Q4 2022 CBAK Energy Technology Inc Earnings Call
Speaker 1: You.
Speaker 2: conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time.
Speaker 2: Now, I'll turn the call over to Terry Lee, Investor Relations Director of SEABEC Energy. Mr. Lee, please proceed.
Speaker 3: Thank you, operator, and hello, everyone. Welcome to CBAC Energy's fourth quarter and full year 2022 earnings conference call. Joining us today are Mr. Yunfei Li, our chief executive officer, Mrs. Yuna Pei, our interim chief financial officer, Mr. Xiu Jun-pian, our general engineer, and Jennifer, our interpreter.
Speaker 3: We released results earlier today. The press release is available on the company's IR website at ir.cbr.com.cn, as well as from Newswire Services. A relay of this call will also be available in a few hours on our IR website.
Speaker 3: Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Security Litigation Reform Act of 1995.
Speaker 3: For oil clean statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC.
Speaker 3: The company doesn't assume its applications to update any forward-looking statements, except as required under applicable laws.
Speaker 3: Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US storage.
Speaker 3: With that, let me now turn the call over to our CEO Mr. Yim Peili. Mr. Li will speak in Chinese and I will translate his comments into English. Go ahead Mr. Li. Please don't increase your volume.
Speaker 3: Thank you and hello everyone. Thank you for joining our Earnings Conference call today.
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Speaker 3: We have just released the financial report for Q4 and the full year of 2022. We are proud to present to our shareholders and investors the tremendous growth we have achieved in sales revenues. The company's revenue has grown by 3.7 times from $52.67 million in 2021 to $2.7 million in 2020.
Speaker 3: to $249 million in 2022 which is a remarkable achievement.
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Speaker 3: Thanks to the continuous trust and support from our major clients, as well as the success we have achieved in expanding our overseas markets, our battery business has grown rapidly. In 2022, the annual revenue of our battery segment reached approximately 94.5 billion dollars.
Speaker 3: 0.72 million, a remarkable increase of 1.76 times year on year. Please don't increase your...
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Speaker 3: In our previous announcements, we mentioned receiving orders from various important clients, some of whom we could not name due to confidentiality reasons. However, the fact that our revenue has increased by almost four times indicates the long-term trust and satisfaction of these clients with our products and services.
Speaker 3: In fact, the order among from these previously announced clients is still growing. In this conference call, I will provide an update on these clients.
Speaker 3: Currently, we are actively expanding our production capacity to meet the high demand in our industry. I will also update our shareholders and investors on the construction stages of our new factory in Nanjing. Thank you for your attention.
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Speaker 3: Firstly, let me update the total amount of orders awaiting delivery in our company. As of March 31st this year, the three main production bases located in Dalian, Nanjing, and Shaoxing have received orders totaling approximately $180 million that are yet to be delivered.
Speaker 3: This backlog of orders will support the company's high revenue growth in the future. We have reasons to hold a highly optimistic forecast for the sales performance in 2023. In fact, due to the hot market demand, some of our products have been in short supply for a very long time. This is why we are actively expanding the company's production capacity.
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Speaker 3: In May 2022, we announced that we received orders from a leading European provider of heating, cooling and renewable energy systems. With over a century of history and more than 14,000 employees globally, this client is currently our largest customer. As of December 31, 2022, their order amount has reached...
Speaker 3: 72.41 million euros equivalent to 78.85 million dollars.
Speaker 3: We have been in talks with this client since 2018 and after an extensive period of negotiations and supply chain due diligence. They have placed high value orders since 2022 and agree on further collaboration with us in 2023. We anticipate that they will place even larger orders this year.
Speaker 3: In order to protect our key client information and due to the intense competition in the new energy market, we have chosen not to reveal their identity at this time. Nevertheless, the significant increase in our revenue is consistent with the order amount we announced from this client. We will disclose the name when the time is right in the future.
Speaker 3: client information and due to the intense competition in the new energy market, we have chosen not to review the identity at this time. Nevertheless, the significant increase in our revenue is consistent with the order amount we announced from this client. We will disclose the name when the time is right in the future.
