Dear Fellow Shareholders,

I am appreciative of your patience and support as Zixin Group overcame adversity to deliver a set of commendable results in the second half (“2H”) of the financial year ended 31 March 2024 (“FY2024”), and steered us back to profitability for the full financial year.

As China entered the endemic phase in early 2023, we gradually resumed our business activities in the first half of FY2024 (“1H FY2024”). However, the spillover effect from the loss of harvest at end of FY2023, coupled with higher operational costs, undermined our financial performance in 1H FY2024. Nonetheless, we were fortunate to have been spared from the three super typhoons that ravaged Fujian Province in August and September of last year.

During 2H FY2024, we tested our integrated circular economy industrial value chain model, starting with the harvesting of sweet potatoes from our contracted farmlands in Liancheng County. These fresh sweet potatoes were delivered to the third-party-operated smart warehouse, where they undergo automated washing and sorting, packaging, and climate-controlled cold storage services. This strategic collaboration, is believed to improve our Group’s frontend operational efficiency while reducing sweet potato spoilage and operational costs, especially manpower. During the harvest season, traditional cellar-based sweet potato storage methods often result in spoilage and less competitive selling prices. With the smart warehouse, we are able to maintain the freshness and quality of fresh sweet potatoes and extend their shelf life. This could open up potential business opportunities for us to provide a regular supply of high-quality fresh sweet potatoes to supermarkets and e-commerce platforms.

Revenue Analysis By Products

FYE 31 March (RMB ’000)	1H FY2024	2H FY2024	HoH Change	FY2024
Sweet potato processed products	98,446	161,902	64.5%	260,348
Sweet potatoes	18,745	39,354	109.9%	58,099
Total	117,191	201,256	71.7%	318,447

For FY2024, Zixin Group saw a 45.0% year-on-year increase in revenue of RMB 318.4 million, up from RMB 219.6 million in FY2023, on the back of a higher volume of fresh and processed sweet potato products produced and sold in 2H FY2024. Through better operational efficiency, improved economies of scale, and better resource utilisation, which lowered the cost of production of our sweet potato processed products, we achieved an improved gross margin. This correspondingly lifted our gross profit by 72.0% year-on-year from RMB 59.2 million in FY2023 to RMB 101.9 million in FY2024. Overall, we recorded a net profit of RMB 13.4 million in FY2024, a reversal from a net loss of RMB 14.2 million in FY2023.

Financial Highlights

FYE 31 March (RMB’000)	1H FY2024	2H FY2024	HoH Change	FY2024
Revenue	117,191	161,902	71.7%	318,447
Gross profit	34,708	67,163	93.5%	101,871
Gross margin	29.6%	33.4%	3.8 pp	32.0%
Profit / (Loss) before tax	(1,687)	23,152	N.M.	21,465
Profit / (Loss) after tax(1)	(3,403)	16,757	N.M.	13,354
Profit / (Loss) per share(2) (RMB cents)	(0.25)	1.21	N.M.	0.97

Advancing Growth With Innovation

Our core proprietary biotech competencies, developed through our wholly-owned subsidiary, Fujian Zixin Biotechnological Potato Co., Ltd., focus on the research and development (“R&D”) of extraction and production techniques to maximise the uses and applications of sweet potatoes in snack products and functional food products, including purple sweet potato powder and nutritional supplements, for health benefits. Our planned high-tech manufacturing facility for the production of functional food will use the extraction and production processes on sweet potato peels and flesh to produce sweet potato functional food products, including purple sweet potato powder, which has wide applications in the food and beverage industry, such as confectionery and noodles that we believe would command higher profit margins. We expect to start manufacturing in phases by the end of September 2024, and we will continue to develop the facility to meet the evolving needs of our customers.

Our another prominent R&D project focused on managing agricultural waste materials has made a preliminary breakthrough with our proprietary probiotic fermentation formulation that ferments spoiled sweet potatoes and sweet potato peels, stems, and leaves into raw ingredients that could potentially become a component of poultry and animal feeds.

Currently, tests and feed trials are being conducted by feed manufacturers who use sweet potato probiotic-infused feed ingredients for poultry and livestock. Feeds with added sweet potato probiotic-infused ingredients are also undergoing validation with the goal of being classified as an alternative to soymeal or corn by the relevant authorities. We expect that the accreditation process involving feed trials will take some time to complete.

We believe that our innovative proprietary probiotic fermentation formulation for agricultural waste recycling would potentially (i) lower business risk for the sweet potato agriculture industry; (ii) reduce environmental pollution; and (iii) monetise our proprietary probiotic fermentation solution.

Our Future Is Bright

Zixin Group’s participation in rural revitalization projects, such as those in Lingao County, Hainan Province, and Lankao County, Henan Province, will involve replicating our biotechfocused sweet potato integrated circular economy industrial value chain business model with the complementary industries (smart warehouses and fermentation plants) to drive economic value and benefit local communities.

China’s agriculture ministry issued a three-year plan in April 2023 aimed at reducing the use of soymeal in animal feed to reduce heavy reliance on soybean imports. The new plan proposes that the soymeal ratio in animal feed should be reduced to less than 13% by 2025, down from 14.5% in 2022.1 We believe our breakthrough in the proprietary probiotic fermentation formulation to convert agricultural waste into raw ingredients as an alternative option for poultry and animal feed manufacturers will resolve the woes of sweet potato farmers and poultry and livestock farmers.

Strengthening Our Shareholder Base

As Zixin Group progresses, we are also looking into broadening our shareholder base to enhance shareholder value in the long term. We are heartened by the overwhelming support from our shareholders for the renounceable non-underwritten rights cum warrants issue announced on 28 March 2024, and successfully completed on 24 June 2024. The Company raised net proceeds of approximately S$2.1 million from the rights cum warrants issue, and we expect to receive up to approximately S$26.0 million if the issued Warrants are fully exercised.

An aggregate of 144,481,810 new ordinary shares (the “Rights Shares”) have been allotted at an issue price of S$0.0165 per Rights Share and 577,927,240 free detachable warrants (the “Warrants”) to successful subscribers on the basis of one (1) Rights Share for every ten (10) existing shares held by eligible shareholders and four (4) Warrants for every one (1) Rights Share subscribed, and each Warrant carrying the right to subscribe for one (1) new ordinary share in the capital of the Company at the exercise price of S$0.045 per Warrant.

The Warrants have commenced trading on the SGX-ST with effect from 26 June 2024 under the counter name Zixin W260623 and stock code 46CW.

Acknowledgements And Appreciation

I am appreciative of my fellow board directors for their guidance and support. On behalf of the Board, I would like to express our appreciation to all Zixin Group members for their dedication, motivation, and efforts throughout the last financial year. We remain committed to strengthening our fundamentals in the integrated circular economy industrial value chain in order to improve and deliver sustainable values to our stakeholders.

We are appreciative of our business partners, customers, and shareholders for their confidence, patience, and support in Zixin Group. As we refine our biotech-focused sweet potato integrated circular economy industrial value chain model in Liancheng County, along with the complementary industries of smart warehouse and agricultural waste fermentation, we look forward to the opportunities to replicate our successful business model in China’s agricultural regions and assist them in meeting their rural revitalization goals.

LIANG CHENGWANG
Executive Chairman & Chief Executive Officer