胜利管道(01080) - 2025 - 中期业绩

Company Information and Financial Highlights This section provides an overview of Shengli Oil & Gas Pipe Holdings Limited's interim results for the six months ended June 30, 2025, including key financial performance indicators Company Information Shengli Oil & Gas Pipe Holdings Limited (Stock Code: 1080) announced its interim results for the six months ended June 30, 2025 - Company Name: SHENGLI OIL & GAS PIPE HOLDINGS LIMITED 胜利油气管道控股有限公司[2] - Stock Code: 1080[2] - Reporting Period: Six months ended June 30, 2025[2] Financial Highlights For the six months ended June 30, 2025, the company's revenue increased by 12.4% to RMB 374,825 thousand, with gross profit margin improving by 0.9 percentage points to 11.9%, while loss attributable to owners of the Company slightly increased to RMB 0.62 cents per share, and no interim dividend is recommended 2025 Half-Year Financial Highlights | Indicator | 2025 Half-Year (RMB thousands) | 2024 Half-Year (RMB thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 374,825 | 333,604 | Increase 12.4% | | Gross Profit Margin | 11.9% | 11.0% | Increase 0.9 percentage points | | Loss for the period attributable to owners of the Company | (24,146) | (23,716) | Loss increased | | Total comprehensive loss for the period attributable to owners of the Company | (38,133) | (49,305) | Loss decreased | | Basic loss per share | (0.62) cents | (0.61) cents | Loss increased | - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025[2] Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including the statement of profit or loss and other comprehensive income, and the statement of financial position Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended June 30, 2025, the company's revenue increased by 12.36% and gross profit by 21.73%, but loss before tax and loss for the period expanded due to litigation provision, while total comprehensive loss for the period narrowed due to reduced loss on fair value change of equity investments Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2025 (RMB thousands) | 2024 (RMB thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 374,825 | 333,604 | +12.36% | | Cost of sales and services | (330,040) | (296,810) | +11.19% | | Gross profit | 44,785 | 36,794 | +21.73% | | Other income, gains and losses | 6,793 | 4,423 | +53.59% | | Selling and distribution costs | (19,896) | (18,909) | +5.22% | | Administrative expenses | (38,904) | (39,763) | -2.16% | | Other expenses | (802) | (380) | +111.05% | | Share of results of an associate | 7,437 | (28) | Turnaround from loss to profit | | Net reversal of impairment loss on trade receivables | 93 | 378 | -75.40% | | Litigation provision | (18,403) | — | New | | Finance costs | (6,447) | (6,601) | -2.33% | | Loss before tax | (25,344) | (24,086) | +5.22% | | Income tax expense | (20) | (20) | 0% | | Loss for the period | (25,364) | (24,106) | +5.22% | | Loss on fair value change of equity investments | (14,272) | (25,589) | Loss narrowed | | Total comprehensive loss for the period | (39,636) | (49,695) | Loss narrowed | - Loss for the period attributable to owners of the Company was RMB 24,146 thousand, an increase from RMB 23,716 thousand in the prior period[4] - Basic and diluted loss per share were RMB 0.62 cents, slightly higher than RMB 0.61 cents in the prior period[4] Condensed Consolidated Statement of Financial Position As of June 30, 2025, the company's total assets and net assets both decreased, primarily due to fair value changes in equity investments and a significant increase in net current liabilities, which rose from RMB 15,358 thousand at the end of 2024 to RMB 146,338 thousand, mainly due to the reclassification of long-term borrowings to current liabilities Condensed Consolidated Statement of Financial Position (As of June 30) | Indicator | 2025 June 30 (RMB thousands) | 2024 December 31 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Non-current assets | 534,945 | 549,733 | -2.7% | | Current assets | 486,351 | 514,764 | -5.5% | | Current liabilities | 632,689 | 530,122 | +19.3% | | Net current liabilities | (146,338) | (15,358) | Loss expanded | | Total assets less current liabilities | 388,607 | 534,375 | -27.3% | | Non-current liabilities | 914 | 107,046 | -99.1% | | Net assets | 387,693 | 427,329 | -9.28% | | Equity attributable to owners of the Company | 380,049 | 418,182 | -9.12% | | Cash and cash equivalents | 119,658 | 127,720 | -6.47% | | Trade receivables | 37,608 | 49,129 | -23.45% | | Trade payables | 107,661 | 46,104 | +133.52% | | Borrowings (total) | 338,806 | 309,836 | +9.35% | - Net current liabilities significantly increased to RMB 146,338 thousand, primarily due to the reclassification of long-term borrowings to current liabilities as their maturity date is less than one year[5][78] Notes to the Unaudited Condensed Consolidated Interim Financial Statements This section provides detailed notes to the unaudited condensed consolidated interim financial statements, covering general information, basis of preparation, segment information, and specific financial line items General Information Shengli Oil & Gas Pipe Holdings Limited was incorporated in the Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange, with the Group primarily engaged in the production, processing, and sale of welded pipes for oil and gas pipelines and other construction applications, as well as commodity trading - The Company was incorporated in the Cayman Islands on July 3, 2009, and its shares have been listed on the Main Board of the Hong Kong Stock Exchange since December 18, 2009[7] - The Group is principally engaged in the manufacture, processing, and sale of welded pipes for oil and gas pipelines and other construction and manufacturing applications, and commodity trading[8] Basis of Preparation The unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard 34 and the Listing Rules, on a historical cost basis, except for financial assets designated at fair value through other comprehensive income, with no significant impact from newly adopted IFRS accounting standards - The financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[9] - The financial statements are presented in RMB and prepared on a historical cost basis, except for equity investments designated at fair value through other comprehensive income[10] Going Concern Despite net current liabilities of RMB 146,338 thousand as of June 30, 2025, the Board believes the Group has sufficient working capital to prepare financial statements on a going