HENG TAI (00197) issues profit warning, predicting a net loss of approximately HKD 33.4 million for the mid-term.

HENG TAI (00197) announced that, compared to the previous financial period, the unaudited comprehensive financial performance of the Group for the six months ended December 31, 2025 is expected to record a decrease of approximately 34% in revenue and approximately 52% in gross profit. The Board of Directors noted that the operating environment of the Group remains challenging, due to reasons including: (i) the Chinese economy continues to be affected by the real estate and debt crisis, leading to weak market demand; (ii) unpredictable foreign trade policies of major countries continue to create ongoing uncertainty, inhibiting global economic growth and international trade; (iii) intensified market competition as domestic brands continue to compete fiercely through low-price strategies and extensive advertising activities; and (iv) rising procurement costs, which the Group has been unable to pass on to customers due to intense market competition. In this context, the Group strategically reduced some unprofitable imported goods trading businesses to lower operating costs and expenses. Additionally, in order to maintain competitiveness in the intense market environment, despite rising procurement costs, the Group has not been able to increase the prices of imported fast-moving consumer goods and Shenzhen Agricultural Power Group. As a result, the revenue and gross profit for each business segment have declined for the six months ended December 31, 2025. Despite the decrease in revenue and gross profit as mentioned above, the Board of Directors expects the Group to record a net loss of approximately HK$33.4 million for the six months ended December 31, 2025, a decrease of about 13% compared to the previous financial period. The main reason for the reduction in net loss is an increase of approximately HK$3.8 million in unrealized fair value net income from investments compared to the previous financial period. In addition, the Group has successfully implemented various cost-cutting measures, including streamlining unprofitable goods trading businesses as mentioned above to streamline operations, leading to a total decrease of approximately 19% in sales and distribution expenses and administrative expenses compared to the previous financial period. However, given the current uncertain economic situation, the Group continues to adopt a cautious approach in dealing with higher receivables risk, and the Board of Directors expects the Group to record impairment losses of approximately HK$5.7 million on receivables and other receivables for the six months ended December 31, 2025.