coal industry report q3/2019 - virac...2.4 five force and swot analysis 61 2.5 coal industry...

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COAL INDUSTRY REPORT Q3/2019

Content

Abbreviation 3

Executive Summary 4

1. Business Environment 6

1.1 Macroeconomic context 7

1.2 Legal Framework 9

1.3 Trade Agreements 12

2. World Coal Industry 14

2.1.1 Production – Consumption 14

2.1.2 Import – Export 22

2.1.3 Coal Price Movements 25

2.1.4 Current situation of key nations in the industry 26

3. Vietnam Coal Industry 34

2.2.1 Formation and development process 35

2.2.2 Definition and classification 36

2.2.3 Industrial value chain 39

2

2.2.4 Industrial scale and characteristics 40

2.2.5 Current mining and producing situation 42

2.2.6 Coal mining methods 46

2.2.7 Consumption 49

2.2.8 Import 51

2.2.9 Export 54

2.2.10 Inventory 55

2.2.11 Price Movements 56

2.2.12 Distribution and transportation 57

2.3 Risk Analysis 59

2.4 Five force and SWOT Analysis 61

2.5 Coal Industry Planning 65

3. Enterprises Analysis 70

3.1 Enterprises Introduction 71

3.2 Financial Analysis 73

4 Financial Statement Appendix 83

Abbreviation

MNRE Ministry of Natural Resources and Environment

MIT Ministry of Industry and Trade

CNCA China National Coal Association

AE Administration Expenses

SE Selling Expense

CPI Consumer Price Index

LLC Limited Liability Company

JSC Joint Stock Company

CI Commercial Investment

EIA US Energy Information Administration

EVN Vietnam Electricity

GDP Gross Domestic Product

IEA International Energy Agency

PAT Profit after tax

CB Central Bank

PVN Vietnam Oil and Gas Corporation

GDVC General Department of Vietnam Customs

IS Industry Standard

FS Financial Statement

GSO General Statistics Office of Vietnam

VS Vietnamese Standard

TKV Vietnam National Coal – Mineral Industries Group

VICEM Vietnam Cement Industry Corporation

VIRAC VIRAC Joint Stock Company

3

4

WORLD

❖ Reserves: According to a report by global energy company BP, by

the end of 2018, worldwide coal reserves are about xxx billion tons,

❖ Supply: In 2018, coal production reached xxx million tons; xxx%

increase over the same period;

❖ Consumption: coal consumption recovered, reaching xxx million

tons in 2018

❖ Trade: In 2017 global coal exports increased by xxx% over the same

period in 2016, reaching xxx million tons.

❖ Coal price:

VIETNAM

❖ Supply: In the first half of 2019, TKV exploited clean coal reaching

xxx million tons, up by xxx% over the same period.

❖ Consumption: In the first half of 2019, domestic coal consumption

reached xxx million tons, down xxx% over the same period.

Executive Summary

5

❖ Trade:

• Import: In the first half 2019, Vietnam imported xxx million tons of

coal, increased by xxx% over the same period, the import turnover

of coal reached xxx million USD, increased by xxx% over the same

period.

The average price of imported coal in the first 6 months of 2019

reached xxx USD/ton (down xxx% over the same period).

• Export: In the first 6 months of 2019, coal output and export turn to

xxx million tons worth xxx billion USD,

❖ Inventory: Inventory of the first 6 months of 2019 decreased to only

xxx million tons, a deep decrease compared to the end of 2018.

Forecast:

❖ World:

❖ Vietnam:

Enterprises:

• The coal industry enterprises in 2018 had many positive changes, the

average growth rate of industry reached xxx%.

• Most coal industry enterprises have better financial indicators than

the same period,

Executive Summary

1. BUSINESS ENVIRONMENT

7

Sources: VIRAC, GSO

Source: VIRAC, GSO

%

CNY/VND Exchange rate, 1/2016 – 6/2019

Nguồn: VIRAC, SBV

• The gross domestic product (GDP) in the second quarter of 2019 is

estimated to increase by xxx% over the same period last year,

• Since the beginning of 2019, a number of mining products face difficulties

in production, selling prices fluctuate constantly. The structure of the

mining industry's contribution to GDP decreased to xxx%.

