Heng Tai (00197.HK) issued a profit warning, expecting a net loss increase of approximately 56% for the fiscal year ending in June this year. The board of directors believes that China's economic growth continues to be dragged down by the real estate crisis and weak market demand after the epidemic; domestic product competition remains fierce; adverse weather conditions continue to pose a threat to the group's upstream farming business; and the persistently high interest rate environment significantly increases financing costs and hinders new investments.

In view of the above unfavorable conditions, the group adopts a conservative approach to the development of its upstream farming business, and has lowered its expectations for the future performance of farmland and agrotourism operations. The group has valued certain assets and investments in the upstream farming business in accordance with the income approach to calculate their fair value. To reflect the risks related to adverse factors affecting the upstream farming business, the management has prepared profit and cash flow forecasts based on a more conservative approach compared to the previous fiscal year forecast, such as estimating lower sales growth, lower gross profit forecasts, and higher discount rates, leading to a decrease in future cash flows, resulting in impairment losses compared to their fair value.

The board of directors expects the group to record a net loss of approximately 0.196 billion yuan for the full year, compared to a loss of 0.126 billion yuan in the previous year. The increase in net loss is mainly due to impairment losses confirmed for certain assets and investments in the upstream farming business as mentioned earlier. On the other hand, excluding impairment losses, the board of directors anticipates that the group's operating losses for the period will decrease compared to the financial performance of the previous fiscal year.