Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to China, You try International Limited's first quarter 2020 conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session. You asked a question. During this session you will need.

Depressed our water in your telephone.

You see advice that today's conference is being recorded.

Now the turn the conference over to Kevin Ses. Please go ahead Sir.

Thank you for joined US today, and welcome to China, Yuchai International Limited first quarter, Walkie Talkie conference call and webcast.

Joining us today are Mr. <unk>, Oh Dr. Thomas.

President and Chief Financial Officer of C.

Respectively.

We also look on the Golden like VP of operations.

Before we begin I will remind all listeners are progressing school, we may make statements that may contain forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.

The words believe expect anticipate for drug targets optimistic confident that continue to produce in Paris.

I will or similar expressions are intended to identify forward looking statement.

All statements other than.

Historical facts or certain was it may be deemed forward looking statement.

These forward looking statements.

Including but not limited to statements concerning the Companys operation.

A couple form and Gryphon are based on current expectations beliefs, and assumptions, which are subject to change the any god.

The company caution there's these statements by their nature involve risk and uncertainties.

Actual results may differ materially.

I'm being on a variety of important factors, such as government and stock exchange regulations complication political economic and social condition around the world and in China, including those discussed in the company's form 20-F under the headings risk factors results of operations and business overview.

And then other reports filed with the Securities and Exchange Commission from time to time.

That's a good banking pandemic does not affect you'll be controlled our business operations and financial condition may be materially and adversely affected due to the iridium <unk> deteriorating market for automotive sales and economic slowdown in China and abroad.

That's a weakening of the financial condition of our customers because adverse impact to our suppliers and supply chain or other factors that we cannot foresee.

All forward looking statements are applicable only I'd love to date they are made.

The company, specifically disclaims any obligation to maintain or update for forward looking information whether of the nice nature James.

In the in the press release.

During today's call or otherwise in the future.

In this presentation, well, we're going to buy comparisons between the first quarter Twentytwenty import the 19, respectively. We must caution that any comparison of operational and financial data during the two quarters will likely be a very limited value.

Mr. Hoe will provide a brief overview in summary, and then Dr. from will review the financial results for the first quarter ended March 31 Twentytwenty.

Thereafter, we will conduct a question answer session.

For the purposes of today's call them financial results for the first quarter ended March 31, Twentytwenty are unaudited and there will be presented an already and U.S. dollars.

Oh for.

Formation presented isn't boarded using international financial reporting standards as if you buy the international standards Board.

Oh, please begin your prepared remarks.

Thank you Kevin.

And the first quarter E. coli fandom, it's nice to spend I mean, it's clear that they get disruption to the economy.

Well do industries in China.

Hey, it's affected customers suppliers look though.

So these networks and other auto related compensation.

Lee do you kind of me conditions will improve <unk> made up and he said he yeah sorry.

Since.

The <unk> lighting and doing it that's it that's it so basically what was the radiant slowly come to market.

Lower growth effective Kalkadoon, that's true but.

[laughter] lessen declined by four the system for one thing.

But what if anything.

In addition, the implementation of the first phase, especially those six emission standards and the ongoing trend tension between U.S. in China.

Moving on to Tennessee column.

The Street.

First quarter if anything.

China GDP declined by <unk> percent lift year over year quarterly decline.

<unk>.

Regardless national travel destruction.

South Korea.

Double interruption in employment and consumer industrial services and transportation <unk> <unk> industrial production.

Okay and distribution into first quarter.

Okay.

The unemployment rate rose to 6.2% Fairbreeze any clarity the highest level ever reported.

[noise] According to data reported by China Association automobile infectious.

Yeah.

What does that each when he feels the commercial equal.

Excluding gasoline powered electric vehicles decreased by 35.7% truck sales decreased by 75 with 5% with heavy truck.

He was down by 15.6% and bought sales decreased by city that.

Oh operational and financial results during the first quarter.

After the impact at the Chinese government mandated a nationwide lucked out to lead the spread up.

<unk> outbreak.

Leading to massive disruption to the movement of products that people.

Oh, the total units still suffer 33% year over year decline.

