Juhua Co., Ltd.: 70,000 tons of production capacity for third-generation refrigerants under construction or planned for construction

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On December 22, Zhejiang Juhua Co., Ltd. issued a statement addressing questions and answers related to the investor reception day event held on December 19, 2025. Image (I) Replies to Common Questions Raised in the Call for Input 1. The impact of \"replacing copper with aluminum\" in the air conditioning industry on the supply and demand structure of refrigerants in companies. Answer: “Replacing copper with aluminum” in the air conditioning industry is one of the future development trends. First is **policy support** ； Secondly, in recent times, 19 major air-conditioning manufacturers have been actively promoting the \"aluminum-based replacement for copper\" technology ； Thirdly, considering China’s aluminum resources and costs, aluminum materials have clear advantages over copper materials. The implementation of the \"use aluminum to replace copper\" approach in the air conditioning industry has a positive impact on the refrigerant market. Although aluminum has a clear cost advantage, it falls short of copper in terms of thermal conductivity, machinability, and weather resistance. In the early stages of the strategy to replace copper with aluminum, an increase in the demand for refrigerants may occur due to higher amounts of refrigerant required and more frequent maintenance tasks associated with third-generation refrigerants. 2. Impact on the company’s refrigerants regarding the quota policy for 2026, which increases the quota adjustment rate from 10% to 30%. Answer: The expansion of the adjustment ratio has correspondingly broadened the right of industry enterprises to operate flexibly in response to changes in global market supply and demand. Market investors pay considerable attention to the air conditioning market and conduct in-depth research on it. According to the data published by the Ministry of Ecology and Environment, the total quota for 2026 is 797,800 tons. Of this amount, about 50% constitutes export quotas, which can only be used for exports and not for sale within the domestic market. Of the remaining 50% of quotas intended for domestic use, approximately 30% are used for exporting finished products; thus, domestic consumption accounts for 35% of the total quota, while the remaining 65% depends on demand from the global market. Based on the company’s historical data, the volume of refrigerants sold by the company in the first three quarters of 2025 decreased compared to the previous year. However, the overall volume of refrigerants sold in the industry was greater than its production volume. This was due to factors such as large amounts of inventory in the market and significant price fluctuations in 2024, as well as differing opinions within the industry regarding the trends in the refrigerant market and the practice of internal trading. At the same time, due to policy restrictions, foreign trade quotas that were not utilized within the year will be counted as domestic quotas, which may lead to excessive use of domestic quotas and subsequent cancellation of those quotas. As market understanding gradually converges and social inventory decreases, future foreign trade data and sales figures will approach the actual market demand. By 2026, the company expects a tight balance between supply and demand for R32. According to **statistics bureau data, from January to October 2025, the total production of room air conditioners was 230 million units, representing a 3% increase compared to the previous year. Meanwhile, based on the production plans of air conditioning manufacturers, domestic sales in January 2026 are expected to increase by 30% on top of the high level achieved in 2025; it is anticipated that the air conditioning market will continue to grow steadily in 2026 as well ； With the rapid development of new energy vehicles, the supply-demand balance for R134a will become even more strained. According to data from the Ministry of Industry and Information Technology, from January to November 2025, the total number of cars sold was 31.127 million units, representing a 11.4% increase year-on-year; among these, 14.78 million were new energy vehicles, with a 31.2% increase year-on-year. Due to factors such as battery temperature control, changes in heating methods, and increased interior space in new energy vehicles, the amount of refrigerant required per vehicle is generally 2 to 4 times that of fuel-powered vehicles. Additionally, as the consumption pattern for new energy vehicles shifts toward larger SUVs, demand for R134a is expected to increase. Due to the low proportion of domestic quotas and the reduction in stock levels in the market, supply and demand for R125 are also expected to be tight. At the same time, some companies in the refrigerant industry have incomplete ranges of quota products, and the quota quantities for certain products are limited; therefore, when the prices of refrigerant products with high GWP (global warming potential) rise, or to meet the needs of maintaining customers and distribution channels, it may be necessary to increase the production of refrigerants with high GWP values. Therefore, the company believes that the quota adjustment ratio should be raised from 10% to 30%; what the market should pay more attention to is the balance of refrigerants with high GWP values, rather than the balance of R32. The data on quota applications for 2026 also shows that manufacturing companies are relatively cautious regarding quota adjustments for that year. The company will adapt to the changing market demands for different products around the world, take a comprehensive approach and proactively take action to maintain a healthy supply chain, seize market opportunities, and create value to benefit society and its shareholders! 3. Recent sharp fluctuations in the price of R22 products and their impact on the prices of third-generation refrigerants. Answer: Recently, there have been significant changes in the price of R22 products, which has had a positive effect on the market for third-generation refrigerants. First, market fluctuations have accelerated the pace of reducing the social inventory of third-generation refrigerants ； Second, raise awareness within the industry and in the market ； Thirdly, overseas customers experience longer inventory periods due to reasons such as stockpiling, obtaining permits, and transportation; they do not want to suffer losses from falling prices, and thus are more willing to accept rising product prices. 