Huasheng International Holding Limited board of directors (the Directors) of the Company announced that on 19 July 2022, the Company entered into a non-legally binding strategic cooperation framework agreement (the Cooperation Agreement) with KR Trading Limited (KR Trading), for the possible cooperation between the parties. Pursuant to the Cooperation Agreement, the Group and KR Trading agreed to (i) make use of each other's business network and operational expertise to identify potential business opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (the Greater Bay Area) and Hainan province; and (ii) give due consideration (subject to applicable laws, rules and regulations) to engage each other as a business partner and/or formation of a joint venture to commence natural sand business or procure to enter into natural sand business transactions in the Greater Bay Area and Hainan Province. The Cooperation Agreement is a non-legally binding framework agreement setting out the principles on long-term cooperation and strategic direction.

Cooperation with KR Trading is subject to further negotiation and execution of formal agreement(s) between the Group and KR Trading. The Group is principally engaged in (i) production and sales of ready-mixed commercial concrete; (ii) wholesale and retail of household consumables; and (iii) provision of money lending services. As mentioned in the Company's annual report for the year ended 31 March 2022, the Group has been exploring business or investment opportunities in the same industry including horizontal expansion by acquiring small to medium size concrete manufacturing plants to capture larger market shares or vertical expansion by acquiring businesses in concrete's raw material, namely sand and gravels.

In recent years, the government of the People's Republic of China (the PRC) has introduced several policies on ecological protection which led to the ban and cracking down on river sand mining business and the shortage of natural sand supply in the PRC while the demand for sand and gravels remained high as the infrastructure projects driving up the consumption. As a result, the price of sand and gravels are expected to continue to rise. As sand and gravels are the key raw materials of the Group's concrete business, the Directors believe that the Group could benefit from the Cooperation Agreement with KR Trading to secure the supply of sand and gravels.

Cooperation with KR Trading also provides the opportunity to tap into the supply of sand and gravels business in the Greater Bay Area and Hainan Province since KR Trading has obtained various qualifications and licenses and access to the abundant resources in the Philippines. It also has experienced management team and solid operational track record. The Directors believe that the Cooperation Agreement provides a more flexible, efficient and cost-effective opportunity for the Group to cooperate with an experienced operator to establish its business presence in the Greater Bay Area.

It is also expected that the operational expertise and business network of the Group and KR Trading can synergise with each other and expedite the Group's business development in both Hainan Province and the Greater Bay Area.