Q4 2020 China Yuchai International Ltd Earnings Call
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Yeah.
Ladies and gentlemen, thank you for standing by and the one to China, China International Limited second top and Andrew <unk>. The results at this time all participate in listen only mode. After the speaker's presentation, there will be of question and answer session.
The question during the session you will need to press star one on the telephone I would now like to turn the conference of Covid.
Please go ahead Sir.
Thank you for joining us today and welcome to China.
The second half and fiscal year conference call and webcast.
Joining us today are Mr. Ho from Dr. Thomas Phung, President and Chief financier of C Yi, respectively.
In addition, the awesome.
Mr. Kelvin Lai VP of operations of <unk>.
Before we begin I'm more.
Remind all listeners that throughout this call.
We may make statements that may contain.
Looking statements within the meaning of the private Securities Litigation Reform Act with 1995, the words believe expect anticipate project.
Are you optimistic.
That continues to predict.
Then aim will or similar expressions are intended to identify forward looking statements.
All statements other than statements of.
Historical fact are statements that may be deemed forward looking statements.
These forward looking statements include but are not limited to statements concerning the company's operations and financial performance and condition.
Based on current expectations beliefs, and assumptions quicker subject for change at any time.
The company cautions that these statements by their nature of involve risks and uncertainties and actual results may differ materially depending on the variety of important factors such as government and stock exchange regulations competition.
Political economic and social conditions around the world and in China, including those discussed in the company's form 20-F under the heading risk factors.
The bulk of operations and business overview and then the other reports filed with Securities and Exchange Commission from time to time.
If the COVID-19 pandemic has effectively control our business operations and financial condition.
The early in the adversely affected due to a deterioration of market for automotive sales.
And the economic slowdown in China and abroad.
A potential weakness of the financial condition of our customers.
The adverse impact of our suppliers and supply chain or other factors that we cannot foresee.
All forward looking statements are applicable only as of the day. They are made and the company specifically disclaims any obligation to the main thing or update the forward looking information.
Of the nature of contained in the press release.
The call or otherwise in the future Mr.
Mr Hill will provide a brief overview and summary, and then Dr. Phung will review the.
The financial results for the second half periods in fiscal year ended December 31 2020.
The reactor, we will conduct a question and answer the second.
For the purposes of today's call the financial results for the second half period of interest.
Year ended December 31, 2020 are unaudited and they will be presented the RMB and U S dollars all of the financial information presented.
For using the international financial reporting standard.
This is by the international accounting standard Board.
The whole begin your prepared remarks.
Thank you Kevin.
So the 20 years started out with the fare but end of the strong momentum for China.
For the first country hard hit by COVID-19 bundling.
This widespread the infection caused major disruptions in the Chinese economy, including the launch of an important automotive industries in China.
Customers suppliers, the Lurkers service networks and the other auto related occupations well all in fact, the in the first half of 2020.
The man mandatory travel restrictions and Lockdowns triple the Chinese economy in the first quarter of credit or indeed the.
China's GDP declined by $6 eight per cent.
Year over year quarterly the crises like the 92.
Despite the economy in fact in our lower engine unit sales, we maintain profitability at the end of the first quarter of 'twenty, the basic and diluted earnings per share of RMB 149.
We maintained a strong financial position with cash and bank balances of RMB four 8 billion.
The with the success of Lockdowns and travel restrictions the Chinese government quickly.
The limit growth catalysts, which helped the Chinese economy recover all of a GDP of sort of as China's GDP rose by three two per cent.
The second quarter 2020, it is sales of commercial vehicles, excluding gasoline powered and electric powered vehicles increased by 55% led by truck sales increase of 66, 1% of its according to the C. In the data.
Some of this growth force pent up demand from the first quarter and some was the response to incentives.
For when the economy stimulus will bear fruit.
By the fourth quarter of 2020 the.
Chinese economy was fully recovered with GDP of turning it.
The $6, 5% growth rate and two three per cent for the <unk> 20 for the year.
In the second half of 2020, our sales for 217238 engine units an increase of 30 148 per cent compared with the same period into the 19.
Our total truck unit sales increased by $43 four per cent.
This increase of spearheaded by our six of four 4%.
The medium duty truck engine.
