Revenue
Our revenue decreased by RMB436.1 million, or 3.1%, from RMB14,027.3 million in ten months ended October 31, 2013 to RMB13,591.2 million (US$2,223.5 million) in ten months ended October 31, 2014, primarily due to a decrease in revenue derived from sales of cement.
Our revenue from sales of cement products amounted to RMB10,990.0 million (US$1,798.0 million) in the ten months ended October 31, 2014, which represented a decrease of RMB497.9 million, or 4.3%, from RMB11,487.9 million in the ten months ended October 31, 2013, primarily due to the decrease in unit selling price. Our sales volume of cement products increased slightly by 0.4 million tons from 45.8 million tons in the ten months ended October 31, 2013 to 46.2 million tons in the ten months ended October 31, 2014, primarily due to an increase in our production capacity. The average unit selling price of our cement products decreased by 5.3% from RMB251.1 per ton in the ten months ended October 31, 2013 to RMB237.8 (US$38.9) per ton in the ten months ended October 31, 2014, primarily due to a slowdown of the overall economy in China and a decrease in demand for infrastructure construction projects in the Northeastern China.
Our revenue from sales of clinker totaled RMB1,585.7 million (US$259.4 million) in the ten months ended October 31, 2014, representing an increase of RMB99.7 million, or 6.7%, from RMB1,486.0 million in the ten months ended October 31, 2013, primarily due to the increases in sales volume and average unit selling price. Our sales volume of clinker increased by 5.2% from 7.7 million tons in the ten months ended October 31, 2013 to 8.1 million tons in the ten months ended October 31, 2014, mainly due to increases in our production capacity and our export of clinker products. The average unit selling price of clinker increased by 1.1% from RMB193.8 per ton in the ten months ended October 31, 2013 to RMB196.0(US$32.1) per ton in the ten months ended October 31, 2014, primarily because of a higher selling price for the clinker products we sold offshore.
Our revenue from sales of concrete products and other products and services, including sales of pipes and bubble bricks as well as provision of transportation service and equipment installation services, totaled RMB1,015.5 million (US$166.1 million) in the ten months ended October 31, 2014, representing a decrease of RMB37.9 million, or 3.6%, from RMB1,053.4 million the ten months ended October 31, 2013, primarily reflecting a decrease of RMB281.0 million in sales of other products and services, partially offset by an increase of RMB243.1 million in sales of concrete products.
Cost of sales
Our cost of sales increased by RMB32.5 million, or 0.3%, from RMB10,599.7 million in the ten months ended October 31, 2013 to RMB10,632.2 million (US$1,739.4 million) in the ten months ended October 31, 2014, primarily due to an increase of RMB93.8 million in depreciation and amortization. Our cost of sales as a percentage of revenue increased from 75.6% in the ten months ended October 31, 2013 to 78.2% in the ten months ended October 31, 2014. Our cost of raw materials as a percentage of cost of sales decreased from 35.7% in the ten months ended October 31, 2013 to 34.7% in the ten months ended October 31, 2014, primarily due to the decrease in oil prices and increased efficiency in our unified procurement procedure. Our cost of coal as a percentage of cost of sales slightly decreased from 25.7% in the ten months ended October 31, 2013 to 25.3% in the ten months ended October 31, 2014, primarily due to a decrease in coal prices. Our average purchase price of coal decreased from RMB576 per ton in the ten months ended October 31, 2013 to RMB533 (US$87.2) per ton in the ten months ended October 31, 2014. Our cost of power as a percentage of cost of sales increased from 14.2% in the ten months ended October 31, 2013 to 14.6% in the ten months ended October 31, 2014, primarily due to an increase in the purchase price of power. Depreciation and amortization as a percentage of cost of sales increased from 7.9% to 8.7% in the ten months ended October 31, 2013 and 2014, primarily due to the completion of most of our production facilities in Shanxi province, which do not have a direct bearing on production capacity.
Gross profit
As a result of the foregoing, our gross profit decreased by RMB468.6 million, or 13.7%, from RMB3,427.6 million in the ten months ended October 31, 2013 to RMB2,959.0 million (US$484.1 million) in the ten months ended October 31, 2014. Gross profit margin decreased from 24.4% in ten months ended October 31, 2013 to 21.8% in the ten months ended October 31, 2014.
