雨润食品(01068) - 2025 - 中期财报

Company Information This section provides fundamental company details, including board composition, committees, auditors, and contact information Board of Directors and Committee Composition This chapter lists the company's basic information, including board members, committee compositions, company secretary, authorized representatives, auditors, and stock code - Board composition: Executive Directors Zhu Yuan (Chairperson and Chief Executive Officer), Yang Linwei; Independent Non-executive Directors Gao Hui, Chen Jianguo, Xu Xinglian[4] - Audit Committee Chairperson: Gao Hui[4] - Company Secretary and Authorized Representative: Li Wing Sze[4] - Auditor: BDO Limited[4] - Stock Code: 1068[5] Management Discussion and Analysis This section provides management's perspective on the company's performance, industry trends, and financial position Industry Review The Chinese economy faced complexities in H1 2025, with a fragile recovery, while the hog farming industry experienced significant price pressure - China's GDP grew by 5.3% year-on-year in H1 2025 (at constant prices)[7] - National Consumer Price Index (CPI) decreased by 0.1% year-on-year, indicating insufficient consumer willingness[7] - Hog slaughter volume increased by 0.6% year-on-year to 366.19 million heads[7] - Hog inventory increased by 2.2% year-on-year to 424.47 million heads[7] - Long-term trend of pork consumption is expected to decline due to improved living standards, increased health awareness, aging population, and declining birth rates[7] Business Review The Group focused on "Harbin Meat Union" products, but reduced low-profit slaughtering and terminated some processing plant leases, leading to a significant revenue decrease - Core brand: 'Harbin Meat Union' series, adhering to traditional craftsmanship while exploring innovation[8] - Average live hog price in H1 2025: RMB15.32/kg, a 2.2% year-on-year decrease[8] - Average pork retail price in H1 2025: RMB26.48/kg, a 3.4% year-on-year increase[8] - Overall revenue decreased by approximately 52.6% year-on-year[10] Product Quality and R&D The Group upholds "quality first" by strictly controlling food safety from raw material procurement to sales, ensuring product consistency - Core principle: 'Quality First', strict food safety standards[9] - Quality control: Strict control over every stage from raw material procurement, production, processing to sales[9] Sales and Distribution The Group strategically reduced low-profit slaughtering and terminated some processing plant leases, leading to decreased sales, though chilled and low-temperature processed meats remain key - Strategic adjustment: Reduced production at individual low-profit slaughtering plants and terminated businesses related to some processed meat product plant lease agreements[10] Product Sales Performance | Product Type | H1 2025 Sales (HK$) | H1 2024 Sales (HK$) | Year-on-year Change | % of Total Revenue (2025) | % of Total Revenue (2024) | | :----------------------- | :------------------ | :------------------ | :------------------ | :------------------------ | :------------------------ | | Chilled Meat | HK$54 million | HK$270 million | -80.1% | 21% | 50% | | Low-temperature Processed Meat | HK$185 million | HK$154 million | +20.7% | 73% | 28% | Production Facilities and Capacity As of June 30, 2025, the Group's annual production capacity for upstream slaughtering and downstream processed meat products remained consistent with December 31, 2024 - Upstream slaughtering annual capacity: Approximately 2.35 million heads[11] - Downstream processed meat products annual capacity: Approximately 20,000 tonnes[11] - Capacity stability: Consistent with December 31, 2024[11] Financial Review and Key Performance Indicators The Group's H1 2025 revenue significantly decreased to HK$255 million, with loss attributable to equity holders increasing to HK$11 million, despite an improved gross margin - H1 2025 revenue: HK$255 million (H1 2024: HK$539 million), a 52.6% year-on-year decrease[12] - Loss attributable to equity holders: HK$11 million (H1 2024: HK$10 million)[12] - Basic and diluted loss per share: HK$0.006 (unchanged from H1 2024)[12] Revenue Total revenue for H1 2025 was HK$255 million, a 52.6% year-on-year decrease, driven by significant declines in upstream business and a shift towards low-temperature processed products Total Revenue | Indicator | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | Year-on-year