XD Inc. — Interim / Quarterly Report 2018

Aug 17, 2018

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 [478 x 64] intentionally omitted <==

UNAUDITED INTERIM RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2018

I IMPORTANT

1. This Interim Report summary is extracted from the full text of the Interim Report. To fully understand the operation result, financial position and future development plans of the Company, investors are advised to read carefully the full text of the Interim Report which has also been published on websites designated by the CSRC including the website of the Shanghai Stock Exchange for details.

2. The Board, supervisory committee and directors, supervisors and senior executives of the Company ensure that the contents of the Interim Report are real, accurate and complete, without false records, misleading statements or material omissions, and assume individual and joint liabilities.

3. All directors of the Company attended the Board meeting.

4. The Interim Report is unaudited.

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

Nil

– 1 –

II BASIC INFORMATION ON THE COMPANY

2.1 Company Information

Stock Profile

Stock Profile
			Stock
			abbreviation
	Place of	Abbreviated	before
Type	listing	name	Stock code adjustment
A share	Shanghai Stock Chongqing Iron &		601005 * ST
	Exchange	Steel	Chonggang
H share	The Stock Exchange of Chongqing Iron &		1053 Nil
	Hong Kong Limited Steel
Contact		Secretary	Securities
information		to the Board	representative
Name		Yu Hong	Peng Guoju
Tel		86-23-6887 3311	86-23-6898 3482
Correspondence address		No. 1 Gangcheng	No. 1 Gangcheng
		Avenue,	Avenue,
		Changshou Economic	Changshou Economic
		Development Zone,	Development Zone,
		Chongqing, the PRC	Chongqing, the PRC
E-mail		IR@email.cqgt.cn	IR@email.cqgt.cn

– 2 –

2.2 Major Financial Data of the Company

Unit: RMB’000

			Change from
			the end of
	At the		last year to
	end of		the end of
	the Reporting	At the	the Reporting
	Period	end of last year	Period
			(%)
Total assets	24,402,346	25,012,459	-2.44
Net assets attributable
to shareholders of the
Company	17,499,888	16,730,115	4.60
			Change from
	This		the same
	Reporting		period of
	Period		last year to
	(January	Same period	this Reporting
	to June)	last year	Period
			(%)
Net cash flow from
operating activities	-1,301,188	-82,023	-1,486.37
Operating income	11,092,899	4,521,727	145.32
Net profit attributable
to shareholders of the
Company	761,960	-998,482	N/A
Net profit attributable
to shareholders of
the Company after
extraordinary gains
and losses	736,096	-1,004,337	N/A
Weighted average
return on net
assets (%)	4.45	N/A
Basic earnings per share
(RMB per share)	0.09	-0.23	139.13
Diluted earnings per
share (RMB per
share)	0.09	-0.23	139.13

– 3 –

Notes:

The net cash flow from operating activities decreased significantly year-on-year. The main reasons are as follows:

1. The Company has fully repaid the agreed supply debts and the relevant employees’ claims in the amount of approximately 1.1 billion, which was derived by the continuous performance of contracts and judicially adjudicated in the process of judicial reorganization in the end of June 2018, such that cash outflow from operating activities increased;

2. In the first half of 2018, the Company effectively implemented the “full production and full sales” production and operation policy, and further expanded the scale of production and sales to ensure stable production and crude fuel inventory increased significantly. The inventory occupied funds at the end of the reporting period increased by approximately RMB674 million compared to the beginning of the period, resulting in an increase in cash outflows from operating activities;

3. To ensure the variety and quality of crude fuel resources, the Company gradually established direct cooperation with relevant excellent suppliers and crude fuel advance payments increased by RMB151 million compared to the beginning of the period, resulting in an increase in cash outflows from operating activities.

2.3 Shareholdings of top ten shareholders

Unit: share

Total number of shareholders as of the end of the reporting period (account) 153,266 Total number of preferential shareholders with resumed voting rights as of the end of the reporting period (account) 0

Shareholdings of top 10 shareholders

				Number of
				shares held
	Type of	Shareholding	Number of	with trading	Number of shares
Name of shareholder	shareholder	percentage	shares held	limitations	pledged	or frozen
		(%)
Chongqing Changshou Iron &	Domestic non-	23.51	2,096,981,600	0	Pledged	2,096,981,600
Steel Company Limited	state-owned
	legal person
HKSCC NOMINEES	Foreign legal	5.95	530,755,540	0	Unknown
LIMITED	person
Chongqing Qianxin Energy	Unknown	4.79	427,195,760	0	Unknown
Environmental Protection
Company Limited
Chongqing Rural Commercial	Unknown	3.24	289,268,939	0	Unknown
Bank Co., Ltd.

– 4 –

Shareholdings of top 10 shareholders

				Number of
				shares held
	Type of	Shareholding	Number of	with trading	Number of shares
Name of shareholder	shareholder	percentage	shares held	limitations	pledged or frozen
		(%)
Chongqing Guochuang	Unknown	3.12	278,288,059	0	Unknown
Investment and
Management Co., Ltd.
Sinosteel Equipment &	Unknown	2.83	252,411,692	0	Unknown
Engineering Co., Ltd.
Bank of Chongqing Co., Ltd.	Unknown	2.53	226,042,920	0	Unknown
Industrial Bank Co., Ltd.	Unknown	2.46	219,633,096	0	Unknown
Chongqing Branch
Agricultural Bank of China	Unknown	2.43	216,403,628	0	Unknown
Limited Chongqing
Branch
China Shipbuilding Industry	Unknown	2.37	211,461,370	0	Unknown
Complete Logistics Co.,
Ltd.

Description on the related relationship or acts in concert of the above shareholders

Chongqing Changshou Iron & Steel Company Limited is the controlling shareholder of the Company and has no related relationship with the other 9 shareholders and they are not parties acting in concert as stipulated in Administrative Measures for Management of Information Disclosure of Changes in Shareholdings of Shareholders of Listed Companies. The Company is also not aware of whether there is any related relationship among the other 9 shareholders or whether they are parties acting in concert.

