Dear our Valuable Shareholders,
In 2018, while the global economy recorded a mild recovery, the international political andeconomy instability and uncertainty increased. The overall domestic economy of the PRCcontinued to undergo structural restructuring and reform. In respect of the domestic market, thekey business of the Group, EMM sector, continued to undergo restructuring and the environmentalpreservation policies requirements continued to strengthen. On the other hand, with the fastgrowing demand for portable electronics, hybrid and electric vehicles and other energy storageproducts, the market consumption of battery materials grew rapidly. During the year, themanganese business sector recorded a structural change and the keen competition continued,thereby furthering the concentration level.
To cope with the complicated and volatile environment globally and in the PRC, the Group upheldthe development principle while maintaining stability, optimizedresource allocation and productmix, deepened the reform-and-innovation driven development strategy and strengthened itsunderlying quality and efficiency, so as to maintain smooth and stable growth, improve its marketcompetitiveness and value on an ongoing manner, thereby facilitating the healthy and high qualitydevelopment of the Group.
Expanding Income Sources and Reducing Expenditures, LoweringCosts andIncreasing Efficiencies
During the year, the Group continued to adopt the strategy of expanding income sources and costreduction into our various business segments and by gathering experience and deepening reformand innovation, expanded the income sources in a comprehensive manner and strictly implementedcost saving measures, which effectively strengthened the Group’s management base and its overallcompetitiveness. In addition, the Group also continuously strived to its upgrade manufacturingtechniques and knowhow for unit consumption reduction, thereby increasing its efficiency andkept close communication with raw material suppliers, in order to manage the unit productioncosts, maintaining the Group’s market share in the manganese industry and strengthening theGroup’s leading industrial position. In 2018, the production costs of the Group’s major productsremained stable as compared to last year.
Judging the situation and adjusting the strategy
Capturing the growth of the global manganese market, the Group, keeping the developmenttrend of the market in mind, has prudently structured and adjusted its production strategy throughrationally allocating capital and resources with market orientation strategy and flexibly adjustingits operation strategy in accordance with market demands. During the year, the Gabon project ofthe Group increased its production, achieving manganese ore sales of 740,000 tonnes (includingthe sales under subcontracting arrangements). The subcontracting and profit sharing income fromthe Gabon project under the subcontracting arrangement together with the international ore tradingdriven thereby contributed an important portion of income to the Group during the year.
Innovation and Diversified Development
The Group also constantly explored new development opportunities by actively reviewing variousdevelopment areas, so as to expand diversified business development. Due to growing importanceof the battery materials (including new energy products), the Group has prudently enhanced thebattery materials product production and its product mix since 2016 and achieved remarkableresults. During 2018, the revenue of battery materials product recorded a substantial growth andwe have become the leading enterprise in the sector. Moreover, the Group also proactively enteredinto the international ores trading and continued to develop the ores, manganese alloy and relatedraw materials trading, which has obtained good development and generated substantial income tothe Group.
Facing the Market and Capturing Opportunities
The Group adhered to market-oriented policy and cautiously assessed the opportunities andchallenges brought by new situations, closely monitored the market information and trends inorder to capture the full advantage of market changes. The Group also adjusted its production,sales and trading strategies and improved its marketability and optimized the market competitionstrategies on a continuing basis and timely manner, thereby enhancing the Group’s vitality,competitiveness, influence and anti-risk capabilities.
Encountered with the new opportunities and challenges, the management followed the markettrend by capturing opportunities and overcoming challenges, made appropriate strategicdecisions in line with market conditions and development trends and implemented various worktasks properly to achieve high quality development. In June 2018, the Group entered into anagreement with Cinda Asset Management Co., Ltd. to establish a limited partnership in the PRC,which engages in the merger and acquisition of the upstream and downstream enterprises ofthe manganese industry, covering manganese ore resources, manganese products and ferroalloymanufacturing as well as joint production. It successfully controlled 100% equity interestin Huiyuan Manganese which engages in production of EMD. This acquisition significantlystrengthened our production capacity and subcategories of EMD, a niche product and alsoprovided profit contribution in the year 2018 instantly, producing encouraging results duringthe year. In addition, DushanJinmeng, an associate of the Group, is expected to come into fulloperation in 2020, and then it will become a major integrated ferromanganese alloy plant in thePRC.
Looking forward, the Group will continue to expand its income sources by exploring new sourceof income, actively looking for and prudently assess quality investment projects which are fit withits development strategies and further expand the Group’s business scale and asset base.
Sincere Gratitude and Jointly Composing a New Chapter
On behalf of the Board, I would like to take this opportunity to express my gratefulness toDirectors, the management and all staff for their hard work and cooperation. I also hereby delivermy greatest sincere appreciation for the long-term understanding and support of our shareholders,clients and business partners.