Yuan Heng Gas Holdings Limited Issues Supplemental Announcement on Significant Asset Impairments for FY2025

Date: 18 March 2026

Key Highlights from the Announcement

• Substantial Asset Impairments Recognized: Yuan Heng Gas Holdings Limited (“the Company”) has disclosed significant impairment losses in its annual report for the year ended 31 March 2025 (FY2025):
  • Impairment loss on prepayments: RMB 1,339.8 million
  • Impairment loss on trade receivables: RMB 496.8 million
• Additional Potential Losses Identified: Based on an external valuation, impairment losses of RMB 921.3 million should be recognized on trade receivables, but only RMB 496.8 million is accounted for FY2025. The difference (RMB 424.5 million) relates to prior years and is treated as such.
• Involvement of Major Long-Term Supplier: A major supplier (a sizable gas/oil-fired power plant in the Greater Bay Area, trading with the Group for over 10 years) defaulted on contracts, triggering most of the prepayment impairment.
• Delayed LNG Procurement and Supplier Default: The Company had made large advance payments for shipload LNG, but unfavorable market conditions led to delayed orders and, ultimately, supplier default in February 2025.
• Legal and Recovery Actions: Management opted not to immediately pursue formal legal proceedings, considering the supplier’s extensive guarantees to affiliates. Instead, they secured an agreement to monitor the supplier’s operations and decisions, as part of a recovery plan.
• Further Impairments on Other Major Customers: Besides the supplier, three other customers accounted for significant portions of the impaired trade receivables, with most of the exposure overdue by more than 365 days.
• Potential Impact from COVID-19 and Real Estate Downturn: Liquidity issues among domestic trading customers were exacerbated by the pandemic and real estate market weakness, resulting in high probability of default and loss rates.

Detailed Breakdown of Impairments

Impairment Loss on Prepayments

The prepayment impairment of RMB 1,339.8 million relates to advance payments for LNG procurement from a long-term supplier. Despite a decade-long relationship and the supplier’s size, the supplier defaulted in February 2025, after failing to fulfill orders due to adverse market conditions. The default led to the application of a 100% probability of default (PD) and an 88.2% loss given default (LGD) in the expected credit loss (ECL) model, as assessed by an independent valuer. Eventually, the Company decided against immediate legal proceedings but obtained rights to monitor the supplier’s operations, aiming for prepayment recovery.

Impairment Loss on Trade Receivables

Trade receivables impairments total RMB 496.77 million for FY2025, primarily associated with four customers:

• The Supplier: RMB 310.96 million gross balance, with receivables for LNG sold between April 2023 and March 2024. Upon default, a 100% PD and 88.2% LGD were applied.
• Customer A: RMB 725.42 million gross balance, a major overseas trading partner since 2018. After partial repayments, Customer A declared inability to pay further, leading to a 100% PD and LGD.
• Customer B: RMB 70.30 million gross balance, a domestic LNG trading partner since 2020, affected by COVID-19 and real estate market issues. ECL assessment used PDs of 1.57% and 100%, with an LGD of 58%.
• Customer C: RMB 50.43 million gross balance, another domestic LNG customer since 2018, also impacted by market and pandemic factors. ECL used 100% PD and 61.7% LGD.

Notably, the total impairment on trade receivables, as assessed by the external valuer, should be RMB 921.31 million, but prior year errors mean RMB 424.54 million of this is not recorded in FY2025.

Actions and Outlook

The Company is actively pursuing all means to recover overdue receivables, including potential legal action and asset-based settlements. Continued monitoring of the supplier’s operations is underway, and further announcements will be made as developments occur.

Key Issues for Shareholders

• Material Impact on Financial Statements: The scale of the impairments (over RMB 1.8 billion in FY2025 alone) is substantial relative to the Company’s operations, significantly affecting net assets and potentially future profitability.
• Potential Share Price Volatility: The announcement of such high levels of non-recoverable assets and customer defaults may be seen as a negative signal to investors, increasing risk perception and potentially leading to share price declines.
• Ongoing Credit Risk: The Company’s exposure to a concentrated customer base, especially in volatile sectors, remains a key risk factor.
• Management Actions: Shareholders should closely monitor the Company’s ability to recover impaired amounts and its approach to future credit risk management.

Board Statement

The announcement is signed by Chairman and CEO Wang Jianqing. The Board comprises two executive directors (Mr. Wang Jianqing and Mr. Bao Jun) and three independent non-executive directors (Dr. Leung Hoi Ming, Dr. Wong Siu Hung Patrick, and Ms. Lin Ying).

Disclaimer: This article is a summary and interpretation of the supplemental announcement issued by Yuan Heng Gas Holdings Limited. Investors should read the full official announcement and consult their financial advisors before making investment decisions. The information presented here does not constitute investment advice or an offer to buy or sell any securities.

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