Zhongfu Industrial Achieved Revenue Growth but Profit Decline in 2024, with Aluminum Processing Business Gross Margin Falling Below 10%

Affected by factors such as the sustained pressure on the aluminum processing business in recent years, with gross margin falling below 10%, Zhongfu Industrial (600595.SH) experienced revenue growth but profit decline in 2024.

This evening, Zhongfu Industrial released its 2024 annual report. During the reporting period, the company achieved a record high revenue of 22.761 billion yuan, up 21.12% YoY; net profit attributable to shareholders of the publicly listed firm was 704 million yuan, down 39.30% YoY; net profit excluding non-recurring gains and losses was 593 million yuan, down 38.61% YoY.

On the same day, the company also announced its Q1 2025 performance, with revenue of 5.021 billion yuan, down 3.10% YoY; net profit attributable to the parent company was 230 million yuan, up 426.79% YoY. The company attributed this performance change mainly to increased profitability in the aluminum processing business.

Cost increase was one of the key factors for Zhongfu Industrial's revenue growth but profit decline last year. In 2024, the operating cost was 20.554 billion yuan, up 29.75% YoY. The company attributed this to increased sales of aluminum processing products, rising prices of alumina, the main raw material for aluminum, and increased electricity costs.

Further, the company's gross margin for main business in 2024 was 9.37%, down 5.97 percentage points YoY; among which, the gross margin for the aluminum processing business decreased by 2.88 percentage points YoY, and the gross margin for the aluminum business decreased by 9.96 percentage points YoY.

In terms of production, the company achieved aluminum production of 408,800 mt last year, down 6.16% YoY, with inventory decreasing by 61.53% YoY; aluminum processing product production was 677,500 mt, up 32.90% YoY, with inventory increasing by 47.68% YoY.

Notably, the company's accounts receivable reached a record high of 1.946 billion yuan in 2024, up 86.52% YoY, which the company attributed to increased sales of aluminum processing products; short-term loans were 523 million yuan, up 110.07% YoY, which the company attributed to replenishing working capital for aluminum processing.

In fact, as Zhongfu Industrial's largest business, which has accounted for more than half of its revenue for years, the aluminum processing business has seen a continuous decline in gross margin, with gross margins of 22.16%, 15.72%, 11.04%, and 8.16% from 2021 to 2024.

Specifically, Zhongfu Industrial's aluminum processing business mainly includes can body stock, can lid stock, pull tab stock, and automotive aluminum for new energy vehicles. Currently, the company has formed a business model centered on "aluminum and aluminum deep processing," supported by "coal mining, thermal power generation, and carbon" for upstream and downstream industry synergy.

Zhongfu Industrial mentioned in its industry competition risks that in recent years, with changes in the demand structure of the aluminum processing market, some aluminum processing enterprises have invested in new capacity, which may lead to capacity surplus and intensified competition, affecting the company's aluminum processing business. The company also stated that it is "continuously optimizing product structure, developing new products, and enhancing the competitiveness of its products."

Notably, Zhongfu Industrial's aluminum processing products have been certified by multiple international producers, making it a mainstream supplier in the industry. In 2024, the company achieved sales of 640,300 mt of aluminum deep processing products, of which export sales were 416,100 mt, accounting for about 65%.

In April, Zhongfu Industrial stated on the investor interaction platform that the company's product exports are mainly packaging materials for cans, which have been exported to more than 40 countries and regions. Since the US tariff policy on China was introduced in 2018, the company has continuously developed international markets and adjusted its customer structure. Currently, exports to the US are temporary small orders, and this US tariff policy has almost no impact on the company. As of now, the company's aluminum deep processing business has full orders, and production and operations are normal.