Q4 2019 China XD Plastics Company Ltd Earnings Call

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[music].

Hello, everyone.

Thank you all for joining us for the China, XD plastics fourth quarter 2000, Nike finding so himself conference call joining.

Joining me on the call today, Mr., Jie Han Chairman and CEO Mr. Chine way, My Chief operating Officer, and Chief Technology Officer, Mr., Taylor Dunn Chief Financial Officer.

Our year to date, China, XD plastics issue a press release announcing the fourth quarter 2019 cells.

So managements presentation I would like to refer to the safe Harbor statements in connection with today's conference call and remind I will defend those that meant humans prepared remarks doing to coal may contain forward looking statements, which are subject to risks and uncertainties and that management may take.

Addition, no forward looking statements in response to your questions.

All statements other than statements off so we could affect contained forward looking statements, including but not limited to the convenes gross potential in international markets. They affect me and profitability of the company's Proto labs casing <unk> off the competes product mix shift to more.

Event called <unk> and relate pricing policies, the bought a futility often companies operating retail and financial condition. The company's projection of the phone must into though my team and I don't Miss detail you become these filings with the FCC and available.

Website at Www FCC Taco.

These forward looking statements involve known and unknown risks and uncertainties and not based on Covance expectations assumptions estimates and projections about the company and the industry accompanying therefore tends to protection off the safe Harbor pull forward looking statements that is continuing to.

Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and we refer you to a more detailed discussion.

The risks and uncertainties in the company's filings with the Securities and Exchange Commission.

To supplement the financial results presented in accordance with the U.S. GAAP mentioned, when we will make reference to earnings before interest expense income tax depreciation and amortization, which we refer to as at the day. After that you said non-GAAP financial measure reconcile from net income which.

The company today to provide meaningful additional information to better understand it's up a waiting for filmless.

The table.

Well consulting net income to after that can be found on the earnings press release, you show earlier today.

I would now like to turn the call over to our chairman and Chief Executive Officer, Mr. Han Mr. Han will be speaking Chinese and I will check they keep opening remarks into English.

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Our physical 2019 results were consistent with the overall slow recovery of China auto industry.

Hey, tension between China, and United States, the stricter environmental protection Spender and their larger reduction of subsidies on new energy vehicles have generate a lot of pressure on the entire although industry in China, resulting in depressed domestic demand.

China XD has taken proactive measures to respond to these chains since the second quarter of 2019, we'd have a chief revenue by increase so often new categories of high end products.

60 mph, six produce will be higher pipe bomb material with higher selling prices domestic market.

In South Africa, Highpoint semi finished goods in domestic market.

[music] aside to wait until we turnover and replenish operating funds.

Happy to see an overall increase of 45.9 for saying, Hey, we try and be selling price off our products, partially offset the increase decrease.

Sales volume of 18.8% for the year in December 31st 2019 at the same time that come in has a chief of rapid increase of customer orders in non automobile application evidenced by our staples sell school <unk> several of them.

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So 2000 tonne, though cobot Nike has caused a shop for production and sells off the Chinese automotive industry.

The risk of hi destruction of some parts of the domestic automobile industry increased.

That's a result, China XD has respond to stop producing raw materials for P. P. <unk>, such as goggles and mosque to help alleviate a pandemic to our communities and mitigate the negative impact of well pandemic on Chinese auto industry.

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Secondly, we close just harder to able to find out.

We are committed to compete industry project for upgrading existing equipment for <unk>.

<unk> thousand metric tons of engineering plastics by the end of second quarter 20 times.

And our team real project and can line wrote Hodja full equipment upgrade and factory revamping by the end up if the quota of Twentytwenty.

Bringing the production capacity in hate on Gen campus back to 290000 metric tons I.

At the same time, we expect to compete additional 10 production line.

Our sutron plant by the end of the full quota of Twentytwenty.

That's to bring the total capacity of says one thing to 300000 metric tons.

Together with the production capacity ramp up in Dubai, We will continue to remain our ability to make for the usual into more specialized high end product.

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Secondly, we will assist quarter achievable to find that walnuts listeners should have anyway.

What other quite a few Pat for MACI.

We will continue to optimize our benjamin structure, and hence our operating efficiency and we are confident so a couple they shouldn't be Chinese big thing to solicit companies expand expansion strategy in multiple regions and sectors.

And to be confident with our core market positioning and expand platform for core.

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With that I would now tend to go over to tailor then our CFO to walk you through our financial Ana.

Thank you is another thing to anyone who are joining the call today.

Before I review of the numbers, let me remind you that all theaters I discuss our well this reporting period.

First quarter 2018 nationalistic.

Additionally, in the year over year comparisons to the fourth quarter 2018.

And then is the producer comparison is too that the corridor between 19.

So let's go over our first quarter results.

Revenues were 310.5 million dollar for the first quarter community.

Compared to $349.8 million Synchronoss here.

Really they need a decrease of a 39.3 million dollar.

Or 11.2%.

The year over year decreases primarily as a combined results or 46.3 few person sales volume.

In addition of RMB against the U.S. dollar.

In two person.

And partially offset by.

Speaking I think I personally increasing average RMBS and.

As compared to those of last year.

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Revenues from the missing market decreased by.

$41.8 million or a point or person concur with that in its imperative last year.

And the combined results.

The decrease 47% in sales volume.

Depreciation of RMB against us dollars by 4.2%.

I'm personally I'll say by increasing 69.1% in average RMBS enterprise product.

I was comparable to those of us here.

According to China Association of automobile manufacturers.

During the first quarter 2019 viewpoint.

Inside of production and sales continue to narrow.

For the whole warm there could be mountains.

Released by increasing 0.03 pursuing all the production.

And do because of the discipline there would be person on the cells respectively.

Compared to its important when they too.

The company attempt is passed through efforts.

To spend our money areas and the customer basis.

