The board of directors of Xiwang Special Steel Company Limited informed the shareholders of the Company and potential investors that it is expected that the Group would record a net loss not exceeding RMB 296.8 million for the six months ended 30 June 2022 as compared with a profit for the period of approximately RMB 191.7 million for the six months ended 30 June 2021. This is mainly because the costs of the major raw materials of the Group, such as coking coal, for the Current Period increased significantly when compared to the Previous Period, while the cost of iron ore remained high during the Current Period. The average unit cost for the Group's ordinary steel and special steel products increased from approximately RMB 3,956 per tonne for the Previous Period to approximately RMB 4,198 per tonne for the Current Period.

However, the Group was not able to raise the selling price to the same extent despite such increase in costs of sales, in order to maintain its competitiveness. Further, as disclosed in the announcement of the Company dated 19 August 2022, the Group experienced a sharp drop in the average selling price of the products plus a decrease in the sales volumes in May and June 2022. The revenue of the Group decreased accordingly and squeezed the Group's profit margin.

As a result, the Group recorded a gross loss margin of approximately 0.3% for the Current Period, compared to a gross profit margin of approximately 6.5% for the Previous Period.