天德化工(00609) - 2025 - 中期财报

Corporate Information This section provides the company's basic information, including board members, committee compositions, contact details, and listing information, outlining its governance structure and external communication channels Corporate Information and Governance Structure This section details the company's fundamental information, including board composition, committee structures, key contacts, and listing specifics, illustrating its governance framework - The Board of Directors comprises executive directors including Mr. Liu Yang (Chairman), Mr. Wang Zijiang, Mr. Chen Xiaohua (General Manager), and independent non-executive directors including Mr. Liang Jinyun, Mr. Liu Chenguang, and Ms. Shan Honghong[4] - The Company has established an Audit Committee, Remuneration Committee, Nomination Committee, and Safety and Environmental Protection Committee to ensure effective corporate governance[5] - The Company's stock code is 609, listed on The Stock Exchange of Hong Kong Limited, with investor relations contact at 852-2866 6848[9][10] Condensed Consolidated Income Statement This section presents the company's financial performance, showing a 5.6% decrease in revenue to RMB 932.3 million and a 19.0% decline in gross profit to RMB 116.7 million for the six months ended June 30, 2025 Financial Performance Overview For the six months ended June 30, 2025, the company's revenue decreased by 5.6% to RMB 932.3 million, gross profit fell by 19.0% to RMB 116.7 million, and profit for the period significantly dropped by 43.2% to RMB 19.2 million Condensed Consolidated Income Statement (RMB'000) | Metric | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Revenue | 932,301 | 987,765 | -5.6% | | Cost of sales | (815,625) | (843,681) | -3.3% | | Gross profit | 116,676 | 144,084 | -19.0% | | Other income and gains | 18,100 | 18,166 | -0.4% | | Selling expenses | (40,747) | (36,327) | +12.2% | | Administrative and other operating expenses | (52,197) | (83,289) | -37.3% | | Finance costs | (6,395) | (638) | +902.4% | | Profit before income tax | 35,437 | 41,996 | -15.6% | | Income tax expense | (16,206) | (8,146) | +99.0% | | Profit for the period | 19,231 | 33,850 | -43.2% | | Profit attributable to owners of the Company | 35,154 | 42,357 | -17.0% | | Basic earnings per share | RMB0.040 | RMB0.049 | -18.4% | Condensed Consolidated Statement of Comprehensive Income This section details the company's total comprehensive income, which decreased significantly by 62.3% to RMB 13.1 million for the six months ended June 30, 2025, primarily due to negative currency translation differences Analysis of Total Comprehensive Income For the six months ended June 30, 2025, profit for the period was RMB 19.2 million, but negative currency translation differences of RMB 6.2 million led to a total comprehensive income of RMB 13.1 million, a 62.3% decrease year-on-year Condensed Consolidated Statement of Comprehensive Income (RMB'000) | Metric | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Profit for the period | 19,231 | 33,850 | -43.2% | | Other comprehensive income (currency translation differences) | (6,175) | 737 | -938.4% | | Total comprehensive income for the period | 13,056 | 34,587 | -62.3% | | Total comprehensive income attributable to owners of the Company | 28,803 | 43,242 | -33.4% | | Total comprehensive income attributable to non-controlling interests | (15,747) | (8,655) | +81.9% | Condensed Consolidated Statement of Financial Position This section outlines the company's assets, liabilities, and equity as of June 30, 2025, showing a slight decrease in total assets less current liabilities and stable total equity Assets, Liabilities, and Equity Status As of June 30, 2025, total assets less current liabilities were RMB 2,529.4 million, a slight decrease from 2024 year-end, with net current assets declining to RMB 867.3 million, while total equity remained stable at RMB 2,504.6 million Condensed Consolidated Statement of Financial Position (RMB'000) | Metric | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | 变化 (%) | | :--- | :--- | :--- | :--- | | Non-current assets | 1,662,114 | 1,659,245 | +0.2% | | Current assets | 1,520,861 | 1,425,188 | +6.7% | | Current liabilities | 653,606 | 524,507 | +24.6% | | Net current assets | 867,255 | 900,681 | -3.7% | | Total assets less current liabilities | 2,529,369 | 2,559,926 | -1.2% | | Non-current liabilities | 24,778 | 45,002 | -44.9% | | Net assets | 2,504,591 | 2,514,924 | -0.4% | | Total equity | 2,504,591 | 2,514,924 | -0.4% | - Trade and bills receivables increased by 22.3% from RMB 377,774 thousand at the end of 2024 to RMB 461,932 thousand[15] - Bank borrowings increased by 60.9% from RMB 220,134 thousand at the end of 2024 to RMB 354,191 thousand[15] Condensed Consolidated Statement of Cash Flows This section analyzes the company's cash flows, showing a significant 66.8% decrease in net cash from operating activities, a shift to net cash inflow from investing activities, and a stable net cash from financing activities Cash Flow Analysis For the six months ended June 30, 