China Shenhua 2025 Annual Report Analysis: Non-recurring Net Profit Down 19.2%, Net Cash Outflow from Financing Activities Increased by 98.1%

Operating Revenue: Pressure from Both Supply/Demand and Prices, Down 13.2% Year over Year

In 2025, China Shenhua achieved operating revenue of RMB 294.916 billion, down 13.2% year over year from RMB 339.788 billion after the 2024 restatement, failing to meet the annual operating target of RMB 320.0 billion; the completion rate was only 92.2%. By business segment, the revenue decline in the coal business is the core drag: affected by the coal market’s supply-demand relationship, the company’s coal sales volume was 430.9 million tons, down 6.4% from 460.2 million tons in the prior year; meanwhile, the average selling price (excluding tax) fell from RMB 563/ton to RMB 495/ton, a decline of 12.1%. The dual factors led to a significant reduction in coal revenue. In the power business, driven by lower power and heat utilization hours and falling electricity prices, the electricity sales volume was 207.0 billion kWh, down 3.9% year over year; the average electricity selling price fell from RMB 402/MWh to RMB 386/MWh, a decline of 4.0%, and electricity sales revenue also declined.

Net Profit: Profit Scale Shrinks; Adjusted Non-GAAP Decline Is Significant

Net Profit and Non-GAAP Net Profit

In 2025, the company’s net profit attributable to shareholders of the parent company was RMB 52.849 billion, down 5.3% year over year from RMB 55.805 billion after the 2024 restatement; net profit after excluding non-recurring gains and losses was RMB 48.589 billion, down sharply by 19.2% year over year from RMB 60.125 billion in 2024. The decline in non-GAAP profit significantly exceeded the decline in net profit, indicating that the company’s core business profitability is under clear pressure. Regarding non-recurring gains and losses, in 2025 the total was RMB 4.260 billion, mainly consisting of specific expenditures such as the write-off of amounts not required to be paid by subsidiaries/branch companies, etc. In 2024, non-recurring gains and losses were -RMB 4.320 billion. The positive change in non-recurring items buffered, to some extent, the impact of the core business profit decline on net profit.

Earnings Per Share

In 2025, basic earnings per share were RMB 2.660/share, down 5.3% from RMB 2.809/share in 2024; basic non-GAAP earnings per share were RMB 2.445/share, down 19.2% from RMB 3.026/share in 2024, fully consistent with the changes in net profit and non-GAAP net profit.

Expenses: Total Slightly Up, with Divergent Structure

In 2025, the company’s total selling, administrative, R&D, and financial expenses were RMB 15.206 billion, up 4.0% from RMB 14.620 billion in 2024 year over year, exceeding the annual expense target of RMB 14.5 billion.

Selling Expenses

Selling expenses were RMB 527 million, down 8.2% from RMB 574 million in 2024, mainly due to optimization of sales strategies for core businesses such as coal and power, which led to lower costs for market promotion and channel maintenance.

Administrative Expenses

Administrative expenses were RMB 11.380 billion, up 4.2% year over year from RMB 10.924 billion in 2024, mainly due to increases in information service expenses, labor costs, etc. The company’s scale expansion and digital transformation drove higher administrative costs.

Financial Expenses

Financial expenses were RMB 445 million, up 16.5% from RMB 382 million in 2024. This was mainly because foreign exchange losses increased; however, affected by the reduction in interest-bearing liabilities and the fall in interest rates, the company’s interest expense decreased year over year. Meanwhile, a decline in the average deposit balance and falling interest rates also led to reduced interest income.

R&D Expenses

R&D expenses were RMB 2.854 billion, up 4.2% from RMB 2.740 billion in 2024. This was mainly due to R&D investment and progress factors. The company’s total R&D investment for the full year was RMB 4.890 billion, up 17.0%. The proportion of R&D investment to operating revenue increased from 1.2% to 1.7%. Key focus areas included coal safety and high-efficiency intelligent mining, co-firing ammonia and coal-fired boilers, and heavy-haul train group operation control systems, among other projects. The company added 1,229 new patent authorizations during the year, including 560 invention patents. R&D investment continued to increase.

R&D Personnel Profile: Stable Team, Optimized Structure

As of end-2025, the company had 4,233 R&D personnel, accounting for 4.6% of total staff. In terms of educational background: 107 PhD students, 668 master’s students, and 3,006 undergraduates. The proportion of employees with undergraduate or higher education exceeded 89%. In terms of age structure: R&D personnel aged 30–50 accounted for 58.2%, forming an R&D team centered on mid-young professionals, supported by highly educated talent, providing stable talent support for the company’s technological innovation.