Description on the preferential shareholders with resumed Nil voting rights and shareholding

2.4 Particulars of the total number of preferential shareholders and top ten preferential shareholders as of the end of the reporting period

Applicable ✓ Not Applicable

– 5 –

2.5 Changes in controlling shareholder or beneficial controller

Applicable ✓ Not Applicable

2.6 Undue and unpaid or overdue corporate bonds

Applicable ✓ Not Applicable

III MANAGEMENT DISCUSSION AND ANALYSIS

3.1 Management Discussion and Analysis

In the first half of 2018, the Company earnestly implemented the operation principle of “achieving full production and sales, low cost and high efficiency” and the strategies of cost leadership and leading manufacturing technologies. It advanced a smooth integration of production, supply and sale and realised stable and smooth production, substantial improvement of costeffectiveness, and rapid growth of systematic capabilities. In the first half of the year, the Company realised iron, steel and steel products production of 2,784,500 tonnes, 3,100,100 tonnes and 2,966,900 tonnes respectively, representing an increase of 79.10%, 89.96% and 91.57%, respectively, as compared to the same period last year; sales of steel products of 2,943,500 tonnes, representing a year-on-year increase of 125.45%; revenue of RMB11.093 billion, representing a year-on-year increase of 145.32%; and total profit of RMB763 million, marking a dramatic turnaround as compared with the loss of RMB999 million of the same period last year. Earnings before interest, taxes and depreciation (EBITDA) rose from RMB205 million in the same period last year to RMB1.348 billion, representing an increase of 5.58 times. The asset-liability ratio at the end of the half-year period further decreased from 32.62% at the end of the first quarter to 28.29%, representing a decrease of 74.72 percentage points from 103.01% in the same period of last year. The Company’s production and operation entered a virtuous cycle.

In the first half of the year, the Company had taken the following key measures:

1. Through accurate market positioning and restructuring of the marketing system, the Company’s position in regional market gradually changed from “getting on the bandwagon” to “taking the lead”

• (1) The Company mapped out the market positioning of “taking root in Chongqing, pursuing further development in Sichuan and Chongqing, and branching out across southwest regions”. In the first half of the year, according to the market and customer needs, the Company reasonably arranged product flow and proactively expanded the channel layout, which resulted in a significant year-

– 6 –

on-year increase in the market share in Chongqing and Chengdu. In the second quarter, the Company’s medium and heavy sheets accounted for 85% and 60% of the market share in Chongqing and Chengdu, respectively; while its hot rolled coil accounted for 80% and 25% of the market share in Chongqing and Chengdu, respectively.

• (2) A marketing system featured with direct supply, sales and delivery was established to achieve sales premium and appreciation. Based on in-depth analysis of regional market demand, the Company further tapped the terminal market. In the first half of the year, the proportion of direct supply of major products to strategic direct supply users rose sharply, amounting to more than 40%. The Company established factory distribution centers and developed its own logistics distribution and service platform, striving to increase direct delivery and realise benefits and value appreciation through logistics chain and service.

• (3) Leveraging the development opportunities brought by the Western Development and the Belt and Road, the Company made its foray into the market of steel for steel structures. In the first half of the year, the Company focused on the construction of major projects and key municipal projects in the regional market, and managed to supply products for key projects including Xi’an Silk Road Convention Center, Chongqing Raffles Plaza, Chengdu Tianfu International Airport, Hengfeng Guiyang Center, Xi’an Olympic Sports Center and Xi’an Jinmao Center and key infrastructures including Longzhouwan Tunnel Project, Chongqing Light Rail Line 10, Yulin River Bridge, Luzhou Yangtze River Bridge 6 and Guangxi Pingnan Bridge 3.

2. The procurement supply chain management was remodeled

• (1) The procurement supplier structure was optimised. In the first half of the year, the Company consolidated and upgraded the proportion of strategic suppliers, expanded the scope, platform, resources and channels of procurement, and realised resource guarantee, structural optimisation, platform consolidation, and smooth channels. The resource channels were stabilised through expanding and strengthening cooperation with quality ore suppliers; due to the strengthened cooperation, the proportion of direct supply + strategic coal resources steadily increased. The Company effectively reduced the restriction in terms of coal resources purchased from other places and logistics through intensifying the cooperation in respect of local direct supply of resources, resulting in a substantial increase in the proportion of local resources.

– 7 –

• (2) By strengthening tracking and analysis of market information on ore, coal and scrap steel, the Company implemented strategic procurement when the prices temporarily touched the bottom.

3. The capability in production organisation and management and equipment support was intensified

• (1) The Company promoted first-class and lean management of plan and organisation, to ensure the centralised, unified and efficient plan and organisation throughout the process from raw material procurement to product delivery; and set up the principle of “process obedience and mutual support” to maintain a safe, stable and smooth production system. In addition, the Company strengthened contract fulfillment management and improved contract delivery capability.

• (2) In order to achieve “stable state, effectiveness of functions and maintenance of precision”, the Company propelled integrated management of equipment. Spot inspection management was intensified so as to ensure reliable operation of equipment in each production line under high load production conditions. In the first half of the year, the Company completed “adjustments and replenishments” for equipment at a faster pace, put in maintenance cost of RMB446 million and significantly improved the disrepair of equipment of all processes of the Company, which effectively guaranteed the functionality of equipment and dramatically reduced equipment failure rate.

4. Optimisation of product mix was promoted based on the analysis of product profitability

• (1) The Company established and improved the product profitability analysis system, which was capable of providing prompt external response and effective internal synergy, and allocating production lines and product resources reasonably, dynamically and efficiently, based on the product profitability. As a result, the great misalignment between the previous product mix and the demand in the target market and the situation of external-dependent purchase and sales were practically changed.

– 8 –

• (2) The existing product mix was optimised at a higher speed. Leveraging its advantages in production lines and product portfolio, the Company applied its years of advantages in medium and heavy sheets products into high value-added products for building structures and generated products with different quality, including Q345 to Q420 series of structural steel for bridges and buildings, Q345 to Q690 low-alloy high-strength structural steel plates as well as products with Z-direction properties, thus improving the proportion and structure of variety steel and boosting the profitability of production lines.