Change | | :-------- | :--------------------- | :--------------------- | :------------------ | | Revenue | 255,353 | 538,975 | -52.6% | Chilled and Frozen Meat Upstream business sales revenue significantly decreased by 77.7% to HK$70 million, with chilled meat sales down 80.1% and its proportion of total revenue falling from 50% to 21% - Upstream business total sales revenue: HK$70 million (H1 2024: HK$312 million), a 77.7% year-on-year decrease[14] - Chilled meat sales: HK$54 million (H1 2024: HK$270 million), an 80.1% year-on-year decrease[14] - Chilled meat as a percentage of total revenue: 21% (H1 2024: 50%)[14] - Frozen meat sales: HK$16 million (H1 2024: HK$42 million), a 61.9% year-on-year decrease[14] Processed Meat Products Processed meat product sales decreased by 18.1% to HK$185 million, with low-temperature processed meat revenue growing by 20.7% and its share of total revenue significantly increasing to 73% - Processed meat product sales: HK$185 million (H1 2024: HK$227 million), an 18.1% year-on-year decrease[15] - Low-temperature processed meat revenue: HK$185 million (H1 2024: HK$154 million), a 20.7% year-on-year increase[15] - Low-temperature processed meat as a percentage of total revenue: 73% (H1 2024: 28%)[15] - High-temperature processed meat revenue: None in H1 2025 (H1 2024: HK$73 million), due to expiration of plant lease agreements[15] Gross Profit and Gross Margin Total gross profit decreased to HK$58 million, but the overall gross margin improved to 22.9% due to a strategic focus on higher-margin downstream businesses - Total gross profit: HK$58 million (H1 2024: HK$76 million), a 22.7% year-on-year decrease[16] - Overall gross margin: 22.9% (H1 2024: 14.0%), an 8.9 percentage point increase[16] - Upstream business gross margin: 1.5% (H1 2024: 1.4%), a 0.1 percentage point increase[16] - Low-temperature processed meat products gross margin: 30.9% (H1 2024: 37.2%), a 6.3 percentage point decrease due to increased raw material costs[16] Other Net Loss / Income The Group recorded an other net loss of HK$2.2 million, primarily due to reduced government subsidies and gains from asset disposals - Other net loss: HK$2.2 million (H1 2024: net income of HK$1.8 million)[17] Composition of Other Net (Loss) / Income | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :------------------------- | :--------------------- | :--------------------- | | Government subsidies | – | 468 | | Gain on disposal of property, plant and equipment | – | 2,031 | | Other expenses | (2,431) | (981) | Operating Expenses Operating expenses decreased by 20.1% to HK$52 million due to lower sales volume, but their proportion of revenue increased to 20.5% - Total operating expenses: HK$52 million (H1 2024: HK$66 million), a 20.1% year-on-year decrease[18] - Operating expenses as a percentage of revenue: 20.5% (H1 2024: 12.2%)[18] - Reason for decrease: Lower sales volume led to reduced sales-related direct expenses[18] Operating Results The Group's operating profit significantly decreased to HK$4 million from HK$12 million in the prior period - Operating profit: HK$4 million (H1 2024: HK$12 million)[19] Net Finance Costs Net finance costs decreased by 23.7% to HK$19 million, mainly due to lower interest rates on some bank borrowings and no longer accruing overdue interest - Net finance costs: HK$19 million (H1 2024: HK$25 million), a 23.7% year-on-year decrease[20] - Reason for decrease: Lower interest rates on some bank borrowings and no longer accruing overdue interest and penalties[20] Income Tax Income tax expense was HK$0.004 million, compared to a credit of HK$0.05 million in the prior period - Income tax expense: HK$0.004 million (H1 2024: credit of HK$0.05 million)[21] Loss Attributable to Equity Holders of the Company The loss attributable to equity holders of the Company expanded to HK$11 million, compared to HK$10 million in the prior period - Loss attributable to equity holders of the Company: HK$11 million (H1 2024: HK$10 million)[22] Financial Resources Cash and cash equivalents decreased to HK$21 million, with HK$438 million in outstanding bank borrowings, mostly due within one year, and net cash outflow for debt repayment and operations - Cash and cash equivalents: HK$21 million (December 31, 2024: HK$41 million), a decrease of approximately HK$20 million[23] - Outstanding bank borrowings: HK$438 million (December 31, 2024: HK$444 million), of which HK$376 million is due within one year[23] - Fixed-rate debt ratio: 