The board of directors of Texhong International Group Limited and potential investors that based on the preliminary assessment of the unaudited consolidated management accounts of the Group for the five months ended 31 May 2023 and the information currently available to the Board, the Group is expected to record a net loss of about RMB 800 million for the six months ending 30 June 2023 as compared to the net profit of the Group for the six months ended 30 June 2022 of approximately RMB 1 billion. The net loss is expected to be mainly attributable to the continued weak demand for textiles in the overseas markets during the Period, resulting in weak product selling prices and low utilization rates of the Group's production capacity, which in turn affected the unit production costs and gross profit margins of the Group. However, the situation has started to improve in the second quarter of 2023, and together with the stabilization of cotton prices, the Group's profitability is expected to gradually improve.

Despite the difficult operating environment, the cash position of the Group remains strong. The Group will closely monitor the market situation and will focus on optimizing product mix to improve utilization of the Group's production capacity.