And to meet their new requirements into American markets.

The company has achieved their skills.

232.1% sounds Chen.

And assist and sentencing central triangle.

We're still has so speakers of 30.3% most is China, 18.7% in this channel.

System or 1% in southwest China.

In person you string them.

Okay.

I just would only be selling price you Chris.

69.8% was mainly due to increased sales of new categories of high end products P 66, and PS six.

Produced two is high priced raw materials with higher send him pricing them at the market.

So it's a high priced semi finished goods in domestic markets. During the three months period ended December 31st when making.

In overseas markets over what's your sales were 16.9 million dollar.

Or 5.4% total sales for the first quarter 2018, as compared to $15 million and accounting worse. It went deeper soon in total sales.

The same period last year.

After a successful production I don't production base in Dubai in November 2018, the company has established business relationships with new customers. You are you in India.

Ship products to end users Europe in Southeast Asia.

We're optimistic about any prospects of or business suspension overseas.

Yes.

Good pop is it was 43 point some you know because for the 2019 compared to 62.4 million dollar for the same period when <unk>.

Really getting a decrease of $18.7 million 30%.

There's nothing is 14.1 person compared to 17.8% in support of Wendy.

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They needed due to the implementation of our strategy on <unk> and products to penetrating new markets.

Jim expenses were 13 point immune though when it was.

And in IP.

Compared to 8.6 million dollar for the same period of 2018.

Reasoning and decrease of <unk>.

Two and $2 million worth 70 72.1 person.

The increase was primarily due to the increase of professional fees salary welfare traveling and transportation and the mean business expenses.

R&D expenses were 10.3 million dollar for the first quarter 2019.

Compared to $26.9 million plus inheriting an easy.

Revealing a decrease of.

Just $2.1 million were 59.9%.

The decrease was mainly due to the decreases.

15.9 million dollar in raw materials consumption.

As of December 31st 2019.

And the number of ongoing research and development products was 357.

I'm going in loss was $45 million has quite a 2019.

Compared to 24 point, when we didn't know of operating income in period last year.

Representing a decrease of 60 net $1 million worth 200.

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This substantial decrease is primarily due to the decrease was offered by 30% division of doubtful accounts 62 million dollar.

Right you are you customer.

Hydrogenics is.

Partially offset by the Los Angeles loses and distances.

Income tax expense was 2.2 million dollar for the has quite a plan that maybe we began the effective everything.

Negative 3.8%.

Compared to income has benefited.

Zero eminent dollar in it's imperative that year, representing an effective a certain negative.

One 6%.

The increase their respective encompass roots was primarily due to the increased operating loss Dubai Sheila.

Net loss was just if I mean in dollar for the first quarter between 19 compared to net income.

$30 million for that's Npls are representing a decrease of 78 million dollar works is under precinct.

Basic and diluted loss per share for the first quarter Tonight He would bose.

Seven cents compared to 20 cents.

Per share.

Well the same period of time to repeat.

The average number of shares used in the competition the basic during the losses per share for the three months ended December 31st 2019 was 66.9 million compared to 50 point I mean insurance earnings per share.

What are your period.

Earnings before interest taxes, depreciation amortization was negative 20 to 27.3 million dollar whether it was quite between 19.

Compared to $30.1 million, but it's imperative to an 18.

Rather than it is 65.7 million dollar were 111.1 person.

For a detailed reconciliation of EBITDA, a non got married or two years to GAAP equivalent.

See the financial tables and end of the press release issued earlier today.

Now, let's turn to the patients as of December 31st to 19.

The company had.

220.4 billion dollar in the total amount of cash cash equivalents.

Restricted cash.

The decrease of 103.6 million dollar or 37.8% that's compared to.

$367 million as of December 31st turning to me.

What do you happen to us negative 14.1 million dollar and current ratio was.

I was comparing to the parent issue as you know one night as of December 31st when he.

So there's ever the as of December 31st I mean, I was 836.4 million dollar.

And nucleus of 11.7% as compared to $748.9 million.

Or 30% to an 18 million due to the conversion of 60 prefer stock into common.

Announced on September 26, 29.

Yes.

Hey, those are great Koby 19 in the PRC, Chen or the industry production and sales.

Just with decreased by 33.4% and 31.1% or the first four months when you're in 28.

According to the China Association of where the automobile manufacturers.

It has a ripple effect.

The impact to alternative supply chain, including the company.

Given the fact that the company had temporarily closed its manufacturing facilities offices and the PRC.

According to USDA requirements of the parents economy recurrence or the ongoing covina in pandemic has had and material out of US We act.

On our business operations.

Hi doesn't just a consensus and ongoing uncertainties the company will not be able to forecast initial guidance physical 2022 without notice.

Now before we open the call to your questions I'd like to know that question through access to imagine in China attempt Liberals their questions and answers.

Do you want to ask a question in Chinese precisely ASCII <unk> English for the benefit of our other business.

Please also note that would enable to this point questions about financial and operating results.

One of them as including the can offer we refer you to our already we should I said Mrs.

I will not be able to respond to questions about our directed to the principles of the going up or about the proposed transaction.

With that we'll now open the call if your question operator.

Ladies and gentlemen, we are now beginning to question and answer session. If you wish to answer your question. Please press star, one well telephone anyway or other than to be announced if you wish to cancel request.

Our stuff how ash.

Your first question come from.

Laufer <unk> up your question.

Okay. Thanks for taking my question I'm I've got a lot of.

Because ah Theres a lot of things going on.

I'll start with a positive you guys are.

Crushed your guidance you did a lot better than your expectation.

The last conference call you had guidance for revenues for top line of 1.1 to 1.3.

Oh I pointed out you would already done more than 1.1 after three quarters. It was a little strange just this quarter strategy you ended up with one point.

Oh for for instance are you <unk>.

But your guidance significantly on the top line.

