耐世特(01316) - 2025 - 中期财报

Company Profile Corporate Vision and Core Competencies The company aims to be a global leader in motion control technology, accelerating safe, green, and exciting mobility - The company's vision is to become a global leader in motion control technology, accelerating safe, green, and exciting mobility[8] - The core product portfolio includes Electric and Hydraulic Power Steering systems, Steer-by-Wire, Rear-Wheel Steering, steering columns, intermediate shafts, driveline systems, software solutions, and Brake-to-Steer, supporting chassis-by-wire control[9] - The company's competitive advantage lies in its in-house development and system integration capabilities across hardware, software, and electronic components[9] - The company addresses motion control challenges driven by megatrends such as electrification, software/connectivity, ADAS/AD, and shared mobility[9] Global Presence, Products, and Customers Nexteer operates globally with extensive facilities and serves a diverse customer base of major global and domestic OEMs - The global headquarters is located in Auburn Hills, Michigan, USA[14] - The company operates 26 manufacturing plants (including one non-consolidated joint venture), 5 technical centers, and 13 customer service centers[14] - Key products include Electric Power Steering (EPS), Steer-by-Wire (SbW), Rear-Wheel Steering (RWS), Brake-by-Wire (BbW), Column and Intermediate Shafts (CIS), Driveline (DL), Hydraulic Power Steering (HPS), and Software Solutions (SW)[14] - Customers include global and domestic OEMs such as BMW, BYD, Changan, Chery, Ford, GAC, General Motors, Geely, Great Wall Motor, Li Auto, Maruti Suzuki, Renault-Nissan-Mitsubishi Alliance, SAIC, SGMW, Stellantis, Volkswagen, and XPeng Motors[14] Corporate Information Board of Directors and Corporate Structure The company's board comprises executive, non-executive, and independent non-executive directors, with upcoming leadership changes in 2025 - Mr DING Fengtao will be re-designated from a Non-executive Director to an Executive Director and appointed as Chairman and CEO, effective August 13, 2025[15] - Mr LEI Zili will be re-designated from an Executive Director to a Non-executive Director and will resign as Chairman and CEO, effective August 13, 2025[15] - The Audit and Compliance Committee is chaired by Mr WANG Bin, and the Remuneration and Nomination Committee is chaired by Mr LAU Kin Kwan[15] Registration and Listing Information The company is registered in the Cayman Islands, headquartered in the US, and its shares are listed on the Hong Kong Stock Exchange - Headquarters: Auburn Hills, Michigan, USA[15] - Registered Office: Cayman Islands[15] - Principal Place of Business in Hong Kong: 31/F, Tower Two, Times Square, Causeway Bay, Hong Kong[16] - Shares are listed on The Stock Exchange of Hong Kong Limited with stock code 1316[16] Business Overview Profitable Growth Strategy Nexteer adheres to a six-point profitable growth strategy to enhance shareholder value and achieve its corporate vision - The company is committed to a six-point profitable growth strategy to drive shareholder value and realize its vision[17] - The strategy includes expanding and diversifying the revenue base, strengthening technology leadership, capitalizing on megatrends, optimizing the cost structure, selectively pursuing acquisitions and alliances, and focusing on China and emerging markets[19] H1 2025 Business Highlights In H1 2025, Nexteer achieved $2.2 billion in revenue, a 7% year-over-year increase, and secured $1.5 billion in customer project bookings H1 2025 Business Highlights | Metric | Amount/Description | Change | | :--- | :--- | :--- | | Half-year Revenue | $2.2 billion | 7% increase vs H1 2024 | | Customer Project Bookings | $1.5 billion | - | | New/Conquest Business Share | 74% | - | | Bookings from Chinese Domestic OEMs | Approx $600 million (39%) | - | | New Customer Program Launches | 31 | - | | Battery Electric Vehicle (BEV) Programs | 21 | - | - The company continues to be the steering systems market leader among Chinese domestic OEMs in China[21] - The first DPEPS project in China and the first modular Column-Assist EPS project in Europe were successfully launched[21] Value Growth in a Dynamic Market Nexteer navigates the complex global automotive industry by enhancing resilience and competitiveness through strategic supply chain and production adjustments - Global vehicle production rose by 3.1% in H1 2025 but is expected to decline in the second half, with a full-year increase of only 0.4%[22] - The company made significant progress in customer negotiations for cost recovery by adjusting its supply chain to comply with the USMCA, strengthening US-China tariff planning, and implementing dual-sourcing strategies[23] - Cost optimization initiatives are actively being identified and implemented across global operations, including adjusting fixed cost structures and leveraging technical centers in Mexico and the Asia Pacific region for talent rotation[23] Supply Chain and Cost Optimization Nexteer proactively manages supply chain challenges and enhances profitability through tariff planning, dual sourcing, and digital supply chain management - A dual-sourcing strategy is implemented to mitigate risks and ensure the continuity of critical component supply[26] - The company collaborates with suppliers to achieve target costs and incorporates annual price reductions into contractual agreements[26] - Digitalization enhances the efficiency, transparency, and responsiveness of global supply chain management[26] Manufacturing Footprint Expansion and Transformation The company expands its Asia Pacific capacity with new facilities in China and transforms its US Saginaw site to optimize operations - A new plant in Changshu, opened in January 2025, enhances capacity to meet Chinese domestic OEM demand with a focus on high-end, intelligent, and sustainable manufacturing[27] - Ground was broken for a new smart manufacturing plant in Liuzhou, which will replace existing operations, increase capacity, and solidify market leadership in the Asia Pacific steering systems market[27] - The US Saginaw site completed DL business consolidation, listed a vacant plant for sale, and transferred column business to Mexico to optimize facility space and reduce costs[27] 2025 Global Supplier Conference Nexteer hosted its Global Supplier Conference in April 2025 to enhance supply chain agility, resilience, and sustainability - The Global Supplier Conference