Profit Declines 36% Despite 9.6% Revenue Growth
China XLX Fertiliser (01866.HK) reported a 36.1% year-on-year decrease in net profit to RMB932 million for the fiscal year ending December 31, 2025, a result of significant market headwinds. The profit decline occurred even as total revenue increased by 9.6% to RMB25.35 billion. A supply glut in the domestic coal chemical market pressured selling prices, with the average price for urea falling 10% and compound fertiliser dipping 3%.
However, the headline profit figure masks underlying stability. When excluding non-recurring items, the company's profit actually grew by 1.2% year-on-year, holding steady at RMB932 million. This indicates the core business remained resilient while contending with challenging price dynamics and cost pressures from delayed price transmission to end-users.
Dividend Hiked 23.1% as Debt Structure Improves
In a signal of confidence to investors, the company's board proposed a final dividend of RMB 32 cents per share, a 23.1% increase from the prior year's RMB 26 cents. The move is supported by a significant strengthening of the company's financial position. Management successfully optimized its capital structure by shifting its debt profile heavily toward longer-term obligations.
The ratio of long-term to short-term borrowings improved from 6:4 at the start of the year to 8:2 by year-end. This restructuring, which included replacing RMB9.24 billion in high-interest loans, helped reduce the average borrowing interest rate by 0.5 percentage points and lowered overall finance costs by 3% year-on-year. These actions enhance the company's liquidity and financial stability for future projects.
Sales Volumes Rise on Strategic Expansion
China XLX compensated for lower prices with higher sales volumes across its main product segments. Methanol sales volume jumped 43%, driving a 37% increase in segment revenue to RMB3.67 billion. Compound fertiliser sales volume grew 19%, lifting its revenue by 15% to RMB6.92 billion. Even in the challenged urea market, export expansion pushed sales volume up 3%.
This performance reflects the company's strategy of focusing on cost reduction and market share growth. Progress on its Xinxiang and Zhundong production bases is expected to increase the company’s domestic fertiliser market share by six percentage points upon full operation. Chairman Liu Xingxu anticipates a stable urea market in 2026, with new projects projected to lower production costs by approximately 8%, reinforcing the company's competitive position.