2025, net cash from operating activities significantly decreased by 66.8% to RMB 50.3 million, while investing activities shifted to a net inflow of RMB 209.6 million, primarily due to fixed deposit withdrawals Condensed Consolidated Statement of Cash Flows (RMB'000) | Metric | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 50,349 | 151,845 | -66.8% | | Net cash generated from / (used in) investing activities | 209,602 | (209,339) | +199.9% | | Net cash generated from financing activities | 22,104 | 25,381 | -12.8% | | Net increase / (decrease) in cash and cash equivalents | 282,055 | (32,113) | +978.2% | | Cash and cash equivalents at end of period | 633,913 | 144,371 | +339.1% | - Non-cash financing activities include supplier financing arrangements with banks, where banks directly paid RMB 106,400 thousand to suppliers, which the Group classified as "bank borrowings"[20][21] Condensed Consolidated Statement of Changes in Equity This section details the changes in the company's equity, showing a slight increase in equity attributable to owners of the Company, influenced by dividend declarations, share issuance from option exercises, and profit for the period Equity Composition and Changes As of June 30, 2025, equity attributable to owners of the Company slightly increased to RMB 2,425.5 million, with key changes including a declared 2024 final dividend of RMB 24.2 million, share issuance from option exercises of RMB 0.8 million, and profit for the period of RMB 35.2 million Condensed Consolidated Statement of Changes in Equity (RMB'000) | Metric | 2025年1月1日 (RMB'000) | 2025年6月30日 (RMB'000) | 变动 (RMB'000) | | :--- | :--- | :--- | :--- | | Share capital | 8,060 | 8,069 | +9 | | Share premium | 146,691 | 147,611 | +920 | | Exchange fluctuation reserve | 19,120 | 12,769 | -6,351 | | Retained profits | 1,153,733 | 1,164,669 | +10,936 | | Total equity attributable to owners of the Company | 2,420,103 | 2,425,517 | +5,414 | | Non-controlling interests | 94,821 | 79,074 | -15,747 | | Total equity | 2,514,924 | 2,504,591 | -10,333 | - The 2024 final dividend of RMB 24,218 thousand was declared and paid on August 28, 2025[22] - Share capital increased by RMB 9 thousand and share premium increased by RMB 920 thousand due to the exercise of share options[22] Notes to the Condensed Consolidated Financial Statements This section provides detailed notes to the financial statements, covering general information, accounting policies, critical judgments, segment information, revenue breakdown, finance costs, profit before tax, income tax, dividends, earnings per share, asset details, receivables, payables, share capital, commitments, share-based payments, related party transactions, and fair value measurements 1. General Information and Basis of Preparation and Presentation This section outlines Tianneng Chemical Holdings Limited's registration, primary business (R&D, manufacturing, and sales of fine chemical products), and the basis for preparing interim financial statements under HKAS 34 and Listing Rules, noting HKD as functional currency and RMB as presentation currency - The Company's principal business is investment holding, while its subsidiaries are primarily engaged in the research, development, manufacturing, and sales of fine chemical products[26][30] - The unaudited condensed financial information is prepared in accordance with Hong Kong Accounting Standard 34 issued by the Hong Kong Institute of Certified Public Accountants and the applicable disclosure requirements of Appendix D2 to the Listing Rules of the Stock Exchange[27][31] - The Company's functional currency is HKD, but due to its principal operations being in China, the unaudited condensed financial information is presented in RMB[27][34] 2. Significant Accounting Policies This section details the Group's initial application of new and revised HKFRSs, including amendments to HKAS 21 and HKFRS 1 (Lack of Exchangeability), and notes the potential significant impact of HKFRS 18 on presentation and disclosure - The Group first applied the amendments to Hong Kong Accounting Standard 21 and Hong Kong Financial Reporting Standard 1, "Lack of Exchangeability," issued by the Hong Kong Institute of Certified Public Accountants, which had no impact on the interim condensed consolidated financial statements[36][37][38] - Hong Kong Financial Reporting Standard 18 (replacing Hong Kong Accounting Standard 1) is expected to have a significant impact on the presentation and disclosure of certain items in the consolidated financial statements, including classifications and subtotals in the income statement[41][44] 3. Critical Judgements and Estimates The significant judgments and key sources of estimation uncertainty made by management in preparing the interim condensed financial information are consistent with those applied in the 2024 annual financial statements - The significant judgments made by management and the key sources of estimation uncertainty in preparing the unaudited condensed financial information are the same as those applied in the 2024 annual financial statements[42][45] 4. Segment