Overview - Hydrophilic colloids are natural food additives that align with the increasing consumer demand for green, eco-friendly, and healthy products, leading to a growing acceptance and recognition among consumers [1][8] - The market for hydrophilic colloids is expanding, with projected sales in China reaching 175,800 tons by 2024, accounting for 36.72% of the global market [1][8] Development History - Since the 1990s, domestic companies have recognized the importance of independent research and development, leading to increased investment and a shift from imitation to innovation in the hydrophilic colloid industry [4] - The industry has entered a rapid development phase, supported by government initiatives and expanding market demand, resulting in a more complete industrial chain [4] Industry Chain - The upstream raw materials for natural hydrophilic colloids primarily come from agriculture and forestry, while synthetic colloids are produced through chemical synthesis [6] - The downstream applications span various sectors, including food and beverage, pharmaceuticals, daily chemicals, and textiles, enhancing product quality and stability [6] Current Market Situation - The demand for hydrophilic colloids is driven by the growing health consciousness among consumers, leading to broader applications in food, pharmaceuticals, and cosmetics [1][8] - The market is characterized by a diverse range of products, with significant growth in high-value applications [1][8] Competitive Landscape - The hydrophilic colloid industry in China features numerous participants, with varying focuses on different segments, such as gelatin, carrageenan, and konjac gum [10] - Major listed companies include Green New Hydrophilic Colloid, Dongbao Biological, and Yizhi Konjac, with Green New Hydrophilic Colloid leading in revenue at 989 million yuan for 2024 [10][13][15] Future Trends - Companies are expected to increase R&D investments to develop hydrophilic colloids with enhanced properties, including higher stability and additional functionalities [17] - The industry will face stricter environmental standards, prompting a focus on sustainable materials and green production processes to meet market demands for eco-friendly products [17]

Overview - The demand for carrageenan is increasing in the food industry due to rising health consciousness and the preference for natural additives among consumers [1][10] - In the pharmaceutical sector, carrageenan is recognized for its biocompatibility and biodegradability, making it suitable for drug delivery systems and wound dressings [1][10] - China has become a major producer and consumer of carrageenan, with projected sales reaching 67,300 tons in 2024, although market size is expected to decline to 2.872 billion yuan due to falling product prices [1][10] Industry Background - Economic development and rising income levels in China are driving demand for carrageenan across various sectors, particularly food, cosmetics, and pharmaceuticals [4] - The food industry is the primary application area for carrageenan, accounting for over 70% of consumption, with a growing need for high-quality products [8] Industry Chain - The upstream of the carrageenan industry includes the cultivation and harvesting of red algae, while the downstream encompasses applications in food, medical, cosmetic, and agricultural sectors [6] - Carrageenan is widely used in beverages, candies, and meat processing for thickening and stabilizing, and in cosmetics for its moisturizing properties [6] Market Dynamics - In 2024, China's carrageenan export volume is expected to reach 25,200 tons, with an export value of approximately 20.84 million USD [12] - Major export destinations include Spain, Russia, and the Philippines, with significant revenue contributions from these markets [12] Competitive Landscape - The carrageenan market in China is becoming increasingly competitive, with key players including Green New Hydrophilic Gels, Zhejiang Shangfang Biotechnology, and Fujian Green Power Biotechnology [14][19] - Green New Hydrophilic Gels reported a revenue of 989 million yuan in 2024, with a gross profit margin of 22.49% [17] Future Trends - The application of carrageenan is expected to expand in biotechnology, particularly in tissue engineering and regenerative medicine [21] - There is a growing emphasis on sustainable production practices, with companies likely to adopt green technologies and biodegradable products to meet market demands for environmentally friendly options [21]

Market Position and Production Capacity - The company maintains its market leadership, being recognized as the largest global producer of agar and refined and semi-refined carrageenan products for 2023 and 2024, according to a report by Frost & Sullivan[5][18]. - As of December 31, 2024, the total designed production capacity is 27,390 tons, including 7,265 tons of agar, 10,355 tons of carrageenan, 1,500 tons of konjac composite products, and 3,300 tons of blended products[6]. - The company completed the acquisition of 82% of Hong Tai Shun International Trading Co., which holds 99.83% of PT Hongxin Algae International, enhancing its production capacity for semi-refined carrageenan by 4,300 tons annually[10]. - The designed production capacity for konjac gum products at the Shiyan Haiyi production base is 660 tons annually, maintaining the same capacity as in 2023[6]. - The company has been recognized as the leading producer of carrageenan and agar in China for 2020 and 2021, and continues to hold this position for 2023 and 2024[17][18]. Financial Performance - For the fiscal year 2024, the company's revenue was RMB 989.3 million, a decrease of RMB 184.7 million or 15.7% compared to RMB 1,174.0 million in 2023[36]. - The gross profit for fiscal year 2024 increased by RMB 184.8 million or 491.0%, resulting in a gross margin of 22.5%, up 19.3 percentage points from the previous year[37]. - The net profit for fiscal year 2024 was RMB 60.9 million, a turnaround from a net loss of RMB 85.4 million in 2023, representing an increase of RMB 146.3 million[37]. - Sales revenue from carrageenan products decreased by RMB 220.9 million or 31.2% compared to the previous year, primarily due to a decline in seaweed material prices[36]. - The sales revenue from compound products increased by RMB 29.1 million or 17.4% in fiscal year 2024[36]. - The total asset value for fiscal year 2024 was RMB 1,572.3 million, an increase from RMB 1,205.3 million in 2023[26]. - The net debt to total asset ratio for fiscal year 2024 was 26.9%, compared to 24.3% in 2023[29]. - The group's revenue for fiscal year 2024 was RMB 989.3 million, a decrease of RMB 184.7 million or 15.7% compared to RMB 1,174 million in fiscal year 2023[54]. - The group's gross profit for fiscal year 2024 was RMB 222.5 million, an increase of RMB 184.9 million or 491.8% compared to fiscal year 2023[58]. - The overall gross profit margin for fiscal year 2024 was 22.5%, an increase of 19.3 percentage points from fiscal year 2023[58]. Research and Development - The number of R&D personnel increased to 106 in 2024, up from 80 in 2023, indicating a focus on innovation and product development[7]. - The company launched the production of agarose microspheres in 2022, aimed at the biopharmaceutical sector, indicating a diversification of its product offerings[10]. - The company established "Xiamen Blue Seaweed Film Biotechnology Co., Ltd." in July 2023 to develop 100% biodegradable seaweed films for beauty masks and plastic alternatives, reflecting its commitment to sustainability[10]. Corporate Governance and Management - The board of directors includes independent non-executive directors who have confirmed their independence as per the listing rules[100]. - The company emphasizes high standards of corporate governance, which are crucial for balancing the interests of shareholders, customers, and employees[168]. - The board has appointed Mr. Chen Jincong as both Chairman and CEO, emphasizing the importance of his leadership in the group's strategic planning and business development[176]. - The company has established appropriate insurance arrangements for directors and senior officers facing legal claims[186]. - The board confirmed that there are no significant uncertainties regarding the company's ability to continue as a going concern[196]. Employee Relations and Compensation - The group has 1,148 full-time employees as of December 31, 2024, with 961 located in mainland China and 187 in Hong Kong and other regions[73]. - Competitive compensation packages are offered to employees, with regular reviews based on group performance and individual contributions[73]. - The company has maintained competitive compensation to attract and motivate employees, with no major disputes with customers or suppliers during the year[97]. Environmental and Regulatory Compliance - The company has not recorded any environmental violations or exceeded environmental standards during the reporting period[98]. - The company has complied with all relevant laws and regulations without any significant violations during the review period[99]. Shareholder Information and Dividends - The company proposed a final cash dividend of HKD 0.012 per share for the fiscal year 2024, totaling HKD 10.5 million[40]. - As of December 31, 2024, the company's distributable reserves were approximately RMB 867 million[93]. - The company proposed a final dividend of HKD 0.012 per share, totaling HKD 10.5 million, compared to HKD 0 in the previous year[90]. Future Outlook - The company expects a rebound in global demand for hydrophilic colloid products in the foreseeable future, driven by a decline in seaweed prices and an anticipated increase in customer demand[38]. - The group anticipates a rebound in global demand for hydrophilic colloid products in the foreseeable future, supported by a decrease in seaweed sales prices[49]. Audit and Risk Management - The audit committee consists of three independent non-executive directors, with Mr. He Guicheng serving as the chairman, responsible for reviewing financial statements and overseeing risk management policies[164]. - The internal audit department is responsible for reviewing operational, financial, and compliance controls to ensure adherence to the group's risk management and internal control policies[200]. - Audit results and control deficiencies are reported to management responsible for ensuring timely remediation[200].