The glaring problem is of course, the Ah the large uncollectible as you call it.

Bill for some customer in the you a.

All right.

You must have known that was uncollectible during the fourth quarter and that actually in December is when you were able to close on the very very important financing so the banks.

We're willing to lend you money for the first time.

These state owned enterprise banks, or even though they knew that there was supposedly some sort of collection problems.

So to me that's a one off events.

And.

Can you tell us the status of that alone now okay. It's in a June now and.

That was uncollectable as of the ended the quarter.

I kinda paints the quarter negatively, but if it's a one off events it really doesn't matter going forward. Okay. So how does that stand now.

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Hey men's Terry I'm. So the answer comes from our Chairman Mr. Jie Han.

So first of all we're accrual such loss based on the U.S. GAAP and also obviously the number we're already by or are there KPMG.

Secondly, we still continue how efforts in connection and would think.

Sometime later this year, we'll be able to collect the outstanding amount.

Lastly, he doesn't necessarily believe Oh this is listening to the bank.

The bank conversion.

No what I was there anything like what is yes well.

I'm sorry go ahead.

So yes. This we view this as a one off events.

Okay then.

If you first of all.

Still unclear I mean the.

The sale to some customer in the you a basically was twice what you do for the whole year.

And so.

Whoever made that sale and approved it.

Yeah, you got a question, though what sort of due diligence they did but it sounds to me that you're going to collect it so you're going to write that losses back up this year all right. So.

By a one off of that you just dumped it into the fourth quarter.

Hi.

And the numbers look worse than they are because you're going to be able to recoup that and then put it back on as an income item for this year.

And the banks lunch you the money knowing that and that's the critical thing because they wouldn't be lending you money for the first time.

If you were showing some sort of.

You know shortfall of that magnitude.

But your revenues grew dramatically.

Your EBITDA, we're still very strong.

And.

For a long term shareholders. The key is how's the company going to go to be doing going forward Mr. Han obviously believes it will be fine because he's trying to buy the company.

And I know we're not.

Supposed to ask any questions regarding the offer but does mr. Han.

No I mean I know he knows this but does he I understand that when he makes an offer.

You know after not even reporting.

20 at four or anything like that.

At a cyclical low that's like four or 5% above the average trading prices a dollar time.

It is not only insulting alright because.

The offer could have.

Even if he had offered $1.30 or $1.40. It's still would be insulting would at least would be 30 or 40% above the price.

And what he must realize that shareholders would find that completely unacceptable, particularly if they've been holding the shares all these times.

And if.

If you're going to be recovering that.

The unpaid balance then you're looking at a company.

Yeah.

He has made an offer at less than one times earnings is certainly a lot less than a ever Utah. Okay. If you come in a 145, even with that poor fourth quarter showing.

The dollar 10 times 66 million shares is about a 70 some odd million dollar. It's one half of every time. So it just makes no sense and it's inappropriate and shareholders are rightfully.

I'm upset about that sort of notion alright. So you should know that and he knows that anyway, all right. So its something that in the United States here.

Nobody would even try.

Because they would realize that they would be a class action lawsuit would be filed so what is the current book value of the company can you give me the shareholder equity please.

Hey, Matt and let me translate your question first.

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Yeah, so over the years hopeful and obviously.

Okay.

First of all you asked me shareholder value at the end of last year.

On.

It was 836.4 million dollar.

And also your parents are coming from our chairman usage at home.

Oh he wanted to thank you for your understanding.

Oh piece position as regard to you can probably offer so he wanted to.

Hey, good that it's not easy to fishing and all this launch so.

Hi issues associated with them.

So I was regarding the.

[noise] connection pharma.

Your your customer we believe that we'll be able to recoup.

Some hundred resolving sometime later this year.

Right, you already said that but so if you're going to collect to that.

Than the loss last year.

For the near Los since you only made.

The loss that occurred in the fourth quarter really isn't a loss all right.

Almost as if.

It was a new customer.

Whoever made the sales to that customer.

Hi, I do have done I looked at up due diligence visa represented over half your foreign sales.

And it doesn't make sense, you would make a sale to a new customer like that and not get paid so it's almost as if its purposely.

In the late so that the numbers would look bad I have to tell you that alright. So now after he makes an offer for about the value of the wholesale $1.10 times 66 million shares.

Oh, it's about $69 million $60 million, all right or 70 million. That's the whole amount of the uncollectible that is now going to be collectible this year. So.

It it just doesn't look very good and now he wants to buy the company. So a at that at the lowest price that is traded at a since he came public for the is a is brought a public essentially.

So anybody valuing the company would have to write the value back up based on the Collectability of that are of that sale and since your margins have gone up dramatically.

Because of the higher cost of goods sold then the company going forward is gonna be significantly more profitable your current book value by the well I'll point out.

There's about a.

12 times, what he's interested in buying a company that does that seem.

Like a fair assessment of the value of the company 12 times, what the offer is so.

Yes. These are things that just don't make any sense all right other than that the company got some.

However, the market knows the company got some very important financing.

Your revenues.

Right by a wide margin your projections for the year.

The only reason you're showing reduced income is because of this one sale that you are still not being very clear on.

If some new customer.

With that we we don't even know who it is but that customer is going to be paying you back anyway, and the banks that led to the money no. It otherwise it would have never close on the alone. So I just want Mr. Han to be very aware that this is not lost on on it.

Festers and if there's any.

Chance to try and.

Take the company private is dollar 10, it's not going to work.

From the viewpoint of shareholders that are not part of the consortium because.

There's no point in a grain do a deal at this level because its such as such a low price.

What would rather take the chance a in courts or just not voting for it to go through so I'll just leave.

You all with that there's a there's tremendous disappointment on the on my part as well as investors that I represents that they feel that this is not a very honest.

Or ethical.

Uh huh.

Maneuver by Mr. Han.