concern basis, considering cash flow forecasts, credit commitments, and bank loan extension intentions - As of June 30, 2025, the Group's current liabilities exceeded its current assets by approximately RMB 146,338 thousand[12] - The Board believes that, considering cash flow forecasts, credit commitments from financial institutions, and banks' intentions to extend approximately RMB 92,200 thousand in bank loans, the Group has sufficient working capital to meet current needs, thus preparing financial statements on a going concern basis[12] Changes in Accounting Policies The adoption of new and revised IFRS accounting standards during the period did not result in significant changes to the Group's accounting policies, presentation methods, or reported amounts in the financial statements - The adoption of new and revised IFRS accounting standards did not significantly change the Group's accounting policies, the presentation of the interim financial statements, or the amounts reported for the current and prior periods[13] Segment Information The Group operates two reportable segments: welded pipe business and trading business, with the welded pipe business being the primary revenue source, contributing all external revenue in the first half of 2025 and turning its segment results from loss to profit, while the trading business revenue significantly decreased to zero, with most revenue and non-current assets located in China - The Group currently has two reportable segments: welded pipe business (production of spiral submerged arc welded pipes and related services) and commodity trading[14] - Management allocates resources and assesses performance based on the individual results of operating segments[14] Segment Revenue and Results In the first half of 2025, welded pipe business revenue was RMB 374,825 thousand, while trading business revenue was zero, resulting in a total revenue increase of 12.36% year-on-year, and the welded pipe business segment result turned from a loss of RMB 10,699 thousand in the prior period to a profit of RMB 4,945 thousand Segment Revenue and Results (For the six months ended June 30) | Indicator | 2025 Welded Pipe Business (RMB thousands) | 2025 Trading Business (RMB thousands) | 2025 Total (RMB thousands) | 2024 Welded Pipe Business (RMB thousands) | 2024 Trading Business (RMB thousands) | 2024 Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales to external customers | 374,825 | — | 374,825 | 322,910 | 10,694 | 333,604 | | Segment results | 4,945 | (1,046) | 3,899 | (10,699) | (1,652) | (12,351) | - In the first half of 2025, the welded pipe business segment turned from loss to profit, and the trading business loss narrowed[15][16] Segment Assets and Liabilities As of June 30, 2025, the Group's total assets were RMB 1,021,296 thousand and total liabilities were RMB 633,603 thousand, with the welded pipe business contributing the majority of segment assets, while unallocated liabilities accounted for a significant portion of total liabilities Segment Assets and Liabilities (As of June 30) | Indicator | 2025 Welded Pipe Business (RMB thousands) | 2025 Trading Business (RMB thousands) | 2025 Unallocated (RMB thousands) | 2025 Total (RMB thousands) | 2024 Welded Pipe Business (RMB thousands) | 2024 Trading Business (RMB thousands) | 2024 Unallocated (RMB thousands) | 2024 Total (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Segment assets | 925,630 | 24,146 | 71,520 | 1,021,296 | 949,785 | 24,103 | 90,609 | 1,064,497 | | Segment liabilities | (275,132) | (6) | (358,465) | (633,603) | (324,250) | (8) | (312,910) | (637,168) | Geographical Information The majority of the Group's revenue is derived from China, thus no geographical analysis of revenue is provided, and non-current assets are primarily located in China - The majority of the Group's revenue is derived from China, and no geographical analysis of revenue is provided[19] Geographical Distribution of Non-Current Assets (RMB thousands) | Geographical Location | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | China | 371,079 | 378,501 | | Hong Kong | 467 | 962 | | Total | 371,546 | 379,463 | Major Customers Information Customer A is the Group's major customer, contributing RMB 314,450 thousand in revenue in the first half of 2025, accounting for the vast majority of total revenue Major Customer Revenue (RMB thousands) | Customer | Segment | 2025 Half-Year | 2024 Half-Year | | :--- | :--- | :--- | :--- | | Customer A | Welded Pipe Business | 314,450 | 250,151 | - Revenue from Customer A accounted for over 70% of total revenue[48] Revenue In the first half of 2025, the Group's total revenue was RMB 374,825 thousand, entirely from the welded pipe business, with welded pipe sales forming the main component, while trading business revenue decreased to zero, and all revenue was generated in China and recognized at a point in time Disaggregation of Revenue from Contracts with Customers (For the six months ended June 30) | Type of Goods or Services | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Welded pipe sales | 341,927 | 293,963 | | Provision of welded pipe business related services | 32,898 | 28,947 | | Trading business | — | 10,694 | | Total | 374,825 | 333,604 | - In the first half of 2025, all revenue was generated from the China market and recognized at a point in time[21] Other Income, Gains and Losses In the first half of 2025, total other income, gains, and losses significantly increased to RMB 6,793 thousand from RMB 4,423 thousand in the prior period, primarily due to growth in net gains from sales of materials and new compensation income Other Income, Gains and Losses (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Interest income | 190 | 406 | | Government grants | 146 | 146 | | Rental income | 501 | 486 | | Compensation income | 981 | — | | Other income | 895 | 406 | | Net gains from sales of materials | 4,158 | 2,937 | | Net gains on disposal of property, plant and equipment | — | 42 | | Write-off of property, plant and equipment | (78) | — | | Total | 6,793 | 4,423 | - Compensation income of RMB 981 thousand arose from a settlement of a lawsuit, representing partial financial compensation from the defendant[22] Finance Costs In the first half of 2025, finance costs were RMB 6,447 thousand, a slight decrease from the prior period, primarily consisting of interest on bank loans Finance Costs (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Interest on bank loans | 5,578 | 5,319 | | Interest on other loans | 847 | 1,234 | | Interest on