Financial Performance - Revenue for the fiscal year 2024 was RMB 989.3 million, a decrease of 15.7% compared to RMB 1,174.0 million in fiscal year 2023[3] - Gross profit was RMB 222.5 million with a gross margin of 22.5%, an increase of RMB 184.9 million and 19.3 percentage points from RMB 37.6 million and 3.2% in fiscal year 2023[3] - The profit for the fiscal year 2024 was RMB 60.9 million, with a net profit margin of 6.1%, an increase of RMB 146.3 million and 13.4 percentage points from a net loss of RMB 85.4 million and a net loss margin of 7.3% in fiscal year 2023[3] - Basic and diluted earnings per share for the fiscal year 2024 were RMB 0.074, compared to a loss of RMB 0.103 in fiscal year 2023[4] - The group’s net profit for the fiscal year 2024 was RMB 609 million, a significant increase of RMB 1.463 billion compared to a net loss of RMB 854 million in fiscal year 2023[55] Assets and Liabilities - Total assets as of December 31, 2024, were RMB 1,572.3 million, an increase from RMB 1,543.6 million as of December 31, 2023[6] - Total equity increased to RMB 850.1 million from RMB 754.1 million year-over-year[7] - Non-current liabilities rose to RMB 126.4 million from RMB 92.4 million in the previous year[7] - Cash and bank balances increased to RMB 120.7 million from RMB 72.6 million year-over-year[6] - The total amount of trade and other receivables reached RMB 149,536,000 in 2024, up from RMB 127,337,000 in 2023[39] Revenue Breakdown - Revenue from the Chinese market was RMB 475,237,000 in 2024, down from RMB 595,174,000 in 2023, reflecting a decrease of about 20.2%[22] - Sales revenue from carrageenan products decreased by RMB 220.9 million or 31.2% due to a decline in seaweed material prices[56] - The sales value in the Chinese market for fiscal year 2024 was RMB 475.2 million, a decrease of RMB 119.9 million or 20.1% compared to fiscal year 2023[57] Expenses - The cost of raw materials and consumables used in 2024 was RMB 598,374,000, down from RMB 884,780,000 in 2023, representing a reduction of 32.4%[25] - Research and development expenses for 2024 amounted to RMB 22,808,000, an increase of 46.1% from RMB 15,589,000 in 2023[26] - The total employee benefits expense for 2024 was RMB 117,576,000, slightly down from RMB 117,866,000 in 2023[25] - The group's sales and distribution expenses rose to RMB 20.6 million, an increase of RMB 2.8 million or 15.7% due to more overseas sales representatives[61] - Administrative expenses increased by RMB 7.3 million or 7.5% to RMB 104.6 million, primarily due to increased material costs in R&D functions[62] Dividends and Shareholder Returns - The company proposed a final cash dividend of HKD 0.012 per share, subject to shareholder approval[2] - The proposed final dividend for 2024 is HKD 0.012 per share, totaling approximately RMB 9,713,000, compared to zero in 2023[38] - The company plans to pay a final cash dividend of HKD 0.012 per share, totaling HKD 10.5 million, to share its operational results with shareholders[54] Corporate Governance - The company confirmed adherence to the corporate governance code, with the exception of the separation of the roles of chairman and CEO as per code provision C.2.1[90] - The company has adopted the principles and provisions of the corporate governance code as its governance framework since its listing[89] - The audit committee, consisting of three independent non-executive directors, reviewed the company's annual performance and financial statements for the fiscal year 2024[93] Future Outlook and Investments - The company is currently evaluating the comprehensive impact of new accounting standards and interpretations on its operations[17] - The company expects that newly issued accounting standards will not have a significant impact on its financial reporting in the foreseeable future[16] - The group plans to invest further in expanding the production capacity of Hongxin using internal resources in the foreseeable future[77] - The group has entered into an investment agreement to inject up to RMB 63.85 million into Xiamen Blue Sea Algae Film Biotechnology Co., Ltd.[73] Market Position and Strategy - The group maintained its market leadership in agar products and refined carrageenan products in China, being recognized as the largest global producer of these products by 2025[48] - The company has launched a 100% biodegradable seaweed film as a plastic alternative, aiming to capitalize on global decarbonization opportunities[51] - The group aims to diversify the geographical location of its production facilities to reduce costs and improve product quality and competitiveness[52] Taxation - The income tax expense for 2024 was RMB 19,996,000, compared to a tax benefit of RMB 27,447,000 in 2023[28] - The effective tax rate for 2024 was 25%, up from 24% in 2023[32] - The group’s subsidiaries in Indonesia and Hong Kong are subject to a corporate tax rate of 22% and 16.5%, respectively[29] Compliance and Reporting - The company will publish its annual report for the fiscal year 2024 on its website and the stock exchange website, in compliance with applicable laws and regulations[97] - The company will suspend share transfer registration from June 3, 2025, to June 6, 2025, to determine eligibility for attending the annual general meeting and voting rights[94] - The company confirmed that there were no significant events affecting the group from December 31, 2024, to the date of the announcement[88]

Financial Performance - The company's revenue for the first half of 2024 was RMB 459.0 million, a decrease of 21.2% compared to RMB 582.9 million in the same period of 2023[7]. - In the first half of 2024, the company's gross profit was RMB 98.8 million, a decrease of RMB 7.3 million or 6.9% compared to the first half of 2023[5]. - The overall gross margin for the first half of 2024 was 21.5%, an increase of 3.3 percentage points from the first half of 2023[5]. - The profit attributable to the owners of the company for the first half of 2024 was RMB 231 million, down RMB 19 million or 7.6% from RMB 250 million in the same period of 2023[22]. - The net profit for the period was RMB 22,624,000, compared to RMB 25,116,000 in the previous year, a decrease of 9.9%[38]. - The company reported a basic and diluted earnings per share of RMB 0.028, unchanged from the previous year[38]. - The company's interim profit for the six months ended June 30, 2024, was RMB 22,624,000, a decrease of 9.9% compared to RMB 25,116,000 for the same period in 2023[39]. - Total comprehensive income for the period was RMB 20,534,000, down from RMB 21,503,000 in the previous year, reflecting a decline of 4.5%[39]. Sales and Market Performance - Sales revenue from agar and carrageenan products accounted for 78.8% of total sales revenue, a decrease of 6.6% compared to the first half of 2023[7]. - Sales revenue from carrageenan decreased by RMB 141.3 million or 39.5% in the first half of 2024, primarily due to a drop in seaweed material prices[13]. - The sales value from the Chinese market accounted for 53.6% of total sales, while the overseas market accounted for 46.4%, with respective sales values of RMB 245.9 million and RMB 213.1 million[5]. - The company anticipates a recovery in global demand for hydrophilic colloid products in the foreseeable future due to reduced inventory levels among customers[5]. - The economic conditions in China and European countries remain weak, impacting overall market demand for the company's products[7]. Cost and Expenses - The sales cost for the first half of 2024 was RMB 360.2 million, a reduction of RMB 116.5 million or 24.4% compared to RMB 476.7 million in the first half of 2023[14]. - Administrative expenses for the first half of 2024 were RMB 491 million, up RMB 36 million or 8.0% from RMB 454 million in the same period last year[18]. - In the first half of 2024, the group's sales and distribution expenses amounted to RMB 94 million, an increase of RMB 9 million or 11.0% compared to the same period in 2023[17]. - The company reported financing costs of RMB 16.7 million for the six months ended June 30, 