China Water Industry Group Issues Profit Warning for FY2025: Key Updates and Investor Insights

Summary of Announcement

China Water Industry Group Limited (Stock Code: 1129) has issued a profit warning for the financial year ended 31 December 2025 (FY2025). The company’s Board of Directors has provided a preliminary update based on unaudited management accounts, warning shareholders and potential investors of a significant, but slightly improved, net loss for FY2025.

Key Financial Highlights

• Expected Net Loss for FY2025: The Group anticipates a net loss attributable to owners of the Company of not more than HK\$300 million.
• Comparison with Previous Year: This represents an improvement over the net loss of approximately HK\$322.28 million recorded for FY2024.

Factors Contributing to the Change in Net Loss

The anticipated reduction in net loss is attributed to several key factors:

• Cost Control: There was a decrease in administrative and selling expenses due to enhanced cost control measures implemented across the Group’s operations.
• Credit Loss Provisions: A reduction in the provision for expected credit loss on trade receivables.
• Lower Income Tax Expenses: Income tax expenses decreased, reflecting lower taxable profits for FY2025.
• Other Operating Income: The Group recognized other operating income in FY2025, as opposed to other operating expenses in FY2024. The prior year’s expenses were mainly due to equipment write-offs, construction costs, and default interest payments related to litigation.
• Impairment Losses: There was a net reduction in impairment losses on non-financial assets (including right-of-use assets, intangible assets, and goodwill). This is because renewable energy projects that had been discontinued or ceased construction had already been substantially impaired in the prior year.

Offsetting Negative Factors

The positive impact of the above improvements was partially offset by several challenges:

• Decline in Renewable Energy Revenue: There was a decline in revenue and gross profit from the renewable energy business, mainly due to fewer landfill sites in operation. This led to a significant reduction in on-grid electricity generation, as less new garbage was delivered to landfill sites (partly because of local incineration projects coming online).
• Absence of One-Off Gain: The Group did not record the net gain from the disposal of Yichun Water Industry Group Company Limited in FY2025, a gain that was present in FY2024.
• Impairment Loss on Acquisitions: There was an impairment loss on deposits paid for the acquisition of additional interests in a subsidiary.

Important Matters for Shareholders

• Preliminary Figures: The financial results for FY2025 are based on unaudited management accounts. These results are subject to review and potential adjustment by the audit committee and auditors.
• Final Results Announcement: The finalized annual results for the Group are expected to be published on 30 March 2026.
• Shareholder Caution: The Board advises shareholders and potential investors to exercise caution when dealing in the Company’s shares, as the information is preliminary and unaudited.

Potential Share Price Impact

This profit warning is a material event and is likely to be price sensitive. While the Group’s net loss is expected to narrow in FY2025 compared to FY2024, the ongoing losses, continued challenges in the renewable energy business, and absence of one-off gains may weigh on investor sentiment. Conversely, improvements in cost control, credit loss provisions, and impairment charges could provide some reassurance to investors looking for signs of operational improvement.

Board Composition

• Chairman & Executive Director: Mr. Zhu Yongjun
• Executive Director: Ms. Chu Yin Yin, Georgiana
• Independent Non-Executive Directors: Mr. Wong Siu Keung, Joe; Mr. Lam Cheung Shing, Richard; Mr. Mak Ka Wing, Patrick

Disclaimer: The above article is based on preliminary, unaudited figures and forward-looking statements provided by China Water Industry Group Limited. Investors are strongly advised to review the full annual results announcement when published and to exercise caution in their investment decisions. This article does not constitute investment advice.

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