SMC ELECTRIC (02381) has announced a profit warning, stating the group anticipates recording an attributable loss to shareholders of approximately HK$2 million to HK$5 million for the six months ending June 30, 2026.

This represents a significant shift from the profit of approximately HK$12.896 million reported for the corresponding period ended June 30, 2025.

The board attributes this swing from profit to loss primarily to a substantial decline in gross profit.

The major drop in gross margin is attributed to several key factors.

Adverse impacts from the conflict between the United States and Iran have led to a complete halt in the group's sales to the Middle Eastern market and have driven up the cost of multiple raw materials procured by the company.

Furthermore, the shipment of several new products originally scheduled for the first half of the year was delayed due to product design updates, postponing the delivery and revenue recognition for these items to the second half.

Additionally, weakened market demand amid a challenging economic environment has resulted in a reduction in customer orders.