• In the first 6 months of 2019, CNY continued to devalue with USD

while VND has stabilized, making VND rise against CNY.

1. Business Environment

1.1 Macroeconomic Context

Quaterly GDP Growth rate, 2016-2019

Mining industry contribution to GDP structure,

2013 – H1/2019

8

Electricity prices in Vietnam are quite low compared to other countries in

the Asia-Pacific region.

The average electricity retail price in 2019 applied from March 20, 2019 is

adjusted to the new price of VND xxx/kWh.

Energy demand of Vietnam has increased rapidly in 15 years since 2001

(average increase of xxx%/year) and is expected to continue to rise quite

high in the next 15 years.

By 2030, when Vietnam reaches xxx billion consumption, only equal to the

world average in 2016.

Sources: VIRAC, Worldbank

Sources: VIRAC, MIT

Electricity price per capita, 7/2007 - 3/2019

VND/ kWh


1.1 Macroeconomic Context

Vietnam electricity consumption per capita, 2000 – 2017ekWh/capita

9

Decision No. 2006/QD-TTg of the Prime Minister dated 12/12/2017 approving the Project on restructuring Vietnam Coal and Mineral Industry in the

period of 2017-2020. Specifically:

• According to the arrangement plan, 16 units will maintain the organization and operation mechanism and be in the structure of Parent Company - TKV;

8 units implement merger, consolidation, dissolution, reorganization and reorganization.

• Regarding the charter capital ratio of TKV, the project specifies as follows :

Decision No. 1265/QD-TTg dated August 24th, 2017 of the Prime Minister adjusting and supplementing a number of articles in Decision No. 60/QD-TTg

on the planning on development of Vietnam's coal industry till 2020, with consider prospects to 2030.

• According to the adjustment, by 2020, the coal industry will invest in building new coal screening plants as follow:

• djusting the coordinates of the closed boundary some investment projects to explore coal resources such as:

• Adjusting the list of some Vang Danh mining projects; Nam Mau mine; Suoi Lai mine; Coc Sau mine; Deo Nai mine; Lo Tri mine; Mong Duong mine.

•


1.2 Legal Framwork

10

• Ministry of Industry and Trade issued Circular No. 13/2016/TT-BCT dated July 11th, 2016 on regulations on drift coal management, including activities

of collecting, buying, selling drift coal and volume, quality and price. purchasing driftwood.

• Decree 12/2016/NĐ-CP dated 19/02/2016 of the Government on environmental protection fees for mineral exploitation.

No. Group, type of resource Tax rate(%)

• Resolution No. 1084/2015/UBTVQH13 dated December 10th, 2015 of the Standing Committee of the National Assembly on the Table of natural

resource tax rates effective from July 1st, 2016.

Sources: VIRAC, MNRE


1.2 Legal Framwork

Natural resource tax rate applied Dec 10th 2015

11

• The Prime Minister issued Directive 21/CT-TTg dated August 26, 2015, requesting ministries, branches, localities, agencies and units to strengthen the

state management of production activities. export and trading coal.

• Decree No. 203/2013/ND-CP of the Government regulating the calculation method, the fee level for granting mineral mining rights starts to take effect

from January 20, 2014.

• Ministry of Industry and Trade issued regulations on list, coal quality standards and coal export conditions in Circular No. 15/2013/TT-BCT dated

01/2013.

Product Code Description Tax rate (%)

Sources: VIRAC, MIT


1.2 Legal Framwork

12

1995 1998 2000 2002

2007

2008 2009 2011 2015 20172006 2018 2019


1.3 Trade Agreements

Integration process of Vietnam from 1995 until now

By the end of the first quarter of 2019, Vietnam had signed, enforced, and was negotiating a total of 17 free trade agreements (FTAs). Joining

international trade agreements provides opportunities and challenges for domestic businesses.

13

The ASEAN economic community (AEC): completely cuts import duties on goods from the community to 0% including coal.

❖ Opportunities:

❖ Challenges:

ASEAN Trade in Goods Agreement (ATIGA)

Vietnam and the Eurasian Economic Union Free Trade Agreement

The Trans-Pacific Partnership Agreement (TPP) and TPP-11 after the US withdrawal, was renamed the Comprehensive Partnership and Trans-Pacific

Partnership (CPTPP) signed in March 2018 and expected to take effect from the beginning of 2019.