It more than double this year end, we reported 34, 1% growth in the medium duty industry truck sales as our market share. So in this segment.
The heavy and light duty truck engine sales so for achieved double digit growth.
Our total off road engine sales to the rule by 51 per cent.
And half of 2020 with strong agricultural engine unit sales in the industrial is also reported double digit unit growth as well.
These gains in the truck and off road segments more than offset lower engine unit sales the bus.
Yeah.
Revenue rose by 18, 1%.
The operating profit grew by 14, 5% in the second half of 2020 compared with the second half of city of 19.
Our net profit of RMB 200 of for the tree.
For 2 million U S. Dollar study of $7 3 million was impacted by the share of results of our associates.
And just we should decrease to a loss of RMB 64 of five 5 million all your style of sniper of 9 million.
But with a profit of RMB 11, 7 million in the second half of the the 19th.
For the 2030 year of.
Revenue increased by 14, 2% to RMB four 6 billion.
The other $3 2 billion or the of 14, 4% increase in engine sold to Florida.
For the 30000 trend for the unit.
I know the truck engine unit sales were up by double digits in off Road unit sales increased by 31, 7% led by a large increase in unit sales to the agricultural market.
Oh annual net profit attributable to China. Each has showed US was RMB five of them for the eight 9 million for all U S dollars 84 per $1 million compared with 600 of four 9 million in 2019.
Basic and diluted earnings per share was RMB 13 for poultry or U S. Dollar to dollar of sales success compared with RMB for the envoy eight one in 2019.
Our annual net profit was also affected.
<unk> share of results of associates and JV, Chris the of loss of RMB 59 million Toyah style.
All of the 5 million.
With the profit of 19 million in 2019.
For the 2020 year.
R&D expenses increased by $27 three per cent to RMB, $636 5 million or U S. Dollar $96 million as he continues to further develop our portfolio of new engines compliant with China six emission standards the lesson.
Of those six for on road and deal flow for off road applications and for improving the performance and quality.
20, the total R&D expenditure, including capitalized cost was RMB, one 2 billion of all U S dollars wondering sort of themselves, but 4 million representing $5 six per cent of the net revenue.
The national six emission standards, the significantly more stringent compared with the nice correlation of five standard and it's one part of the Chinese goblins campaign to improve the environment.
So that's about six inches the room for any to any year and with the national six emission standards to be nationally mandated in 'twenty 'twenty. One we are ready to be for complete portfolio of the shows 60 sales and natural gas engines.
The major part of our product strategy is to be among the first to introduce the engines that meet or surpass upcoming I mean, the new emission standards to better serve current clients the attract new customers as well.
In the Marine space, we introduced the new lightweight high powered engine designed to replace the important engines of the yacht.
Plus also a Y C zero of 5175 fish as founder of Indian pass the European stage five emission standards.
Yes and.
This engine the challenge.
Good day, and there'll be a market leader in the European Union for for application.
Each has a long history of providing high quality high performance of bus engines has attracted many of the leading automotive Oems in China.
Well as customers as well as creating opportunities for strategic allies of associates and joint ventures.
In addition to the current driver and just why the C injuries at book.
Each of you try to exhaust and empty the ehi, we entered a new strategy of lines in 2020 with Sonny.
The show, which will of other potential applications further increase our presence in the heavy truck heavy duty truck.
We look forward the improving contributions from this China operations and the future of theft.
Flooring.
The initial for new alliances.
At December 31, 2020, we maintain our financial strength with cash and bank balances of RMB six 4 billion. All of you saw the $988 1 million after higher a higher R&D spending being cash dividends and investing RMB, one 7 billion more in inventories the high.
Inventory consisted of increase of mouth initial five engines for and expect the pre buy of the thing is before the national six emission standards of nationally mandated.
And we have increase of the chance of materials and components for national six.
Engine production as the standard.
The approach.
The rebounded strongly in the second half of 'twenty from the issues caused by the COVID-19 pandemic, we enter 2020 with momentum and strong for that life to meet the challenges of the upcoming national roll out of the necessary 60 emission standard.
In addition for a masseuse should generate higher demand in 2021 SCR economies improve.
With the continued.
Continued focus on maintaining our financial strength to provide the resources to enhance shareholder value.
I will turn to the Thomas to go over the financials.
With me.