Information The Group's chief operating decision maker identifies the R&D, manufacturing, and sales of fine chemical products as a single operating segment, with China remaining the primary revenue source, complemented by significant contributions from overseas markets - The Group's research, development, manufacturing, and sales of fine chemical products are identified as a single operating segment[46] Revenue by Region (RMB'000) | Region | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | China (local) | 643,615 | 708,475 | -9.2% | | India | 103,938 | 124,289 | -16.4% | | United Arab Emirates | 41,891 | 24,533 | +70.8% | | United States | 29,300 | 16,375 | +78.9% | | Brazil | 21,459 | 6,112 | +251.1% | | Others | 92,098 | 107,981 | -14.7% | | Total | 932,301 | 987,765 | -5.6% | - For the period ended June 30, 2025, no single customer accounted for 10% or more of the Group's revenue[50][51] 5. Revenue and Other Income and Gains This section details the Group's revenue, primarily from fine chemical product sales, and other income and gains, including bank interest and exchange gains, totaling RMB 932.3 million and RMB 18.1 million respectively for the period Revenue and Other Income and Gains (RMB'000) | Item | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Sales of fine chemical products | 932,301 | 987,765 | -5.6% | | Government grants | 85 | 47 | +80.9% | | Bank interest income | 15,099 | 10,771 | +40.2% | | Net gain on disposal of property, plant and equipment | 1,018 | – | Not applicable | | Net exchange gain | 1,008 | 4,826 | -79.1% | | Total other income and gains | 18,100 | 18,166 | -0.4% | 6. Finance Costs This section discloses the Group's finance costs, which totaled RMB 6.4 million for the six months ended June 30, 2025, a significant 902.4% increase year-on-year, mainly due to interest from asset-backed financing, supplier financing, and advances from related companies Finance Costs (RMB'000) | Item | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Interest on bank borrowings | 2,701 | 638 | +323.4% | | Interest on asset-backed financing | 391 | – | Not applicable | | Interest on supplier financing arrangements | 3,202 | – | Not applicable | | Interest on advances from related companies | 101 | – | Not applicable | | Total finance costs | 6,395 | 638 | +902.4% | 7. Profit Before Income Tax This section details the key expenses deducted or included in calculating profit before income tax, highlighting a 14.5% decrease in total employee costs and a 58.3% decrease in research costs Expenses Deducted/Included in Profit Before Income Tax (RMB'000) | Item | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Directors' emoluments | 1,869 | 2,024 | -7.6% | | Other employee costs | 74,124 | 87,187 | -15.0% | | Contributions to retirement benefit schemes | 7,693 | 8,699 | -11.6% | | Total employee costs | 83,686 | 97,910 | -14.5% | | Depreciation of right-of-use assets | 1,287 | 1,287 | 0.0% | | Amortisation of intangible assets | 902 | 902 | 0.0% | | Cost of inventories recognised as expense | 815,625 | 843,681 | -3.3% | | Depreciation of property, plant and equipment | 90,487 | 83,700 | +8.1% | | Research costs | 22,669 | 54,426 | -58.3% | - Cost of inventories recognized as expense includes depreciation expenses of RMB 87,464 thousand and staff costs of RMB 58,085 thousand[63] - Research costs include depreciation expenses of RMB 900 thousand and staff costs of RMB 12,286 thousand[63] 8. Income Tax Expense This section details the Group's income tax expense, which significantly increased by 99.0% to RMB 16.2 million for the six months ended June 30, 2025, primarily due to a substantial rise in China dividend withholding tax Income Tax Expense (RMB'000) | Item | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Current tax – China corporate income tax | 11,319 | 9,167 | +23.5% | | – Over-provision in prior years | (641) | (1,172) | -45.3% | | – China dividend withholding tax paid | 25,706 | 970 | +2549.1% | | Deferred tax – Credit for the period | (20,178) | (819) | +2363.6% | | Total income tax expense | 16,206 | 8,146 | +99.0% | - Hong Kong-registered subsidiaries are not subject to Hong Kong profits tax as they had no assessable profits during the period[64][66] - Subsidiaries established in China are subject to China corporate income tax at a rate of 25%, and China withholding tax at 5% or 10%[64][67] 9. Dividends This section reports the declaration and payment of the 2024 final dividend of HKD 0.03 per share, totaling RMB 24.2 million, and the Board's decision not to recommend an interim dividend for the current period - The 2024 final dividend of HKD 0.03 per share, totaling RMB 24,218 thousand, was paid on August 28, 2025[68] - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025 (2024: HKD 0.02 per share)[69] 10. Earnings Per Share This section provides data for calculating basic and diluted earnings per share, both of which decreased to RMB 0.040 for the six months ended June 30, 2025, compared to the prior year Earnings Per Share | Metric | 2025年6月30日止六个月 | 2024年6月30日止六个月 | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company (RMB'000) | 35,154 | 42,357 | -17.0% | | Weighted average number of ordinary shares for basic earnings per share ('000 shares) | 877,462 | 869,418 | +0.9% | | Weighted average number of ordinary shares for diluted earnings per share ('000 shares) | 877,506 | 873,606 | +0.4% | | Basic earnings per share (RMB) | 0.040 | 0.049 | -18.4% | | Diluted earnings per share (RMB) | 0.040 | 0.049 | -18.4% | 11. Property, Plant and Equipment / Right-of-use Assets This section discloses the Group's investments, disposals, and pledges related to property, plant, and equipment and right-of-use assets, noting a significant increase in property, plant, and equipment acquisitions and certain assets pledged as collateral - For the six months ended June 30, 2025, the Group acquired property, plant and equipment totaling RMB 97,933 thousand, a significant increase from RMB 47,314 thousand in the prior period[74][76] - During the period, a gain of RMB 1,018 thousand was realized from the disposal of property, plant and equipment, and property, plant and equipment with a net book value of RMB 2,353 thousand were written off[74][76] - As of June 30, 2025, certain buildings with a net book value of RMB 50,411 thousand and right-of-use assets of RMB 76,645 thousand were pledged as collateral for bank borrowings of RMB 175,000 thousand[75][78] 12. Trade and Bills Receivables This section details the composition, credit terms, aging analysis, and impairment provisions for trade and bills receivables, which totaled RMB 461.9 million (net of provisions) as of June 30, 2025, representing a 22.3% increase from 2024 year-end Trade and Bills Receivables (RMB'000) | Item | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | 变化 (%) | | :--- | :--- | :--- | :--- | | Trade receivables | 328,576 | 275,024 | +19.5% | | Bills receivables | 138,089 | 105,999 | +30.3% | | Less: Provision for impairment losses | (4,733) | (3,249) | +45.7% | | Total | 461,932 | 377,774 | +22.3% | Aging Analysis of Trade and Bills Receivables (RMB'000) | Aging | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | | :--- | :--- | :--- | | 0 to 90 days | 321,193 | 275,588 | | 91 to 180 days | 49,260 | 87,238 | | 181 to 365 days | 78,260 | 14,753 | | Over 365 days | 13,219 | 195 | | Total | 461,932 | 377,774 | - The Group discounted certain bills receivables with full recourse to financial institutions; as of June 30, 2025, approximately RMB 62,791 thousand of bills receivables continued to be recognized in the financial statements and included in bank borrowings[81][84] 13. Prepayments and Other Receivables This section details the composition of prepayments and other receivables, which totaled RMB 53.2 million as of June 30, 2025, a 23.6% increase from 2024 year-end, primarily due to increased advances to suppliers and prepayments Prepayments and Other Receivables (RMB'000) | Item | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | 变化 (%) | | :--- | :--- | :--- | :--- | | Advances to suppliers | 23,724 | 27,200 | -12.8% | | Recoverable VAT | 8,750 | 8,223 | +6.4% | | Prepayments | 7,311 | 894 | +717.8% | | Other receivables | 13,435 | 6,746 | +99.1% | | Total | 53,220 | 43,063 | +23.6% | 14. Trade Payables This section provides an aging analysis of trade payables, which totaled RMB 40.8 million as of June 30, 2025, a 7.5% increase from 2024 year-end, with credit terms generally ranging from 30 to 270 days Aging Analysis of Trade Payables (RMB'000) | Aging | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | | :--- | :--- | :--- | | 0 to 90 days | 35,600 | 32,497 | | 91 to 180 days | 851 | 1,798 | | 181 to 365 days | 1,666 | 1,533 | | Over 365 days | 2,638 | 2,073 | | Total | 40,755 | 37,901 | - The credit period for trade payables ranges from 30 to 270 days, and their carrying amounts approximate their fair values[93][95] 15. Accruals and Other Payables This section details the composition of accruals and other payables, which totaled RMB 240.1 million as of June 30, 2025, remaining largely stable compared to 2024 year-end, with an increase in payables for property, plant, and equipment offset by decreases in accrued expenses and staff welfare payables Accruals and Other Payables (RMB'000) | Item | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | 变化 (%) | | :--- | :--- | :--- | :--- | | Payables for property, plant and equipment | 153,969 | 140,874 | +9.3% | | Accrued expenses | 9,365 | 30,473 | -69.2% | | Payables for salaries and welfare | 5,396 | 12,452 | -56.6% | | Dividends payable | 24,218 | – | Not applicable | | Total | 240,084 | 238,471 | +0.7% | - Other payables primarily include amounts due for maintenance and procurement of spare parts[97] 16. Share Capital This section provides details on the company's authorized and issued share capital, noting a slight increase in issued share capital to RMB 8,069 thousand as of June 30, 2025, due to the exercise of share options Share Capital (RMB'000) | Item | Number of shares ('000 shares) | Amount (RMB'000) | | :--- | :--- | :--- | | Issued and fully paid at January 1, 2024 | 869,418 | 7,986 | | Shares issued upon