was held in Changshu, China, in April 2025, gathering around 200 suppliers and government representatives[28] - The conference focused on enhancing supply chain agility, resilience, and sustainability, emphasizing accelerated innovation-to-market, collaborative cost and time efficiency, and a continued focus on safety-critical quality[28][30] H1 2025 Order Bookings Nexteer secured $1.5 billion in customer project bookings in H1 2025, driven by strong demand for its EPS and RWS technologies H1 2025 Order Bookings Distribution | Metric | Amount/Percentage | | :--- | :--- | | Total Bookings | $1.5 billion | | EPS Product Line Share | 69% | | CIS Product Line Share | 23% | | Driveline Product Line Share | 8% | | EV or EV/ICE Shared Platform Share | 39% | | ICE Platform Share | 61% | | New/Conquest Business Share | 74% | - The company secured significant orders for Chinese NEV platforms and its first Rear-Wheel Steering (RWS) orders in China and EMEASA[29] - Bookings from Chinese domestic OEMs amounted to $600 million, supporting their globalization strategies, with their total production in H1 2025 increasing by 21.7% compared to H1 2024[31] Shanghai Auto Show Showcase and Chinese Domestic OEM Expansion Nexteer showcased its latest motion control innovations at the 2025 Shanghai Auto Show, reinforcing its partnership with global and Chinese automakers - The company showcased its latest motion control innovations at the 2025 Shanghai Auto Show under the theme "Pioneering Motion Control at China Speed for the World – Vision, Velocity & Value"[32] - Featured technologies included Steer-by-Wire, Rear-Wheel Steering, and the public debut of its electromechanical Brake-by-Wire system[32] - Closed-door meetings were held with select OEMs to discuss future innovations and strategic collaboration opportunities[33] Product Innovation and Industry Megatrends In H1 2025, Nexteer launched new technologies and product upgrades to align with customer needs and industry megatrends - Released the MotionIQ™ software suite to simplify by-wire chassis development and vehicle health monitoring, offering precise motion control, accelerated development, and advanced predictive maintenance[34] - Launched a new electromechanical braking system, strategically expanding into by-wire chassis motion control to enhance vehicle safety, handling, and energy efficiency[36] - Introduced a new Rear-Wheel Steering system to improve handling, stability, and safety for heavier vehicles like trucks, SUVs, and EVs, securing two production contracts[36] - Expanded the HO CEPS product portfolio, increasing steering assist capability to 110 Nm to support larger, heavier vehicles and enhance platform flexibility[36] - Launched innovative driveline products, including Face Spline Halfshafts, 8-Ball Constant Velocity Joints, and High-Offset Double Offset Joints, designed to meet EV and hybrid vehicle demands by optimizing ride performance, lightweighting, and NVH[37] Technology Leadership Showcase Nexteer's thought leaders demonstrated industry expertise by speaking at multiple global events on mobility megatrends and motion control technology - Nexteer experts participated in global industry events such as the Mexico Automotive Summit, Germany's "Chassis Tech Days 2025," and the 2025 US Automotive Chassis Systems event[39] Customer and Industry Recognition In H1 2025, Nexteer received numerous awards for quality and excellence from customers and industry bodies globally - The Ford Ranger, equipped with Nexteer's column, intermediate shaft, and REPS system, was named the 2025 North American Truck of the Year[40] - Nexteer Suzhou, China, received the I&CIM's Fast World Cup Award and Zeekr's Excellent Supplier Award[40] - Nexteer Liuzhou, China, received GAC Group's Excellent Supplier Award, the Liudong New District Government's High-Quality Development Excellent Enterprise Award, and SGMW's Excellent KD Supplier and Excellent Supplier Awards[40] - Nexteer Pune, India, received Mahindra's Supplier Excellence Award, and Nexteer Chennai, India, received a Quality Award from the Quality Circle Forum of India[40] - Nexteer Wuhu, China, received Lynk & Co's Excellent Supplier Award, SGM's Quality Pioneer Award, SGM's Supplier Quality Excellence Award, and Nissan's 2024 Nissan China Investment Supplier Quality Excellence Award[40] Financial Summary Results for the Six Months Ended June 30, 2025 For the six months ended June 30, 2025, revenue grew 6.8% year-over-year, while profit attributable to equity holders increased by 304.5% Results for the Six Months Ended June 30, 2025 (USD '000) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,242,248 | 2,098,927 | 6.8% | | Gross Profit | 258,907 | 210,927 | 22.7% | | Profit before income tax | 95,681 | 40,790 | 134.6% | | Income tax expense | 26,667 | 17,729 | 50.4% | | Profit attributable to equity holders of the Company | 63,480 | 15,695 | 304.5% | | Profit for the period | 69,014 | 23,061 | 199.3% | | Adjusted EBITDA | 230,353 | 197,295 | 16.8% | Assets and Liabilities As of June 30, 2025, total assets increased, driven by a 7.2% rise in current assets, while liabilities also grew moderately Assets and Liabilities as of June 30, 2025 (USD '000) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Non-current assets | 1,811,366 | 1,794,818 | 0.9% | | Current assets | 1,805,185 | 1,684,324 | 7.2% | | Non-current liabilities | 323,213 | 296,861 | 8.9% | | Current liabilities | 1,185,107 | 1,152,380 | 2.8% | | Capital and reserves attributable to equity holders of the Company | 2,066,776 | 1,978,877 | 4.4% | Management Discussion and Analysis Financial Review In H1 2025, revenue reached $2.2 billion, outperforming the market by 450 basis points, with Adjusted EBITDA growing 16.8% to $230.4 million H1 2025 Financial Review (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,200,000 | 2,056,700 | 6.8% | | Adjusted Revenue Growth | 7.6% | - | Outperformed market by 450 bps | | Adjusted EBITDA | 230,400 | 197,300 | 16.8% | | Cash Balance (End of Period) | 459,200 | 422,300 | 36,900 | | Net Cash from Operating Activities | 142,300 | 152,400 | (10,100) | - Improved profitability was primarily driven by higher sales volumes and enhanced efficiency, partially offset by net tariff costs in North America and impacts from two distressed suppliers[43] Operating Environment The global automotive market directly impacts the company's business, with H1 2025 light vehicle production growth of 3.1% led by Asia Pacific H1 2025 Global Light Vehicle