And Oh, you know you should know that I think he does he probably doesn't care but.

Got it needs to be said and I'm using my opportunity on the phone call right now to say that so I'll, let somebody else express their opinion.

So.

Well I'll be I'll be courteous and say thank you very much for the time.

Fair enough. Thank you and dozens of comments obviously.

As to the evaluation upon me on the market has a value on it in addition, I'm, especially community.

So the wiser, yeah, who will be hunter.

On behalf of especially committee and its shareholders.

Well as long as you brought him up the last time they made an offer for the company in February of 2017, you hired Duff and Phelps, but you never told US even though you had been asking number of times on conference calls.

What Duff and Phelps, what number Duff and Phelps it come up with when you had made the offer years ago or you just never told US. So you know what are we going to find out what.

Value the company.

It was assessed at by Duff and Phelps. This time around is that we're going to get an opportunity to get this independent appraisal.

So the thing that is very important to node that doesn't though.

Yeah hired by.

Measure community, you're not looking for the company. So we don't have any dialogue well communication with them regarding the including offer.

I'm sure you on their you're Gonna go from adequately time they will.

Yeah right action.

Or not.

Well at least who buys to especially me.

Well like they did last time I guess alright, Thank you Taylor.

I think in that.

Once again, if you wish to answer your question. Please press star one on your telephone and we already name to be a no.

Your next question comes from Paul Paul from I'd investment management.

Your question.

Hi, Thanks for taking the call I just a quick question on your current offers if you can comment on them obviously the long young is.

An area that still being affected in China, and that's where are your main production facility is are you currently running for operations harder than <unk>. That's car production, we started in China.

If not you haven't met the when you'll be able to start producing again.

And also maybe just comment on this region and if you can comment on your part build the PDP production as well. Thank you.

Sure I'm thinking huh.

Let me answer questions remain.

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<unk>.

Hello.

Hi, how HM.

Here's what's your from our chairman Mr. Han.

So as you correctly noted heading down has other singed.

[noise] Oh come from cases went through the rest in China.

So.

He was worsening before.

Butler.

So during which we have.

The strong affecting I believe in March.

Putting out we are operating like approximately 60% of our capacity.

[noise] missing from last year.

HM.

For your question regarding.

The margin situation, where you saw p. materials.

And can we haven't stimulus for Mt. Blown corporates. So the market has cannot treat a lot with me most notably in China, but when so many area in a world.

For example in April.

The gross margin was approximately 50% I mean, the me it came down to 30%.

But anyway and you didn't even over the long term we believe.

Good good business. So the gross margin probably will be normalized at the level of people seem to go by them.

Okay. That's helpful. Thank you maybe just an those for a pillar that maybe in the issue Q1 results or guidance. If you ever do we would just like you worked out the percentage of he team.

Product sales just so we know how relevant it is compared to traditional.

Tells me that up.

And we'll just want to follow up questions on maybe your capacity expansion in Capex.

Senior a around 230 million of cash on hand, but you also had commitment and the fourth quarter what are your line extension.

Let me just that's about you plan on delaying some of those projects make sure you go through 2022.

To help your balance sheet, we know the company has a lot of that's already so.

I'm very concerned about investing massively again on a year, but interesting.

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[noise] hi, how so first of all.

Chairman I want to thank you for your suggestion and we will.

I do not I mean, the pointing corner only.

Loose our we don't.

Regarding the description of our pp materials.

Secondly, core products. This year, we'll monitor our test position, our cash level as well as potential additional financing.

[noise] when we.

Proceeding with our Capex, So we will.

And Doug I want to Capex.

Carefully.

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I mean, I think a lot of minority shareholders shared the.

Let's say a distressed over the pricing a walk, though you see what their Manhattan has done it salmon part over the last year and reporting to compete with liquidity.

And we hope that when it come if it comes down to a vote that like lop off or you will allow minority shareholders vote on the proposal without.

Even his majority stake obviously on though on the offer.

And that's it for me today. Thank you.

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Okay.

Once again, if you wish to answer your question. Please press star, one oil, California and wait for on into the adult.

[noise].

Yeah, No further questions I'll now hand circumference back to now we care one for closing remarks.

Oh, yes.

On behalf of China, XD plastics, we want to thank you for your interest and participation in this call. If you would like to speak with I suppose it he's coal either myself or Taylor.

Well this often contact numbers for all of us I'd and the past neat. Thank you.

[music].

[music].

[noise].

[music].

Ladies and gentlemen, thank you for spending by and welcome to the fourth quarter.

<unk>, China XD itself, they hold limits that earnings conference call. At this time, all participants I know they said orderbook. After the presentation that whatever your question Yeah. The session you watch entry into that then you any depressed a one oil cut equal.

If I said to this conference is theme I called it I will now I'd like to end the confidence although I do know today I think.

Thanks, I auditing, Saudi I would thank you. Please go ahead.

Hello, everyone.

Thank you all for joining us for the China, XD plastics fourth quarter 2000, Nike finding so themselves conference call joining.

Joining me on the call today are Mr., Jie, Han Chairman and CEO Mr. Chine way, My Chief operating Officer, and Chief Technology Officer, Mr., Taylor Dunn Chief Financial Officer.

Our year to date, China, XD plastics issue a press release announcing that fourth quarter 2019 cents iPhone managements presentation, I would like to refer to the safe Harbor statements in connection with today's conference call and we mine our defendants that management's prepared remarks doing.

Coal may contain forward looking statements, which are subject to risks and uncertainties and that management may take a.

In addition, no forward looking statements Nissan two little questions.

All statements other than statements off he so we could affect contained forward looking statements, including but not limited to that combines both potential in international markets, they need and profitability up the company's product ABS kitchen, <unk> off the competes product mix shift to more.

