Kunming Dianchi Water Treatment (“DCWT”) reported sharp year-on-year declines for the six months ended 30 June 2026, as discontinued VAT incentives cut into top-line growth and profits.

Revenue and Profitability • Revenue slid 13.1% to RMB 582.61 million, mainly due to a RMB 69.42 million contraction in the core wastewater-treatment business following the lapse of VAT exemptions. • Profit before tax dropped 58.2% to RMB 65.85 million; net profit attributable to equity holders fell 65.7% to RMB 45.21 million. • Earnings per share decreased to RMB 0.04 from RMB 0.13. • Gross margin narrowed 4.4 percentage points to 42.4%, reflecting a fall in the wastewater segment margin to 37.0% (H1 2025: 42.5%).

Segment Performance • Wastewater treatment: Revenue RMB 422.57 million (72.5% of total), down 14.1%; gross margin 37.0%. • Water supply: Revenue RMB 73.78 million, up 8.4% on higher BT repurchase income; gross margin improved to 52.9%. • Other businesses (management, transportation, thermoelectricity, etc.): Revenue RMB 86.26 million, down 22.1%; gross margin 59.7%.

Cost and Expense Dynamics • Cost of sales declined 5.9% to RMB 335.69 million, helped by lower construction and operating expenses. • Administrative expenses fell 42.7% to RMB 14.55 million, reflecting reduced staff costs. • Net impairment losses on financial and contract assets grew 16.1% to RMB 58.03 million. • Other losses surged to RMB 20.64 million, driven largely by late-payment tax surcharges.

Balance Sheet and Liquidity • Total assets edged up 0.5% to RMB 13.50 billion; total equity rose 0.8% to RMB 5.48 billion. • Cash and cash equivalents decreased to RMB 12.54 million (31 Dec 2025: RMB 33.63 million). • Net operating cash outflow improved to RMB 29.40 million (H1 2025: outflow RMB 98.51 million). • Total borrowings stood at RMB 5.08 billion; net gearing eased slightly to 48.0% (31 Dec 2025: 48.7%).

Capital Expenditure and Commitments • First-half capex totalled RMB 27.27 million, mainly for water-supply upgrades. • Contracted but unspent capex for property, plant & equipment: RMB 815.12 million; concession and construction projects under contract: RMB 680.93 million.

Operational Footprint • 34 wastewater plants in operation with 1.87 million m³/day capacity; 12 reclaimed-water stations and 4 running-water plants also in service. • Managed an additional 0.55 million m³/day of municipal wastewater facilities and 763 rural sewage sites across 11 counties/districts.

Legal and Financing Developments • Ongoing litigation with Guizhou Construction resulted in a court-mandated payment of approximately RMB 103.30 million plus interest. • Outstanding finance-lease liabilities and bank loans total RMB 5.08 billion; average effective interest rate 4.28%. • Mutual and framework guarantees totalling up to RMB 2.0 billion with Kunming Water Group remain in effect; RMB 670.1 million utilised as of period-end. • Entrusted loans to local state-owned entities outstanding: RMB 452 million, with recent extensions lowering coupon rates to 6.0%.

Dividend The board proposed no interim dividend for H1 2026, citing the macro environment and development plans.

Outlook Management will focus on stabilising core wastewater operations, expanding reclaimed-water initiatives, enhancing digital and low-carbon capabilities, and improving asset efficiency amid evolving regulatory and economic conditions.