exercise of share options | 8,000 | 74 | | Issued and fully paid at December 31, 2024 | 877,418 | 8,060 | | Shares issued upon exercise of share options | 1,000 | 9 | | Issued and fully paid at June 30, 2025 | 878,418 | 8,069 | 17. Commitments This section discloses the Group's capital commitments, primarily for the acquisition of property, plant, and equipment, which decreased to RMB 105.7 million as of June 30, 2025, from 2024 year-end Commitments (RMB'000) | Item | 2025年6月30日 (RMB'000) | 2024年12月31日 (RMB'000) | 变化 (%) | | :--- | :--- | :--- | :--- | | Commitments for acquisition of property, plant and equipment | 105,696 | 140,324 | -24.7% | 18. Share-based Payments This section details the 2016 Share Option Scheme, designed to reward contributors to the Group, noting that Executive Director Mr. Chen Xiaohua exercised 1,000,000 share options during the period, resulting in no outstanding options at period-end - The 2016 Share Option Scheme became effective on May 20, 2016, with a ten-year validity, allowing for a maximum grant of 84,687,800 share options[103][105] - During the period, option holders exercised 1,000,000 share options at an exercise price of HKD 0.908 per option[104][106] - As of June 30, 2025, there were no outstanding share options granted under the 2016 Share Option Scheme[107] 19. Related Party Transactions This section discloses the Group's related party transactions during the period, including short-term lease expenses paid to related companies, advances from related companies, and interest payments Related Party Transactions (RMB'000) | Type of transaction | 2025年6月30日止六个月 (RMB'000) | 2024年6月30日止六个月 (RMB'000) | | :--- | :--- | :--- | | Short-term lease expenses paid to related companies | 257 | 257 | | Advances from related companies | 12,000 | – | | Repayment to related companies | 12,000 | – | | Interest paid to related companies | 101 | – | - Advances from related companies are unsecured, bear interest at an annual rate of 2%, and are repayable within one year[114] 20. Fair Value Measurement This section explains the fair value measurement hierarchy (Level 1, 2, 3) and provides an analysis of financial assets (bills receivables) measured at fair value through other comprehensive income, with fair value determined using Level 2 inputs - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[117] Fair Value Measurement of Financial Assets (RMB'000) | Item | Level 1 (RMB'000) | Level 2 (RMB'000) | Level 3 (RMB'000) | Total (RMB'000) | | :--- | :--- | :--- | :--- | :--- | | June 30, 2025: Bills receivables | – | 138,089 | – | 138,089 | | December 31, 2024: Bills receivables | – | 105,999 | – | 105,999 | - The fair value of bills receivables is determined by discounting expected future cash flows using current available interest rates for instruments with similar terms, credit risk, and remaining maturities[120] Management Discussion and Analysis This section provides management's insights into the Group's business and financial performance, discussing market conditions, strategic responses, and key financial metrics Business Review Despite macroeconomic headwinds, geopolitical tensions, and US tariffs causing domestic manufacturing downturns and deflation, the Group strategically expanded overseas markets, increased capacity, and diversified applications, achieving moderate overseas sales growth that mitigated overall revenue decline - Persistent unfavorable macroeconomic factors, international geopolitical tensions, and US tariff policies severely impacted domestic manufacturing, leading to increased downward pressure on the domestic economy and intense competition due to market supply-demand imbalance[122][124] - The selling prices of almost all the Group's products further declined compared to the same period last year[122][124] - The Group strategically focused its marketing efforts and resources on developing overseas markets, achieving moderate year-on-year growth in overseas sales by actively expanding its international marketing network and successfully opening up new application areas in downstream industries[123][125] - Domestic deflation led to a decrease in average raw material costs, and the Group effectively reduced labor and overall production costs through automated production processes and a circular economy production system, though this could not fully offset the negative impact of declining product selling prices[127][129] Outlook Looking ahead, the Group anticipates continued challenges from US-China trade tensions and a slowing domestic economy, planning to respond by expanding business scope, diversifying risks, enhancing operational flexibility, optimizing product portfolios, and seeking new revenue streams, while emphasizing cash flow management and operational efficiency - Persistent US-China trade tensions and US tariff policies pose significant pressure on the domestic economy, with continued economic slowdown and deepening deflation expected to present severe challenges to domestic manufacturing operations[128][130] - The Group is actively expanding its business scope and diversifying its business