<unk> called <unk> and relate pricing policies, the bought a t. often companies operating results and financial condition. The company's perception of the phone much into the Nike and other risks detailed in the company's filings with the FCC and available.

<unk> website at Www FCC dotcom.

These forward looking statements involve known and unknown risks and uncertainties.

Based on Colin expectations assumptions estimates and projections about the company and the industry.

Coming dapple tends to protection off the safe Harbor pulled forward looking statement that is contained in the private Securities Litigation Reform Act up 1995.

Actual results may differ from those discussed today and we refer you to a more detailed discussion for the risks and uncertainties in the company's filings with the securities and exchange.

Michelle.

Some of them and their financial results presented in accordance with the U.S. GAAP mentioned, when we will make reference to earnings before interest expense.

Income tax depreciation and amortization, which we refer to as at the dock appetite you said non-GAAP financial measure like in South from net income, which the company did east to provide meaningful additional information to better understand aesop awaiting fulfilled.

In table.

But consulting net income to appetite can be found on the earnings press release easier today.

I would now like to turn the call over to our chairman and Chief Executive Officer, Mr. Han Mr. Han will be speaking in Chinese and I will check they keep opening remarks into English.

Hi, Joe <unk> tissue.

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Yes Hello.

This is hoelscher coolswitch sheet, having that yes, you have quite was alive.

Chewed up Chile, she lost social choose how to social emotional.

Our fiscal 2019 results were consistent with the overall slow the tower, we opt kind the auto industry [noise].

Hey, tension between China, and United States stricter environmental protection standard and the larger reduction off subsidies on new energy, we acos have generate a lot of pressure on the entire auto industry in China, resulting in depressed domestic demand.

China XD has taken proactive measures to respond to these changes since the second quarter. After 2019, we have achieved revenue site increase so often new categories of high end products.

60, mph, six producing <unk>, hi, pipe bomb material with higher selling prices in domestic market.

In South Africa, Hi, like semi finished goods in domestic market.

Aside to wait until we come over and replenish operating funds.

T to see an overall increase up 45.9 for thing and we try and be selling price off our products, partially offset the increase decrease.

Sales volume of 18.8% for the year in December 31st 2019 at the same time that combine has a cheaper let the increase of customer orders in non automobile application I have you done I was staples sell school <unk> several done that.

<unk> regions.

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So 2012, the cobot Nike has caused a shop for production and sales up the Chinese automotive industry.

The risk off Heikki swaption off some Pos up the domestic automobile industry increased.

That said we felt.

<unk> XT has responded to stop producing raw materials for P. P E checks goggles and mosque.

To help alleviate a pandemic to our communities and mitigate did not impact off road pandemic on Chinese auto industry.

Well, let you are the audio Harding at TRG rule.

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Sure the VAT TV channel to pull T cells.

He shuttle call one time here they won't be all mostly all she she.

Secondly, we let's just hope to achieve modify that.

We are committed to compete industry project for upgrading existing equipment full <unk>.

<unk> thousand metric tons of engineering plastics by the end of second quarter 20 times.

And I, what chimney rock project and gentleman wrote Hodja full equipment upgrade and fat treat revamping I'd and often quoted upper Twentys R&D.

Bringing the production capacity in hate on Gen campus back to 290000 metric tons I.

At the same time, we expect to compete additional 10 production night.

Our Sichuan plant by the end of the full quota of Twentytwenty.

That's to bring that total capacity ups is one thing to 300000 match it Tom.

Together with the production capacity ramp up in Dubai, We will continue to remain our ability to make for the year looks into more specialized high end product.

All right it is important new markets.

Well Gee she'll off quite a hit all shave off funding Shelly.

He or she came from William Blair talking a holiday those all tools just thought he really.

What I'm trying to.

Secondly, we will assist core the t. able to find that well this listeners should not be way what type of what other quite appealing had too much easier.

We will continue to optimize our benjamin structure, and hence our operating efficiency and we are confident so a couple they shouldn't be Chinese big Bang juice, let's see companies extend expansion strategy in multiple regions and sectors.

And to be confident we've I will call Maki positioning and expand platform for <unk>.

[noise] [noise] shouldn't that Laval, each other's time ahead or national she is how what.

She has all gone so that's how we'll draw.

With that I would now tend to call over to take that Dan how its CFO to walk you through our financial Ana.

Thank you ladies and thanks to everyone for joining the call today before I review of the numbers, let me remind you that all theaters I discuss our well this reporting period.

First quarter over 20, making nationalistic.

Additionally, any year over year comparisons to the first quarter 2018.

And then it's a crucial comparison is to the quarter between 19.

So let's go over our first quarter results.

Revenues were 310.5 million dollar for the first quarter 2019.

Fair to $349.8 million since your last year.

Really they need a decrease of a 39.3 million dollar.

Or 11.2%.

The year over year decreases primarily as a combined results or 46.3 few person sales volume depreciation of RMB against the U.S. dollar.

We're going to person.

And partially offset by.

Six 9.5%, increasing average RMB ascendon price of apart.

As compared to those of last year.

International markets Completeness period ended December 31st and 19.

Revenues for the missing market decreased by <unk>.

$41.5 million or 12.4% concur with that in this impaired last year.

As a combined results and <unk>.

The decrease or 47% in sales volume.

Depreciation of RMB against us donors by 4.2%.

And partially offset by increasing 69.1% in average RMBS enterprise products.

I was comparable to those of us here.

According to Chinas Association of automobile manufacturers.

During the first quarter 2019 viewpoint.

Inside of production and sales continue to narrow.

But the whole warm that could rebound as.

Witnessed by increasing 0.3 pursuant to the production.

And do because of the discipline the person on the cells respectively.

Compared to this impaired as intended.

The company attempt is parts to efforts.

We spend our marketing areas and customer basis.

And to meet their new requirements into making markets.

The company has achieved sales gross.

232.1% sounds Chen.

And 6.7% Central China.