4. Regarding the price ceiling for third-generation refrigerants: Answer: Due to their different structures, third-generation and fourth-generation refrigerants have different performance characteristics and applications; none of the fourth-generation refrigerants can replace third-generation refrigerants on their own. The fourth-generation refrigerant R1234yf is more environmentally friendly, with a GWP value of 4. However, at present, single-component products based on this fourth-generation refrigerant cannot be used directly in air conditioners or new energy vehicles; they need to be mixed with third-generation refrigerants. In fuel-powered vehicles, where the heating mechanism differs from that of new energy vehicles, the fourth-generation refrigerant can be used alone, though its cooling efficiency is relatively low. At the same time, as patents for fourth-generation refrigerants are lifted, production capacity will gradually increase. However, with the reduction of quotas for third-generation refrigerants, their scarcity will increase further; therefore, in the future, the pricing power will lie with third-generation refrigerants, and the highest price of third-generation refrigerant products will not be equal to the cost of fourth-generation refrigerants. At present, only new construction or expansion of third-generation refrigerant production facilities for which environmental impact assessments have been approved is permitted. The company is currently building or planning to build facilities with a capacity of 70,000 tons of third-generation refrigerants (30,000 tons in Shandong and 40,000 tons locally), primarily to meet the demands during peak delivery periods, reduce production pressure, and also to leave room for future development. The pricing power in the third-generation refrigerant industry has shifted from developed countries in Europe and America to China. With the reduction of quotas for developed countries and the fixation of quotas for the second batch of developing countries, the proportion of domestic refrigerant quotas will increase further. Coupled with advantages such as the domestic industrial chain and talent pool, as well as the close integration of fourth-generation refrigerants with third-generation ones, China will also hold the power to set prices for fourth-generation refrigerants in the future. Therefore, the company is currently focusing more on maintaining its presence in global markets rather than excelling solely in the domestic market. 5. Regarding the market structure of third-generation refrigerants: Currently, in the downstream industries for refrigerants—namely the air conditioning and automotive sectors—there is a “multi-dominant players” competitive landscape. No single company holds an absolute leading position, and these companies possess strong viability. It is anticipated that this “multi-dominant players” pattern will persist for a considerable period. Meanwhile, thanks to the advantages of China’s domestic industrial chain and related services, the domestic air conditioning and automotive industries enjoy an absolute leading position globally; they are expected to further expand their global market share. This customer structure on the demand side has a positive impact on the industry. Additionally, the refrigerants industry is highly concentrated, with leading enterprises occupying dominant market shares; there is also a growing consensus among industry players regarding this situation. 6. Regarding the allocation of quotas for the second batch of developing countries: The year 2026 will be the last year of the baseline period for these quotas. There is a possibility that, in an effort to secure import quotas, companies will purchase third-generation refrigerants with high GWP values; this represents unexpected demand in this market, and it is currently difficult to estimate exact figures. The supply of **refrigerants in the second group of developing countries is relatively small; even if production there increases significantly, it will be difficult to establish effective quotas during the baseline period (2024 to 2026). At present, the company’s factory in the UAE is actively organizing production and operations in accordance with the principle of maximizing quotas. 7. Regarding liquid cooling: Answer: The company is one of the earliest enterprises in China to engage in liquid cooling activities, boasting extensive technical expertise as well as advantages in terms of industrial infrastructure. In the field of liquid cooling, products such as hydrofluoroethers, perfluoropolyethers, and refrigerants are used. However, considering that there are still multiple technical approaches and various types of cooling fluids available for liquid cooling technology, it remains uncertain which approach or type of coolant will become the mainstream in the future. Therefore, the company will closely monitor the development of liquid cooling technology, make efforts to stock up on relevant products and expand the market for its existing products, and depending on future demand, it may increase production capacity or further expand the market for specialized products. 8. Other business developments of the company: Currently, the basic chemicals industry is at the bottom of its cycle. Since the meeting of the Political Bureau of the CPC Central Committee held on July 30, 2025, which once again made specific arrangements to address \"competitive intensification,\" and the release of the Ministry of Industry and Information Technology’s \"Work Plan for Stabilizing Growth in the Petrochemical Industry,\" efforts are being made to reshape the structure of this industry, improve its supply capacity, and eliminate outdated production facilities, thereby facilitating a strong recovery and improvement in its performance. The improvement in PVDF prices has a positive impact on the company, but the issue of overcapacity in the industry remains prominent; more measures to counter excessive competition are needed to promote the healthy development of the industry. The company is a leading global producer of PVDC. Since the anti-dumping measures implemented in the industry in 2017, prices for domestic products as well as the supply and demand dynamics in this sector have remained stable. Going forward, the company plans to expand its customer base in the field of pharmaceutical packaging as well as explore other applications for its products. (II) Other issues 1. What is the market situation for third-generation refrigerants in the United States? Answer: Due to the high \"anti-dumping and countervailing duties\" imposed by the United States on China’s third-generation refrigerants (with the exception of R32 in R454b), not much of China’s third-generation refrigerants are exported to the U.S. The company’s U.S.