Interview with Yu Yapeng, Chairman of CITIC Special Steel: Widely concerned about the possibility of domestic and foreign mergers and acquisitions
“The Group has faced the adverse factors during the epidemic situation and faced the difficulties. The operation and production work is proceeding as planned. The orders from January to February this year are generally stable and the production and operation conditions are good.”Ya Peng, chairman of CITIC Special Steel, a leader in China’s special steel industry, said in an interview with”CITIC Special Steel has the annual production capacity of more than 1,300 additional special steels and is the world’s largest special steel group.Yu Yapeng said that during the epidemic situation, the headquarters of CITIC Special Steel Group and the eight subordinate production enterprises insisted on “grasping the epidemic prevention and control on one hand and operating production on the other”, and worked hard to be effective. The operation and production were basically stable, and the current production capacity has basically recovered.Regarding the topic of new infrastructure that has been hotly discussed in the market recently, Yu Yapeng believes that it is the development potential of CITIC Special Steel. “The new infrastructure project has opened up room for the improvement of production efficiency for the transformation and development of steel enterprises and intelligent construction.”In the past few years, CITIC Special Steel has expanded and expanded, integrating internal continuous special steel companies, and achieved overall listing in October 2019.Yu Yapeng said that landing in the capital market will help CITIC Special Steel increase its market share and further strengthen its leadership in the special steel industry, thereby promoting the gradual specialization, refinement and internationalization of the special steel industry and strengthening its state-owned capital.It is of great significance to make it bigger.Yu Yapeng said that CITIC Special Steel’s production target for this year has been steadily rising on the basis of 2019, and the company will continue to pay attention to mergers and acquisitions and trends in the special steel industry at home and abroad.Yu Yapeng, Chairman of CITIC Special Steel. The production capacity has basically recovered, and the cash flow is in good condition. We will continue to optimize our asset and liability structure. What impact will this new crown pneumonia epidemic have on the company’s production and operations?How about the company’s orders from January to February this year?How did it respond?Yu Yapeng: The new coronary pneumonia epidemic has brought a certain impact on the company’s production and operation, which is mainly reflected in the recovery rate of labor recovery, the transportation of raw materials and products, and the delay in the resumption of downstream customers, but the overall impact is controllable.In terms of epidemic prevention and control, CITIC Special Steel set up an emergency command leading group and working group for the special video conference on the prevention and control of the new pneumonia epidemic, and formulated the “CITIC Special Steel Epidemic Prevention Implementation Plan.”In terms of operation and production, CITIC Special Steel’s domestic and foreign trade and procurement departments have kept a close eye on the epidemic situation and policy situation in various regions of the world, strengthened the research criteria, and tried to grab orders in response to contingency.From January to February this year, the orders were generally stable and the production and operation conditions were good.At the same time, CITIC Special Steel worked hard to compress its non-productive costs, reduce costs and consumption throughout the process, and continuously improve product quality and innovation capabilities to develop better and better products that meet user needs.Sauna Nightnet: During the epidemic situation, what was the status of the shutdown and resumption of the work of CITIC Special Steel’s bases?What is the current capacity recovery situation?Yu Yapeng: During the epidemic, CITIC Special Steel Group ‘s headquarters and 8 subordinate production enterprises unwaveringly grasped the grid control of personnel, epidemic information supervision, epidemic information reporting, epidemic prevention, sanitation and disinfection, operation of production materials and supply, etc.Work, adhere to the “one-handed prevention and control of epidemic situation, one-handedly focus on operating production”, all work is fruitful, operating production is basically stable, and the current production capacity has been basically restored.Sauna Nightnet: Affected by the epidemic, a large number of manufacturing companies have encountered poor supply chain circulation, and some steel companies have insufficient supply of iron ore and coke.Has CITIC Special Steel encountered the same facts?Yu Yapeng: Raw material guarantee suppliers are always normal and decomposed. Before the holiday, the bulk raw material inventory of the subordinate enterprises was increased and converted. In order to reduce the impact of poor logistics during the epidemic, regular conference calls were held to discuss the solutions through collective calls and leadership.The understanding and support of the maritime department, coal mining enterprises, and alloy producers have overcome the multiple difficulties of the maritime department’s control of ships going to Hubei and the stop of automobile transportation in Hubei Province to ensure that the supply of materials is always under control.Sauna Night: Does the epidemic put pressure on the company’s cash flow?Does the company currently have a financing plan or debt reduction plan?Yu Yapeng: The company’s operating cash flow is in good condition, and the epidemic has little impact on the company’s cash flow.In order to ensure the company’s sustained and healthy development, the company will continue to optimize its asset-liability structure.Sauna Nightnet: Affected by the epidemic, the central and local government budgets are increasing investment in major projects, especially infrastructure construction projects.How does this affect CITIC Special Steel?Yu Yapeng: Investment in infrastructure construction projects, expanding demand, steady growth, and employment, infrastructure investment has always been an important consumption point of steel, which has helped the stability of the entire steel industry and the recovery of the market.CITIC Special Steel has a wealth of product accumulation, and some major projects such as energy, transportation, and electricity will bring us benefits. In addition, the central and local governments are occupying some new infrastructure projects such as big data, 5G, industrial Internet, big data, artificial intelligenceAs a result of stricter transformation and development of steel companies, intelligent construction has opened up room for improvement of production efficiency. For CITIC Special Steel, this is also a development possibility.The realization of listing will help the state-owned assets to become stronger and better, and the