lease liabilities | 22 | 48 | | Total | 6,447 | 6,601 | Loss Before Tax In the first half of 2025, loss before tax expanded to RMB 25,344 thousand from RMB 24,086 thousand in the prior period, with major costs including cost of inventories sold and services, while staff welfare expenses and depreciation charges slightly decreased Items Deducted From/Credited to Loss Before Tax (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Cost of inventories sold | 310,449 | 278,890 | | Cost of services | 19,591 | 17,920 | | Staff welfare expenses | 30,020 | 30,612 | | Depreciation of property, plant and equipment | 7,909 | 9,186 | | Depreciation of right-of-use assets | 2,176 | 2,157 | | Net reversal of impairment loss on trade receivables | (93) | (378) | - Cost of inventories sold includes a net reversal of inventory write-downs of approximately RMB 227 thousand in the first half of 2025, compared to inventory write-downs of approximately RMB 1,182 thousand in the first half of 2024[25] Income Tax Expense Income tax expense remained at RMB 20 thousand in the first half of 2025, primarily for deferred tax, as the Group's entities in Hong Kong, Singapore, and mainland China did not generate assessable profits, thus no provision for profits tax or corporate income tax was made Income Tax Expense (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Current tax | — | — | | Deferred tax | 20 | 20 | | Income Tax Expense | 20 | 20 | - The Group's entities in Hong Kong, Singapore, and mainland China did not generate assessable profits, thus no provision for profits tax or corporate income tax was made[26][27] Loss Per Share In the first half of 2025, both basic and diluted loss per share were RMB 0.62 cents, a slight increase compared to RMB 0.61 cents in the prior period Loss Per Share (For the six months ended June 30) | Indicator | 2025 (RMB cents) | 2024 (RMB cents) | | :--- | :--- | :--- | | Basic | (0.62) | (0.61) | | Diluted | (0.62) | (0.61) | - The weighted average number of ordinary shares used for calculating basic loss per share was 3,874,365,600 shares, consistent with the prior period[29] - Diluted loss per share was the same as basic loss per share because the exercise price of share options was higher than the average share price[29][30] Interim Dividend The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025 - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025[31] Property, Plant and Equipment In the first half of 2025, the cost of acquisitions of property, plant and equipment significantly decreased to RMB 2,299 thousand, with a small amount of write-offs during the period but no gains on disposal Changes in Property, Plant and Equipment (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Total cost of acquisitions of property, plant and equipment | 2,299 | 13,622 | | Written-off carrying amount | 78 | — | | Disposed carrying amount | — | 19 | Equity Investments – Financial Assets Designated at Fair Value Through Other Comprehensive Income As of June 30, 2025, the fair value of the Group's 19.95% equity investment in Xinfeng Energy was RMB 48,347 thousand, with a fair value change loss of RMB 14,272 thousand recognized during the period, which was a narrower loss compared to the prior period, as this investment is designated for long-term strategic purposes and valued using the net asset method Fair Value Change of Equity Investments (RMB thousands) | Date | Amount | Fair Value Change (Other Comprehensive Loss) | | :--- | :--- | :--- | | 2024 January 1 | 97,264 | | | 2024 December 31/2025 January 1 | 62,619 | (34,645) | | 2025 June 30 | 48,347 | (14,272) | - The unlisted equity investment refers to a 19.95% equity interest in Xinfeng Energy Group Co, Ltd, which is primarily engaged in the design and construction of wind farms and the sale of wind turbine generators[34] - The valuation is performed using the net asset method and classified as Level 3 fair value hierarchy as defined by IFRS 13[34] Trade Receivables As of June 30, 2025, net trade receivables were RMB 37,608 thousand, a 23.45% decrease from the end of 2024, with an increased proportion of overdue amounts within one year, but overall loss allowance rate remained stable Trade Receivables (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Trade receivables from third parties | 38,054 | 49,668 | | Less: Loss allowance | (446) | (539) | | Net amount | 37,608 | 49,129 | Ageing Analysis of Trade Receivables (RMB thousands) | Ageing | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Within 3 months | 32,072 | 40,346 | | 3 to 6 months | 513 | 2,410 | | 6 months to 1 year | 790 | 4,772 | | 1 to 2 years | 4,233 | 1,601 | | Total | 37,608 | 49,129 | - Trade terms are primarily credit transactions, generally up to 180 days[35] Prepayments, Deposits and Other Receivables As of June 30, 2025, total prepayments, deposits, and other receivables significantly decreased to RMB 113,068 thousand from RMB 173,362 thousand at the end of 2024, mainly due to a reduction in advances to suppliers Prepayments, Deposits and Other Receivables (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Advances to suppliers | 99,378 | 149,390 | | Recoverable VAT | 834 | 2,130 | | Prepayments | 160 | 865 | | Tender deposits paid to customers | 1,897 | 2,203 | | Guarantee deposits for customer sales contracts | 8,180 | 13,931 | | Consideration receivable for partial disposal of equity interest in a subsidiary from non-controlling interests | — | 1,890 | | Others | 2,619 | 2,953 | | Total | 113,068 | 173,362 | - Advances are interest-free, refundable, and/or expected to be utilized within one year, primarily to secure raw material supply and subcontracted services[37] Trade Payables As of June 30, 2025, total trade payables significantly increased by 133.52% to RMB 107,661 thousand from RMB 46,104 thousand at the end of 2024, primarily concentrated in amounts due within three months Trade Payables (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Trade payables to third parties | 107,661 | 46,104 | Ageing Analysis of Trade Payables (RMB thousands) | Ageing | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Within 3 months | 96,525 | 35,209 | | 3 to 6 months | 1,397 | 518 | | 6 months to 1 year | 859 | 2,199 | | 1 to 2 years | 1,134 | 449 | | Over 2 years | 7,746 | 7,729 | | Total | 107,661 | 46,104 | - Trade payables are interest-free, with payment terms to suppliers generally ranging from 90 to 180 days credit period[39] Borrowings As of June 30, 2025, the Group's total borrowings increased to RMB 