Overall business environment

The principal activities of China Infrastructure & Logistics Group Ltd. are investment in and the development, operation and management of container and other ports (including the WIT Port (武漢陽邏港), the Multi-Purpose Port (通用港口), the Hannan Port (漢南港) and the Shipai Port (石牌港), all located in the Yangtze River Basin in Hubei Province, the PRC), and the provision of port related integrated logistics, leasing of port-related warehouses, supply chain management, trading services and other services.

In 2023, the inland port in the PRC completed the cargo throughput of 3.80 billion tonnes , representing a year-on-year increase of 14.2%; In terms of region, the cargo throughput in the Yangtze River increased by 15.9% year-on-year. Container throughput was 21.322 million TEUs, representing a year-on-year increase of 15.2%.

Since Hubei Port became the immediate holding company of the Company in January 2022, the integration of phase I, II and III terminals of Yangluo Port has been completed so as to further optimize port logistics resources, all of which were conducive to the synergy and development of the Group’s port business.

The WIT Port and the Multi-Purpose Port

The WIT Port is located along the Yangtze River in the Yangluo Economic Development Zone, Wuhan, Hubei Province, the PRC.

Wuhan has a solid and developed industrial base, and is where various major industrial operators have commenced operations in, including operators of automobile and parts, chemical products, steel, grain, wood, textile, machinery and equipment as well as construction material businesses. They have been and will continue to be the major suppliers of gateway cargo containers transportation service in the WIT Port.

There are many ports opened. Due to the channel passage capacity limitations along the upstream regions of the Yangtze River, large ships are precluded from navigating directly between those areas and Shanghai. The trans-shipment service provided by the WIT Port offers a more economical alternative for customers in these areas, namely the trans-shipment of container cargoes to Shanghai or direct shipping overseas upon amalgamation at Yangluo Port. The economic hinterlands which are serviced by the WIT Port include Hunan, Guizhou, Chongqing, Sichuan, Shanxi, Henan, Hubei and Shaanxi Provinces. In 2023, the regional routes of “Wuhan-Huanggang” and “Wuhan-Ezhou”, rail-water route of “Macheng-Wuhan￾Shanghai-Ethiopia”, rail-water route of “Yingcheng-Wuhan-Shanghai/Guangdong”, river-sea route of “Russia-Shanghai￾Yangluo Port” and the direct shipping route of “Yangluo Port to Kailai Port in Vietnam” were newly opened. The direct shipping route of “Yangluo Port to Kailai Port in Vietnam” is the fourth international direct shipping route opened by Wuhan. It is the most convenient transportation channel between Hubei and ASEAN region, which will help promote business and trade between Hubei and ASEAN, and help Hubei to build a modern comprehensive traffic and transportation system leading central China, radiating the whole country, and reaching the whole world. In addition, two new ships were put into operation on the international direct route of “Wuhan-Japan, South Korea and Russia”, forming a regular export schedule of two shipments per week. Enriching shipping routes and increasing the number of shipments are beneficial to the further enhancement of the turnover rates of import and export goods in Hubei, marking the further enhancement of the position of Wuhan International Port as a hub and taking the construction of the Wuhan maritime centre along the middle reaches of the Yangtze River to a new stage.

The business expansion in 2023 was highly effective. Container throughput amounted to 900,142 TEUs, representing an increase of 12.3% over the same period last year. The assembling and dissembling of containers in CFS increased significantly, with a total of 18,661 TEUs, representing an increase of 10% over the same period last year. The loading and unloading volume of general cargo continued to rise, with 190 voyages of bulk carriers completed and 252,000 tonnes of cargoes loaded and unloaded. The introduction of the new business of conversion of bulk cargo to container for cobblestone can increase the income of nearly RMB500,000 per year. The container management realizes the unified management of logistics in the WIT Port (陽邏港), and the radiation scope is further expanded, and the container management service is extended to Yichang, Huangshi, Jiangxi and other places.

The Group has also developed port related services, including agency and integrated logistics services to expand its revenue sources. Such agency and integrated logistics services include bonded warehousing, customs clearance, break bulk and distribution at the WIT Port.

