CFY CF Energy Corp

CF Energy Corp. (TSX-V: CFY) (“CF Energy” or the “Company”, together with its subsidiaries, the “Group”), an energy provider in the People’s Republic of China (the ”PRC” or “China”), announces that the Company has filed its audited consolidated financial results for the year ended December 31, 2023  

Results for the year ended December 31, 2023

Continuing Operations

In millions	2023		2022		Change		%		2023		2022		Change
(except for % figures)	RMB		RMB		RMB				CAD		CAD		CAD
Continuing Operations
Revenue	434.0		309.2		124.8		40	%	82.8		59.8		23.0
Gross Profit	119.3		105.6		13.7		13	%	22.8		20.4		2.4
Gross Profit Margin	27.5	%	34.2	%			-6.7	%
Net Profit	3.0		7.3		(4.3	)	-59	%	0.6		1.4		(0.8	)
Adjusted net Profit (loss) [Non-IFRS]	20.7		(3.6	)	24.3		675	%	4.0		(0.7	)	4.7
EBITDA	72.2		77.3		(5.1	)	-7	%	13.8		15.0		(1.2	)
Adjusted EBITDA [Non-IFRS]	89.9		66.4		23.5		35	%	17.2		12.9		4.3

Revenue in 2023 was RMB434.0 million (approx. CAD82.8 million), an increase of RMB124.8 million (approx. CAD23.0 million), or 40%, from RMB309.2 million (approx. CAD59.8 million) in 2022.

Gross profit in 2023 was RMB119.3 million (approx. CAD22.8 million), an increase of RMB13.7 million (CAD2.4 million) or 13% from RMB105.6 million (approx. CAD20.4 million) in 2022.   Overall Gross margin in 2023 was 27.5%, a decrease of 6.7 percentage points from 34.2% in 2022.  

In millions	2023		2022		Change		%		2023		2022		Change
(except for % figures)	RMB		RMB		RMB				CAD		CAD		CAD
Continuing Operations
Net profit for the year	3.0		7.3		(4.3	)	-59	%	0.6		1.4		(0.8	)
Non-recurring/non-operating items
Fair value change on derivative financial instrument	18.5		(11.4	)	29.8		262	%	3.5		(2.2	)	5.7
Reversal of share-based payment expense	-		0.8		(0.8	)	-100	%	-		0.2		(0.2	)
Government financial assistance	(0.8	)	(0.3	)	(0.5	)	130	%	(0.1	)	(0.1	)	0.0
Adjusted net profit (loss) for the year (Non-IFRS)	20.7		(3.6	)	24.3		675	%	4.0		(0.7	)	4.7

Net profit in 2023 was RMB3.0 million (approx. CAD0.6 million), a decrease of RMB4.3 million (approx. CAD0.8 million) from RMB7.3 million (approx. CAD1.4 million) in 2022. Net profit in 2023 included non-recurring/non-operating items. On a comparable basis, after excluding the fair value loss on derivative financial instrument of RMB18.5 million (approx. CAD3.5 million) and the government financial assistance of RMB0.8 million (approx. CAD0.1 million), the adjusted net profit in 2023 (non-IFRS) was RMB20.7 million (approx. CAD4.0 million), an increase of RMB24.3 million (approx. CAD4.0 million) or 675% from adjusted net loss of RMB3.6 million (approx. CAD0.7 million) in 2022.

Basic earnings per share (“EPS”) in 2023 from continuing operations was RMB0.14 (CAD0.04) per share. Adjusted EPS in 2023 was RMB0.31 (CAD0.06) per share (non-IFRS).