338,806 thousand from the end of 2024, with all amounts repayable within one year, and bank loans are primarily secured, while other loans are unsecured Borrowings Composition (RMB thousands) | Type | Collateral Status | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | :--- | | Bank loans | Secured | 305,430 | 276,040 | | Other loans | Unsecured | 33,376 | 33,796 | | Total | | 338,806 | 309,836 | Borrowings Repayment Period (RMB thousands) | Repayment Period | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | On demand or within one year | 338,806 | 203,866 | | One to two years | — | 105,970 | | Total | 338,806 | 309,836 | - Bank loans are secured by property, plant and equipment, right-of-use assets, and pledged bank deposits[40] - Other loans are advances from the Company's directors, other key management personnel, and employees, with a fixed annual interest rate of 5%[40] Commitments As of June 30, 2025, the Group had capital commitments of approximately RMB 52 thousand for the acquisition of property, plant and equipment, a significant decrease from the end of 2024 Capital Commitments (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Contracted but not provided for, net of deposits paid | 52 | 175 | Related Party Transactions The Group engaged in various transactions with related parties, including purchases from an associate and payment of interest on other loans to directors and key management personnel Significant Related Party Transactions In the first half of 2025, the Group's purchases from its associate, Hunan Shengli Xianggang Steel Pipe Co, Ltd, significantly increased to RMB 104,466 thousand Significant Related Party Transactions (For the six months ended June 30) | Type of Transaction | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Interest paid on other loans to directors and other key management personnel of the Company | 26 | 26 | | Purchases from an associate – Hunan Shengli Xianggang Steel Pipe Co, Ltd | 104,466 | 754 | Significant Related Party Balances As of June 30, 2025, the Group had other loans from directors and key management personnel of RMB 1,065 thousand, and interest payable on other loans to them of RMB 107 thousand Significant Related Party Balances (RMB thousands) | Type of Balance | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Other loans from directors and other key management personnel of the Company | 1,065 | 1,065 | | Interest payable on other loans to directors and other key management personnel of the Company | 107 | 67 | Key Management Personnel Remuneration In the first half of 2025, total remuneration for directors and other key management personnel was RMB 3,281 thousand, a decrease from the prior period Key Management Personnel Remuneration (For the six months ended June 30) | Item | 2025 (RMB thousands) | 2024 (RMB thousands) | | :--- | :--- | :--- | | Directors' fees | 913 | 976 | | Salaries, wages, allowances and other benefits in kind | 2,177 | 2,654 | | Contributions to retirement benefit schemes | 191 | 310 | | Total | 3,281 | 3,940 | Litigation The Group's subsidiary, Zhejiang Shengguan, was ordered to bear supplementary compensation liability in a lawsuit involving Xinfeng Energy, leading to the recognition of a litigation provision of approximately RMB 18,403 thousand in the current period, with the appeal dismissed and the judgment being final - Zhejiang Shengguan was ordered to bear supplementary compensation liability for the outstanding amount of approximately RMB 17,196 thousand and accrued default interest payable by Xinfeng Energy due to breach of contract[44][45] - A litigation provision of approximately RMB 18,403 thousand was recognized in profit or loss for the six months ended June 30, 2025[45] - Zhejiang Shengguan's appeal was dismissed, the original judgment was upheld, and the judgment is final[45] CEO's Report This section provides the CEO's report, covering the market overview, business review and strategy, and future outlook for the Group Market Overview In the first half of 2025, the international environment remained complex, but China's economy maintained overall stability and positive momentum, with expanding consumption and manufacturing growth, while the oil and gas industry saw stable upstream output but declining demand for refined oil products, accelerating global energy transition - In the first half of 2025, China's economy withstood pressure, maintaining overall stable and positive operations, with a gradual expansion of the consumer market and continued good growth momentum in manufacturing[47] - Upstream output in the oil and gas industry remained stable with slight increases, but demand for refined oil products showed a downward trend[47] - The National Pipeline Network Group is fully accelerating the construction of a "nationwide network" to ensure national energy security[47] Business Review and Strategy During the reporting period, the Group deepened cooperation with core customers, expanded into the social market, optimized equipment management, broadened its product range, achieved cost reduction and efficiency improvement through personnel structure optimization, training, and technological innovation, while strengthening safety and quality management Strengthening Core Customer Cooperation and Actively Expanding Market Resources The Group continued to deepen strategic cooperation with key customers such as the National Pipeline Network Group and the "Three Barrels of Oil," with sales to the National Pipeline Network Group accounting for over 70% of total sales, while actively expanding into the social market by developing three new customers and signing sales orders, and increasing efforts in processing-on-demand orders - The Group's strategic cooperation with key customers such as the National Pipeline Network Group, Sinopec, PetroChina, and CNOOC remained effective[48] - During the review period, the Group's sales to the National Pipeline Network Group accounted for over 70% of its total sales[48] - Three new customers were developed, sales orders were signed, and the Group actively laid out plans for the social heating pipeline market[48] Strengthening Equipment Management, Efficiently Completing Pipeline Tasks, and Expanding Product Range Shandong Shengli Steel Pipe ensured stable equipment operation by improving maintenance systems, efficiently completing steel pipe production and anti-corrosion tasks for multiple large-scale oil, gas, and water pipeline projects, and successfully broke through the lower limit of internal coating