2024, with financing costs decreasing by RMB 3.0 million or 15.2%[16]. Financing and Cash Flow - Financing costs decreased in the first half of 2024 due to lower procurement prices of seaweed materials and reduced average loan balances in RMB, USD, and HKD[7]. - The company's financing income and costs were RMB 287,000 and RMB 16.7 million respectively, with financing costs decreasing by RMB 3.0 million or 15.2%[16]. - The company’s cash flow from operating activities was impacted by a significant increase in tax payments, which rose by approximately 122% year-over-year[17]. - The total cash and cash equivalents at the end of the period were RMB 64,556 thousand, up from RMB 46,620 thousand at the end of June 2023[17]. Assets and Liabilities - As of June 30, 2024, the group's cash and bank balances reached RMB 646 million, a decrease of RMB 80 million or 11.1% from the end of 2023[23]. - The total assets as of June 30, 2024, amounted to RMB 1,509,240,000, a decrease from RMB 1,543,603,000 at the end of 2023, representing a reduction of 2.2%[40]. - The company's equity attributable to owners increased to RMB 769,274,000 from RMB 745,243,000, reflecting a growth of 3.2%[40]. - Total liabilities decreased to RMB 731,736,000 from RMB 789,491,000, a reduction of 7.3%[41]. - The total bank borrowings amounted to RMB 5,843 million, with RMB 5,251 million due within one year[26]. Research and Development - The company has made progress in developing new applications and end products through its research and development efforts[6]. - The company aims to expand its business into high-tech and commercially attractive compound product markets to meet diverse customer needs[6]. - The company has set long-term goals to provide high-technology products, enhancing its product mix and profitability through continuous investment in R&D[5]. Corporate Governance and Compliance - The audit committee, consisting of three independent non-executive directors, reviewed the unaudited interim results for the first half of 2024[121]. - The company has adopted the corporate governance code and confirmed compliance with its applicable provisions during the first half of 2024, with one exception regarding the separation of the roles of chairman and CEO[119]. - The company has established strict guidelines for securities trading by directors and employees, confirming compliance with these standards during the first half of 2024[120]. Shareholder Information - The ownership structure shows that Mr. Chen Jincong holds a 19.48% equity interest and a 70.87% interest through a concert party agreement, reflecting significant insider ownership[97]. - Major shareholders include Chuangyu and Yingbo, each holding 161,700,000 shares, representing 19.39% of the total shares[99]. - The combined holdings of the concert party agreement amount to 588,000,000 shares, which is 70.49% of the total[99]. Dividend and Share Options - The board did not recommend the distribution of an interim dividend for the first half of 2024[12]. - The company did not propose an interim dividend for 2024, consistent with the decision in 2023[71]. - The company has no options granted, exercised, or canceled under the pre-IPO share option plan as of June 30, 2024[103].

Financial Performance - Revenue for the first half of 2024 was RMB 459.0 million, a decrease of 21.2% compared to RMB 582.9 million in the first half of 2023[1] - Gross profit was RMB 98.8 million with a gross margin of 21.5%, down from RMB 106.1 million and 18.2% in the same period last year[1] - Profit for the first half of 2024 was RMB 22.6 million, with a net profit margin of 4.9%, compared to RMB 25.1 million and 4.3% in the first half of 2023[1] - Operating profit for the first half of 2024 was RMB 46.4 million, down from RMB 52.9 million in the previous year[3] - The company reported a net profit of RMB 23,086 thousand for the six months ended June 30, 2024, compared to RMB 25,008 thousand for the same period in 2023, reflecting a decrease of approximately 7.7%[8] - The total comprehensive income for the six months ended June 30, 2024, was RMB 20,534 thousand, down from RMB 21,503 thousand in the same period of 2023[8] - Profit attributable to ordinary equity holders for the six months ended June 30, 2024, was RMB 23,086,000, down from RMB 25,008,000 in 2023, reflecting a decrease of about 7.69%[36] Dividends and Earnings - The company did not recommend the distribution of an interim dividend for the first half of 2024[1] - Basic and diluted earnings per share for the first half of 2024 were RMB 0.028, compared to RMB 0.030 in the same period last year[3] - Basic and diluted earnings per share for the six months ended June 30, 2024, were RMB 0.028, a decrease from RMB 0.030 in 2023, representing a decline of approximately 6.67%[35] Assets and Liabilities - Total assets as of June 30, 2024, were RMB 1,509.2 million, a decrease from RMB 1,543.6 million as of December 31, 2023[5] - Total liabilities decreased to RMB 731.7 million from RMB 789.5 million at the end of 2023[6] - Cash and bank balances were RMB 64.6 million, down from RMB 72.6 million at the end of 2023[5] - The company’s total liabilities include RMB 4,277,000 in lease liabilities as of June 30, 2024[52] - Trade payables as of June 30, 2024, amount to RMB 83,794,000, a decrease from RMB 103,713,000 as of December 31, 2023[51] Cash Flow and Investments - Operating cash flow for the six months ended June 30, 2024, was RMB 45,391 thousand, a significant improvement from a cash outflow of RMB 46,747 thousand in the same period of 2023[9] - The company incurred a net cash outflow from investing activities of RMB 20,590 thousand for the six months ended June 30, 2024, compared to RMB 4,614 thousand in the prior year[9] - Financing activities resulted in a net cash outflow of RMB 33,129 thousand for the six months ended June 30, 2024, compared to a net cash inflow of RMB 58,536 thousand in the same period of 2023[10] Revenue Breakdown - The group reported total sales of RMB 459,015 thousand for the six months ending June 30, 2024, with the following breakdown: RMB 145,213 thousand from gelatin sales, RMB 216,434 thousand from carrageenan sales, RMB 31,673 thousand from konjac products, RMB 60,910 thousand from blended products, and RMB 4,785 thousand from other sales[27] - Revenue from the Chinese market was RMB 245,862,000, down from RMB 294,712,000 in the previous year, reflecting a decline of approximately 16.5%[30] - Sales revenue from carrageenan decreased by RMB 141.3 million or 39.5% in the first half of 2024, primarily due to a decline in seaweed material prices[68] Expenses and Costs - The company incurred administrative expenses of RMB 45,435,000, which is a slight decrease from RMB 49,061,000 in the previous period[29] - Financing costs amounted to RMB 19,738,000, compared to RMB 16,693,000 in the previous period, indicating an increase of approximately 12.4%[29] - The income tax expense for the period was RMB 7,367,000, down from RMB 8,388,000 in the same period last year[32] - The group's net financial costs for the first half of 2024 were RMB 16.7 million, a decrease of RMB 3.0 million or 15.2% from RMB 19.7 million in the same period of 2023, attributed to a reduction in bank deposit amounts and a decline in loan interest rates[73] Financial Position and Ratios - The group's current ratio as of June 30, 2024, was 1.51, compared to 1.43 as of December 31, 2023, while the capital debt ratio increased to 43.3% from 41.2%[77] - The net current assets as of June 30, 2024, were RMB 329.0 million, an increase of RMB 29.4 million or 9.8% from RMB 299.6 million as of December 31, 2023[78] Corporate Governance and Compliance - The audit committee reviewed the unaudited interim results for the first half of 2024, ensuring compliance with relevant financial reporting standards[96] - The company has adopted corporate governance principles to enhance overall effectiveness and shareholder value[95] Future Outlook - The company anticipates a recovery in global demand for hydrophilic colloid products in the foreseeable future due to price adjustments and customer inventory replenishment needs[67] - The company has set long-term goals for continuous investment in product technology to enhance its product offerings and profitability[66]

