,312 Year ended 31 December 2017
	Share capital Capital reserves Less: treasury shares Other comprehensive income Special reserves Surplus reserves Accumulated losses Total shareholders’ equity 4,436,023 7,185,146 – – – 577,012 (12,398,006) (199,825) 4,482,579 12,127,944 – – – – 326,140 16,936,663 – – – – – – 326,140 326,140 – 16,610,523 – – – – – 16,610,523 – 16,610,523 – – – – – 16,610,523 4,482,579 (4,482,579) – – – – – – 4,482,579 (4,482,579) – – – – – – – – – – – – – – – – – – 13,619 – – 13,619 – – – – 13,619 – – 13,619 8,918,602 19,313,090 – – – 577,012 (12,071,866) 16,736,838

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Consolidated Statement of Cash Flows

For the Year ended 31 December 2018

Unit: RMB’000

Items I. Cash flows from operating activities: Cash received from sale of goods and rendering of services Other cash received relating to operating activities Sub-total of cash inflows from operating activities Cash paid for purchase of goods and services Cash paid to and on behalf of employees Cash paid for all types of taxes Other cash paid relating to operating activities Sub-total of cash outflows from operating activities Net cash flows from operating activities II. Cash flows from investing activities: Cash received from disposal of investments Cash received from return on investments Net cash received from disposal of property plant and equipment, intangible assets and other long- term assets Sub-total of cash inflows from investing activities Cash paid for acquisition of property plant and equipment, intangible assets and other long- term assets Cash paid for acquisition of investments Sub-total of cash outflows from investing activities Net cash flows from investing activities	Year ended 31 December 2018 13,270,746 175,337 13,446,083 9,306,899 1,536,319 263,339 1,001,331 12,107,888 1,338,195 1,241,636 7,021 16,229 1,264,886 14,281 620,000 634,281 630,605	Year ended 31 December 2017 1,127,997 2,866,598 3,994,595 1,109,954 907,211 79,896 1,391,719 3,488,780 505,815 – 9,112 6,887,024 6,896,136 – 650,000 650,000 6,246,136

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Items III. Cash flows from financing activities: Cash received from borrowings Other cash received relating to financing activities Sub-total of cash inflows from financing activities Cash repayments of borrowings Cash paid for distribution of dividends or profits, and for interests expenses Other cash paid relating to financing activities Sub-total of cash outflows from financing activities Net cash flows from financing activities IV. Ef fect of changes in exchange rate on cash and cash equivalents V. Ne t increase in cash and cash equivalents Add: Ca sh and cash equivalents at the beginning of the period VI. Ca sh and cash equivalents at the end of the period	Year ended 31 December 2018 185,500 1,181,576 1,367,076 400,000 247,845 1,587,450 2,235,295 (868,219) – 1,100,581 868,962 1,969,543	Year ended 31 December 2017 5,317,740 594,952 5,912,692 10,021,909 172,257 2,343,765 12,537,931 (6,625,239) (3,197) 123,515 745,447 868,962

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For the Year ended 31 December 2018

Statement of Cash Flows of the Parent Company

Unit: RMB’000

Items I. Cash flows from operating activities: Cash received from sale of goods and rendering of services Other cash received relating to operating activities Sub-total of cash inflows from operating activities Cash paid for purchase of goods and services Cash paid to and on behalf of employees Cash paid for all types of taxes Other cash paid relating to operating activities Sub-total of cash outflows from operating activities Net cash flows from operating activities II. Cash flows from investing activities: Cash received from disposal of investments Net cash received from disposal of property plant and equipment, intangible assets and other long- term assets Net cash received from disposal of subsidiaries and other business units Sub-total of cash inflows from investing activities Cash paid for acquisition of property plant and equipment, intangible assets and other long- term assets Cash paid for acquisition of investments Sub-total of cash outflows from investing activities Net cash flows from investing activities	Year ended 31 December 2018 13,269,131 173,919 13,443,050 9,306,899 1,536,290 262,516 994,972 12,100,677 1,342,373 591,636 16,229 2,289 610,154 14,256 620,000 634,256 (24,102)	Year ended 31 December 2017 1,072,973 2,850,182 3,923,155 1,058,376 897,689 79,366 1,377,270 3,412,701 510,454 – 6,887,024 – 6,887,024 – – – 6,887,024

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Items III. Cash flows from financing activities: Cash received from borrowings Other cash received relating to financing activities Sub-total of cash inflows from financing activities Cash repayments of borrowings Cash paid for distribution of dividends or profits, and for interests expenses Other cash paid relating to financing activities Sub-total of cash outflows from financing activities Net cash flows from financing activities IV. Ef fect of changes in foreign exchange rate on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Ca sh and cash equivalents at the beginning of the period VI. Ca sh and cash equivalents at the end of the period	Year ended 31 December 2018 185,500 1,181,576 1,367,076 400,000 247,382 850,438 1,497,820 (130,744) – 1,187,527 779,827 1,967,354	Year ended 31 December 2017 5,317,740 594,952 5,912,692 10,021,909 172,257 2,341,518 12,535,684 (6,622,992) 203 774,689 5,138 779,827

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The annual report of the Company for the year ended 31 December 2018 will be published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and the website of the Company (www.cqgt.cn) respectively on or before 29 March 2019.

By order of the Board Chongqing Iron & Steel Company Limited Meng Xiangyun Secretary to the Board

Chongqing, the PRC, 29 March 2019

As at the date of this announcement, the Directors of the Company are: Mr. Zhou Zhuping (Non-executive Director), Mr. Li Yongxiang (Executive Director), Mr. Tu Deling (Executive Director), Mr. Zhang Shuogong (Executive Director), Mr. Xu Yixiang (Independent Non-executive Director), Mr. Xin Qingquan (Independent Non-executive Director) and Mr. Wong Chunwa (Independent Non-executive Director).

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