❖ Opportunities::

❖ Challenges:


1.3 Trade Agreements

2. WORLD COAL INDUSTRY

15

World Coal Reserves

• According to a report by global energy company BP, by the end of

2018, worldwide coal reserves are about xxx billion tons.

Million ton

World Coal Reserves, 2018

Sources: VIRAC, Statista

Sources: VIRAC, BP statistical review

World coal reserves structure by types, 2018

2. Industry Overview

2.1 World Coal Industry – 2.1.1 Production – Consumption

16

• The period 2016 – 2018 had witnessed the recovery of the coal industry

Million ton

Sources: VIRAC, BP Statistical Review

World Coal Production, 2011-2018



17

❖ Coal production is not uniform across regions: Asia is the region

with the largest coal production in the world,

❖ The Middle East is the world's smallest coal producer

Million ton

❖ In 2018, the top 10 largest coal-producing countries in the world

hardly changed rankings.

❖ Vietnam ranked xxx in the list of the world's largest coal producing

countries with the proportion of xxx% and production volume

reaching xxx million tons in 2018, down by xxx% compared to 2017.

Sources: VIRAC, BP Statistical review


Top 10 largest coal producing countries, 2018

Coal production structure by regions, 2018



18

• The structure of coal production by product in 2017 did not change much

compared to 2016. In 2017, it is estimated that up to xxx% of coal exploited is

thermal coal

• In 2017, thermal coal production increased again with xxx%, reaching xxx million

tons after 3 consecutive years of decline.

• World coke coal production decreased slightly during the period 2014-2017 but

with a smaller reduction.

• World production of lignite coal in 2017 is estimated at xxx million tons,

increasing again with xxx% compared to 2016

Sources: VIRAC, IEA

Million ton

Coal production structure by products, 2017e

Sources: VIRAC, IEA

Coal production by products, 2014 – 2017e



19

❖ In the 2013-2016 period, witnessed a rapid decline in global coal consumption, mainly due to the effects of tightening production.

❖ In the period 2016-2018, coal consumption recovered, reaching xxx million tons in 2018; contributing the most to growth including China and India.

Million ton

Sources: VIRAC, Enerdata

Coal demand changes by regions, 2010 -2018World coal consumption, 2011 – 2018

Sources: VIRAC, Enerdata



20

Million ton

Sources: VIRAC, IEA

❖ Top 3 countries in coal consumption volume in 2018 remained

unchanged from 2017.

❖ The highest output growth over the previous year was Turkey;

Sources: VIRAC, EnerdataCoal consumption by sectors, 2012 – 2040f



Top 10 largest coal consuming countries by volume, 2018

21

In 2017, the IEA estimates that xxx% of global coal consumption is steam

coal, xxx% is coking coal and xxx% is lignite coal consumption.

Steam coal consumption

Coking coal consumption

Sources: VIRAC, IEALignite coal consumption

Coal consumption structure by products, năm 2017



22

In 2017 global coal exports increased by xxx% over the same period in

2016, reaching xxx million tons.

Sources: VIRAC, IEA

World coal export, 2017

World coal trading 2015-2017

Sources: VIRAC, IEA

Million ton


2.1 World Coal Industry – 2.1.2 Import – Export

23

Sources: VIRAC, IEA

Billion USD Million ton

Sources: VIRAC, IEA



Top largest coal exporting countries by value, 2017 Top largest coal exporting countries by volume, 2017

24

Sources: VIRAC, IEA

Sources: VIRAC, IEA



Coal importing structure by countries 2017

Coal exporting structure by countries, 2017

• Regarding coal imports, China is the largest importer of coal with

xxx million tons in 2017, an increase of xxx% compared to 2016,

accounting for xxx% of coal imports worldwide.

• Coke export in 2017 increased by xxx%, reaching xxx million tons.