We're still has two speakers of 30.3% in most of these China, 18.7% in North China.

15.1% in southwest China, maybe a person you stream.

I just for the R&D spending price you, Chris 69.8% was mainly due to increased sales of new categories of high end products P 66, and PS six.

Produced two is high priced woman cheerios with higher sand in pricing coming to market and.

Sales of a high priced semi finished goods in domestic markets. During the three months period ended December 31st when making.

In overseas markets <unk> [noise], what's your sales were 16.9 million dollar.

Or 5.4% told US shows for the first quarter 2018, as compared to $15 million and accounting worse when the pursuit in total sales.

The same period last year.

After a successful truck production at our production based seem to buy in November 2018. The company has established business relationships with new customers you would be in India.

Ship products and end users Europe, and South East Asia.

We're optimistic about the prospects about businesses mentioned overseas.

Yes.

Good pop is it was 43 point. Some you know is quite a 2019 compared to $62.1 million for the same period when eating.

Representing a decrease of $18.7 million, 30%.

There's nothing is 14.1 person compared to 17.8% was for the Wendy.

[music].

Premier due to the implementation of led by strategy on <unk> and products to penetrating new markets.

Jim expenses were 13 point immune though for the first.

The Nike.

Compared to 8.6 million dollar for the same period in 2018.

Reasoning and decrease of <unk>.

When 2 million dollar, we're spending 72.1 person.

The increase was primarily due to the increase of professional fees sadly welfare traveling and the team shouldn't have been needs expenses.

R&D expenses were pinpoint theme you know what it was quite of 2019.

Compared to $26.9 million plus inheriting an 18.

Revealing nucleus of.

Just $2.1 billion were 59.9%.

The decrease was mainly due to the de prison.

15.9 million dollar in raw materials consumption.

As of December 31st 2018.

A number of ongoing research and development products was 300, and if you're saying.

I've been in loss was $45.3 million has quite a 2019.

Compared to 24 when women in our operating income in peer last year.

Representing a decrease of $61 million worth 200.

<unk>.

This substantial decrease is primarily due to the decrease was profits by 30% division of doubtful accounts.

62 million dollar.

You are you customer.

Hydrogenics is.

Partially offset by the Lewis and leases and distances.

Income tax expense was 2.2 million dollar for the has quite a clean maybe we began the effective assertive.

Negative 3.5%.

Compared to income benefit.

Zero point eminent dollar it's imperative that year.

It does any effective income streams and negative 3.6%.

The increase their respective income tax rates was primarily due to the increased operating loss Dubai Sheila.

Net loss was just if I mean in dollar for the first quarter between 19 compared to net income.

$30 million for that's in Paradise here.

As a new decreased 78 million dollar works is under persons.

Basic and diluted loss per share for the first quarter Tonight He would bose.

87 cents compared to 20 cents per.

Sure.

Well the same period of 20 Pete.

The average number of shares used in Commutations basic Jamie the losses per share for the three months ended December 31st to 19 was 66.9 million compared to 50 point I mean insurance earnings per share.

Lighter year period.

And used before interest taxes, depreciation and amortization was meant to when you said 27.3 million dollar for the first quarter 219.

Compared to $30.1 million, but it's imperative to an 18.

Rather than it is $65.7 million were 171.1 person.

A detailed reconciliation of EBITDA, a non got married or two years to getting equivalent.

See the financial tables and into the press release issued earlier today.

Now, let's turn to the balance sheets as of December 31st to 19.

The company had.

$220.4 million in the total amount of cash cash equivalents and speak to cash.

The decrease of 130.6 million dollar, 37.8% that's compared to.

$867 million as of December 31st Twin engine.

Wouldn't happen to us negative 14.1 million dollar and current ratio was.

As compared to the parent mission was 2.9 as of December 31st when he.

So there is every bit as of December 31st.

Was $836.1 million.

And he was a 11.7% as compared to $748.9 million.

Or 30% to an eight.

Maybe due to the conversion of steep restocking to common.

And so on September 26, 29.

Any dose outbreak koby 19 in the PRC Chen or the industry production and sales.

Jeff you pushed by 33.4% and 31.1% for the first four months when you're 20 <unk>.

According to the 10 Association automobile manufacturers.

It hasn't really affect impact to alternative supply chain, including.

Does it affect the company had temporarily closed its manufacturing facilities offices and the PRC.

You put into his new requirements are becoming recurrence of down going putting it in pandemic has had a material out of Us Act.

Our business operations.

Doesn't just a consensus and ongoing uncertainties the company will not be able to forecast initial guidance physical 2022 without notice.

Now before we open the call Joe quite choose to note that question two exits to imagine in China.

Simply because they are quite shoes and users.

I do want to ask a question Chinese precisely ASCII English for the benefit of our business.

Please also note that we would need able to this point issues about all financial and operating results.

One of them as including the gun I'd offer we refer you to have already issued I should leases.

I will not be able to respond to questions that are directed to the principles moved to the going over about the proposed transaction.

With that we'll now open the call into question operator.

Ladies and gentlemen, and I'll begin the question and answer session. If you wish to answer your question. Please press star one telephone and where are they seem to be an out if you wish to cancel requests.

Stuff how ash.

Your first question comes from.

<unk> losses.

Your question.

Okay. Thanks for taking my question I'm I've got a lot of.

Because theres a lot of things going on.

I'll start with a positive you guys are.

Crushed your guidance you did a lot better than your expectation.

The last conference call you had guidance for revenues the top line of 1.1 to 1.3.

I pointed out you would already done more than 1.1 after three quarters shows a little strange just like this quarter Strange you ended up with one point.

For for instance are you beat.

Beat your guidance significantly on the top line.

The glaring problem is of course, the large uncollectible as you call it.

Bill for some customer in the you a.

All right.

