中国波顿(03318) - 2025 - 中期财报

Company Information This section provides an overview of the company's governance structure and fundamental registration details Board of Directors and Committees This section lists the composition of the company's Board of Directors, including executive, non-executive, and independent non-executive directors, as well as members of the Audit, Remuneration, and Nomination Committees - The Board of Directors comprises executive directors Mr. Wang Mingfan (Chairman and CEO), Mr. Li Qinglong, Ms. Yang Yingchun (resigned), and Ms. Wang Xinyi; non-executive director Ms. Yin Shuzhen; and independent non-executive directors Mr. Wu Guanyun, Mr. Liang Weimin, Mr. Zhou Xiaoxiong, and Mr. Qiu Haobo[6] - The composition of the Audit, Remuneration, and Nomination Committees is detailed, with Mr. Wu Guanyun chairing the Audit and Remuneration Committees, and Mr. Liang Weimin chairing the Nomination Committee[6] Company Basic Information This section provides basic contact and registration details, including the company's registered office, Hong Kong head office and principal place of business, share registrar, share listing information, and company website - The company's registered office is in the Cayman Islands, with its Hong Kong head office and principal place of business located in Kwun Tong Road, Kowloon, Hong Kong[7] - The company's shares are listed on The Stock Exchange of Hong Kong Limited under stock code 3318, and its website is www.boton.com.hk[8](index=8&type=chunk) Interim Condensed Consolidated Statement of Financial Position As of June 30, 2025, total assets slightly increased, driven by non-current asset growth despite a decline in current assets, while total equity and liabilities both saw minor increases, notably in non-current borrowings Consolidated Statement of Financial Position Key Data (RMB in thousands) | Indicator | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Assets | | | | Non-current assets | 4,590,960 | 4,434,214 | | Current assets | 1,719,706 | 1,863,711 | | Total assets | 6,310,666 | 6,297,925 | | Equity | | | | Equity attributable to owners of the Company | 3,133,854 | 3,140,955 | | Non-controlling interests | 277,609 | 268,323 | | Total equity | 3,411,463 | 3,409,278 | | Liabilities | | | | Non-current liabilities | 1,246,529 | 1,071,645 | | Current liabilities | 1,652,674 | 1,817,002 | | Total liabilities | 2,899,203 | 2,888,647 | - Borrowings within non-current liabilities significantly increased from RMB 955,904 thousand as of December 31, 2024, to RMB 1,133,013 thousand as of June 30, 2025[11] - Trade and other receivables decreased from RMB 938,946 thousand as of December 31, 2024, to RMB 875,808 thousand as of June 30, 2025[9] Interim Condensed Consolidated Statement of Profit or Loss For the six months ended June 30, 2025, the company experienced significant declines in revenue, gross profit, and operating profit, resulting in a loss attributable to owners of the Company, with a basic loss per share of RMB 0.01 Consolidated Statement of Profit or Loss Key Data (RMB in thousands) | Indicator | 2025 H1 (Unaudited) | 2024 H1 (Unaudited) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Revenue | 637,753 | 750,975 | -15.1% | | Cost of sales | (438,894) | (445,344) | -1.4% | | Gross profit | 198,859 | 305,631 | -34.9% | | Operating profit | 33,725 | 109,237 | -69.1% | | Profit before income tax | 10,840 | 81,230 | -86.7% | | Profit for the period | 8,707 | 62,682 | -86.1% | | Profit/(Loss) attributable to owners of the Company | (8,119) | 44,332 | -118.3% | | Basic and diluted (loss)/earnings per share (RMB) | (0.01) | 0.04 | -125.0% | - Net impairment loss on financial assets shifted from an impairment loss of RMB 9,052 thousand in the prior period to a reversal of RMB 4,379 thousand in the current period[12] Interim Condensed Consolidated Statement of Comprehensive Income For the six months ended June 30, 2025, total comprehensive income for the period significantly decreased, primarily due to lower profit for the period, despite a positive shift in currency translation differences Consolidated Statement of Comprehensive Income Key Data (RMB in thousands) | Indicator | 2025 H1 (Unaudited) | 2024 H1 (Unaudited) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Profit for the period | 8,707 | 62,682 | -86.1% | | Currency translation differences | 2,604 | (3,292) | +179.1% | | Total comprehensive income for the period | 11,311 | 59,390 | -80.9% | | Total comprehensive income/(loss) attributable to owners of the Company | (4,875) | 42,461 | -111.5% | Interim Condensed Consolidated Statement of Changes in Equity For the six months ended June 30, 2025, total equity slightly increased, primarily driven by growth in non-controlling interests, despite a reduction in retained earnings attributable to owners of the Company due to period loss and dividend payments Consolidated Statement of Changes in Equity Key Data (RMB in thousands) | Indicator | Balance as at January 1, 2025 | Balance as at June 30, 2025 | | :--- | :--- | :--- | | Share capital | 101,522 | 101,522 | | Share premium | 1,292,432 | 1,292,432 | | Retained earnings | 1,245,431 | 1,235,057 | | Other reserves | 502,549 | 505,822 | | Total equity attributable to owners of the Company | 3,140,955 | 3,133,854 | | Non-controlling interests | 268,323 | 277,609 | | Total equity | 3,409,278 | 3,411,463 | - Profit for the period attributable to owners of the Company was a loss of RMB 8,119 thousand in the current period, compared to a profit of RMB 44,332 thousand in the prior period[15] - Total dividends paid in the current period amounted to RMB 9,126 thousand, with RMB 2,255 