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Stock Quote HKEx Stock Code: 01205
Chairman's Statement

Dear Shareholders,

First of all, on behalf of the Board, I would like to express my sincere appreciation to my fellow management and all of my colleagues for their faith in the Company, smooth cooperation and relentless dedication under such extraordinarily challenging business environment over the past year. In addition, on behalf of the Group, I would also like to extend my heartfelt gratitude to all our shareholders, customers, suppliers, bankers and business associates for their trust and support throughout these years.

The year 2020 passed in a blink, and we have witnessed the impact brought by the COVID-19 pandemic on the global economy. The lockdown measures implemented worldwide have also affected global economic activities and suppressed market demands, thus led to the decline in the prices of key commodities related to the Group’s major businesses, such as crude oil, coal, aluminum and alumina. During the year, the Group’s revenue decreased 16.8% year-on-year to HK$2,850,058,000, and loss attributable to shareholders was HK$363,848,000. Responding to severe challenges, we actively reduced our investment and management costs as well as refined and tightened our cost control. Through striving for higher efficiency with improved technology and management levels, we tried our best to overcome the adverse effects brought by the macro environment and realized a consolidated operating profit in the crude oil segment. Although the Group’s annual performance has turned from profit to loss compared to last year, we still managed to maintain good cash flow. By optimizing our asset structure and management structure, we further improved the Company’s operational efficiency and risk control capabilities, thus laying the foundation for the Group’s future development.

Assets Disposal and Structure Optimization

During the year, the Group completed the transaction to dispose its 34.39% equity interests in CDH, which brought a gain on disposal of asset of approximately HK$192,040,000 and a cash inflow of approximately HK$1,080,613,000 for the Group. This partially offset the declining financial performance of the Company against the backdrop of economic downturn and tightened market demands, and it also replenished the cash reserve of the Company. The transaction also included clauses to maintain the stability of CDH’s principal businesses and employees, which yielded both good economic benefits and social benefits.

We also sorted out redundant legal entities and corporate layers during the year, and completed the disposals of Gundyer West coal exploration project and auto parts business in Australia. Through the above, we optimized the overall asset structure of the Group, improved operational efficiency and were able to manage risks more effectively.

Increasing Income and Reducing Expenditure

At the beginning of the year, we proactively deployed stress tests in response to the pressure caused by low oil prices and the pandemic, required our subsidiaries to strictly control operating risks and reduce costs. With our clear goals and effective measures, we managed to control our operating costs and cash expenditure. Together with the cash inflow supplemented by the disposal of the equity interests in CDH, the overall liquidity of the Group has been improved in the adverse market environment. By the end of 2020, the Group’s financial position remained stable with sufficient cash flow. The carrying amount of cash balance increased to HK$2,314,285,000 compared with last year while the current ratio increased to 2.9 times, and the ratio of net debt to net total capital dropped to 30.8%. Interest expenses for bank and other borrowings decreased by 46.8% compared with the same period of last year.

Pandemic Prevention and Production Safety Control

As for the pandemic prevention and control, we referred to the successful experience of Mainland China and supervised our subsidiaries to formulate and gradually improve their pandemic prevention and control plans and guidelines depending on their own situations, so as to minimize the impact of the pandemic on production and operation. Facing the outbreak and rapid spread of the pandemic, the management of the Group made careful arrangements, while all employees actively cooperated and worked hard to achieve “zero confirmed cases” at all oilfield operation sites during the year and achieved its preliminary stage success to fight the pandemic.

While taking into account our own production safety, we also tried our best to contribute to the pandemic prevention work at project countries by donating a large amount of anti-pandemic supplies to local communities and medical institutions.

Improve Governance and Increase Efficiency

In order to improve our corporate governance and management efficiency, we enhanced the coordination between the finance department and technical team in the management of existing oil and gas business during the year, which enabled them to play a better role in providing guidance, services and supervision in the production and operating activities.

Considering the “working from home” policy during the pandemic as well as the needs including the improvement in office efficiency, the Group also set up and gradually improved an online office platform and a documents management system, and achieved milestone progress in the construction of an information system.

Moreover, the Group complied with the latest requirement of the Stock Exchange by incorporating “Environmental, Social and Governance” functions into the terms of reference of the Risk Management Committee. The Group also established relevant work groups to conduct effective management and control on the environmental, social and governance issues, striving to become a more socially responsible enterprise.

2021 is the first year of the “14th Five-Year Plan”. We will proactively plan ahead and seize the opportunities to enhance the value of our existing assets. On one hand, we will maintain and improve oilfield reserves by conducting thorough reservoir research as well as launching and applying new technologies, so as to establish a solid foundation for value enhancement of our existing assets. On the other hand, we will continue to strengthen our refined management and achieve success in operation and management with a focus on increasing asset value, while striving to exceed the annual business targets and grasping the opportunities arising from market recovery to improve our operating results.

No matter how complex and volatile the external environment is, we will remain persistent, pragmatic, hardworking and dedicated, and continue to be unremitting in realizing the Company’s new development and creating value for shareholders!


Sun Yufeng
Chairman

Hong Kong, 26 March 2021

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