Diwang Industrial Holdings Limited Issues Profit Warning for FY2025

Key Highlights

• Significant Swing to Loss: Diwang Industrial Holdings Limited has announced that it expects to report a consolidated loss of approximately RMB1.8 million for the year ended 31 December 2025, compared to a consolidated profit of RMB30.0 million for the previous year (2024).
• Major Drivers of the Downturn: The dramatic reversal is mainly due to:
  • Impairment Losses: An increase in impairment losses under the expected credit loss model, net of reversals, rising sharply by RMB23.8 million—from RMB7.0 million in 2024 to RMB30.8 million in 2025. This spike is primarily attributed to a rise in customers’ outstanding accounts receivable, reflecting a more competitive and adverse operating environment in the faux-leather chemicals industry.
  • Higher Selling and Distribution Expenses: These expenses increased by approximately RMB35.8 million, mainly due to:
    • An increase in advertising expenses by RMB27.8 million.
    • An increase in depreciation by RMB5.3 million.
  • Offsetting Factor: The negative impacts more than offset an approximately RMB27.9 million increase in gross profit, which was achieved on the back of higher Group revenue.
• Financial Reporting Status: The financial figures are based on preliminary unaudited management accounts and information available to the Board. The final audited results are expected to be published by the end of March 2026.

Important Information for Shareholders

• Price Sensitive Information: The swing from a profit of RMB30.0 million in 2024 to an estimated loss of RMB1.8 million in 2025 is a material development that is likely to impact investor sentiment and could significantly affect the Company’s share price.
• Industry Headwinds: The notable increase in impairment losses points to rising credit risk among the Company’s customers, likely due to worsening industry conditions in the faux-leather chemicals sector. This could signal ongoing challenges ahead.
• Cost Structure Deterioration: The sharp rise in selling and distribution expenses, particularly in advertising and depreciation, may prompt investors to scrutinize the Company’s cost management and efficiency going forward.
• Pending Financials: As the final results are still being prepared and have not been audited or reviewed by the audit committee, there is a possibility of further adjustments.
• Caution Advised: The Company has specifically cautioned shareholders and potential investors to exercise care when dealing in its securities.

Board Statement

The Board, led by Executive Director and Joint Company Secretary Lam Kam Kong Nathaniel, has reiterated that the information disclosed is based on preliminary assessments and subject to final review. Investors should await the full audited annual results, which are expected by the end of March 2026.

Conclusion

This profit warning signals a notable deterioration in Diwang Industrial Holdings Limited’s financial performance for 2025, with both industry-specific risks and internal cost pressures contributing to the loss. The dramatic swing from profit to loss, coupled with increased credit risk and expenses, is highly price sensitive and could result in significant share price volatility. Investors are strongly advised to monitor further announcements and exercise caution in trading the Company’s shares at this time.

Disclaimer: This article is based on a preliminary profit warning announcement by Diwang Industrial Holdings Limited. The financial results are yet to be audited and may be subject to adjustments. This article does not constitute investment advice. Investors are urged to act with caution and consider seeking advice from a professional financial adviser before making any investment decisions.

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