• (3) More efforts were devoted to the development of new high valueadded products. Giving play to the advantages in the productionsales-research linkage mechanism and closely following market demands, the Company expanded downstream industries and customers for high value-added products and promoted the development of new products in the first half of the year. It developed HB400 (NM400) high-strength abrasion resistance steel plates used for engineering machinery and completed the trial production of HRB500E thread steel; and continued to advance the development of high-strength steel belts for vehicles with the CG590CL and 610L series of products already put into the market.

5. The cost management system was established and improved and meticulous cost management was implemented

• (1) The cost management system was consummated. The Company shifted the emphasis in cost management from the headquarters to the cost center to specify and implement responsibilities in grass-root cost management; it completed the connection of the financial information system and all business information systems and thus enhanced the standardisation, accuracy, timeliness and comprehensiveness of major business and fundamental financial data.

• (2) The thorough synergy between finance and business was reinforced. The Company set up a hierarchical technical index system to match the standards of advanced enterprises externally and meet the standards of all cost centers internally through comparing with budget targets, the performance of the previous period, the best performance in history and other procedures, and provide on-site guidance on cost improvement; it increased the weightiness of cost management in the performance appraisal system and set up rewards for cost reduction and efficiency enhancement, which is based on the cost, consumption and index of all processes.

– 9 –

• (3) The overall planning on cost reduction was advanced. On the basis of cost, index and consumption under full production and sales, which became reasonable stepwise in the first quarter, the Company systematically schemed, formulated and promoted the annual overall planning on cost reduction in the second quarter. It strengthened the establishment of the overall planning system on annual cost reduction, index subdividing, implementation of responsibilities, tracking and analysis, appraisal and encouragement. As a result, the proportion of contribution from internal cost reduction gradually increased and the cost safety margin further hiked in the first half of the year.

• (4) Coal blending and ore blending plans were optimised. In close accordance with market conditions, dynamic adjustments were made with the orientation of the “optimal molten iron cost”, achieving structural cost reduction. The Company implemented the principle of best quality to enhance index on process control. In the second quarter, the hot strength, ash content and sulfur content of coke reached 63.36%, 13.25% and 1.10% while the tumbler strength of sintering mines and the comprehensive grade of furnace coke were 77.27% and 58.25%, respectively, all representing their respective best standard historically, which laid a solid foundation for the stable and high production of blast furnaces and cost reduction. Technological cost reduction was carried out comprehensively. In the first half of the year, the Company augmented the learning, application and promotion of advanced and mature technologies in the industry. In the second quarter, the consumption of hot molten iron in the first and second steel making plants reached 871.16kg/t and 865.84kg/t, respectively, reaching the advanced level in the industry.

6. Increasing investment in environmental protection and carrying out special treatment for energy conservation and environmental protection

• (1) Efforts were devoted to renovate the environment protection functions of facilities and to guarantee the synchronous operation rate. The Company further strengthened environmental awareness and carried out function renovation for the existing 72 sets of environmental protection facilities in the first half of the year. It contributed eco-friendly operation fees of RMB367 million to ensure 100% synchronous operation of the environmental protection facilities.

– 10 –

• (2) Special environmental management projects were launched. In the first half of the year, the Company thoroughly inspected the operation efficiency and effectiveness of environmental protection facilities, and conducted centralised rectification on treatment of waste water, exhaust, dust and solid waste. In terms of the waste water system, coking waste water treatment efficiency was improved and the concentration of pollutants in recycling coking water was reduced to make sure that the quality of water with ammonia nitrogen met the index requirements. Waste water from the sintering desulfurization system was recycled and reused in the system after satisfying the standards. The emergency response capacity in the central waste water treatment system was enhanced to guarantee conformable water quality improve recycling rate and reduce waste water discharge. As for waste gas treatment, the main target was to control disordered emissions in the plant area and reduce total dust fall. In the first half of the year, 22 treatment projects were implemented. The disordered emissions of dust in the plant area were effectively controlled, and the dustfall in the plant area decreased by 36.8%, thus completing the periodical treatment targets.

7. Comprehensive transformation was carried out with the view of developing systematic capabilities

• (1) The “100-day Plan” was fully promoted to complete key tasks and solve difficulties. Proceedings from project-based method, a special action plan was formed in six aspects including full production and full sale, capability of cost management and control, energy saving and emission reduction, technical transformation of spare parts and utilisation of inventories, management capacity improvement, the Party building and employee care action. The Company also screened and developed the “Quickly-won Project”, and promoted the “filling-in and replenishing” for the production and operation and corporate management as soon as possible.

• (2) Organisational framework was optimised and post setup was streamlined. The Company solved the problem of “lack of function and absence of management”, clarified and implemented professional management responsibility. The Company implemented reform of separation of production execution segment and professional management functions in each secondary production plant, integrated the functional departments for simplicity and efficiency, and streamlined management structure to ensure smooth production, orderly management and stable team.

– 11 –

• (3) It standardised the management system, updated the management process, and achieved “concentrated and consistent” management. The Company developed 36 new systems, made amendments to 212 systems and abolished 8 systems.

• (4) The “horse racing mechanism” was rolled out to stimulate the vitality of employees. The Company fully implemented the “horse racing mechanism”, which prescribed that, all management personnel at the office head-level or above should be determined by open recruitment, aiming at creating a fair, just and open post competition environment, and inspiring the employees.

• (5) Performance-oriented approach was advocated and remuneration reform was promoted. By fully utilizing the advantages of mixed ownership, the Company actively promoted the incentive mechanism reform, advocated performance-oriented approach, designed a market-competitive remuneration system and introduced cost reduction and efficiency enhancement incentive plan and profit sharing plan which were linked to cost improvement and operation performance. It integrated the interests of management, employees and the shareholders, aiming to accomplish mutual development of the employees and the Company.

In the first half of the year, the Board and the shareholders’ general meeting considered, approved and disclosed the 2018 – 2020 Employee Share Ownership Plan (Draft), pursuant to which, the performance incentives for the management and key staffs of core technology, business and management would be honored through the employee stock ownership plan whereby to arouse the enthusiasm of the management and core and backbone staffs, accomplish shared responsibility, risk and benefits and facilitate the long-term and stable development of the Company and improvement of the shareholder value.

– 12 –

8. The promise to compensate the supply debts and employee claims of the judicial reorganization was fulfilled, and the business reputation has gradually improved.