95% (December 31, 2024: 94%)[24] - Reason for net cash outflow: Primarily for repayment of bank borrowings and operating activities[24] - Capital expenditure: HK$1.3 million (H1 2024: HK$10 million)[24] Breach of Loan Agreements The Group failed to meet covenants for HK$349 million in bank borrowings, which are overdue, but management is actively negotiating with banks to mitigate immediate repayment risks - Bank borrowings in breach of covenants: HK$349 million (December 31, 2024: HK$344 million)[25] - Overdue borrowings and accrued interest: HK$272 million (December 31, 2024: HK$251 million)[25] - Restructuring plan: Related debts are part of the consolidated restructuring described in the company's 2021 and 2022 financial reports[26] - Management response: Actively communicating with a state-owned commercial bank to discuss extension, renewal, and/or revision of loan terms[27] - Risk assessment: The Board assesses that the risk of immediate repayment demands due to overdue borrowings is controllable and will not have a material adverse impact on the going concern ability[27] Assets and Liabilities Total assets decreased to HK$621 million, with total liabilities at HK$1.351 billion, resulting in a net liability position, though non-current assets support operations - Total assets: HK$621 million (December 31, 2024: HK$645 million), a decrease of HK$24 million[28] - Total liabilities: HK$1.351 billion (December 31, 2024: HK$1.353 billion), a decrease of HK$2 million[28] - Property, plant and equipment: HK$195 million (December 31, 2024: HK$199 million), a decrease of HK$3 million[28] - Net liability position: Recorded a net liability position, but holds approximately HK$235 million in non-current assets[29] - Net current liabilities: HK$902 million (December 31, 2024: HK$872 million)[29] - Net liabilities: HK$729 million (December 31, 2024: HK$708 million)[29] - Board confidence: Believes the Group has sufficient financial resources to support operations and fulfill financial obligations[30] Pledge of Assets As of June 30, 2025, approximately HK$12 million in trade receivables were pledged as collateral for HK$23 million in bank borrowings - Carrying value of pledged trade receivables: HK$12 million (December 31, 2024: HK$17 million)[34] - Total pledged bank borrowings: HK$23 million (December 31, 2024: HK$27 million)[34] Significant Investments, Acquisitions and Disposals of Subsidiaries and Associates, and Plans for Major Investments or Capital Asset Purchases The Group had no significant investments, acquisitions, or disposals of subsidiaries/associates, nor any plans for major investments or capital asset purchases during the reporting period - Significant investments and M&A: No significant investments or major acquisitions and disposals of subsidiaries and associates during the reporting period[35] - Future plans: No plans for major investments or capital asset purchases as of the reporting date[35] Contingent Liabilities A PRC bank has sued a subsidiary for immediate repayment of HK$349 million in bank borrowings, which the Group is actively negotiating to resolve - Major litigation: A PRC bank demands immediate repayment of approximately HK$349 million in bank borrowings from a Group subsidiary[36] - Management response: The Group is negotiating with the bank to resolve these litigations[36] - Other contingent liabilities: No other significant litigations or contingent liabilities beyond those disclosed above[36] Exchange Rate Fluctuation Risk and Hedging The Group's operations are primarily settled in RMB, which is subject to exchange controls, and it continuously monitors foreign exchange risk to maintain it within a controllable range - Primary settlement currency: RMB[37] - Foreign exchange control: RMB is subject to foreign exchange control and is not freely convertible[37] - Risk management: Continuously monitors foreign exchange risk, considering exchange rate trends and cash flow needs to ensure risk is controllable[37] Human Resources The Group's headcount decreased to approximately 600 employees, with total staff costs of HK$26 million, while maintaining a people-oriented approach to employee welfare and development - Total employees: Approximately 600 (December 31, 2024: approximately 1,000)[38] - Total staff costs: HK$26 million (H1 2024: HK$35 million)[38] - Staff costs as a percentage of revenue: 10.1% (H1 2024: 6.4%)[38] - Human resources strategy: Safeguards employees' legal rights, provides