25

USD/ton

Sources: VIRAC, Indexmundi

Since July 2018, coal prices have started to decline sharply. At the time of October and November 2018, coal prices reached xxx USD/ton; reduced to

xxx USD/ton in January 2019 and as of June 2019 coal price dropped deeply to xxx USD/ton. Reason:


2.1 World Coal Industry – 2.1.3 Coal Price Movements

Thermal Coal price movements in 10/2012 – 6M/2019

26

Sources: VIRAC, NBS of People’s Republic of China

• hina is a super coal importer, coal import is always much higher than

export. In 2018, over the same period, coal imports into China

increased by about xxx% but limited exports, export volumes fell by

xxx%.

Million ton

Million ton

Sources: VIRAC, BP Statistical Review, Enerdata


2.1 World Coal Industry – 2.1.4 Current situation of key nations in the industry

China

• China is both the producer and the largest coal consumer in the world.

Coal production and Consumption in China, 2011 – 2018

Coal Import-Export, 2011 - 2018

27

Sources: VIRAC, EIA

Sources: VIRAC, EIA

Million ton

Million ton



Coal consumption by industries, 2015 – Q1/2019

Coal production and consumption in US, 2011 – 2018US

• The US is the second largest coal production market but the

consumption is only the 3rd in the world.

28

Sources: VIRAC, EIA

Oversupply is the cause of America's trade surplus,

❖ Regarding exports, in the first 3 months of 2019, Europe and Asia are the

two main coal export markets of the US,

❖ In terms of imports, in the first 3 months of 2019, coal import

increased by xxx% over the same period in 2018, reaching xxx million

tons.

Million ton

Sources: VIRAC, EIA

Sources: VIRAC, EIA

Million ton Million ton



US coal import - export, 2011 – Q1/2019

US Coal Export by region in Q1/2019 US Coal Import by region in Q1/2019

29

Sources: VIRAC, Ministry of coal, WEB

India

• India is the xxx largest coal producer in the world.

• In 2018, India's estimated coal reserves reached xxx billion tons.

Sources: VIRAC, Ministry of Coal, WEC

Million ton

Coal consumption by sectors 2018-19*



Coal production and consumption in India in 2013 -2019

30

Million ton

• While India's coal exports tend to decrease and are insignificant,

Indian coal imports also began to rise again from 2016-17. In 2018-

2019, India's imports increased xxx% set xxx million tons, of which

imported coke increased xxx% to xxx million tons.

Billion ton

• Abundant coal reserves are an advantage for India as it is one of the

largest 'coal mines' in the world.

• Mainly producing coal in this country is concentrated in the East

India Coal Import 2013 -2019*

India Coal Reserves 2013 – 2018





31

Sources: VIRAC, BP Statistical ReviewMillion TOE

Japan

• Japan is in the top 10 most coal consuming countries in the world in

2018.

Million TOE

Sources : VIRAC, BP Statistical Review

Japan Coal Production, 2008-2018

Japan Coal Consumption, 2008-2018



32

• Coal import trend has gradually decreased over the years. In 2018, coal

import volume reached xxx million tons, down by xxx% compared to 2017.

• The Japanese coal import market is mainly from Australia, accounting

for xxx% of 2016 import turnover

•

Sources: VIRAC, UN Comtrade Sources: VIRAC, UN Comtrade

Thousand ton

Sources: VIRAC, UN Comtrade

Japan coal importing market structure, 2018Japan coal exporting market structure, 2018

Nhập khẩu than Nhật Bản, 2010 -2018



Autralian coke exporting market structure by value, 2017-2018

33

Australia

• Australia is the world's largest coal exporter.

• Australia's R/P ratio (reserves/production) is xxx, with the remaining

coal reserves accounting for xxx% of global reserves (according to BP

Statistical Review), Australia will still be a major source of coal during the

next time.

Sources: VIRAC, Australian department of industry, innovation and science


Million TOE

Australia coal production and consumption, 2008-2018

Sources: VIRAC, Australian department of industry, innovation and science



Autralian coke importing market structure by value, 2017-2018

2. THỊ TRƯỜNG THẾ GIỚI

3. VIETNAM COAL INDUSTRY

35

• Vietnam's coal industry has been born and undergone development for more than 120 years.


2.2 Vietnam Coal Industry– 2.2.1 Formation and development process

36

Than ở Việt Nam có 5 loại chính gồm: than anthracite, than mỡ, than bùn, than ngọn lửa dài và than nâu.

