Q2 2022 CBAK Energy Technology Inc Earnings Call
of revenues in the first quarter, which had already surpassed that in the entire 2021, we have again achieved another remarkable success in this quarter. Our revenues reached $56.4 million in the second quarter and $136.5 million in the first half, which have respectively increased by 8.57 times and 7.92 times from the same period last year. Specifically, revenues from battery business were about $25.7 million, upped by over three times if compared to the same period in the last year. Such an increase was astonishing. The significant increase in revenues was attributed to the precise understanding of our management team on the new energy industry. In the context that China views carbon utilization as one of its basic development guidelines and that governments put great resources into the new energy industry, it is our decision to expand our current production capacity for new energy batteries. Understanding the business of new energy vehicles is getting hotter, which leads to the shortage of battery material supply. It is again our decision to acquire hydrogen as our battery materials unit to support our development. Both of these decisions without self-understanding on and solid experiences in the industry cannot be precisely made. Besides our record high revenues, I'm also happy to extend to all shareholders and investors here our efforts for development from three perspectives, from capacity expansion, from sales performance, and from research and development progress perspectives.
First, please allow me to have an introduction on the entire blueprint of our capacity expansion plan.
First, please allow me to have an introduction on the entire blueprint of our capacity expansion plan. Thank you.
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I will introduce the capacity of our base with business. We currently have two major production centers, one of which is located in Dalian and the other is in Nanjing. Our Dalian center was put into operation roughly a decade ago and currently has an annual capacity of one gigawatt hour. We planned two phases in our Nanjing manufacturing center. Phase one was put into production in late 2021 with a carrying capacity increased.
from 0.7 GWh at the very beginning to 1 GWh at this moment. We anticipate to increase the capacity of Phase 1 to its fully designed capacity 2 GWh at the end of this year or early next year. Besides, our total capacity is far from enough given that the market demand continuously grows.
Our phase 2 project in Nanjing is thus much bigger.
capacity of 18 GWh. We believe that phase 2 projects will gradually stop operating from late next year. We will deliver 6 GWh per year until the capacity reaches 18 GWh. Going forward, our Nanjing plant will mainly produce large cylindrical batteries that are mostly power batteries for EV and LEVs. Our Dalian facility will continue focusing on its mature 026650-026700 batteries.
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In this quarter and first half of 2022, we continued our strong momentum in the sales of our battery and battery material products. The demand of our products is far over our current supply. As of August 6, we have received orders worth of about $55.35 million that have not yet been delivered, and we'll have a great number of orders coming in line. We believe that these orders will strongly enhance our sales performance in the second half of the year.
I will also introduce the latest developments on the duals that we have announced before. We have already delivered samples of battery packs worth of about $208,000 to Azapa and Diehard.
And now I'm producing more samples. We anticipate to receive an order of 5000 to 10000 units of battery packs from Diehuts next year.
In July , we announced a framework cooperation with Gmail, which is a LEV manufacturing unit of JP Group, one of China's biggest LEV manufacturers.
We have already provided several samples for testing. Once we pass the test, we anticipate to start receiving a great number of orders from Gmail and JP Group.
At this moment, we are also approaching more LEV and EV manufacturers in anticipation to bring much more valuable orders for our shareholders and investors.
Going forward, we will continue developing our natural energy storage business, on the basis of which we vow to further expand our revenues from the EV and LEV sections.
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We view our research and development capabilities as a key to Revit development. Developing new types of batteries that cater to variable market demands will make us easier in our marketing campaigns.
In last quarter, we had reported that we were in the process of developing new model 42140 batteries. In this quarter, we are pleased to report that the testing on the prototype of model 42140 batteries was successful.
We are currently preparing for the establishment of its production lines. Larger, synergical batteries such as model 4140 are much more suitable for EV and LEV applications.
This battery will surely be used for LEV market development. More excitingly, we recently announced a joint development agreement with one of the top players that is leading in the research and development of sodium ion batteries. At this stage, we are moving smoothly in the development of sodium ion batteries. The prototype was out and had passed the test. We expect to see mass production soon in the second half of the year.
In these days, there are a number of top Chinese battery manufacturers that are investing in sodium ion batteries, which will contribute to a huge potential market worth of tens of billions of RMBs.
If we are able to take a lead in this area.
It will be vitally and strategically important to our future growth.
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In the second portion, we have achieved comprehensive progress in revenues, research and development, sales, and capacity expansion. We are actively investing in the battery material business and the potential sodium ion battery business in an attempt to obtain greater competitiveness.
Despite the inflation of the price of raw materials has resulted in a rising manufacturing cost and linked to a slow progress in our profits growth, we believe that the inflation will eventually be effectively controlled as a result of capacity expansion from battery material producers and the introduction of new type of batteries such as sodium ion batteries.
