Announces 2021 Interim Results Turn Losses into Profits.
Economic Recovery Drives Sales Growth.
Revenue Increased by 53.6% and Gross Profit Increased by 3.6X.
D&G Co-operates with State-Owned Enterprise to Broaden Revenue.
|RMB 000’||For the six months ended 30 June|
|Gross profit||66,089||14,227||+ 364.5%|
|Profit/(loss) for the period attributable to owners of the Company||8,228||(27,009)||Negative to positive|
|Basic earnings / (loss) per share (RMB cents)||1.31||(4.34)||Negative to positive|
|Gross Profit Margin (%)||33.5||11.1||+ 22.4 p.p|
|• Sales of Asphalt Mixing Plants Segment||33.8%||27.0%||+ 6.8 p.p|
|• Sales of Spare Parts and Modified Equipment Segment||38.2%||42.1%||- 3.9 p.p|
|Net Profit Margin (%)||4.2||(21.0)||Negative to positive|
Although the COVID-19 outbreak still has a certain impact on the global economy, the Group's business has returned to normalisation and achieved remarkable growth, benefiting from the control of the pandemic in China and the gradual recovery of the economy. The Group recorded a total revenue of RMB197.1 million, representing an increase of approximately 53.6% as compared to the last corresponding period. Gross profit increased by 364.5% to RMB66.1 million, and Gross profit margin increased to 33.5% (1H2020: 11.1%), which was mainly due to the increase in sales of asphalt mixing plants, the decrease in provision for impairment of inventories and the absence of impairment of property, plant and equipment. The Group recorded a net profit attributable to owners of the Company of RMB8.2 million compared with a net loss of RMB27.0 million in the last corresponding period. The basic earnings per share is RMB 1.31 cents.
Sales of Asphalt Mixing Plants Segment (91.6% of total revenue)
The Group continued to participate in top-tier highways construction and maintenance projects in the PRC and overseas countries, twenty (2020: thirteen) sales contracts of asphalt mixing plants completed during the period, accounted for approximately 91.6% of the Group's total revenue (2020：86.9%). The asphalt mixing plants were used in major highway construction and maintenance projects such as Anhui Bengbu-Wuhe Expressway (安徽蚌五高速), Hegang-Dalian Expressway (鶴大高速), Dhaka Highway (達卡公路), etc. Revenue from sales of asphalt mixing plants increased by approximately 62.0% to around RMB180 million during the period.
- The gross profit margin of the segment was 33.8%, an increase of 6.8 percentage points over the same period last year, which was mainly due to the increase in sales projects with higher production capacity;
- The average contract value was about RMB 9.0 million, a year-on-year increase of 5.3% over the same period last year；and
- 95% of the revenue contributed from China and 5% from overseas.
Sales of Spare Parts and Components and Modified Equipment Segment (7.9% of revenue)
During the period, the revenue amounted to RMB14.3 million representing a year-on-year decrease of 9.4%. The decrease in revenue was mainly due to the decrease in the number of customers demand fort modification of Conventional Plants. The gross profit margin decreased by 3.9 percentage points during the period was mainly due to more competitive pricing given to the customers in order to attract new customers.
Development of Upstream and Downstream Asphalt Related Business
The Group is committed to the development of asphalt related business along the supply chain with an aim to broaden income sources and raise profits. In order to leverage the synergies of local expertise, the Group has been seeking potential strategic partners to develop the production and sale of asphalt mixtures business.
In July 2018, the Group’s subsidiary Langfang De Feng New Materials Technology Limited (“Langfang De Feng”) and Sichuan Xin De Yuan Trading Limited (“Sichuan Xin De Yuan “) jointly established Sichuan Rui Tong De Long New Materials Technology Limited (“Sichuan RTDL”). The Group expected that with the leverage of local expertise of Sichuan Xin De Yuan, the establishment of Sichuan RTDL would push forward the application of asphalt mixing plant station with local government in Sichuan. However, the progress of development of asphalt mixing plant station remained slow since the joint venture was formed. On 30 May 2021, Langfang De Feng entered into a share transfer agreement with Sichuan Xin De Yuan to transfer 50% of equity interest in Sichuan RTDL to its joint venture partner for a consideration of approximately RMB2.4 million. Upon the completion of the share transfer, Sichuan RTDL will no longer be a joint venture of the Group. The Group’s management considered that the share transfer offers an opportunity for the Group to realise its investment at a profit and can provide funds to cater for other new suitable investment opportunities with more growth potential in the development of production and sales of asphalt mixture plant business.
Partnership with State-owned enterprise LiuGong Wuxi Road Equipment Co., Ltd.* (“LiuGong Road Equipment”) to develop domestic and overseas markets
In May 2021, the Group has entered into an agreement with LiuGong Road Equipment to become the exclusive supplier of asphalt mixing plant for LiuGong Road Equipment. The Group will research and develop, design and manufacture products under the label of “LiuGong”. The Group expects this strategic partnership will further penetrate the mid-end asphalt mixing plant market to win more orders and expand its revenue stream. Furthermore, the collaboration enables LiuGong Road Equipment to enrich and improve its one-stop road construction equipment solution to achieve a win-win situation.
The Group expects that the local demand for asphalt mixing plants in the second half of 2021 shall gradually increase as the PRC government would inject more funds into domestic infrastructure projects to stimulate the local economy. Management also expects the customers shall accelerate the settlements going forward as more road construction projects and funding shall be in place in China. With its established overseas network and high-technology asphalt mixing plants, the Group is prepared to grasp the opportunities of upgrading asphalt mixing plant technology and equipment in countries in South Asia and in the ASEAN region. To utilise the Group’s wide clientele base of over 600 asphalt plants spreading across the PRC and 35 nations overseas, the Group is also exploring business opportunities in developing business upstream into the road construction and maintenance materials equipment and downstream into the asphalt mixture provision. The Group will however manage its business development strategies cautiously due to the relatively volatile international economic and political conditions.
Ms. Choi Kwan Li, Glendy, the Executive Director & Chief Executive Officer of D&G Technology said: “In view of the ongoing US-China trade war and COVID-19, we believe the PRC government will continue adopting policies to stimulate the local economy and increase the fixed asset investment. Besides, in light of growing awareness on environmental protection issues during the asphalt mixture production among the road construction and maintenance companies and the PRC government’s emphasis on reducing pollution from industrial sector, the demand for our recycling and environmentally-friendly products continue to grow in the long run. There will be increasing demand for the recycling asphalt plants as well as the modification services of adding recycling and environmental protection functions to existing plants. The Group will further promote green technology innovation and continue to improve its competitive advantage so as to reinforce its leading position in the market. Looking ahead, the Group is prepared to grasp the business opportunities arising from the “Belt and Road” construction projects and bring substantial returns to our shareholders.”
About D&G Technology Holding Company Limited (Stock Code 1301.HK)
As an advanced equipment manufacturing high and new technology enterprise, D&G Technology specialises in the R&D, design and manufacture of conventional and recycling asphalt mixing plants. Especially focusing on providing the high-end energy-saving and environment-friendly asphalt mixing plants and waste asphalt mixture recycling plants and services. The Group has accumulated a good reputation and established a vast and stable customer base over the years. Our products are distributed in 35 overseas countries and more than 30 domestic provinces, cities and autonomous regions and have played a great role in the construction of highways, high-level roads and urban roads. In recent years, D&G has been actively seeking entrance to the vast mid-end asphalt mixing plant market.