Shanxi Coking Co., Ltd. (600740.SH) is facing challenging times. The company's Q3 2025 report revealed a net loss of 50.052 million yuan for the first three quarters, marking a year-on-year plunge of 119.81%—its first loss for the same period since 2017.
Although the company achieved a net profit of 27.5591 million yuan in Q3 alone, reversing the previous quarter's loss, it still represented a 59.89% decline compared to the same period last year. Total operating revenue for the first three quarters stood at 4.589 billion yuan, down 15.84% year-on-year.
From a Q1 net loss of 70.2591 million yuan to a H1 loss of 77.61 million yuan, and then a cumulative loss of 50.05 million yuan by Q3, Shanxi Coking's 2025 performance reflects the broader downturn in the coking industry.
**1. Performance Decline: Three-Quarter Loss of 50.05 Million Yuan** Shanxi Coking's operating performance in 2025 has shown a continuous downward trend. Over the first three quarters, revenue fell by 15.84% year-on-year, while net profit attributable to shareholders plummeted 119.81% to -50.052 million yuan.
In Q3, the company managed a slight profit of 27.5591 million yuan, down 59.89% year-on-year, primarily driven by sequential growth in investment income.
Gross margin for the first three quarters was -10.10%, an 8.89 percentage point improvement from the previous year, marking six consecutive quarters of growth. However, core operations remained unprofitable.
Total assets also contracted slightly, standing at 26.147 billion yuan as of September 2025, down 3.38% from the end of the previous year.
**2. Reasons Behind the Loss: Dual Pressures on Core Business and Investment Income** The "first loss in eight years" can be attributed to two main factors:
**(1) Continued Pressure on Coking Operations** Coke, Shanxi Coking's core product, accounts for over 60% of total revenue. However, the coke market in 2025 extended its 2024 slump, with prices "falling more than rising."
Data shows that from January to March 2025, the ex-factory price of Shanxi's quasi-first-grade wet-quenched coke dropped by 300 yuan per ton, a 20.2% decline. Since late October 2024, coke prices have fallen by 550-605 yuan per ton.
Demand has also weakened. With Q1 being a seasonal low for domestic steel demand, blast furnace maintenance increased, reducing coke demand. Meanwhile, coking plants maintained high production levels, exacerbating oversupply and price pressures.
Analysts noted that the company's coking losses widened in Q3, with gross losses reaching 126 million yuan, up from 18.4028 million yuan in Q2.
**(2) Sharp Decline in Investment Income** Shanxi Coking holds a 49% stake in Zhongmei Huajin Group, historically a key profit contributor. However, Zhongmei Huajin's earnings fell year-on-year in the first three quarters of 2025, leading to a 51.09% drop in Shanxi Coking's investment income to 918 million yuan.
Historically, Zhongmei Huajin had been a pillar of Shanxi Coking's performance, with investment income rising from 1.11 billion yuan in 2018 to 3.442 billion yuan in 2022. However, declining profitability since 2023 has exposed the risks of over-reliance on investment income and slow transformation of core operations.
**3. Cash Flow Challenges: Operating Cash Flow at -1.403 Billion Yuan** The company's cash flow situation is concerning. Operating cash flow for the first three quarters was -1.403 billion yuan, an improvement from -1.708 billion yuan in the same period last year but still negative.
Over the past three years, operating cash flow has deteriorated: - H1 2023: -367 million yuan - H1 2024: -1.297 billion yuan - H1 2025: -1.564 billion yuan
This trend highlights weak operational sustainability. Additionally, the company's short-term liquidity ratios—current ratio of 0.23 and quick ratio of 0.19—are well below safe levels.
**4. Countermeasures: Cost-Cutting and Business Adjustments** To address these challenges, Shanxi Coking has implemented cost-reduction measures and operational reforms.
The company has optimized coal blending, reducing coking coal procurement costs to 1,010.54 yuan per ton in Q2, down 12.97% sequentially. These efforts helped narrow Q2 losses to 7.35 million yuan from 70.2591 million yuan in Q1.
The company is also exploring new business models, such as customized coke partnerships, and expanding its chemical product portfolio, including methanol, carbon black, and industrial naphthalene.
**5. Industry-Wide Challenges: A Sector Under Pressure** Shanxi Coking's struggles mirror broader industry difficulties, with weak upstream cost support and downstream demand squeezing margins.
Under China's "dual carbon" goals, experts suggest transitioning toward clean coal technologies, extending industrial chains, and investing in renewables like wind and solar.
**6. Outlook: Transformation is Key** Analysts maintain a "cautiously optimistic" rating, forecasting net profits of 34 million yuan, 202 million yuan, and 301 million yuan for 2025-2027.
Shanxi Coking's parent company, Shanxi Coking Coal Group, provides resource security, but long-term success hinges on diversifying away from coke and investment income dependence.
While cost-cutting measures may stabilize near-term performance, the path to transformation remains arduous for traditional coking enterprises. Industry consolidation could eventually benefit leading players like Shanxi Coking.
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