pipe diameter through technological innovation, expanding its product range - Shandong Shengli Steel Pipe ensured stable equipment operation by improving equipment maintenance systems, efficiently completing multiple large-scale SAWH welded pipe projects[49] - Successfully completed the internal anti-corrosion task for Ф508 steel pipes for the Wuhu connection line of the Sichuan-East Gas Transmission Second Line natural gas pipeline project, breaking through the previous lower limit of internal coating pipe diameter and expanding the product range[50] Optimizing Staff Structure, Enhancing Training, and Implementing Multiple Measures for Cost Reduction and Efficiency Improvement The Group improved overall staff quality by optimizing personnel structure, strengthening skills training for key positions, and implementing multi-tasking incentive measures, while achieving significant cost reduction and efficiency improvement through equipment localization by the technology center and optimized procurement processes by the logistics center - Optimized personnel structure, strengthened skills training for key positions, and advocated multi-tasking incentive measures to improve overall quality[51] - The Technology Center localized equipment that had long relied on imports, significantly reducing procurement costs and increasing operational efficiency[51] - The Logistics Center achieved an overall 2% reduction in procurement costs through detailed division of labor and competitive bidding[51] Strengthening Safety Management to Ensure Stable and Safe Production The Group strictly implemented safety management systems, strengthened publicity and education, organized emergency drills, promoted the principle of "all-staff participation and grid management," and completed safety hazard investigations and training, achieving "zero accidents" in safe production - Strictly implemented safety management systems, strengthened publicity and education, and organized emergency response drills to enhance overall safety awareness[53] - Adhered to the principle of "all-staff participation and grid management," completed safety hazard investigations, and achieved "zero accidents" in safe production[53] Enhancing Quality Management to Ensure Provision of High-Quality Products The Group successfully passed the initial certification of its energy management system, maintained good operation of its CNAS laboratory system, and strengthened quality control from the procurement source through expert training and standard development, ensuring the provision of high-quality products - Successfully passed the initial certification of the energy management system, and the CNAS laboratory system operated well[54] - Invited welding experts to conduct training and compiled "Rules and Methods for Testing Weld Metal Overlay Materials," strengthening quality control from the procurement source[54] Enhancing Technological Innovation Capability and Strengthening R&D Prowess The Group increased investment in technology, obtaining 3 authorized patents (1 invention, 2 utility models) and publishing 3 scientific papers in the first half of 2025, successfully passing the municipal enterprise technology center evaluation with an excellent rating, and participating in discussions on oil and gas pipeline industry standards - In the first half of 2025, 3 patents were authorized (1 invention patent and 2 utility model patents), and 3 scientific papers were published[55] - Successfully passed the 2024 municipal enterprise technology center evaluation with an excellent rating and participated in discussions on oil and gas pipeline industry standards as a drafting unit[55] Future Outlook Looking ahead to 2025, with a steady global economic recovery and strong growth in China, the National Energy Administration has set clear goals for high-quality completion of the "14th Five-Year Plan" and ensuring oil and gas supply security, prompting the Group to flexibly respond to industry changes, explore new models, expand into new areas, deepen strategic adjustments, optimize business structure, and actively strive for more project orders from the National Pipeline Network Group while expanding into social and international markets - The IMF forecasts global economic growth of 3.0% in 2025, with China's economic growth forecast revised up to 4.8%[56] - The National Energy Administration proposed high-quality completion of the "14th Five-Year Plan" goals, ensuring crude oil production remains above 200 million tonnes and natural gas production continues to increase[56] - The Group will flexibly respond to industry trends, explore new avenues, and promote new quality productive forces to empower industrial upgrading[56] - The Group will continue to deepen strategic adjustments, optimize its business structure, and while consolidating its position in the mid-to-high-end oil and gas pipeline market, actively open up social and international markets[57] - As a key supplier to the National Pipeline Network Group, the Group will leverage its production capacity and technological advantages to secure more project orders and actively prepare for the 2025 second-half framework agreement bidding process[57] Management Discussion and Analysis This section provides a detailed management discussion and analysis of the Group's market overview, business review, financial performance, and financial position Market Overview In the first half of 2025, despite a complex international environment, China's economy showed steady progress, with GDP growing by 5.3%, creating a favorable environment for energy infrastructure investment, while the oil and gas market experienced structural recovery with stable domestic oil and gas production increases, but traditional refined oil consumption structures diverged, and the proportion of non-fossil energy rose, leading the Group to deepen cooperation with strategic customers and establish a strategic partnership with Rizhao Steel - In the first half of 2025, China's GDP reached approximately RMB 66.05 trillion, growing by 5.3% year-on-year, creating a favorable macroeconomic environment for energy infrastructure investment[60] - In the first half, crude oil output from industrial enterprises above designated size was 108 million tonnes, up 1.3% year-on-year; natural gas output was 130.8 billion cubic meters, up 5.8% year-on-year[61] - The consumption structure of traditional refined oil products diverged, with apparent consumption of gasoline, diesel, and natural gas decreasing year-on-year, and the share