competitive salaries, performance bonuses, and social insurance, optimizes training programs, and establishes fair promotion mechanisms[38] Environmental Protection and Performance The Group prioritizes sustainable development, integrating green and low-carbon principles into its governance and operations, and is committed to a comprehensive green transformation - Core philosophy: Sustainable development, actively fulfilling corporate social responsibility[39] - Implementation measures: Optimizes energy structure, improves energy efficiency, promotes green office concepts, and advocates green travel[39] - Future outlook: Comprehensively promotes the company's transformation towards low-carbon and green operations[39] Other Information This section covers interim dividends, directors' and major shareholders' interests, share option schemes, corporate governance, and audit committee reviews Interim Dividend The Board resolved not to declare an interim dividend for the reporting period - Interim dividend declaration: None (H1 2024: None)[41] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares and Debentures As of June 30, 2025, no directors or chief executives held any disclosable interests or short positions in the company's securities - Directors' and Chief Executive's interests: As of June 30, 2025, none held any disclosable interests or short positions in shares, underlying shares, or debentures[42] Substantial Shareholders' Interests and Short Positions in Shares and Underlying Shares Willie Holdings Limited and its associated parties, Mr. Zhu Yicai and Ms. Wu Xueqin, are substantial shareholders, holding 25.82% of the company's issued shares Substantial Shareholders' Interests | Name / Designation | Nature | Number of Shares | Approximate Percentage of Issued Shares | | :---------------------- | :----- | :--------------- | :-------------------------------------- | | Willie Holdings Limited | Long | 470,699,900 | 25.82% | | Zhu Yicai | Long | 470,699,900 | 25.82% | | Wu Xueqin | Long | 470,699,900 | 25.82% | - Relationship: Mr. Zhu Yicai and his spouse Ms. Wu Xueqin respectively hold 93.41% and 6.59% equity interests in Willie Holdings[43] Share Option Scheme The new share option scheme, adopted on August 7, 2015, has expired without any options granted, exercised, lapsed, or cancelled during the reporting period - New Share Option Scheme adoption date: August 7, 2015[45] - Number of share options authorized for grant (beginning/end of period): 182,275,565 shares[47] - Outstanding share options: None at the beginning and end of the reporting period[47] - Share option activities (during the reporting period): None granted/exercised/lapsed/cancelled[47] - New Share Option Scheme status: Expired, no share options granted since adoption[47] Corporate Governance The company adheres to high corporate governance standards, with a five-member board and committees, but the Chairman and CEO roles are combined, which the Board deems beneficial - Governance principles: Integrity, transparency, openness, and efficiency[50] - Board composition: Five directors, with Audit, Remuneration, and Nomination Committees[50] - Risk management and internal control: Systems established to safeguard assets, manage risks, and maintain proper records[50] - Non-compliance with Code Provision C.2.1: Roles of Chairperson and Chief Executive Officer are combined and held by Ms. Zhu Yuan[51] - Board explanation: Believes this arrangement facilitates business strategy formulation and execution, and the Board's experienced members, with over half being independent non-executive directors, ensure a balance of power[51] - Future plan: To identify and appoint a suitable Chief Executive Officer in the long term[51] Standard Code for Securities Transactions by Directors The company adopted the Standard Code for directors' securities transactions, and all directors complied with its provisions during the reporting period - Code of conduct: Adopted the 'Standard Code'[52] - Compliance: All directors complied with the 'Standard Code' during the reporting period[52] Purchase, Sale or Redemption of the Company's Listed Securities Neither the company nor its subsidiaries purchased, sold, or redeemed any of its listed securities during the reporting period - Listed securities transactions: Neither the Company nor its subsidiaries purchased, sold, or redeemed any listed securities during the reporting period[53] Audit Committee The Audit Committee reviewed the