The Hannan Port

The Hannan Port is located along the Yangtze River in Wuhan, adjacent to the Shanghai-Chengdu Expressway, Beijing- Zhuhai Expressway and is within 80 kilometers of the Beijing-Guangzhou and Beijing-Kowloon rail link.

Wuhan, the provincial capital of Hubei, is an important transport hub city in the PRC. In terms of riverway traffic, Wuhan is linked through the Yangtze River with eight provinces (namely Jiangsu, Anhui, Hubei, Sichuan, Jiangxi, Hunan, Yunnan and Guizhou) and Shanghai. Given the important role of Wuhan in the development of the Yangtze River Economic Belt, the Directors consider that it is in the interests of the Group to make further investments in its port businesses in the Wuhan area.

The Hannan Port creates synergies between the WIT Port and the Hannan Port, particularly because the management team of the WIT Port has extensive experience in the construction, development and management of ports in the PRC. Being the feeder port of the WIT Port, the Hannan Port can increase the throughput capacity of the WIT Port to satisfy the demand for logistics services in Wuhan. The WIT Port, together with the Hannan Port, can provide more cost effective solutions to the Group’s customers. The Hannan Port will be developed into a multi-purpose service platform in several phases, providing terminal, warehousing and logistics services, RORO (Roll on Roll off), bulk cargo transportation and storage, automobile spare parts processing and logistics services.

Since Hubei Port became the immediate holding company of the Company in January 2022, the Group has proactively explored all favorable business opportunities and seized the favorable opportunity of the upcoming construction of the Hannan Bridge and the Sixth Ring Road to strive for the settlement of bridge construction-related enterprises in Hannan Port Industrial Park. At the same time, the Group has vigorously developed its logistics and transportation service business around Hannan. The Group will keep a close eye on the development opportunities brought by the construction of the Hannan Bridge which promotes the explosive expansion in the demand of logistics and transportation services due to the need to transport bridge construction materials and equipment, actively integrate various superior resources, organize relevant supporting services, and make every effort to smooth the supply channels of materials, so as to build the industrial park into a distribution centre for imported goods. We endeavour to engage with new customers for new projects to create more economic benefits for the Group.

The Shipai Port

The Shipai Port is located in Shipai Town, Zhongxiang City, Hubei Province, the PRC and is intended to be developed into a port, logistics and industrial mixed-use port district with an area of approximately 25 square kilometers. The port portion of the Shipai Port will occupy an area of approximately 2.5 square kilometers with four 1000-tonne class berths, and a logistics park covering approximately 2.5 square kilometers will be constructed next to the port area. The investment in the Shipai Port provides an opportunity for the Group to expand its geographical coverage and create synergy among its ports.

The Shipai Port commenced commercial operations in 2018. Currently, four 1000-tonne class berths and around 70 mu of temporary stacking yard have been built. Two 40t gantry cranes, one 7-tonne forklift have been installed at the front of the terminal, with an investment of RMB120 million. As a comprehensive terminal, Shipai Port is mainly engaged in container businesses for goods such as fertiliser and conversion of bulk cargo to container for crushed stone, supplemented by port logistics services for bulk cargo such as construction materials, steel, block stones and chemical raw materials, become an important comprehensive terminal in the Han River Basin

The Hanjiang Logistics Centre

The Group owned the Hanjiang logistics centre adjacent to the Shayang Port. It comprises 7 blocks of warehouses and an ancillary office building and it is intended to be held as investment property for generating rental income.

Tongshang Supply Chain

Leveraging the Group’s extensive experience in the operation and management of various ports and terminals located within the Yangtze River Basin in Hubei Province, coupled with its solid customer and supplier network cultivated during its many years of business operation, Tongshang Supply Chain Management (Wuhan) Co., Ltd.* (通商供應鏈管理（武漢）有限公司) (“Tongshang Supply Chain”) serves as the principal supply chain service provider for up-stream suppliers and down-stream customers through the supply chain management and trading business of the Group. The development of supply chain management and trading business will enable the Group to establish deeper connections with both supply and demand sides of the supply chain, positioning in various business such as trading, logistics, storage and delivery of bulk grain commodities domestically and in Southeast Asia and enhance efficiency of integrated services. At the same time, it will enable the Group to consolidate and optimise flows of commodities, capital and information for the supply chain, which will facilitate trading among enterprises, reduce costs and strengthen competitiveness of the Group, striving to build a bulk grain trading and distribution centre which centered around Wuhan, Hubei and relying on the port