of non-fossil energy increasing by 1.7 percentage points[61] - The Group officially established a strategic partnership with Rizhao Steel Holding Group Co, Ltd, deepening cooperation in resource supply, technological innovation, and market expansion[61] - Looking ahead to the second half, the National Energy Administration clearly aims to achieve high-quality "14th Five-Year Plan" goals, ensuring crude oil production remains above 200 million tonnes and natural gas production continues to increase[62] Business Review The Group is a leading oil and gas pipeline producer in China, specializing in the design, manufacturing, anti-corrosion, and insulation processing and services of SAWH welded pipes, with major customers including the National Pipeline Network Group and the "Three Barrels of Oil"; as of June 30, 2025, its annual production capacity for SAWH welded pipes was approximately 800 thousand tonnes, anti-corrosion production lines approximately 4.8 million square meters, and insulation pipe production lines 110 kilometers, with a cumulative total length of approximately 35,779 kilometers of welded pipe products primarily used in China - The Group is one of China's largest and quality-leading oil and gas pipeline producers, capable of providing large-diameter, high-pressure pipes for major oil and gas pipeline projects[63] - Major customers include the National Pipeline Network Group and large state-owned oil and natural gas enterprises such as the "Three Barrels of Oil"[63] Capacity Overview (As of June 30, 2025) | Product Type | Annual Capacity | | :--- | :--- | | SAWH Welded Pipes | Approximately 800 thousand tonnes | | Anti-corrosion Production Lines | Approximately 4.8 million square meters | | Insulation Pipe Production Lines | 110 kilometers | - As of June 30, 2025, the cumulative total length of welded pipes produced by the Group for global oil and gas pipeline main lines was approximately 35,779 kilometers, of which 94.9% were installed in China[63] - During the review period, the Group participated in several large-scale SAWH welded pipe and anti-corrosion pipeline projects, including the National Pipeline Network Group's Sichuan-East Gas Transmission Second Line natural gas pipeline project[64] Financial Performance Review In the first half of 2025, the Group's revenue increased by 12.4%, gross profit by 21.7%, and gross profit margin improved by 0.9 percentage points, with other income, gains, and losses increasing, administrative expenses decreasing, and share of results of an associate turning from loss to profit; however, loss before tax expanded due to litigation provision and increased selling and distribution costs, while total comprehensive loss for the period decreased due to a narrower loss on fair value change of equity investments Revenue In the first half of 2025, the Group's turnover was RMB 374,825 thousand, a 12.4% year-on-year increase, entirely from the welded pipe business, with both SAWH welded pipe sales revenue and anti-corrosion treatment revenue increasing, while trading business revenue significantly decreased to zero Revenue Composition (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Turnover | 374,825 | 333,604 | +12.4% | | SAWH Welded Pipe Sales Revenue | 341,927 | 293,963 | +16.3% | | Anti-corrosion Treatment Revenue | 32,898 | 28,947 | +13.6% | | Trading Business Revenue | — | 10,694 | -100% | - Trading business revenue significantly decreased to zero as the Group is still seeking trading opportunities with higher gross profit potential customers[65] Cost of Sales and Services In the first half of 2025, cost of sales and services increased by 11.2% year-on-year to RMB 330,040 thousand, primarily due to increased sales volume in the welded pipe business Cost of Sales and Services (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Cost of Sales and Services | 330,040 | 296,810 | +11.2% | - The increase in cost was mainly due to the increase in sales volume of the welded pipe business compared to the prior period[66] Gross Profit In the first half of 2025, gross profit increased by 21.7% year-on-year to RMB 44,785 thousand, with gross profit margin improving by 0.9 percentage points to 11.9%, primarily driven by the growth in higher-margin national pipeline and anti-corrosion treatment businesses Gross Profit and Gross Profit Margin (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Gross Profit | 44,785 | 36,794 | +21.7% | | Gross Profit Margin | 11.9% | 11.0% | +0.9 percentage points | - The increase in gross profit and gross profit margin was mainly due to the increase in higher-margin national pipeline and anti-corrosion treatment businesses compared to the prior period[67] Other Income, Gains and Losses In the first half of 2025, other income, gains, and losses increased by 53.59% year-on-year to RMB 6,793 thousand, primarily due to increased gains from sales of materials Other Income, Gains and Losses (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Other Income, Gains and Losses | 6,793 | 4,423 | +53.59% | - The increase was mainly due to increased gains from sales of materials compared to the prior period[68] Selling and Distribution Costs In the first half of 2025, selling and distribution costs slightly increased to RMB 19,896 thousand, primarily due to higher transportation expenses Selling and Distribution Costs (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Selling and Distribution Costs | 19,896 | 18,909 | +5.22% | - The increase was mainly due to a slight increase in transportation expenses borne by the subsidiary[69] Administrative Expenses In the first half of 2025, administrative expenses decreased to RMB 38,904 thousand, primarily due to the company's rational planning to reduce various administrative expenses Administrative Expenses (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Administrative Expenses | 38,904 | 39,763 | -2.16% | - The slight decrease in administrative expenses was mainly due to the Group's continued rational planning to reduce various administrative expenses[70] Share of Results of an Associate In the first half of 2025, the Group's share of profit from an associate was RMB 7,437 thousand, a significant improvement from a loss of RMB 28 thousand in the prior period, primarily due to the substantial improvement in the performance of the associate, Hunan Shengli Xianggang Steel Pipe Co, Ltd Share of Results of an Associate (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Share of Results of an Associate | 7,437 | (28) | Turnaround from loss