In the first half of the year, the Company has already fully compensated the supply debts and employee claims of the judicial reorganization as agreed; as the administrator has made a decision to discharge the joint venture contract, the Company has completed the liquidation and deregistration procedures of Chongqing POSCO Chonggang Automobile Co., Ltd. ( 重慶浦項重鋼汽車板有限公司 ) and Chongqing Chonggang Heavy and High-strength Cold-Rolled Sheet Co., Ltd ( 重慶重鋼高強冷軋板材有限公司 ) as planned in the first half of the year. In the first half of the year, the Company has kept its promises and faithfully performed its contractual duties. The financial institutions gradually recovered their confidence. As of the end of the reporting period, the Company has obtained a credit line of RMB1 billion.

9. Development plans were in place for future prosperity

In the first half of the year, the Company organised and prepared the plan on future process optimisation and green smart manufacturing improvement. In the short term, it mainly improved the existing facility and equipment and enhanced the competitiveness of long products. In the medium term, it gradually increased production and gave effect to the economies of scale. In the long run, the Company aimed to enhance product mix and ameliorate the process. The plan will pave the way for the Company in developing into the most competitive steel enterprise in Southwest China, creating a modern production mode with less environmental impact and high resource efficiency, and building a green steel plant with clean production, waste reclamation and low-carbon emission; the Company will integrate intelligent and information technologies into the steel technology to build an intelligent manufacturing system and lay a sound foundation for the sustainable development of the enterprise.

In 2018, the Company plans to achieve 5.37 million tonnes of iron production, 6 million tonnes of steel, and 5.75 million tonnes of commodity billets.

In the second half of 2018, the Company will aim at becoming “the most competitive steel enterprise in Southwest China; the transforming and upgrading leader of environmentally friendly steel mill in the mainland; a model company in which employees and enterprises mutually develop”. It also continues to strengthen the reform, to focus on the target of “full production full sales”, to emphasise on market

– 13 –

demand and profitability, to optimise the existing product structure, and to continue promoting the marketing strategies of “direct supply, direct sales and direct distribution”. It builds a foundation in Sichuan and Chongqing and further explores the Yuan Gui Region, improving the capabilities of marketing network and fully expanding its influence in the regional market. The Company also further enhances the ability to respond quickly to market changes, promotes the launch of smart logistics operation platform for products, improves the efficiency of logistics and delivery, reduces the cost of logistics so as to improve user satisfaction, and continues to focus on cost reduction in regard to the system and techniques as well as to develop potential personnel internally and reducing the cost, in order to equip with stronger competitiveness regarding costs in the southwest region at the end of 2018.

3.1.1 Principal business analysis

• (I) Analysis of changes in certain items from financial statements

Unit: RMB’000

		For the
		corresponding
	For the	period
Subject	period	last year	Change
			(%)
Operating income	11,092,899	4,521,727	145.32
Operating cost	9,344,298	4,412,817	111.75
Selling expenses	41,986	23,681	77.30
General and
administrative
expenses	731,376	532,656	37.31
Financial expenses	147,250	515,559	-71.44
Total profit	762,972	-998,821	N/A
Net cash flow from
operating activities	-1,301,188	-82,023	-1,486.37
Net cash flow from
investing activities	664,294	-17,868	N/A
Net cash flow from
financing activities	217,947	109,566	98.92
R&D spending	221,857	126,312	75.64

Note: Net cash flow from investing activities increased significantly, which is mainly attributable to the receipt of investment income from financial products of RMB660 million by Chongqing Chonggang Heavy and High-strength Cold-Rolled Sheet Co., Ltd, a subsidiary of the Company.

– 14 –

(II) Others

• (1) Detailed notes to the major changes in the Company’s profits structure or profits sources

✓ Applicable Not applicable

In the first half of 2018, the Group realized operating income of RMB11.093 billion, with a year-on-year increase of 145.32%; it incurred operating cost of RMB9.344 billion, with a year-on-year increase of 111.75%; and it recorded gross profit of RMB763 million, representing a year-on-year increase of RMB1.762 billion as compared with the loss of RMB999 million last year. The considerable turnaround was mainly attributable to:

• ① In the first half of 2018, revenue of the principal operations of the Group amounted to RMB11.066 billion, representing a year-on-year increase of 145.32%, mainly attributable to the expansion of production scale, the full production and sales, the increased sales volume and the rising selling price of steel products.

Type First half of 2018 Amount Percentage (RMB’000) (%) Plate products 2,654,990 23.99 Hot rolled coil 6,004,637 54.26 Rod products 918,454 8.30 Wire rods 939,650 8.49 Sub-total of rolled steel billet 10,517,731 95.04 Processing on order – 0.00 Others 548,036 4.96 Total 11,065,767 100.00	First half of 2017 Amount Percentage (RMB’000) (%) 734,615 16.29 2,980,277 66.07 207,770 4.61 – – 3,922,662 86.97 164,340 3.64 423,685 9.39 4,510,687 100.00	Year-on-year growth (%) 261.41 101.48 342.05 /
		168.13 / 29.35
		145.32

In the first half of 2018, revenue from the sale of rolled steel billet of the Group amounted to RMB10.518 billion, representing an increase of RMB6.595 billion as compared with the corresponding period of last year. This was mainly attributable to the increase in both

– 15 –

selling price and sales volume. The average selling price of rolled steel billet of the Group was RMB3,573 per tonne, representing an increase of 18.94% as compared with the corresponding period of last year, leading to an increase of RMB1.507 billion in the sales income. The Group sold 2,943,500 tonnes of rolled steel billet, representing a year-on-year increase of 125.45%, leading to an increase of RMB5.088 billion in the sales income.

Item Plate products Hot rolled coil Rod products Wire rods Total Item Plate products Hot rolled coil Rod products Wire rods Total

Selling price for the first half of 2018 Selling price for the first half of 2017 Year-on- year growth Revenue increase RMB/tonne RMB/tonne (%) (RMB’000) 3,776 2,976 26.88 562,724 3,515 2,993 17.44 891,249 3,498 3,297 6.10 52,603 3,488 / 3,573 3,004 18.94 1,506,576 Sales volume for the first half of 2018 Sales volume for the first half of 2017 Year-on- year growth Revenue increase (0’000 tonnes)(0’000 tonnes) (%) (RMB’000) 70.30 24.68 184.85 1,357,651 170.85 99.58 71.57 2,133,111 26.26 6.30 316.83 658,081 26.94 / 939,650 294.35 130.56 125.45 5,088,493

– 16 –

• ② The principal operations realized gross profit of RMB1.726 billion, representing a year-on-year increase of RMB1.625 billion, mainly due to the significant increase in sales volume and selling price of steel products, enhancement of cost control and the decrease of purchasing and processing cost.