Production Year-over-Year Growth | Region | H1 2025 YoY Growth | | :--- | :--- | | North America | (4.2%) | | China | 12.3% | | India | 3.7% | | Europe | (3.7%) | | South America | 8.9% | - Fluctuations in the exchange rates of the US dollar against the RMB and Euro adversely affected the Group's revenue in H1 2025[46] - 31 new customer programs were successfully launched in H1 2025, of which 23 were new or conquest business and 21 were for customer BEV programs[46] Revenue Analysis H1 2025 revenue was $2.24 billion, a 6.8% year-over-year increase, outperforming the market by 450 basis points on an adjusted basis H1 2025 Revenue (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 2,242,248 | 2,098,927 | 6.8% | | Unfavorable Foreign Currency Translation | (13,000) | - | - | | Commodity Price Reduction Impact | (2,400) | - | - | | Adjusted Revenue Growth | 7.6% | - | Outperformed market by 450 bps | Revenue by Geographic Segment The Asia Pacific segment led growth with a 15.5% increase, while North America also grew despite a regional production decline H1 2025 Revenue by Geographic Segment (USD '000) | Region | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | North America | 1,138,304 | 1,118,983 | 1.7% | | Asia Pacific | 686,533 | 594,578 | 15.5% | | EMEASA | 400,851 | 366,348 | 9.4% | | Other | 16,560 | 19,018 | (13.0%) | - After adjusting for foreign currency translation and commodity price reductions, Asia Pacific revenue grew by 16.7%, outperforming regional OEM production growth by 870 basis points[48] - The EMEASA segment's revenue, adjusted for currency translation and a slight commodity price increase, grew by 10.8%, outperforming the regional OEM production decline by 1,330 basis points[50] Revenue by Product Line The EPS product line revenue grew by 8.6% in H1 2025, primarily driven by increased customer demand in the Asia Pacific region H1 2025 Revenue by Product Line (USD '000) | Product Line | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | EPS | 1,525,379 | 1,404,555 | 8.6% | | CIS | 228,499 | 221,999 | 2.9% | | HPS | 91,624 | 90,129 | 1.7% | | DL | 396,746 | 382,244 | 3.8% | Net Profit Attributable to Equity Holders Net profit attributable to equity holders for H1 2025 was $63.5 million, a significant increase of $47.8 million from the prior year Net Profit Attributable to Equity Holders (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Profit Attributable to Equity Holders of the Company | 63,500 | 15,700 | 47,800 | | Percentage of Total Revenue | 2.8% | 0.7% | - | - The increase in net profit was primarily due to a $33.1 million increase in EBITDA and the absence of a significant product development intangible asset impairment charge recorded in H1 2024[55] Cost of Sales Cost of sales in H1 2025 was $1.98 billion, a 5.0% year-over-year increase, with the cost of sales to revenue ratio improving to 88.5% Cost of Sales (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Cost of Sales | 1,983,341 | 1,888,000 | 5.0% | | Raw Material Costs | 1,479,635 | 1,339,211 | 10.5% | | Raw Material Costs as % of Revenue | 66.0% | 63.8% | - | | Cost of Sales as % of Revenue | 88.5% | 90.0% | (1.5%) | - Depreciation and amortization (including amortization of capitalized product development costs) deducted from cost of sales decreased by 2.5% to $128.2 million[51] Gross Profit Gross profit for H1 2025 was $259 million, a 22.7% year-over-year increase, with gross margin improving to 11.5% Gross Profit (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | 258,907 | 210,927 | 22.7% | | Gross Margin | 11.5% | 10.0% | 1.5% | Engineering and Product Development Costs Engineering and product development costs for H1 2025 were $75.4 million, a 14.9% decrease from the prior year Engineering and Product Development Costs (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Engineering and Product Development Costs | 75,400 | 88,600 | (14.9%) | | Percentage of Revenue | 3.4% | 4.2% | - | | Product Development Intangible Asset Impairment | 1,600 | 7,300 | (78.1%) | | Total Investment | 129,300 | 135,400 | (4.5%) | - Capitalized interest related to engineering development costs decreased from $3.4 million to $2.0 million[56] Selling, Distribution, and General and Administrative Expenses Selling, distribution, and general and administrative expenses for H1 2025 were $92.2 million, an 11.9% increase from the prior year Selling, Distribution, and General and Administrative Expenses (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Selling, Distribution, and General and Administrative Expenses | 92,200 | 82,400 | 11.9% | | Percentage of Revenue | 4.1% | 3.9% | - | Other Gains, Net Other gains, net for H1 2025 were $1.8 million, an increase of $0.4 million compared to the prior year period Other Gains, Net (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Other Gains, Net | 1,800 | 1,400 | 0.4% | Finance Income / Finance Costs The company recorded net finance income of $0.8 million in H1 2025, compared to net finance costs of $2.2 million in the prior year period Finance Income / Finance Costs (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Finance Income | 800 | (2,200) | 3,000 | - The reduction in finance costs was primarily due to fluctuations in short-term borrowings[60] Share of Results of a Joint Venture The company's share of results from its joint venture, Chongqing Nexteer Steering Systems Co, Ltd, was $1.8 million in H1 2025 Share of Joint Venture Results (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Share of Joint Venture Results | 1,800 | 1,700 | 0.1% | Income Tax Expense Income tax expense for H1 2025 was $26.7 million, representing 27.9% of profit before tax Income Tax Expense (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Income Tax Expense | 26,700 | 17,700 | 8,900 | | Percentage of Profit Before Tax | 27.9% | 43.5% | - | - The company has assessed the Pillar Two legislation and does not expect to incur significant liability for Pillar Two income taxes[63] - The company is currently evaluating the potential impact of the relevant tax provisions under the US Tax Relief for American Families and Workers Act of 2024 on its consolidated financial statements[63] Provisions Total provisions as of June 30, 2025, were $110.9 million, an increase of $11.2 million from year-end 2024 Provisions (USD '000) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Provisions | 110,900 | 99,800 | 11,200 | | Net Additions to Warranty Reserve | 26,700 | - | - | | Cash Payments for Past Warranty