ZHONGZHENG INTL (00943) issues profit warning, expecting a comprehensive loss of HKD 680-720 million for the fiscal year, turning from profit to loss year-on-year.

ZHONGZHENG INTL (00943) announces that the group is expected to record a comprehensive loss attributable to owners of the company of HK$680 million to HK$720 million for the year ending June 30, 2024, compared to a comprehensive profit of approximately HK$69 million for the same period in 2023. The announcement states that the loss for the year is mainly due to (i) a decrease in gross profit from approximately HK$254 million in the 2022/23 financial year to approximately HK$23 million in the 2023/24 financial year. In the 2022/23 financial year, the group had delivered most of the residential units of a property development project in Dongguan, China in July 2022, bringing in revenue of approximately HK$697 million for the group in that financial year. However, revenue from the Dongguan project in the 2023/24 financial year was only approximately HK$47 million. At the same time, revenue from the healthcare and household products business also decreased to approximately HK$100 million (2022/23 financial year: HK$172 million). The decrease in revenue was mainly due to several customers starting destocking processes at the beginning or around 2023; (ii) impairment loss of approximately HK$289 million on the equity interest in a joint venture company engaged in primary land development in Luanping, China (2022/23 financial year: HK$76 million); (iii) impairment loss of approximately HK$68 million on receivables from joint venture companies (2022/23 financial year: nil); (iv) impairment loss of approximately HK$196 million on unsold properties under development in a property development project in Nanjing, China (2022/23 financial year: nil); (v) financing costs of approximately HK$192 million (2022/23 financial year: HK$85 million) mainly related to overdue bank loans for the Nanjing project; (vi) impairment loss of approximately HK$66 million on other receivables (2022/23 financial year: HK$2 million); and (vii) loss attributable to joint venture companies of approximately HK$68 million (2022/23 financial year: HK$38 million). The above losses were partially offset by the reversal of impairment losses of approximately HK$32 million on exploration and evaluation assets due to the restoration of mining rights and a reduction in administrative expenses of approximately HK$10 million.