Now, let me review of our second half results for 2020.
Sure.
Revenue for second half of 'twenty 'twenty increased by 18, 1%.
I'll repeat the endpoint 6 billion U S dollar $1 6 billion.
Compared to RMB nine point sort of appealing in the second half of printing of 19.
The total number of engines. So two of them showed during the second half of 'twenty 'twenty.
The one in 17158.
Yeah.
An increase of 31.8 per cent compared with 146789 units in the second half of 2019.
The increase was mainly due to higher end.
Unit sales in the truck market.
Total unit sales to the heavy and medium duty trucks market, but more of an upset the overall unit sales decline in the Pos into the settlement.
The market also achieved significant sales.
Unit sales growth in the second half of 'twenty 'twenty compared with the second half of 2019.
According to data reported by the China Association of automobile manufacturers see them in the second half of 'twenty 'twenty commercial vehicle unit sales.
Excluding sales of gasoline powered and.
Yeah true power because the.
The increase by $35 four per cent compared with second half of 'twenty of 19.
As unit sales of Pos declined by four 6% well.
Unit sales rose by 43 four per se.
Two of them so.
In unit sales.
On the commercial vehicle market increased by $23 five per se with truck unit sales.
By $43 four per cent.
Matching the.
Truck market school.
Sure.
In the unit sales.
To the opera market increased by the.
The 1.0 per cent compared with second half of the.
Company higher opera and the.
Unit sales were led by a strong growth in the part of culture settlement in the second half of 'twenty 'twenty compared with the second half of 2019.
Gross profit increased by four 9% to RMB, one 7 billion U S dollar $262 3 million compared with RMB, One 6 billion in the second half of 2019.
Good.
Gross margin was $16 one per cent compared with.
At this point of 1% in the second half of 2019, mainly due to change in the sales mix and higher material costs.
Other operating income increased by $39 six per se to RMB $273 3 million U S. Dollar $41 9 million compared with RMB $195 7 million of in the second half of 2019.
The increase was mainly due to higher government grant in the second half of 'twenty 'twenty compared with the skip hop of 29.
Research and development R&D of spin says were RMB $410 5 million U S. Dollar of $63 5 million compared with RMB $209 8 million in the second half of 2019.
The company continued to further develop its net new national six and tier four engine for the on and off road market.
In the second half of 'twenty 'twenty, the total number of or in the total.
The R&D expenditure, including capitalized cost was RMB $754 6 million U S dollar of $156 million.
And it represented seven 1% of revenue compared with $6 three per se in the second half of 'twenty.
Good day.
Selling general administrative SG&A expenses were RMB 1.0 billion U S. Dollar of 153 7 million, representing nine 4% op revenue compared with RMB 1.0.
Representing 11 4 million for.
Percentage of revenue in the second half of 'twenty.
Operating profit increased by $14 five per cent to RMB 568 for it.
Okay.
U S dollar it sounds like $2 billion.
From RMB $496 6 million in the <unk>.
And half of 2019.
The.
The operating margin was $5 four per cent compared with 5.5 per cent in the second half of my day.
<unk>.
Finance costs increased by 87 per cent to RMB eight points of ROE million U S. Dollar per $10 5 million from RMB 70 for two minutes.
Second half of the indeed and I didn't.
Higher finance costs, mainly result from higher low amount compared with second half of 2019.
The share of financial result of the joint venture decreased by a loss of <unk>.
RMB $64 5 million U S dollar of $9 9 million compared with the profit of RMB 11, 7 billion in the second half of the did.
Net profit attributed to China, <unk> shareholder decreased by $6 four per cent to RMB $243 2 million U S dollar $37 3 million compared with RMB 259.
$9 9 million in the second half of 'twenty.
And I did.
Basic and diluted earnings per share decreased by $6 four per cent to RMB five.
95 U S dollars zero point 91, compared with RMB 636 in the second half of 2019.
Basic and diluted earnings per share in the second half of 'twenty 'twenty in the second half of 15 19, well based on the hope.
For 2.858 million tour of Nike share.
Now I'll go over the fiscal year 'twenty 'twenty result.
Revenue.
It was RMB 26 billion U S dollar tree 2 billion compared with RMB 18 points of ROE in the.
The fiscal year 'twenty of 19.