Provisions | 18,400 | - | - | Liquidity and Capital Resources The company funds its significant working capital needs through cash from operations and third-party financing - The company primarily meets its working capital and other capital requirements through cash generated from operations and borrowings from third-party financial institutions[65] - The company utilizes a global cash pooling arrangement to consolidate and manage global cash balances, enhancing cash management efficiency[65] Cash Flow from Operating Activities Net cash generated from operating activities in H1 2025 was $142.3 million, a decrease of $10.1 million from the prior year period Cash Flow from Operating Activities (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 142,316 | 152,387 | (10,071) | Cash Flow Used in Investing Activities Net cash used in investing activities in H1 2025 was $105.7 million, a decrease of $49.0 million from the prior year period Cash Flow Used in Investing Activities (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Purchase of property, plant and equipment | (54,994) | (91,185) | 36,191 | | Additions to intangible assets | (55,491) | (54,094) | (1,397) | | Additions to right-of-use assets | – | (8,826) | 8,826 | | Net cash used in investing activities | (105,650) | (154,648) | 48,998 | Cash Flow Used in Financing Activities Net cash used in financing activities in H1 2025 was $11.7 million, a decrease of $8.0 million from the prior year period Cash Flow Used in Financing Activities (USD '000) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash used in financing activities | (11,730) | (19,703) | 7,973 | Indebtedness Total borrowings as of June 30, 2025, were $48.7 million, a slight increase due to foreign exchange impacts on RMB-denominated loans Total Borrowings (USD '000) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Borrowings | 48,680 | 47,762 | 918 | - The increase in borrowings was primarily due to foreign exchange impacts on RMB-denominated term loans in China[69] Pledge of Assets Total assets pledged as collateral as of June 30, 2025, were approximately $835.6 million, an increase of $107.7 million Total Pledged Assets (USD '000) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Pledged Assets | 835,600 | 724,100 | 107,700 | - Pledged assets include trade receivables, inventories, and property, plant and equipment[70] Foreign Exchange Fluctuation Risk and Related Hedging The company mitigates foreign currency risk by matching material purchases and finished goods sales in the same currency - The company seeks to limit its foreign currency risk by matching material purchases with sales of finished goods in the same currency[71] - The company regularly monitors its remaining foreign currency risk to reduce the volatility of its operations[71] Gearing Ratio The gearing ratio as of June 30, 2025, was 2.3%, a decrease of 10 basis points from year-end 2024 Gearing Ratio | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Gearing Ratio | 2.3% | 2.4% | (0.1%) | Future Prospects The company is committed to maintaining its market leadership in global motion control technologies by aligning with key industry megatrends - The company is committed to maintaining its market leadership in global motion control technologies, including advancements in by-wire chassis[74] - The company's future prospects are enhanced by five key strengths: continuous innovation, product portfolio depth and breadth, system integration experience, in-house R&D capabilities, and a global manufacturing footprint[74][77] - The company's product lines are well-aligned with megatrends such as ADAS, software and connectivity, electrification, and shared mobility[74] Employee Remuneration Policy As of June 30, 2025, the company employed approximately 12,000 full-time employees and 1,800 contract staff Employee Headcount | Employee Type | Number | | :--- | :--- | | Full-time Employees | Approx 12,000 | | Contract Staff | Approx 1,800 | - Remuneration policies are based on individual performance and the Group's results and are reviewed regularly[78] - The company offers various employee benefit plans, including retirement benefits, extended disability benefits, workers' compensation, and employee incentive plans[78] Forward-Looking Statements Forward-looking statements in this interim report are based on current plans and estimates and involve risks and uncertainties - Forward-looking statements and opinions are based on current plans, estimates, and projections and involve risks and uncertainties[80] - Actual results may differ materially from those discussed in the forward-looking statements and opinions[80] - The company, its directors, and employees assume no obligation or liability to correct or update any forward-looking statements or opinions[80] Corporate Governance / Other Information Corporate Governance Practices The company is committed to high standards of corporate governance and has complied with all applicable code provisions in H1 2025 - The company is committed to maintaining high standards of corporate governance and has adopted internal control and corporate governance policies[82] - The Board believes the company has complied with all applicable code provisions of the Hong Kong Corporate Governance Code during H1 2025[82] Chairman and Chief Executive Officer The roles of Chairman and CEO are currently combined, a deviation from listing rules that the Board believes provides consistent leadership - Mr LEI Zili has served as both Chairman of the Board and CEO from June 21, 2022, to August 13, 2025[84] - Mr DING Fengtao will be appointed as Chairman and CEO effective August 13, 2025, which deviates from Code Provision C.2.1 of Appendix C1 to the Listing Rules[84] - The Board believes this structure provides consistent leadership for the Group's future and more effective implementation of its overall strategy without compromising the balance of power and authority[84] Compliance with the Model Code for Securities Transactions by Directors The company has adopted the Model Code for securities transactions by directors, and all directors have confirmed compliance for H1 2025 - The company has adopted the Model Code as set out in Appendix C3 to the Listing Rules as its code of conduct for securities transactions by directors[86] - All directors have confirmed their compliance with the required standards set out in the Model Code throughout H1 2025[86] - The company maintains and regularly reviews a list of sensitive information