Chairman's Statement

Extracted from the Annual Report 2022

On behalf of the Board, I am proud to present the Group’s performance for the financial year ended 31 December 2022 (“FY2022”). For the year under review, we continued to unlock and deliver value against a backdrop of a global economy that is still recovering from the Novel Coronavirus (“COVID-19”) pandemic. Border reopenings and ongoing vaccination programmes translated to steady economic recovery despite new virus variants and outbreaks. The year also saw geopolitical conflicts disrupting economic activity, and the resulting inflation and rising US interest rates became a concern. Despite these challenges, the Group pressed forward with operational improvements to continue navigating towards future growth.

Business Review

For the financial year under review, our revenue increased by approximately 30.3% or RMB 1,081.2 million from RMB 3,563.5 million in FY2021 to RMB 4,644.7 million in FY2022. This was due to the significant increase in the average price of liquefied petroleum gas (“LPG”) from RMB 4,449 per ton in FY2021 to RMB 5,175 in FY2022, combined with the higher sales volume of LPG from 802,660 tons in FY2021 to 897,543 tons in FY2022. With the shift towards clean energy in China, LPG has become a key energy source for the users in the industrial, residential and petrochemical industry.

In line with the Group’s increase in revenue, gross profit increased by RMB 53.8 million or 41.0% from RMB 131.3 million in FY2021 to RMB 185.0 million in FY2022. The price hikes for LNG have spurred an increase in demand for LPG as an alternative, and since we had built up our inventories prior to the price hike, we saw an improvement in our gross profit margin from 3.7% in FY2021 to 4.0% in FY2022. After deduction for costs and taxes, the Group yielded a net profit of RMB 48.5 million for FY2022, compared to the net profit of RMB 33.0 million in FY2021.

Outlook FY2023

The PRC’s carbon reduction and carbon neutrality policy continues to spur rising demand for clean energy in China, which in turn creates opportunities for us to unlock greater value by leveraging on our established position in the LPG industry. Furthermore, ongoing geopolitical tensions, including the Russia-Ukraine war, may lead to further oil price volatility, which in combination with global inflation, may lead to further negative impacts on the global economy and affect the recovery process.

Despite the aforementioned challenges, the forecast published on 3 February 2023 by the International Monetary Fund (“IMF”) projected that China’s economy is to expand by 5.2% in 2023, compared to the 3% growth in 2022, and hence contribute to a third of the global growth for this year . This growth is driven by a rebound in private consumption accompanying the reopening in China which took place earlier than expected .

Ouhua endeavours to seize opportunities that may arise from the ongoing geopolitical and economic developments. As we contribute to China’s sustainability efforts, the management will continue upgrading our infrastructure and investing in clean energy technologies to remain relevant and agile to better serve the evolving needs of our customers.

We are also placing greater emphasis on risk management and exploring opportunities to turn challenges into opportunities. Work is already underway to further integrate risk management into our daily business and allow us to best respond in today’s fast-changing world.

Ouhua will also continue to build upon on the Company’s long-established relationships with customers, suppliers, banks and local government, while seeking to diversify our customer base to more industries and regions to improve its capability for sustainable growth

Acknowledgements

On behalf of the Board and Management, I would like to express my heartfelt appreciation to our valued staff, customers, business partners and other stakeholders for their steadfast support especially in the current landscape. Given our track record, I am confident that we will continue to optimise our operations and stay on top of challenges as we pursue better results and value for all parties.

LIANG GUO ZHAN