• ③ The Group incurred expenses for the period in the amount of RMB921 million, representing a year-on-year decrease of RMB151 million, mainly attributable to: first, the year-on-year increase of RMB18 million in selling expenses as a result of the year-on-year increase in sales volume of steel products by 125.45% in the first half of the year; second, the Company’s production scale improved. In order to ensure the normal functioning of the equipment, the maintenance cost of the first half of the year was RMB446 million, resulting in an increase of RMB199 million in administrative expenses; third, the considerable year-on-year decrease of RMB368 million in finance costs benefiting from proper management of the Group’s interest-bearing financial liabilities after the judicial reorganisation.

Item Selling expenses General and administrative expenses Financial expenses Total	Amount for the current period (RMB’000) 41,986 731,376 147,250 920,612	Amount for the last period (RMB’000) 23,681 532,656 515,559 1,071,896	Percentage change in the amount for the current period as compared with that of the last period (%) 77.30 37.31 -71.44 -14.11

– 17 –

(2) Others

✓ Applicable

Not applicable

Principal operations by sectors, products and regions

			Principal	operations by sectors	operations by sectors
				Change in	Change in	Change in
	Income from	Costs of		operating	operating	gross profit
	principal	principal	Gross profit	income from	costs from	margin from
By sectors	operations	operations	margin	last year	last year	last year
	(RMB’000)	(RMB’000)	(%)	(%)	(%)
Iron and steel	11,065,767	9,339,727	15.60	145.32	111.81	Increased by 13.36
						percentage points
			Principal operations by products
				Change in	Change in	Change in
	Income from	Costs of		operating	operating	gross profit
	principal	principal	Gross profit	income from	costs from	margin from
By products	operations	operations	margin	last year	last year	last year
	(RMB’000)	(RMB’000)	(%)	(%)	(%)
Rolled steel billet	10,517,731	8,816,571	16.17	168.13	129.52	Increased by 14.09
						percentage points
Others	548,036	523,156	4.54	29.35	44.03	Decreased by 9.73
						percentage points

– 18 –

By regions Principal operations by regions Income from principal operations Costs of principal operations Gross profit margin Change in operating income from last year (RMB’000) (RMB’000) (%) (%) Southwest region 10,110,216 8,530,117 15.63 – Other regions 955,551 809,610 15.27 – Total 11,065,767 9,339,727 15.60 –	Change in operating costs from last year Change in gross profit margin from last year (%) – – – – – –	Change in operating costs from last year Change in gross profit margin from last year (%) – – – – – –
		–

Note: Establishing a scientific marketing system with accurate market positioning. By leveraging its geographical advantages and product competitive edges, the Company mapped out the market positioning of “taking root in Chongqing, pursuing further development in Sichuan and Chongqing, and branching out across southwest regions”. In the first half of 2018, income from southwest regions accounted for 91.36%.

Regions Southwest region Other regions Total	Income from principal operations (RMB’000) 10,110,216 955,551 11,065,767	Percentage of income from principal operations (%) 91.36 8.64
		100.00

– 19 –

3.2 Changes of accounting policies, estimations and methods and their reasons and influence as compared to the last accounting period

✓ Applicable Not applicable

The changes made to the accounting policies of the Company during the reporting period are detailed as follows:

Particulars of and reasons for the changes in accounting policies

Notes (names and amounts of report items materially affected)

From 1 January 2018, the Group implemented the Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments, the Accounting Standards for Business Enterprises N o . 2 3 – T r a n s f e r o f F i n a n c i a l Assets, the Accounting Standards for Business Enterprises No. 24 – Hedge Accounting and the Accounting Standards for Business Enterprises No. 37 – Presentation of Financial Instruments (the “New Financial Instruments Standards”) revised by the Ministry of Finance on 31 March 2017. The standards stipulate that, from the implementation date of these standards, enterprises shall conduct classification and measurement of financial instruments in accordance with these standards. If there are inconsistencies between the information in previous comparable financial statements and those under these standards, no adjustments are required. For the differences between the original carrying amount of the financial instruments and the new carrying amount of the financial instruments on the implementation date of these standards, the retained earnings at the beginning of 2018, other comprehensive revenue and the amount of other items in the financial statements shall be adjusted accordingly.

Based on the Group’s assessment, the implementation of New Financial Instruments Standards did not have a material effect on the classification and measurement of the financial assets, nor did it have a significant impact on the accounts receivable, notes receivable and provisions for other bad debt of other receivables, except for the reclassification of available-for-sale financial assets into financial assets at fair value with changes recorded as other comprehensive income.

– 20 –

Particulars of and reasons for the changes in accounting policies

From 1 January 2018, the Group i m p l e m e n t e d t h e A c c o u n t i n g Standards for Business Enterprises No. 14 – Revenue (the “New Revenue Standard”) revised by the Ministry of Finance on 5 July 2017. The standards stipulate that enterprises implementing the standards for the first time shall adjust the amount of retained earnings and other items in the financial statements at the beginning of the year in accordance with the cumulative effect and no adjustment shall be made to the comparable period. The change of the accounting policy did not involve the restatement of comparative information and have no effect on 2017 financial statements. The retained earnings at the beginning of 2018 and the amount of other items in the financial statements shall be adjusted.

Notes (names and amounts of report items materially affected)

Based on the Group’s assessment, the Group’s implementation of the New Revenue Standard did not have significant impacts on the recognition of revenue under the existing contracts. No adjustment was required for the retained earnings at the beginning of the year.

