Fangda Carbon’s semi-annual board management review in 2021

Fangda Carbon (600516)’s 2021 semi-annual board of directors’ management review content is as follows:

XNUMX. Description of the company’s industry and main business during the reporting period

The company’s industry is non-metallic mineral products. The company is mainly engaged in the production and sales of graphite and carbon products, lithium-ion battery anode materials, graphene and downstream products and other new materials. The main products are graphite electrodes, isostatic graphite, lithium ion battery anode materials, graphene masks, etc. Graphite electrodes are mainly used in iron and steel smelting; isostatic graphite is widely used in semiconductor, solar photovoltaic, mold processing, nuclear energy, metallurgy, petrochemical and many other fields. Large working capital investment, long production cycle, large investment in environmental protection costs, rising upstream raw material prices, shortage of high-quality raw materials, technical barriers, product supply capacity, quality stability, after-sales service and other factors have become the characteristics of the carbon industry. The competitive advantages of large-scale carbon companies with stronger strength and high-end product production capacity have become more obvious. From the perspective of industry environmental protection policies, the China Carbon Industry Association has issued the “T/ZGTS001—2019 Carbon Industry Air Pollution Emission Standard” in March 2019, which was officially implemented on September 1, 2019. The release of this standard means that the industry’s environmental protection requirements have become stricter, which will put pressure on the development of the industry. The company took the lead in drafting the above-mentioned “T/ZGTS001—2019 Carbon Industry Air Pollution Emission Standard”. At the same time, the company has invested a lot of money in environmental protection in recent years, making the company’s environmental protection and governance leading the forefront of its domestic counterparts. The national industrial policy is clearly directed to increase the proportion of electric furnace steel. With the increasing energy and environmental constraints, the conditions for the development of electric furnace steelmaking are gradually emerging. It is estimated that by 2030, social scrap steel resources can reach 400 million tons; then electric furnace steelmaking will enter a period of rapid development, and the proportion of electric furnace steel will exceed 20%. Electrodes, especially ultra-high-power graphite electrodes, will also gain further development space.

XNUMX. Discussion and analysis of operating conditions

During the reporting period, supported by policy guidance, foreign epidemics, complex and volatile international situations, and stricter environmental protection, commodity prices increased, and downstream market demand improved, the company’s graphite electrode products increased in volume and price compared with the same period last year, and the operating performance in the first half of the year was significant year-on-year increase. During the reporting period, the company’s total operating income reached RMB 2,364,170,600, a year-on-year increase of 44.57%; the net profit attributable to shareholders of the listed company was RMB 502,113,300, a year-on-year increase of 153.01%. In the first half of 2021, the company insisted on focusing on both epidemic prevention and control and production and operation, with sales as the driving force, flexibly adjusted product structure, in-depth promotion of industry and sector benchmarking and refined management, and promoted the goal of incremental efficiency increase. To achieve the goal, strive to promote the enterprise to achieve higher efficiency, higher quality and more competitive development. Significant changes in the company’s operating conditions during the reporting period, as well as events that have a significant impact on the company’s operating conditions during the reporting period and are expected to have a significant impact in the future

XNUMX. Possible risks

1. Operational risks With the expansion of the company’s business scale and the gradual increase in the volume of import and export trade business, factors such as international trade frictions, repeated epidemics, and slowdown in global economic growth may have an impact on the company’s import and export business and the company’s management model And the marketing operation mechanism puts forward higher requirements. If it cannot be adjusted in time to adapt to the above changes, the company will have certain operating risks. Response measures: guided by customer and market demand, scientifically coordinate production, supply and marketing, conform to the general trend of the “dual cycle” market, vigorously develop the domestic market, rationally regulate the supply of domestic and foreign markets, and maximize the company’s interests. 2. Industry capacity expansion risks. Enterprises in the industry will blindly resume production and expand production at a low level, which may result in overcapacity of some varieties, which will cause product price fluctuations and affect the company’s performance. In the face of industry risks, the company adheres to the quality policy of “improving corporate strength with scientific and technological innovation, and meeting customer needs with first-class products”, actively promotes key scientific research work, and does a good job of combining scientific research with large-scale production. At the same time, we will continue to promote refined management and adjust the product structure in accordance with the principle of optimal resource efficiency and the greatest contribution rate of products per ton to the company’s benefits, and improve the overall operating quality of the company’s production and operation. 3. Exchange rate risk Some of the company’s products are sold to the international market, and exchange rate fluctuations affect the company’s export volume and exchange losses. Response measures: Strengthen the collection and analysis of foreign exchange market information, keep abreast of foreign exchange market dynamics, timely adjust settlement currencies and settlement methods, introduce cross-border RMB settlement services, promote RMB-denominated settlement in some overseas markets, and actively carry out hedging services such as foreign exchange locks Carry out risk exposure management.

