Earnings Call: H1 2021

Aug 27, 2021

Dear investors and analysts, good afternoon. I'm the Xu Jin from the Board Office. And today, because of the pandemic, so we are going to conduct this conference by means of live webcast, telephone conference, on-site conference. The meeting will be conducted in Mandarin with simultaneous English interpretation. We have a Q and A session for today's results release and investor briefing. If you wish to communicate with the management and please dial in the system in advance. If you would like to ask questions, please press ask to risk 1 to be connected. Please note that the content of this meeting and your questions may be recorded. First of all, please allow me to introduce the management attending today's meeting. They are Mr. Zhu He Xin, Chairman of CitiQ Limited Mr. Xiguo Hua, Vice Chairman General Manager Ms. Li Qingping, Executive Director and Vice General Manager Mr. Liu Zhenjun, Vice General Manager Mr. Wang Gouche, Vice General Manager Mr. Shuzuo, Vice General Manager Mr. Feng He Yin, Vice General Manager and Mr. Cao Guo Tian, CFO. We also have Mr. Zhen Chen, Chairman of City Pacific, who attends the meeting by telephone. Now let's start the 2021 half year results release and investor briefing. First of all, please allow me to welcome Mr. Zhu He Xin to address us. Dear investors and analysts, good afternoon. I would like to welcome you to attend the 2021 half year results release and investor briefing of Citic Limited. In the first half of the year, Citiq Limited, facing the complicated and severe external situation, sees the favorable opportunity for economic recovery and its performance reached a record high. The net profit attributable to ordinary shareholders recorded HKD44.2 billion, an increase of 64% over the same period last year. Our financial and non financial segments have achieved good results. Among them, the financial segments continue to improve steadily with a profit increase of 32%. The non financial segment sees the opportunity and promoted the overall performance to be significantly improved with a profit increase of 130%. And the business structure of comprehensive enterprises was further strengthened. This is the 1st year of the 14th 5 year plan. In order to meet the demands of the 14th 5 year plan this March, we put forward the 553 development strategy, which includes 5 major segments, 5 major platforms and 3 major starting points. Over the last 6 months, we have carried out a number of special management work in-depth, including enhancing business collaboration, promoting increasing revenue and reducing expenditure, reducing costs and increasing efficiency and speeding up the establishment of a comprehensive risk management system. We achieved good results in all aspects. These measures have laid a solid foundation for our 14th 5 year plan. In the future, all the work will continue. We will, as always, pursue lean management, strengthen the foundation, reinforce the synergy and scientific and technological innovation. So that this we are going to firmly implement the development strategy of the 14th 5 year plan continuous deliver value for shareholders. Next, I will take the floor to Mr. Cao Guo Chang, CFO, to introduce us the company's performance in the first half of the twenty twenty one. Dear investors and analysts, good afternoon. So I'm going to brief you the highlights and the results of Citi Limited in the first half of the year. So a little bit so we have in front of the complex operational environment, we have seized the opportunities and we have achieved rapid growth in our business. Revenue grew by 38% to KRW 352 1,000,000,000 and profit attributable to shareholders grew 64% to KRW 44.2 billion. So the average 2 year growth rate is was 11.3% 13.1 percent, respectively, outpacing overall economic growth for the same period. The financial services continued to improve, which helped stabilize the fundamentals of the performance. Non Financial business managed to significantly increase the contribution of the revenue and the profit, highlighting the advantages we have as a conglomerate. So in the first half of the year, so the earnings per share is HKD 1.52, dividend per share, HKD 0.15. And the total asset is over HKD 10,000,000,000,000, up by 5%. And net per asset per share, JPY24 more than HKD24.58, up by 6%. This is segment information. Total asset in terms of total assets, 93% of it is from the Financial Services. And the contribution of revenue and the profit are mainly coming from the Advanced Materials Financial Services. I'm not going to dive into details. Next, let's have a look at this slide. This is the summary of the key earnings of the key subsidiaries of the corporation. So and later on, I'm going to dive into details 1 by 1, so I'm not going to talk too much about it right here. Next, let's move on to the our businesses by segment. In the Comprehensive Financial Services, the revenue is 132,000,000,000 yen with a net profit of 41,000,000,000 yen, which has been after by 13% and 32%, respectively, excluding the impact of exchange rate translation. Revenue and the profit increased by 4.1% and 26%, respectively, which all businesses in segment delivery saw a little performance. The PBOC has accepted the C Tech's financial holding company application, and C Tech will leverage this good opportunity to become a leader in integrated financial services. Speaking of some