– 21 –

Particulars of and reasons for the changes in accounting policies

In the preparation of the 2018 interim statements in accordance with the Notice of the Ministry of Finance on Revising and Issuing the Format of Financial Statements of General Enterprises for the year 2018 (Cai Kuai [2018] No.15), the Group presented the receivables and commercial bills received from the sale of goods and the provision of services and other operating activities of the enterprise measured at amortised cost on the balance sheet date under “notes receivable and accounts receivable” instead of the previous “notes receivable” and “accounts receivable”; the payables and commercial bills issued and accepted for the purchase of materials, goods and the acceptance of services measured at amortised cost on the balance sheet date under “notes payable and accounts payable” instead of the previous “notes payable” and “accounts payable”; and the “interests payable” separately reported previously under “other payables”.

Notes (names and amounts of report items materially affected)

The Group retrospectively restated the items relating to the comparative balance sheet. The change of the accounting policy had no effect on the consolidation and the interests of the shareholders of the Company.

– 22 –

Particulars of and reasons for the changes in accounting policies

Notes (names and amounts of report items materially affected)

T h e G r o u p i m p l e m e n t e d t h e I n t e r p r e t a t i o n o f A c c o u n t i n g Standards for Business Enterprises No. 9 – Accounting Treatment of Net Loss of Investment under Equity Method, the Interpretation o f A c c o u n t i n g S t a n d a r d s f o r 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 a n d t h e R e c i p i e n t o f t h e K e y 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 Group’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.

The aforesaid changes in the accounting policies were considered and approved at the third meeting of the eighth session of the Board and the second meeting of the eighth session of the supervisory committee of the Company. Independent directors of the Company expressed independent opinion on such changes.

• 3.3 Correction of significant accounting errors requiring restatement, correction amount, and their reasons and influence during the reporting period.

Applicable ✓ Not applicable

– 23 –

IV OTHER SIGNIFICANT EVENTS

(I) Compliance with the Corporate Governance Code

To the best knowledge of the Board, the Company had complied with the requirements of the “Corporate Governance Code”, Appendix 14 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange during the reporting period, and no deviation from the Code has been identified.

(II) Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (“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 six months ended 30 June 2018.

(III) Interim dividend

Given the fact that the undistributed profit of the Company remained negative as of the end of the reporting period, the Company does not recommend distribution of any interim dividend for the six months ended 30 June 2018.

(IV) Purchase, Sale or Redemption of Listed Securities of the Company

None of the Company and its subsidiaries purchased, sold or redeemed any listed securities of the Company during the reporting period.

(V) Major acquisition and disposal of subsidiaries and affiliates

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

(VI) Audit Committee

The Audit Committee is comprised of three independent non-executive directors and one non-executive director, namely, Xin Qing Quan, Zheng Jie, Wong Chun Wa and Zheng Yuchun with Mr. Xin Qing Quan acting as the chairman of the Audit Committee.

The unaudited interim financial report of the Company for the six months ended 30 June 2018 had been reviewed by the members of the Audit Committee before being submitted to the Board for approval.

– 24 –

V UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY FOR THE SIX MONTHS ENDED 30 JUNE 2018 PREPARED IN ACCORDANCE WITH THE PRC GAAP

Consolidated Balance Sheet

As at 30 June 2018

Unit: RMB’000

Items Current assets: Cash and bank balances Notes and accounts receivable 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 progress Intangible assets Total non-current assets Total assets Current liabilities: Notes payable and accounts payable Advances from customers Contract liabilities Employee benefits payable Tax payable Other payables Non-current liabilities due within one year Total current liabilities	Closing balance 450,015 1,595,141 221,939 14,331 2,212,662 167,659 4,661,747 – – 5,000 17,239,463 10,702 2,485,434 19,740,599 24,402,346 1,138,403 – 1,449,496 128,587 10,668 410,646 590,000 3,727,800	Opening balance 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 2,155,294 187,099 – 563,547 13,095 1,491,912 400,000 4,810,947

– 25 –

			Closing		Opening
Items			balance		balance
Non-current liabilities:
Long-term borrowings			500,000		700,000
Long-term employee benefits payable			232,936		243,190
Provisions			–		11,204
Deferred income			41,722		43,154
Other non-current liabilities			2,400,000		2,400,000
Total non-current liabilities			3,174,658		3,397,548
Total liabilities			6,902,458		8,208,495
Owner’s equity:
Share capital			8,918,602		8,918,602
Capital reserve			19,282,147		19,282,147
Special reserve			7,813		–
Surplus reserve			606,991		606,991
Accumulated losses			(11,315,665)		(12,077,625)
Total equity attributable to	owners of
the parent			17,499,888		16,730,115
Non-controlling interests			–		73,849
Total shareholder’s equity			17,499,888		16,803,964
Total liabilities and shareholders’
equity			24,402,346		25,012,459
	The person in charge of		The head of the accounting
Legal Representative:	accounting body:		department:
Zhou Zhuping	Lv Feng		Lv Feng

– 26 –

Balance Sheet of the Parent Company As at 30 June 2018

Unit: RMB’000

Items Current assets: Cash and bank balances Notes and accounts receivable 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 Total non-current assets Total assets Current liabilities: Notes payable and accounts payable Advances from customers Contract liabilities Employee benefits payable Tax payable Other payables Non-current liabilities due within one year Total current liabilities	Closing balance 443,453 1,599,602 221,518 14,325 2,211,332 167,640 4,657,870 – 50,000 5,000 17,239,463 10,702 2,485,434 19,790,599 24,448,469 1,183,695 – 1,448,926 128,587 10,667 404,951 590,000 3,766,826	Opening balance 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 2,204,070 185,905 – 563,518 13,113 1,486,183 400,000 4,852,789

– 27 –

			Closing		Opening
Items			balance		balance
Non-current liabilities:
Long-term borrowings			500,000		700,000
Long-term employee benefits payable			232,936		243,190
Provisions			–		11,204
Deferred income			41,722		43,154
Other non-current liabilities			2,400,000		2,400,000
Total non-current liabilities			3,174,658		3,397,548
Total liabilities			6,941,484		8,250,337
Owner’s equity:
Share capital			8,918,602		8,918,602
Capital reserve			19,313,090		19,313,090
Special reserve			7,813		–
Surplus reserve			577,012		577,012
Accumulated losses			(11,309,532)		(12,071,866)
Total shareholder’s equity			17,506,985		16,736,838
Total liabilities and shareholders’
equity			24,448,469		24,987,175
	The person in charge of		The head of the accounting
Legal Representative:	accounting body:		department:
Zhou Zhuping	Lv Feng		Lv Feng