risks, enhancing operational flexibility, continuously optimizing its product portfolio, and actively seeking new revenue sources[128][131] - Strengthening cash flow management and improving operational efficiency remain key priorities for the Group[128][131] Financial Review This section provides a detailed review of the Group's financial performance, including declining revenue and gross profit, changes in operating expenses, significantly increased finance costs, reduced profit for the period, increased receivables and bank borrowings, and the status of liquidity and financial resources Revenue and Gross Profit Affected by the domestic economic downturn and falling product prices, the Group's total revenue decreased by 5.6% to RMB 932.3 million, and gross profit fell by 19.0% to RMB 116.7 million, with gross margin contracting by 2.1 percentage points to 12.5% Revenue and Gross Profit (RMB million) | Metric | 2025年6月30日止六个月 (RMB million) | 2024年6月30日止六个月 (RMB million) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Total revenue | 932.3 | 987.8 | -5.6% | | Gross profit | 116.7 | 144.1 | -19.0% | | Gross profit margin | 12.5% | 14.6% | -2.1个百分点 | - The decrease in revenue was primarily due to a sustained significant decline in overall product selling prices, despite moderate growth in overseas market revenue[134] - The decline in gross profit was due to cost savings from lower raw material costs and improved operational efficiency being insufficient to fully offset the negative impact of falling product selling prices[135] Operating Expenses Selling expenses increased by 12.2% to RMB 40.7 million due to higher transportation costs from increased domestic sales of hazardous products, while administrative and other operating expenses significantly decreased by 37.3% to RMB 52.2 million due to lower R&D costs Operating Expenses (RMB million) | Metric | 2025年6月30日止六个月 (RMB million) | 2024年6月30日止六个月 (RMB million) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Selling expenses | 40.7 | 36.3 | +12.2% | | Selling expenses as % of revenue | 4.4% | 3.7% | +0.7个百分点 | | Administrative and other operating expenses | 52.2 | 83.3 | -37.3% | | Administrative and other operating expenses as % of revenue | 5.6% | 8.4% | -2.8个百分点 | - The increase in selling expenses was primarily attributable to increased domestic sales of hazardous products, leading to higher transportation costs to comply with national safety regulations[136] - The decrease in administrative and other operating expenses was mainly attributable to lower research and development expenses[137] Finance Costs Finance costs surged by 902.4% to RMB 6.4 million, primarily due to the Group's strategic increase in the use of bank borrowings, asset-backed financing, supplier financing arrangements, and advances from related companies to optimize short-term liquidity management Finance Costs (RMB million) | Metric | 2025年6月30日止六个月 (RMB million) | 2024年6月30日止六个月 (RMB million) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Finance costs | 6.4 | 0.6 | +902.4% | - The increase in finance costs was due to the strategic increase in the use of bank borrowings, asset-backed financing, supplier financing arrangements, and advances from related companies to optimize short-term liquidity management[139][142] Profit for the Period Influenced by the aforementioned factors, profit for the period attributable to owners of the Company decreased by 17.0% to RMB 35.2 million compared to the prior period Profit for the Period Attributable to Owners of the Company (RMB million) | Metric | 2025年6月30日止六个月 (RMB million) | 2024年6月30日止六个月 (RMB million) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Profit for the period attributable to owners of the Company | 35.2 | 42.4 | -17.0% | Trade and Bills Receivables As of June 30, 2025, trade receivables (net of impairment provisions) increased by 19.1% to RMB 323.8 million, and bills receivables rose by 30.3% to RMB 138.1 million, with the Directors deeming no additional bad debt provision necessary Trade and Bills Receivables (RMB million) | Metric | 2025年6月30日 (RMB million) | 2024年12月31日 (RMB million) | 变化 (%) | | :--- | :--- | :--- | :--- | | Trade receivables (net of impairment provisions) | 323.8 | 271.8 | +19.1% | | Bills receivables | 138.1 | 106.0 | +30.3% | - Approximately 60.7% of trade receivables were generated in the second quarter of the current year and were mostly not yet due, while 28.3% of trade receivables were aged over 180 days[144] - All bills receivables are bank acceptance bills, guaranteed by reputable licensed banks in China, carrying low default risk, thus requiring no bad debt provision[145] Short-term Bank Borrowings As of June 30, 2025, total bank borrowings increased to RMB 354.2 million, primarily utilized for the Group's general working capital requirements Short-term Bank Borrowings (RMB million) | Metric | 2025年6月30日 (RMB million) | 2024年12月31日 (RMB million) | 变化 (%) | | :--- | :--- | :--- | :--- | | Total bank borrowings | 354.2 | 220.1 | +60.9% | - All bank borrowings were obtained in China, bear interest at fixed rates, are