and takes appropriate measures to maintain its confidentiality[87] Risk Management and Internal Control The company has adopted and periodically reviews its risk management and internal control systems and related procedures - The company has adopted risk management and internal control systems and related procedures, and reviews their effectiveness from time to time[88] Changes in Directors' Biographical Details under Rule 13.51B(1) of the Listing Rules Several changes in director roles and external appointments occurred, including upcoming leadership transitions effective August 13, 2025 - Dr WANG Bin retired as an independent director of UBS Securities Co, Limited in March 2025[89] - Mr DING Fengtao will be appointed as an Executive Director, Chairman, CEO, and an authorized representative effective August 13, 2025[89] - Mr LEI Zili will resign as Chairman and CEO, be re-designated from an Executive Director to a Non-executive Director, and cease to be an authorized representative effective August 13, 2025[90] Interim Dividend The Board of Directors does not recommend the payment of an 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[92] Audit and Compliance Committee and Review of Unaudited Condensed Consolidated Interim Financial Information The Audit and Compliance Committee has reviewed the unaudited interim financial information for H1 2025 with no disagreements - The Audit and Compliance Committee has reviewed the Company's unaudited condensed financial information for the six months ended June 30, 2025, together with management and the external auditor[93] - There were no disagreements between the Audit and Compliance Committee and the auditor regarding the accounting treatments adopted by the Company[93] Purchase, Sale or Redemption of the Company's Listed Securities Neither the company nor any of its subsidiaries purchased, sold, or redeemed any of its listed securities during H1 2025 - For the six months ended June 30, 2025, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[94] Share Option Scheme The company's 2014 Share Option Scheme expired on June 5, 2024, with 4,626,240 options outstanding but unexercised as of the period end - The Share Option Scheme expired on June 5, 2024, and no options are available for grant as of June 30, 2025[95][97] - No options under the Share Option Scheme were vested during the six months ended June 30, 2025[96] - As of June 30, 2025, the weighted average remaining contractual life of outstanding options was 6.1 years, with exercise prices ranging from HK$4.268 to HK$12.456[179] Share Option Scheme Summary as of June 30, 2025 | Category | Options held at Jan 1, 2025 ('000) | Options cancelled/lapsed during the interim period ('000) | Options held at Jun 30, 2025 ('000) | | :--- | :--- | :--- | :--- | | Directors | 1,843.54 | (117.05) | 1,726.49 | | Other employees | 2,899.75 | 0 | 2,899.75 | | Total | 4,743.29 | (117.05) | 4,626.24 | Directors' and Chief Executives' Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2025, several directors held long positions in the company's shares through share options Directors' Interests in Underlying Shares of the Company (via Share Options) | Name | Number of underlying shares of the Company held | Approximate percentage of total issued shares | | :--- | :--- | :--- | | LEI Zili | 555,990 (L) | 0.02% | | MILAVEC, Robin Zane | 1,053,450 (L) | 0.04% | | ZHANG Wendong | 117,050 (L) | <0.01% | - The calculation is based on the total number of issued shares of 2,509,824,293 as of June 30, 2025[103] Directors' Rights to Purchase Shares or Debentures No directors or their associates were granted or exercised any rights to acquire shares or debentures of the company during H1 2025 - For the six months ended June 30, 2025, no director or their respective spouse or children under 18 were granted any rights to acquire benefits by means of the acquisition of shares in or debentures of the Company or any of its subsidiaries, nor have they exercised any such rights[104] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares As of June 30, 2025, AVIC Auto and its related entities held a 44.03% interest, while Beijing E-Town International held an 18.98% interest Substantial Shareholders' Interests in Shares and Underlying Shares | Name | Number of Shares | Approximate percentage of total issued shares | | :--- | :--- | :--- | | Nexteer Automotive (Hong Kong) Holdings Limited | 1,105,000,000 (L) | 44.03% | | Pacific Century (Beijing) Automotive Components Co, Ltd | 1,105,000,000 (L) | 44.03% | | AVIC Automobile Industry Holding Co, Ltd | 1,105,000,000 (L) | 44.03% | | Aviation Industry Corporation of China, Ltd | 1,105,000,000 (L) | 44.03% | | Beijing E-Town International Investment & Development Co, Ltd | 476,372,000 (L) | 18.98% | | Beijing E-Town International Automotive Investment Management Co, Ltd | 476,372,000 (L) | 18.98% | - Nexteer Hong Kong is wholly owned by Pacific Century (Beijing) Automotive, which is owned 72.88% by AVIC Auto and 27.12% by Beijing E-Town International Automotive Investment Management Co, Ltd[105] - AVIC Auto is 70.11% owned by Aviation Industry Corporation of China, Ltd (AVIC)[105] Review Report on the Condensed Consolidated Interim Financial Information Introduction Deloitte Touche Tohmatsu has reviewed the H1 2025 interim financial information, which was prepared in accordance with IAS 34 - Deloitte Touche Tohmatsu has reviewed the condensed consolidated interim financial information of the Company for the six months ended June 30, 2025[107] - The condensed consolidated interim financial information has been 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[107] Scope of Review The review was conducted in accordance with ISRE 2410, with a scope substantially less than an audit, and no audit opinion is expressed - The review was conducted in accordance with International Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the International Auditing and Assurance Standards Board[108] - The scope of a review is substantially less than that of an audit conducted in accordance with International Standards on Auditing, and consequently, it does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit; accordingly, we do not express an audit opinion[108] Conclusion Based on the review, nothing has come to attention that causes the belief that the interim financial information is not prepared in accordance with IAS 34 - Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34[109] Condensed Consolidated Interim