• Anthracite coal:

• Fat coal:

• Peat coal:


2.2 Vietnam Coal Industry– 2.2.2 Definition and classification

37

• Long-flame coal:

• Lignite coal:


2.2 Vietnam Coal Industry– 2.2.2 Definition and classification

38

• Coal mining is a capital intensive industry.

• Input:

• Exploitation:

• Transportation:

• Consumption:


2.2 Vietnam Coal Industry– 2.2.3 Industrial value chain

Coal Mining Industry value chain

39

Sources: VIRAC, GSO

Sources: VIRAC, GSO

Million VND

Labor


2.2 Vietnam Coal Industry– 2.2.4 Industrial scale and characteristics

Vietnam Coal Industry Characteristics

• Vietnam's coal industry is fragmented, complicated geological conditions.

Despite the advanced technology, the conditions for application and technology

deployment are limited by scale. By the end of 2017, there are about xxx enterprises

operating in the coal industry, of which 3 leading companies include: Vinacomin,

Vietmindo and Northeast Corporation.

• Currently, the supply of coal nationwide is mainly undertaken by TKV.

Number of enterprises and labor in the coal industry,

2010 - 2017

Coal Industry Revenue and Profit, 2010 - 2017

40

• Currently, technology of exploiting and processing at coal mines is

backward and infrastructure is poor

Sources: VIRAC,GSO

• Over the past years, opencast coal production still plays a key role and accounts for about xxx% of the industry's total coal production.

• Labor in the coal industry is currently very crowded, but mainly as unskilled workers, working in a heavy and hazardous environment, requiring good health and

mostly men. The total number of workers in the coal industry in 2017 is more than xxx thousand people, an increase of xxx% over the same period in

2016.

Billion VND


2.2 Vietnam Coal Industry– 2.2.4 Industrial scale and characteristics

Total investment capital and fixed assets of coal industry, 2010 - 2017

41

According to the report, the estimated total reserves and coal resources

as of December 31, 2016, about xxx billion tons, include about xxx

billion reserves and xxx billion tons of resources, including xxx billion

tons of peat.

Vietnamese coal mining issues:

• Vietnam's coal reserves are becoming less and less.

• The level of exploitation is getting harder and harder.

• Labor productivity is lower than many countries in the region.

Thousand ton

Sources: VIRAC, MIT


2.2 Vietnam Coal Industry– 2.2.5 Current mining and producing situation

Coal reserves and resources by types, 2016

42

2018 is a golden year of coal industry in production and business

activities,

In the first 6 months of 2019, TKV exploited clean coal reaching xxx

million tons, up by xxx% over the same period.

Sources: VIRAC, GSO, TKV

Million ton



Clean coal production in 2010-H1/2019

43

The causes affecting the cost and production and business situation of the

coal industry over the years:

• Part of coal reserves has favorable exploitation conditions, low

production costs have been exhausted,

• The increasing tax policy, which accounts for xxx% of coal price, is

one of the factors pushing up the price of coal in recent years.

Sources: VIRAC, TKV

Thousand VND/ton

Taxes related to coal Payable tax

rates

Average cost

(VND/ton)

Sources: VIRAC synthesized



Charges for domestic coal production

Coal Production Cost, 2001 – 2030F

44

In detail:

✓ According to statistics of countries in the region, Vietnam is a country with a high royalty rate bracket in the world.

✓ In addition to natural resources tax, the coal industry enterprise has to pay the mining right for coal which is xxx%;

✓ Environmental protection fee increases from 6,000 to 10,000 VND/ton of raw coal (Decree74/2011/NĐ-CP dated 25/8/2011).

✓ For export coal:



45

• Advantages of open-cast mining method:

• Weaknesses:


2.2 Vietnam Coal Industry– 2.2.6 Coal mining methods

Process of open pit coal mining

46

Mining underground

• Due to being exhausted coal resources in opencast mines, new construction mines will be underground mines.

• The process of pit mining technology is a collection of many working steps,

• Geological conditions in Vietnam's coal regions are mainly hilly and mountainous, suitable for open-cast mining.

• The application of advanced science and technology into underground mining still faces many difficulties due to complicated geological conditions,

enterprises are not active in spare parts, materials, specialized equipment and depend on imports,...