Operating results

Revenue

For the year ended 31 December 2023, the Group’s revenue amounted to HK$361,301,000 (2022: HK$319,535,000), representing an increase of approximately 13.1% as compared to 2022. The increase was mainly due to the offsetting effect of (i) the increase in revenue from terminal and related business of 15.0% to HK$152,042,000 (2022: HK$132,252,000), mainly due to the increase in container throughout handled by the WIT Port (陽邏港), the cessation of price cutting competition after the completion of acquisition of the controlling interests of the Group by Hubei Port since January 2022 and the successful integration of the operations of Phase I, Phase II and Phase III of Yangluo Port area, and the increase in the standard tariff of both gateway cargo containers and trans-shipment containers drove the increase in revenue from the terminal service business; (ii) the decrease in integrated logistics service income of 37.4% to HK38,230,000 (2022: HK$61,067,000); (iii)the significant increase in revenue of 34.9% to HK$158,281,000 (2022: HK$117,315,000) from the supply chain management and trading business, due to commencement of the rice and broken rice trading business since September 2022 and the continued strong demand for such business; and (iv) the increase in stacking yard and warehouse leasing income of 43.2% to HK$12,748,000 (2022: HK$8,901,000) in the WIT Port and the Hannan Port.

Terminal service

Container throughput

Provision of terminal service, container handling, storage and other service, general and bulk cargoes handling service at the WIT Port is one of the Group’s principal business. Total throughput achieved by the WIT Port for the year ended 31 December 2023 increased by approximately 12.3% to 900,142 TEUs (2022: 801,537 TEUs). Among them, the shares of local and trans-shipment cargoes were about 35.7% and 64.3% respectively. The gateway cargoes throughput decreased by approximately 4.8% to 320,905 TEUs (2022: 337,042 TEUs) and the trans-shipment cargoes throughput increased by approximately 24.7% to 579,237 TEUs (2022: 464,495 TEUs).

The increase in the total throughput of the WIT Port was mainly due to the cessation of price cutting competition after the completion of acquisition of the controlling interests of the Group by Hubei Port since January 2022 and the successful integration of Phase I, Phase II and Phase III of Yangluo Port area. Besides, a new trans-shipment route between Yangluo and Huanggang region and Ezhou intercity trans-shipment route were added during the year. Hubei opened the first direct ASEAN shipping route from Wuhan to Kailai Port in Vietnam on 15 November 2023. The newly added routes boosted the increase in land-to-water transportation containers business and the Group has continued to increase its share of certain markets.

Market share

The Group’s market share of container throughput in Wuhan for the year ended 31 December 2023 was approximately 32% (2022: 29%) based on a total of 2,790,000 TEUs (2022: 2,700,000 TEUs) handled for the whole of Wuhan Ports in 2023.

Integrated logistics service

The integrated logistics service business of the Group provides agency and logistics services mainly at the WIT Port and the Hannan Port, including provision of freight forwarding, customs clearance, transportation of containers and logistics management services. Revenue generated from the integrated logistics service business for the year ended 31 December 2023 decreased by 37.4% to HK$38,230,000 (2022: HK$61,067,000). The relevant revenue accounted for approximately 10.6% of the Group’s total revenue for the year ended 31 December 2023 (2022: 19.1%).

The decrease was mainly attributable to the decline in business volume from the certain agency and logistics services with thin gross margin because of the Group’s business optimization in place during the year ended 31 December 2023.

Supply chain management and trading business

The revenue of the Group’s supply chain management and trading business increased by 34.9% to HK$158,281,000 (2022: HK$117,315,000) which accounted for approximately 43.8% of the Group’s total revenue for the year ended 31 December 2023 (2022: 36.7%).