important companies within financial services, Citibank recorded revenue of RMB105 1,000,000,000, increased by 3 point 4 percent and the profit grew 14 percent to RMB 29,000,000,000. RMB focused on promoting a capitalized business and the non interest income increased by 12% driven by rapid growth of Wealth Management and Back Card business. The net interest income increased 0.2% mainly due to the expansion of interest bearing assets. But the net interest margin declined as it was affected by the market rates. And we see that we have a solid asset quality with decline in both NPL ratio and NPL balance. The NPL balance decreased by 3.8 percent at the end of June, and the NPL ratio dropped by 0.14 percentage, 0.2%, 1.5%. And the bank strengthened the disposal of NPL and the non performing assets disposal and recovery in the first half of the year increased significantly by 49%, reached RMB 16,500,000,000. For Citi Securities, it recorded revenue of RMB 47,000,000,000, grew by 38 percent, and the profit rose 37 percent to RMB 12,000,000,000, all benefited from the steady growth of the market and revived domestic capital market. Citi Securities led the market in Asia lead underwriting, bond underwriting, financial advisory and asset management up so leading the markets and other counterpart parts. For City Trust, it has performed very well. Revenue grew 23 percent to RMB 4,100,000,000. Profit grew 88% to RMB 2,000,000,000, maintaining the leading position in the industry. And it cultivated new drivers of growth. The AUM proportion of innovative businesses such as standard security investments, Family Trust increased to 25%, up by 4 percentage points year to date, while the revenue from the innovative businesses achieved a year on year growth of 47%. CC Prudential Life is premium. Income increased to RMB 14,000,000,000 and an increase of 11 percent, which was one of the highest in the industry. Profit grew 57 percent to RMB 1,200,000,000. It continued to leverage the competitive advantage in the Bancurance channel with a focus on higher value business, the proportion of term business increased by 11 percentage points to 72%. The total investment of insurance funds increased by 14% to JPY146,200,000,000 at the end of June as compared with the beginning of the year. So and for advanced manufacturing revenue increased by 6.97% and the net profit up by 190 2%. And we see that excluding the consolidated impact of Dicastal, revenue increased by 58%, mainly benefited from the recovery of production and operations. For this advanced intelligent manufacturing and for Citec, Daghasto, revenue grew by 46 percent to RMB15.5 billion. Profit grew 81% to RMB500 1,000,000, which increased the demand for lightweight vehicles due to the revival automotive market. The sales of aluminum wheels and the car seats increased by 44% and 53%, respectively, year on year. And in June, we see that Phase 2 of the Moroccan plants achieved full production in June, adding annual production capacity of 3,000,000 aluminum wheels. And overseas annual production capacity of aluminum wheels is now 9,000,000. City Heavy Industries recorded revenue of 3,800,000,000, up by 40% and profit of RMB 174 1,000,000. Transformation programs achieved solid results with high speed growth in new business streams such as offshore wind power and specialized mining robots. In terms of the advanced materials, the revenue reached 142,000,000,000, and net profit reached 14,000,000,000 yen so up by 66% to 226%, respectively, driven by economic recovery and abundant liquidity, which supported the rise in commodity prices, particularly the prices of iron ore and the copper reached new highs. Acetic Pacific Special Steel, Cyano Iron and Acetic Metal Group will achieve the best performance in history. When it comes to CITIC Pacific Special Steel, it recorded revenue of RMB 49,100,000,000 and a profit of RMB 4,200,000,000 Y o Y, increase of 35% and 52%, respectively. It continued to strengthen operations management to optimize the product portfolio and adapted technologies to reduce consumption of materials. So accounts receivables and inventory turnover were further shortened. For Sino Iron, benefiting from the buoyant iron ore price and continuous efforts to reduce operating costs and improve efficiency, it recorded a significant rising profit. Key operation indices achieved a historic high. 110,570,000 wet tons of iron ore concentrate were shipped in the first half of this year, a year on year increase of 8.5%. The effective operating rate is now at an advanced level. For Citec Metal Group, its revenue grew 83 percent to HK68.1 billion dollars and the profit grew 153 percent to HK1.8 billion dollars for trading business. It sees the opportunity of rising commodity prices. And the trading volume of iron ore, nibium products and the copper increased. The profits increased significantly by nearly 200% year on year. For the mining investment business, We see that the copper mine in Peugeot delivered substantial profit increase, and the Ivanhoe copper mine in DRC commenced production in May ahead of schedule, and the profit of mining investment business increased by 62%. So the copper mine for Ivanhoe in DRC commenced production ahead of schedule in this May, contributed to the profit and revenue for Citec Resources, the revenue grew 38 percent to HKD1.7 billion, delivered a turnaround profit of HKD427 1,000,000. The business mainly