47

• Factors that inhibit mechanization in coal mining in Vietnam



48

❖ n the first 6 months of 2019, domestic coal consumption reached

xxx million tons, down xxx% over the same period.

Coal consumption forecast:

Vietnam's coal demand is expected to increase by xxx million tons in 2020;

xxx million tons in 2025 and xxx million tons in 2030.

Sources: VIRAC, BCT, TKV

Sources: VIRAC, GSO

Million ton


2.2 Vietnam Coal Industry– 2.2.7 Consumption

Coal consuming structure, 2017

Domestic coal consumption, H1/2019

49

• In the first 6 months of 2019, TKV revenue reached xxx billion dong, gaining xxx% of the plan, increasing xxx% compared to the same period in 2018. In which,

coal revenue reached xxx billion dong, gaining xxx% of the year plan, increasing xxx% compared with the same period in 2018. Profit is estimated at xxx billion,

with xxx% of the year plan..

The production and business efficiency of TKV has improved markedly in 2019 due to some main reasons :

• The policy mechanism is thought to have changed in many ways in favor of the coal industry.

• TKV has had many operating solutions, removing difficulties and making efforts to implement business and production plans,

Sources: VIRAC, TKV

Billion VND

TKV business results, 2013 – H1/2019


2.2 Vietnam Coal Industry– 2.2.7 Consumption

50

❖ In the first 6 months of 2019, Vietnam imported xxx million tons of coal

increased by xxx% over the same period, the import turnover of coal

reached xxx million USD, increased by xxx% over the same period.

Million USD

Coal import volume and value, 2013 – H1/2019

Sources: VIRAC, GDVC

Thousand ton


Top largest coal importing countries by volume, H1/2019

Rank Country Volume Market

share

Change over

H1/2018


2.2 Vietnam Coal Industry– 2.2.8 Import

51

❖ The price of Chinese coal exported to Vietnam is quite high:

❖ Vấn đề của giá than nhập khẩu:


Coal import prices by countries, 6T/2019

USD/ton

❖ Causes of coal price differentiation:



52

Currently, along with TKV, there are quite a number of commercial enterprise clues allowed to import coal. In particular, there are two leading coal mining

enterprises in Vietnam are Northeast Corporation and TKV. Hai doanh nghiệp nhập khẩu lớn nhất trong 6 tháng năm 2019 là FORMOSA Hà Tĩnh chiếm xxx%

và Tổng công ty Phát Điện 1 chiếm xxx%.

Sources: VIRAC, TCHQ

Top 10 coal import enterprises, H1/2019e Top 10 coal exporter to Vietnam, H1/2018e

Sources: VIRAC, TCHQ



53


Million ton

Coal export volume and turnover, 2011 – H1/2019

Billion USD

❖ In the first 6 months of 2019, coal output and turnover reached xxx million tons, worth xxx billion USD, in turn reduced xxx% and xxx% over the same

period.

• n many years ago, the main coal export market of Vietnam was China, however from the beginning of 2017, coal export to China is very low, and instead

are markets such as Laos, Taiwan, and Thailand. Lan due to the impact of the nation's application of regulations on quality barriers to imported coal.

Vietnam coal exporting structure by volume, H1/2019

Rank Country Volume Market

share

Change over

H1/2018

Souces: VIRAC, GDVC


2.2 Vietnam Coal Industry– 2.2.9 Export

54

Inventory of the first 6 months of 2019 decreased to only xxx million tons, a deep decrease compared to the end of 2018. Although production

increased, the demand for coal increased at a high rate, reducing inventory significantly.

• Domestic coal prices are narrowed compared to import prices

• Promoting coal export :

Million ton

Souces: VIRAC, GSO

Coal Inventory, 2010 – H1/2019


2.2 Vietnam Coal Industry– 2.2.10 Inventory

55

Date Price increasing rate

• The increase in coal selling prices is due in part to high taxes and fees, namely: high taxes,

accounting for about xxx%,

Adjust coal selling price for electricity industry

Coal Type Unit Price

Coal selling price for electricity production

(Hon Gai-Cam Pha coal calculated at

01/04/2019)


