MORIMATSU INTL (02155) has issued a profit warning, projecting a net loss of approximately RMB 150 million to RMB 180 million for the six months ending June 30, 2026, compared to a net profit of RMB 333 million for the same period last year. The anticipated loss is attributed to three key factors.

First, geopolitical and macroeconomic headwinds have significantly impacted operations. The ongoing instability in the Middle East has caused delivery delays for the group in that region, leading to lower-than-expected revenue and profit contributions. Disruptions to international trade logistics and rising supply chain costs have also negatively impacted gross margins.

Second, weakened demand in downstream industries has led to project delays or cancellations, increasing credit risk and requiring higher provisions for expected credit losses. Intense competition in the energy and materials sectors has also reduced average selling prices, further pressuring gross margins.

Third, the strengthening of the Chinese yuan against the US dollar and euro has resulted in significant foreign exchange losses on the group's USD and EUR-denominated assets and receivables, further compressing profits. In response, MORIMATSU INTL is implementing several measures, including optimizing its global delivery network to reduce exposure to geopolitical hotspots, diversifying its customer base, and pivoting towards high-value sectors such as AI infrastructure, sustainable energy, and life sciences.

The group is also actively managing currency risk through adjusted settlement strategies and hedging, while exploring renminbi-denominated settlements with international clients. The board emphasized that the interim results reflect a specific delivery phase and do not fully represent the company's long-term profitability or business model, expressing confidence in its medium-to-long-term growth prospects.