Letter to shareholders

In 2025, the global economy experienced a moderate recovery as inflation slowed and major economies gradually adjusted their monetary policies. However, geopolitics, tariff policies, the energy transition, and supply chain restructuring meant that the overall operating environment remained fraught with uncertainty. According to analysis by the Chung-Hua Institution for Economic Research (CIER), driven by the AI boom and strong momentum in exports and investment, Taiwan’s economic growth rate reached 7.43% in 2025, demonstrating industrial resilience amid global shifts. However, the concentration of growth momentum and structural cost pressures also led enterprises to become more cautious in their strategic decision-making.

Looking ahead to 2026, the CIER expects the pace of global growth to moderate, with Taiwan’s economic growth rate projected at 4.14% as its growth pattern shifts toward "balanced domestic and external growth." Mainland China’s economic growth is estimated to be between 4.4% and 4.6%, indicating that the regional economy will enter a period of adjustment. Furthermore, as energy and carbon costs are internalized, Taiwan will officially enter the "carbon pricing" era. Corporate operations will directly reflect disparities in energy structure, carbon management, and circular economy capabilities, factors that will become critical for navigating structural shifts and sustaining long-term competitiveness. With the "Saccharide Economy" at its core, YFY has pioneered a new business model for the climate technology industry. By prioritizing "energy transition" and "material innovation," we have built a resilient, sustainable business framework that provides a solid foundation for long-term growth and delivers enduring value to investors.

Financial Performance

YFY's consolidated revenue for 2025 reached NT$73.643 billion. Non-operating income was approximately NT$3.517 billion, with net income attributable to the parent company of approximately NT$1.974 billion, and earnings per share of NT$1.19. YFY's operational highlights and strategic outlook are outlined below.

In response to climate change and the dawn of the carbon pricing era, YFY continues to invest in R&D across three core areas: "low-carbon and low-energy consumption," "full circular economy," and "non-plastic materials." Furthermore, YFY is developing total net-zero value-added solutions, including renewable energy sales, smart energy, virtual power plants, and carbon management services. By fostering synergy with various companies, government agencies, and organizations alike, YFY is working to jointly reduce carbon emissions.

"Energy transition" and "material innovation" are the two major focuses under this direction for corporate transformation.

In terms of "energy transition," as Taiwanese enterprises begin paying carbon fees in 2026 for their 2025 emissions, YFY is implementing improvement strategies focused on a "low-carbon energy structure" and "process optimization." Regarding carbon fee assessments, although seven of our plants are subject to fees, our proactive efforts resulted in two plants securing Preferential Rate A, and the remaining five obtaining Preferential Rate B. To ensure each plant reaches its committed carbon emission caps for 2025–2030, through a self-developed carbon management platform, YFY digitally monitors each plant's daily carbon emission data, successfully decoupling production growth from carbon emissions.

l Low-carbon Energy Structure

YFY believes that the key to addressing climate change lies in systematically reducing dependence on traditional fossil fuels. Therefore, from 2025 to 2030, YFY has proposed an energy structure and fuel transformation plan for its paper business, gradually converting cogeneration boilers from high emission-intensity coal to low-carbon and resource-recycling fuels.

Among these, the Qingshui Plant, which produces household paper, is gradually converting from coal to natural gas; the Xinwu Plant, which produces industrial paper, is increasing the proportion of recycled paper sludge and recycled wood, processing them into resource-recycling fuels to replace bituminous coal.

Meanwhile, to increase the proportion of self-generated and self-consumed electricity, YFY launched Taiwan's largest biomass energy power generation renovation project in 2025 at the Hualien Plant, which produces pulp and stationery paper products, with a total investment exceeding NT$4.5 billion. The project will construct new high-efficiency biomass energy recovery and power generation facilities, and through strengthened technical R&D, will enhance overall power generation efficiency and green electricity output.

After the renovation is completed, the lignin concentration will increase from 65% to 85%, and the power generation system capacity will increase from 18,000 kW to 43,500 kW, with the annual power generation more than doubling from 150 million kWh. Overall, it is expected to reduce approximately 105,000 tons of CO2e emissions per year, continuing to advance the long-term goals of green energy self-sufficiency and net-zero carbon emissions.

l Process Optimization to Improve Energy Efficiency

YFY began planning to invest in energy-saving and carbon-reduction equipment projects in 2024 to reduce carbon emissions, focusing on 'equipment replacement,' 'system integration,' and 'digitalization.' Key initiatives include investing in new paper machines to replace equipment with low energy efficiency, as well as modifying steam systems and vacuum turbine pumps to reduce steam and electricity consumption.