thousand attributable to owners of the Company and RMB 6,871 thousand to non-controlling interests[15] Interim Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2025, the company's net cash and cash equivalents decreased, primarily due to a significant increase in net cash used in investing activities, despite a substantial rise in net cash generated from financing activities Consolidated Statement of Cash Flows Key Data (RMB in thousands) | Indicator | 2025 H1 (Unaudited) | 2024 H1 (Unaudited) | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 6,074 | 18,422 | -67.0% | | Net cash used in investing activities | (258,334) | (91,159) | +183.4% | | Net cash generated from financing activities | 203,580 | 41,472 | +391.0% | | Net decrease in cash and cash equivalents | (48,680) | (31,265) | +55.7% | | Cash and cash equivalents at end of period | 236,668 | 319,895 | -26.0% | - Cash outflow for the purchase of property, plant and equipment significantly increased from RMB 75,311 thousand in the prior period to RMB 241,615 thousand in the current period[17] - Proceeds from borrowings increased from RMB 399,919 thousand in the prior period to RMB 823,922 thousand in the current period, with a corresponding increase in repayment of borrowings[17] Notes to the Interim Condensed Consolidated Financial Statements This section provides detailed notes to the interim condensed consolidated financial statements, covering general information, accounting policies, financial risk management, key accounting estimates, segment revenue, balance sheet item details, revenue and expense components, income tax, earnings per share, dividends, contingent liabilities, commitments, and related party transactions, offering deeper context and explanation for the financial statements 1. General Information The Group primarily engages in the production and sale of flavors, fragrances, and e-cigarette products in China and Asia, with the company incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange - The Group's principal activities are the production and sale of flavors, fragrances, and e-cigarette products, with its main markets in China and Asia[18] - The Company was incorporated in the Cayman Islands on March 9, 2005, and listed on The Stock Exchange of Hong Kong Limited on December 9, 2005[18][19] 2. Basis of Preparation and Changes in Accounting Policies The interim condensed consolidated financial statements are prepared in accordance with Hong Kong Accounting Standard 34 issued by the HKICPA, and new and revised standards adopted in the current period have no significant impact on financial performance or position - The interim financial statements are prepared in accordance with Hong Kong Accounting Standard 34 'Interim Financial Reporting'[22] - The new and revised standards adopted in the current period have no significant impact on the Group's financial performance and position[23] 3. Financial Risk Management The Group faces market risks (including exchange rate, fair value interest rate, and cash flow interest rate risks), credit risk, and liquidity risk, with detailed information available in the annual financial statements - The Group's principal financial risks include market risk (exchange rate risk, fair value interest rate risk, and cash flow interest rate risk), credit risk, and liquidity risk[24] 4. Critical Accounting Estimates and Judgements The preparation of interim financial statements involves management's judgments, estimates, and assumptions, with significant judgments made in the current period being consistent with those applied in the 2024 annual consolidated financial statements - Significant judgments made by management in preparing the interim financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2024[25] 5. Revenue and Segment Information The Group operates in five segments: flavor enhancers, food flavors, daily use fragrances, e-cigarette products, and investment properties; for the six months ended June 30, 2025, flavor enhancer revenue significantly decreased, while e-cigarette products, food flavors, and daily use fragrances saw slight increases, and investment property revenue declined - The Group's business is divided into five segments: flavor enhancers, food flavors, daily use fragrances, e-cigarette products, and investment properties[26] Segment Revenue and Profit (RMB in thousands) | Segment | 2025 H1 Revenue | 2024 H1 Revenue | 2025 H1 Operating Profit/(Loss) | 2024 H1 Operating Profit/(Loss) | | :--- | :--- | :--- | :--- | :--- | | Flavor Enhancers | 179,463 | 308,057 | (7,363) | 88,014 | | Food Flavors | 93,051 | 90,286 | 25,694 | 34,207 | | Daily Use Fragrances | 73,115 | 69,567 | 17,037 | 15,260 | | E-cigarette Products | 267,233 | 256,132 | (20,027) | (15,034) | | Investment Properties | 24,891 | 26,933 | 24,491 | 27,351 | | Total | 637,753 | 750,975 | 33,725 | 109,237 | 6. Property, Plant and Equipment and Intangible Assets As of June 30, 2025, the net book value of property, plant and equipment increased, primarily due to additions, while the net book value of intangible assets slightly decreased Net Book Value of Property, Plant and Equipment and Intangible Assets (RMB in thousands) | Indicator | June 30, 2025 | January 1, 2025 | June 30, 2024 | January 1, 2024 | | :--- | :--- | :--- | :--- | :--- | | Property, plant and equipment | 2,164,053 | 1,993,623 | 1,570,420 | 1,528,866 | | Intangible assets | 1,597,156 | 1,615,432 | 1,700,598 | 1,721,629 | - For the six months ended June 30, 2025, additions to property, plant and equipment amounted to RMB 204,622 thousand, and additions to intangible assets were RMB 262 thousand[30] 7. Leases This section