We will definitely see our process normally grow at that time.
Thus, our 19 plant was put into use just at the end of 2021. We are still ramping up its capacity and will not be surprised to see it generate greater profits once it takes reasonable time to reach its full capacity.
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We are still monitoring any valuable targets alongside its supply chain and talking to experienced teams in an attempt to search for valuable and profitable investment opportunities.
In the future, we not only wish to grow faster in our principal business, which is basically producing, but also anticipate to act as an industrial investor with focus on the new energy sector. With our solid experiences in the industry, we are confident to activate any acquired assets and to make our book look better. Our management team has full confidence about this company's future.
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Now let me turn the call over to our CFO Yuna Pei who will provide details on our financial performance.
Thank you, thank you, Mr. Lianders. Thank you everyone for joining our call today. I will now go over our key financial results for the second quarter and the first half of 2022. For the full details of our financial results, please refer to our earnings pass relief.
The strong fields in our battery and battery material products are fully reflected in the astonishing increase of revenues. Even if the raw material price hike is still a short-term setback to the factory design, which limits the growth of the asset, the children act in order to mitigate this impact.
As always, we continue our investments into our new facility to enhance our good past and new care for growing others.
We also increased the ability to translate our investments in research and development and sales marketing efforts.
Moving on to our results. In the second quarter, our net revenue surged by 857% to $56.4 million from the same period of 2021, primarily due to growing sales in our battery products and faculty material.
Specifically, our net revenue from our battery business grew by about 337% from the same period of 2021.
In the first half of 2022, net revenue still demonstrates a great growth momentum, which increased by 792% to $136.5 million from the first half of 2021.
Revenues in the battery sector grew in the first half of 2022 by approximately 176% from November 2021.
Cost of revenues was $50.8 million in the second quarter and $125.7 million in the first half.
up by 961% and by 916% respectively from the same period in the previous year.
Growth profit was 5.5 million USD in the second quarter and 10.9 million USD in the first half.
representing an increase of 404% and 270% respectively from the prior year.
Growth margin was 9.5% in the second quarter and 8% in the first half, compared with 18.6% and 19% respectively in the same period of 2021 as raw material cost rose.
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and we expect the price of raw materials to decrease while new capacity is being added by the industry.
Our operating expenses rose by 41% to $2.5 million.
for $1.9 million in the second quarter and by 100% to $12 million in the first half primarily due to growth in head coughs. The first half primarily due to growth in head coughs in our new 19 facilities and the acquisition of our bathroom material business.
Within that, our research and development expenses increased by 120% to $2.3 million in the second quarter and by 267% to $5.6 million in the first half. Sales and marketing expenses increased by 12% to $9.
0.7 million dollars in the second quarter and by 100% to 1.5 million dollars in the first half. And the general and other administration expenses increased by 5% to 2.5 million dollars in the second quarter and by 8% to 4.7 million dollars.
Even with this increase, our operating expenses were held only 9.6% relative to our revenues in the second quarter and 8.8% in the first half, compared with 64.9% and 37.2% in the second period of 2021.
Our change in their value of volumes was $2.1 million in the second quarter and $3.8 million in the first half, compared to $5.8 million and $34.2 million in the prior year. Thus, net income attributed to shareholders of feedback energy was $2.5 million in the previous year.
$0.8 million during the second quarter and $1.3 million in the first half, compared to $22.7 million and $32.3 million in the same period of 2021.
That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
Operator, please.
Ladies and gentlemen, we now begin the question and answer session.
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We have a question now.
The question is from Laura Liu. Please go ahead.
I would like to thank our speaker. Thank you for yourKill. I think we will continue the discussion Herald will continue if you come back. visit Chen ordered Yuk state nishuun
Okay, so the question is concerning sodium-iron batteries. The company announced the plan to develop sodium-iron batteries and as you just mentioned, it is expected to be ready for mass production soon. Will sodium-iron batteries become the company's main business in the future and what is its strategic significance to the company?
And what are the advantages of a sodium-ion battery over lithium-ion battery?
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Yes, so we believe that sodium ion battery is a very good supplement for lithium ion battery. But we have to say that at present, lithium ion battery enjoys quite a lot of advantages. For example, it has higher energy density and performance is stable, and there is a complete supply chain surrounding lithium ion battery. So it is still our main business currently.
However, we also noticed that since 2020, the price of lithium has been increasing and the market demand for lithium batteries has been growing.
dramatically and all these factors will lead to a structural shortage of lithium-ion batteries. And as we know for...
sodium ion battery enjoys a large amount of storage and reserves and the price is relatively low. So for our company, we have already finished the prototype development and the
prototype production is also stable and the performance is satisfactory. We have overcome various difficulties in terms of the production technology and the performance turned out to be satisfactory. So we believe that the sodium ion battery will become a very good supplement for our product portfolio and it will also become a very good driving force for us to cover the niche markets.
and improve the competitiveness of our company. So we believe sodium ion battery is of great strategic significance to the company.