denominated in RMB, and are primarily used to finance the Group's general working capital[146][149] Liquidity and Financial Resources The Group maintained a sound financial position with a net cash balance of RMB 490.4 million as of June 30, 2025; despite a significant decrease in net cash inflow from operating activities, funding needs were met through new bank borrowings and fixed deposit withdrawals Liquidity and Financial Resources (RMB million) | Metric | 2025年6月30日止六个月 (RMB million) | 2024年6月30日止六个月 (RMB million) | 同比变化 (%) | | :--- | :--- | :--- | :--- | | Net cash inflow from operating activities | 50.3 | 151.8 | -66.8% | | New bank borrowings | 118.6 | 26.0 | +356.2% | | Repayment of bank borrowings | 91.0 | – | Not applicable | | Net cash balance (period-end) | 490.4 | 626.9 | -21.8% | | Net current assets (period-end) | 867.3 | 900.7 | -3.7% | - The Group's gearing ratio is not applicable as cash and cash equivalents exceeded total outstanding borrowings[151] - The Group is capable of meeting its capital commitments and working capital requirements for the foreseeable future and will continue to closely manage its working capital[153] Pledge of Assets As of June 30, 2025, the Group pledged bank deposits, certain buildings, and right-of-use assets as collateral for factory water supply guarantees, foreign exchange forward contract performance guarantees, and bank borrowings - Bank deposits of RMB 300 thousand were pledged as collateral for factory water supply guarantees, and RMB 1,000 thousand were pledged as collateral for foreign exchange forward contract performance guarantees[155][160] - Certain buildings (RMB 50.4 million) and right-of-use assets (RMB 76.6 million) were pledged as collateral for the Group's bank borrowings[155][160] Contingent Liabilities As of June 30, 2025, the Group had no significant contingent liabilities - As of June 30, 2025, the Group had no significant contingent liabilities[156][161] Exposure to Fluctuations in Exchange Rates The Group primarily faces RMB exchange rate fluctuation risk, with most income and expenses denominated in RMB and export sales in USD; no significant difficulties were encountered during the period, and cost-effective hedging methods will be considered in the future - The Group's most significant foreign exchange fluctuation risk arises from changes in the RMB exchange rate[157][163] - Most of the Group's income and expenses are denominated in RMB, while export sales are primarily denominated in USD[157][163] - No significant difficulties or impacts were encountered due to exchange rate fluctuations during the period, and cost-effective hedging methods will be considered in the future[157][163] Other Information This section covers various other corporate information, including dividend policy, human resources, directors' and substantial shareholders' securities interests, share option scheme details, compliance with securities transaction codes, share repurchase activities, and corporate governance practices Dividends The Board of Directors does not recommend the payment of any interim dividend for the six months ended June 30, 2025 - The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2025 (2024: HKD 0.02 per share)[164][167] Human Resources As of June 30, 2025, the Group had 1,213 full-time employees, a decrease from 1,358 at the end of 2024, with policies in place for compensation, benefits, diverse training, and a share option scheme for employee incentives Number of Full-time Employees | Metric | 2025年6月30日 | 2024年12月31日 | 变化 (%) | | :--- | :--- | :--- | :--- | | Number of full-time employees | 1,213 | 1,358 | -10.7% | - The Group has established human resources policies and systems, including compensation and rewards, employee benefits (medical insurance and provident fund), and diverse training and personal development programs[169][170] - The Group has adopted a share option scheme to reward eligible participants who have contributed to the Group's business achievements, but no share options were granted during the period[171] Directors' and Chief Executive's Interests in Securities As of June 30, 2025, the interests of the Company's directors, chief executive, and their associates in the Company's shares were disclosed, with Mr. Liu Yang, Mr. Wang Zijiang, and Mr. Chen Xiaohua holding significant share interests Directors' and Chief Executive's Interests in Securities | Name of Director / Chief Executive | Number of shares held / Nature of interest | Capacity | Approximate % of total issued shares | | :--- | :--- | :--- | :--- | | Mr. Liu Yang | 232,560,000 (Controlled corporation) | Interest in controlled corporation | 26.47% | | | 5,000,000 | Beneficial owner | 0.57% | | Mr. Wang Zijiang | 159,120,000 | Beneficial owner | 18.11% | | | 140,000 | Interest of spouse | 0.02% | | Mr. Chen Xiaohua | 4,532,000 | Beneficial owner | 0.52% | - Mr. Liu Yang holds 232,560,000 shares through Zhifeng Group Limited, which he ultimately beneficially owns[176] - Save as disclosed, as of June 30, 2025, none of the Directors, chief executive, or their associates had any interests or short