In millions	2023		2022		Change		%		2023		2022		Change
(except for % figures)	RMB		RMB		RMB				CAD		CAD		CAD
Continuing Operations
EBITDA for the year	72.2		77.3		(5.1	)	-7	%	13.8		15.0		(1.2	)
Non-recurring/non-operating items
Fair value change on derivative financial instrument	18.5		(11.4	)	29.8		262	%	3.5		(2.2	)	5.7
Reversal of share-based payment expense	-		0.8		(0.8	)	-100	%	-		0.2		(0.2	)
Government financial assistance	(0.8	)	(0.3	)	(0.5	)	130	%	(0.1	)	(0.1	)	0.0
Adjusted EBITDA for the year (Non-IFRS)	89.9		66.4		23.5		35	%	17.2		12.9		4.3

EBITDA (Non-IFRS measure) in 2023 was RMB72.2 million (approx. CAD13.8 million), a decrease of RMB5.1 million (approx. CAD1.2 million), or 7%, from RMB77.3 million (approx. CAD15.0 million) in 2022. EBITDA in 2023 included non-recurring/non-operating items. On a comparable basis, after excluding the fair value loss on derivative financial instrument of RMB18.5 million (approx. CAD3.5 million) and the government financial assistance of RMB0.8 million (approx. CAD0.1 million, the adjusted EBITDA in 2023 (non-IFRS) was RMB89.9 million (approx. CAD17.2 million), an increase of RMB23.5 million (approx. CAD4.3 million), or 35%, from RMB66.4 million (approx. CAD12.9 million) in 2022.

The audited consolidated financial results and Management’s Discussion and Analysis (MD&A) can be downloaded from www.sedarplus.com or from the Company's website at www.cfenergy.com.

Chair Statement

In the past five years, CF Energy has successfully transformed from a traditional natural gas company to a district energy solutions provider. The Sanya Haitang Integrated Smart Energy Project is now operating with a steadily increasing customer base. The advantage of Haitang Bay is that customers can have a one-stop energy supplier under the influence of Changfeng natural gas division. Through customer accumulation, electrochemical energy storage can be further promoted as an added value and effectively promoted among customers in Haitang Bay.

CF Energy is also one of the few companies in China to successfully operate a battery swap station network. Our goal for entering the battery swap business has always been in testing viability in district energy storage via station and battery packs. The company’s expertise and understanding of storage related technology has increased immensely in the three years that the company has entered this business. It will become an important next step in the integration of the Sanya district energy management solution. The supply chain generated by the operation mode of battery swapping and storage, combined with the number of users accumulated in pipeline business, further promotes the use of electrochemical energy storage in industry and commerce.The Company envisions the smart energy centralized cooling for hotels, battery swap stations, and operates as a virtual power plant with active end user participation. The combined energy capacity from the cooling system, battery swap stations, additional storage units, can act as a virtual power plant, providing grid services such as peak shaving, load balancing, and frequency regulation. Through the above methods, we aim to promote investment in electrochemical energy storage for the target customer group (industrial and commercial), complete the investment in Changfeng's electrochemical energy storage cloud platform, and reduce operating costs. We will also form a digital platform for user side energy consumption management, and actively participate in peak shaving and frequency regulation of national power grids, generating sustainable income.

Company Outlook

While the Company is ambitious in its goal to become the largest clean energy service solutions provider and carbon asset management company in Hainan, we recognize the economic and political instability in the world and will be cautious in our investments in the next few years. That being said, the need for CF Energy to become a clean energy service solutions provider rather than just a natural gas distributor is more important than ever. The natural gas industry faces a variety of challenges ranging from regulatory impacts to market dynamics, and in the competitive and shifting landscape, we must evolve to embrace the changes and plan ahead.

Distributed Smart Energy Ecosystem – What We Achieved:

CF Energy Corp. has developed from a traditional natural gas company into a comprehensive energy solutions provider that aims to incorporate its smart energy system and battery swapping network via energy storage technology to create a highly integrated and efficient framework for sustainable energy management.

CF Energy’s Haitang Bay integrated smart energy project and Meishan project are examples of standalone distributed energy system with advanced grid technologies that enable real-time monitoring and responsive energy distribution based on demand and supply conditions. Through ice storage technology, the Haitang Bay integrated smart energy system was founded.

We have entered the field of electrochemical energy storage for cost reduction and energy conservation through the mode of battery swapping in new energy vehicles. The battery pack also serves as a power storage unit, if scaled to a network, can also be considered a distributed energy system. Incorporating battery storage into an energy system provides flexibility and enhances system stability. Strategically placed storage systems, both at utility-scale and distributed sites, ensure energy availability across the network, especially in remote or critical areas. The CF Energy battery swap station network in Sanya already successfully provides an energy storage and distribution network for the EV taxis in Sanya city.

