Shenguan Holdings (Group) Limited provided consolidated earnings guidance for the six months ended 30 June 2023. For the six months, the Group is expected to record a loss attributable to the owners of the Company of approximately RMB 2.0 million to a profit attributable to the owners of the Company of approximately RMB 5.0 million, as compared to a profit attributable to the owners of the Company of approximately RMB 13.5 million for the six months ended 30 June 2022. The Board is of the view that the major factors leading to the less favourable results for the Period were the large-scale product trial production and equipment transformations conducted by the Group due to new products research and development, as well as expansion of production capacity.

After the completion of equipment transformations, the production capacity increased by approximately 25-30%, the production lines were required to undergo trial production to test their quality effectiveness, and the raw materials, auxiliary materials and energy consumed for the trial production were higher than those under normal production, which in turn increased the average unit cost of production. Coupled with the fact that the prices of raw materials, auxiliary materials and energy remained high, it resulted in a significant increase in the unit cost of production as compared to the Prior Period. However, the impact was partially offset by higher sales volume and average selling prices of products.