benefited from the increase of the product prices, improved management of the oil production business as well as the optimized debt structure. For the new consumption segment, so the delivered revenue of HKD32.9 billion, down by 7.1 percent and a turnaround profit of HKD771 1,000,000. Excluding the deconsolidation of McDonald's China, the revenue of this segment increased by 25% year on year, mainly due to the revitalization of the consumers' markets. Citi Telecom International recorded revenue of HKD4.8 billion and profit of HKD534 million, maintaining steady growth, increased by 9.4% and 4.2%, respectively. And they became the 1st provider in Macau in the indoor and outdoor 5 gs coverage. For City Press, the revenue grew by 19% to RMB952 1,000,000 and profit grew by 52 percent to RMB145 1,000,000. Sales books increased 12% year on year, ranked the 2nd among publishers in terms of market share and the sales. The retail business explored new operational models and established onlineoffline membership system. Bookstores recovered steadily for Daqing Home. It recorded revenue of HKD26 billion, up by 28% and delivered turnaround profit of 280,000,000 yen. So last year, it's lost it recorded a negative increase. So this year, it has turned around. Vehicle sales improved by 19% year on year. Revenue of consumer products and other businesses improved by 9%. And we have achieved HKD22 1,000,000,000, up by 52 percent. And our profit was HKD 3,200,000,000, declined by 22%. If we exclude the provision made for overseas projects affected by the pandemic, profit will increase by actually 24% year on year. Our business achieved a year on year improvement in operating profit. So for new type organization, the property development operation and management, we have achieved HKD 3,500,000,000 by 24%. And for Construction and Engineering, we have achieved HKD 1,000,000,000, up by 143 percent. For its subsidiaries, focused on regional markets in China with a total value of new contracts matching RMB 17,700,000,000, an increase of 34% year on year. For urban operation, profit grew 65 percent to HKD460 1,000,000 mainly due to the increase in revenue from the operation of City Environment, Circular Economy, Industrial Park and rapid recovery of City Offshore Helicopter Offshore Oil Business has been developing very fast. That is my brief overview. Thank you, Mr. Cao. Now let's enter to the Q and A session. We are going to invite institutions online. Due to time limit, please ask no more than 2 questions. Now let's welcome the first one. Now let's welcome Ronald Meiyin Securities to pose her question. Hello, dear management. Can you hear me? Yes, exactly. Hello, dear management. I have two questions. The first one is that Citi Limited has attached high importance to the asset management quality and also reduced the cost. So in the 1st 8 months, how is about our growth performance? Do you have any data? What is the amount of the exhibit of non performing assets? And what is the target for the cost reduction? 2nd, could you share with us the dividend policy? What it will be like in the future? We have seen that the mother company is going to invest in financing or financing holding companies. So is there any possibility that the dividends will be increased? These are my two questions. Thank you for your question. As for your second question, I want to share with my observations. Actually, for the dividends sharing, it is very stable and consistent. In the first half year, we are 0.15 per share, which has seen a significant increase with that of last year. And our dividend policy with the development policy and high quality development, actually, we are moving ahead of the entire industry. With regards the Huarong, we have made in-depth research. As for your first question, I will give floor to Mr. Guo Hua to answer this question. Thank you for your question. For the reduction of cost and efficiency increase is our target. Lean Management and Outstanding Enterprise is our routine work. Last year, we have seized the great opportunity brought by the external environment on operational business. We have converted the pressure into opportunities. We undertake the cost reduction and open source for profits generation. We have made a great performance. Our work can be summarized into the 3 aspects. First, we identify target and push it forward steadily. Last year, our target is that we are going to increase profits by JPY 5,000,000,000 and reduce cost by JPY 10,000,000,000. We can we have increased JPY 4,200,000,000 and reduced the cost by JPY 118,000,000,000. So the morale of our colleagues has been enhanced, and our collective consciousness has been increased. It has facilitated the business profits generation in 2021. Our target is to increase JPY 10,000,000,000 and reduced cost by JPY 20,000,000,000. By the end of July, we have achieved JPY 10,900,000,000 open source for profits and reduced the JPY 12,900,000,000 for profits and reduced the JPY 12,900,000,000 production reduction of profits. We have achieved 97 79% reduction, and we have conducted the outcomes sharing. Not too long ago, we have held the outcomes sharing and demonstration in terms of the new manufacturing. And we have accumulated the research outputs and we have set up the database for innovation. For those best practices for cost reduction, profits generation, we summarize the best cases and convert it into the treasure