Balance Sheet Assets As of June 30, 2025, the company's total assets were $3.62 billion, including $1.81 billion in non-current assets and $1.81 billion in current assets Condensed Consolidated Interim Balance Sheet - Assets (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-current assets | | | | Property, plant and equipment | 995,670 | 981,141 | | Right-of-use assets | 43,549 | 48,283 | | Intangible assets | 674,615 | 675,428 | | Deferred income tax assets | 48,239 | 41,566 | | Investment in a joint venture | 24,476 | 22,715 | | Income tax receivable | 4,288 | 5,997 | | Other receivables and prepayments | 20,530 | 19,688 | | Total non-current assets | 1,811,367 | 1,794,818 | | Current assets | | | | Inventories | 309,606 | 283,826 | | Trade receivables | 841,442 | 820,395 | | Notes receivable | 86,605 | 58,114 | | Income tax receivable | 637 | 954 | | Other receivables and prepayments | 107,662 | 98,743 | | Restricted bank deposits | 14 | 14 | | Cash and cash equivalents | 459,219 | 422,278 | | Total current assets | 1,805,185 | 1,684,324 | | Total assets | 3,616,552 | 3,479,142 | Equity and Liabilities As of June 30, 2025, total equity was $2.11 billion, and total liabilities were $1.51 billion Condensed Consolidated Interim Balance Sheet - Equity and Liabilities (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Equity | | | | Share capital | 32,377 | 32,377 | | Other reserves | (12,731) | (58,985) | | Retained earnings | 2,047,130 | 2,005,485 | | Capital and reserves attributable to equity holders of the Company | 2,066,776 | 1,978,877 | | Non-controlling interests | 41,456 | 51,024 | | Total equity | 2,108,232 | 2,029,901 | | Non-current liabilities | | | | Lease liabilities | 32,198 | 27,950 | | Borrowings | 48,541 | 47,625 | | Retirement benefits and compensation | 20,825 | 20,883 | | Deferred income tax liabilities | 1,409 | 1,754 | | Provisions | 79,528 | 59,863 | | Deferred income | 107,313 | 108,062 | | Other payables and accruals | 33,399 | 30,724 | | Total non-current liabilities | 323,213 | 296,861 | | Current liabilities | | | | Trade payables | 890,073 | 873,172 | | Other payables and accruals | 203,690 | 169,017 | | Current income tax liabilities | 21,323 | 25,782 | | Retirement benefits and compensation | 2,709 | 3,163 | | Provisions | 31,399 | 39,898 | | Deferred income | 24,382 | 25,329 | | Borrowings | 139 | 137 | | Lease liabilities | 11,392 | 15,882 | | Total current liabilities | 1,185,107 | 1,152,380 | | Total liabilities | 1,508,320 | 1,449,241 | | Total equity and liabilities | 3,616,552 | 3,479,142 | Condensed Consolidated Interim Income Statement For the Six Months Ended June 30, 2025 For H1 2025, the company generated revenue of $2.24 billion and profit for the period of $69.0 million Condensed Consolidated Interim Income Statement (USD '000) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | 2,242,248 | 2,098,927 | | Cost of sales | (1,983,341) | (1,888,000) | | Gross profit | 258,907 | 210,927 | | Engineering and product development costs | (75,393) | (88,628) | | Selling and distribution expenses | (10,704) | (10,790) | | Administrative expenses | (81,474) | (71,622) | | Other gains, net | 1,792 | 1,424 | | Operating profit | 93,128 | 41,311 | | Finance income | 4,182 | 3,131 | | Finance costs | (3,390) | (5,309) | | Share of results of a joint venture | 1,761 | 1,657 | | Profit before income tax | 95,681 | 40,790 | | Income tax expense | (26,667) | (17,729) | | Profit for the period | 69,014 | 23,061 | | Profit for the period attributable to equity holders of the Company | 63,480 | 15,695 | | Profit for the period attributable to non-controlling interests | 5,534 | 7,366 | | Basic and diluted earnings per share (USD) | 0.025 | 0.006 | Condensed Consolidated Interim Statement of Comprehensive Income For the Six Months Ended June 30, 2025 For H1 2025, total comprehensive income was $116.2 million, including a positive currency translation difference of $47.2 million Condensed Consolidated Interim Statement of Comprehensive Income (USD '000) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Profit for the period | 69,014 | 23,061 | | Exchange differences on translation | 47,187 | (25,256) | | Total comprehensive income (loss) for the period | 116,201 | (2,195) | | Total comprehensive income (loss) attributable to equity holders of the Company | 109,734 | (8,330) | | Total comprehensive income attributable to non-controlling interests | 6,467 | 6,135 | Condensed Consolidated Interim Statement of Changes in Equity For the Six Months Ended June 30, 2025 Equity attributable to the company's equity holders increased from $1.98 billion to $2.07 billion during H1 2025 Condensed Consolidated Interim Statement of Changes in Equity (USD '000) | Metric | At January 1, 2025 | Total comprehensive income | Dividends paid to shareholders | Dividends paid to non-controlling interests | At June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Capital and reserves attributable to equity holders of the Company | 1,978,877 | 109,734 | (21,835) | - | 2,066,776 | | Non-controlling interests | 51,024 | 6,467 | - | (16,035) | 41,456 | | Total | 2,029,901 | 116,201 | (21,835) | (16,035) | 2,108,232 | Condensed Consolidated Interim Statement of Cash Flows For the Six Months Ended June 30, 2025 For H1 2025, net cash from operations was $142.3 million, resulting in a period-end cash balance of $459.2 million Condensed Consolidated Interim Statement of Cash Flows (USD '000) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash generated from operating activities | 142,316 | 152,387 | | Net cash used in investing activities | (105,650) | (154,648) | | Net cash used in financing activities | (11,730) | (19,703) | | Net increase (decrease) in cash and cash equivalents | 24,936 | (21,964) | | Cash and cash equivalents at beginning of period | 422,278 | 311,741 | | Effect of exchange rate changes on cash and cash equivalents | 12,005 | (9,941) | | Cash and cash equivalents at end of period | 459,219 | 279,836 | Notes to the Condensed Consolidated Interim Financial Information General Information Nexteer Automotive Group Limited is a Cayman Islands-incorporated company engaged in designing and manufacturing steering and driveline systems - The Company was incorporated in the Cayman Islands as an exempted limited company on August 21, 2012, under the Companies Act (as revised) of the Cayman Islands[119] - The Group is principally engaged in the business of designing and manufacturing steering and driveline