– 28 –

Consolidated Income statement

For the six months ended 30 June 2018

Unit: RMB’000

Items I. 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 Add: O ther income (losses are represented by “-”) Investment income(losses are represented by “-”) Including: in vestment income from joint ventures Gains on disposal of assets (losses are represented by “-”) II. Operating profit (losses are represented by “-”) Add: Non-operating income Less: Non-operating expenses III. Total profit (losses are represented by “-”) Less: Income tax expenses IV. Net Profit (net losses are represented by “-”) (1) B reakdown by continuity of operations	Six months ended 30 June 2018 11,092,899 9,344,298 52,437 41,986 731,376 147,250 190,466 (46,428) – 1,502 (1,826) (2,628) 8,482 783,710 325 21,063 762,972 885 762,087	Six months ended 30 June 2017 4,521,727 4,412,817 39,779 23,681 532,656 515,559 539,309 (7,146) – 6,286 (1,911) (1,911) 6 (998,384) 78 515 (998,821) 2 (998,823)

– 29 –

		Six months		Six months	Six months
		ended			ended
Items		30 June 2018		30	June 2017
1. N et profit from continuing
operations (net losses
are represented by “-”)		762,087			(998,823)
2. N et profit from
discontinued operations
(net losses are
represented by “-”)		–			–
(2) B reakdown by attributable
interests
1. N et profit attributable to
the shareholders of the
parent company		761,960			(998,482)
2. Non-controlling interests		127			(341)
V. Other comprehensive income
after tax		–			–
VI. Total comprehensive income		762,087			(998,823)
Total comprehensive income
attributable to owners of the
parent		761,960			(998,482)
Total comprehensive income
attributable to non-controlling
interests		127			(341)
VII. Earnings per share:
(1) Basic earnings per share
(yuan/share)		0.09			(0.23)
(2) Diluted earnings per share
(yuan/share)		0.09			(0.23)
The person in charge of		The head of the accounting
Legal Representative: accounting body:		department:
Zhou Zhuping Lv Feng		Lv Feng

– 30 –

Income statement of the Parent Company Six months ended 30 June 2018

Unit: RMB’000

Items I. 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 Add: O ther income (losses are represented by “-”) Investment income(losses are represented by “-”) Including: investment income from joint ventures Gains on disposal of assets (losses are represented by “-”) II. Operating profit (losses are represented by “-”) Add: Non-operating income Less: Non-operating expenses III. Total profit (losses are represented by “-”) Less: Income tax expenses	Six months ended 30 June 2018 11,093,696 9,345,628 52,430 41,815 728,145 152,589 190,466 (38,073) – 1,502 52 (2,628) 8,482 783,125 241 21,032 762,334	Six months ended 30 June 2017 4,385,450 4,277,126 39,576 21,810 526,699 519,174 539,309 (1,739) (1) 6,286 (4,547) (1,911) 6 (997,189) 76 515 (997,628)

– 31 –

			Six months		Six months
			ended		ended
Items			30 June 2018		30 June 2017
IV. Net Profit (net losses are
represented by “-”)			762,334		(997,628)
Breakdown by continuity of
operations
1. Net profit from continuing
operations (net losses are
represented by “-”)			762,334		(997,628)
2. Net profit from discontinued
operations (net losses are
represented by “-”)			–		–
V. Other comprehensive income
after tax			–		–
VI. Total comprehensive income			762,334		(997,628)
The person in charge of			The head of the accounting
Legal Representative:	accounting body:		department:
Zhou Zhuping	Lv Feng		Lv		Feng

– 32 –

Consolidated cash flow statement

For the period between 1 Jan 2018 and 30 June 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 purchases 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	Six months ended 30 June 2018 10,366,330 109,689 10,476,019 9,743,269 1,030,356 58,176 945,406 11,777,207 (1,301,188)	Six months ended 30 June 2017 847,862 2,170,517 3,018,379 836,390 253,804 38,646 1,971,562 3,100,402 (82,023)

– 33 –

Items II. Cash flows from investing activities: Cash received from sale of investments Cash received from return on investments Net cash received from disposals 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 Sub-total of cash outflows from investing activities Net cash flows from investing activities 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	Six months ended 30 June 2018 651,376 7,021 8,561 666,958 2,664 2,664 664,294 – 1,181,576 1,181,576	Six months ended 30 June 2017 – – – – 17,868 17,868 (17,868) 1,817,740 412,753 2,230,493

– 34 –

		Six months		Six months	Six months
		ended			ended
Items		30 June 2018		30	June 2017
Cash repayments of borrowings		10,000			1,311,117
Cash paid for distribution of
dividends or profits, and for
interests expenses		189,060			164,600
Other cash paid relating to
financing activities		764,569			645,210
Sub-total of cash outflows from
financing activities		963,629			2,120,927
Net cash flows from financing
activities		217,947			109,566
IV. Effect of changes in exchange
rate on cash and cash equivalents		–			(1,790)
V. Net increase in cash and cash
equivalents		(418,947)			7,885
Add: Ca sh and cash equivalents
at the beginning of the
period		868,962			745,447
VI. Cash and cash equivalents at the
end of the period		450,015			753,332
The person in charge of		The head of the accounting
Legal Representative: accounting body:		department:
Zhou Zhuping Lv Feng		Lv Feng

– 35 –

Cash flow statement of the parent company For the period between 1 Jan 2018 and 30 June 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 purchases 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	Six months ended 30 June 2018 10,362,602 108,270 10,470,872 9,743,269 1,030,327 57,285 939,061 11,769,942 (1,299,070)	Six months ended 30 June 2017 746,155 2,160,248 2,906,403 736,245 248,254 38,516 1,965,467 2,988,482 (82,079)

– 36 –

Items II. Cash flows from investing activities: Cash received from return on investments Net cash received from disposals 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 Sub-total of cash outflows from investing activities Net cash flows from investing activities 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	Six months ended 30 June 2018 1,376 8,561 9,937 2,664 2,664 7,273 – 1,181,576 1,181,576 10,000 188,597 27,556 226,153 955,423	Six months ended 30 June 2017 – – – 16,512 16,512 (16,512) 1,817,740 412,753 2,230,493 1,311,117 164,600 645,210 2,120,927 109,566