That's it for the end, thank you for the question.
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Okay, so the second question is concerning the revenue of the company. We can see that the company's revenue has witnessed a great increase again, but still we cannot see breakthrough in the profit growth. What is the main reason behind it? And will the company take any measures to boost profit growth?
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season, our profits cannot achieve a proportional increase with the revenue. And there are reasons behind it. And the main reason is the price hike of raw materials and the increase of the raw material price lead through and growth of our manufacturing cost. And this will also have an implication in our profit growth.
But we have to see that our production capacity expansion in Nanjing and Dalian has gone smoothly and we believe that with the capacity reached its full production in the second half of the year and as the decrease of the raw material, we believe that our profits will return to a normal level soon.
Hello, everyone. I would like to thank you for your attention. I would like to thank you for your attention. I would like to thank you for your attention.
Okay. We can see that the planned capacity for the second phase development of Nanjing manufacturing center is huge. With nearly 18 pounds, the capacity of the existing plant in Dalian, how does the company plan to allocate this capacity and what other types of batteries, such as sodium ion batteries, will be developed in this plant in the future? Okay.
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So, I'm going to answer this question. I'm going to answer this question in the second phase.
development plan. Yes, as you can see, the plant production, the plant capacity is very big. However, we are going to tap this potential year by year, gradually. In August this year, we're going to kick off the establishment of the production line and the first phase will…
only finish one third of our total exact capacity. And then for the rest of them, we're going to finish them in the coming three to five years so we will gradually finish our construction and then we will put into operation step by step.
And for the expansion of new energy markets we can see it enjoys very good momentum and our capacity expansion is well matched with our own capacity and also the market demand. At present we can see that the supply in this area is a false shot of demand.
we can also see a tendency for the major economies. Most of them have already set the goal to stop the production of...
fuel car by the year 2030. So we believe that in the future new energy vehicles will occupy a huge proportion of the market.
Secondly, not only our company is going to expand our production dramatically, actually for other leading companies, they also have the plan to roll out and ramp up their production. For some of them, they even have the plan to build factories with over 100 or even thousands of gigawatt hours. That's all there is to it.
So this is a huge market. It will be a huge market.
Thirdly, let's have a look at the market of energy storage. It is also a huge market as well. And for the global market it has been developed – it has been witnessing great development, especially the grid side energy storage. The market need is almost as big as the need of new energy vehicle.
So, if you ask me how are we going to allocate our capacity, I can say that for 50 percent of our capacity it will be allocated through new energy vehicle and then 30 percent for energy storage and another 20 percent for new energy vehicle.
power products or other related products. And what I can be sure is that sodium ion battery will take up some proportion in our production. That's all the basic steps I've talked about for this session.
That's it for the answer. Thank you for the question.
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We are delighted to see that the company has reached an agreement for cooperation with JML and JP Group. Can you give us some brief introduction about this company and could you make an estimate of the company's relationship with JML?
possible order volume to be brought by this corporation? And is the company still talking to other large group customers about other corporation?
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the battery pack and then it is expected that we're going to receive small lot order in September and after the delivery of these orders we expect the volume of the orders to further expand.
And then, what about JP Group? Well, JP Group is a very powerful company in China. And Jimmo is a subsidiary under it, responsible for assembly and packing. And then, for JP Group, its main product is electric three-wheelers and traditional three-wheelers.
and it is the largest manufacturer in electric three-wheelers and traditional three-wheelers in the world.
Every year, the shipment of this company is 1.50 million and the sales also rate number one in the world.
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It also has the channels of production and sales for four-wheelers.
So in the future, the possible cooperation between us and JV Group is high-speed AOO grade EV and low-speed four-wheelers. And it is estimated to fit 5,000 vehicles per month under our cooperation, and the value of the Wythen would be better for the quality, less cost per 1 Browne shop. Vast- Blockchain and Technology &
100 million yen. And when you ask me whether we are poking through other large groups, well the answer is positive. Yes, for sure we are approaching more customers, our clients at the present.
Due to the current stage, it is not convenient for us to tell you exactly who they are, but what I can tell you is that some of the clients that we approach is even bigger than JP group, and we will tell you more information when it is appropriate.
Okay, I don't have any further questions. Thank you very much for your answers.
Thank you for your question.
as an reminder start 1 and 1 if you wish to ask a question
There are no further questions at the moment. I will hand the conference back to Mr Yung-Feh Lee for closing remarks.
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Thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.
Thank you all, you may disconnect from the call. Let's conclude the conference for today. Thank you for participating. You may hold this. The conference will begin shortly. If you raise your hand during Q&A, you can dial star 1-1.