of our knowledge. We have made a great performance. For example, our Special Steel, it has innovated the theory for reducing cost and increasing profits. They have formulated their own model. In the second half of this year, there will be the financial sharing for the profits generation and cost reduction will become our routine. That will be an important component of FATIC culture. Thirdly, lean management has been improved considerably. All subsidiaries have vigorously undertaken all staff, all procedure and omnidirectional cost reduction process increase. For example, by innovating by innovation and research, we have extended product pipelines and expand the scope of the customers and the markets. And by the replacement of the products of a higher level once we have reduced the cost reduction and the financial burden has been released for example by concentrated procurement to master the trend of the raw materials and we master the cost of procurement by optimizing the procedure for manufacturing, enhance the automatic manufacturing to reduce the manufacturing cost. Those what we have done in the cost reduction and profit increase. As for the disposal of NPL, nonperforming assets, actually, since last year, we have undertaken the disposal of nonperforming assets and the low efficient assets, we have introduced 2.71 projects and got to the return of RMB 36,000,000,000,000. Actually, we have seen a great optimized assets. In the future, we are going to follow the 14th 5 year plan and the streamlined management guideline and the specialized activities. We are going to reinforce our efforts on disposal of non performing assets. Generally speaking, centering on the 4 aspects, we are going to further enhance our efforts on the disposal of low efficient non performing assets for those non competitive assets that's going to be disposed. For example, like oil, gas and coal, all these resources. Despite the positive performance and good results, That is my answer. Thank you. Thank you for the Chairman and General Manager answers. Let's welcome the second question. Now let's give floor to investor and for CICC, Huang Yue Han, to pose a question. Thank you for this opportunity. I'm Huang Yue Han. I have two questions for the management. First one is Citigroup Bank. We know that non performing ratio, So we want to know the outlook for the nonperforming ratio reduction and how do you view this phenomenon? The second question is the wealth management. In the first half of the year, the wealth management has reduction. That is the first time for us to achieve the new lows since 2016. And the preferential coverage has achieved the highest level since 2014, up by 18% to 189%. For the subsequent outlook, based on the situation and the structure of assets, liabilities, our judgment is that under the current situation and policies, as far as we're concerned, first, with difficult and challenges, we can achieve sustainable development. It can be justified as follows. Pre indicators, the relevant indicators for non performing ratio, The generation ratio of non performing has been decreased from 0.88.2 to 0.5, and we can see the trend can be sustained. Secondly, for the loans related loans has been increased, but there are 2 factors. First, due to the pandemic impact, since March, accepting the preferential inclusive micro loans, They are still entitled to the policies and some others have been exited from that. And secondly, the key issue is that we impose stringent standards on the categorizations for one part. In my words, for those where I think it's not normal, we have categorized into the risky ways for those without interest, without principals and they haven't paid. So we have imposed stringent standards. And thirdly, our expectation is the credit cards non performing ratio has been improved. In the first half of last year, our credit cards impact on non performing ratio is very large. So for the credit cards impact is increased with that the same period of last year, but because of the extension policy due to the pandemic. However, we must see that there are positive indicators. There are 3 positive indicators which may have you have comprehensive understanding. And 7, in July, the non performing ratio increased compared with the Q1 non performing ratio, it has been decreased by 40%, the second indicator from the normal to the expected one in July because for the credit cards, some are the good customers. You know that compared with 2020, it has been reduced by 50 on a daily basis. Certainly, for our priority deposits, which has been reduced to JPY 7,500,000,000 from over JPY 10,000,000,000 at the beginning of the year and which has been automatically included into the NPL. This is my 3rd point. My 4th point is that for some of the over companies with excessively high NPL, so because of the development of the business or improvement of the business, so the value has been greatly recovered, which has exerted a very good contribution to our provision demand. So before, we provided like JPY 4,800,000,000 for and for ST Yanhu, we used to have this day repayment of the debt with the materials. And as as for now, we can recover by JPY 1,000,000,000. And for Yotai, we provided by 70%. But now we can see the improvement of their business. And also, the 1,000,000,000 yen has been for the hydropower stations also have been improved. So in the late in the past year, so we see