Group's accounting standards, internal controls, risk management, and financial reporting, including the unaudited interim results - Responsibilities: Reviews accounting standards and practices, discusses internal controls, risk management, and financial reporting matters[54] - Review scope: Includes the Group's unaudited interim results for the reporting period[54] Significant Events Affecting the Group After the Reporting Period No significant events affecting the Group occurred from June 30, 2025, up to the date of this report - Significant events: No significant events affecting the Group occurred from June 30, 2025, up to the reporting date[55] Consolidated Statement of Profit or Loss and Other Comprehensive Income The Group's loss for H1 2025 widened to HK$15.2 million, with revenue significantly down by 52.6%, despite an improved gross margin Key Financial Data (H1 2025 vs H1 2024) | Indicator | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | Year-on-year Change | | :-------------------------------------- | :--------------------- | :--------------------- | :------------------ | | Revenue | 255,353 | 538,975 | -52.6% | | Cost of sales | (196,967) | (463,472) | -57.5% | | Gross profit | 58,386 | 75,503 | -22.7% | | Operating results | 3,755 | 11,606 | -67.6% | | Net finance costs | (18,958) | (24,842) | -23.7% | | Loss for the period | (15,207) | (13,191) | +15.3% | | Loss attributable to equity holders of the Company | (10,803) | (10,069) | +7.3% | | Basic and diluted loss per share (HK$) | (0.006) | (0.006) | 0% | - Total comprehensive income for the period: HK$(21,591) thousand (H1 2024: HK$(48,120) thousand)[59] Consolidated Statement of Financial Position As of June 30, 2025, total assets were HK$621 million, with total liabilities at HK$1.351 billion, indicating a persistent net liability position Key Financial Position Data (June 30, 2025 vs December 31, 2024) | Indicator | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :-------------------------------------- | :--------------------------- | :------------------------------- | | Non-current assets | 234,976 | 238,720 | | Current assets | 386,352 | 406,233 | | Current liabilities | 1,288,795 | 1,278,594 | | Net current liabilities | (902,443) | (872,361) | | Net liabilities | (729,187) | (707,596) | | Total equity attributable to equity holders of the Company | (715,968) | (704,841) | - Cash and cash equivalents: HK$20,694 thousand (December 31, 2024: HK$40,983 thousand)[61] - Bank borrowings (current): HK$375,990 thousand (December 31, 2024: HK$369,922 thousand)[61] Consolidated Statement of Changes in Equity The Group's total equity decreased from HK$(707.596) million to HK$(729.187) million, primarily due to the total comprehensive loss for the period - Total equity (end of period): HK$(729,187) thousand (June 30, 2024: HK$(737,499) thousand)[65] - Total equity attributable to equity holders of the Company (end of period): HK$(715,968) thousand (June 30, 2024: HK$(727,067) thousand)[65] - Total comprehensive income for the period: HK$(21,591) thousand (H1 2024: HK$(48,120) thousand)[65] Condensed Consolidated Statement of Cash Flows The Group experienced a net decrease of HK$19.478 million in cash and cash equivalents, primarily due to net outflows from operating and financing activities - Net decrease in cash and cash equivalents: HK$(19,478) thousand (H1 2024: HK$(7,384) thousand)[66] - Net cash used in operating activities: HK$(5,236) thousand (H1 2024: HK$(33) thousand)[66] - Net cash used in investing activities: HK$(312) thousand (H1 2024: HK$(5,882) thousand)[66] - Net cash used in financing activities: HK$(13,930) thousand (H1 2024: HK$(1,469) thousand), primarily for repayment of bank borrowings[66] - Cash and cash equivalents at June 30: HK$20,694 thousand (H1 2024: HK$31,666 thousand)[66] Notes to the Unaudited Interim Financial Report This section provides detailed explanations and disclosures for the unaudited interim financial report, covering accounting policies, financial instruments, and related party transactions 1. Reporting Entity China Yurun Food Group Limited, incorporated in Bermuda, presents its interim financial report covering the company and its subsidiaries - Place of incorporation: Bermuda[68] - Scope of report: The Company and its subsidiaries[68] 2. Basis of Preparation The interim financial report is prepared under IAS 34 and HKEX Listing Rules, highlighting significant going concern uncertainties due to net loss, net