presents lease-related items in the interim condensed consolidated statement of financial position, including right-of-use assets and lease liabilities, as well as depreciation, interest, and short-term lease expenses recognized in the statement of profit or loss Lease-related Items (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Right-of-use assets | 156,771 | 152,934 | | Lease liabilities | 15,356 | 9,879 | Lease-related Expenses (RMB in thousands) | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Depreciation expense of right-of-use assets | 5,630 | 4,227 | | Interest expense | 445 | 195 | | Short-term lease related expenses | 5,460 | 4,953 | 8. Trade and Other Receivables As of June 30, 2025, net trade receivables decreased while net other receivables increased, and the aging analysis of trade receivables indicates a persistently high proportion of receivables over one year old Trade and Other Receivables (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade receivables – net | 385,511 | 466,841 | | Bills receivable | 6,013 | 5,045 | | Other receivables – net | 489,653 | 473,222 | | Current trade and other receivables | 875,808 | 938,946 | Aging Analysis of Trade Receivables (RMB in thousands) | Aging | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Less than 3 months | 208,247 | 300,331 | | More than 3 months but less than 1 year | 153,163 | 149,314 | | More than 1 year | 267,746 | 265,288 | | Total | 629,156 | 714,933 | 9. Share Capital As of June 30, 2025, the company's issued and fully paid ordinary share capital and share premium remained unchanged Share Capital Information (RMB in thousands) | Indicator | June 30, 2025 | | :--- | :--- | | Number of shares (thousands) | 1,080,512 | | Share capital | 101,522 | | Share premium | 1,292,432 | | Total | 1,393,954 | 10. Shares Held Under Share Award Scheme The company adopted a share award scheme on December 11, 2023, to reward employees or service providers for their contributions; for the six months ended June 30, 2025, no shares were granted under the scheme, and 500,000 shares remain held by the trustee but ungranted - The Share Award Scheme was adopted on December 11, 2023, to reward employees or service providers for their contributions to the Company[37] - For the six months ended June 30, 2025, no shares were granted under the scheme, and 500,000 shares remain held by the trustee but ungranted[37] 11. Trade and Other Payables As of June 30, 2025, total trade and other payables significantly decreased, primarily due to a reduction in trade payables and accrued salaries Trade and Other Payables (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade payables | 292,667 | 432,587 | | Payables for business combination | 150,000 | 150,000 | | Accrued salaries | 14,720 | 44,447 | | Other tax payables | 27,543 | 35,136 | | Amount due to a related party | 27,470 | — | | Total | 629,461 | 807,141 | Aging Analysis of Trade Payables (RMB in thousands) | Aging | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Less than 3 months | 133,881 | 290,632 | | More than 3 months but less than 1 year | 87,834 | 64,980 | | More than 1 year | 70,952 | 76,975 | | Total | 292,667 | 432,587 | 12. Borrowings As of June 30, 2025, the company's total borrowings increased to RMB 2,039,661 thousand, primarily denominated in RMB and secured by various assets and corporate/personal guarantees Total Borrowings (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-current borrowings | 1,133,013 | 955,904 | | Current borrowings | 906,648 | 894,086 | | Total borrowings | 2,039,661 | 1,849,990 | - Borrowings are primarily denominated in RMB (RMB 1,804,455 thousand), with a portion in HKD (RMB 235,206 thousand)[41] - Bank borrowings are secured by property, plant and equipment, investment properties, bank deposits, land use rights, 100% equity pledge of Shenzhen Boton, personal guarantee of Chairman Mr. Wang Mingfan, and corporate guarantees from the Company and Shenzhen Boton[41] 13. Revenue The Group's revenue primarily derives from the sale of extracts, flavors, fragrances, e-cigarette products, and rental income from investment properties; for the six months ended June 30, 2025, both revenue from contracts with customers and rental income decreased - The Group is principally engaged in the trading, manufacturing, and sale of extracts, flavors, and fragrances, as well as the design and manufacture of e-cigarettes and related products[43] Revenue Sources (RMB in thousands) | Revenue Source | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Revenue from contracts with customers (sale of goods) | 612,862 | 724,042 | | Rental income | 24,891 | 26,933 | | Total revenue | 637,753 | 750,975 | 14. Other Income For the six months ended June 30, 2025, other income, primarily comprising government grants and other miscellaneous income, decreased in total compared to the prior period Other Income (RMB in thousands) | Source | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Government grants | 1,239 | 1,306 | | Others | 221 | 938 | | Total | 1,460 | 2,244 | 15. Other Gains – Net For the six months ended June 30, 2025, net other gains significantly decreased, primarily due to fair value losses on investment properties and reduced other gains Other Gains – Net (RMB in thousands) | Source | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Fair value loss on investment properties | (400) | (400) | | Others | 583 | 2,938 | | Total | 183 | 2,538 | 16. Expenses by Nature For the six months ended June 30, 2025, total cost of sales, selling and marketing expenses, and administrative expenses decreased, with reductions in raw materials and consumables