Dongjiang Environmental Company Limited (002672.SZ) disclosed its 2025 annual report on March 27. Following three consecutive years of losses, the company's net profit attributable to shareholders widened by 53.14% last year, marking its worst financial performance since listing. This brings the company's total losses over the past four years to more than 3.2 billion yuan.
The company, a former leader in the hazardous waste treatment industry, is currently grappling with a complex operational dilemma amid a deep industry-wide adjustment period characterized by overcapacity. On one hand, its traditional core business faces challenges including weak growth and sustained pressure on gross margins due to the industry downturn. Significant goodwill accumulated during previous mergers and acquisitions has also been substantially impaired in the current downcycle. On the other hand, its precious metals recycling business, once seen as a promising venture, saw its gross margin fall into negative territory during the reporting period. Although the company has repeatedly emphasized its strategic shift towards the resource recycling sector, substantive progress in business implementation remains limited.
Financial data reveals that the company generated operating revenue of approximately 3.457 billion yuan during the reporting period, a slight decrease of 0.85% year-on-year, remaining largely stable compared to the previous year. However, on the profitability front, the net loss attributable to shareholders reached 1.232 billion yuan, a significant widening of 53.14% year-on-year. The net loss after deducting non-recurring items was 1.137 billion yuan, an increase of 40.38% compared to the previous year.
The trajectory of its performance indicates that Dongjiang Environmental's losses are not a short-term phenomenon. From 2022 to 2024, the company reported net losses attributable to shareholders of approximately 500 million yuan, 751 million yuan, and 804 million yuan, respectively. Combined with the 2025 loss of 1.232 billion yuan, the cumulative loss over four years has surpassed the 3.2 billion yuan mark.
In its annual report, the company attributed the losses to several factors. In 2025, influenced by the domestic macroeconomic situation, competitive dynamics in the hazardous waste industry did not improve significantly, and the sector as a whole continued to face substantial operational pressure. Prices for the company's non-hazardous disposal services continued to decline, leading to a year-on-year decrease in gross margin and resulting in a net loss. Furthermore, based on the industry environment and the company's operational reality, it recognized asset impairment losses and credit impairment losses on related assets, and also booked provisions for losses in accordance with court rulings on litigation. These factors collectively had a significant adverse impact on the annual profit.
Beyond the operational losses, the company's debt pressure is also a concern. As of the end of 2025, its asset-liability ratio increased by 8.32 percentage points year-on-year to 71.52%, reaching a record high since its listing. Short-term debt pressure is particularly acute. Specifically, short-term borrowings stood at 1.649 billion yuan, and non-current liabilities due within one year amounted to 1.549 billion yuan, totaling 3.198 billion yuan. In contrast, the company's monetary funds were 1.207 billion yuan, insufficient to cover even half of its short-term debt obligations.
Despite profitability pressures, net cash flow from operating activities saw a substantial increase of 208.59% year-on-year, reaching 387 million yuan. The company stated this was primarily due to growth in revenue from its industrial waste resource utilization business, increased collection of funds, and a rise in recovered government receivables during the reporting period.
According to the annual report, Dongjiang Environmental's main business segments include industrial waste resource utilization, industrial waste treatment and disposal, and precious metals recycling. Industrial waste resource utilization and industrial waste treatment and disposal represent the company's traditional core businesses. During the reporting period, the resource utilization segment generated revenue of 1.573 billion yuan, an increase of 20.88% compared to the previous year, accounting for 45.50% of total revenue. However, the gross margin for this business decreased by 2.51 percentage points year-on-year to 8.84%.
The industrial waste treatment and disposal business, which is the company's second-largest revenue source, reported revenue of 734 million yuan. This represented a year-on-year decrease of 21.52%, and its gross margin fell by 14.65 percentage points, dropping to -12.12%.
Industry-wide overcapacity has been a key factor undermining profitability. The company noted that due to high capacity and significant business homogenization in non-hazardous disposal services, unit prices have declined for several consecutive years, and the segment remains in a challenging phase. According to the company's disclosure, competitive conditions in the hazardous waste treatment industry did not markedly improve in 2025. The average collection price for incinerable waste decreased by approximately 15% year-on-year, while average prices for landfillable waste, including both flexible and rigid landfill categories, fell by over 15% and 20%, respectively.
Given that the imbalance between supply and demand in the hazardous waste disposal industry is unlikely to be resolved in the short term, significant goodwill accumulated during the company's earlier M&A-driven expansion phase has led to concentrated risk exposure during the industry downturn. Financial data shows that Dongjiang Environmental recognized a total of 306 million yuan in goodwill impairment related to subsidiaries engaged in industrial waste resource utilization and treatment/disposal businesses, such as Xiamen Green Island, Xiantao Lvyi, and Qingyuan Xinlv. This impairment accounted for 67.3% of the total asset impairment losses for the period.
Confronted with the prolonged weakness in its traditional businesses, Dongjiang Environmental has been actively seeking change. In 2021, the company entered the precious metals sector through the acquisition of Xiongfeng Environmental Protection. Since the acquisition, the company has frequently reiterated its strategic direction to "transform towards the resource recycling field" and expressed its intention to accelerate its evolution into an "excellent comprehensive environmental service provider and a leader in the resource recycling industry."
However, there remains a considerable gap between ambition and actual results. The 2025 annual report shows that the company's precious metals recycling business achieved sales volume of 28,164 tons, an increase of 11.17% year-on-year. Nevertheless, revenue was approximately 718 million yuan, a decrease of 16.33% compared to the previous year, indicating a pattern of volume growth coupled with price decline, which reflects intense market competition.
Consequently, the gross margin for this business decreased by 10.69 percentage points year-on-year, falling into negative territory at -7.58%, resulting in an overall shift from profit to loss. Specifically, its core platform, subsidiary Xiongfeng Environmental Protection, generated revenue of approximately 719 million yuan in 2025, accounting for 20.80% of the company's total revenue, but reported a loss of 148 million yuan, which widened compared to the previous year.
In terms of expanding its comprehensive environmental services and resource recycling businesses, the company is adopting an asset-light model to accelerate its footprint. It has established joint ventures with several enterprises and initiated collaborations in areas such as automotive parts dismantling, energy-saving retrofits, environmental consulting, and green intelligent logistics, with related projects progressing steadily. Simultaneously, the company is vigorously promoting the transformation of its resource-based products towards higher value-added and diversification. High-end products like nano-grade basic copper sulfate and copper hydroxide have commenced full-scale production, and firework-grade copper oxide is being sold at full capacity, gradually enhancing the competitiveness of its resource-based products. However, based on current performance, expansion in these areas is still largely in a developmental phase and has not yet provided substantial support to overall profitability.
It is important to note that whether the company's current financial condition can adequately support its strategic transformation remains to be seen. For this former leader in hazardous waste treatment, finding new profit growth drivers amidst multiple pressures appears to be the central challenge for overcoming its current predicament.