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Speaker 3: In addition to the rapid growth in the energy storage sector, we are also actively developing customers in the EV and LEV fields. In 2022, we signed a framework agreement with the world's largest electric vehicle manufacturer Jingpeng Group and its affiliated company Gmail.
Speaker 3: As of December 31, 2022, Jingping Group and Gmail have placed orders worth of approximately $7 million. At the same time, our 3-2-1-4-0 batteries have also been applied to Jingping Group's electric vehicles, which is very helpful to the company's filter expansion in the electric vehicle market.
Speaker 3: Our cooperation with King Kong Group is still continuing, and it is expected that the total amount of orders received from this customer will continue to increase in the future.
Speaker 3: Besides, with respect to our cooperation with Die Hard's Mortals, which is a subsidiary under Toyota, we had supply battery pack products worth of about 2.7 million RMB in 2022. In February this year, the project team from Die Hard's Mortals pay a visit to our 19th factory to see our production.
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Speaker 3: The company has made significant progress in terms of customer development. In addition to maintaining a stable partnership with our major European clients in the energy storage business, we also managed to form partnerships with major players in the electric vehicle and light electric vehicle markets.
Speaker 3: Besides, the company is supplying products to several other internationally renowned clients, and we will announce this cooperation and corresponding order amounts to the capital market when it is appropriate.
Speaker 4: The company maintains an optimistic outlook for 2023.
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Speaker 3: As mentioned earlier, the company's current production line is in high demand. In 2020, we partnered with the local government in Nanjing to launch our Nanjing project. By the end of 2021, the first phase of our Nanjing project was successfully put into operation. We are now adding more production lines to the first phase and expect to achieve a production capacity of 2 GbH by 2022.
Speaker 3: 2023 to 2024 and then add another capacity of 6 GWh annually until the total production capacity of the second phase reaches 18 GWh. After the conviction of the second phase construction, the company will have a production capacity of up to 20 GWh in Nanjing.
Speaker 3: Together with our mature darling base, we believe that the capacity by then is expected to meet the demands of the vast majority of customer orders.
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Speaker 3: On our R&D efforts, we currently focus on sodium ion batteries. Sodium ion batteries have become a highly contested market in China, drawing interest from a variety of leading leadium battery producers.
Speaker 3: A few leading firms have released their own sodium ion battery products. Our company has recently completed their test production of 27700 and 32140 sodium ion batteries, with expected formal product release and sales by the end of this year. By then, we will be among the earliest companies worldwide to mass-produce sodium batteries.
Speaker 3: Given the immense potential of sodium ion batteries to be widely applied in light electric vehicles, energy storage solutions and beyond, sodium battery products are expected to quickly establish a market sizeable of at least hundreds of billions of RMB.
Speaker 3: or tens of billions of dollars in the near future, thus becoming a supplement to the lithium battery market. We encourage our shareholders and investors to maintain your attention on our company and upcoming launch of our sodium ion battery product.
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Speaker 3: In 2022, the company has made significant progress in both research and development and sales. Our sales revenue increased by 3.7 times and we will become one of the earliest companies in the market to achieve mass production of sodium batteries. Currently, the company has a huge amount of orders waiting to be delivered.
Speaker 3: We also manage to maintain a good relationship with our major European customers and we are also supplying products to several internationally renowned clients. Relevant information will be released at appropriate time.
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Speaker 4: The price of lithium carbonate, a key raw material skyrocketed in the most of 2022 by about 300%.
Speaker 3: which affects our profitability. However, along with the new capacity put into use by each raw material producer, the price of lithium carbonate declines quickly. We believe that the quick decrease of raw material price will help us increase profits this year. The successful market development, decline of raw materials price and unveiling of our sodium-based...
Speaker 3: our interim CFO Yuna Pei who will provide details on our financial performance.
Speaker 2: Thank you, Mr. Li, and thank you everyone for joining our call today. I will now go over our key financial results for the fourth quarter and the full year of 2022. For the full details of our financial results, please refer to our earnings press release.
