💸 ECONOMY IN 1ST HALF OF 2022 | APU JSC: ACING THE PANDEMIC | GOBI JSC: LOSSES DESPITE INCREASED SALES

POWERED BY

Good morning! As Mongolians say “Naadmiin daraa namar”, which means “Autumn comes right after Naadam”, indeed, it’s become a bit chilly immediately after the festivities. Anyway, we hope everyone enjoys the more or less nice weather outside before it gets colder and unbearably windy!

🤔 DID YOU KNOW?

💸 MONGOLIA’S ECONOMY IN FIRST HALF OF 2022

The economic indicator figures for the year's first half have been released. Exports and state budget revenues increased, and the balance of payments deficit, inflation and livestock prices have also risen.

To foreign currencies

As of last month, the foreign currency deposits reached ₮4.5 billion, which is 55.2% higher than the previous year’s. The strengthening of the US dollar against other currencies, combined with the decline in the Mongolian currency reserves, seemed to have served as a signal for people to make currency deposits.

Increase in budget revenue

In the first six months of this year, the state budget revenue increased by 12.6%, currently at ₮8 billion. This is due in no small part to the increased VAT and social insurance premium rates which have risen by ₮458.9 billion and ₮391.9 billion, respectively.

International trade

Mongolia traded with 145 countries in the first half of this year, and total exports reached $5.3 billion, an increase of $1.2 billion from last year, resulting in a surplus of $1.4 billion. 82.5% of the total exports were made to China, which, as usual, mainly consisted of coal and copper concentrates.

The rise and rise of prices

The consumer price index for the first half of this year reached 16.1%, which includes a 19.5% increase in prices for food products, an increase of 27.2% for transportation, and an increase of 14.1% for clothing and textiles. The consumer price index considers the prices of 373 consumer products, of which 45.5% were imported goods, accounting for 57.1% of the 16.1% inflation.

And finally… although some key economic indicators for the first half of the year have been released, GDP growth has yet to be announced. The Bank of Mongolia has projected this year's GDP growth to be 2.4%.

📈 DATA STORY

Since the beginning of the year, prices of RON 92 gasoline has increased by 6.8%, while prices for diesel fuel has grown by as much as 40.1%. For those who mainly rely on RON 92 gasoline it might sound like good news, but for the overall economy that consumes twice as much diesel as RON 92, it's nearly catastrophic. Indeed, diesel fuel, which has become ₮300 more expensive per liter, accounted for 50% of this year's oil imports driving inflation rates even higher.

🥤 APU: ACING THE PANDEMIC

Does anyone own or is planning to buy the shares of APU JSC, the first Mongolian company to be valued at ₮1 trillion? If yes, then their Q2 financial report summary below might be of great use to you.

Net profit grows 2.9 times

Before the pandemic, the net profit of APU JSC was ₮29 billion in the first half of 2019, and reached ₮82.1 billion in the same period of this year, increasing 2.9 times. 😮 It’s clear that the company overcame the COVID-19 era quite spectacularly, in comparison to most businesses operating on the brink of bankruptcy. But how?

• Perhaps, export growth… Their sales increased by ₮173.1 billion or 44.3% compared to the period before the pandemic. Last year, APU JSC produced 4 types of Sengur beer for the Chinese market and sold its Chinggis Khan beer in Russia's GUM Department Store, increasing sales to both countries by 440% and 220%, respectively, since 2020.

We could not find information on how much the sales of these beer brands increased this year. However, considering overall sales of the company were up 28% YoY in the first half of 2022, Russians and the Chinese seem to have acquired a taste for Sengur and Chinggis Khan beers.

Assets & Liabilities

As of the first half of this year, the total assets of APU JSC increased by ₮133.9 billion from the same period last year and reached ₮729.4 billion, of which 71.7% is owner’s property. The total liabilities made up ₮206 billion, accounting for 64.3% of the total working capital and resulting in a debt-to-assets ratio of 28.2%.

Overall

APU JSC, with a market value of ₮1.4 trillion, has increased its net profit and sales even in difficult times, so it’s very likely that they will remain Mongolia's top company in the long term.