Oh, we're all trying to do them, but they do sales declined as opposed to put us and he said he thought heavy duty trucks to.

<unk> decreased by a single digit pet this the microphone.

Oh Britain, good sales decreased the plus plus plus any 20 <unk>.

It is still up and used to that good cultural missionary market down by 6.5%.

Oh, and they should I take that we should better technologies have created a function of Houston, but he like team.

Thanks for the balance sheet.

Automobile holding group.

Well do some heavy duty trucks in China for calling with a.

For the support for National compliant engines that technology.

The growing sales telephone there's nothing that's still get engines in.

Right.

Heavy duty trucks and given market is directly related to the launch of additional six guessing proto.

We continue to fend off without offerings in other markets as well.

During the 2021st quarter, Oh subsidiary <unk> and the fun.

Hi, Paul It learning gene to address the growing domestic demand for vessels.

This is a segment that has been historically.

Fights and for the engine models.

Hi, Paul let's.

Hello, and good Optimizes the existing design he type model.

In June <unk> innovative technology to class engine.

You know what Heath and all you have to increase the engine power and reducing <unk> you did drive with though like T. Six M.D. Marine engine.

Subsequent to the first quarter 50 50.

Do you buy M.C.L. announced it is likely to apply west Tellus five session at five it can get that's pop the upfront European stage five I mean should said in Europe.

I didn't see each I engine can now be much of the in the European Union fall for application.

<unk> construction machinery generally just another.

If you annualize have come in real fuel injection technology.

Featuring a biopsy so.

They shouldn't Kathleen after treatment, a diesel particulate filter and a highly efficient active selective catalytic reduction emissions control technology system.

I believe to be computers, the comparable product currently in the marketplace.

He will end this travel environment, we maintain profitability with basic and diluted earning per share of RMB $1.49.

Let's start at 31 cents compared with RMB 4.5, as opposed to close in the United.

He meant enough financial strength Petchem bank balances of RMB $4.8 billion, you want but selling the list. That's it must be for that he said he that'd be correct, especially with Oh, you with it if I said, but ordinary share could be paid on July 31st City.

Entering into second quarter, if any fenty locked out of switches half at least the in nearly all provinces cities in China.

In April the fill a commercial equal escalation gasoline powered electric power equal that's increased slightly to 4.4% yielded a year monthly led by.

Two by 2% grew up in heavy duty equal according to data from T. I.

Its growth clearly represents the.

Pent up demand from the disruption related to the fact of the nice thing gradually.

While the outlook for the remainder up and he said he may not be so clear.

Mass fulfil that economy, so China, and it's making trading partners can quickly resumed growth.

The Chinese central government has initiated a fixed costs.

Propositions that loosing money through policy system, let it go messy.

First based on you try to trade agreement has been agreed upon.

Hello, and fruit trees populous country that I will turn to public to go with the financials.

Thank you we mean.

Now, let me review all first quarter results for Twentytwenty.

Oh right now for the first quarter <unk> Twentytwenty decreased by 18.1% to RMB 3.4 billion U.S. dollar.

81.2 million from RMB 4.2 billion for the first quartile didn't didn't I can.

The revenue decrease was mainly due to the impact all equally exciting financing.

We should result in both.

Oh and travel restrictions in China.

[noise]. According to the data reported by D. I know say should also say should know automobile messenger. She is.

In the first quarter Twentytwenty.

So commercial vehicle, excluding gasoline powered pena trick pony because decreased by 35.7%.

Talk shows decreased by 35.5% heavy duty trucks so style.

15.6, but.

The result decreased.

POS sales decreased by 58.0.

Yeah, I'm show overall truck engine sales declined by [noise].

<unk> 0.2 person and Boston engine shipments declined by 58.4% isn't good for score football Twentytwenty compared with the same quarter last year.

However.

I am still it'd be duty truck engine sales decreased by a single digit.

Compared with the same quarter last year.

In addition.

So <unk> engine shows decreased in the fourth quarter, both twentytwenty with the sales well.

And you into the cultural missionary market down 6.5 cents compared with the same quarter last year [noise].