Safety and Health Management - In 2023, the company implemented a safety production responsibility system, emphasizing accountability at all levels to enhance safety performance [2]. - The company conducted safety training and inspections, including emergency drills for hazardous chemical leaks and fire evacuations, to improve employee emergency response capabilities [5]. - Over the past three years, the company reported no fatalities due to work-related incidents, with a total of 300 workdays lost due to injuries in the reporting period [6]. - The company provided personal protective equipment such as anti-static clothing and high-pressure gloves to employees engaged in special operations [7]. - The company established a monthly performance evaluation system for production staff to enhance safety performance indicators and address potential safety hazards [2]. - The company organized a "Safety Production Month" in 2023, promoting the concept of "safety first" among employees [3]. - The company adheres to the Occupational Disease Prevention Law, conducting annual health check-ups for employees and maintaining health monitoring files [7]. - The company has implemented a comprehensive safety management system, including regular inspections and emergency response plans for various hazardous operations [2]. - The company actively promotes safety awareness through signage and LED displays in production areas [4]. Employee Management and Training - The total number of employees as of December 31, 2023, is 1,184, all of whom are full-time staff [22]. - The company hired 2 external trainers for specialized training for managerial staff and team leaders in 2023 [14]. - The company has established a comprehensive training management system, including annual and monthly training plans, to enhance employee skills and knowledge [14]. - The company offers various training opportunities, including external training, onboarding for new employees, and management training [14]. - The company aims to cultivate innovative talents and enhance operational efficiency through its training programs [14]. - In 2023, the company conducted 6 employee communication meetings to strengthen the connection between employees and management [29]. - The company emphasizes performance-based management and has optimized its performance evaluation system with four core assessment dimensions [24]. - The company is committed to providing fair treatment to all employees, ensuring compliance with labor laws and regulations [27]. - The company has implemented a "Key Department Talent Pipeline Construction Plan" to match talent with key positions and tailor training programs accordingly [20]. Financial Performance - The group experienced a significant decline in gross profit and gross margin due to a sharp drop in the selling price of carrageenan products, influenced by a substantial decrease in overseas customer demand [70]. - The group recorded an annual net loss for the fiscal year 2023, attributed to high sales costs and rising bank borrowing rates in USD and HKD [70]. - The total revenue for the fiscal year 2023 was RMB 1,174.0 million, a decrease of 16.8% compared to RMB 1,410.9 million in fiscal year 2022 [88]. - The overall gross profit was RMB 180.0 million with a gross margin of 15.3%, down 53.1% and 11.9 percentage points from RMB 384.1 million and 27.2% in fiscal year 2022, respectively [96]. - The sales value from the Chinese market was RMB 595.2 million, an increase of RMB 12.3 million or 2.1%, while the overseas market sales value was RMB 578.8 million, a decrease of RMB 249.2 million or 30.1% [81]. - The company recorded an annual net loss in fiscal year 2023 due to a significant decline in the selling price of carrageenan products and rising bank borrowing rates [79]. - The net loss attributable to the owners of the company was RMB 85.3 million, a decrease of RMB 284.5 million or 142.8% compared to a profit of RMB 199.2 million in fiscal year 2022 [100]. - The cash and bank balances increased by RMB 45.6 million or 117.8% to RMB 84.3 million as of December 31, 2023 [101]. - The current ratio as of December 31, 2023, was 1.43, down from 1.60 as of December 31, 2022 [101]. - The total bank borrowings amounted to RMB 599.1 million, with a weighted average interest rate of 5.73% as of December 31, 2023, compared to 4.59% in the previous year [107]. Corporate Governance and Compliance - The board is responsible for the group's risk management and internal control systems, ensuring their overall effectiveness [35]. - The internal audit department, led by the internal audit manager, conducts reviews of operational, financial, and compliance controls to ensure adherence to risk management policies [36]. - The board reviewed the effectiveness of the risk management and internal control systems and found them to be adequate and effective [37]. - The company has established an insider information disclosure policy to manage and disclose insider information in compliance with regulations [37]. - The company has implemented training for all directors to ensure compliance with listing rules and regulations regarding securities trading [42]. - The company secretary has completed no less than 15 hours of relevant professional training to update skills and knowledge as required by listing rules [43]. - The company's Audit Committee consists of three independent non-executive directors, ensuring compliance with corporate governance standards [189]. - The Nomination Committee reviewed the board's structure and diversity, ensuring appropriate qualifications for board members [191]. - The Remuneration Committee assessed the remuneration of directors and senior management, ensuring transparency in compensation policies [197]. - The company confirmed no significant uncertainties affecting its ability to continue as a going concern [198]. Research and Development - The number of product R&D personnel increased to 80 in 2023, up from 63 in 2022 [58]. - Continuous investment in R&D is aimed at enhancing product offerings, with significant market potential identified for instant agar products and deep-processed carrageenan products [84]. - The group has initiated research and preliminary production of 100% biodegradable seaweed films for plastic alternative packaging and mulch [59]. Shareholder Relations and Dividends - Shareholders have the right to propose independent resolutions at general meetings on significant matters, including the election of individual directors [44]. - The company did not recommend any final dividend for the fiscal year 2023, compared to a final dividend of HKD 0.03 per share for the fiscal year 2022 [143]. - The company’s dividend policy aims to distribute at least 20% of the distributable profit attributable to shareholders, subject to operational needs and future business expansion plans [180]. - The company encourages shareholders to attend the annual general meeting to raise any questions directly to the board and management [178]. - The board has reviewed the implementation and effectiveness of the shareholder communication policy, with satisfactory results [176]. - The company has established a channel for effective communication through its website, where financial information and other relevant data are published [176]. Environmental and Social Responsibility - The company has not recorded any environmental breaches or violations during the fiscal year ending December 31, 2023 [150]. - The company emphasizes the importance of maintaining good relationships with employees, customers, and suppliers to achieve its short-term and long-term goals [149]. - The company has complied with all relevant laws and regulations that significantly impact its business and operations during the review period [151]. - The nature of the company's main business has not undergone significant changes during the year [141].

