China XLX Fertiliser Ltd. (HKEX: 01866) reported a 62% year-on-year surge in net profit to approximately RMB 1.229 billion for the six months ended June 30, 2026. The Hong Kong-listed coal-based fertiliser producer also saw revenue climb 24% to RMB 15.74 billion, supported by volume growth in core products and structural upgrades.

The group’s net profit attributable to owners of the parent rose 54% year-on-year to approximately RMB 921 million. This figure approaches the full-year net profit of 2025, indicating accelerated profitability in the current fiscal period.

Revenue and Segment Performance

Revenue growth was broad-based across the group’s diversified portfolio. Urea sales contributed significantly, with revenue reaching approximately RMB 3.981 billion, up 23% year-on-year. This increase was driven by a 21% rise in sales volume, aided by the commissioning of the Jiujiang Phase II Project which added 560,000 tonnes of output capacity. The average selling price of urea advanced 2% year-on-year as the company expanded sales of high-efficiency humic acid black urea.

Compound fertiliser revenue amounted to approximately RMB 4.103 billion, a 15% year-on-year increase. Sales volume grew 12% due to channel development and differentiated services, while average selling prices rose 3% on feedstock cost increases and marketing efforts for high-efficiency products.

The chemicals segment also delivered strong growth:

• Methanol revenue grew 18% to approximately RMB 1.93 billion
• Liquid ammonia revenue nearly doubled to approximately RMB 1.586 billion
• Melamine sales advanced 20% to approximately RMB 454 million
• DMF sales increased 13% to approximately RMB 661 million
• Polyformaldehyde sales grew 27% to approximately RMB 292 million

What the Numbers Show

A key driver of the profit surge was margin expansion in the core urea business. While urea revenue grew 23%, the average gross profit margin increased by 6 percentage points year-on-year to 27%. This divergence between top-line growth and margin expansion suggests that product mix shifts toward higher-value items like black urea contributed more to profitability than volume growth alone.

Additionally, the group maintained cost discipline despite expansion. Selling, administrative, and financial expenses edged up but remained stable as a ratio of total operating expense compared to the prior year. The proportion of short-term borrowings to total borrowings dropped by 0.5 percentage points, and the working capital gap narrowed by 25%, with working capital increasing by approximately RMB 1 billion.

Outlook and Capacity Expansion

Looking ahead, Chairman Liu Xingxu noted that urea selling prices are expected to be lower in the second half as market supply becomes abundant. However, domestic demand may improve with relaxed export regulations and steady industrial demand pickup.

New capacity additions are scheduled to come online soon:

• Chemical new materials and urea plant at Xinxiang Base: Q3 2026
• Major integrated complex at Zhundong Base: Q4 2026
• Flagship project at Guangxi Base: Q3 2027

These projects aim to enhance economies of scale and reduce unit production costs, reinforcing the group’s cost leadership position.