current liabilities, and overdue bank borrowings - Preparation standards: IAS 34 and Appendix D2 of the Listing Rules[69] - Going concern uncertainties: As of June 30, 2025, the Group recorded a net loss of HK$15,207 thousand, net current liabilities of HK$902,443 thousand, and net liabilities of HK$729,187 thousand[70] - Bank borrowing status: Bank borrowings of HK$437,710 thousand, of which HK$348,827 thousand plus accrued interest of HK$271,858 thousand are overdue and in breach of covenants[70] - Management plans: (i) Negotiate with banks for updated financing terms and waivers; (ii) Bank borrowings to be ultimately settled as part of a consolidated restructuring; (iii) Seek additional new financing[72][73] - Going concern effectiveness: Depends on the successful outcome of the aforementioned plans and measures[72] 3. Changes in Accounting Policies The Group adopted new or revised IFRSs, including amendments to IAS 21 and IFRS 1, which had no material impact on the interim financial report - Adoption of new/revised standards: Amendments to IAS 21 and IFRS 1[75] - Impact: No material impact on the interim financial report[75] 4. Revenue and Segment Information The Group's revenue primarily comes from chilled and frozen meat and processed meat products, with total revenue significantly decreasing in H1 2025 Segment Revenue (H1 2025 vs H1 2024) | Segment | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :----------------------- | :--------------------- | :--------------------- | | Chilled and Frozen Meat | 69,781 | 312,426 | | Processed Meat Products | 185,572 | 226,549 | | Total | 255,353 | 538,975 | Segment Results (H1 2025 vs H1 2024) | Segment | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :----------------------- | :--------------------- | :--------------------- | | Chilled and Frozen Meat | (12,225) | (22,510) | | Processed Meat Products | 22,037 | 40,189 | | Total Reported Segment Results | 9,812 | 17,679 | - Unallocated head office and corporate expenses: HK$(6,057) thousand (H1 2024: HK$(6,073) thousand)[78] 5. Seasonality of Operations The Group's operations are subject to seasonal fluctuations, with demand for processed meat products typically peaking before the Lunar New Year - Seasonal impact: Demand for processed meat products peaks before the Lunar New Year (January or February)[79] 6. Other Net (Loss) / Income The Group recorded an other net loss of HK$2.164 million in H1 2025, mainly due to reduced government subsidies and gains from asset disposals Composition of Other Net (Loss) / Income | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :------------------------- | :--------------------- | :--------------------- | | Government subsidies | – | 468 | | Gain on disposal of property, plant and equipment | – | 2,031 | | Other expenses | (2,431) | (981) | | Total | (2,164) | 1,809 | 7. Loss Before Income Tax The Group's loss before income tax widened to HK$15.203 million, influenced by net finance costs, staff costs, and other items - Loss before income tax: HK$(15,203) thousand (H1 2024: HK$(13,236) thousand)[58] 7(a) Net Finance Costs Net finance costs for H1 2025 decreased, primarily comprising interest on bank borrowings and lease liabilities, despite ongoing issues with overdue borrowings and litigation Composition of Net Finance Costs | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :------------------------- | :--------------------- | :--------------------- | | Interest on bank borrowings | 18,936 | 23,836 | | Interest on lease liabilities | 18 | 1,038 | | Bank charges | 30 | 56 | | Net foreign exchange (gain) / loss | (11) | 57 | | Interest income from bank deposits | (15) | (145) | | Total | 18,958 | 24,842 | - Bank borrowings in breach of covenants: HK$348,827 thousand, plus accrued interest of HK$271,858 thousand, are overdue[81] - Litigation status: A PRC bank initiated litigation against a subsidiary, demanding immediate repayment of HK$348,827 thousand in bank borrowings[84] - Judged outstanding bank borrowings: HK$437,726 thousand (December 31, 2024: HK$416,664 thousand)[84] 7(b) Staff Costs Total staff costs for H1 2025 decreased, primarily consisting of salaries, wages, other benefits, and contributions to defined contribution retirement plans Total Staff Costs | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :--------------------------------- | :--------------------- | :--------------------- | | Salaries, wages and other benefits | 24,230 | 32,421 | | Contributions