that the businesses of many companies and the provisions have been provided. And for the JPY 138,500,000,000 and of them, the JPY 6,200,000,000 has been improved. And at the end of the year, so it can reach JPY 8,000,000,000. For those with higher recovery rate, it's a very good signal for us to boost our confidence. And for Wealth Management, let's welcome Qingping to share with us the information and answers. For Wealth Management, the Wealth Management business of Citic Bank, like you said And the data you have mentioned has elaborated that Citic Bank, over the last few years, has transitioned its retail business. And from the data you have accessed, has proved that we have done a very good job. So I would like to answer your question about the branding about the building of the brand of our Wealth Management business subsidiary. About the Wealth Management business, Citec has attached great importance to it, and we are very positive about its development because Wealth Management is a potential driver of growth of Financial Services, which is also very competitive. And the Comprehensive Financial Services will move deeper into this segment. We have a very good competitive edge. Like you said, we have the good brand. So in the segment of comprehensive financial services, especially the 2C, which is called the CITIC Xinfu Wealth Management. Secondly, about we have the advantage in our licenses that 8 subsidiaries under the Citic Group has the licenses needed. And many of them are the leaders in their respective sectors or industries. So the financial holding company we are applying. So this is the model, which means that all the subsidiaries will be contained in this financial holding company. And We are going to follow this separation of risk management requirements. We are going to build 1 group, 1 client, 1 account system. And this is a system is very possible. Well, I can't say that it is very easy, but we say it is quite possible. So we will have a very clean business in this financial holding company. And we also have this advantage in the integration of businesses and industries. And we need the allocation of assets, and we need the good quality asset. This is the advantage of Citic. We have very good leading real businesses. So at the Wealth Management end, we have the provision of products because we have the assets available, good quality assets available. On the other hand, we have the integration advantages, which can help us to build a comprehensive capability of financial services. Starting from last year when we started to build integrated brand, I can report the data to you, and you can have a look. And you will see that CitiQ Group's Wealth Management or our brand of Wealth Management, you can see our current value and our potential value in the future at the end of June. The 8 financial subsidiaries, including our securities, Huaxia Fund, and Baocheng, Xinyin and Baocheng Foundation, all the 8 financial subsidiaries have AUM starting from increased from RMB 7,150,000,000,000. So last year, we have RMB 219,000,000 now. We have also RMB 310,000,000 clients. All those data can help us to see that our cross sells to see clients from last year is JPY 45,000,000,000. Now we have increased 83%. And we have 40,000 third party trust clients. We can see that while we are building an integrated brand outside and internally, we have enhanced our top level designs and integrations, which has led to a very good outcome. We hope that in the future, we are going to continue to build a competitive mega wealth management system, and we are going to continue to improve our integrated allocation of resources, management of assets, integration of channels and the driving forces by technologies and shaping of the brands and our added value provided to the non financial services so that the comprehensive financial service segment can be a cornerstone of the whole group. Thank you, Mr. Feng and Madam Li. Now let's welcome the 3rd analyst, Morgan Stanley, investor from Morgan Stanley. Let's welcome. Thank you very much. I'm from Morgan Stanley, Fairen. And I'd like to ask 2 questions. The first question is that whether you can introduce us about the shareholding in Huarong, so some information about this trading. And do you have a timetable for the progression of the work and about the management and nonperforming business? So what kinds of plans or strategies do you have? The second question is about whether the management can introduce us about the strategy for the picking for carbon emissions and carbon neutrality and what's the layout in your industries? Thank you for your two questions. The first about Huarong. So this is a very important issue, which is in progression and which has attracted a lot of attention for Huarong Management Company Asset Management Company. So this is in line with the strategy of the whole group. We are following the requirements of market based operation and the law based management, too. Now we are in a very important phase of disposing of the nonperforming loans. We attached a great importance to this work. We're going to give full play to the integrated and the synergies of the whole group so that we can give full play to the full potential of our group. A second about the carbon peak and the carbon neutrality. I would like to give the floor to Guo Hua to answer your question. Thank you very much for your question. So we strive