Combining deep cultivation in the energy storage field of ice and electrochemical energy storage technology, vigorously expanding cooperation with companies in the industry, relying on the customer bas of the natural gas company, further promoting the application of industrial and commercial energy storage.

Distributed Smart Energy Ecosystem – What We Are Currently Doing:

The company is working with partners in the IoT (internet of things), and cloud services field to create an efficient EMS (energy management system) that connects the standalone distributed smart energy systems with various energy storage technologies (including battery storage). - IoT Devices and Sensors are deployed across all components of the energy system—solar panels, energy storage units, battery swapping stations, and consumer endpoints. They collect real-time data on energy production, storage levels, battery health, and consumption patterns. Using historical data and machine learning models, the EMS can predict demand spikes, potential system disruptions, and optimal energy production schedules. This helps in preemptive management, reducing wastage, and increasing system reliability.This interconnected ecosystem facilitates a sustainable, resilient, and efficient energy landscape, capable of reducing carbon footprints and promoting the use of clean energy technologies. Integrated software and management platforms monitor and control the flow of energy throughout the ecosystem. They optimize when to store energy, when to release it, and how to efficiently distribute it across various needs. CF Energy’s integrated system operates on a cycle of data-driven decision-making where sensors collect data, the EMS analyzes and makes decisions, and commands are sent to adjust production, storage, or distribution. This smart, interconnected ecosystem not only supports current energy needs but also scales to meet future demands and technological advancements.

By adopting an open market model, we aim to further attract upstream/midstream clean energy enterprises and improve the design, implementation, and operation of regional energy management roles. Further improve the integration of relevant supply chains, from the production end of upstream related equipment to equipment integrators, and finally in the development of relevant software and equipment operation and maintenance, forming a closed-loop chain involving production, sales, and maintenance.

Distributed Smart Energy Ecosystem – Vision Moving Forward:

In the past five years, the Company has successfully established itself in the district energy and renewable energy space. The Haitang Bay smart energy centralized cooling project was the Company’s first venture into energy management services and despite setbacks during COVID-19, the project is now successfully in operation, reducing the overall carbon footprint of the Haitang Bay area. CF Energy is also one of the few companies in China to successfully operate battery swap station networks. Our goal for entering the battery swap business has always been in testing viability in district energy storage via station and battery packs. CF Energy’s stations also incorporate solar panel installation to optimize the energy usage of the stations.

The Company envisions the smart energy centralized cooling for hotels, battery swap stations, and operates as a virtual power plant with active end user participation. The combined energy capacity from the cooling system, battery swap stations, and possibly additional storage units, can act as a virtual power plant, providing grid services such as peak shaving, load balancing, and frequency regulation.

The Company is working to integrate a demand response system where hotels and other end users can opt-in to adjust their energy usage during peak periods in response to incentives. For example, shifting non-essential power usage to off-peak hours. EV owners can charge their vehicles during off-peak hours to benefit from lower rates and reduce grid strain during high-demand periods. Alternatively, V2G (Vehicle to Grid) concept allows EVs to return energy to the grid during peak times, effectively using the vehicle’s battery as a grid resource. Furthermore, utilizing a platform for energy trading that allows surplus energy (from renewable sources and stored energy) to be sold back to the grid or shared among participants will add additional revenue stream and encouraging sustainable practices. The integration must connect all components through a smart grid that enables two-way communication between the energy providers and consumers. This integration allows for real-time monitoring, control, and optimization of energy flows.

The traditional core business of CF Energy will also be integrated into this system, utilize the flexibility and high-energy density of natural gas to balance and support the renewable components of the system, especially during peak demands or intermittent renewable supply. The combined heat and power (CHP) design is already a part of the Haitang Bay project, with the aim to simultaneously generate electricity and thermal energy from natural gas. The electricity can support the grid or local energy needs, while the thermal energy is used directly for hotel heating or to augment the centralized cooling system via absorption chillers.

Using natural gas turbines or engines to provide additional power generation capacity, especially during periods when renewable energy sources are insufficient. This can ensure continuous operation of critical infrastructure without interruption.