Speaker 2: We continue to maintain a strong momentum in the increase of sales of our battery and battery material products.
Speaker 2: As mentioned by Mr. Chien, the high cost of raw materials and the need to invest in and expand our profits. However, with big clients making orders and price of raw materials declining in this year,
Speaker 2: We are very confident in the future growth of our profits.
Speaker 2: In 2022, our revenues and the gross profits group reflecting the success of our marketing strategies will increase significantly our investments in research and development to both develop new large cylindrical layers of battery
Speaker 2: and sodium do Trade Products. Meanwhile, we managed to slightly reduce our sales and marketing expenses and the general and administrative expenses.
Speaker 2: to increase our sales revenues while to reduce our related expenses will be helpful in the long run to deliver a better financial result.
Speaker 2: Moving on to our results. In the fourth quarter, our net revenue surged by 95.9% to 54.4% mainly from the same period of 2021. In the full year, our net revenue grew by 300.
Speaker 2: First, on the EV market, our product has improved the features at higher quality, which become more attractive to EV manufacturers. Besides, the downstream market for electric vehicles continued to grow in 2022.
Speaker 2: leading to an increase in demand for EV battery products on the L EV market, thanks to a huge increase in market demand.
Speaker 2: We successfully sell more batteries to LEV manufacturers. More importantly, our large cylindrical lithium battery 32140 batteries have gradually been accepted by key players in the EV and LEV markets, leading to significant growth.
Speaker 2: On the energy storage market, the increase in sales of batteries for air interruptible supplies in 2022 can be attributed to a combination of factors, including growing demand for renewable energy sources.
Speaker 2: and our development of reliable products. Additionally, our focus on research and development has allowed us to develop innovative and reliable energy storage products at a competitive pricing, as we continue to invest in R&D and improve our products.
Speaker 2: 69% from the same period in the previous year.
Speaker 2: Our cost of revenues for 2022 was $230.6 million up by 384.9%.
Speaker 2: from 2021. The increase in cost of revenues was in line with the increase of net revenues.
Speaker 2: Growth profit was 3.78 million US dollars in the fourth quarter representing an increase of 263% from the same period in the prior year. Growth profit was 3.78 million US dollars from the same period in the prior year representing
Speaker 2: for 2022 was 18.1 million US dollars representing an increase of 254.1% from 2021. The Borgian was a
Speaker 2: 6.7% from fourth quarter and 7.3% for 2022 compared with 3.7% from 2020.
Speaker 2: 75% and 9.7% in the same period of 2021. Growth profit margins slightly decreased in 2022, largely due to increasing price of battery raw materials in the year. Along with the decline, the economic performanceup at our goal was significantly weakened suffer from the crisis.
Speaker 2: of raw material price from 2003. Our gross profit margin will recover and increase this year. Our operating expenses rose by 84.7% to $12.6 million for both quarters and
Speaker 2: 75.9% to $10.9 million for 2022. The increase in operating expenses in 2022 was primarily due to our commitment to increase our investment in the research and development efforts.
Speaker 2: and the impairment charge or hatches, property, plant and equipment, as well as goodwill. Within that, our research and development expenses increased by 36.7% to...
Speaker 2: 2.6 million for the fourth quarter and by 100, 1.6 percent to 10.6 million for 2022. Sales and marketing expenses increased by 12.8 percent to $2 million for 2022.
Speaker 2: And the general and administration expenses decreased by 4.3% to $6.8 million for the fourth quarter and by 2.9% to $6.8 million for the third quarter.
Speaker 2: $9.7 million for 2022. Even with the increase in R&D investments and the occurrence of impairment charges, our operating expenses were held only 11.9%.
Speaker 2: relative to our revenues in 2022, compared with 31.9% in the same period of 2021.
Speaker 2: Our operating loss in the fourth quarter was $8.8 million, increased by 52.6% from the same period of 2021. Our operating loss in 2022 was $11.5 million.
Speaker 2: reduced by 1.8% from $11.7 million in 2021. Our change in our value of warrants in fourth quarter was $1 million decreased by $78.7 million.
