REDCO GROUP (01622) has issued a profit alert, projecting a net loss ranging from approximately RMB 1.05 billion to RMB 1.15 billion for the six months ending June 30, 2026, compared with a net loss of about RMB 709 million recorded in the corresponding period of 2025.

The company also anticipates a loss attributable to shareholders of approximately RMB 1.35 billion to RMB 1.45 billion for the period, versus a shareholder-attributable loss of around RMB 590 million in the first half of the previous fiscal year.

Where the pressure comes from

The wider expected losses are primarily driven by a significant surge in financing costs. Due to the persistently challenging conditions in China's real estate market, which have led to delays and suspensions in certain property development projects, the amount of borrowing costs eligible for capitalization has fallen sharply during the period. Consequently, a larger proportion of borrowing costs has been recognized as expenses.

As a result, the group's net financing costs for the period are expected to rise by approximately RMB 530 million compared with the same timeframe in 2025. These adverse effects have only been partially offset by improvements in gross profit margins and reductions in selling and administrative expenses.