XNUMX. Analysis of core competitiveness during the reporting period

In the long-term development process, the company has gradually formed its own core competitiveness, as follows: 1. R&D and innovation advantages. The company is a national high-tech enterprise, a national technological innovation demonstration enterprise, a leading enterprise in the national science and technology innovation base, and a key enterprise in strategic emerging industries in Gansu Province. Based on the research and development and production of carbon products for more than 50 years, it has a national-level enterprise technology center, a post-doctoral research station, Gansu Carbon New Material Engineering (Research) Center, Gansu Xingmao Innovation Base, and cooperates with Tsinghua University, University of Science and Technology Beijing, Lanzhou University , Hunan University, Shanxi Institute of Coal Chemistry of the Chinese Academy of Sciences, Lanzhou University of Technology and other well-known domestic research institutes have strengthened research and development cooperation, and jointly established “Tsinghua University-Fangda Carbon Nuclear Graphene Research Center”, “Lanzhou University-Fangda Carbon Graphene Research Institute”, etc. The R&D platform has formed a research and development system and a diversified industrial system centered on the research and development of cutting-edge new material products, supplemented by the upgrading of traditional products, and supplemented and supported by the research and development of raw materials. It has the conditions for continuous development of new products, rapid industrialization, and transformation and upgrading. 2. World-class production technology level advantage. “Ultra-high-power graphite electrode development” project won the second prize of Gansu Provincial Science and Technology Progress Award, and “Φ700mm ultra-high-power graphite electrode” won the special award of Gansu Province Industrial Excellent New Product. Industrial applications show that the Φ700mm UHP graphite electrode has the same quality as similar products from the world-renowned UHP graphite electrode manufacturer SGL Carbon Company in Germany, UCAR Group Carbon Company in the United States and NCK Carbon Company in Japan. In addition, some products are exported to the United States and other western developed countries and regions, and users have received good feedback, and various technical indicators have reached the international advanced level. my country’s ultra-high power graphite electrode technology has entered the ranks of the world’s first-class level, drove the technological progress and industrial structure upgrade of my country’s carbon industry, improved the competitiveness of my country’s high-end carbon products in the domestic and foreign markets, and helped my country’s metallurgical industries to achieve transformation and upgrading And high-quality development has promoted my country’s transformation and upgrading from a carbon-powered country to a carbon-powered country. 3. Advanced equipment advantages. The company has internationally advanced production equipment for carbon products. Internationally advanced key equipment such as electric kneaders, secondary roasting tunnel kilns, electrode cleaning machines, high-pressure impregnations, and vibration forming machines have been introduced from the United States, Japan, and Germany, especially the fully automatic batching and 40MN vertical equipment imported from Japan. The ramming press equipment is the most advanced large-size electrode production equipment in the world today. It also has domestic advanced internal string graphitization furnace and 20000KVA DC graphitization furnace. A large-scale electrode and joint production line and a nuclear-grade carbon/graphite material production line have been newly built, and the equipment technology level has reached the domestic first-class level and the world’s leading. 4. Advantages of mature quality system. Based on the research and development and production of carbon products for more than 50 years, the company has perfected and continuously improved the management system of research and development, production, quality, equipment, safety, environmental protection, and occupational health suitable for the technological characteristics of carbon products. The company has independent intellectual property rights in terms of core and key technologies, independent ownership and use rights, and has obtained nuclear safety equipment manufacturing license, CNAS laboratory accreditation certificate, ISO9001 quality system, ISO14001 environmental system and OHSAS18001 occupational health and safety management system Certificates, etc., and the overall technological capability has reached the international advanced level. The research and production of blast furnace carbon bricks, carbon/graphite materials for nuclear power, and graphene preparation and application technologies have maintained a leading position in China. The major nuclear power project “Research on Carbon Reactor Internal Components Manufacturing Technology” has passed the formal acceptance of the National Energy Administration, forming a series of Intellectual property rights such as project results and technical secrets are the domestic research and production base of nuclear-related carbon materials. 5. The advantages of a complete product system. The company has a number of carbon production subsidiaries and raw material production and processing companies. The geographical layout is reasonable, and it has realized the industrial structure of resource sharing, centralized research and development, complementary advantages, and overall marketing. According to the equipment status of each subsidiary, standardized production, division of labor and coordination, we can produce various types and specifications of carbon products and special graphite products required by customers at home and abroad. The products are divided into four series, and the high-, middle- and low-end products produced can complement each other in the market. 6. Focus on sustainable development. The company has many years of advantages in the production, operation and management of carbon enterprises. Through continuous innovation in production and operation management, and continuous improvement of new management mechanisms, “refined management” runs through a series of links such as procurement, production, quality, sales, and financial management. Drive the healthy and sustainable development of the enterprise with scientific and technological innovation; achieve environmental protection standards, clean and civilized production; refine the connection between production and sales, pay attention to product quality, and provide excellent product quality and after-sales service market; accelerate the upgrading of traditional products and adopt technological innovation A sustainable development path that is resource-saving and environmentally friendly.