You must have known that was uncollectible during the fourth quarter and that actually in December is when you were able to close on the very very important financing so the banks.

We're willing to lend you money for the first time.

These state owned enterprise banks.

Even though they knew that there was supposedly some sort of collection problems.

So to me that's a one off events.

And.

Can you tell us the status of that alone now okay. It's in June now and.

That was uncollectable as of the ended the quarter.

I kinda paints the quarter negatively, but if it's a one off events it really doesn't matter going forward. Okay. So how does that stand now.

I'm, a this sort of homes, all the hall or any change.

So a motion in China can be found.

You're welcome.

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Hi, this is a cousin huh.

Ah goal.

What how have moved from a.

Yeah look like.

Hey matters to so you answered comes from our chairman Mr. Jie Han.

So first of all we've accrued as such loss and based on the U.S. GAAP and also obviously the number we're only buy or are there you can keep on secondly, we still continue how efforts in connection and would think.

Sometime later this year, we'll be able to collect the outstanding amount.

Lastly, he doesn't necessarily believe Oh this is really into the bank.

Ben conversion.

No what I was there anything like what is yes wont.

I'm sorry go ahead.

So yes. This we view this as a one off events.

Okay then.

If you first of all I still unclear I mean.

The.

The sale to some customer in the EU, a basically was twice what you did for the whole year.

And so.

Whoever made that sale and approved it.

Yeah, you got a question what sort of due diligence they did but it sounds to me that you're going to collect yet so you're going to write that losses back up this year all right. So.

By a one off of that you just dumped it into the fourth quarter.

Hi.

And then numbers look worse than they are because you're going to be able to recoup that and put it back on as an income item for this year.

And the banks lunch you the money knowing that and that's the critical thing because they wouldn't be lending you money for the first time, if you were showing some sort of.

You know shortfall of that magnitude.

But your revenues grew dramatically.

Your EBITDA was still very strong.

And.

You know.

For a long term shareholders. The key is how the company going to go be doing going forward Mr. Han obviously believes it will be fine because he's trying to buy the company.

And I know we're not.

Supposed to ask any questions regarding the offer but does mr. Han.

No I mean I know he knows this but does he I understand that when he makes an offer.

You know aptar not even reporting.

20 at Ford anything like that.

At a cyclical low it's like four or 5% above the average trading prices a dollar time.

It is not only insulting alright because.

Hi.

Offer could have.

Even if he had offered $1.30 or $1.40. It's still would be insulting would at least would be 30 or 40% above the price.

And what he must realize that shareholders would find that completely unacceptable, particularly if they've been holding the shares all these times.

And if.

If you're going to be recovering that.

The unpaid balance then you're looking at a company.

Yeah.

He's made an offer at less than one times earnings is certainly a lot less than a ever Utah. Okay. If you come in at 145, even with that poor fourth quarter showing.

The dollar 10 times 66 million shares is about a 70 some odd million dollar. It's one half of every time. So it just makes no sense and it's inappropriate and shareholders are rightfully.

Upset about that sort of notion all right. So you should know that and he knows that anyway, all right. So its something that in the United States here.

Nobody would even try.

Because they would realize that there would be a class action lawsuit would be filed so what is the current book value of the company can you give me the shareholder equity please.

Okay, Matt Let me translate your question first.

[noise] [noise] handling how can run in a manner, one I mean that actually so you'll get the sort of guy I noticed your Oh, we got on the with the allowance in the meantime, John.

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Well its falloff.

Uh huh.

That's why don't you said you go around how can you are not one this year who's on the high now.

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How much is how you're feeling.

Feeling positive about who there again I'm not sure transitional though.

Okay and the Hunter you can think claims handling it looks even though no change because things have been essentially.

Well.

Oh, I told you that would make prudent hello.

So my team to find that used to doing homework.

I mean that they wouldn't have not made lucent handled long canyon redundancies or.

And then kind of one of the.

Yeah, Bob usual somebody that sequence, we don't put it will go into a leading here she's getting funding.

Hi, <unk>.

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Okay.

Hi, Mike on.

Well first of all you actually lose shareholder value as of the end of mass here.

On.

It was 836.4 million dollar.

And also you again, so it comes down our chairman usage at home.

Well he wanted to thank you for your understanding.

Of his position as regard to new compared to offer so he wanted to.

Hey, good that it's not easy to fishing and all this launch so.

Hi issues associated with it.

So I was regarding the.

Connection pharma.

Your your customer we believe that we'll be able to recoup.

Sometimes we resolved and sometime later this year.

Right you already said that but so if you're going to collect that.

Than the loss last year.

For the near Los since you only made.

The loss that occurred in the fourth quarter really isn't a loss all right.

Almost as if.

It was a new customer.

Whoever made to sales to that customer.

Hi, I do have done I looked at up due diligence visa represented over half your foreign sales.

And it doesn't make sense, you would make a sale to a new customer like that and not get paid so it's almost as if its purposely.

In delayed so that the numbers would look bad I have to tell you that alright. So now after he makes an offer.

For about the value of the wholesale $1.10 times 66 million shares.

Oh, it's about $69 million $68 million, all right or 70 million. That's the whole amount of the uncollectible that is now going to be collectible. This year. So it. It just doesn't look very good and now he wants to buy the company. So a at that at the low.

This price that is traded at a since he came public for the US a is brought a public essentially so anybody valuing the company would have to write the value back up based on the collectability of that.

Sales and since your margins have gone up dramatically because of the higher cost of goods sold then the company going forward is gonna be significantly more profitable your current book value by the well I'll point out.

Is it about a.

12 times, what he's interested in buying a company that does that seem.

Like a fair assessment of the value of the company 12 times, what the offer is so.

Yeah. These are things that just don't make any sense alright other than that the company got some.

However, the market knows the company got some very important financing.

Your revenues.

Right by a wide margin your projections for the year.