2.2 Vietnam Coal Industry– 2.2.11 Price Movements

Sources: VIRAC, TKV, EVN

Sources: VIRAC, TKV, EVN

56

Coal selling price for retail households

Coal Type

Current export

price

(USD/ton)

Current import

price (USD/ton)

Current selling

price (VND

thousand/ton)

Estimated

price

(thousand

VND/ton)

Coal typeCurrent export

price (USD/ton)

Current import

price (USD/ton)

Current selling

price (VND

thousand/ton)

Estimated price

(thousand

VND/ton)

Price of coal for cement, fertilizer and paper


2.2 Vietnam Coal Industry– 2.2.11 Price Movements

Sources: VIRAC, TKV

Sources: VIRAC, TKV

57

• Currently, the coal industry is using the main modes of transport including: railway, waterway and road transport with the main means of trucks,

trains and barges.

• From 1/1/2017, Quang Ninh officially prohibits the transportation of coal by road, moving to transport by waterway.

• Currently, the Coal and Mineral Group is still monopolizing in transporting coal to consumers through two forms: delivery at loading port (upstream)

and at the unloading port or buyer's warehouse (end of source).


2.2 Vietnam Coal Industry– 2.2.12 Distribution and transportation

58

❖ Risks during exploitation

❖ Health-related risks

• Coal is a dangerous energy source on the planet; Coal burning process releases a large amount of pollutants including particulate sulfur dioxide (SO2),

nitrous oxide (NOx), carbon dioxide (CO₂), mercury and arsenic.

❖ Labor risks

• As a kind of hard, toxic, dangerous labor, the potential coal industry poses no danger to workers' health.

• The recruitment of kiln workers is considered a key issue, ensuring the completion of coal production targets.

2. Tổng quan ngành

2.3. Phân tích rủi ro

59

❖ Environmental risks

❖ Weather and climate risks

❖ Substitute Risk

❖ Policy risks


2.3. Risk Analysis

60

SWOT Analysis

1. Strengths

2. Weaknesses

3. Opportunities


2.4. Five force and SWOT Analysis

61

4. Challenges


2.4. Five force and SWOT Analysis

62

On August 24, 2017, the Prime Minister issued Decision No. 60 / QD-TTg (Planning 60) on the coal industry development plan until 2020 considering the prospect

of 2030. Accordingly, in time to the coal industry will reduce both capital demand and output.

Adjustments include:

Regarding exploration orientation,

Regarding coal minning,

Regarding coal loss,

Regarding screening and processing coal,

Regarding environment protection,

Regarding coal market,


2.5 Coal Industry Planning – Planning

63

No. Coal Demand 2020 2025 2030

Regarding supply and demand balance :

Regarding investment demand:

According to industry experts, the current coal industry planning is impractical and low feasible, due to :


2.5 Coal Industry Planning – Planning

Forecast of coal consumption demand

64

Million ton

Sources: VIRAC, BMI

USD/tonMillion tonUSD/ton

Sources: VIRAC, BMI


2.5 Coal Industry Planning – Forecast the world coal industry

World coal Forecast

World thermal coal Forecast, 2011-2022f World Coke Forecast, 2011-2022f

Thermal Coal Forecast:

65

Coke Forecast:


2.5 Coal Industry Planning – Forecast the world coal industry

66

Million ton

Source: VIRAC

The domestic market is also seeing positive changes, a series of thermal power

projects have been completed and put into operation, promising to be the "hot

spots" of coal consumption, bringing in great revenue.

It is estimated that production output, exploitation decrease by an

average of xxx%/year and import volume will increase with the average growth rate

of xxx%/year in the period of 2016-2020.


2.5 Coal Industry Planning – Forecast domestic coal Industry

Production and Import Forecast, 2010 – 2020f

The forecast of Vietnam's future coal industry may be through a summary scenario as follows:

3. ENTERPRISE ANALYSIS

68

Enterprises LogoTotal asset

(billion VND)

Mine reserves

(million ton)

Revenue

(billion VND)General Information

3. Enterprises Analysis

3.1. Enterprises Introduction

69

Enterprises LogoTotal asset

(billion VND)

Mine reserves

(million ton)

Revenue

(billion VND)General Information


3.1. Enterprises Introduction

70

Billion VND

Sources: VIRAC, FS of enterprises

Coal enterprises in 2018 had many positive changes, the industry average growth rate reached xxx%. Most businesses have high revenue growth rates.

