CM-ENERGY (00206) has issued a profit warning, announcing that for the six months ending June 30, 2026, the group expects to record a loss of approximately US$9.3 million. This contrasts with a profit of about US$2.78 million for the corresponding period in the prior year, which ended June 30, 2025.

The board attributes the anticipated swing from profit to loss primarily to an expected provision for impairment losses of around US$9.5 million on an ongoing project for the six months to June 30, 2026. The provision is linked to a recent collaboration between the group and Pemex, a Mexican state-owned oil and gas company and one of the world's largest petroleum firms, involving drilling, equipment supply, and services. The partnership was terminated for the unexecuted portion after completing certain independent milestones.

Changes in the local commercial and macroeconomic environment, including shifts in Pemex's management, business strategy, and treasury practices, have led to tighter budget constraints on its projects. Slow payment progress from Pemex to the group has impacted project timelines, while the group continued to incur expenses. Despite the group's efforts to negotiate with Pemex to restore normal project progress, the desired outcome was not achieved. Considering the current situation and operational risks, all parties decided not to proceed with the remaining project work to avoid incurring substantial ongoing costs for both parties.

As a result, the group expects to make a one-off provision, primarily for costs previously incurred across the entire project, excluding completed milestones. The group is still in close discussions with Pemex and will make every effort to take appropriate measures to recover unpaid contract amounts under the project, which have been acknowledged by Pemex. Based on a preliminary analysis, the overall return from the terminated project, including contract payments, is expected to offset most of the costs and expenses incurred, resulting in only a relatively minor estimated loss. Therefore, the company believes that terminating the project is a strategic decision to control the group's financial and operational risks, aligning with the overall interests of the company and its shareholders.