KO YO GROUP (00827) subsidiary intends to sell a 90% equity stake in Jiangsu Blue Planet Environmental New Materials for RMB27 million

KO YO GROUP (00827) announces that on October 26, 2026 (after trading hours), the seller, Jiuyuan Hong Kong New Materials Co., Ltd. (a wholly-owned subsidiary of the Company), and the buyer, Shanxi Jiayuan Investment Co., Ltd., entered into a sale and purchase agreement, pursuant to which the seller has agreed to sell, and the buyer has agreed to purchase, a 90% equity interest in the target company, Jiangsu Blue Planet Environmental New Materials Co., Ltd., for a consideration of RMB27 million, subject to the terms and conditions of the sale and purchase agreement. As at the date of this announcement, the Company owns a 90% equity interest in the target company through the seller. The buyer does not hold any equity interest or other interest in the target company. Upon completion, the buyer will own a 90% equity interest in the target company, and the target company will cease to be a subsidiary of the Company. Accordingly, the financial information of the target company will no longer be consolidated into the consolidated financial statements of the Group. The target company is owned as to 90% by the seller and as to 10% by Jiangsu Blue Planet Environmental Technology Co., Ltd., and is principally engaged in the manufacture and sale of chemical products; and the research and development of chemical products. Deteriorating market conditions (including rising raw material prices) have led to a challenging operating environment and placed funding pressure on the Group. According to the management accounts of the target company as at June 30, 2026, the target company had net current liabilities of approximately RMB1.148 billion. The disposal is expected to reduce the net current liabilities of the Group, and the proceeds from the disposal will improve the liquidity and cash flow position of the Group. In addition, the target company has recorded losses for consecutive years, which has had an adverse impact on the cash flow of the Group. Having considered the current strategic focus of the Group as set out in the 2025 annual report, the Board has decided to refocus the Group's resources on its core chemical fertilizer business and the stable operation of its existing production plants, which have demonstrated more stable returns and stronger market positions. The Board considers that the propylene oxide business of the target company no longer aligns with the Group's short-to-medium-term strategic direction, which focuses on, among other things, cost reduction, energy-saving upgrades and the digital transformation of existing businesses. The disposal will also enable the Group to, among other things, unlock the value of its investment in the target company and realize cash proceeds, avoid the substantial further capital expenditure required to put the propylene oxide production line into full commercial production, and instead deploy such funds to the Group's existing plants and priority projects; and streamline the corporate structure of the Group and reduce the administrative and compliance costs associated with maintaining the target company as a subsidiary.