used and consulting fees, but an increase in advertising expenses Expenses by Nature (RMB in thousands) | Expense Category | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Depreciation and amortisation | 58,207 | 56,326 | | Employee benefit expenses | 91,466 | 96,929 | | Raw materials and consumables used | 348,588 | 405,999 | | Advertising expenses | 6,951 | 2,448 | | Consultancy fees | 15,583 | 24,107 | | Total | 610,050 | 637,468 | 17. Finance Income and Costs For the six months ended June 30, 2025, net finance costs decreased, primarily due to lower interest income but increased exchange gains, and a higher amount capitalized for qualifying assets Finance Income and Costs (RMB in thousands) | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Interest income | 621 | 2,306 | | Interest expense | (34,879) | (34,456) | | Exchange gains | 3,582 | 737 | | Less: Amount capitalised for qualifying assets | 7,791 | 3,406 | | Net finance costs | (22,885) | (28,007) | 18. Income Tax Expense For the six months ended June 30, 2025, income tax expense significantly decreased, primarily due to increased reversal of deferred income tax; certain subsidiaries of the Group qualify as high-tech enterprises, enjoying a preferential tax rate of 15% Income Tax Expense (RMB in thousands) | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Current income tax | 10,570 | 31,464 | | Deferred income tax | (8,437) | (12,916) | | Total | 2,133 | 18,548 | - Certain subsidiaries of the Group (e.g., Shenzhen Boton, Boton Flavors & Fragrances Co., Ltd.) qualify as High and New Technology Enterprises, enjoying a preferential tax rate of 15%[48] 19. Earnings Per Share For the six months ended June 30, 2025, the company reported a basic loss per share of RMB 0.01, compared to earnings per share of RMB 0.04 in the prior period, with diluted earnings per share being the same as basic earnings per share due to no potential dilutive effects Earnings Per Share (RMB) | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | (Loss)/profit attributable to owners of the Company (thousands) | (8,119) | 44,332 | | Weighted average number of ordinary shares in issue (thousands) | 1,080,012 | 1,080,493 | | Basic and diluted (loss)/earnings per share | (0.01) | 0.04 | - Diluted earnings per share is the same as basic earnings per share, as there were no potential dilutive effects for both the current and prior periods[51] 20. Dividends The Board 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 an interim dividend for the six months ended June 30, 2025[52] 21. Contingent Liabilities The company is involved in a legal dispute related to the Kimree acquisition, concerning outstanding consideration of RMB 150,000 thousand, with the case in early stages and the outcome not reasonably estimable - The Company is involved in a legal dispute with one of the vendors of the share purchase agreement, concerning outstanding consideration of RMB 150,000 thousand related to the Kimree acquisition[53] - The defense stage of the case has concluded, but the plaintiff has not taken further action, and management is currently unable to reasonably estimate the outcome[53] 22. Commitments As of June 30, 2025, the Group's capital commitments primarily consist of contracted but unprovided property, plant and equipment, and future minimum lease payments related to short-term leases Capital Commitments (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Contracted but not provided for property, plant and equipment | 21,724 | 188,898 | Short-term Lease Related Commitments (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Within one year | - | 174,412 | 23. Related Party Transactions For the six months ended June 30, 2025, the Group did not enter into any significant related party transactions - For the six months ended June 30, 2025, no significant transactions were entered into with related parties[56] Management Discussion and Analysis This section provides management's discussion and analysis of the company's business performance, covering principal activities, business review, revenue and financial performance analysis, corporate culture, outlook, financial review, material investments, contingent liabilities, and post-balance sheet events, detailing operating conditions, challenges, and future development strategies for the reporting period Principal Activities of the Group The Group primarily designs and manufactures e-cigarette products and engages in the production, trading, and sale of extracts, flavors, and fragrances, with products widely used across tobacco, food, and daily chemical industries - The Group's principal activities include the design and manufacture of high-quality e-cigarettes and related products (such as disposable e-cigarettes, rechargeable e-cigarettes, and accessories), sold to tobacco companies, independent e-cigarette manufacturers, and various brand customers[57] - Fragrance products are sold to manufacturers in the tobacco, beverage, daily food, canned food, savory, and confectionery industries in China and overseas; flavor products are sold to manufacturers in the beauty, perfume, soap, cosmetics, hair care, deodorant, detergent, and air freshener industries[57] Business Review During the reporting period, the global economy remained complex and challenging, with international trade affected by geopolitical tensions, leading to severe challenges across the Group's business segments, rising production costs, and hindered overseas expansion, prompting the company to control costs through automation and corporate restructuring - The global economy is complex, with international trade severely impacted by prolonged