-based subsidiary took advantage of this policy window to export a certain amount of such refrigerants to the U.S. and secure corresponding quotas. Given the U.S. EPA’s proposal to amend the Inflation Reduction Act of 2020 in order to delay the use of refrigerants with low GWP values in industries such as air conditioning and refrigeration, there is a certain shortage of refrigerants in the U.S. market. Moreover, as quotas will be further reduced in the future, the supply and demand balance of refrigerants in the United States will become very tight, especially in the repair market for R32 and R134a. 2. Starting from July 1, 2029, the automotive industry will prohibit the use of refrigerants with a GWP value greater than 150 in the air conditioning systems of new M1 vehicles to be registered. Will this have an adverse effect on R134a? Answer: The new M1 model refers to a completely new vehicle, not an update to an existing model. Looking at the development of the automotive market, it is expected that by 2029 the popular models of new energy vehicles will have been largely determined, and the automotive industry will submit applications for new M1 models in advance; as a result, there will be fewer new M1 models for which applications are submitted at that time. At the same time, with the rapid development of new energy vehicles and the 10% reduction in R134a quotas by 2029, R134a is expected to become even more scarce. 3. Will the price of R22 rise next year, given the reduction in illegal production and the cut in quotas? Answer: In recent years, the Ministry of Ecology and Environment and relevant industries have intensified their efforts to crack down on the illegal production of R22. Not only has a special fund been established to address and punish illegal production and sales of HFCs, but illegal production of HFCs has also been made a criminal offense. The market situation has improved, but product prices are primarily determined by supply and demand in the market. 4. What is the company’s target for foreign trade growth in 2026? Answer: The company’s R125 export volume in 2025 will be roughly the same as that in 2024, but the average price per unit of the product will double. Since 2026 is the final year of the quota baseline period for the second batch of developing countries, it is not ruled out that efforts will be made to increase import volumes in order to secure import quotas. The company will organize production in a scientific and rational manner to maintain balance in the industrial chain and achieve greater efficiency. 5. Will the quota adjustment ratio under the future third-generation refrigerant quota policy continue to increase? Answer: Currently, the supply and demand balance in the refrigerant market is generally stable. Given that a 30% quota adjustment was already made this year, and in the absence of any particularly serious disruptions in the supply chain, in order to maintain the seriousness and stability of these policies, it is expected that there will be no significant changes in the adjustment rates in the future. The specific details shall be subject to the relevant announcements issued by the Ministry of Ecology and Environment. 6. If the national subsidy policy for home appliances is abolished, will it have a significant impact on the demand for refrigerants? Answer: In line with the spirit of the Central Economic Work Conference to boost consumption, it is expected that the national subsidy policy for home appliances will continue, and Sichuan Province has already issued relevant national subsidy policies. Although government subsidies for home appliances have a positive impact on air conditioner consumption, such consumption does not rely entirely on short-term subsidies; rather, it is driven more by the improvement in the living standards of the Chinese people, as air conditioners have become an essential part of daily life. 7. The company has maintained a high level of investment in research and development in recent years; what are the results of this? Answer: The company relies on technological innovation as its main driving force and maintains a high level of investment in research and development. In the first three quarters of 2025, the expenditure on R&D amounted to 855 million yuan, with an expectation that the annual investment in this area will be no less than 1 billion yuan. Focusing primarily on the research and development of high-end fluorine materials, the company has achieved a series of results, including a fourth-generation refrigerant production process using multiple raw materials, the blended refrigerant R495a (as a substitute for R134a in vehicles), perfluoropolyether oils, and resins. After acquiring Shandong Feiyuan, it has expanded its research and development efforts related to trifluorine-based products. In the future, it will continue to maintain a high level of investment in research and development in order to strengthen the company’s competitive advantages. 8. May I ask about the progress of the company’s construction in Gansu? Answer: The company’s Juhua project in Gansu is currently under active progress, with the goal of completing its construction by June 2026 and starting operations through trial runs by the end of 2026. 9. What is the company’s future dividend plan? Answer: Since its listing, the company has focused on providing cash returns to investors. A total of 6.289 billion yuan in cash dividends has been distributed (including the amount from share repurchases), accounting for 40.13% of the cumulative net profit attributable to the parent company. In response to the demands of investors and taking into account the company’s actual situation, the company plans to distribute a cash dividend of 4.86 yuan for the first three quarters of 2025. In the future, the company will adhere to the principle of \"creating value and giving back to society\" in order to generate greater value. It will also take into account both the company’s sustainable development and the needs of investors for cash dividends, continuously optimizing its profit distribution strategy.