to be ESG leader in the industry, and we are going to seize the opportunity of the low carbon transition strategy to follow the path of low carbon and green development. In May 10, we have announced to the society that we strive to peak our carbon emissions by 2025 and carbon neutrality by 2,050, which is higher and is more ambitious than the national strategy of carbon picking and the carbon neutrality. In order to deliver those goals, we have this 2 increase and 1 decrease. Two increases are: Firstly, we are going to increase the green finance so that it can benefit the transition to low carbon development secondly, about the non financial businesses development. We are going to expand the supply chain and to give or play to the role of carbon of low carbon development. And we're going to reduce the investment with high impact on the environment or with high intensity in carbon. So we're going to follow the strategy of carbon picking, carbon neutrality. While proposing this strategy this proposal of this strategy is based on our past experience and work. So for example, for the transition of Green Finance, by June 30 this year, the balance of Green Finance is JPY 130,000,000,000. We're going to continue to improve the ratio of the Green Finance. For our 2 securities, so these issuance for green bonds are the top 2 in the industry. For carbon neutrality concept, the sovereignty bonds has been increasing. And in the trading, in the market and the innovations of carbon products. And now we are integrating ourselves into the global supply chain of energy transition and the low carbon development. So for example, the automotive industry is developing to the lightweight direction. The dicastal production of lightweight components is 650,000 tons. Comparing to the traditional steel components, we are going to reduce the consumption of oil of 200,000,000 tons and reduced carbon emissions by 500,000 tons. And we also deployed in the medium industry and to develop the medium steel industry so that we can reduce the weight of the steel product. And now we take up about 80 more than 80% of the market share. The intensity of carbon emission is lower than the whole industry by 30%. This is benefiting from the improvement optimization of the innovative technologies, so which can reduce the emissions by 650,000 tons. And we are doing 2 work. Firstly, we have carried out the accounting of carbon emissions across board. We are surveying the carbon emissions of the whole group. We are studying and developing 1st of its kind, the accounting table for carbon piggy and the carbon neutrality so that our strategies can be traced, tested and evaluated. In the meantime, we are developing 2025 carbon peaking and the 2,050 carbon neutrality road map. We plan that at the end of the year or the beginning of the next year, we're going to publish the white paper for carbon peaking and carbon neutrality. In order to achieve these two goals, on one hand, we are going to optimize our business structure so that for those businesses can be modified and optimized, they should do that. And secondly, for those difficult to decarbonize, we need to use of our platforms and the resources to adjust its structure in the whole portfolio. Secondly, we are going to improve the proportion of green businesses, And we are going to make strategic investments in clean energy, low carbon technologies so as to accelerate the innovation, so financing investment business and to participate in the carbon trading market and to also innovate our financial products. Thank you, Chairman and Mr. C. Next, let's welcome the 4th investor or analyst for Goldman Sachs, Dear management, I have two questions. The first is about Sino Iron. I would like to ask what's the trend of production in the next half of the in the second half of the year and also look for the iron price or steel price because we see some decline in the recent days. I'd like to ask about the production and the price. Do you feel the pressure? The second question is about I want to ask about Citec Dicasto. So we would like to see the recovery production in Germany. And in the future, because of the trend of developments of new energy, many of the clients are following the path of low energy. Are you going to spend your business to the manufacturer car manufacturers of new energy vehicles and your outlook for the next year? Thank you. Thank you. Now is Chen Chen available online? Yes, I'm here. Could you answer this question? Okay. Thank you. Thank you for your question. Now I'm going to review on the production of cyano ion. We have overcome the difficulties, including pandemic and Australia Mining Prosperity, which results in the lack of insufficient labor, we have produced more than 1,000,000,000 100,000,000,000 tons of the copper concentrate, and it has entered into August for 21,000,000 tons of production will be achieved except the emergence of the extreme climate. We are confident to achieve the 21,000,000 for the steel and the iron ore for the price of the iron ore, actually, it is going down flatulatively and is going steadily and rebound. For the iron ore in the first half year, it has seen significant increase. That results from the supply and demand battle. So from the demand perspective, China's raw iron production has made record. At present, the limits on production, especially the carbon neutralization neutrality and carbon peak, So the