HONGHUA GROUP (HKEX: 00196) has released an announcement indicating a projected net loss attributable to shareholders of approximately RMB 20 million to RMB 40 million for the six-month period ending June 30, 2026. This represents a significant shift from the net profit of roughly RMB 37.095 million recorded for the corresponding period ending June 30, 2025.
Key Factors Behind the Anticipated Loss
The expected loss is primarily attributed to two main factors. Firstly, the company cites ongoing geopolitical tensions and challenging macroeconomic operating conditions. During the reporting period, persistent instability in the Middle East has pressured the company's market expansion efforts for its drilling equipment, offshore vessels, and drilling engineering services in the region. Consequently, revenue contribution and profit realization from this area have fallen significantly short of expectations. Additionally, disruptions in international trade logistics and rising supply chain costs have further compressed the group's overall gross profit margin.
The second major factor involves foreign exchange losses stemming from currency fluctuations. The sustained strengthening of the Renminbi against the US Dollar during the reporting period resulted in substantial exchange losses for the group's US dollar-denominated assets and foreign currency receivables. These losses further eroded profits for the period. The company noted that despite implementing active currency risk management measures—such as adjusting settlement strategies and utilizing forward exchange contracts and hedging instruments—it was unable to fully offset the adverse impact of the exchange rate volatility.
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