Weichai Power's subsidiary approved to conduct foreign exchange derivatives trading equivalent to no more than €608 million

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According to a report from Finance Network on March 26, Weichai Power Co., Ltd. (stock code: 000338, hereinafter referred to as “the Company”) announced that in order to prevent foreign exchange fluctuation risks, the Company’s controlling subsidiary plans to conduct foreign exchange derivatives trading. The trading amount will not exceed the equivalent of $500 million, €60 million, and ¥400 million, with a total scale equivalent to approximately ¥4.35 billion (estimated at the current exchange rate). This matter has been approved by the Company’s seventh board of directors’ sixth meeting and does not require submission to the shareholders’ meeting for approval.

The announcement shows that the derivatives trading business to be conducted includes three types: foreign exchange forwards, foreign exchange options, and foreign exchange swaps, with trading periods not exceeding 1 year. The funding source will be the subsidiary’s own funds and will not involve raised funds or bank credit funds. The trading amount is valid for 12 months from the date of board approval and can be reused, with any single transaction amount not exceeding the above upper limit.

The Company stated that the purpose of this business is to hedge against foreign exchange fluctuation risks related to expected receipts from export contracts and foreign currency fund holdings. All transactions will be based on genuine business operations and will not engage in any speculative arbitrage activities. It is understood that Weichai Power, as a global leading provider of power system solutions, has a continuously increasing proportion of overseas business, with overseas revenue accounting for 42% by 2025. Foreign exchange risk management has become an important measure to ensure the Company’s financial stability.

To control trading risks, the Company has established a multi-level risk control system: first, a “Futures and Derivatives Trading Management System” has been formulated to clarify operational processes and approval authorities; second, a dedicated derivatives investment task force has been established with a professional team responsible for trade execution and risk monitoring; third, high-rated large banks are selected as trading counterparts, and leveraged trading is prohibited; fourth, strict management of risk exposure limits is enforced to ensure that trading scales match actual business needs.

Financial data shows that as of the end of 2025, Weichai Power’s consolidated statements indicate foreign currency assets and liabilities totaling approximately ¥12.6 billion, with USD assets accounting for 78%. The approved derivatives trading limit accounts for about 34.5% of the Company’s foreign currency asset scale, indicating a prudent hedging ratio. The Company emphasizes that it will dynamically adjust trading strategies based on foreign exchange fluctuation conditions and use financial tools scientifically to stabilize operating performance and safeguard shareholder rights.

It is worth noting that the announcement specifically reminds that foreign exchange derivatives trading is affected by fluctuations in exchange rates and interest rates, and carries market risks, liquidity risks, and performance risks. The Company will conduct regular internal audits of foreign exchange derivatives trading and accurately account for transaction gains and losses according to enterprise accounting standards, fulfilling information disclosure obligations in a timely manner.

The launch of this business marks an important step for Weichai Power in international operational risk management, helping to enhance the Company’s ability to respond to global exchange rate fluctuations and providing financial support for the sustainable and healthy development of overseas business. Market analysts point out that in the context of increasing global exchange rate fluctuations, the reasonable use of foreign exchange derivative tools will effectively reduce the volatility of the Company’s performance and enhance profit stability.

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Editor: Xiao Lang Quick Report