systems and components, including advanced driver-assistance systems and automated driving, for automobile manufacturers and other automotive-related companies[119] - The Group operates primarily in the United States, Mexico, China, Poland, India, Morocco, and Brazil, with major markets in North America, Europe, South America, China, and India[119] - Aviation Industry Corporation of China, Ltd is the ultimate holding company of the Company[119] Basis of Preparation The financial information is prepared in accordance with IAS 34 and should be read in conjunction with the 2024 annual financial statements - The condensed financial information has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of Appendix D2 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[122] - This condensed financial information should be read in conjunction with the annual financial statements for the year ended December 31, 2024[122] Accounting Policies The accounting policies applied are consistent with those used in the 2024 annual financial statements - The accounting policies applied are consistent with those used in the annual financial statements for the year ended December 31, 2024[123] - The Group has adopted the amendments to IAS 21 "Lack of Exchangeability," but it did not have a significant impact on the condensed financial information[124][125] Critical Accounting Estimates and Judgements The preparation of this financial information requires management to make judgements and estimates consistent with those applied in the 2024 annual report - The preparation of condensed financial information requires management to make judgements, estimates, and assumptions, and actual results may differ from these estimates[126] - The significant judgements made by management in applying accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2024[126] Financial Instruments The carrying amounts of the Group's current financial assets and liabilities approximate their fair values - The carrying amounts of the Group's current financial assets and liabilities approximate their fair values[127] - Notes receivable are measured at fair value through other comprehensive income and are classified within Level 2 of the fair value hierarchy[127] - Level 1 fair value measurements are for financial instruments traded in active markets; Level 2 are for those not traded in active markets but for which all significant inputs are observable; Level 3 are for those where one or more significant inputs are not based on observable market data[129] Revenue and Segment Information The Group generates revenue from contracts with OEMs for steering and driveline systems, with operations organized into three reportable segments - The Group generally enters into contracts with OEM customers to sell steering and driveline systems and components, and to provide tooling and prototypes[130] - The Group has organized its business into three reportable segments: North America, Asia Pacific, and EMEASA[135] - The key performance indicator monitored by the Group for managing segment operations is Adjusted EBITDA[136] Revenue from Contracts with Customers Revenue is primarily derived from production parts, tooling, and engineering services, with recognition based on the satisfaction of performance obligations - Revenue from production parts is recognized upon shipment to the customer and transfer of title and risk of loss[132] - Tooling revenue is recognized over time using an input method based on costs incurred to date for customer-reimbursable tooling[132] - Non-production related engineering design and development/prototype revenue is recognized over time using an input method[132] Contract Balances (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current contract assets | 36,937 | 46,219 | | Current contract liabilities | 24,382 | 25,329 | | Non-current contract liabilities | 107,313 | 108,062 | Segment Information The company presents results across three segments: North America, Asia Pacific, and EMEASA, with General Motors being the largest customer H1 2025 Revenue by Geographic Segment (USD '000) | Region | H1 2025 | H1 2024 | | :--- | :--- | :--- | | North America | 1,138,304 | 1,118,983 | | Asia Pacific | 686,533 | 594,578 | | EMEASA | 400,851 | 366,348 | | Other | 16,560 | 19,018 | | Total | 2,242,248 | 2,098,927 | H1 2025 Revenue by Product Line (USD '000) | Product Line | H1 2025 | H1 2024 | | :--- | :--- | :--- | | EPS | 1,525,379 | 1,404,555 | | CIS | 228,499 | 221,999 | | HPS | 91,624 | 90,129 | | DL | 396,746 | 382,244 | | Total | 2,242,248 | 2,098,927 | H1 2025 Revenue from Major Customers (USD '000) | Customer | H1 2025 | H1 2024 | | :--- | :--- | :--- | | General Motors | 771,142 | 754,995 | | Customer A | 414,764 | 408,694 | | Customer B | 349,576 | 342,660 | Property, Plant and Equipment and Intangible Assets As of June 30, 2025, the net book value of property, plant and equipment was $996 million, and intangible assets were $675 million Net Book Value of Property, Plant and Equipment and Intangible Assets (USD '000) | Metric | June 30, 2025 | January 1, 2024 | | :--- | :--- | :--- | | Property, plant and equipment | 995,670 | 1,000,227 | | Intangible assets | 674,615 | 732,560 | - During the period ended June 30, 2025, additions to product development costs (including capitalized interest) were $57.54 million[143] - For the six months ended June 30, 2025, the Group recorded an impairment of product development intangible assets of $1.58 million related to the cancellation of specific customer projects, a significant decrease from $37.7 million in the prior year period[146] - The carrying amount of property, plant and equipment pledged as collateral was $240.64 million as of June 30, 2025[146] Leases The Group's leases primarily consist of real estate, equipment, and vehicles, with total right-of-use assets of $43.55 million Right-of-Use Assets and Lease Liabilities (USD '000) | Metric | June 30, 2025 | January 1, 2024 | | :--- | :--- | :--- | | Total right-of-use assets | 43,549 | 48,283 | | Total present value of lease liabilities | 43,590 | 43,832 | | Total cash outflow for leases (H1) | 9,134 | 17,723 | - Additions to right-of-use assets during the six months ended June 30, 2025, amounted to $5.31 million[148] - Interest on lease liabilities for the six months ended June 30, 2025, was $1.39 million[151] Trade Receivables As of June 30, 2025, net trade receivables were $841 million, with credit periods generally ranging from 30 to 90 days Trade Receivables (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Gross trade receivables | 848,264 | 827,051 | | Less: Provision for impairment | (6,822) | (6,656) | | Net trade receivables | 841,442 | 820,395 | | Carrying amount of pledged trade receivables | 493,624 | 367,049 | - Credit periods generally range from 30 to 90 days from the invoice date, depending on the customer and region[153] Notes Receivable As of June 30, 2025, the amount of uncollected notes receivable was $86.6 million Notes Receivable (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amount of uncollected notes receivable | 86,605 | 58,114 | - Notes receivable are measured at fair value through other comprehensive income[155] Other Receivables and Prepayments As of June 30, 2025, total other receivables and prepayments were $128 million, with a current portion of $108 million Other Receivables and Prepayments (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Other taxes recoverable | 32,764 | 17,219 | | Prepaid assets | 40,822 | 38,324 | | Contract assets | 36,937 | 46,219 | | Total other receivables and prepayments | 128,192 | 118,431 | | Current portion | 107,662 | 98,743 | Share Capital As of June 30, 2025, the company had 2,509,824,293 issued and fully paid ordinary shares Share Capital Information | Metric | June 30, 2025 | | :--- | :--- | | Number of issued and fully paid ordinary shares | 2,509,824,293 | | Par value per share | HK$0.10 | | Total amount | HK$250,982,429 | Borrowings As of June 30, 2025, total borrowings were $48.7 million, with a weighted average annual interest rate of 2.7% Total Borrowings and Maturity Profile (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-current bank borrowings | 48,668 | 47,816 | | Current bank borrowings | 139 | 137 | | Total borrowings | 48,680 | 47,762 | | Due within 1 year | 139 | 137 | | Due in 1 to 2 years | 139 | 137 | | Due in 2 to 5 years | 48,402 | 47,488 | - A subsidiary of the company has an unsecured credit facility balance of $48.81 million, maturing in October 2027[160] - A subsidiary of the company has access to $323 million of a revolving credit facility (totaling $325 million), secured by trade receivables, inventories, and machinery and equipment[160] - The weighted average annual interest rate was 2.7% (December 31, 2024: 4.1%)[165] Provisions As of June 30, 2025, total provisions were $110.9 million, primarily for warranty, environmental, and litigation matters Movement in Provisions (USD '000) | Metric | At Jan 1, 2025 | Net additions | Payments | Exchange differences | At Jun 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Litigation | 858 | 172 | (50) | 81 | 1,061 | | Environmental liabilities | 11,937 | 2 | (63) | 5 | 11,881 | | Warranty | 74,477 | 26,739 | (18,428) | 2,427 | 85,215 | | Shutdown claims | 10,729 | 229 | – | 52 | 11,010 | | Other provisions | 1,760 | – | – | – | 1,760 | | Total | 99,761 | 27,142 | (18,541) | 2,565 | 110,927 | - The increase in warranty provisions was mainly due to net additions of $26.7 million and cash payments of $18.4 million for past warranty provisions[167] Deferred Income As of June 30, 2025, total deferred income was $131.7 million, primarily related to pre-production activities Deferred Income (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current deferred income | 24,382 | 25,329 | | Non-current deferred income | 107,313 | 108,062 | | Total deferred income | 131,695 | 133,391 | - Deferred income is primarily related to pre-production activities and is recognized over the relevant project life cycle (typically four to seven years)[170] Trade Payables As of June 30, 2025, total trade payables were $890 million, with the majority aged between 0 and 60 days Trade Payables (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade payables | 843,721 | 821,874 | | Notes payable | 46,352 | 51,298 | | Total trade payables | 890,073 | 873,172 | Aging Analysis of Trade Payables (USD '000) | Aging | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 0 to 30 days | 414,016 | 391,589 | | 31 to 60 days | 259,085 | 243,284 | | 61 to 90 days | 129,567 | 135,169 | Other Payables and Accruals As of June 30, 2025, total other payables and accruals were $237 million, with a current portion of $204 million Other Payables and Accruals (USD '000) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued expenses | 173,205 | 164,167 | | Dividends payable to equity holders of the Company | 21,835 | – | | Dividends payable to non-controlling interests | 16,065 | – | | Total other payables and accruals | 237,089 | 199,741 | | Current portion | 203,690 | 169,017 | Other Gains, Net Other gains, net for H1 2025 were $1.8 million, primarily from other income offsetting net foreign exchange losses Other Gains, Net (USD '000) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net foreign exchange loss | (7,038) | (253) | | Gain (loss) on disposal of property, plant and equipment | 262 | (1,497) | | Others | 8,568 | 3,174 | | Total | 1,792 | 1,424 | Expenses by Nature Total expenses for H1 2025 were $2.15 billion, with raw material costs accounting for $1.48 billion Expenses by Nature (USD '000) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Raw materials (including work-in-progress and finished goods) | 1,479,635 | 1,339,211 | | Employee labor and benefit costs | 302,559 | 322,679 | | Depreciation of property, plant and equipment | 70,492 | 72,866 | | Amortization of intangible assets | 60,811 | 60,186 | | Impairment expense on intangible assets | 1,579 | 37,699 | | Customer compensation income related to impairment | (2,643) | (24,000) | | Total cost of sales, engineering and product development costs, selling and distribution, and administrative expenses | 2,150,912 | 2,059,040 | Share-Based Payments The company operates a Value Creation Plan, while its Share Option Scheme expired in June 2024 - The company has a Share Option Scheme (expired on June 5, 2024) and a Value Creation Plan (comprising Restricted Measurement Units and Performance Measurement Units)[176][180] - For the six months ended June 30, 2025, the total fair value of Restricted Measurement Units and Performance Measurement Units charged to the condensed financial information was $2.66 million[182] Share Options The Share Option Scheme expired on June 5, 2024, with 4,626,240 options outstanding at the end of H1 2025 Movement in Outstanding Share Options | Metric | Weighted average exercise price (HK$) | Outstanding options ('000) | | :--- | :--- | :--- | | At January 1, 2025 | 5.830 |