Gross profit decreased by 8.4% to RMB 500 opinion 9.9 million U.S. dollar 74.8 million compared with RMB 761.3 billion in the first quartile Finicky 90 [noise].

Gross margin.

Well.

15.5 person into first quarter of 53, d. compared with 18.3% into fiscal <unk> didn't I did.

The reduction in gross profit growth and gross margin was.

Indeed attribute to it to go to the lower unit shows due to the koby. Thank you I meant thick.

Okay. So that's how you unit production costs.

Other operating income was flat.

RMB 43.9 million U.S. dollar 6.2 million.

Compared with the same quarter last year.

We had higher interest income and lower fat, but I do loss on foreign exchange for contracts into first quarter of twentytwenty being offset by higher unrealized fish exchange losses.

R&D.

Sorry research and development R&D expenses increased by 5.7% to RMB 76.0 million U.S. dollar 10.7 million from RMB 71.9 million into fiscal adopting didn't I did.

Hi, R&D expenses room, mainly due to deep aren't going to put money off the portfolio mix generations national six in Q4 engine I smell.

Well from an.

Indeed engine quality and performance.

Interfyl sports talk Twentytwenty.

The total R&D expenditure, including kept.

The life.

When close well RMB 132.4 million U.S. dollar some did point 3 billion.

And disrupt person, 33.6% revenue compared with RMB 119.5 million, representing 2.9% Oh revenue in the first what Philippine didn't I did.

Selling general administrative SG any expenses decreased by 11.4% to RMB 233.3 million U.S. dollar 47.0 million.

From RMB.

Turning to 76.1 million into fiscal 15 19.

As she any expenses represented 9.8% revenue compared with nine point.

Zero in.

First quarter 2019.

The lower SGN <unk> expenses was mainly due to.

Lower warranty expenses and lower on Oh, what freight charges, partially offset by higher impairment losses on trade receivables into first quarter of 53 D.

Operating profit decreased by 5.3.

Sorry, 53.9% to RMB 164.5 billion U.S. dollar.

Two entry point 2 million from RMB 357 point.

3 million into first quarter posting good night.

The operating margin was 4.8% compared with 8.6% into first quarter. After it didn't I did.

The decrease was money was primary due to the bush impactful de <unk> nice independent.

[noise] financial cost increase probably [noise].

44.1% to RMB 36.5 million U.S. dollar 5.1 million from RMB 25.3 million interfaced, well talk to it didn't I didnt, mainly due to higher ammonium nitrate few discounted [noise].

In the first quarter posting <unk> <unk>.

Total net profit attribute to China, each high shareholder was RMB 61.1 million U.S. dollar <unk> point 6 million compared with.

RMB 198.0, Midland into fiscal opposed to exceed 90.

Basic and diluted earning per share well RMB 1.49, U.S. dollar 0.21.

Compared with RMB four point, it fly into plus growth of 59.

Basic and diluted earning per share in the first quartile fiftytwenty and <unk> in well based.

With that fish <unk> 40 million 858290.

Good.

And then should highlight at March 31st Twentytwenty.

Cash and bank balance were RMB 4.8 billion U.S. dollar 601, 7 billion compared with RMB 6.4 billion at the end of 2000 I did.

Great.

And beauty Sue will RMB 8.0 mean billion U.S. dollar one quick one yeah compared with RMB seven point it.

Yeah.

Bill in at the end of 2019.

Inventory were RMB 4.6 billion U.S. dollar.

655.4 million compared with RMB 2.8 billion.

2019.

Great and Bupendra Blue RMB 7.0 billion U.S. dollar 982.7 billion compared with RMB 6.2 billion at the end of 2019.

Bullring were flat at RMB 2.1 billion.

U.S. dollar 295.2 million [noise].

[noise] I will now open the call, but the Kevin's for the comments before we begin to acuity.

Thank you Thomas.

Please note that due to covert 19, the off Suzhou, China, Yuchai remotely calling into the conference call.

Result in a slight delay in providing answers to some questions we apologize.

Unions and thank you for your patience with that operator, we're ready to begin the Q when they purchase.

