Three Squirrels Inc. is racing to list on the Hong Kong Stock Exchange, but the company faces three significant challenges: financial performance, disclosure issues, and food safety concerns. In the first half of this year, its net profit attributable to owners, excluding non-recurring items, plummeted by 77.75%, with the second quarter recording the largest quarterly loss since its inception.
Record Quarterly Losses The reporting period for Three Squirrels Inc.'s Hong Kong prospectus spans 2022 to 2024. The prospectus notes, “No material adverse changes have occurred” as of the document's date (with the latest possible date being April 18, 2025). However, the company experienced a noticeable decline in net profit during the first quarter of this year.
According to Three Squirrels’ Q1 2025 report, its revenue amounted to 3.723 billion yuan, a year-on-year increase of 2.13%, while its net profit attributable to owners, excluding non-recurring items, fell by 38.31% to 162 million yuan. Additionally, the net cash flow from operating activities for the quarter was 108 million yuan, down 62.96% year-on-year.
The company’s H1 2025 report revealed revenues of 5.478 billion yuan, representing a 7.94% year-on-year increase. Yet, its adjusted net profit dropped to 50.8 million yuan, down 77.75% with a further widening decline. Moreover, the net cash flow from operating activities showed a negative figure of 377 million yuan, flipping from net inflow to net outflow.
In Q2 specifically, Three Squirrels' adjusted net profit fell to a loss of 112 million yuan, while the net cash outflow from operating activities reached 485 million yuan, both significantly worse than Q1 figures. The company demonstrates a notable seasonal performance pattern where the first quarter accounts for a significant share of net profit, while the second quarter typically shows a loss. Historical data indicates that from 2020 to 2024, the adjusted net profit for Q2 has seen losses ranging from approximately 14.17 million yuan to 94.4 million yuan, with Q2 2025 seeing the highest quarterly loss since its listing.
Discrepancies Between Hong Kong Prospectus and A-Share Annual Reports The Hong Kong prospectus reports product sales for Three Squirrels over the period 2022 to 2024, listing total sales of various snack categories at 166,100 tons, 173,200 tons, and 295,900 tons, respectively. The product categories include nuts, baked goods, mixed snacks, meat products, dried fruits, and others, with nuts being the largest category, recording sales of 82,600 tons, 79,000 tons, and 122,700 tons.
Conversely, according to the A-share annual reports for 2022, 2023, and 2024, Three Squirrels reported sales volumes for the same years in the snack food industry as 77,900 tons, 68,500 tons, and 111,500 tons, respectively. Comparing the two shows that the total sales figures in the prospectus were over 100% higher in each year from 2022 to 2024 than those disclosed in the annual reports, showcasing significant discrepancies.
Even when focusing solely on the core product of nuts, sales figures still exhibit differences of 6.03%, 15.33%, and 10.04% respectively for the noted years. Besides the substantial volume discrepancies, the Hong Kong prospectus also conflicts with A-share periodic disclosures regarding sales figures, intangible assets composition, and number of authorized patents.
Consider the company's largest customer: the prospectus indicates that “Customer A and its related entities” accounted for sales of 1.611 billion yuan, 1.145 billion yuan, and 1.34 billion yuan respectively during the reporting period. However, the A-share annual reports specify that sales to this customer were 2.512 billion yuan, 1.445 billion yuan, and 2.45 billion yuan over the same three years, indicating discrepancies of 55.93%, 26.2%, and 82.84%.
Additionally, looking at sales to the top five customers, the prospectus shows a combined sales share to these clients of 31.4% for 2022, with similar calculations revealing figures of 25.4% and 19.8% for 2023 and 2024, respectively. Yet, the A-share annual reports indicate that during 2022 to 2024, Three Squirrels' combined sales to the top five customers were 68.76%, 60.34%, and 54.39%, which marks an increase of 37.36 percentage points, 34.94 percentage points, and 34.59 percentage points, respectively, compared to the prospectus.
Furthermore, regarding intangible assets, the prospectus indicates that at the end of 2023 and 2024, Three Squirrels maintained only two categories of intangible assets: software and patents. Nevertheless, the company reported adding patent costs of 557,000 yuan and 38,000 yuan for 2023 and 2024, respectively, and as of the end of 2024, the total patent costs recorded were 595,000 yuan.
The A-share annual reports state that for 2023 and 2024, Three Squirrels added trademark rights valued at 557,000 yuan and 38,000 yuan, respectively, with a remaining balance of 595,000 yuan for trademark rights at the end of 2024. Critically, the company reported no recorded value for patent rights at the beginning or end of 2023 and 2024. This suggests that the changes in patent costs reported in the prospectus may correspond to changes in trademark rights values in the annual report, with different categories of intangible assets being accounted.
The prospectus further discloses that as of December 31, 2024, Three Squirrels had registered 249 patents, while the 2024 annual report reveals that the company and its subsidiaries held 243 authorized patents, which is six fewer than indicated in the prospectus.
Food Safety Concerns with Numerous Complaints As a well-known snack retailer in China, Three Squirrels’ core category is nuts, with over 1,000 unique snack SKUs launched in 2024. Most of the company's nut products are manufactured in-house, while other snacks are produced through OEM partners.
Food safety is paramount for food enterprises. However, as of October 20, 2025, the number of complaints related to Three Squirrels reached as high as 4,788 according to the consumer service center affiliated with Sina, “Black Cat Complaints.” Common complaints include product spoilage (even before the expiration date), foreign substances in products, nutritional content not meeting national standards, and false advertising during sales.
In addition to a high number of consumer complaints, reports emerged in media stating that in July 2022, consumers discovered suspected leakage of desiccants in the daily nut packaging from Three Squirrels, which were inadequately sealed and featured open gaps; the second package purchased had the same issue.
Three Squirrels responded by stating that the damage to the desiccant occurred due to misalignment during the dispensing process.
In May 2021, the State Administration for Market Regulation published a notice detailing 20 batches of food product sampling failures, where a batch of open pine nuts from Three Squirrels was deemed substandard due to an excessive peroxide value that did not comply with national food safety standards. Three Squirrels clarified that this was due to improper storage by the actual operators during transport, failing to adhere to the packaging requirements.
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