Cash Flow: Operating Cash Flow Contracts; Financing Cash Flow Sees a Large Outflow

Cash Flow from Operating Activities

In 2025, net cash flow from operating activities was RMB 75.059 billion, down 17.6% from RMB 91.086 billion in 2024. This was mainly due to declines in revenue from coal and power businesses. Cash received from selling goods and providing labor fell from RMB 356.763 billion to RMB 296.161 billion. At the same time, cash paid for purchasing goods and receiving labor also decreased due to factors such as lower costs for purchased coal; however, the cash flow contraction at the revenue end was more pronounced.

Cash Flow from Investing Activities

Net cash flow from investing activities was -RMB 21.794 billion, narrowing significantly by 74.7% compared with -RMB 86.095 billion in 2024. This was mainly because the company redeemed structured deposit products, and more time deposits were added in the same period of the prior year; cash received from investment redemptions this year reached RMB 48.339 billion. Cash paid to purchase fixed assets, intangible assets, and other long-term assets was RMB 48.398 billion. The scale of investment outflows was basically in line with the prior year.

Cash Flow from Financing Activities

Net cash flow from financing activities was -RMB 96.242 billion, up 98.1% from -RMB 48.590 billion in 2024. This was mainly because the company had more payments for dividends and debt repayments: cash paid for distributing dividends, profits, or paying interest during the year totaled RMB 87.204 billion, of which RMB 64.374 billion was distributed to shareholders of the parent company. Meanwhile, cash paid to repay debts was RMB 22.913 billion, a significant increase from RMB 13.138 billion in the prior year.

Key Risks Faced

Market Competition Risk

Competition in the energy industry is becoming increasingly intense. The coal industry faces dual pressures from demand reaching a peak and the “stabilize supply and price” policy. On the power demand side, the trend shows “more capacity additions but no increase in incremental volume.” Market competition in industries such as chemicals and transportation is becoming even fiercer. The company’s integrated operations are squeezed from both resource and demand ends, and seasonal and structural conflicts are highlighted.

Policy Risk

Policies in the national energy sector are driving profound changes in energy supply-demand dynamics, structure, and technology. Environmental protection policies for the coal industry are becoming increasingly stringent. Controls on energy consumption and emissions indicators are tightening. The stance that energy enterprises are constrained by policy is long-term and continually being strengthened, which affects the approval process for the company’s industrial layout and newly built/expanded projects, as well as changes in operation and management models.

International Operating Risk

The global trend toward multipolarity in geopolitics is accelerating. Escalations such as trade wars and technology monopolies are increasing. Overseas projects face risks including public safety and currency fluctuations, which may cause overseas project returns to fall short of expectations and reduce asset return rates.

Safety and Environmental Protection Risks

Risks to safe production in coal mines are intertwined and layered, and the situation for ensuring energy supply is severe. National requirements for ecological and environmental protection are becoming more stringent. Under the “dual carbon” backdrop, energy conservation, emissions reduction, and environmental protection constraints are further increased. The company faces a continuing rise in compliance costs related to safety and environmental protection.

Compensation of Directors, Supervisors, and Senior Management

During the reporting period, the compensation of the company’s directors and senior management was as follows:

• Chairman: Lü Zhiren resigned in March 2025. The total pre-tax remuneration received within the company during the reporting period was RMB 0.8169 million (including the performance-based remuneration for 12 months in the 2024 term already fulfilled/paid out);
• General Manager: Zhang Changyan’s total pre-tax remuneration during the reporting period was RMB 1.0183 million;
• Deputy General Managers: Wang Xingzhong—RMB 1.2799 million pre-tax; Li Zhiming—RMB 1.3270 million pre-tax;
• Chief Financial Officer: Song Jinggang also serves as the Secretary of the Board of Directors, with total pre-tax remuneration of RMB 1.3496 million.

In terms of compensation, the company pays directors executing the duties and the general manager based on performance evaluations tied to operating results. The structure includes basic annual salary, performance annual salary, and incentive awards for terms of office. Compensation for independent non-executive directors is a fixed allowance of RMB 300,000 per year. The compensation structure for employee directors includes post salary, performance salary, and a comprehensive subsidies and allowances package. The overall compensation system is closely linked to performance evaluation, balancing incentives and constraints.

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Responsible editor: Xiao Lang KuaiBao