STRONG PETRO (00852): Expected to incur a loss of approximately USD 10.7 million in a transaction involving asphalt products trading.

Strong Petro (00852) has announced that the group is expected to incur a loss of approximately $10.7 million in a recent asphalt product trading transaction. In November 2025, the company, through its wholly-owned subsidiaries Nantong Strait International Trading Co., Ltd. (Nantong Strait) and STRONG PETRO Limited (Hong Kong Strait), entered into a framework contract with an independent third-party supplier for the import of asphalt products. As per the contract, Nantong Strait and Hong Kong Strait purchased a total of approximately 1.65 million barrels of asphalt products in batches in 2026, with the plan to use them as raw materials for producing road asphalt for domestic sales. However, during the course of the transaction, delays in customs inspections at the import destination, misclassification of the products, and sudden geopolitical conflicts in the Middle East led to a significant increase in the group's selling costs. Simultaneously, the conflict resulted in higher transportation costs, a surge in crude oil prices, and a decrease in purchasing enthusiasm from Chinese mainland users, posing severe challenges to the group's cost and risk management. Ultimately, considering factors such as the price difference in the buying and selling of the asphalt products, storage costs during delays, and related hedging arrangements, the group expects to incur a loss of approximately $10.7 million in the aforementioned transaction. This figure is a preliminary assessment by the group's management and has not been reviewed or audited by the company's auditors. The board of directors believes that this loss will not have a significant adverse impact on the group's ongoing operations. The group will continue to address the follow-up matters of this transaction and complete the necessary closure work in accordance with the agreements. In the future, the group will improve its business processes related to commodity import compliance, closely monitor the ongoing developments in international situations such as the Middle East geopolitical conflicts, and enhance its overall risk management capabilities in the complex and evolving global business environment to better respond to price fluctuations and structural risks, further elevating the level of risk management in its commodity trading business.