Financial Performance - Total revenue for the year ended December 31, 2023, was RMB 1,173,991 thousand, a decrease of 16.8% from RMB 1,410,889 thousand in 2022[2] - Gross profit for the year was RMB 37,641 thousand, significantly down from RMB 384,122 thousand in the previous year[2] - The company reported a net loss of RMB 85,444 thousand for the year, compared to a profit of RMB 199,919 thousand in 2022[2] - Basic and diluted loss per share for the year was RMB (0.103), compared to earnings of RMB 0.242 in the previous year[2] - Total revenue for the fiscal year 2023 was RMB 1,174.0 million, a decrease of 16.8% compared to RMB 1,410.9 million in fiscal year 2022[68] - The loss attributable to the company's owners was RMB 85.3 million, a decrease of RMB 284.5 million or 142.8% compared to a profit of RMB 199.2 million in fiscal year 2022[77] - The company incurred a loss of RMB 85.4 million in fiscal year 2023, with a net loss margin of 7.3%, a decline of 142.7% compared to a profit of RMB 199.9 million and a net profit margin of 14.1% in fiscal year 2022[167] Revenue Breakdown - Revenue from the China segment was RMB 595,174 thousand, a slight increase from RMB 582,922 thousand in 2022[18] - Revenue from the European segment decreased to RMB 291,632 thousand from RMB 470,733 thousand in the previous year, reflecting a decline of 38.0%[18] - Revenue from the China segment was RMB 423,478 thousand in 2023, down from RMB 448,184 thousand in 2022, reflecting a decline of approximately 5.5%[43] - In fiscal year 2023, sales value from the Chinese market accounted for approximately 50.7%, while overseas market sales value accounted for 49.3%, compared to 41.3% and 58.7% in fiscal year 2022[69] - Sales value in the Chinese market was RMB 595.2 million, an increase of RMB 12.3 million or 2.1%, while overseas market sales value decreased by RMB 249.2 million or 30.1% to RMB 578.8 million[69] Inventory and Provisions - The company recognized an inventory provision of RMB 142.4 million to adjust inventory to its net realizable value as of December 31, 2023[9] - The company recognized a provision for inventory write-down amounting to RMB 142,424 thousand in 2023, compared to no provision in 2022[46] - The gross profit margin decreased by 24.0 percentage points to 3.2% due to higher sales costs of carrageenan products, including a provision of RMB 142.4 million for inventory[97] - The group recorded a significant impact of RMB 142.4 million in inventory provisions for carrageenan products based on current market price estimates[102] - Inventory as of December 31, 2023, was RMB 784.998 million, down from RMB 906.209 million in the previous year[169] Assets and Liabilities - Total equity as of December 31, 2023, was RMB 754,112 thousand, down from RMB 852,210 thousand in 2022[4] - The total amount of trade payables decreased to RMB 103,713 thousand in 2023 from RMB 137,763 thousand in 2022, a reduction of approximately 24.7%[65] - The total liabilities of the company as of December 31, 2023, were RMB 789.5 million, compared to RMB 838.8 million in the previous year[164] - Total assets decreased to RMB 1,543.6 million as of December 31, 2023, from RMB 1,691.0 million in the previous year[169] Operational Insights - The company plans to continue focusing on operational cash flow and bank borrowings to meet its working capital needs[9] - The company plans to expand the capacity of PT Hongxin to leverage cost advantages and potential tax benefits in the foreseeable future[72] - The company maintains a focus on product innovation and technical expertise to enhance performance and investment returns despite global economic uncertainties[70] - The group plans to continue investing in capacity expansion at PT Hongxin in 2024 as part of its strategy to enhance cost competitiveness[116] Employee and Governance - Employee benefit expenses increased to RMB 117,866 thousand in 2023 from RMB 110,117 thousand in 2022, reflecting a rise of approximately 7.9%[46] - The group had a total employee cost of RMB 117.9 million in fiscal year 2023, compared to RMB 110.1 million in fiscal year 2022[119] - The company has maintained a good working relationship with employees and offers competitive compensation aligned with market standards[138] - The board of directors has complied with all provisions of the corporate governance code for fiscal year 2023, with one exception regarding the separation of roles of chairman and CEO[125][126] Taxation - The company’s subsidiary in Indonesia is subject to a corporate tax rate of 22%, consistent with the previous year[49] - The company plans to maintain a tax rate of 25% for its subsidiaries in China, consistent with the previous year[194] - The income tax expense for 2023 was RMB (27,447) thousand, a decrease from RMB 61,670 thousand in 2022, marking a reduction of approximately 144.5%[196] Shareholder Information - The company declared a final dividend of 3 HK cents per share in 2023, up from 2.5 HK cents per share in 2022, totaling RMB 22,433 thousand[56] - The company did not recommend any final dividend for fiscal year 2023, compared to a dividend of HKD 0.03 per share in fiscal year 2022[167] - In the fiscal year 2023, the company adopted a share incentive plan, purchasing 544,000 shares at a total cost of approximately HKD 482,000[122] - A total of 860,000 shares were vested under the share incentive plan in fiscal year 2023[122]

Financial Performance - For the first half of 2023, the company's revenue was RMB 582.9 million, a decrease of 9.5% compared to RMB 644.2 million in the same period of 2022[8]. - The company reported a net profit attributable to shareholders of RMB 25.0 million, a decrease of 76.0% from RMB 104.4 million in the first half of 2022[14]. - The total comprehensive income for the period was RMB 20,846 thousand, down from RMB 97,626 thousand in the previous year[28]. - The company reported a net profit of RMB 25,008 thousand for the six months ended June 30, 2023, compared to RMB 104,408 thousand for the same period in 2022, indicating a significant decrease[28]. - The net profit for the six months ended June 30, 2023, was RMB 25,116 thousand, a decline of 76.0% compared to RMB 104,460 thousand in the previous year[52]. - The gross profit for the same period was RMB 106,143 thousand, down 45.7% from RMB 195,421 thousand in 2022[52]. - The gross profit margin for carrageenan products significantly declined due to increased average inventory costs and rising sales costs[4]. - Net profit decreased to RMB 25.1 million, down RMB 79.4 million, primarily due to a 37.7% reduction in net sales volume from overseas customers and a gross margin decline of 12.1 percentage points to 18.2%[150]. Market Performance - Sales value in the Chinese market was RMB 294.7 million, an increase of RMB 39.6 million or 15.5%, while overseas market sales value was RMB 288.2 million, a decrease of RMB 100.9 million or 26%[5]. - The sales revenue of carrageenan and agar products accounted for 85.4% of total sales revenue, reflecting a 3.5% decrease compared to the first half of 2022[8]. - The total sales in the Chinese market reached RMB 294,712 thousand, an increase from RMB 255,097 thousand, representing a growth of approximately 15.5%[101]. - In the first half of 2023, the sales revenue of blended products increased by RMB 21.4 million or 55.0% compared to the first half of 2022, driven by an increase in new customer numbers[189]. Assets and Liabilities - As of June 30, 2023, total liabilities amounted to RMB 939,098 thousand, an increase of 11.9% from RMB 838,797 thousand as of December 31, 2022[27]. - The company's bank borrowings increased to RMB 590,362 thousand, up 20.1% from RMB 491,269 thousand in the previous period[27]. - The company's total assets reached RMB 1,818,862 thousand, an increase from RMB 1,691,007 thousand at the end of the previous period[27]. - The total equity as of June 30, 2023, reached RMB 879,764 thousand, a growth of 12.5% from RMB 782,363 thousand at the end of the previous period[28]. - Trade and other payables rose to RMB 227,610 thousand, reflecting an increase of 9.6% compared to RMB 207,838 thousand as of December 31, 2022[27]. - Trade receivables as of June 30, 2023, totaled RMB 155,971,000, up from RMB 107,527,000 as of December 31, 2022, reflecting an increase of approximately 45.0%[139]. Cash Flow and Financing - The company's cash and cash equivalents as of June 30, 2023, were RMB 608,119 thousand, showing an increase from RMB 500,736 thousand at the end of the previous period[28]. - The effective tax expense for the first half of 2023 was RMB 8.4 million, a decrease of RMB 25.0 million or 74.9% compared to RMB 33.4 million in the same period of 2022[12]. - The weighted average interest rate on bank borrowings was 5.64% as of June 30, 2023, compared to 4.46% in 2022[170]. - The group had a net current asset value of RMB 459.7 million, an increase of RMB 29.3 million from December 31, 2022, primarily due to an increase in inventory[169]. - The company incurred financing costs of RMB (19,738) thousand, up from RMB (10,781) thousand in the previous year, marking an increase of approximately 83.5%[77]. Strategic Goals and Investments - The company anticipates a recovery in global demand for hydrophilic colloid products in the foreseeable future due to price adjustments and replenishment of customer inventories[6]. - The company has set long-term goals to enhance product technology levels, aiming to differentiate from competitors and meet changing customer demands[5]. - The company continues to invest in product development, particularly in blended products and processed carrageenan, which are expected to drive future profitability[5]. - The company plans to continue expanding its market presence and investing in new product development to drive future growth[29]. - The group plans to further invest in expanding the production capacity of its subsidiary Hongxin, which specializes in semi-refined carrageenan manufacturing[172]. Employee and Operational Costs - Employee benefits expenses, including director remuneration, increased to RMB 57,558 thousand from RMB 52,063 thousand, reflecting a rise of about 10.6%[77]. - Administrative expenses rose by 2.7% to RMB 45.4 million, mainly due to increased labor costs and annual wage growth[167]. - The group employed 1,257 full-time employees as of June 30, 2023, with 1,201 based in mainland China[174]. Dividends and Share Capital - The company did not propose an interim dividend for 2023, compared to a dividend of 0.02 HKD per share in 2022, which amounted to RMB 14,029[119]. - The company’s share capital increased to RMB 7,485,000 as of June 30, 2023, from RMB 7,444,000 as of December 31, 2022, following the issuance of additional shares[140].