to profit | - The profit was mainly due to the significant improvement in the performance of the associate, Hunan Shengli Xianggang Steel Pipe Co, Ltd, compared to the prior year[71] Litigation Provision In the first half of 2025, the Group recognized a one-off litigation provision of approximately RMB 18,403 thousand due to a lawsuit involving its subsidiary, Zhejiang Shengguan Litigation Provision (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | | :--- | :--- | :--- | | Litigation Provision | (18,403) | — | - The litigation provision was due to a lawsuit involving the subsidiary, Zhejiang Shengguan, with a final judgment requiring it to bear supplementary compensation liability[72] Finance Costs In the first half of 2025, finance costs slightly decreased to RMB 6,447 thousand, primarily from interest on bank loans Finance Costs (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Finance Costs | 6,447 | 6,601 | -2.33% | - Finance costs primarily arose from interest on bank loans[73] Other Comprehensive Loss In the first half of 2025, the loss on fair value change of equity investments designated at fair value through other comprehensive income narrowed to RMB 14,272 thousand, an improvement from RMB 25,589 thousand in the prior period Loss on Fair Value Change of Equity Investments (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Loss on Fair Value Change of Equity Investments | (14,272) | (25,589) | Loss narrowed | - The narrower loss was mainly due to a decrease in the loss on fair value change of equity investments[76] Income Tax Expense Income tax expense remained at RMB 20 thousand in the first half of 2025, consistent with the prior period Income Tax Expense (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 20 | 20 | 0% | Total Comprehensive Loss for the Period In the first half of 2025, total comprehensive loss for the period narrowed to RMB 39,636 thousand, an improvement from RMB 49,695 thousand in the prior period, primarily due to a reduction in the loss on fair value change of equity investments Total Comprehensive Loss for the Period (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Total Comprehensive Loss for the Period | (39,636) | (49,695) | Loss narrowed | - The narrower loss was mainly due to a decrease in the loss on fair value change of financial assets designated at fair value through other comprehensive income[76] Financial Position Review As of June 30, 2025, the Group's total assets and net assets both decreased, with a significant increase in net current liabilities, and total borrowings increased, all becoming due within one year, leading to a slight rise in the gearing ratio; the Group secured bank loans through asset pledges and closely monitors foreign exchange risks Assets and Liabilities As of June 30, 2025, the Group's total assets were RMB 1,021,296 thousand, total liabilities were RMB 633,603 thousand, and net assets were RMB 387,693 thousand, all showing a decrease from the end of 2024 Assets and Liabilities Overview (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Total Assets | 1,021,296 | 1,064,497 | | Total Liabilities | 633,603 | 637,168 | | Net Assets | 387,693 | 427,329 | Net Current Liabilities As of June 30, 2025, net current liabilities significantly increased to RMB 146,338 thousand, primarily due to the reclassification of long-term borrowings to current liabilities Net Current Liabilities (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Net Current Liabilities | (146,338) | (15,358) | - The significant increase in net current liabilities was mainly due to long-term borrowings being reclassified as current liabilities because their maturity date is less than one year[78] Capital Expenditure In the first half of 2025, the Group's capital expenditure significantly decreased to RMB 1,318 thousand, primarily for the acquisition of property, plant and equipment Capital Expenditure (RMB thousands) | Item | 2025 Half-Year | 2024 Half-Year | | :--- | :--- | :--- | | Acquisition of property, plant and equipment | 1,318 | 13,622 | Indebtedness As of June 30, 2025, the Group's total borrowings were RMB 338,806 thousand, an increase from the end of 2024, with all amounts repayable within one year, and the effective annual interest rate for bank loans ranged from 2.73% to 4.38% Total Borrowings (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Total Borrowings | 338,806 | 309,836 | - Approximately RMB 338,806 thousand of borrowings are repayable within one year[84] Effective Annual Interest Rate for Bank Loans | Date | Effective Annual Interest Rate (%) | | :--- | :--- | | 2025 June 30 | 2.73 to 4.38 | | 2024 December 31 | 3.40 to 4.38 | Financial Management and Treasury Policy The Group's turnover, expenses, assets, and liabilities are largely denominated in RMB, resulting in limited foreign exchange risk, and while no hedging arrangements are in place, foreign exchange movements are closely monitored - The Group's turnover, expenses, assets, and liabilities are largely denominated in RMB, resulting in limited foreign exchange risk[87] - No hedging arrangements have been entered into, but foreign exchange movements are closely monitored from time to time[87] Liquidity, Financial Resources and Capital Structure As of June 30, 2025, cash and cash equivalents slightly decreased, total borrowings increased, and the gearing ratio rose from 54.3% at the end of 2024 to 55.4% Liquidity and Capital Structure (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 119,658 | 127,720 | | Borrowings | 338,806 | 309,836 | | Gearing Ratio | 55.4% | 54.3% | Contingent Liabilities As of the six months ended June 30, 2025, the Group had no significant contingent liabilities - As of the six months ended June 30, 2025, the Group had no significant contingent liabilities[89] Capital Commitments As of June 30, 2025, the Group had capital commitments of approximately RMB 52 thousand for the acquisition of property, plant and equipment Capital Commitments (RMB thousands) | Item | 2025 June 30 | 2024 December 31 | | :--- | :--- | :--- | | Acquisition of property, plant and equipment | 52 | 175 | Pledge of Assets As of June 30, 2025, the Group pledged approximately RMB 112,718 thousand of property, plant and equipment, approximately RMB 67,144 thousand of right-of-use assets, and RMB 30,000 thousand of pledged bank deposits to secure bank loans of RMB 305,430 thousand - Pledged property, plant and equipment, right-of-use assets, and pledged bank deposits to secure bank loans of RMB 305,430 thousand[91] Foreign