– 37 –

		Six months		Six months
		ended		ended
Items	30 June 2018			30 June 2017
IV. Effect of changes in foreign exchange
rate on cash and cash equivalents		–		–
V. Net increase in cash and cash equivalents		(336,374)		10,975
Add: Cash and cash equivalents at the
beginning of the period		779,827		5,138
VI. Cash and cash equivalents at the end of
the period		443,453		16,113
The person in charge of		The head	of the accounting
Legal Representative: accounting body:		department:
Zhou Zhuping Lv Feng		Lv Feng

– 38 –

Unit: RMB’000

Consolidated statement of changes in shareholders’ equity For the period between 1 Jan 2018 and 30 June 2018

Six months ended 30 June 2018

Items I. Closing balances of the preceding year and opening balances of the current year II. Changes in the current period (decrease are represented by “-”) (I) Total comprehensive income (II) Shareholders’ contribution and decrease in share capital 1. Others (III) Profit distribution 1. Distribution to owners (or shareholders) (IV) Special reserve 1. Amount established in the year 2. Amount utilized in the year III. Closing balance for the current year Items I. Closing balances of the preceding year and opening balances of the current year II. Changes in the current period (decrease are represented by “-”) (I) Total comprehensive income (II) Shareholders’ contribution and decrease in share capital 1. Others (III) Special reserve 1. Amount established in the year 2. Amount utilized in the year III. Closing balance for the current year	Share capital 8,918,602 – – – – – – – – – 8,918,602 Share capital 4,436,023 – – – – – – – 4,436,023	Total equity attributable to own	Total equity attributable to own	Total equity attributable to own	Total equity attributable to own	Total equity attributable to own	ers of the parent	ers of the parent			Accumulated losses (12,077,625) 761,960 761,960 – – – – – – – (11,315,665)	Non- controlling interests 73,849 (73,849) 127 (73,513) (73,513) (463) (463) – – – –	Total shareholders’ equity 16,803,964 695,924 762,087 (73,513) (73,513) (463) (463) 7,813 10,260 2,447
		Other equity instruments Preferred shares Perpetual bonds Others – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –			Capital reserves 19,282,147 – – – – – – – – – 19,282,147	Less: treasury shares Other comprehensive income Special reserves – – – – – 7,813 – – – – – – – – – – – – – – – – – 7,813 – – 10,260 – – 2,447 – – 7,813 Six months ended 30 June 2017			Surplus reserves 606,991 – – – – – – – – – 606,991	General risk provision – – – – – – – – – – –
			Perpetual bonds – – – – – – – – – – –
													17,499,888
				Total equity attributable to owners of the company							Accumulated losses (12,397,711) (998,482) (998,482) – – – – – (13,396,193)	Non- controlling interests 93,060 (341) (341) – – – – – 92,719	Total shareholders’ equity (107,434) (990,315) (998,823) 8,508 8,508 – 9,332 9,332
		Other equity instruments Preferred shares Perpetual bonds Others – – – – – – – – – – – – – – – – – – – – – – – – – – –			Capital reserves 7,154,203 8,508 – 8,508 8,508 – – – 7,162,711	Less: treasury shares Other comprehensive income – – – – – – – – – – – – – – – – – –		Special reserves – – – – – – 9,332 9,332 –	Surplus reserves 606,991 – – – – – – – 606,991	General risk provision – – – – – – – – –
													(1,097,749)

Legal Representative: Zhou Zhuping

The person in charge of The head of the accounting accounting body: department: Lv Feng Lv Feng

– 39 –

Statement of changes in Shareholders’ Equity of the Parent Company For the period between 1 Jan 2018 and 30 June 2018

Unit: RMB’000

Share capital Othe Items Preferred shares I. Closing balances of the preceding year and opening balances of the current year 8,918,602 – II. Changes in the current period (decrease are represented by “-”) – – (I) Total comprehensive income – – (II) Special reserve – – 1. Amount established in the year – – 2. Amount utilized in the year – – III. Closing balance for the current year 8,918,602 – Share capital Items I. Closing balances of the preceding year and opening balances of the current year 4,436,023 II. Changes in the current period (decrease are represented by “-”) – (I) Total comprehensive income – (II) Shareholders’ contribution and decrease in share capital – 1. Others – (III) Special reserve – 1. Amount established in the year – 2. Amount utilized in the year – III. Closing balance for the current year 4,436,023 Legal Representative: Zhou Zhuping				Six months ended 30 June 2018								Total shareholders’ equity 16,736,838 770,147 762,334 7,813 10,260 2,447
	Othe	r equity instruments Perpetual bonds Others – – – – – – – – – – – – – –	Capital reserves 19,313,090 – – – – – 19,313,090	Less: treasury shares Other comprehensive income r – – – – – – – – – – – – – – Six months ended 30 June 2017	r	Special eserves – 7,813 – 7,813 10,260 2,447 7,813		Surplus reserves 577,012 – – – – – 577,012	General risk provision – – – – – – –	Accumulated losses (12,071,866) 762,334 762,334 – – – (11,309,532)
		Perpetual bonds – – – – – –
		–										17,506,985
											Accumulated losses (12,398,006) (997,628) (997,628) – – – – –
											(13,395,634)

By order of the Board Chongqing Iron & Steel Company Limited Yu Hong Secretary to the Board

Chongqing, the PRC, 17 August 2018

– 40 –

As at the date of this announcement, the Directors of the Company are: Mr. Zhou Zhu Ping (Non-executive Director), Mr. Zheng Jie (Non-executive Director), Mr. Li Yong Xiang (Executive Director), Mr. Tu De Ling (Executive Director), Mr. Zhang Shuo Gong (Executive Director), Mr. Xu Yi Xiang (Independent Non-executive Director), Mr. Xin Qing Quan (Independent Non-executive Director), Mr. Wong Chun Wa (Independent Non-executive Director) and Mr. Zheng Yuchun (Independent Nonexecutive Director).

– 41 –