[Performance Highlights](index=1&type=section&id=%E4%B8%9A%E7%BB%A9%E6%91%98%E8%A6%81) [Financial Performance Overview](index=1&type=section&id=%E8%B4%A2%E5%8A%A1%E8%A1%A8%E7%8E%B0%E6%A6%82%E8%A7%88) For the six months ended June 30, 2023, the Group's total revenue decreased year-on-year by 9.5% to RMB583 million, gross profit significantly declined by 45.7% to RMB106.1 million, and gross profit margin decreased from 30.3% to 18.2%, with profit for the period sharply decreasing by 76.0% to RMB25.1 million, and the Board decided not to declare an interim dividend 2023 first half Key Financial Metrics | Metric | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | RMB 582.9 million | RMB 644.2 million | -9.5% | | Gross Profit | RMB 106.1 million | RMB 195.4 million | -45.7% | | Gross Profit Margin | 18.2% | 30.3% | -12.1 percentage points | | Profit for the Period | RMB 25.1 million | RMB 104.5 million | -76.0% | | Net Profit Margin | 4.3% | 16.2% | -11.9 percentage points | - The Board did not recommend the payment of an interim dividend for the first half of **2023**[45](index=45&type=chunk)[122](index=122&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=%E7%BB%BC%E5%90%88%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8) [Interim Condensed Consolidated Statement of Profit or Loss](index=2&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E6%8D%9F%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2023, the company's revenue was RMB583 million, a year-on-year decrease of 9.5%, with gross profit significantly reduced by 45.7% to RMB106 million due to increased cost of sales, operating profit decreased by 64.5% to RMB52.94 million, and increased net finance costs ultimately led to a sharp decline in profit for the period by 76.0% to RMB25.12 million Interim Condensed Consolidated Statement of Profit or Loss | Item | For the six months ended June 30, 2023 (RMB thousand) | For the six months ended June 30, 2022 (RMB thousand, restated) | | :--- | :--- | :--- | | Revenue | 582,876 | 644,157 | | Cost of Sales | (476,733) | (448,736) | | **Gross Profit** | **106,143** | **195,421** | | Operating Profit | 52,938 | 149,061 | | Net Finance Costs | (19,434) | (11,235) | | Profit before Income Tax | 33,504 | 137,826 | | Income Tax Expense | (8,388) | (33,366) | | **Profit for the Period** | **25,116** | **104,460** | | Profit attributable to owners of the Company | 25,008 | 104,408 | | Basic Earnings Per Share (RMB) | 0.030 | 0.127 | [Interim Condensed Consolidated Statement of Comprehensive Income](index=3&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) Building on the profit for the period of RMB25.12 million, a loss of RMB3.61 million from currency translation differences resulted in a total comprehensive income of RMB21.5 million for the first half of 2023, a significant decrease of 78.0% compared to RMB97.89 million in the prior year Interim Condensed Consolidated Statement of Comprehensive Income | Item | For the six months ended June 30, 2023 (RMB thousand) | For the six months ended June 30, 2022 (RMB thousand, restated) | | :--- | :--- | :--- | | Profit for the Period | 25,116 | 104,460 | | Other Comprehensive Loss (Currency Translation Differences) | (3,613) | (6,575) | | **Total Comprehensive Income for the Period** | **21,503** | **97,885** | [Consolidated Statement of Financial Position](index=4&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) As of June 30, 2023, the Group's total assets were RMB1.819 billion, a 7.6% increase from the beginning of the year, primarily driven by a significant 18.0% increase in inventories to RMB1.07 billion, while total liabilities increased by 12.0% to RMB939 million mainly due to increased bank borrowings, and total equity slightly increased by 3.2% to RMB880 million Balance Sheet Key Items | Item (RMB thousand) | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **1,818,862** | **1,691,007** | | Non-current Assets | 531,591 | 537,716 | | Current Assets | 1,287,271 | 1,153,291 | | Of which: Inventories | 1,069,510 | 906,209 | | **Total Liabilities** | **939,098** | **838,797** | | Non-current Liabilities | 111,480 | 115,825 | | Current Liabilities | 827,618 | 722,972 | | **Total Equity** | **879,764** | **852,210** | [Interim Condensed Consolidated Statement of Changes in Equity](index=6&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E6%9D%83%E7%9B%8A%E5%8F%98%E5%8A%A8%E8%A1%A8) As of June 30, 2023, profit attributable to owners of the Company was RMB872 million, an increase from RMB845 million at the beginning of the year, with the change primarily resulting from profit for the period contribution of RMB25.01 million and equity-settled share-based payments of RMB3.8 million, partially offset by a loss of RMB4.16 million from currency translation differences - Opening equity was **RMB852 million**, total comprehensive income for the period was **RMB21.5 million**, and transactions with owners (including share issuance, share-based payments, etc.) resulted in a net increase of **RMB6.05 million**, bringing total equity to **RMB880 million** at period-end[131](index=131&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=8&type=section&id=%E4%B8%AD%E6%9C%9F%E7%AE%80%E6%98%8E%E7%BB%BC%E5%90%88%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In the first half of 2023, net cash outflow from operating activities was RMB46.75 million, primarily due to increased cash used in operations, net cash outflow from investing activities was RMB4.61 million, and net cash inflow from financing activities was RMB58.54 million, mainly from new borrowings, with cash and cash equivalents at period-end at RMB46.62 million, an increase of RMB7.18 million from the beginning of the period Cash Flow Statement Summary | Item (RMB thousand) | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (46,747) | (36,984) | | Net Cash Used in Investing Activities | (4,614) | (33,331) | | Net Cash Generated from Financing Activities | 58,536 | 28,154 | | **Net Increase/(Decrease) in Cash and Cash Equivalents** | **7,175** | **(42,161)** | | Cash and Cash Equivalents at Beginning of Period | 37,675 | 109,421 | | **Cash and Cash Equivalents at End of Period** | **46,620** | **70,269** | [Notes to the Financial Statements](index=10&type=section&id=%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8%E9%99%84%E6%B3%A8) [Note 3: Change in Presentation Currency](index=11&type=section&id=Note%203%20%E5%91%88%E5%88%97%E8%B4%A7%E5%B8%81%E5%8F%98%E5%8A%A8) Effective January 1, 2023, the Group's financial statements' presentation currency changed from HKD to RMB to more appropriately reflect its primary business activities conducted in China, and this change has been applied retrospectively with all comparative figures restated - Considering the Group's primary operations (production and sales) are conducted in China and the functional currency of its Chinese subsidiaries is RMB, the Directors believe changing the presentation currency to RMB more appropriately reflects the Group's transactions[75](index=75&type=chunk)[142](index=142&type=chunk) [Note 7: Revenue and Segment Information](index=16&type=section&id=Note%207%20%E6%94%B6%E7%9B%8A%E5%8F%8A%E5%88%86%E9%83%A8%E8%B5%84%E6%96%99) Group revenue primarily derived from sales of carrageenan and agar, accounting for 61.4% and 24.0% of total revenue respectively, while geographically, China market sales