Ladies and gentleman will now begin to question and answer session. If you wish to ask the question. Please press star one or your telephone and wait for him to be announced if you wish to catch on your request lease spreads still powder hashed.

Once again, if you wish to ask a question.

Please press star one on your telephone and weight training to be announced.

Your first question.

Comes from the line up Dawn SB from Shah capital. Please ask your question.

Thanks, good quarter.

A few questions.

2019 free cash flow was 110 million.

Yes.

Should we assume around 100 million U.S. and 2020.

It's engine sales have picked up.

Q1.

At this point time, <unk> 19 delivery do something China with effective I call the 19.

We can really.

None of them not to.

So in crew.

That's a good or bad debt back to normal so again and the vessel was still having are you seeing dealing with it so at this point hi.

It's really quite difficult to Ah.

As to how much free cash flow is gonna be.

We believed that it will be positive.

He doesn't mean that get it but.

On the results for for you.

Okay.

Could you talk about you chose role in further consolidation of the diesel engines.

Especially in China.

Yeah.

If you look at the the top players in them.

Do you see engine player in the Chinese market.

I think the L. Steele debt.

I think most of them will still be around I don't think or they will have difficulties complying with.

The.

Nationalistic emission standards.

In fact in many of them ready to pet.

With pet for it so I.

The one thing no you'll see a major consolidation in the industry.

Okay.

Could you talk about growth drivers for your gas engines electric powertrain and hybrid <unk> business.

Okay.

Kevin Kevin line is the only thing that.

Oh that question.

[noise], Oh, sorry, sorry, I I, let me step.

I mean, that's a part of the question and then or to grow drive this whole who want epicage notion that.

Yeah, good growth drivers for gas engines electric powertrain and.

<unk>.

Okay, yes, he regarding on the catch engines, mainly because of the high heavy duty or a truck and trader and then they are being used to India somewhat Oh, we strip that area. So somebody in the Tommy no.

In the <unk> area and ensure that seat or they're really an end the demand there and.

Do you I am showing that the you tie a we had oh, let's fix and gets engines are ready.

Late last year ready and then for the next six implementation. So this is one of the base. Your demand is regarding on data to co two I train.

We don't have or the right <unk> at this stage because.

Oh range extender.

Readied for their commercial launch, but still take some some more time for the trial.

The Oh, we have also ready and then said on the.

Our next generation high bit, but that's just the steel.

Right and that will take time, and then for the OEM testing so.

We're not ready and then the picking up on this topic collapsing them at this stage.

[noise] and JV income was around 700000.

In Q1.

Should we expect same or higher quarterly trend in 2020.

Okay.

Referring to the.

Yeah floors, so profit joint venture and associate with them right now the thing is that a D D.

No lead yeah, because if I could be 19, the joint ventures I also effective.

So.

First quarter, it's probably one of the this quarter just at the quarter that China.

Do I have to lock down basically the country.

And it's dropped at the of the whole flow goods and people. So that they see a I think it will be better that first quarter.

Today for the rest of the pause.

Okay.

And in light of the political tensions isn't.

She.

Closely.

Having a second listing.

Sure.

<unk>.

Yeah, I think a I think you asked the question a lot faster though.

At this point in time, we have no plants, one in others listing and other Atlanta somewhat but I didn't really stupid supposed to stay on with the U.S. change a series a and they've been beef.

Let's change something rocket four inside the United Fall and Yeah, we have no plans to do another one at this point.

Okay.

That's all for me thanks.

<unk>.

Once again, ladies and gentlemen, if he wished asked a question. Please press star one and your telephone and wait for any GP announced.

Once again, ladies and gentlemen, if you wish to ask.

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There are no questions at this time please continue.

Excuse me for sensors, we don't have questions on the line discontinued.

All right well.

All right. There's no question here, but now reached the animal care the session.

Thank you all participating in a conference call. We wish you shop, you could help and be 50 safety read the crisis.

We look forward to begin video game Goodbye.

Ladies and gentlemen. This concludes today's conference call. Thank you for party Speedy you may all disconnect.

[music].