Speaker 2: from the same period of 2021. The change in the value of warrants for 2022 was $5.7 million compared to 2021, meaning in the prior year. Thus, we recorded a net loss of tribute to
Speaker 2: The net loss attributable to shareholders of feedback energy was 9.45% made in 2022 compared to net income attributable to shareholders of 61.5%.
Speaker 2: for 9 million US dollars in 2021.
Speaker 2: That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
Speaker 7: Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone and light for your name to be announced.
Speaker 7: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker 8: Not.
Speaker 7: Once again, if you wish to ask your question, please press star 11 on your telephone keypad.
Speaker 7: The first question comes from the line of Tian Xia from IBM. Please ask your question, Tian.
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Speaker 5: Thank you.
Speaker 2: So the first question is from IBM. I am glad to see the rapid growth of the company's revenue and I've also noticed that the company suffered from some losses in profits.
Speaker 2: Can you give us more details in this regard? The management also mentioned that there has been a significant decrease in raw material prices. Do you think the company will be able to control its production cost in 2023?
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Speaker 2: Thank you for your question and according to our report we made just now, in 2022 due to the price fluctuation in lithium carbonate, that is one of the key raw materials of our product.
Speaker 2: the growth margin of our company witnessed a decline compared to the figure in 2021. And on the other hand, if we have a look at the operation expenses of our company, we can see that we increased a lot in our input in the R&D.
Speaker 2: In 2022, our investment in R&D amounted to 106.3 million US dollars. It's almost, it's more than double that of the amount of 2021. And this sector also led to a reduction in our profits.
Speaker 2: In the future, we will still be committed to the continuous input in the R&D in our high quality battery products so as to maintain a leading position in the industry.
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Speaker 2: And on the other hand, we have been
Speaker 2: committed to the optimization of our production processes with an aim to reduce the production cost. And in addition, we also make our efforts in improving the management structure so as to improve the operation efficiency.
Speaker 2: So, if you have a look at the specific figures of 2022, our revenue realized a 3.7 fold of increase and if we have a look at the operation loss, actually it…
Speaker 2: shrinks to some extent by 1.8%. So if we have a look at 2023 with the price of raw material returning to a normal level and also with the optimization of our management structure, we believe that our profitability will be further increased.
Speaker 5: I think that the new technology will be more efficient. Thank you for your question. Sorry, thank you for your answer. I have another question. Just now the senior management spoke of sodium batteries.
Speaker 5: Can you walk us through the application scenarios and the market size of sodium batteries? In particular, can you give us an update on its popularity in the Chinese market? Is the company currently in a leading position in sodium batteries? Thank you.
Speaker 3: Thank you for your attention.
Speaker 3: We've been very proud of your RSS Bind. Thank you for that.
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Speaker 5: Okay, so this is a very good question. First of all, I'd like to answer the question about the popularity of sodium batteries in the Chinese market.
Speaker 5: In the past three years, we all noticed that the price of lithium-ion batteries fluctuated a lot, and it is mainly because of the fluctuation of the lithium carbonate. It increased multi-fold.
Speaker 5: in the past three years. And actually this kind of fluctuation in price exerted a negative impact in the markets. However, if we have a look at sodium battery, on the one hand, it enjoys a more stable price. And on the other hand, it is easier to assess.
Speaker 5: it has a better accessibility. Besides that, its performance in low temperature conditions is also superior. That makes it a good product to be used in vehicles, especially in winter when the temperature is low.
Speaker 5: even grow in the market in the future. So we expect a billion dollar market size for sodium battery. And in addition, the decline in the popularity of lithium battery will also...
Speaker 5: On the other hand, it creates a market opportunity for sodium batteries. And we expect the market to further expand in the future. And if you ask me about the development status of sodium batteries in our company, well, we have already finished three generations of development.
Speaker 5: and we have sodium battery products such as the 26700 and 32140. And for the latter one, we have already come up with products that is...
Speaker 5: 130 watts per kilogram. And we have already cooperated with our partners now to put this product on the vehicle. And in the coming future, we're going to promote the mass production of this product and we'll use them more and more in the vehicles.