steel market is expected to benefit from the recovery of infrastructure investment. The company has achieved overall listing in October 2019. According to your feelings, how does it help the company’s development after landing in the capital market?Yu Yapeng: CITIC Special Steel has become the largest professional special steel listed company in the A-share market. It can give full play to the advantages of unified management, build a complete procurement, production and sales system, improve the level of refined management and compliance control capabilities, so as to achieveEnterprise standardization, efficient operation, increase market share, and further strengthen the leadership in the special steel industry, has a strong foundation for the long-term sustainable development of the enterprise.The company’s overall listing will help companies broaden their financing channels. At the same time, through effective coordination of assets, brands, channel resources and management, they can fully stimulate business potential, increase profit levels, and promote the gradual specialization, refinement, and internationalization of the special steel industryIt is of great significance to the development of the state and to make the state-owned capital stronger and better.Sauna Night: The company recently released its 2019 annual report with a profit of 53.8.6 billion, an annual increase of 50.45%.The annual report shows that one of the reasons for the increase in performance is cost reduction and efficiency increase.Can you specifically describe the company’s cost control alternatives?Yu Yapeng: The company has always recognized the work of “targeting potential, lowering costs and increasing efficiency”, positioning 2019 as the “cost reduction and efficiency increase” year, focusing on reducing consumption, improving efficiency, increasing output, etc., and reducing costs.Decompose into 15 specific paths, practice internal skills in every aspect, and reduce costs on the basis of ensuring product quality.For example, in 2019, through technological transformation, optimizing processes, strengthening lean production management and key process capabilities, the company achieved an increase in production of nearly 160 tons, and the scale effect became the unit fixed cost of steel products (including basic labor costs, depreciation costs, repair costs, etc.)This is a significant decrease from 2018.Sauna Night Network: The long-term auto market is getting colder. Has the company’s business development in this direction been affected?How does the company respond?Yu Yapeng: China’s auto production and sales will be around 25.7 million units in 2019, every 8% decline. Car companies are under pressure, but the market share of mid- to high-end auto companies is growing. It is expected that the auto industry will end its in-depth adjustment in 2019 in 2020.The overall market stabilized in 2016.The expected short-term internal epidemic of the epidemic has caused a blow to the production and sales of auto companies, and the parts supply system has been disrupted, but it is expected that there will be a recovery growth in the later period.We will pay close attention to the automotive steel market trends, and use the brand influence and product competitiveness in the automotive steel field to further expand downstream customers and increase the automotive steel market share.At the same time, it actively follows the development trend of the automobile industry, pays close attention to the development of new energy vehicles, and vigorously develops steel for electric vehicles.Sauna Night Net: Overcapacity in the steel industry has always been a concern for a long time.In the field of special steel, Wang Huaishi, Secretary-General of the China Special Steel Enterprise Association, said in an interview that maintaining a reasonable and moderate overcapacity is conducive to promoting the healthy development of the special steel industry. Excessive overcapacity will lead to the recurrence of the tragedy of the whole industry.What do you think of the capacity problem in the special steel field?Does CITIC Special Steel have plans to expand production this year?Yu Yapeng: The focus of the development of the special steel industry should be on “advancing with production” and “stuck neck” materials, improving product quality and grade, improving market competitiveness and profitability, increasing industry concentration, improving international operation level, and buildingNeutral cultivates the special steel industry chain, which helps strengthen China’s special steel industry.The company’s production target for this year has steadily increased on the basis of 2019.Sauna Night: CITIC Special Steel merged to complete the acquisition of Qingdao Special Steel and Jingjiang Special Steel.After the acquisition, have the operating conditions and disadvantages of Qingdao Special Steel and Jingjiang Special Steel improved?What kind of measures has the company taken, can you introduce it?Yu Yapeng: After the acquisition of Qingdao Special Steel and Jingjiang Special Steel, the operating efficiency and resistance situation have been better improved.The Group has strengthened the management of the two companies. In addition to technical support and system construction, it has also effectively strengthened the coordinated development between their respective companies.In terms of finance, the company’s overall credit advantages and internal financing are used to reduce and reduce the financing costs of various enterprises, thereby reducing financial costs.In terms of sales, the Group manages and schedules the sales and orders of related companies in a unified manner, which improves the coordination of production capacity among different sectors and the market bargaining power of products.In terms of procurement, the Group Procurement Center is responsible for the centralized procurement of bulk raw materials of various subsidiaries and the benchmarking management of the purchased materials of various companies.Unified deployment among enterprises.Sauna Night: What are the policies and objectives of CITIC Special Steel’s future mergers and acquisitions?Yu Yapeng: As a special steel company with high technical and management level and good financial status, in addition to endogenous growth, the company will also choose opportunities to find out M & A opportunities to achieve epidemic growth. The country is currently encouraging advantageous enterprises in the steel industry to conduct M & A,To improve industry concentration and health.Sauna Night: What are the criteria for the selection of M & A targets?Yu Yapeng: When choosing M & A targets, the main considerations are: compliance with the company ‘s strategy, compliance with national strategies and industry development trends, good market prospects and expectations, obvious integration and ability to achieve.CITIC Special Steel continues to pay close attention to the potential and trends of mergers and acquisitions in the domestic and foreign special steel industry.The goal is to further strengthen the special steel industry.Sauna, Ye Wang Zhao Yibo Zhu Yueyi Editor Zhao Ze proofreading He Yan