conflicts and geopolitical tensions, affecting consumption patterns[58] - Production costs for e-cigarette products increased due to tightening domestic and international regulations and rising labor costs, while tariff uncertainties hindered overseas expansion[58] - The Group strictly controlled costs through automation of production plants and corporate restructuring to streamline internal procedures[58] Revenue Analysis For the six months ended June 30, 2025, the Group's total revenue decreased by 15.1% year-on-year, primarily due to a significant decline in the flavor enhancers segment, while e-cigarette products, food flavors, and daily use fragrances segments saw slight increases Segment Revenue Details (RMB in millions) | Segment | 2025 Revenue | % of Total Revenue | 2024 Revenue | % of Total Revenue | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Flavor Enhancers | 179.5 | 28.1% | 308.1 | 41.0% | -41.7% | | Food Flavors | 93.1 | 14.6% | 90.3 | 12.0% | +3.1% | | Daily Use Fragrances | 73.1 | 11.5% | 69.6 | 9.3% | +5.0% | | E-cigarette Products | 267.2 | 41.9% | 256.1 | 34.1% | +4.3% | | Investment Properties | 24.9 | 3.9% | 26.9 | 3.6% | -7.4% | | Total | 637.8 | 100.0% | 751.0 | 100.0% | -15.1% | Flavor Enhancers Flavor enhancers segment revenue significantly decreased by 41.7%, primarily due to intense industry competition, rising natural raw material costs, stricter government safety regulations, and changing consumer demand, leading to higher production costs and reduced profit margins - Flavor enhancer revenue was approximately RMB 179.5 million, a significant year-on-year decrease of 41.7%[61] - This segment faced challenges including intense industry competition, increased natural raw material costs, tightening government safety regulations, and changing consumer demand, leading to higher production costs and reduced profit margins[61] Food Flavors Food flavors segment revenue slightly increased by 3.1%, as the Group maintained stable revenue in a competitive food market by developing new flavors - Food flavor revenue was approximately RMB 93.1 million, a slight year-on-year increase of 3.1%[62] - The Group continued to develop new flavors, maintaining stable revenue in this segment[62] Daily Use Fragrances Daily use fragrances segment revenue increased by 5.0%, primarily benefiting from an increase in new customers and continued support from long-term cooperative clients - Daily use fragrance revenue was approximately RMB 73.1 million, a year-on-year increase of 5.0%[63] - The increase in revenue was attributed to new customer acquisition and continued support from long-term cooperative clients[63] E-cigarette Products E-cigarette product revenue slightly increased by 4.3%, benefiting from diversified local customers and an extensive marketing network. Management is actively negotiating collaborations with major companies, expecting business improvement in the second half of the year - E-cigarette product revenue was approximately RMB 267.2 million, a slight year-on-year increase of 4.3%[64] - Revenue growth benefited from diversified local customers and an extensive marketing network[64] - Management is negotiating collaborations with several major companies, expecting to enhance synergy and improve business in the second half of the year[64] Investment Properties Investment property segment revenue decreased by 7.4%, primarily due to some tenants terminating leases amidst the challenging property market conditions in Shenzhen, China - Investment property revenue was approximately RMB 24.9 million, a year-on-year decrease of 7.4%[65] - The decrease in revenue was due to certain tenants terminating leases amidst the challenging property market conditions in Shenzhen, China[65] Financial Performance This section details changes in gross profit, net profit, other income, net other gains, selling and marketing expenses, administrative expenses, and net finance costs during the reporting period, indicating a significant decline in the company's overall profitability Gross Profit For the six months ended June 30, 2025, the Group's gross profit decreased by 34.9% year-on-year to approximately RMB 198.9 million Gross Profit (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Gross profit | 198.9 | 305.6 | -34.9% | Net Profit for the Period The Group's net profit for the period significantly decreased by 86.1% to approximately RMB 8.7 million, with the net profit margin falling to about 1.4% Net Profit for the Period (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Net profit for the period | 8.7 | 62.7 | -86.1% | | Net Profit Margin | 1.4% | 8.3% | -6.9% | Other Income Other income decreased by 34.9% year-on-year to approximately RMB 1.5 million, primarily due to reduced auxiliary business income not classified under principal business segments Other Income (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Other income | 1.5 | 2.2 | -34.9% | Other Gains – Net Net other gains significantly decreased to approximately RMB 0.2 million, primarily due to the absence of gains from derecognition of a PRC subsidiary in the current reporting period Other Gains – Net (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Other gains – net | 0.2 | 2.5 | -92.0% | Expenses Selling and marketing expenses increased by 5.5% to approximately RMB 24.9 million, mainly due to higher advertising expenses; administrative expenses decreased by 13.2% to approximately RMB 146.3 million, primarily due to lower employee benefit expenses, consulting fees, and office expenses Key Expenses (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Selling and marketing expenses | 24.9 | 23.6 | +5.5% | | Administrative expenses | 146.3 | 168.5 | -13.2% | Net Finance Costs Net finance costs decreased to approximately RMB 22.9 million, primarily due to lower loan interest rates on borrowings Net Finance Costs (RMB in millions) | Indicator | 2025 H1 | 2024 H1 | Y-o-Y Change | | :--- | :--- | :--- | :--- | | Net finance costs | 22.9 | 28.0 | -18.2% | Corporate Culture The Group upholds its 'Four New and Five Heart' corporate culture and core values of 'High Technology, High Quality, High Starting Point, High Standards,' committed to enhancing competitiveness and achieving international development - The Group's corporate culture embodies the spirit of 'Four New and Five Heart': 'New Brand, New Culture, New Strength, New Image' and 'Careful, Dedicated, Meticulous, Sincere, Concerned'[72] - Its core values are 'High Technology, High Quality, High Starting Point, High Standards,' aiming to enhance competitiveness and embark on an international journey[72] Outlook Looking ahead to H2 2025, the global economy is expected to recover slowly, driven by emerging economies; the Group will actively regain domestic market share, accelerate globalization, capture high-value-added markets through technological cooperation and production enhancements, and commit to green economy and sustainable development - The global economy is expected to experience a slow and uneven recovery in H2 2025, with new economies, particularly Asian countries, driving global growth[73] - The Group will actively recover and enhance domestic market share, accelerate its globalization efforts, especially in developing countries, and drive existing business growth through localization and technological cooperation[75] - The Group will continue to apply enhanced production technologies and capture high-value-added markets, committing to long-term goals such as the green economy, carbon reduction, and improved adaptability[75] Financial Review This section reviews the Group's financial matters, including liquidity, financial resources, capital structure, foreign exchange and interest rate risks, asset pledges, capital expenditures, interim dividends, employee policies, and material investments Liquidity and Financial Resources As of June 30, 2025, the Group's net current assets and current ratio both improved, primarily due to a reduction in trade and other payables Liquidity and Financial Resources (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net current assets | 67,000 | 46,700 | | Cash and bank deposits pledged for bank borrowings | 420,200 | 466,200 | | Current ratio | 1.04 | 1.03 | Financing The Group is confident in securing sufficient funding for its operations and expansion plans through bank borrowings, equity fundraising, and funds generated from business operations - The Group can obtain financing for its acquisitions through bank borrowings or equity fundraising[78] - Coupled with funds generated from business operations, the Group is confident in having sufficient funds to achieve its operating and expansion plans[78] Capital Structure As of June 30, 2025, the company had 1,080,512,146 ordinary shares in issue; total borrowings increased, leading to a rise in the gearing ratio to 59.8% - As of June 30, 2025, the total number of ordinary shares issued by the Company was 1,080,512,146[79] Capital Structure Key Data (RMB in thousands) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total borrowings | 2,039,700 | 1,850,000 | | Gearing ratio | 59.8% | 54.3% | Foreign Exchange Risk and Interest Rate Risk The Group recorded net foreign exchange gains of approximately RMB 3.6 million, with most transactions denominated in RMB and exchange rates closely monitored; interest rate risk is not considered material by the Board, and the Group does not hedge against it - For the six months ended June 30, 2025, the Group recorded net foreign exchange gains of approximately RMB 3.6 million[80] - Most of the Group's transactions are denominated in RMB, with some in USD and HKD; the Company will closely monitor exchange rates and consider currency hedging possibilities[80][81] - The Board believes that interest rate risk will not have a material impact on the Group, and the Group does not hedge its interest rate risk[81] Pledge of the Group's Assets As of June 30, 2025, the Group has pledged equity interests in certain subsidiaries, properties, land use rights, bank deposits, and Mr. Wang Mingfan's personal guarantee as collateral for borrowings - The Group has pledged equity interests in certain subsidiaries, several buildings, warehouses, and investment properties held by Shenzhen Boton, land use rights in Hubei, China, held by a PRC subsidiary, certain bank deposits, properties in Hong Kong, and land use rights and construction in progress in Huizhou, China, held by a PRC subsidiary as collateral for borrowings[82] - Mr. Wang Mingfan's personal guarantee also serves as collateral for bank borrowings[41][82] Capital Expenditure For the six months ended June 30, 2025, the Group's investment in fixed assets and construction in progress significantly increased, with capital commitments primarily funded by internal resources and financing Capital Expenditure (RMB in thousands) | Indicator | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Investment in fixed assets and construction in progress | 241,600 | 75,300 | | Capital commitments relating to fixed assets | 21,700 | 188,900 | - Capital commitments are funded by internal resources and financing[83] Interim Dividend The Board 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 an interim dividend for the six months ended June 30, 2025[84] Employee Policy As of June 