positions in the shares, underlying shares, or debentures of the Company or any of its associated corporations[177][178] Substantial Shareholders As of June 30, 2025, besides the directors, substantial shareholders holding 5% or more of the issued shares included Zhifeng Group Limited, Ms. Sun Jianhua, and Ms. Zheng Hong Substantial Shareholders' Interests | Name of Shareholder | Number of shares held / Nature and total amount of interest | Capacity | Approximate % of total issued shares | | :--- | :--- | :--- | :--- | | Zhifeng Group Limited | 232,560,000 | Beneficial owner | 26.47% | | Ms. Sun Jianhua | 70,380,000 | Beneficial owner | 8.01% | | Ms. Zheng Hong | 70,380,000 | Beneficial owner | 8.01% | - The entire issued share capital of Zhifeng Group Limited is ultimately beneficially owned by Mr. Liu Yang, an executive director[183][184] - Mr. Gao Feng is deemed to have an interest in the same number of shares held by Ms. Zheng Hong under the Securities and Futures Ordinance[183][184] Share Option Scheme This section provides details on the changes in the 2016 Share Option Scheme, noting that Executive Director Mr. Chen Xiaohua exercised 1,000,000 share options during the period, resulting in no outstanding options at period-end Share Option Scheme Movements | Name of grantee | Date of grant | Vesting period | Exercise period | Exercise price | Outstanding at beginning of period | Exercised during period | Outstanding at end of period | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Mr. Chen Xiaohua | 2021年8月30日 | 2021年8月30日至2023年8月29日 | 2023年8月30日至2028年8月29日 | HKD 0.908 | 1,000,000 | 1,000,000 | – | - No share options were granted under the 2016 Share Option Scheme during the period[189][192] Model Code for Securities Transactions by Directors of Listed Companies The Company has adopted a code of conduct for directors' securities transactions no less exacting than the Model Code in Appendix C3 of the Listing Rules, with all directors confirming compliance for the six months ended June 30, 2025 - The Company has adopted a code of conduct for directors' securities transactions no less exacting than the Model Code set out in Appendix C3 of the Listing Rules[190][193] - Each Director has confirmed compliance with the required standards of the Model Code and the Company's code of conduct for the six months ended June 30, 2025[190][193] - Senior management are also required to comply with the provisions of the Model Code and the Company's code of conduct[190][194] Purchase, Sale or Redemption of the Company's Listed Shares As of June 30, 2025, the Company held no treasury shares, and neither the Company nor its subsidiaries purchased, sold, or redeemed any listed shares during the period - As of June 30, 2025, the Company held no treasury shares[195] - 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 shares[195] Corporate Governance Practices The Board confirms that the Company has complied with the Corporate Governance Code set out in Part 2 of Appendix C1 to the Listing Rules for the six months ended June 30, 2025 - The Board confirms that the Company has complied with the Corporate Governance Code set out in Part 2 of Appendix C1 to the Listing Rules for the six months ended June 30, 2025[196][200] Nomination Committee The Nomination Committee, chaired by Executive Director Mr. Liu Yang and including two independent non-executive directors, did not hold any meetings during the period - The Nomination Committee is chaired by Executive Director Mr. Liu Yang, with members including independent non-executive directors Mr. Liang Jinyun and Mr. Liu Chenguang[197][201] - The Nomination Committee did not hold any meetings during the review period[197][201] Remuneration Committee The Remuneration Committee, chaired by Independent Non-executive Director Mr. Liu Chenguang and comprising three other members, did not hold any meetings during the period - The Remuneration Committee is chaired by Independent Non-executive Director Mr. Liu Chenguang, with members including independent non-executive directors Mr. Liang Jinyun, Ms. Shan Honghong, and Executive Director Mr. Liu Yang[198][202] - The Remuneration Committee did not hold any meetings during the review period[198][202] Audit Committee The Audit Committee, composed of three independent non-executive directors, reviewed the company's accounting principles, internal controls, financial reporting, and compliance matters during the period, communicating with independent auditors and raising no objections to accounting treatments - The Audit Committee comprises three independent non-executive directors, including Chairman Mr. Liang Jinyun, Mr. Liu Chenguang, and Ms. Shan Honghong[199][203] - During the period, the Audit Committee reviewed the Company's accounting principles and practices, Listing Rules, internal controls, statutory requirements, and compliance matters related to financial reporting[199][203] - The Audit Committee has reviewed the unaudited condensed financial information and raised no objections to the accounting treatments adopted by the Company during the review period[199][203]