In addition to carrying out equipment replacement and process optimization, YFY is continually building its smart energy governance capabilities. By developing and implementing a smart energy management system (EMS), YFY can integrate data on electricity consumption, power generation, energy storage, and energy in plants to improve energy dispatch efficiency and management accuracy. In addition, YFY is gradually establishing microgrids and energy storage systems to strengthen its ability to respond to electricity price fluctuations and power supply risks, upgrading energy management from cost control to a predictable and dispatchable key operational capability. Furthermore, through the application of AI technology for smart production, YFY aims to improve yields, lower rework rates, and reduce the proportion of energy used for ineffective production, supporting its long-term competitiveness in the era of carbon pricing.

l Research and Development of Innovative Green Materials

In terms of "material innovation," as envisioned by President S. C. Ho of YFY Academy regarding plastic substitute materials, YFY is moving toward all-paper-based and biodegradable structures; while ensuring food safety, this allows carbon to remain stored within the products and the cycle, rather than being emitted into the atmosphere. While the global industry is racing to develop effective Barrier Layer coatings, YFY has achieved preliminary results with a version that can be applied to both hot and cold beverage paper cups to ensure leak resistance. This not only advances functional performance but also drives packaging toward a higher standard of environmental friendliness.

Furthermore, YFY has also invested in cellulose-dissolving spinning technology using ionic liquids, where wood pulp is directly dissolved in a self-developed ionic liquid and spun into textile fibers. This path will ultimately shift fiber products from polyester to regenerated fibers, providing a new perspective on natural, low-carbon materials for the textile sector and bringing a distinctly different significance to energy conservation and carbon reduction.

In terms of chemical materials, Shin Foong Specialty and Applied Materials, a subsidiary of YFY, utilizes saccharide-based materials and water as a medium to replace traditional organic solvents, reducing volatile organic compound (VOC) emissions and their environmental impact at the source. Furthermore, by refining emulsion polymerization technology and utilizing AI models to predict the temperature and conversion rate of SBR latex polymerization in real time, the particle size of specialized latex has been reduced from 190 nm to 85 nm. This refinement in particle size yields superior coating smoothness, printing gloss, and color saturation, creating more precise customization while reducing the carbon footprint.

Promoting the Common Good of Society and Environmental Sustainability

At YFY, we value environmental protection and social responsibility. Therefore, in 2024, we sponsored the restoration of the Old Railroad Bridge Wetland in Kaohsiung to enhance biodiversity. In 2025, we further collaborated with industry, government, and academia to conduct a carbon sink survey and conservation plan for the Dashu Old Railway Bridge Wetland. Beyond constructing a carbon budget model for artificial wetlands and quantifying carbon sink capacity, the project further supported biodiversity restoration through wetland conservation. Notably, the Water Resources Bureau of the Kaohsiung City Government received the National Sustainable Development Award in recognition of this project.

In 2025, amid challenges posed by African Swine Fever regarding the disposal of household food waste, biomass energy was identified as the most scalable and economically viable alternative. Having developed anaerobic biogas power generation technology for many years, YFY utilizes uniquely cultivated anaerobic bacteria that can decompose 90% of the organic matter in food waste within four hours. This process generates only one-fourth of the carbon emissions of traditional incineration and produces biogas with a methane concentration as high as 83% for biomass green power generation. Currently, in addition to their existing processing capacity, the Xinwu and Guishan ROT Plants can still handle at least 25 tons of food waste per day. This allows them to assist local governments in processing household food waste, as well as managing the food waste disposal for businesses, convenience stores, hypermarkets, and department store food courts, thereby contributing to community well-being and environmental sanitation.

Future Prospects

At the book launch of Circulating between Being and Nothingness, President S. C. Ho mentioned that, "YFY leverages carbon as its axis, saccharide as its source, and data to lead its future development." At YFY, we believe that sustainability is not an option, but a necessity. Therefore, beyond actively promoting "energy transition" and "material innovation," YFY has also aimed to strengthen high-value-added chain promotion, precise investment, and business incubation. We drive the company’s long-term growth through sustainable operations and innovation, meeting social expectations with a responsible commitment as we advance toward a more resilient, innovative, and value-driven future.

 

Wishing you peace, health, and continued prosperity.