30, 2025, the Group had 1,112 employees, offering competitive remuneration, retirement plans, and benefits, with contributions to social security and provident funds in accordance with Chinese and Hong Kong regulations - As of June 30, 2025, the Group had 1,112 employees in China, Hong Kong, and Indonesia[85] - The Group provides employees with comprehensive and competitive remuneration, retirement plans, share option schemes, and benefits, making contributions in accordance with the China Social Security Scheme and the Hong Kong Mandatory Provident Fund Scheme[85] Material Investments The Group made a significant investment in a construction project on a piece of land in Huizhou, Guangdong, China, planning to invest approximately RMB 400 million to expand its e-cigarette products segment - The Group made a material investment in a construction project on a piece of land located in Zhongkai High-tech Industrial Development Zone, Huizhou, Guangdong Province, China[86] - The planned investment in fixed assets on this land (including acquisition consideration, building construction, and machinery costs) is approximately RMB 400,000 thousand, aimed at expanding the e-cigarette products segment[86] Contingent Liabilities Aside from the legal dispute related to the Kimree acquisition, the Group had no other significant contingent liabilities as of June 30, 2025 - As of June 30, 2025, the Group had no other material contingent liabilities apart from the legal proceedings disclosed in the 'Legal Proceedings against a Vendor of an Acquisition Transaction' section of the Management Discussion and Analysis[88] Land Resumption in Shenzhen Shenzhen Nanshan government departments intend to resume a piece of land owned by Shenzhen Boton in Shenzhen for high-speed rail hub construction; compensation plans are under discussion, and it is not expected to have a material adverse impact on Shenzhen Boton's operations - Shenzhen Nanshan government departments intend to resume a piece of land owned by Shenzhen Boton Flavors & Fragrances Co., Ltd. in Shenzhen for the construction of a high-speed rail hub and related projects[89] - Compensation proposals are under discussion, but detailed information is not yet available; preliminary discussions indicate that the land resumption will not have a material adverse impact on Shenzhen Boton's operations[89] Legal Proceedings Against a Vendor of an Acquisition Transaction The Group is involved in multiple legal proceedings related to the 2016 Kimree acquisition vendors, including breaches of non-compete undertakings, fiduciary duties, and misrepresentations; the cases are ongoing, and outcomes remain uncertain - The Group is involved in 4 legal proceedings concerning the vendors of the 2016 Kimree acquisition, including Mr. Liu Qiuming and Mr. Xiang Zhiyong[90] - The lawsuits involve breaches of non-compete undertakings, breaches of fiduciary duties, and misrepresentations regarding the terms of the agreement[90][91] - The cases are ongoing, with no judgments rendered as of the report date, and the outcomes are not reasonably estimable[91] Events After the Reporting Period On August 1, 2025, the Group signed a supplemental agreement with the buyer, extending the profit guarantee for Boton Flavors & Fragrances Group, with the new guarantee requiring net profit growth of no less than 5% from January 1, 2025, to March 31, 2026, constituting a connected transaction - On August 1, 2025, the contracting parties entered into a supplemental agreement to extend the guarantee arrangement for Boton Flavors & Fragrances Group[93] - The new guarantee requires Boton Flavors & Fragrances Group's net profit to grow by no less than 5% for the period from January 1, 2025, to March 31, 2026[93] - As the buyer is a connected person of the Company, the new guarantee constitutes a connected transaction subject to reporting and announcement requirements[93] Other Information This section provides corporate governance and shareholder information, including directors' and substantial shareholders' interests in securities, share option and share award schemes, dealings in listed securities, and the composition and responsibilities of the Audit, Remuneration, and Nomination Committees, along with the company's corporate governance practices Directors' and Chief Executive's Interests in Securities As of June 30, 2025, directors and the chief executive held long positions in the company's shares, with Mr. Wang Mingfan holding a 67.51% interest in the total issued shares of the company Directors' Interests in Shares and Underlying Shares of the Company (Ordinary Shares) | Name of Director | Personal Interest | Family Interest | Corporate Interest | Total | % of Total Issued Shares | | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Wang Mingfan | 336,555,052 | 25,262,431 | 367,638,743 | 729,456,226 | 67.51% | | Mr. Yang Yingchun | 2,000,000 | — | — | 2,000,000 | 0.19% | - Mr. Wang Mingfan's family interest refers to shares held by his spouse, Ms. Yang Yifan, and corporate interests include shares held by Chuanghua Co., Limited and Full Ashley Enterprises Limited, in which Mr. Wang Mingfan is deemed to have an interest[95] Share Option Scheme The company adopted a new share option scheme on December 11, 2023, replacing the old one; the new scheme is valid for ten years from December 12, 2023, but no share options have been granted under it as of the report date - The Company adopted a new Share Option Scheme on December 11, 2023, and the old Share Option Scheme was terminated[98] - The new Share Option Scheme remains valid for a period of ten years from December 12, 2023, but no share options