to defined contribution retirement plans | 1,469 | 2,276 | | Total | 25,699 | 34,697 | 7(c) Other Items This section details other significant items affecting loss before income tax, including cost of inventories, impairment losses on trade receivables, and depreciation Other Key Items (H1 2025 vs H1 2024) | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :--------------------------------- | :--------------------- | :--------------------- | | Cost of inventories | 196,967 | 463,472 | | (Reversal of) / write-down of inventories | (49) | 484 | | Impairment losses on trade receivables | 10,109 | 5,245 | | Depreciation of property, plant and equipment | 8,956 | 14,208 | 8. Income Tax Expense / (Credit) Income tax expense was HK$4 thousand, with tax exemptions for certain operations in China and no taxable profits in Hong Kong, but a risk of being deemed a PRC resident enterprise - Total income tax expense / (credit): HK$4 thousand (H1 2024: HK$(45) thousand)[87] - Tax exemptions: No income tax in Bermuda and BVI; no taxable profits in Hong Kong; PRC enterprises engaged in primary processing of agricultural products are exempt from corporate income tax[87] - PRC resident enterprise risk: The Group may be deemed a PRC resident enterprise, subject to 25% corporate income tax on its global income[87] 9. Other Comprehensive Income There were no tax implications for other comprehensive income during the six months ended June 30, 2025 - Tax impact: No tax impact[88] 10. Loss Per Share Both basic and diluted loss per share for H1 2025 remained at HK$0.006, consistent with the prior period - Basic loss per share: HK$(0.006) (H1 2024: HK$(0.006))[88] - Diluted loss per share: HK$(0.006) (H1 2024: HK$(0.006)), same as basic loss per share due to no potential ordinary shares[89] 11. Property, Plant and Equipment The carrying value of property, plant, and equipment was HK$195.170 million, with additions and disposals, and no impairment losses recognized - Additions: HK$1,303 thousand (H1 2024: HK$6,651 thousand)[91] - Carrying value of items disposed: HK$(976) thousand (H1 2024: HK$(1,694) thousand)[91] - Impairment assessment: No impairment losses recognized as recoverable amount exceeded carrying amount[91] 12. Inventories Total inventories significantly decreased to HK$28.814 million, primarily comprising finished goods, raw materials, and work-in-progress, with a reversal of inventory write-down - Total inventories: HK$28,814 thousand (December 31, 2024: HK$78,439 thousand)[92] Composition of Inventories (June 30, 2025) | Item | Amount (HK$ thousand) | | :---------- | :-------------------- | | Raw materials | 7,109 | | Work-in-progress | 1,784 | | Finished goods | 19,921 | - Reversal of inventory write-down: HK$49 thousand (December 31, 2024: inventory write-down of HK$1,019 thousand)[92] 13. Trade and Other Receivables Total trade and other receivables increased to HK$336.777 million, with net trade receivables at HK$85.896 million, and an increase in trade receivables aged over 180 days - Total trade and other receivables: HK$336,777 thousand (December 31, 2024: HK$286,749 thousand)[93] - Net trade receivables: HK$85,896 thousand (December 31, 2024: HK$85,013 thousand)[93] Trade Receivables Ageing Analysis (June 30, 2025) | Ageing | Amount (HK$ thousand) | | :------------ | :-------------------- | | Within 30 days | 66,569 | | 31 to 90 days | 910 | | 91 to 180 days | 21,357 | | Over 180 days | 15,209 | - Expected credit loss: HK$(18,149) thousand (December 31, 2024: HK$(7,997) thousand)[93] 14. Cash and Cash Equivalents Total cash and cash equivalents significantly decreased to HK$20.694 million, with most denominated in RMB, which is subject to foreign exchange controls - Total cash and cash equivalents: HK$20,694 thousand (December 31, 2024: HK$40,983 thousand)[95] Currency Composition (June 30, 2025) | Currency | Amount (HK$ thousand) | | :--------- | :-------------------- | | RMB | 18,818 | | USD | 296 | | EUR | 209 | | Other currencies | 1,371 | - RMB foreign exchange control: RMB is not freely convertible but can be exchanged through banks with licensed foreign exchange operations[95] 15. Trade and Other Payables Total trade and other payables slightly increased to HK$912.190 million, with significant components including interest payable and litigation loss provisions - Total trade and other payables: HK$912,190 thousand (December 31, 2024: HK$908,023 thousand)[96] Key Components (June 30, 2025) | Item | Amount (HK$ thousand) | | :--------------------------------- | :-------------------- | | Total trade payables | 92,386 | | Customer deposits | 18,670 | | Contract liabilities | 17,465 | | Accrued salaries and welfare | 3,326 | | VAT payable | 67,752 | | Payables for acquisition of property, plant and equipment | 27,647 | | Provision for litigation losses | 64,271 | | Interest payable | 271,858 | | Other payables and accrued expenses | 348,815 | 16. Capital, Reserves and Dividends The Directors do not recommend declaring an interim dividend for the six months ended June 30, 2025 and 2024 - Interim dividend: Directors do not recommend declaration[98] 17. Fair Value Measurement of Financial Instruments The carrying amounts of financial instruments measured at cost or amortized cost did not materially differ from their fair values - Fair value and carrying amount difference: No material difference[98] 18. Capital Commitments Not Provided for in the Interim Financial Report As of June 30, 2025, the Group had contracted capital commitments of HK$365.634 million - Contracted capital commitments: HK$365,634 thousand (December 31, 2024: HK$358,028 thousand)[98] 19. Contingent Liabilities Aside from the significant litigation disclosed in Note 7(a), the Group is not involved in other material litigations, and non-material litigations are not expected to significantly impact financial performance - Significant litigation: No other significant litigation apart from that disclosed in Note 7(a)[98] - Non-material litigation: Management believes it will not have a material impact on financial position and performance[98] 20. Related Party Transactions and Balances The Group engages in various transactions and balances with related parties, including sales and purchases of goods, property leases, and land use rights, with Mr. Zhu Yicai as a key beneficial owner - Related party: Mr. Zhu Yicai is the beneficial shareholder, honorary chairman, and senior advisor of the Company, and holds beneficial interests in related companies[100] 20(a) Significant Related Party Transactions The Group conducted sales and purchases of raw materials and finished goods with related parties, with a significant decrease in finished goods sales to related parties Sales and Purchases of Raw Materials and Finished Goods (H1 2025 vs H1 2024) | Transaction Type | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :------------------------------- | :--------------------- | :--------------------- | | Sales of raw materials to related companies | 29 | 72 | | Sales of finished goods to related companies | 2,012 | 114,624 | | Purchases of raw materials from related companies | 1,929 | 1,713 | - Rent payments: None paid or payable to related companies in H1 2025 (H1 2024: HK$1,540 thousand)[100] - Assets provided by related parties: Certain related parties provided properties and land use rights to the Group, with a carrying value of HK$30,618 thousand[100] 20(b) Amounts Due from Related Parties Trade receivables from related companies amounted to HK$34.530 million, unsecured, interest-free, and expected to be recovered within one year - Trade receivables from related companies: HK$34,530 thousand (December 31, 2024: HK$34,530 thousand)[101] - Terms: Unsecured, interest-free, and expected to be recovered within one year[101] 20(c) Amounts Due to Related Parties Trade payables to related companies were HK$12.927 million, and other payables were HK$247.102 million, both unsecured, interest-free, and without fixed repayment terms Amounts Due to Related Companies (June 30, 2025 vs December 31, 2024) | Item | June 30, 2025 (HK$ thousand) | December 31, 2024 (HK$ thousand) | | :--------------------------------- | :--------------------------- | :------------------------------- | | Trade payables to related companies | 12,927 | 12,927 | | Other payables to related companies | 247,102 | 237,052 | - Terms: Unsecured, interest-free, and without fixed repayment terms[102] 20(d) Key Management Personnel Compensation Total key management personnel compensation for H1 2025 was HK$1.311 million, including salaries, other emoluments, and retirement benefit plan contributions Total Key Management Personnel Compensation | Item | H1 2025 (HK$ thousand) | H1 2024 (HK$ thousand) | | :--------------------------------- | :--------------------- | :--------------------- | | Salaries and other emoluments | 1,286 | 1,292 | | Contributions to retirement benefit plans | 25 | 26 | | Total | 1,311 | 1,318 |