production capacity and task for the steel is very heavy. Therefore, there are fluctuations from the demand side. With a certain time of adjustments, we are confident that iron ore price will go steadily steady. So for the price of next year, we believe that with China's economic recovery from the pandemic as well as with the increase of vaccination, recovery of operation, manufacturing and policies on infrastructure in different countries. Their demands on raw materials and the steel materials will be increased. So from demand perspective, it will be very high. From supply perspective, there is no obvious increase despite that many mining enterprises are stabilized their outputs. Under such circumstances, the price of IRR still at high level. Of course, as the high level in the first half of the half this year, from long term perspective, the price, it cannot maintain such high for long time. And for next year production, we will maintain 20,000,000 tons of the Cyano ion production for Cyano ion. Thank you. As for your loans related question, we will invite Mr. Ji to answer this question. Thank you. KSM, Germany. The overall performance in the first half of twenty twenty one compared with that of 2020, there has shown positive changes for the output and the sales compared with the same period of last year. It has achieved now almost a 50% increase. Sales has increased by 36% increase. For revenue, compared with the same period of last year, 34% increase has registered. So in the first half of this year, EDIT has make turnarounds. Generally speaking, with the improvement of epidemic situation, KS in Germany, all factories have been recovered resumed to the normal level. As for the second question you posed, our company will continue to expand the market for new energy vehicles. We'll keep pace with the development of the new energy vehicles so as to consolidate the KSM Germany's market position. Thank you. Thank you, Mr. Zeng and Mr. Xu. Let's give floor to the 5th question. Now let's welcome Citigroup Investor, George Tai, to answer to pose his question. Thank you. I have two questions. The first one, what's your view about the leverage ratio of Citic Limited? Do you have any targets? And the second was, could you share with us the price outlook prospect for the leverage? Now we will invite Mr. Guo Xiang, the CFO, to answer this question. Thank you for your question. As for the leverage ratio management, Citiq Limited has put it at a high position. We are committed to the management of leverage ratio over the past years, which has seen great output. The major matters are as follows: Generally speaking, we have an overall plan for the management of subsidiaries will be taken into assessments. They take a certain portion of that. Secondly, we get full play to the internal role by Citic Finance and Citic Bank. They will jointly make efforts to reduce leverage by concentrating funds of Citic Finance. It can considerably reduce the leverage ratio. And thirdly, for the overall loans liabilities, we will increase our management we will stringently manage that. The overall leverage ratio has been reduced over the past years. The asset liability rate has been reduced by 1%. So the liability ratio dynamic leverage ratio, we have seen conservative reduction over the past years from very high level to a relatively healthy level. That is a normal level and it's the historical low. So for the standard and poor has upgraded our class from 3B plus is stabilized. It has been upgraded to positive. So that thanks to the management of leverage ratio. We believe that we are going to increase our measures and impose the rigorous measures to guarantee the steady and healthy development of the entire group. Very sorry. Could you repeat your second question? Citi, the colleague from Citi Group. As your second question, that is about the price of steel. That is the what is your perspective? Now we still invite Mr. Zeng to answer this question. As for the price steel price, since it relates to multiple factors of the market, generally speaking, the demand is very high. But in light of the modification adjustments of real estate markets, there may be changes in short term. As I have said, with the structural changes of the market to back to normal level and the reduction of the output in this round, it will be resumed to normal level. Once more, we must see that besides China, overseas markets demand on steel and in the second half of next year, we'll see positive growth. Therefore, we are very cautiously optimistic on the price of steel. And I want to add more words. For Special Steel, we can say that our anti circular capabilities, especially under the pricing reduction of raw materials, that is the favorable stage for Special Steel. Thank you, Mr. Cao and Zeng for your answers. Now let's give floor to the 6th question. Now let's give virtual floor to Wang Yu from Huatai Securities. Dear management, I'm Wang Yu from Huatai Securities. Thanks for this opportunity. Here are my here is my question. What is the update and progress of monitoring and any financial management measures and supplementary requirements? And what is the direction for synergy effect? Thanks for your question. For financial control, so we have Mr. Jin, present here. Thanks for your question. I want to make it clear. And as for the financial control, the financial finance holding company, on 28th May, People's Bank has