Fenglin Group 2025 Annual Report Analysis: Revenue down 16% Year-over-Year, Financial Expenses Plummet by 586.39%

Revenue: Revenue declines for two consecutive years, with the engineered wood business under pressure

In 2025, Fenglin Group achieved operating revenue of RMB 1.697 billion, down 16.00% year over year from RMB 2.020 billion in 2024. This marks the company’s second consecutive year of year-over-year revenue decline. In 2024, revenue declined 13.68% year over year from RMB 2.340 billion in 2023.

Judging by its business structure, the engineered wood business is the core pillar of the company’s revenue. In 2025, it generated revenue of RMB 1.552 billion, down 18.65% year over year. The gross margin was -1.63%, down 2.32 percentage points year over year, making it the main drag on the company’s revenue decline. Forestry industry revenue was RMB 67.075 million, up significantly by 92.77% year over year, but its revenue share was only 3.95%, resulting in limited contribution to overall revenue growth. Other business revenue was RMB 66.3974 million, up slightly by 0.47% year over year.

By product, fiberboard revenue was RMB 735 million, down 15.85% year over year, with a gross margin of 4.37%, up 1.94 percentage points year over year; particleboard revenue was RMB 817 million, down 21.01% year over year, with a gross margin of -7.02%, down 6.25 percentage points year over year, and losses in the particleboard business further expanded.

By region, revenue in East China was RMB 631 million, down 23.58% year over year; South China revenue was RMB 681 million, down 18.30% year over year; North China revenue was RMB 87 million, down 3.77% year over year. Only revenue in Southwest China and Central China increased, up 12.80% and 1.50% year over year, respectively, but together these two regions accounted for only 16.23% of revenue.

Net profit: Losses for two consecutive years, with the loss amount slightly expanding

In 2025, the net profit attributable to shareholders of listed companies was -RMB 128 million; in the same period of 2024, it was -RMB 120 million, and the loss amount slightly increased year over year. The net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was -RMB 129 million; in the same period of 2024, it was -RMB 125 million, meaning that the loss after non-recurring items also increased.

From a quarterly perspective, in 2025 the company was in a loss position in every quarter, with the fourth quarter showing the most severe loss. The net profit attributable to shareholders of listed companies was -RMB 691 million, far exceeding the total losses in the first three quarters, indicating that the company’s full-year performance pressure was mainly concentrated at year-end.

Earnings per share: Negative for two consecutive years, with non-GAAP EPS declining

In 2025, the company’s basic earnings per share was -RMB 0.11/share, the same as -RMB 0.11/share in the same period of 2024; it has been negative for two consecutive years. Non-recurring-item-adjusted basic earnings per share was -RMB 0.12/share, compared with -RMB 0.11/share in the same period of 2024, declining year over year, reflecting further deterioration in the profitability of the company’s core operations.

Expenses: Financial expenses swing into negative, with R&D expenses clearly reduced

Total expenses

In 2025, the company’s total period expenses were RMB 0.9253 million, a substantial decrease from RMB 119 million in 2024, mainly due to financial expenses shifting from positive to negative.

Selling expenses

In 2025, selling expenses were RMB 11.8028 million, down 7.12% from RMB 12.7075 million in 2024. In terms of composition, employee compensation, business entertainment expenses, travel expenses, and others all declined to varying degrees, indicating that the company has contracted its efforts in market expansion and/or reduced related expenses by optimizing its sales processes.

Administrative expenses

In 2025, administrative expenses were RMB 89.249 million, up 3.54% from RMB 86.1963 million in 2024. The increase was mainly attributable to growth in items such as employee compensation and information service fees. Employee compensation rose from RMB 45.8868 million to RMB 48.8088 million, indicating that the company’s labor costs increased.

Financial expenses

In 2025, financial expenses were -RMB 2.7754 million, down 586.39% from RMB 5.706 million in 2024. The main reason is that the company’s cash and cash equivalents increased; interest income rose from RMB 8.5148 million to RMB 13.6246 million, exceeding the growth in interest expense, causing financial expenses to swing from positive to negative.

R&D expenses

In 2025, R&D expenses were RMB 14.8532 million, down 31.36% from RMB 21.6384 million in 2024. The company said this was mainly due to certain project progress being temporarily slowed. In terms of the composition of R&D investment in the current period, expensed R&D investment was RMB 14.8532 million, capitalized R&D investment was RMB 6.189 million, and the total R&D investment as a proportion of operating revenue was 0.91%, down from 1.07% in 2024.

R&D personnel: Team size remains stable, with a higher proportion of high educational attainment

In 2025, the company had 56 R&D personnel, accounting for 4.9% of the company’s total headcount. The team size remained stable. In terms of educational background, there was 1 doctoral graduate, 1 master’s graduate, and 30 bachelor’s graduates. The total number of personnel with bachelor’s degree or above was 32, accounting for 57.14% of all R&D personnel, which is an improvement from before, indicating that the educational level structure of the company’s R&D team has been optimized.