👚 GOBI: LOSSES DESPITE INCREASED SALES

Gobi JSC made sales of ₮45.9 billion in the first half of 2022, an increase of 16% from the same period last year. However, they lost ₮17.5 billion during the reporting period.

Q2 overview

The company’s domestic sales account for ₮26 billion or 57% of total sales, with foreign sales making up for the rest. In the first half of 2022, domestic sales increased by 50% compared to the same period last year, while physical sales in foreign markets decreased by 18% and online sales in foreign markets dropped by 5%.

Positive impact on sales

• The opening of borders in May and the subsequent increase in the number of foreign tourists were positive news for sales. Specifically, 21% of domestic sales in Q2 was made up of purchases by tourists.

• Sales in China grew by an impressive 84% YoY, although the overall performance of the company in foreign markets was lackluster. Sales in Europe and North America increased by only 14% and 3%, respectively, from the same period last year.

• Gobi JSC raised prices for their products sold domestically by 15%, which contributed to the increase in domestic sales.

Conclusion

Gobi JSC is still one of the largest companies outside the mining industry that export goods from Mongolia to the rest of the world. Although the company was hit hard by the pandemic, it’s already starting to recover as tourists start to flock to the country. So lo and behold, good times are coming!

⛏️ FEATURING COAL MONGOLIA 2022

Dear mining industry pros,

Have you already thought about participating in “Coal Mongolia 2022”, the largest international coal trade and investment forum in the country to be held for the 10th time in September?

If you are looking to expand your business and set up a booth for your company there, it might be a good idea to start worrying about it now. 👇

• The 10% discount on booth rentals and badges will end in 10 days.

• 40% of the exhibition area is already booked, which is a significant increase from previous years.

Visit the official page for more information.

🏃‍♀️ QUICK STORIES

📌 Virtual asset service providers legally required to register by September 26, 2022. This also applies to foreign crypto exchanges and other virtual asset service providers operating in Mongolia. Entities who fail to provide the Financial Regulatory Commission with the required documents and register by the specified date, shall be liable to pay relevant fines.

📌 2.500 tourists visit Naadam’s introduction ceremony in 2022. After being suspended for two years due to Covid-19, the Naadam festival was finally celebrated this year, with tourists all around the world coming to Mongolia to witness the event. From thousands of travelers who visited the country during Naadam, around 2.5 thousand attended the main introduction ceremony.

📌 Bogd Bank JSC announces dividend of ₮19.28 per share. 15% of the bank's ₮8 billion net profit for Q2 2022, or ₮1.2 billion, will be distributed in cash among the 62.5 million shares in circulation. The company will close the list of shareholders entitled to receive dividends on August 9, 2022.

📌 Fitch Ratings have affirmed that the Long-Term Issuer Default Ratings for the Development Bank of Mongolia remain at ‘B’, with the Outlook Stable. The ratings indicate that the financial commitments are being met, with the state being highly likely to provide support to the bank if needed. As the Development Bank of Mongolia is the only policy financial institution in Mongolia, the stability of the bank is crucial to the Mongolian economy.

🟦 TOP NEWS

1. Mongolia says Russia-China gas pipeline will break ground in 2024. (Financial Times)

2. Ju-Jitsu International Federation takes 2023 World Championships to Mongolia. (Inside the Games)

3. Fitch Affirms Mongolia's Khan Bank at 'B'; Outlook Stable. (FitchRatings)

4. Mongolia now has a roadmap for the sustainable development of the cashmere sector. (MONTSAME)

5. Mongolia’s paradoxical education problem. (East Asia Forum)

6. ‘Mongolian Craftsmen-2022’ exhibition displaying best works. (MONTSAME)

⬜ GLIMPSE OF MONGOLIA

About: Sükhbaatar Square is the central square of Mongolia’s capital Ulaanbaatar, with a large colonnade monument to Chinggis Khan, as well as to Ögöödei Khan, and Khubilai Khan dominating the square's north side directly in front of the Government Palace. Right at the heart of the square stands the bronze statue of Sükhbaatar, a founding member of the Mongolian People's Party and leader of the Mongolian partisan army during the Revolution of 1921.