officially accepted that Citic Limited to set up the finance financial holding company. We have got the administrative permit. China Citic Financial Holding has become the 1st company to be officially accepted by People's Bank. As far as we understand that People's Bank is reviewing the application, relevant authority has give feedback for the financial holding company's access and the decision. People's Bank got the application and should make approval or disapproval within 6 months in written form. So given that, we have been positively actively cooperating with People's Bank and relevant ministries to push forward the approval work, it is expected and is highly possible that in this year, we are going to get the permit for the finance holding company. And we predict that within this company, we can start our business. That is your first question as for the progress of our finance holding company. And as for the second question, that is the plan and measures of further development. So Comprehensive Financial Services segment is identified as the bedrock in the 14th 5 year plan. So by taking the opportunity of applying for finance holding company, we will reinforce capital management, consolidated sheet and comprehensive sheet comprehensive risk management, we will set up an improved risk prevention control management, reinforce isolation of financial and non financial sectors and will give way to the synergy effect. We hope that the positioning strategy is to create the financial holding company with a global competitiveness and will become the leading financial service pioneer. So under this, we have set up the 1436 strategy. Firstly, we are going to create the 1st class financial control management and we'll improve the 4th management system. We will unify the customer service and coordinated the business service system and improve the risk prevention control system. And we are going to formulate the core capabilities of wealth management, asset allocation and comprehensive financing capabilities. We are going to reinforce the 6 segments, the financing, defense, wealth management and securities. So that is the future 1436 strategy. For the finance holding company, our strategy is that we are going to consolidate the baseline for risk control and release the value of finance actually to create the city finance holding company is to prevent and to control the risks in a comprehensive manner to when we build the system for prevention, control, we must get free to the role played by the finance and we must release the full value. And we must build the monitoring system. We should make it bigger and improved. We should be excelling at the comprehensive financial services. By setting up this platform of financial holding, we will implement the supplies and structure reform and policies of financial monitoring. And we must increase the comprehensive capability of finance and increase its capability to prevent risk and control and push forward its high quality development. Thirdly, we must promote the fueling industrial and financial development and committed to the high quality development of financial sector by building the financial holding company segment, the comprehensive financial services. We will increase the support on non financial sectors, for example, just as Mr. Cao has mentioned. So we need to deliver, Rich. This is why we integrate the financial services and non financial services to do such a work. So we hope that we can have a more close contact or collaboration between the financial, non financial segment, second, about the integration and the synergy to improve the service level. So while we are answering the question about Wealth Management, I have already reported to you about this C end, how do we integrate and synergize on the B end, how do we build this Collaboration Plus platform so that the so our customer services will be greatly improved so that to form a synergy. And we also support the businesses with Science and Technology to consolidate our business. And because financial holding is not just a black sheet in our positioning and the strategy, So we are going to enable our financial services with technologies. This is put high on our agenda. And we are going to strengthen our input and divestment of Science and Technology so that the financial holding company can be a demonstrative and 1st level and 1st tier financial holding company. And about the supplementary funds, CITIC is complying the requirements from PBOC and other ministries. And well and the funds management is a very important part of the financial holding company as a carrier for financial services. Citic Financial Holdings is going to follow the medium- and long term development strategies and to comply with the PBOC's requirements and policies to improve our allocation of funds so that we can have sufficient funds available and to help us to guard against the risks and to take into consideration of the external environment and the adequacy ratio to improve the returns to the shareholders. That's all for my answer to your question. Thank you, Madam Li. Due to time limit, this is the end of our Q and A session. And now for investors and analysts, please contact our Investor Relations department of the Board's office for further questions. Thank you very much. And I would like to thank all the management and all the analysts and investors for attending today's briefing.