The total number of engines so by true Mcl in the fiscal year 2020 increased by 14, 4% too.
430320 unit compared with 276146 units in the fiscal year 2019.
The increase was mainly due to higher engine sales in the heavy and medium duty trucks market Andy of.
But particularly horticulture engine.
Which more than offset the unit sales decline in the bus segment.
Gross profit increased by.
Two seven per cent to RMB, three 2 billion U S dollar for.
One of it for 8 million compared with RMB tripling of $1 billion in the fiscal year 'twenty Nice day.
Gross margin decreased to 50.
<unk> 55 per cent compared with 72 per cent in the fiscal year 2019.
The decline in gross margin was mainly attributed to the change in the sales mix and the higher material costs.
Other operating income increased by 12% to RMB true.
So the $8 9 million U S dollar of $58 1 million compared with RMB $238 5 million in fiscal year.
2019.
The increase was mainly due to higher government grant compared with fiscal year 'twenty the nice thing.
R&D expenses increased by 27, 3% to RMB $626 5 million U S dollar of $96 zero million compared with RMB $492 2 million.
For the fiscal year two of the.
The company continued with its initiatives to develop new engine compliant with China six emission standard national for the next of six it here for <unk>.
To improve engine performance.
Qualities.
In fiscal year 'twenty 'twenty, the total R&D expenditure.
The capitalized cost was RMB, one 2 billion U S dollar of $177 4 million, representing five 6% of revenue compared with four 8% in fiscal year 15.
It did.
SG&A expenses were RMB, one 8 billion U S dollar $269 7 million, representing 6% of revenue compared with RMB, One 8 billion.
Billion, representing 10.0 per cent of the revenue.
Good year 2019.
Operating profit increased by three 1% to.
The 1.2 pillars of U S total of $181 2 million.
From RMB, one 1 billion in the fiscal year 'twenty.
The operating margin was seven four.
Sorry, the operating margin was $5 seven per cent compared with $6 four per cent in fiscal year 2019.
Finance costs increased by $14 seven per cent to RMB 151, 2 million U S. Dollar $23 2 million from RMB 31 point.
In the fiscal year to the United States.
Higher finance costs, mainly result from an increase in loan amount compared to fiscal year 'twenty.
The 19.
The share of financial results of the joint venture decreased to a loss of 59.0 million U S. Dollar of my 0.0 billion compared with the profit of RMB 19.0 million in fiscal year 'twenty.
Net profit attributed to China, each high shareholder was RMB $448 9 million U S. Dollar at the $4 1 million compared with RMB 600 in for 9 million in fiscal year 'twenty.
Basic and diluted earnings per share were RMB 13 for tree U S dollar to put or six compared with RMB 14.1 fiscal year 2019.
Basic and diluted earnings per share for fiscal year, 'twenty 'twenty and fiscal year 2019.
Well based on the weighted average of <unk>.
$40 million.
The 5001 of Nike share.
So let me walk you true our balance sheet highlights as of December 31st in the community.
Cash and bank balance were.
RMB six 4 billion U S. Dollar of 900 of it at one 1 million compared with RMB six 4 billion at the.
End of fiscal year 'twenty.
19.
And Bill receivables were RMB, eight 1 billion U S dollar $1 2 billion compared with RMB seven point it would be the.
At the end of fiscal year 2019.
Inventory were RMB five point.
Sorry, the inventory will already be for 5 billion U S dollar.
6600 of it at $5 3 million compared with RMB, two 8 billion at the end of fiscal year 2019.
And Bill payable were RMB, seven 5 billion U S dollar $1 1 billion compared with RMB six 2 billion at the end of fiscal year 'twenty. The nice did.
Short and long the bank borrowing were RMB, two 2 billion U S dollar share of 41 million.
Compared with RMB, two 1 billion at the end of fiscal year 'twenty the 19.
I'll now turn the call over to Kevin for the comments before we begin our Q&A.
Thank you.
Please note that due to the COVID-19, the officers of China, each eye of remotely calling into the conference call.
This may result in a slight delay in providing answers to some questions. We apologize for any inconvenience and thank you for your patience.
With that operator, we are ready to begin the Q&A.
Certainly ladies and gentlemen, we will now begin the question and answer session. If you wish to ask the question. Please press star one on the telephone keypad and wait for the name could be announced.