contribution increased from 39.6% in the prior year to 50.6%, and Europe market share decreased from 36.3% to 24.7%, reflecting a trend of declining overseas demand and domestic market growth Revenue by Product Segment (RMB thousand) | Product Segment | H1 2023 Revenue | H1 2022 Revenue | | :--- | :--- | :--- | | Agar Sales | 140,173 | 149,346 | | Carrageenan Sales | 357,720 | 423,021 | | Konjac Product Sales | 24,785 | 27,535 | | Compound Product Sales | 60,172 | 38,822 | | Others | 26 | 5,433 | | **Total** | **582,876** | **644,157** | Revenue by Region (RMB thousand) | Region | H1 2023 Revenue | H1 2022 Revenue | | :--- | :--- | :--- | | China | 294,712 | 255,097 | | Europe | 144,121 | 233,594 | | Asia (excluding China) | 103,515 | 99,859 | | South America | 26,480 | 35,370 | | North America | 12,470 | 18,551 | | Others | 1,578 | 1,686 | | **Total** | **582,876** | **644,157** | [Note 10: Earnings Per Share](index=23&type=section&id=Note%2010%20%E6%AF%8F%E8%82%A1%E7%9B%88%E5%88%A9) Due to a significant decrease in profit for the period, basic earnings per share for the first half of 2023 was RMB0.030, a 76.4% decrease compared to RMB0.127 in the prior year, with diluted earnings per share also decreasing from RMB0.126 to RMB0.030 Earnings Per Share Calculation | Item | H1 2023 | H1 2022 (restated) | | :--- | :--- | :--- | | Profit attributable to owners of the Company (RMB thousand) | 25,008 | 104,408 | | Weighted Average Number of Ordinary Shares (Basic) | 825,649,956 | 821,414,933 | | **Basic Earnings Per Share (RMB)** | **0.030** | **0.127** | | Weighted Average Number of Ordinary Shares (Diluted) | 829,385,376 | 828,804,934 | | **Diluted Earnings Per Share (RMB)** | **0.030** | **0.126** | [Note 16: Equity-settled Share-based Payments](index=28&type=section&id=Note%2016%20%E8%82%A1%E6%9C%AC%E7%BB%93%E7%AE%97%E8%82%A1%E4%BB%BD%E4%BB%98%E6%AC%BE) For the six months ended June 30, 2023, the Group recognized a total equity-settled share-based payments expense of RMB3.801 million, including RMB0.608 million for the Share Option Scheme and RMB3.193 million for the Share Award Scheme, with 4.432 million share options exercised and 0.86 million award shares vested during the period Equity-settled Share-based Payments Expense (RMB thousand) | Scheme Type | H1 2023 | H1 2022 (restated) | | :--- | :--- | :--- | | Share Option Scheme | 608 | 881 | | Share Award Scheme | 3,193 | — | | **Total** | **3,801** | **881** | [16(a) Share Option Scheme](index=29&type=section&id=16(a)%20%E8%B4%AD%E6%9D%83%E8%AE%A1%E5%88%92) For the first half of 2023, 4.432 million share options were exercised, reducing outstanding share options to 4.432 million at period-end, with these options granted in 2018 at an exercise price of HKD0.01 and a 5-year vesting period, and approximately RMB1.212 million of unamortized fair value will be expensed in future periods Outstanding Share Options Movement | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | As of January 1 | 8,864,000 | 13,296,000 | | Exercised during the period | (4,432,000) | (4,432,000) | | **As of June 30** | **4,432,000** | **8,864,000** | [16(b) Share Award Scheme](index=31&type=section&id=16(b)%20%E8%82%A1%E4%BB%BD%E5%A5%96%E5%8A%B1%E8%AE%A1%E5%88%92) For the first half of 2023, 0.86 million award shares were exercised (vested), reducing outstanding award shares to 3.44 million at period-end, with 4.3 million shares granted under this scheme in 2022 with a 5-year vesting period, and approximately RMB8.999 million of unamortized fair value will be expensed in future periods Outstanding Award Shares Movement | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | As of January 1 | 4,300,000 | — | | Granted during the period | — | 4,300,000 | | Exercised during the period | (860,000) | — | | **At period-end** | **3,440,000** | **4,300,000** | [Note 17: Trade and Other Payables](index=33&type=section&id=Note%2017%20%E8%B4%B8%E6%98%93%E5%8F%8A%E5%85%B6%E4%BB%96%E5%BA%94%E4%BB%98%E6%AC%BE%E9%A1%B9) As of June 30, 2023, total Trade and other payables amounted to RMB228 million, a 9.5% increase from RMB208 million at the beginning of the year, of which trade payables increased by 27.0% to RMB175 million, with aging primarily within 90 days Trade and Other Payables Composition (RMB thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Trade Payables | 174,899 | 137,763 | | Contract Liabilities - Customer Advances | 14,912 | 22,793 | | Others | 37,799 | 47,342 | | **Total** | **227,610** | **207,838** | [Note 18: Bank Borrowings and Lease Liabilities](index=34&type=section&id=Note%2018%20%E9%93%B6%E8%A1%8C%E5%80%9F%E6%AC%BE%E5%8F%8A%E7%A7%9F%E8%B3%83%E8%B2%A0%E5%82%B5) As of June 30, 2023, the Group's total bank borrowings increased to RMB674 million, a 16.2% increase from the beginning of the year, with the weighted average effective interest rate rising from 4.46% to 5.64%, and part of the borrowings are secured by land use rights and buildings valued at RMB111 million and personally guaranteed by two Directors Bank Borrowings and Lease Liabilities (RMB thousand) | Item | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Total Bank Borrowings | 673,919 | 579,884 | | Total Lease Liabilities | 3,682 | 4,455 | | **Total Borrowings** | **677,601** | **584,339** | - As of June 30, 2023, total bank borrowings amounted to **RMB674 million**, with a weighted average effective interest rate of **5.64%** (**2022**: **4.46%**)[19](index=19&type=chunk)[67](index=67&type=chunk) - The Group's bank borrowings are personally guaranteed by Directors Mr. Chen Jincang and Mr. Guo Dongxu, with a guaranteed amount of **RMB218 million** as of June 30, **2023**[21](index=21&type=chunk) [Note 21: Related Party Transactions](index=36&type=section&id=Note%2021%20%E5%85%B3%E8%81%94%E6%96%B9%E4%BA%A4%E6%98%93) The Group's related party transactions primarily involve key management personnel compensation and Directors providing personal guarantees for bank borrowings, with key management personnel compensation for the first half of 2023 approximately RMB5.592 million, a year-on-year increase of 10.1%, and no amounts were due to related parties at period-end - Two Directors provided personal guarantees for the Group's bank borrowings, as detailed in Note **18**[31](index=31&type=chunk) - For the six months ended June 30, 2023, key management personnel compensation was approximately **RMB5.592 million**, an increase from **RMB5.078 million** in the same period last year[33](index=33&type=chunk) [Management Discussion and Analysis](index=38&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%82%E8%AE%A8%E8%AE%BA%E4%B8%8E%E5%88%86%E6%9E%90) [Business Review](index=38&type=section&id=%E4%B8%9A%E5%8A%A1%E5%9B%9E%E9%A1%B9) In the first half of 2023, the Group's business was impacted by the dual impact of cyclical reduction in overseas customer demand and rising raw material costs, as overseas customers reduced demand due to adjusting safety stock levels and a slowing European economy, while high-priced seaweed purchased in 2022 increased inventory costs, leading to a significant decline in carrageenan product gross profit margin, and rising interest rates and RMB depreciation further compressed operating profit - Total revenue decreased by **9.5%** to **RMB583 million**, primarily due to reduced demand from overseas customers, especially a **38.3%** decline in European market