Dear Valued Shareholders,

Enhanced management and new landscape created amid changes

The global economic environment remained complex and volatile in FY2023. China’s economy faced challenges such as declining demand, supply shocks and weakening growth expectations, with local governments continuing to be troubled by severe debt issues. The new PPP regulations have had far-reaching implications on the industry, and the environmental water industry has been undergoing profound change. However, to complement the country’s “dual carbon” policy, China has been actively promoting environmental protection policies to drive the development of the industry. As highlighted in the “Guidelines to Comprehensively Promote the Development of a Beautiful China” (關於全面推進美麗中 國建設的意見) issued by the Central Committee of the Communist Party of China and the State Council, China will essentially realize the “Beautiful China” goal by 2035, and complete construction of a “Beautiful China” by the middle of the century. China has launched a series of policies, including “Guideline on National Water Network Construction” (國家水網建設 規劃綱要), “Water Ecological Environment Protection Planning for Key River Basins” (重點 流域水生態環境保護規劃), “Special Plan for the Ecological Green Integrated Development Demonstration Zone of the Yangtze River Delta (2021-2035)” (長三角生態綠色一體化發 展示範區生態環境專項規劃(2021-2035年)), and “Implementation Opinions on Promoting Wastewater Treatment to Reduce Pollution and Carbon, Creating Synergies and Strengthening Efficiency” (關於推進污水處理減污降碳協同增效的實施意見), which have attracted greater attention to issues pertaining to environmental protection and carbon emission reduction, creating important development opportunities for the environmental protection and wastewater treatment industries.

In FY2023, the Group adjusted and upgraded its management team, actively formulated plans for strengthening the construction of headquarters, perfected the management systems and improved the corporate governance structure, as well as introduced the professional and lean management model to intensify synergies. The new management team will lead all employees in working together to improve management, consolidate the core competitiveness of the Company, and steadily build more business growth drivers, with the aim of laying a solid foundation for the Group’s sustainable and healthy development.

Controlled risks and explored opportunities amid challengess

In FY2023, the Group’s financial expenses increased due to changes in the international financial market, such as interest rate hikes in the US. To address this, the Group proactively adopted measures to tackle liquidity risks and ensure financial stability. With sufficient facilities granted by the banks and the ability to settle the Group’s current liabilities, the Group plans to replace its short-term borrowing which carries a relatively high interest rate with long-term borrowings at a lower interest rate, and continue to optimize its financing structure to further strengthen the prevention and control of capital risks. As of 31 December 2023, the Group’s cash and cash equivalents and operating cash flow per share were at healthy levels.

However, the recovery of receivables slowed due to the impact of local government debt in China, hence the Group will enhance fund recovery and shorten recovery cycles. In the face of challenges posed by the external environment and the development of internal projects, the Group has remained focused on its core businesses of water and sludge treatment, sought to
secure new projects and steadily advanced existing projects. In FY2023, the Group acquired 5 new wastewater treatment projects, and it reached agreements with 17 wastewater treatment
projects involving upgrade, expansion, tariff increase and extension of the operation and maintenance (“O&M”) period. Three upgrade and expansion projects were completed and have commenced commercial operation. As at the end of FY2023, the Group had nearly 250 wastewater treatment and water supply projects with a total production capacity of 13.16 million tonnes per day.

CHAIRMAN’S STATEMENT

While the Group has continued to acquire high-quality new projects, the volume of wastewater treatment and treatment fee have also steadily increased. In FY2023, the Group’s wastewater treatment volume rose by 2.2% year-on-year to 2,525 million tonnes, and the average wastewater treatment fee (in the fourth quarter) increased by 7.8% year-on-year to RMB1.87/tonne. The rise in wastewater treatment volume and treatment fee boosted the Group’s revenue from water and sludge treatment by 6.55% to RMB5,030 million. Also, the Group’s gross profit increased by 2.7% from the same period last year to RMB2,704 million in FY2023. However, as the primary engineering component of the Group’s waste incineration project – Shanghai Baoshan Renewable Energy Utilization Center (the “Baoshan Project”), was completed at the end of 2022, construction revenue has declined in FY2023. Coupled with other factors, the Group’s 2023 results experienced temporary fluctuations.

The Board of Directors has recommended a final dividend of S$0.006 per ordinary share.

Technology-empowered quality development

The year 2024 marks the 75th anniversary of the founding of the People’s Republic of China. It is also a crucial year for the Group to implement the “14th Five-Year Plan” and deepen the reform of state-owned enterprises. As the country continues to step up implementation of major strategies such as “Development of the Yangtze River Economic Belt”, “Integration of the Yangtze River Delta”, and “Ecological Protection of the Yellow River Basin”, the environmental protection industry will welcome new development opportunities. Regarding the digitalization of water affairs, in February 2023, the Central Committee of the Communist Party of China and the State Council issued the “The Overall Layout of the Country’s Digital Development”(數字中國建設整體佈局規劃) to promote in-depth integration of the digital economy and real economy. The Group has actively responded to national policies, with encouraging progress made in the digitalization of water services in FY2023. In the future, the Group will further increase investment in research and development, accumulate technological expertise, and strengthen the virtuous cycle of research innovation and outcome transformation. It will enhance development of smart water management construction, improve water management capability, reduce costs and boost efficiency while ensuring the discharge of water is stable and compliant. As for the environmental, social and corporate governance (“ESG”) construction, the Group has continued to practice ESG concept by fully integrating the United Nations Sustainable Development Goals into its ESG policies and development plans, and has continuously upgraded the ESG system. In terms of project operation and corporate management, the Group has always adhered to green carbon reduction and strictly controlled total carbon emissions. As the task of reform, innovation and development in the future will be arduous, the Group will continue to uphold innovation-driven development, optimize its layout, strive to cultivate new quality productivity, improve modern governance, and unswervingly follow the path of high-quality sustainable development to make greater contributions to modernization with Chinese characteristics.

Appreciation

On behalf of the Board of Directors, I would like to express our highest respect to all employees for their dedication, and sincerely thank all shareholders, customers and business partners for their longstanding trust and support for the Group. 

In the future, the Group will continue to seize opportunities from national strategies and policies, be attentive to high-quality new projects and business M&A opportunities, and increase expansion efforts in the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Economic Belt. It will increase its market share, continue to consolidate its foundation, empower corporate development with technological innovation, and enhance the Company’s core competitiveness. The Group will reinforce its leading position in China’s water and environmental protection industries, and strive to bring fruitful investment returns to shareholders.

Mr. Zhou Yuding
Chairman of the Board and Executive Director