Yihai Kerry Arawana Holdings Co., Ltd. (hereinafter referred to as "Yihai Kerry Arawana", 300999.SZ) released its 2025 performance forecast on February 26th.
The data shows that the company achieved annual operating revenue of 245.126 billion yuan, a year-on-year increase of 2.87%. Net profit attributable to shareholders of the listed company was 3.153 billion yuan, up 26.01% year-on-year. Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was 2.845 billion yuan, a substantial increase of 193.68% compared to the previous year. Total assets at the end of the period were 228.720 billion yuan, and owners' equity attributable to shareholders of the listed company was 96.432 billion yuan.
The financial report stated that the increase in operating revenue compared to the previous year was mainly due to higher sales volumes of kitchen food, feed ingredients, and oil and fat technology products compared to the prior year.
For kitchen food, the release of new factory capacity, combined with ongoing channel expansion, drove the increase in sales volume. According to the financial report, the profit growth was primarily attributable to significantly improved performance in the flour and rice businesses compared to the previous year. This improvement was mainly due to a year-on-year decrease in raw material prices, coupled with effective raw material procurement and product marketing strategies.
In the feed ingredients and oil and fat technology segment, ample soybean supply from South America during the 2024-2025 period led to a year-on-year decrease in soybean procurement costs for the first three quarters. Strong demand from the domestic downstream aquaculture industry supported soybean meal prices. These combined factors drove an increase in soybean crushing margins. Although procurement costs rose in the fourth quarter, full-year crushing margins were still better than the previous year.
However, there is a significant footnote behind these results. During the reporting period, the company recognized an estimated aggregate liability loss of approximately 733 million yuan due to two lawsuits involving its subsidiaries, leading to a corresponding decrease in net profit.
Yihai Kerry Arawana clearly stated in its forecast that if the impact of these provisions were excluded, the 2025 net profit attributable to shareholders of the listed company would have been 3.886 billion yuan, representing a year-on-year increase of 55.31%. In other words, the recognition of litigation losses compressed the final reported net profit growth rate from 55.31% down to 26.01%.
The nature of the two lawsuits is entirely different, but both are at the stage where a first-instance judgment has been issued, with second-instance trials still pending.
The first case involves subsidiary Yihai (Guangzhou) Grain and Oil Industry Co., Ltd. (hereinafter "Guangzhou Yihai"). In November 2025, Guangzhou Yihai received a first-instance "Criminal Judgment" from the Huaibei Intermediate People's Court in Anhui Province. It was found to be an accessory to contract fraud, sentenced to a fine of 1 million yuan, and required to bear joint restitution liability for economic losses of 1.881 billion yuan suffered by the victim entity, Anhui Huawen International Economic and Trade Co., Ltd. (hereinafter "Anhui Huawen"), together with Yunnan Huijia Import and Export Co., Ltd. (hereinafter "Yunnan Huijia"). Guangzhou Yihai promptly filed an appeal, and the first-instance judgment is not yet effective.
Based on Guangzhou Yihai's asset and owners' equity situation, Yihai Kerry Arawana recognized an estimated liability within the amount of its equity interest, resulting in a reduction of the company's net profit by approximately 261 million yuan. Yihai Kerry Arawana strongly objects to this judgment. The company stated that the palm oil transit business in question occurred between 2008 and 2014, and Guangzhou Yihai strictly performed its contractual duties throughout the process. The company believes this case involves collusion and joint fabrication between Anhui Huawen and Yunnan Huijia, resulting in massive losses of state-owned assets concealed for nearly a decade, in an attempt to illegally transfer these huge losses to Guangzhou Yihai. Guangzhou Yihai also commissioned ten authoritative criminal law experts for a legal assessment, all of whom concluded that Guangzhou Yihai does not constitute an accessory to contract fraud.
The second lawsuit involves subsidiary Dongguan Fuzhiyuan Feed Protein Development Co., Ltd. (hereinafter "Dongguan Fuzhiyuan") and pertains to a tax administrative dispute. In November 2023, the Hongmei Tax Branch of the Dongguan Municipal Taxation Bureau, State Taxation Administration (hereinafter "Hongmei Tax Branch") determined that Dongguan Fuzhiyuan had inaccurately calculated the non-deductible input Value-Added Tax (VAT) for tax-exempt items such as rapeseed meal and issued a tax treatment decision. Dongguan Fuzhiyuan objected to the "Decision Letter" and successively filed for administrative reconsideration and an administrative lawsuit. In June 2025, the first-instance court dismissed its claim, and an appeal has now been filed.
In accordance with the prudence principle required by accounting standards, Dongguan Fuzhiyuan will reclassify the understated non-deductible input VAT for the period from July 1, 2012, to December 31, 2025, as identified and calculated based on the Hongmei Tax Branch's "Decision Letter" and "Notice Ordering Correction within a Time Limit," to the current period's cost of main operations. Simultaneously, the additional VAT surtax and late payment penalties will be recorded in the current period's profit and loss, leading to a reduction of approximately 472 million yuan in the company's 2025 net profit. Yihai Kerry Arawana stated that, based on opinions from external legal and tax experts, it believes Dongguan Fuzhiyuan's VAT treatment complies with legal regulations.
Both lawsuits remain unresolved. It is important to note that recognizing an estimated liability is a financial treatment based on accounting prudence principles and does not equate to the company conceding defeat. If the second-instance outcome differs from the first, the related losses could potentially be reversed, and vice versa.
Beyond the litigation concerns, Yihai Kerry Arawana is also proactively adjusting its asset structure. In early 2026, the company announced the transfer of its respective 50% equity interests in Kellogg's Shanghai and Kellogg's Kunshan to Mars Wrigley Confectionery (China) Ltd., for transaction considerations of $45 million and $15 million, totaling approximately $60 million.
According to the announcement, the main businesses of Kellogg's Shanghai and Kellogg's Kunshan are, respectively, food-focused warehousing, distribution, after-sales service, technical support, and technical training within the zone, and the production, R&D, after-sales service, and technical support of puffed foods.
As of the market close on February 27th, Yihai Kerry Arawana's share price was 29.41 yuan per share, up 0.06 yuan for the day, an increase of 0.20%, with a total market capitalization of 159.449 billion yuan.
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