sales[39](index=39&type=chunk)[40](index=40&type=chunk) - Net profit significantly decreased to **RMB25.1 million**, mainly attributable to a **37.7%** reduction in total overseas sales and a **12.1 percentage points** decline in gross profit margin to **18.2%**[39](index=39&type=chunk) - Sales structure shifted, with China market sales increasing from **39.6%** to **50.6%** of total revenue, while overseas market share decreased from **60.4%** to **49.4%**[40](index=40&type=chunk) [Product Technology and Business Outlook](index=40&type=section&id=%E4%BA%A7%E5%93%81%E6%8A%80%E6%9C%AF%E4%B8%8E%E4%B8%9A%E5%8A%A1%E5%89%8D%E6%99%AF) The Group continued investment in product technology R&D to enhance product value-add and profitability, with compound products, as high-margin products, showing revenue growth of 55.0% in the first half, demonstrating R&D effectiveness, and looking ahead, management anticipates global demand for hydrocolloid products to recover with price adjustments and customer inventory replenishment, is optimistic about the stable performance of the Chinese market and continued growth of compound products, and the Group will continue to advance the diversified layout of its Indonesian factory to reduce costs - The Group enhanced its high-value-added product portfolio, including compound products, instant agar, and deep-processed carrageenan, through continuous R&D investment to improve profitability[42](index=42&type=chunk) - Revenue from compound products increased by **55.0%** year-on-year, demonstrating the success of R&D efforts in meeting evolving customer demands[42](index=42&type=chunk) - Management anticipates global demand to recover as carrageenan product prices adjust and customer inventories replenish, while Indonesian subsidiary Hongxin will continue investing to enhance cost competitiveness[44](index=44&type=chunk) [Financial Review](index=42&type=section&id=%E8%B4%A2%E5%8A%A1%E5%9B%9E%E9%A1%B9) Current period financial performance significantly declined, with revenue decreasing by 9.5% but cost of sales, however, increasing by 6.2%, leading to a sharp decline in gross profit by 45.7% and a 12.1 percentage point decrease in gross profit margin, and various expenses (selling, administrative, finance) all increased to varying degrees, further eroding profit, ultimately leading to profit attributable to owners of the Company significantly decreasing by 76.0% year-on-year [Revenue Analysis](index=42&type=section&id=%E6%94%B6%E7%9B%8A%E5%88%86%E6%9E%90) Total revenue for the first half was RMB583 million, a year-on-year decrease of 9.5%, and except for compound product sales growth of 55.0%, revenue from major product lines such as agar, carrageenan, and konjac all declined, with the decrease in revenue primarily due to reduced demand from overseas customers as a result of adjusting safety stock levels and a slowing European economy Revenue Movement by Product Line | Product | YoY Change | | :--- | :--- | | Agar | -6.1% | | Carrageenan | -15.4% | | Konjac | -10.0% | | Compound Products | +55.0% | [Cost and Gross Profit Analysis](index=42&type=section&id=%E6%88%90%E6%9C%AC%E4%B8%8E%E6%AF%9B%E5%88%A9%E5%88%86%E6%9E%90) Cost of sales for the first half was RMB477 million, a year-on-year increase of 6.2%, primarily due to the use of high-priced seaweed raw materials purchased in 2022, which increased average inventory costs, and rising costs while selling prices peaked led to a sharp decline in gross profit by 45.7% to RMB106 million, with gross profit margin decreasing from 30.3% to 18.2%, and gross profit margins for all product lines declined - The decline in gross profit margin was primarily due to increased average inventory costs from higher-priced seaweed raw materials purchased in **2022**, while final product selling prices had reached their recent peak, creating a 'scissors gap'[50](index=50&type=chunk) [Expenses and Finance Costs Analysis](index=43&type=section&id=%E5%BC%80%E6%94%AF%E4%B8%8E%E8%B4%A2%E5%8A%A1%E8%B4%B9%E7%94%A8%E5%88%86%E6%9E%90) All expenses increased, with selling and distribution expenses increasing by 32.8% due to the resumption of business activities post-pandemic, administrative expenses slightly increasing by 2.7% due to rising labor costs, and net finance costs significantly increasing by 73.0% to RMB19.43 million, primarily due to a significant rise in USD and HKD loan interest rates and an increase in the average outstanding balance of bank borrowings - Selling and distribution expenses increased by **32.8%**, mainly due to higher costs for exhibition participation and overseas customer travel[51](index=51&type=chunk) - Finance costs increased by **74.5%**, primarily due to a significant rise in USD and HKD loan interest rates and an increase in the average outstanding balance of bank borrowings[54](index=54&type=chunk) [Liquidity and Financial Resources](index=46&type=section&id=%E6%B5%81%E5%8A%A8%E8%B5%84%E9%87%91%E5%8F%8A%E8%B4%A2%E5%8A%A1%E8%B5%84%E6%BA%90) As of June 30, 2023, the Group's financial position remained stable but leverage increased, with current ratio decreasing from 1.60 to 1.55 and gearing ratio increasing from 39.1% to 41.9%, total bank borrowings amounted to RMB674 million, and the weighted average interest rate increased from 4.46% to 5.64%, and the Group adopted a prudent treasury policy with major receipts and payments denominated in RMB and USD to achieve natural hedging Key Financial Ratios | Ratio | As of June 30, 2023 | As of December 31, 2022 | | :--- | :--- | :--- | | Current Ratio | 1.55 | 1.60 | | Gearing Ratio | 41.9% | 39.1% | - As of June 30, 2023, total bank borrowings amounted to **RMB674 million**, with a weighted average effective interest rate of **5.64%** (**2022**: **4.46%**)[65](index=65&type=chunk)[67](index=67&type=chunk) - The Group pledged buildings and land use rights with a carrying amount of **RMB111 million** as collateral for borrowings[69](index=69&type=chunk) [Corporate Governance](index=51&type=section&id=%E4%BC%81%E4%B8%9A%E7%AE%A1%E6%B2%BB) The Company complied with most provisions of the Corporate Governance Code but with two deviations: firstly, the roles of Chairman and Chief Executive Officer are held concurrently by Mr. Chen Jincang; secondly, former Non-executive Director Mr. Guo Songsen improperly traded company shares during blackout periods and without prior notification to the Company as required, violating the Model Code, and the Company has taken measures to strengthen internal training and monitoring to prevent similar incidents from recurring - The roles of Chairman and Chief Executive Officer are held by Mr. Chen Jincang, which the Board believes benefits Group management, with the Board's relatively high independence providing a balance of power[97](index=97&type=chunk) - Former Non-executive Director Mr. Guo Songsen repeatedly traded company shares during blackout periods in **2022** and **2023** without prior notification to the Company, violating the Model Code. The Company has reminded all Directors to comply with the rules and arranged training by legal advisors[102](index=102&type=chunk)[106](index=106&type=chunk) - The Audit Committee reviewed the unaudited interim results and financial statements for the period. PricewaterhouseCoopers, the independent auditor, reviewed the condensed consolidated interim financial statements[93](index=93&type=chunk)[99](index=99&type=chunk)