Copper price increase boosts, CMOC's Q3 net profit doubled year-on-year, setting a historical high for the same period, while cobalt sales significantly declined leading to revenue shrinkage | Financial Report Insights

Benefiting from the sharp rise in copper and cobalt metal prices, CMOC's Q3 net profit attributable to shareholders surged by 96.4% year-on-year, reaching a historical high for the same period. However, it is important to note that operating revenue declined, mainly due to fluctuations in metal prices and the impact of sales volume of certain products.

CMOC announced its financial report on Friday afternoon.

Financial Performance:

• Q3 operating revenue was 50.713 billion yuan, a year-on-year decrease of 2.36%; revenue for the first three quarters was 145.49 billion yuan, a year-on-year decrease of 5.99%

• Q3 net profit attributable to shareholders was 5.608 billion yuan, a year-on-year surge of 96.40%; net profit for the first three quarters was 14.28 billion yuan, a year-on-year increase of 72.61%

• Operating cash flow was 15.86 billion yuan, a year-on-year decrease of 8.20%, mainly affected by the capital occupied by trade operations

• Weighted average ROE reached 18.65%, an increase of 5.17 percentage points year-on-year

Core Business Progress:

• Copper Business: Production of 543,000 tons (+14.14%), sales of 520,000 tons (+10.56%), gross profit margin of 54.07% (+1.73pct)

• Cobalt Business: Production of 88,000 tons (+3.84%), sales of 51,000 tons (-36.08%), gross profit margin significantly increased by 26.97pct to 63.46%

• Trading Segment: Sales of refined metal products declined by 54.43%, with a gross profit margin of only 0.34%

Strategic Developments:

• The KFM Phase II project has been approved, with an investment of 1.084 billion USD, expected to be put into production in 2027, adding 100,000 tons/year of copper production capacity

• The TFM mine has become the first project in Africa to obtain copper mark certification and be fully assessed as "fully compliant"

• Launched a restricted stock incentive plan for H-shares, intending to grant no more than 393 million shares

Behind the Profit Explosion: Copper Takes the Lead, Cobalt Business Concerns Emerge

The explosive growth of CMOC's Q3 performance is essentially a dual resonance of rising commodity prices and production growth.

The company clearly stated that the core driver of the 64.37% year-on-year increase in total profit is "the year-on-year rise in the prices of main products, coupled with the year-on-year growth in copper product production and sales."

From the product structure perspective, the copper business contributed the largest increment.

In the first three quarters, revenue from the copper segment was 38.62 billion yuan, a year-on-year increase of 25.67%, with production and sales increasing by 14.14% and 10.56%, respectively. More notably, the gross profit margin of the copper business reached 54.07%, increasing by 1.73 percentage points against the backdrop of rising prices, demonstrating the company's prowess in cost control.

The company stated that the board of directors approved the KFM Phase II project investment of 1.084 billion USD, planned to be put into production in 2027, with an average annual increase of 100,000 tons of copper metal production after reaching full capacity. Based on current copper prices, this translates to an annual revenue increment of approximately 8-10 billion yuan.

The cobalt business, however, has shown more dramatic changes. Despite a year-on-year revenue decline of 7.79%, the gross profit margin soared from 36.49% to 63.46%, a nearly 27 percentage point surge. Given the slowdown in demand for new energy vehicles, inventory pressure is a concern worth noting Seeking stability amid shrinking trade business. In the first three quarters, the sales volume of refined metal products decreased by 54.43% year-on-year, and revenue fell by 21.54% to 72.17 billion yuan, with a gross profit margin of only 0.34%. More troubling is that the trade business has consumed a large amount of cash flow—operating cash flow decreased by 8.20% year-on-year, which the company clearly attributes to "the net outflow of operating activities in the base metal trading business increased year-on-year."

Traditional businesses such as molybdenum and tungsten remained stable, with molybdenum production at 10,600 tons, a slight year-on-year decrease of 6.38%, and sales volume remained basically flat. The gross profit margins of tungsten, niobium, and phosphate fertilizer segments have all improved to varying degrees, reflecting an enhancement in the overall profitability of the company's mining and processing operations.

Other Hidden Concerns Behind the Data

Despite the impressive performance, several details warrant caution:

1. Fair value change loss of 2.39 billion yuan, compared to a loss of 3.59 billion yuan in the same period last year. The volatility of derivatives and financial assets continues to erode profits.

2. Short-term borrowings surged from 13.96 billion yuan to 21.73 billion yuan, an increase of 55.6%, while long-term borrowings decreased from 9.33 billion yuan to 2.55 billion yuan. The short-term nature of the debt structure may increase refinancing pressure.

3. Taxes payable of 7.21 billion yuan, a year-on-year increase of 30.5%, with a growth rate far exceeding revenue and profit, indicating rising tax burden pressure.

4. Other non-current liabilities of 18.15 billion yuan, although slightly decreased, remain substantial, primarily due to deferred liabilities for the TFM project, which pose a "time bomb" for future cash flow.

Overall, CMOC demonstrates strong profit elasticity driven by the dual forces of copper price benefits and capacity expansion, but underlying cash flow pressures, weak cobalt demand, and fluctuations in futures business pose potential threats