2018 is considered a "golden" year of the coal industry in production and business activities, overcoming difficulties of many years before coal piles up

in mountains, workers have little work to take turns. The expected higher coal output, consumption volume and average selling price are the reasons

contributing to the growth of the coal industry.


3.2. Financial Analysis

Net revenue and revenue growth 2017 - 2018

71




Gross profit margin, 2017 - 2018

Enterprises in the group have a low gross profit margin because the output is entirely dependent on the parent company, TKV, while the cost of

exploitation is increasing.

72




Selling expenses/net revenue of coal industry enterprises in 2017-2018

The businesses in the group all have very low selling costs, the industry average is only about xxx% in 2018.

73




Enterprise management cost/net revenue of coal industry enterprises 2017-2018

• In contrast to the cost of sales, the enterprises in the group have a higher level of management expenses, the ratio of general and administrative expenses

per industry average reaches xxx% in 2018, a sharp decrease. compared to 2017 thanks to good revenue growth.

74




Financial expenses/net revenue of coal industry enterprises 2017-2018

75

Billion VND

• Due to the characteristics of coal mining activities, most of the enterprises in the group have asset structure leaning on long-term assets, mainly machinery and

equipment for mining activities.




Asset structure and total assets turnover of coal enterprises, 2017

76

• Currently, most of opencast mining enterprises tend to shift to investment to prepare for underground mining.

• THT is the business with the highest debt ratio, up to xxx times the debt to total asset ratio and xxx times the debt to equity ratio,

Billion VND




Debt structure of coal industry enterprises, 2018

77

In 2018, along with the growth of the coal industry, coal industry inventories

decreased significantly, the average number of days of inventory was about

xxx days, a sharp decrease compared to the xxx days of 2017.

Day Day




Inventory turnover, 2017-2018 Receivables turnover, 2017-2018

78




Solvency coefficient, 2018

79

• In 2018, the average performance indicators of coal industry were better

than the previous year, ROS achieved xxx%, ROA and ROE were at xxx

and xxx, respectively. In general, performance indicators of this year are

better than the previous year.

Billion VND





EAT and EAT/Net revenue, 2018

Operational efficiency, 2018

80

4 Financial Statement Appendix

CONTENT

81

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS

1 Cash and cash equivalents

2 Short-term financial investments

3 Short-term receivable

Receivables of customers

5 Inventories

II NON-CURRENT ASSETS

1 Other long-term receivables

2 Fixed assets

3 Tangible fixed assets

Intangible fixed assets

5 Commercial advantage

III TOTAL ASSETS

I LIABILITIES

1 Current liabilities

Current borrowings and liabilities

Receivables of sellers

Taxes and other payables to the State budget

2 Non-current liabilities

II EQUITY

III TOTAL CAPITAL RESOURCES

INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue

2 Cost of goods sold

3 Gross profit

4 Revenue from financial activities

5 Financial expenses

Loan interest expenses

6 Cost of sales

7 General and administrative expenses

8 Net profit from business activities

9 Before-tax profit

10 Current income tax

11 Deferred income tax

12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018

1 Cash flow from operating activities

Net cash flow from operations

2 Cash flow from investing activities

Net cash flow from investing activities

3 Cash flow from financing activities

Net cash flow from financing activities

4 Net cash flow of the year

4. Appendix of Financial Statement

Cao Son Coal JSC

82

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Coc Sau Coal JSC

83

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Vang Danh Coal JSC

84

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Deo Nai Coal JSC

85

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Ha Tu Coal JSC

86

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Ha Lam Coal JSC

87

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Mong Duong Coal JSC

88

BALANCE SHEETS

Unit: VND 2017 2018

I CURRENT ASSETS





5 Inventories



2 Fixed assets




III TOTAL ASSETS

I LIABILITIES






II EQUITY


INCOME STATEMENT

Unit: VND 2017 2018

1 Net revenue


3 Gross profit




6 Cost of sales



9 Before-tax profit



12 After-tax profit

CASH FLOW STATEMENT

Unit: VND 2017 2018









Nui Beo Coal JSC

89

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