The only reason you're showing reduced income is because of this one sale that you are still not being very clear on.

If some new customer.

Who currently we don't even know who it is but that customer is going to be paying you back anyway, and the banks that lunch you the money no. It otherwise it would have never closed on the loan. So I just want Mr. Han to be very aware that this is not lost on on it.

Masters and if there's any.

Chance to try and.

Take the company private is dollar 10, it's not going to work.

From the viewpoint of shareholders that are not part of the consortium because.

There's no point in a grain do a deal at this level because its such as such a low price.

Well would rather take their chance.

In courts, or just not voting for it to go through so I'll just leave.

You know you all with that there's a there's tremendous disappointment on the on my part as well as investors that I represent that they feel that this is not a very honest.

Or ethical.

Uh huh.

Maneuver by Mr. Han.

And.

You know you should know that I think he does he probably doesn't care, but it needs to be said and I'm using my opportunity on the phone call right now to say that so I'll, let somebody else express their opinion.

So.

I'll be I'll be courteous and say thank you very much for the time.

Fair enough. Thank you and dozens of comments obviously.

As to the evaluation upon coming on the market has a value on it. In addition, especially committee has console advisor, yeah, who will be new copter.

On behalf and especially the meetings and its shareholders.

Well as long as you brought him up the last time they made an offer for the company in February of 2017, you hired Duff and Phelps, but you never told US even though you had been asking number of times on conference calls.

What Duff and Phelps, what number Duff and Phelps it come up with when you had made the offer years ago. You just never told US. So you know what are we going to find out what.

Value the company.

It was assessed at by definition Phelps. This time around is that we're going to get an opportunity to get this independent appraisal.

So I think Matt is very important to node that doesn't help.

Yeah hired a bye.

Special Committee, you're not looking for the company. So we don't have any.

Any.

Dialogue, well communication with them regarding the equal and offer.

I'm sure you on their you're going to go from there could be time will.

Me.

Right.

Action.

Or not.

At least who buys to especially me.

Well like they did last time I guess alright, Thank you Taylor.

Thank you Matt.

Once again, if you wish to answer your question. Please press star one on your telephone and we already name to be allowed.

Your next question comes from how phone from <unk> investment management. Please ask your question.

Hi, Thanks for taking the call.

I just another quick question on your current operations and she can comment on them, obviously longgang is.

<unk> area, that's still being affected in China, and that's where your main production facility is are you currently running for operations harder than Pp. That's car production, we started in China.

If not you haven't met the when you'll be able to start producing again.

And also maybe just comment on that creation and you can comment on your pop build the PDP production as well. Thank you.

Sure. Thank you Uh huh.

Let me translate question can you maybe.

A homeowner <unk>, probably the only thing the hung in Tucson, Godaddy Salamone comes to.

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<unk>.

Hello.

Hi, how HM.

Here's one so from our chairman Mr. Han.

So as you correctly noted heading down has the their surged.

[noise] Oh come from cases went through the rest in China.

So.

We also worsening before.

In bother.

So during which we have.

The strong effect caving February or March.

I'm pulling out.

Operating like approximately 60% of our capacity.

[noise] missing here last year.

HM as for your question regarding.

The margin situation, where you saw P. materials for example, we haven't stimulus for mobile and corporates.

So the market has cannot treat a lock you can you most notably in China, but won't though many area in the world.

For example in April.

The gross margin was approximately 50%, meaning the me it came down to 30%.

But anyway and you didn't even.

Over the long term we believe.

Good good business. So the gross margin probably will be normalized at the level of people seem to go by them.

Okay. That's helpful. Thank you maybe just a note for the pillars that maybe in the issue Q1 results or guidance. If you ever do we would just like you worked out the percentage of he.

Product sales just so we know how relevant it is compared to traditional.

That was made that up.

Just want to follow up questions on maybe your capacity expansion in Capex.

We see in there you had around 230 million of cash on hand, but you also had commitment and the fourth quarter what are your line extension.

Let me just that's about you plan on delaying some of those project mix here you go through 2020 with with the help your balance sheet. We know the company has a lot of that's already so.

I'm very concerned about investing massively.

From a year, but some system.

And maybe can be mangas comment on maybe.

The cash burn that you expect this year, but that will be positive cash flow.

Sure. Let me also trying to your question.

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Okay, and what Matt.

Wow, what a wasn't quite clear now.

ER that originally shall TJ if at all.

[noise] <unk> so first of all.

Chairman I won't go. Thank you for your suggestion and we will.

I do not I mean, the pointing corner and way.

We use our we don't.

Regarding the description of what pp materials.

Secondly, core products this year.

We'll monitor our test position, our cash flow as well as potential.

Additional financing.

When we.

Proceeding with our Capex, So we will.

Conduct our capex.

Carefully.

[noise], Okay, and maybe just a final comments on the <unk> offer I know you've got can comment on it.

I mean, I think a lot of minority shareholders shared the.

Let's say a distressed over the pricing overall, so you see what everyone has done it salmon part over the last year and supporting the company with liquidity.

And we hope that when it come if it comes down to a vote that like lop off or you will allow minority shareholders vote on the proposal without.

Using his majority stake obviously on the on the offer and that's it for me today. Thank you.

Hi, Thank you how I'm not doing one on Hudson Suji going to really working on measurable impact teed off and you know Honda summing up onto a single off 200 people how material enough with alphabetically pool patches is on the why not.

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How much quicker time to fulfill the hospital pool.

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Once again, if you wish to other western.

Sorry, one oil, California, and B y on him to be a though.

[noise].

[noise] I see no further factor I'll now hand circumference back to now we care one for closing remarks.

Yes.

On behalf of China, XD plastics, we want to thank you for your interest and participation in this call. If you would like to speak we asked for that he's coal either myself or painter.

During this often contact numbers, so all of us I'd and end up the past neat. Thank you.