Chairman's Statement

Extracted from the Annual Report 2024

On behalf of Ouhua Energy Holdings Limited (the "Group"), I would like to present an overview of the performance of the Group for the financial year ended 31 December 2024 ("FY2024"). Despite our efforts to adapt, the Group faced several headwinds, leading to a decline in financial performance.

According to the latest release from National Statistics Bureau, the GDP growth in China reached 5.0% year-on-year in the first half of FY2024, however the latter part of the year saw challenges intensify, affecting many industries including our own. Despite the easing of interest rates in the second half of the year, intensifying geopolitical tensions and protectionist policies disrupted the stabilisation of the energy markets, and negatively impacted on trade and investment flows to reduce the resilience of global supply chains and the global economy. The Group's businesses had also been significantly affected by seasonal or cyclical factors during the financial period, resulting in a decline in our financial performance in FY2024.

Business Review

In FY2024, the Group's total revenue comprised of our core business of liquefied petroleum gas ("LPG") distribution and our other new segment of solar power generation market that the Group had just entered into in FY2023. For the financial year under review, Group total revenue decreased further by approximately 20.8% to RMB 2,664.6 million from RMB 3,362.6 million in FY2023, largely because of the fierce competition in the LPG market. Fluctuations in terms of LPG pricing also contributed to the decrease, leading to a fall in sales volume of LPG from 761,285 tons in FY2023 to 572,967 tons in FY2024. The solar power generation segment recorded RMB 5.9 million revenue in FY2024 compared to RMB 1.1 million in FY2023 since this sector started operation in in the second half of FY2023.

Gross profit in FY2024 decreased in line with the drop in revenue, decreasing by RMB 74.7% or RMB 104.2 million from RMB 139.5 million in FY2023 to RMB 35.3 million this year, mainly due to the price fluctuation of LPG. This in turn, created an impact on our cost of sales, pushing down our gross profit margin to 1.33% in FY2024, from 4.15% in FY2023. After deducting for costs and taxes, and as a result of the abovementioned factors, the Group recorded a net loss of RMB 69.6 million for the financial period compared to a net profit of RMB 18.8 million in FY2023.

Outlook FY2025

According to the latest release from National Statistics Bureau, the GDP growth in China reached 5.0% year-on-year in FY2024, and the International Monetary Fund's World Economic Outlook's latest projected GDP growth for China in FY2025 is at 4.6%, a slight upward revision of 0.1% from the October 2024 outlook. The LPG market is expected to continue experiencing dynamic changes over the next 12 months, driven by evolving global energy demands, shifting geopolitical factors, and advancements in energy technology. The growing focus on sustainability and cleaner energy solutions is likely to increase the adoption of LPG as an alternative to traditional fossil fuels, particularly in emerging economies. This bodes well for the Group to tap on our strong positioning in the green energy transition market to navigate through the uncertainties and seize growth opportunities.

Enhancing the efficiency of our supply chain is crucial for the Group to contribute effectively to China's sustainability goals. The Chinese government's commitment to achieving carbon neutrality by 2060 and carbon peaking by 2030 also provides a favourable outlook for the renewable energy sector, and we are strategically aligned to benefit from these long-term policies. In particular, our ongoing focus on clean energy solutions, including our entry into the solar power market, positions us well for the future. Since entering the solar power generation market, electricity has steadily become a stable contributor to our revenue. We will continue to remain focused on upgrading our infrastructure and investing in clean energy technologies, proactively engage in the green energy market to explore new business avenues within this sector to diversify and stabilise our income streams.

In 2025, the demand for LPG market will undergo structural adjustments and meet with challenges such as regulatory changes, competitive pressures from alternative energy sources like electric and hydrogen-powered technologies, and regional disparities in LPG pricing. However, on the overall, the LPG market is expected to exhibit a balanced growth trajectory, with potential for both shortterm volatility and long-term expansion.

While geopolitical uncertainty and energy market volatility persist, we remain confident that the Group's expertise, sound infrastructure, resilience and agility will enable us to navigate through such uncertain times and emerge stronger.

Appreciation

On behalf of the Board and management, I would like to express my deepest appreciation to our valued shareholders, staff, customers, business partners and all other stakeholders for their continuous support and stanch confidence in the Group. With their ongoing support, Ouhua remains dedicated to achieving sustainable growth.

LIANG GUO ZHAN