China Kangda Food Company Limited (2025) – Financial Results Analysis

China Kangda Food Company Limited, a dual-listed food producer in Hong Kong and Singapore, released its audited results for the year ended 31 December 2025. The Group operates primarily in China and is engaged in the production and trading of food products, as well as the breeding and sale of livestock, poultry, and rabbits.

Key Financial Metrics and YoY Performance

Segment and Geographic Performance

Profitability and Expenses

• Gross profit margin: Improved from 4.5% to 5.0% due to higher-margin processed food exports and increased sales volume.
• Operating loss: Narrowed by 20.8% YoY, primarily due to higher revenue and improved gross profit.
• Selling and distribution expenses: Increased to RMB53.4 million (+15.8%) mainly due to higher logistics and staff costs from business expansion.
• Administrative expenses: Rose to RMB41.0 million (+13.5%) on higher staff and professional fees.
• Other operating expenses: Rose to RMB18.5 million, mainly from increased depreciation charges.
• Finance costs: Decreased 38.2% YoY to RMB10.4 million, reflecting lower interest rates and reduced borrowing balances.
• No dividend: No final dividend was declared for FY2025 (unchanged from FY2024).

Balance Sheet and Liquidity

• Total assets: RMB1,295.5 million, with net assets of RMB524.8 million.
• Net current liabilities: RMB6.5 million (improved from RMB26.6 million in FY2024), mainly due to higher inventory and trade receivables.
• Cash and cash equivalents: RMB137.3 million (down from RMB234.2 million), driven by lower collections and higher capex.
• Interest-bearing bank borrowings: RMB103.8 million (down from RMB149.5 million).
• Gearing ratio: 73% (slightly improved from 74%).

Exceptional Items and Risks

• Impairment Losses: Provision for impairment loss on trade and other receivables increased to RMB5.2 million (FY2024: reversal of RMB5.7 million), reflecting a rise in long-aged receivables.
• Going Concern Warning: Auditors highlighted material uncertainty about the Group’s ability to continue as a going concern. The Group is dependent on successful renewal of bank loans and support from related companies to meet liquidity needs.
• No material asset revaluation, legal disputes, or contingent liabilities.
• Capital Commitments: RMB32.6 million in committed but unprovided capex.
• No share buybacks, placements, or dilution occurred.
• Change in Ultimate Ownership: The ultimate holding company changed to Hong Kong Sheng Yuan Holding Company Limited during FY2025.
• Directors’ Remuneration and Employees: Staff costs rose to RMB250.0 million due to increased headcount and competitive compensation; no share option scheme was in place.

Chairman’s Statement

“During the fiscal year 2025, the business environment was full of challenges, due to increasing trade protectionism and downturn pressure of macroeconomic. The Group recorded a loss attributable to owners of the Company of approximately RMB17.4 million, representing a decrease in loss of RMB4.1 million, or 19.1%, as compared to approximately RMB21.5 million loss making for fiscal year 2024.

The Group continued to adopt stable operation strategy. The revenue increased by 12.5% from approximately RMB1,650.5 million for FY2024 to approximately RMB1,857.3 million for FY2025. The decrease of loss making was a net impact of the following: i) increase in gross profit of RMB19.6 million due to increase in revenue and gross profit margin, ii) decrease in finance cost of RMB6.5 million as a result of lower loan balance and interest rate, iii) increase in selling, distribution costs and administrative expenses of RMB12.1 million due to business expansion, and iv) increase in impairment loss on trade and other receivables of RMB10.9 million due to a rise in long-aged receivables.

Despite the challenges, with our products being consumer staples, all the above uncertainties will have limited impact on our business. The food industry will continue to face challenges with low growth rate and intense competition. With consumption upgrades, food safety and healthiness have become the focus of consumers’ attention, which has always been our priority. With our stringent quality control and food safety systems, we will continue to provide customers with high quality products. To maintain overall profitability and to enhance the competitiveness and resistance against market risk, the Group will increase investment in research and development of new products, focus on high value-added processed foods, safeguard business relationship with major customers and proactively explore new markets and new customers.

We will continue to optimise product portfolios, enhance cost management, promote brand building and expand new sales channels to strengthen the core competence and improve the overall performance of the Group.”

Tone: Cautiously optimistic, with an emphasis on resilience amid macroeconomic headwinds, commitment to quality, and strategic investments in R&D and brand building.

Events and Outlook

• No significant events after the reporting period that materially affect the Group.
• Management is actively seeking bank loan renewals and new financing sources, with written commitments in place for some refinancing needs.
• The Group expects to maintain adequate liquidity if planned measures are successful, but admits to material uncertainty surrounding going concern status until refinancing and operational improvements are assured.

Conclusion and Investment Recommendation

Overall Assessment: China Kangda Food Company Limited showed improvement in revenue, gross profit, and narrowing losses in FY2025. However, persistent net losses, rising impairment charges, and material going concern risks continue to overhang the investment case. The company’s revenue growth and margin improvement are positive, but working capital pressures and reliance on refinancing highlight a fragile financial position. The food industry outlook remains challenging, with ongoing competition and macroeconomic uncertainty.

Recommendations

• If you are currently holding the stock: Exercise caution. While the company is narrowing its losses and growing revenue, the going concern warning is serious. Monitor the company’s liquidity management, refinancing progress, and recovery in profitability closely. Consider reducing exposure if refinancing or operational improvements do not materialize in the coming quarters.
• If you are not holding the stock: Consider waiting on the sidelines. The risk profile is elevated due to persistent losses and material uncertainty around the company’s ability to continue as a going concern. Only revisit when there is demonstrated stability in operating profit, improved cash flow, and resolution of refinancing risks.

Disclaimer: This analysis is based solely on the company’s 2025 financial report and does not constitute investment advice. Investors should conduct further due diligence and consider their own financial circumstances before making any investment decisions.

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