Shenguan : Announcements and Notices - Announcement Profit Warning

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SHENGUAN HOLDINGS (GROUP) LIMITED ग़ڿછٰ€ණྠϞࠢʮ̡

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00829)

ANNOUNCEMENT PROFIT WARNING

This announcement is made by the Company pursuant to Rule 13.09 of the Listing Rules and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance.

The Board wishes to inform the shareholders of the Company and potential investors that, based on the preliminary assessment by the Board of the unaudited consolidated management accounts of the Group and the information currently available to the Board, the Group is expected to record a decrease of approximately 55-65% in its net profit for the Reporting Period as compared to that for the Previous Period. If the compensation income from contract in progress and the gain in fair value of a put option for the Previous Period were excluded, the Group is expected to record a decrease of approximately 40-50% in its net profit for the Reporting Period as compared to that for the Previous Period.

Shareholders of the Company and potential investors should exercise caution when dealing in the securities of the Company.

This announcement is made by Shenguan Holdings (Group) Limited (the "Company", and together with its subsidiaries, the "Group") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong) (the "Securities and Futures Ordinance").

The board (the "Board") of directors (the "Directors") of the Company wishes to inform the shareholders of the Company and potential investors that based on the preliminary assessment by the Board of the unaudited consolidated management accounts of the Group and the information currently available to the Board, the Group is expected to record a decrease of approximately 55-65% in its net profit for the year ending 31 December 2017 (the "Reporting Period") as compared to that for the same period in 2016 (the "Previous Period"). If the compensation income from contract in progress and the gain in fair value of a put option for the Previous Period were excluded, the Group is expected to record a decrease of approximately 40-50% in its net profit for the Reporting Period as compared to that for the Previous Period.

Such decrease is primarily due to the following reasons:

• 1. During the Reporting Period, although the sales volume of collagen casings increased as compared to the Previous Period, the average selling price decreased due to the overall decline in prices of the products in this industry and the Group's endeavour to lower the inventory level. The decrease in average selling price caused a drop in the gross profit margin as compared to the Previous Period;

• 2. During the Previous Period, the Group had recorded a compensation income from contract in progress of RMB25,643,000. There was no similar income recorded for the Reporting Period. Details of which had been disclosed in the interim report of the Company dated 18 August 2017;

• 3. During the Previous Period, the Group had recorded a gain in fair value of the put option related to Guangdong Victory Biotech Co., Ltd of RMB17,725,000, this gain had decreased to RMB1,594,000 for the Reporting Period; and

• 4. Other factors that had caused the decrease of the Group's net profit included expenses incurred for development of new products and businesses during the Reporting Period.

The Board considers that although the Group had adopted strict cost control, strengthened its internal control, conducted research and development of new products and implemented strategies for product diversification, the Group still recorded a decline in its results for the Reporting Period because the meat products industry is undergoing an adjustment period and the product diversification is at its initial stage. However, the overall operations of the Group remain sound and intact. The Group's overall financial position also remains healthy.

The information contained in this announcement is only based on a preliminary assessment by the Board of the unaudited consolidated management accounts of the Group and information currently available to the Board. It is not based on any data or information that has been audited or reviewed by the auditor of the Company. The Company is still in the process of finalising the audited results of the Group for the Reporting Period, which will be disclosed in the forthcoming annual results announcement which is expected to be published in mid-March 2018.

Shareholders of the Company and potential investors should exercise caution when dealing in the securities of the Company.

By order of the Board

Shenguan Holdings (Group) Limited

Zhou Yaxian

Chairman

Hong Kong, 12 January 2018

As at the date of this announcement, the executive Directors are Ms. Zhou Yaxian, Mr. Shi Guicheng, Mr. Ru Xiquan and Mr. Mo Yunxi; the non-executive Director is Dato' Sri Low Jee Keong; and the independent non-executive Directors are Mr. Tsui Yung Kwok, Mr. Meng Qinguo and Mr. Yang Xiaohu.