By integrating these elements, CF Energy works to establish the model of a distributed energy system that can effectively operate as a centralized cooling and heating provider for end consumers, a battery swap station network, and a virtual power plant, all while engaging end users to participate actively in energy management. This not only enhances energy efficiency and sustainability but also creates a cooperative ecosystem that benefits all participants economically and environmentally.

About CF Energy Corp. (Previously known as: Changfeng Energy Inc.)

CF Energy Corp. is a Canadian public company currently traded on the Toronto Venture Exchange (“TSX-V”) under the stock symbol “CFY”. It is an integrated energy provider and natural gas distribution company (or natural gas utility) in the PRC. CF Energy strives to combine leading clean energy technology with natural gas usage to provide sustainable energy to its customer base in the PRC.

CONTACT INFORMATION

Corporate Investment RelationsInvestor.relations@changfengenergy.cn

Charles WangExecutive Assistant to CEO & Chair of the Boardzhaoyu.wang@changfengenergy.cn

Frederick WongDirector of the Boardfred.wong@changfengenergy.cn

Mike LiuVP Capital Marketmike.liu@changfengenergy.cn

Forward-Looking Statements

Certain statements contained in this news release constitute forward-looking statements and forward-looking information (collectively, “Forward-Looking Statements”). All statements, other than statements of historical fact, included or incorporated by reference in this document are Forward-Looking Statements, including statements regarding activities, events or developments that the Company expects or anticipates may occur in the future (including, without limitation, no significant adjustments to the gas selling price and charges for related services imposed by the relevant PRC government, the tourism industry continues to recover from COVID-19 impact and no delay in the development of the electric vehicle battery swap stations or the Haitang Bay Integrated Smart Energy Project). These Forward-Looking Statements can be identified by the use of forward-looking words such as “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “believe” or “continue” or similar words or the negative thereof. No assurance can be given that the plans, intentions or expectations or assumptions upon which these Forward-Looking Statements are based will prove to be correct and such Forward-Looking Statements included in this news release should not be unduly relied upon. Although management believes that the expectations represented in such Forward-Looking Statements are reasonable, there can be no assurance that such expectations will prove to be correct. Such Forward-Looking Statements are not a guarantee of performance and involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements or developments expressed or implied by such Forward-Looking Statements. These factors include, without limitation, no significant and continuing adverse changes in general economic conditions or conditions in the financial, tourism, and gas distribution and electric vehicle markets or delays in the development of key projects. Readers are cautioned that all Forward-Looking Statements involve risks and uncertainties, including those risks and uncertainties detailed in the Company’s filings with applicable Canadian securities regulatory authorities, copies of which are available at www.sedar.com. The Company urges readers to carefully consider those factors. The Forward-Looking Statements included in this news release are made as of the date of this document and the Company disclaims any intention or obligation to update or revise any Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities legislation. This news release does not constitute an offer to sell or solicitation of an offer to buy any of the securities described herein and accordingly undue reliance should not be put on such. This news release contains future oriented financial information and financial outlook information (collectively, "FOFI") (including, without limitation, statements regarding expected average production), and are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraph. The FOFI has been prepared by management to provide an outlook of the Company's activities and results, and such information may not be appropriate for other purposes. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management's reasonable estimates and judgments, however, actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein. Any FOFI speaks only as of the date on which it is made, and the Company disclaims any intent or obligation to update any FOFI, whether as a result of new information, future events or results or otherwise, unless required by applicable laws.

Non-IFRS Financial Measures.

This news release contains financial terms that are not considered in the International Financial Reporting Standards ("IFRS"): EBITDA, Adjusted EBITDA and Adjusted Net Profit. These financial measures, together with measures prepared in accordance with IFRS, provide useful information to investors and shareholders, as management uses them to evaluate the operating performance of the Company. The Company's determination of these non-IFRS measures may differ from other reporting issuers, and therefore are unlikely to be comparable to similar measures presented by other companies. Further, these non-IFRS measures should not be considered in isolation or as a substitute for measures of performance or cash flows prepared in accordance with IFRS. These financial measures are included because management uses this information to analyze operating performance and liquidity. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.