Exchange Risk The Group's business is primarily transacted and settled in RMB, resulting in minimal foreign exchange risk, and while no hedging is undertaken, management closely monitors exchange rate fluctuations - The Group's business is primarily transacted and settled in RMB, resulting in minimal foreign exchange risk[92] - No forward contracts or other methods are used to hedge foreign exchange risk, but management closely monitors exchange rate fluctuations[92] Human Resources and Remuneration Policy As of June 30, 2025, the Group had 483 employees, with total salaries and related costs amounting to RMB 30,020 thousand, and the company regularly reviews its human resources and remuneration policies, considering regulations, market conditions, industry practices, and employee performance Employees and Remuneration Costs | Item | 2025 June 30 | 2024 June 30 | | :--- | :--- | :--- | | Number of Employees (including directors) | 483 | | | Total Salaries and Related Costs (RMB thousands) | 30,020 | 30,612 | - The Group regularly reviews its human resources and remuneration policies, taking into account local regulations, market conditions, industry practices, and the performance of the Group and individual employees[93] Interim Dividend The Board does not recommend the declaration of an interim dividend for the review period - The Board does not recommend the declaration of an interim dividend for the review period[94] Events After the Reporting Period Subsequent to the reporting period, the final judgment in the lawsuit involving the Group's subsidiary, Zhejiang Shengguan, was upheld, requiring it to bear supplementary compensation liability; additionally, Shandong Shengli Steel Pipe plans to potentially dispose of its 98% equity interest in Zhejiang Shengguan through a public tender process, but no successful bidder has been identified yet - The final judgment in the lawsuit involving Zhejiang Shengguan was upheld, requiring it to bear supplementary compensation liability[95] - Shandong Shengli Steel Pipe plans to potentially dispose of its 98% equity interest in Zhejiang Shengguan through a public tender process, but no successful bidder has been identified yet[95] Corporate Governance and Other Information This section outlines the Group's adherence to corporate governance principles, compliance with securities trading standards, and other relevant information Corporate Governance Code The Company has adopted the principles and code provisions of the Corporate Governance Code in Appendix C1 of the Listing Rules and has complied with all code provisions during the review period - The Company has adopted the principles and code provisions of the Corporate Governance Code in Appendix C1 of the Listing Rules[97] - During the review period, the Company has complied with all code provisions of the Code[97] Compliance with the Model Code for Securities Transactions by Directors of Listed Issuers The Company has adopted the Model Code in Appendix C3 of the Listing Rules as the standard for directors' securities transactions, and all directors have confirmed compliance with this Model Code during the review period - The Company has adopted the Model Code in Appendix C3 of the Listing Rules as the standard for directors' securities transactions[98] - All directors have confirmed compliance with the required standards set out in the Model Code during the review period[98] Purchase, Sale or Redemption of Securities During the review period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities, and as of June 30, 2025, the Company held no treasury shares - During the review period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[99] - As of June 30, 2025, the Company held no treasury shares[99] Sufficiency of Public Float The Board confirms that the Company has maintained a sufficient public float as required by the Listing Rules throughout the review period - The Board confirms that the Company has maintained a sufficient public float as required by the Listing Rules throughout the review period[100] Audit Committee The Company's Audit Committee comprises three independent non-executive directors, with Mr Chen Junzhu as Chairman, and its primary responsibilities include reviewing and overseeing financial reporting processes, and it has reviewed the Group's unaudited financial statements, risk management, and internal control systems - The Audit Committee comprises three independent non-executive directors, including Mr Chen Junzhu (Chairman), Mr Qi Defu, and Mr Qiao Jianmin[101] - Its primary responsibilities include reviewing and overseeing financial reporting processes, and it has reviewed the Group's unaudited financial statements, risk management, and internal control systems[101][102] Review of Accounts The Audit Committee, together with management and external auditors, has reviewed the Group's accounting principles, internal controls, and financial reporting matters, and has reviewed the unaudited interim financial statements for the review period - The Audit Committee, together with management and external auditors, has reviewed the accounting principles and practices adopted by the Group and discussed audit, internal control, and financial reporting matters[103] - The external auditors have performed certain agreed-upon procedures on the interim financial information in accordance with Hong Kong Standard on Related Services 4400 (Revised)[103] Acknowledgement The Board expresses gratitude to all shareholders, customers, stakeholders, and employees for their support and contributions, and pledges to consolidate its core business while expanding into new ventures to create long-term value for shareholders - The Board expresses gratitude to all shareholders, customers, stakeholders, and employees for their support and contributions[104] - The Company pledges to consolidate the stable development of its existing welded pipe core business and refine its oil and gas pipeline products, while also focusing on long-term development, continuing to expand into new businesses, and creating long-term value for its shareholders[104] Board of Directors As of the date of this announcement, the Board of Directors comprises four executive directors, one non-executive director, and three independent non-executive directors - The Board members include Executive Directors Mr Wei Jun, Mr Zhang Bizhuang, Mr Wang Kunxian, Ms Han Aizhi; Non-executive Director Mr Huang Xingwang; and Independent Non-executive Directors Mr Chen Junzhu, Mr Qi Defu, Mr Qiao Jianmin[106]