Other revenue
Other revenue remained stable at RMB184.3 million in the ten months ended October 31, 2013 and RMB183.3 million (US$30.0 million) in the ten months ended October 31, 2014.
Selling and marketing expenses
Selling and marketing expenses increased by RMB55.9 million, or 14.9%, from RMB374.7 million in the ten months ended October 31, 2013 to RMB430.6 million (US$70.4 million) in the ten months ended October 31, 2014. Salary and employee benefits increased by RMB23.7 million from RMB158.5 million in the ten months ended October 31, 2013 to RMB182.2 million (US$29.8 million) in the ten months ended October 31, 2014, primarily due to an increase in the number of our employees and an increase in the base rate for insurance premiums that we are required to pay for our employees under PRC law. Transportation expenses increased by RMB31.5 million from RMB115.0 million in the ten months ended October 31, 2013 to RMB146.5 million (US$24.0 million) in the ten months ended October 31, 2014, primarily due to an increase in our sales to foreign countries. Selling and marketing expenses accounted for 2.7% and 3.2% of our revenue in the ten months ended October 31, 2013 and 2014, respectively.
Administrative expenses
Administrative expenses increased by RMB97.6 million, or 10.8%, from RMB907.6 million in the ten months ended October 31, 2013 to RMB1,005.2 million (US$164.5 million) in the ten months ended October 31, 2014, primarily due to an increase in employee’s salaries and benefits. Employees’ salaries and benefits increased by RMB45.9 million from RMB357.0 million in the ten months ended October 31, 2013 to RMB402.9 million (US$65.9 million) in the ten months ended October 31, 2014, primarily due to an increase in the number of our employees and an increase in the base rate for insurance premiums that we are required to pay for our employees under PRC law. The number of our employees increased from 22,219 as of October 31, 2013 to 23,529 as of October 31, 2014. Audit and consulting expenses increased by RMB5.8 million from RMB19.3 million in the ten months ended October 31, 2013 to RMB25.1 million (US$4.1 million) in the ten months ended October 31, 2014, primarily because of the higher audit fees charged by our accountants. Other taxes and charges increased by RMB2.1 million from RMB100.6 million in the ten months ended October 31, 2013 to RMB102.7 million (US$16.8 million) in the ten months ended October 31, 2014, primarily due to the increase in land use tax in Shandong province. Depreciation and amortization increased by RMB4.4 million from RMB166.9 million in the ten months ended October 31, 2013 to RMB171.3 million (US$28.0 million) in the ten months ended October 31, 2014, primarily reflecting the expansion of our production facilities. Our administrative expenses accounted for 6.5% and 7.4% of our revenue in the ten months ended October 31, 2013 and 2014, respectively.
Profit from operations
As a result of the foregoing, our profit from operations decreased by RMB650.0 million, or 28.0%, from RMB2,325.1 million in the ten months ended October 31, 2013 to RMB1,674.1 million (US$273.9 million) in the ten months ended October 31, 2014.
Finance costs
Finance costs increased by RMB147.4 million, or 18.2%, from RMB811.8 million in the ten months ended October 31, 2013 to RMB959.2 million (US$156.9 million) in the ten months ended October 31, 2014, primarily due to an increase in our borrowings. The proportion of finance costs to revenue increased from 5.8% in the ten months ended October 31, 2013 to 7.1% in the ten months ended October 31, 2014.
Profit before taxation
As a result of the foregoing, our profit before taxation decreased by RMB811.0 million, or 52.4%, from RMB1,548.2 million in the ten months ended October 31, 2013 to RMB737.2 million (US$120.6 million) in the ten months ended October 31, 2014.
Income tax
Income tax expenses decreased by RMB162.2 million, or 33.0%, from RMB492.0 million in the ten months ended October 31, 2013 to RMB329.8 million (US$54.0 million) in the ten months ended October 31, 2014, primarily due to the decrease in our profits before tax. Our effective tax rate was 31.8% and 44.7% in the ten months ended October 31, 2013 and 2014, respectively.
Profit for the period
As a result of the foregoing, our profit for the year decreased by RMB648.8 million, or 61.4%, from RMB1,056.2 million in the ten months ended October 31, 2013 to RMB407.4 million (US$66.6 million) in the ten months ended October 31, 2014. Our profit margin decreased from 7.5% in the ten months ended October 31, 2013 to 3.0% in the ten months ended October 31, 2014.