Cash flows: Operating cash flow turns from negative to positive, while financing cash flow sees a major outflow

Overall cash flow

In 2025, the company’s net increase in cash and cash equivalents was RMB 64.1123 million; in the same period of 2024, it was RMB 57.4355 million, showing an improvement in cash flow conditions.

Cash flow from operating activities

In 2025, net cash flow generated from operating activities was RMB 317 million; in the same period of 2024, it was -RMB 174 million, turning from negative to positive. The main reason is that the company adheres to the principle of “production determined by sales and demand determined by production,” optimizes production and procurement plans, improves inventory management efficiency, and sees a significant decline in inventory levels of engineered wood products and raw materials—thereby reducing both inventory capital occupation and cash outflows for procurement. Specifically, cash paid for purchasing goods and receiving services decreased from RMB 1.764 billion to RMB 1.214 billion, a noticeable decline.

Cash flow from investing activities

In 2025, net cash flow generated from investing activities was -RMB 17.2553 million; in the same period of 2024, it was -RMB 43.9587 million, meaning the scale of net outflows narrowed. This was mainly because the amount of final payment expenditures for the technical renovation projects and the Qinzhou Fenglin project in the current period decreased year over year, and cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets decreased from RMB 57.5843 million to RMB 23.1359 million.

Cash flow from financing activities

In 2025, net cash flow generated from financing activities was -RMB 236 million; in the same period of 2024, it was RMB 276 million, shifting from net inflow to net outflow. The main reason is that the company reduced its debt scale this year; after repaying maturing debts, it reduced borrowings. Cash paid for repaying debt rose significantly from RMB 270 million to RMB 856 million, while cash received from obtaining borrowings fell from RMB 689 million to RMB 631 million.

Potential risks the company may face: Multiple pressures on the industry and operations

Risk of weak market demand and overcapacity

Supply-demand contradictions in the engineered wood industry continue to become increasingly prominent, and the structural overcapacity situation is severe. In particular, the pace of capacity expansion in the particleboard segment far exceeds the market’s ability to absorb it, inventory pressure is rising, and product prices face downward pressure. The company’s profit margins may be further squeezed.

Rising cost pressure from upgraded environmental protection standards

GB18580-2025 “Indoor Decorative Renovation Materials—Engineered Wood Panels and Their Products—Limits on Formaldehyde Release” will be implemented in June 2026. The new standard sets E0 as a compulsory entry threshold for indoor products. Although the company has a first-mover advantage in environmentally friendly products, the industry-wide environmental upgrades will lead to tighter supply and demand for upstream raw materials and higher prices. At the same time, increased investment in production process modifications and testing and certification will create a stage-specific pressure on the company’s cost control.

International trade barriers and uncertainty in overseas expansion

Global trade protectionism is rising. Economies in Europe and the U.S., among others, impose anti-dumping duties on China’s engineered wood products, and environmental and technical trade measures continue to be tightened, driving up export costs. While the company has made arrangements for overseas market expansion, the international political and economic situation is complex and volatile. Factors such as geopolitical conflicts and fluctuations in cross-border logistics costs may all bring uncertainty to the advancement of overseas business and profit expectations.

Risk of raw material supply and price fluctuations

The macro backdrop of tightening domestic timber supply remains unchanged. The prices of fast-growing and high-yield plantations are affected by factors such as forestry policies, climatic conditions, and changes in downstream demand. Meanwhile, as the share of formaldehyde-free products increases, chemical raw material procurement prices are influenced by the international crude oil market and supply-demand relationships, increasing the risk of volatility transmission and posing challenges for managing the company’s production costs.

Risk of lagging technological innovation

The engineered wood industry is evolving toward greener, more functional, and more customized directions. If the company’s pace of technological R&D in emerging functional board areas such as high-level moisture resistance and water resistance, fire retardancy, and antibacterial properties lags behind market demand, or if the industrialization and commercialization of new products does not meet expectations, it may weaken competitive advantages in the high-end market and affect overall profitability.

Compensation of executives and board members: Chairman and general manager compensation is on par; core executives’ compensation remains stable

In 2025, the chairman, SAMUEL NIAN LIU, reported total pre-tax compensation received from the company during the reporting period of RMB 2.0564 million. The CEO Wang Gaofeng reported total pre-tax compensation of RMB 2.0534 million during the same period. Their compensation levels are basically comparable. The chief financial officer and board secretary Li Honggang reported total pre-tax compensation of RMB 0.8525 million. Overall, the company’s core executives’ compensation remains stable, without significant fluctuations.

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