Speaker 7: That is for the answer. Thank you for your question again. All right. Thank you. Once again, to ask a question, please press star 1-1 on your telephone. Yes, call 3-1-1.Shmeet, lady on the phone as text says hi. Ms. you
Speaker 7: We have a follow-up question from the line of Tian Xia. Please ask your question, Tian.
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So, as you can see, I have another two questions. The first one, the company has experienced significant revenue growth in both...
EV and LEV sector. And since most of the company's revenue still comes from the energy storage business, will EV and LEV continue to grow rapidly in the future, especially after sodium battery is put into mass production? Thank you for your attention.
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Okay. Yes. So yes, you're right. You mentioned that most of the revenue comes from energy storage.
And what is the reason behind it? If you have a look at the products, a product that is manufactured in Bali and Plum, that is our product 26650 and 26700, here you write the sales in the sales revenue, the energy storage.
does take up a large proportion. However, if we have a look at the Nanjing facility, it is the plant that mainly produced 3,2,1,4,0. And this product hasn't been mass produced until last year. Thank You for watching.
OEM companies are still doing the certification.
However, our cells have already amounted to...
50 million US dollars already. So after the vehicle manufacturer,
passed the certification and after the increase of our production capacity, let's say at the
second half of this year, we believe that our production capacity will better meet the demand of the customers and they will place more order with us. So we will better supply our LEP and EB customers in the second half of the year. So we have the reason to believe
battery put into production. Well, the priority of our business this year is to do R&D and production and we will also send samples to our customers and help them to pass the certification. Then for next year, we believe that...
more of our projects will be put into mass production and they will be put in the vehicles.
So that's the answer to question number three. You said you have another question, right?
It is developing larger cylindrical batteries. Is there any information about the development progress that can be shared with investors?
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Yes, indeed, in the past two years, we have been doubling our efforts in the development large cylindrical batteries.
especially the 46 series. We have already finished the prototype A design and shakedown test. And then the test results indicate that this prototype can reach the design objective.
And then now we have finished the prototype B in terms of we have already finished the mold development and now we are in the process of developing the manufacturing process. And we expect that it will be put into mass production in the near future.
At the same time, we have been also developing other products under this 46 series, for example, 120. And then there were two other sites, that is 50 volts and 100. I would believe that these two types of products will be a very suitable product for the household And as always, all those look that way.
energy storage. This is seen to be the golden dimension, golden size for household energy storage and will also present a better price performance ratio. It is even more superior than those products with a big market share at present.
So we believe that this project will enjoy a great, promising future.
that this project will enjoy a great, promising future. That's it for the answer. Thank you.
Okay, now I have finished all my questions. Thanks a lot for the answers.
Our next question comes from the line of Steve Gold from AVIRB. Please ask your question, please.
Now, congratulations to your immense revenue growth. Regarding the current liabilities and the negative cash flow in the past years, do you believe there will ever be serious liquidity issues in the near future? The cost of revenue does not come down.
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Thank you.
Thank you.
So thank you for your question. We can answer this question from two dimensions. First of all, if we have a look at the operation cash flow, actually the cash flow brought by our product.
our production capacity is sufficient or we can say the cash brought by our existing business is sufficient. Both last year and this year we have carried out the calculation and according to the results of the calculation the revenue brought by...
production capacity, we actually have some revenue of financial support coming from different sources. The first one is the local government where our production facilities are based in, actually we have gained great support from the local government.
They give us some policy incentives to support us. And secondly, we also gain support from the banks in China. And thirdly, in the US capital markets, both the domestic investors and overseas investors expressed their great interest in our products.
and now we are having a lot of talks with them and we believe they can also be a support in the financial... finance.
Thank you for your question again.
Thank you, Steve. Do you have any follow-up questions?
All right, thank you. So, as a reminder, to ask a question, please press star 1, 1 again on your telephone keypad. You can also press star 1 again on your telephone keypad.
Thank you, operator, and thank you all for participating on 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 again. This concludes the call. You may now disconnect.
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