Introduction

As previously disclosed, the Company completed the acquisition of the oil and gas industries sector (Petronash Co.) on February 13, 2025. In accordance with IFRS 3 – Business Combinations, the Company undertook a Purchase Price Allocation ("PPA") exercise to identify and measure the fair values of acquired assets and liabilities, including identifiable intangible assets and fair value adjustments to property, plant and equipment.

The Purchase Price Allocation (PPA) exercise was finalized during the fourth quarter of 2025. As a result, full-year depreciation and amortization charges related to PPA-identified intangible assets and fair value uplifts on fixed assets, pertaining to the period from the acquisition date (February 13, 2025) through December 31, 2025, amounted to SAR 121.37 million. These non‑cash expenses were recorded in full during the fourth quarter upon completion of the Purchase Price Allocation (PPA) exercise. This created a concentration of non-cash charges in Q4-2025 within operating profits that does not reflect the effective operational performance of the Group during this quarter.

Clarification of Q4 2025 effective Operating Performance

The Company wishes to draw shareholders attention to the following:

1. The Group's effective operating profit for Q4-2025, before the impact of Purchase Price Allocation PPA-related depreciation and amortization, amounted to SAR 100.14 million, which is consistent with the Group's historical quarterly operating profit trajectory and the momentum as reported in previous quarters. This effective operating profit was significantly offset by non-cash PPA-related depreciation and amortization expenses amounting to SAR 121.37 million resulting in reported operational losses for Q4-2025 amounting to SR 21.2 million.

2. Out of the total SAR 121.37 million in non-cash PPA-related charges, approximately SAR 99.2 million was recorded within cost of revenue, which reduced the reported Q4 gross profit from approximately SAR 195.6 million to SAR 96.4 million. This reduction in reported gross profit is entirely attributable to the Purchase Price Allocation (PPA) catch-up non-cash adjustment and does not reflect any deterioration in the Group's commercial margins or business fundamentals.

3. The net impact of the bargain purchase gain on Q4 2025 group profits amounted to a positive SAR 5.08 million only, being the difference between the bargain purchase gain of SAR 126.45 million recognized on the acquisition date and the non-cash Purchase Price Allocation (PPA) related charges of SAR 121.37 million for the year.

While this impacted the presentation of results within the consolidated statement of profit and loss, the overall effect on net profit for the quarter was largely neutral.

Forward-Looking Normalization

Starting from 2026, PPA-related depreciation and amortization charges will be recognized on a quarterly basis in line with the useful lives of the identified intangible assets and the fair value adjusted fixed assets. As disclosed in the annual results announcement, these charges are expected to remain broadly stable over the next year, before declining significantly thereafter as one of the major underlying assets is expected to reach the end of its useful life, as detailed in the attachment to this announcement.

The Company expects future quarterly results to more accurately reflect the Group's underlying operational performance, as the recurring quarterly Purchase Price Allocation (PPA) amortization impact being significantly lower than the one time amount recognized in Q4 2025.

Summary

The Company confirms that Q4 2025 reported operating profits were impacted by a significant non-cash accounting adjustment arising from the timing of Purchase Price Allocation (PPA) completion, and that the underlying operating performance of the Group, including the newly acquired oil and gas industries sector, remains satisfactory and in line with management's expectations.

Bawan Company confirms that it will continue to fully comply with the adopted disclosure and transparency requirements and will continue to provide its shareholders and investors with any updates related to the accounting impact of the Purchase Price Allocation (PPA) process or any other material developments in accordance with applicable laws and regulations.

The Company also affirms that this announcement is for clarification purposes only and does not include any amendments to the previously disclosed financial information.