Sichuan Lutianhua Co Ltd

Lutianhua recently announced that Agricultural Bank of China Ningxia Branch holds 53.86 million shares, or 3.43% of total share capital, and plans to reduce its stake by 15.68 million shares, or 1% of total share capital. Bank shareholders have already carried out several rounds of reductions: on August 20, Bank of China Luzhou Branch and its concert parties Bank of China Chengdu Branch and Bank of China Ningxia Branch completed a reduction of 14.43 million shares, or 0.92%; in February, the same concert parties completed a reduction of 8.18 million shares, or about 0.522%; in April, Agricultural Bank of China Sichuan Branch completed a reduction of 15.68 million shares, or 1%. Behind the bank shareholders' exit, the company posted first-half 2026 revenue of 2.189 billion yuan, down 8.03% year on year, net profit attributable to the parent of 8.28 million yuan, down 76% year on year, and a net loss attributable to the parent excluding non-recurring items of 10.64 million yuan, down 203% year on year. In 2025, revenue was 4.495 billion yuan, down 11.34% year on year, with a net loss excluding non-recurring items of 38.43 million yuan. In 2024, revenue was 5.069 billion yuan, down 21% year on year, with a net loss excluding non-recurring items of 19.28 million yuan. Excluding non-recurring items, the company has now been loss-making for three consecutive years, and its book profit is highly dependent on government subsidies. At the industry level, domestic urea capacity in 2025 was 80.8 million tonnes, up 4.65% from 2024, with output expected at 71.7 million tonnes, up 10.88% year on year, while consumption was 62.2 million tonnes, cementing an oversupply pattern. Urea spot prices fell from 2,228 yuan per tonne at the end of 2024 to 1,995 yuan per tonne at the end of June 2026. The company's designed methanol capacity is 700,000 tonnes, but its capacity utilisation rate in 2025 was only 36.1%, while the utilisation rate for automotive urea was 19.4%. Its wholly owned subsidiary Lutianhua Import and Export Trading Company has been drawn into a letter-of-credit fraud lawsuit. After losing at first instance, it has appealed. If it ultimately loses, the overall loss would be 68.1585 million yuan. So far, it has cumulatively made provisions for impairment of 27.1035 million yuan, with an additional provision of 6.9757 million yuan in the first half of 2026. As of the end of July, the actual guarantee balance of the company and its controlled subsidiaries was 533 million yuan, accounting for 8.40% of the latest audited net assets, of which guarantees involved in litigation amounted to 60 million yuan.

Lutianhua released its 2026 interim report, with net profit attributable to the parent company of 8.28 million yuan, down 75.83% from the same period last year. Total operating revenue was 2.19 billion yuan, a year-on-year decrease of 8.03%. Net cash inflow from operating activities was 289 million yuan, an increase of 292 million yuan compared with the same period last year. The company's latest asset-liability ratio was 28.61%, gross margin was 10.18%, ROE was 0.13%, and diluted earnings per share was 0.01 yuan.

Lutianhua disclosed its earnings forecast, expecting attributable net profit for the first half of 2026 to be between 7 million and 10 million yuan, a year-on-year decline of 70.54% to 79.37%. Deducted non-recurring net loss is projected at 12 million to 15 million yuan, compared with a profit of 14.3808 million yuan in the same period last year. Basic earnings per share are estimated at 0.0045 to 0.0064 yuan. The company said the sharp decline in performance was mainly due to a year-on-year decrease in sales volume of major products, as well as reduced interest income and investment income resulting from fewer purchases of structured deposits and wealth management products.