Wish to catch the break with completion of British pound.
A bunch of getting start followed by one to ask the question.
We have the first question from the line of credit.
Great for our ski from.
Greenwich Global Please go ahead.
Hi, guys.
Could you talk about what your expectations are for the current year in terms of volumes the unit volume sales and also the mix of that.
But we don't provide a forecast for gliders, William but what we're seeing in the first two months of this year seems to be quite positive the.
The other number seems it is cash.
Much better than what you had in the last year or two.
So we believe the first quarter was it will be a super growth for us, but the other one of the reasons for that is probably because of the.
The implementation.
So you shouldn't wait for the of National six.
Emission standard.
So that will be implemented.
By 2021.
The debt.
That's sort of a soft result of is of some pre buy effect that debt.
The causing some of the higher order numbers of a seek them out in the in January of February.
February.
Okay and in terms of product mix I mean, do you think that.
That's going to be somewhat similar to last year or I guess I'm trying to get towards the gross margin you know it was down quite a bit.
In 2020, and if the things we can do to get that up this year right I think of this last year.
We saw some pretty good growth at all.
Other cultures segment.
Our for sale has a slightly lower margin compared to the at the truck segment. So we would still expect the other the other.
Other cultures that want to grow.
The next year and the years anything one.
Not with the truck segment is already a very high I mean for especially for the heyday of medium duty truck into the 20 <unk>.
Don't see too much more growth in there the right way.
The decline I think for the wholly owned debt.
Okay. Okay. So we should probably expect lower gross margin for 'twenty 'twenty, one compared to 2020.
Hmm.
The last part was it happened twice a day I think it should.
Should go for total.
For anyone.
As the sell more let's let's say for you we expect that the proof of sort of the margin.
Okay, well I don't see that let's say the CRM.
The deterioration that any further.
Okay.
Can you talk about the the R&D other than you're spending a lot more now than you have in the past can you talk about where all of that money is going towards.
Well, it's good for us.
For the new version of spacing.
The city gave me the facility.
And develop a whole new platform. So that is pick up for the fact with R&D.
R&D money, especially in the last few years of.
The bulk of it yes, it's actually took place in 30 per the one I'm sorry 2000.
<unk> now with the election of six now implemented as of right of the products are ready. So we did the effect that the growth of other in fact, the stay to the to be.
The less compared to the previous 2020.
Okay, Alright, great and then last question is what was the loss from the JV from.
Okay. That's from one of our unit up north.
The two.
Two things one is the and things of that.
The like for the the cost of the I call the precious metals that letting them of rhodium and palladium debt when the.
For the roof right in the last couple of year or two so that's one of the a lot of the.
The cost of materials that are debt has impacted debt to unit.
So.
One of the the getting the productivity that we have hundreds of problems. So there were some recognition of costs there that the causes that should be behind us for putting it in what.
Okay, Alright, alright, great. Thank you. So thank you for me okay.
Thank you.
The next question from the line of.
<unk> done Hep C from Shah capital. Please go ahead.
Good morning.
The approximately what.
Low.
Approximately what percent of the what $1 2 billion Renminbi R&D spend was spent on new energy vehicles, including transmission and green hydrogen initiatives the.
The bulk of it is actually spent of the nationalistic sent a T T for.
For the development in the last three years so.
The reason why the bulk of this on this is because of the national six standards, it's gonna be implemented nationwide by the July 1st right.
66, B two years later and the tier four is scheduled to be implemented in 2022.
Now the soldier.
All of this has got in there. So we will have split the debt.
For the amount of spend on the.
Our new energy and <unk> side of things.
But.
It will not be as high as the other two.
I would say it's less than.
The.
20%, perhaps about the.
20%, Yeah all of.
Yep Yep.
Okay.
Thank you that's all from us.
Yeah.
For Q1.
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Yeah.
We have not reached the end of for a Q&A session and I will turn the call back over to Mr. Hart.
Thank you all for participating in our conference call for the East we wish of Yoga health and please be safe during this crisis.
We look forward to give you a gauge goodbye.
Thank you.
Ladies and gentlemen, the does concludes the conference for today. Thank you for participating on the.
Disconnect.
Yes.
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Hmm.
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Yeah.