CHINA STARCH (HKEX: 03838) has announced a profit warning, forecasting a pre-tax loss of approximately RMB 20 million for the five-month period ending May 31, 2026. This represents a significant reversal from the pre-tax profit of RMB 267 million recorded in the same period last year.
The company also expects to report a loss attributable to shareholders of around RMB 4 million, a stark contrast to the profit of RMB 137 million attributable to shareholders in the prior corresponding period.
The group's performance during this period is attributed to the combined impact of adverse market conditions. Within its lysine business, ongoing geopolitical disruptions have continued to elevate export freight costs and restrict certain shipping routes, resulting in freight rates for 2026 exports remaining substantially higher than last year. Consequently, increased overall landed costs have weakened the competitiveness of Chinese-produced lysine in overseas markets.
Domestically, an oversupply in the local lysine market coupled with stagnant demand from the animal farming industry has continued to exert downward pressure on selling prices and sales volume.
The group also faced persistent cost pressures during the period. Corn prices remained elevated, while finished product prices failed to adjust correspondingly, leading to compressed profit margins.
Beyond these operational challenges, the industry environment for both lysine and corn starch products has entered a phase of prolonged saturation and intensifying oversupply. Although the group maintains its leading industry position, the severity of the current cyclical downturn has significantly impacted its profitability.
Management anticipates that this industry adjustment cycle will persist for a longer duration than previous market fluctuations. In response to these challenges and to consolidate its market position, the group is advancing several strategic expansion projects. These include a corn starch expansion project and a thermal power plant construction project at its Linqing production base. These measures are expected to optimize production efficiency and enhance the group's cost competitiveness within the industry.
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