were granted under it during the review period or as of the report date[98] - The maximum number of shares that may be granted under the new Share Option Scheme shall not exceed 10% of the issued shares as of the adoption date (i.e., 108,051,214 shares)[98] Share Award Scheme The company approved the adoption of a share award scheme on December 11, 2023, to reward employees or service providers for their contributions to the Group; no shares were granted during the reporting period, and 500,000 shares remain held by the trustee but ungranted - The Share Award Scheme was approved by shareholders on December 11, 2023, to reward employees or service providers for their contributions to the Group[101] - During the reporting period, no shares were granted under the Share Award Scheme, and as of June 30, 2025, 500,000 shares were held by the trustee but ungranted[101] Directors' Rights to Acquire Shares or Debentures During the review period, neither the company nor any of its subsidiaries entered into any arrangements enabling directors to acquire benefits by acquiring shares or debt securities of the company or any other corporation - At no time during the review period did the Company or any of its subsidiaries enter into any arrangements that would enable the Company's directors to acquire benefits by acquiring shares or debt securities of the Company or any other corporation[102] Substantial Shareholders' Interests in Securities As of June 30, 2025, substantial shareholder Mr. Wang Mingfan held a 67.51% interest in the company's issued share capital through beneficial ownership, family interests, and interests in controlled corporations Substantial Shareholders' Long Positions in Ordinary Shares of the Company | Name of Shareholder | Capacity/Nature of Interest | Number of Shares | % of Issued Shares | | :--- | :--- | :--- | :--- | | Mr. Wang Mingfan | Beneficial owner, family interest, and interest in controlled corporations | 729,456,226 | 67.51% | | Chuanghua Co., Limited | Beneficial owner | 348,320,509 | 32.24% | | Full Ashley Enterprises Limited | Beneficial owner | 19,318,234 | 1.79% | - Mr. Wang Mingfan is deemed to have an interest in shares held by his spouse, Ms. Yang Yifan, and shares held by Chuanghua Co., Limited and Full Ashley Enterprises Limited[105] Purchase, Sale or Redemption of the Company's Listed Securities 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 - Neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities during the six months ended June 30, 2025[106] Audit Committee The Audit Committee comprises four independent non-executive directors and is responsible for reviewing and overseeing the Group's financial reporting process, risk management, and internal control systems - The Audit Committee comprises four independent non-executive directors: Mr. Wu Guanyun (Chairman), Mr. Liang Weimin, Mr. Zhou Xiaoxiong, and Mr. Qiu Haobo[107] - The Committee's terms of reference are to review and supervise the Group's financial reporting process, risk management, and internal control systems[107] Remuneration Committee The Remuneration Committee is responsible for considering and approving remuneration arrangements for the Group's senior employees, comprising four independent non-executive directors and one executive director - The Remuneration Committee comprises four independent non-executive directors (Mr. Wu Guanyun (Chairman), Mr. Liang Weimin, Mr. Zhou Xiaoxiong, and Mr. Qiu Haobo) and one executive director (Mr. Wang Mingfan)[108] - The Committee was established to consider and approve remuneration arrangements for the Group's senior employees, including terms of salary and bonus schemes and other long-term incentive plans[108] Nomination Committee The Nomination Committee reviews the Board's structure, size, and diversity, and makes recommendations to the Board on director appointments and succession planning, comprising four independent non-executive directors and two executive directors - The Nomination Committee comprises four independent non-executive directors (Mr. Liang Weimin (Chairman), Mr. Wu Guanyun, Mr. Zhou Xiaoxiong, and Mr. Qiu Haobo) and two executive directors (Mr. Wang Mingfan and Ms. Wang Xinyi)[109] - The Committee's responsibilities include reviewing the Board's structure, size, and diversity, and making recommendations to the Board on director appointments and succession planning[109] Corporate Governance The company is committed to maintaining good corporate governance standards, generally complying with Appendix C1 of the Listing Rules' Corporate Governance Code during the reporting period, though the roles of Chairman and Chief Executive Officer are combined, which the Board believes is more suitable for the company - The Company has complied with all code provisions set out in Appendix C1 of the Listing Rules' Corporate Governance Code throughout the six months ended June 30, 2025[110] - Code Provision C.2.1 stipulates that the roles of Chairman and Chief Executive Officer should be separate, but Mr. Wang Mingfan serves concurrently as Executive Director, Chief Executive Officer, and Chairman, a structure the Board believes provides strong and consistent leadership[110] Standard of Conduct for Directors' Securities Transactions by Listed Issuers The company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules, and all directors confirmed compliance during the reporting period - The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 of the Listing Rules[112] - All directors of the Company confirmed that they have complied with the required standards set out in the Model Code throughout the six months ended June 30, 2025[112]