Due to the robust market demand of the agriculture and food product, the Group have commenced the rice and broken rice trading business since September 2022 and the revenue from supply chain management and trading business increased significantly during the year ended 31 December 2023

Property business

Revenue for the Group’s property business was mainly generated from the port and warehouse leasing business of the Hannan Port, Wuhan which owns investment properties of leasehold lands, berth, commercial buildings and pontoon, as well as the leasing of a stacking yard and certain warehouses at the WIT Port during the year ended 31 December 2023. The port and warehouse leasing income for property business increased by 43.2% to HK$12,748,000 (2022: HK$8,901,000) which accounted for approximately 3.5% of the Group’s total revenue for the year ended 31 December 2023 (2022: 2.8%).

The increase was mainly due to the increase in revenue from the leases for the stacking yard and warehouses at the WIT Port and the Hannan Port resulted from the increase in occupancy rate.

Gross profit and gross profit margin

For the year ended 31 December 2023, gross profit decreased by 9.0% to HK$77,653,000 (2022: HK$85,371,000) and gross profit margin was 21.5% (2022: 26.7%). The decrease in gross profit and gross profit margin was mainly due to the significant increase in revenue from the supply chain management and trading business with relatively lower gross profit margins.

Other income

Other income for the year ended 31 December 2023 increased by approximately 305.0% to HK$22,117,000 (2022: HK$6,201,000). The increase was mainly due to (i) the increase in government subsidies of approximately HK$4,242,000 granted to certain subsidiaries of the Group; (ii) the Group recorded a gain of HK$3,549,000 on the disposal of associates during the year; and (iii) the foreign exchange gain of approximately HK$6,851,000, mainly arising from loans from the ultimate controlling shareholder denominated in RMB, which decreased and generated foreign exchange gains due to the continued depreciation of RMB during the year

Decrease in fair value gain of investment properties

The Group holds certain investment properties, including (i) the port and warehouse in the Hannan Port; (ii) the logistics centre adjacent to the Shayang Port; and (iii) a stacking yard and certain warehouses at the WIT Port. The Group’s investment properties are revalued at the end of the reporting period on an open market value basis by an independent property valuer. Changes in fair value arising from such revaluations are accounted for as “change in fair value of investment properties” through the consolidated statement of profit or loss and other comprehensive income. For the year ended 31 December 2023, the Group recorded a fair value loss in the value of investment properties of HK$993,000 (2022: a fair value gain in the value of investment properties of HK$25,785,000).

The decrease in fair value gain of investment properties is mainly due to the decrease in the magnitude of rental growth of the warehouse properties in Wuhan for the year ended 31 December 2023

Share of loss of associates

Share of loss was HK$710,000 for the year ended 31 December 2023 (2022: share of profit of HK$796,000) of the associates, namely Wuhan Chang Sheng Gang Tong Automobile Logistics Company Limited* （武漢長盛港通汽車物流有限公司） (“Wuhan Chang Sheng Gang Tong”), which reflected the Group’s share of the results of its 20.4% equity interests of the entity and Tongshang Port (Jiangling) Company Limited* (通商港口(江陵)有限公司) (“Tongshang Port (Jiangling)”), which reflected the Group’s share of the results of its 40.0% equity interests of the entity. The principal activities of Wuhan Chang Sheng Gang Tong are the sale of motor vehicles and provision of car parking services. The principal activities of Tongshang Port (Jiangling) are provision of customs clearance and logistics services.

Profit attributable to owners of the Company for the year

Profit attributable to owners of the Company for the year decreased by HK$5,415,000 or approximately 26.1% to HK$15,360,000 (2022: HK$20,775,000). The decrease in profit attributable to owners of the Company was mainly driven by the offsetting effects of (i) there being a fair value gain from investment properties of approximately HK$25,785,000 recorded during the year ended 31 December 2022 whilst there was no such gain recorded for the year ended 31 December 2023 but a fair value loss of approximately HK$993,000 was recorded resulting from the slightly decrease in market rent; (ii) the decrease in gross profit of HK$7,718,000; (iii) the lower loan facility and the lower interest rate on the loan from the ultimate controlling shareholder resulted in a decrease in financing costs of HK$4,189,000; and (iv) the decrease in general administrative and other operating expenses (excluding depreciation and amortisation) by improving operation efficiency and tightening expenditure control.

Earnings per share (basic and diluted) attributable to owners of the Company for the year ended 31 December 2023 was HK0.89 cents (2022: HK1.20 cents), representing a decrease of 25.8% as compared with that for the year ended 31 December 2022.