Q2 2023 CBAK Energy Technology Inc Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to feedback energy technologies second quarter and first half 2023 earnings conference call.
Currently all participants are in a 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.
Now I will turn the call over to Tim Lee Investor Relations Director of feedback energy Mr. Lee. Please proceed.
Thank you operator, and Hello, everyone welcome to see back energy second quarter and first half of 2023 earnings conference call joining us today I'm mistaken, our chief Executive Officer.
You will not pay our chief financial Officer.
Mr children, Tien tsin or engineer and Jennifer out in temperature.
We released our results earlier today. The press release is available on the company's IR website at IR.
They'll come to us yet as well as from Newswire services.
It will also be available you hours.
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 Securities Litigation Reform Act of 1995.
Forward looking statements involved inherent risks and uncertainties as such the company's actual results may be materially different from the expectations expressed to date.
Information regarding these and other risks and uncertainties is included in the company's public filings with the SEC.
The company doesn't assume any obligations to update any forward looking statements, except as required under applicable laws.
Also please note that unless otherwise stated all figures mentioned during this conference call are in U S stores with that let me now turn the call over to our CEO mistaken failure. We said he was speaking in Chinese and his latest comments into English go ahead, Mr. Li.
Okay Gotcha.
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Thank you and Hello, everyone. Thank you for joining our earnings conference call today and tissue.
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The first half of 2023 witness consider go macro uncertainties overt upstream market for lithium batteries due.
Due to price fluctuations of lithium carbonate, which is an essential raw material of lithium batteries are overwhelmed business with somewhat affected.
That said, we still made meaningful progress in our primary business the sales of lithium batteries in the first half of 2023, our bakery business generated revenues of 50 $184 million, an increase of 27.2% year over year.
Among these revenues $46 $76 million came from beta rates used in energy storage applications up 17% year over year, while Sweet point 12 median dor has came from beta is used in light electric vehicles, a surge of 309, 9% year over year. Moreover.
Revenues from beta release use in electric vehicles reached $196 million, an impressive increase of 6454 times compared to the same period last year.
In the first half of 2023, the gross margin of our business base bakery business reached 12, 8% up three four percentage points year over year.
Since a significant number of clients, we expect to place orders over the second half of the year our revenue growth in the second quarter was related to the fact as we see that won't be the case going forward and.
And we have high expectations for our revenues over the next two quarters and the full year 2023.
Our bakery business will remain solid.
As we gradually expanded our brand influence and continuously activated our R&D capabilities. We have received orders from an array of leading companies worldwide.
Looking ahead.
Poverty and provide high quality products for new and existing clients alike.
Further propelling our revenue growth over the long run.
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First off I'd like to introduce the recent developments in our business as of July 31, 2023, we have recorded RMB, one 1 billion in the combined value of orders, we have received but have yet to fulfil across our two main basically production facilities based in Dalian in 19 together.
Hi, Chase, our subsidiary that supplies lithium battery materials rigor.
Regarding client initiatives already announced as of July 31, 2023, our collaboration with <unk> group the largest EV manufacturer around aware has brought us orders amounting to roughly RMB $54 16 million.
We also make great progress in our partnership with <unk>, the world's leading portable power station manufacturer and Blue TT idle grain on the bipolar vacate which has brought us orders totaling RMB $48 5 million.
In addition, since we entered into a three year strategic partnership with each hub. This July we have received multiple orders from each hub totaling approximately RMB $542 million.
Since each of them is still early in its outdoor portable energy storage business, we expect orders placed by it to steadily increase over time alone size business expansion.
Also for the corporate for the Corporation with Diehard modules as we noted before we have taken in orders with a total value of around RMB 365 million so far seasonal issue.
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Hi, Jonathan.
Jonathan could you.
Those are the latest developments in our kion initiatives, let's move on to the R&D first I'd like to talk about our development of sodium ion bakeries in the second quarter of 2023, we launched our sodium basically at our corporate open day fully showcasing the company's sodium bakery products to invest.
<unk> media and.
And clients are.
Modern suite two one for all largest synergy co sodium basically marks the first model, while the sky industrywide that can be mass mass produced on a larger scale.
We're also leading the industry worldwide by pioneering the mass production of largest surgical sodium ion baytree's immediately upon its launch model three to one for Gunnar high visibility about professional investors and stakeholders from other industries, our R&D capabilities and production capacity for logistics.
Michael Baytree's have been warmly applauded.
Q now empowered with mass production capabilities, we have received requests from numerous clients for samples of the sodium bakery.
We expect orders to meaningfully increased following our production ramp up.
In addition, we have entered into a strategic cooperation agreement with Asia listed company of Shenzhen, Hello Tech companies.
Company limited the parent company of January <unk>.
Leading global portable power supplier.
Hello, takeaway invest RMB 25 million for us to tailor the research development and production of more than five sodium ion battery with an agreed target time for mass production and potentially hundreds of millions RMB Where's all products to be supply.
Currently we have delivered a prototype of this customized product upon receiving hollow tax confirmation of the quality and performance of prototypes and subsequent approvals through the prototype prototype stage. The mass production will proceed as scheduled.
Rover, we make breakthroughs into research and development of lithium batteries. We are currently in the face of prototype the development of this series 46, lithium batteries, which has attractive mens attention from investors and peers alike.
We expect mass production of our series four to six beta rates to be available by the end of the year.
And more of those to be rollout will be model 4611.
46115, or 4615 to seven.
Depending on market dynamics.
We will also assess the potential to mass produce the model <unk> a O.
Next year, we will ramp up the production of our series 46 pesos recently tissue.
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I also want to specifically highlight our production capacity and geographic landscape in view of our R&D pass throughs and the overwhelming incoming orders to have already exceeded our supply.
Typically planning for capacity expansion first of all Oh, and 19 facility currently boasts a production capacity of seven gigawatt hour and we expect it to advance two two gigawatt hour by the end of the year.
In the meantime, our 19 phase III project is under construction potentially adding a production capacity of two gigawatt hour for us in 2020 for elevating the overall capacity of our 19 facilities two four gigawatt hour.
By 2027, with our 19 phase III programs gradually competed and all the production lines in place, we expect to overrule capacity to hit 20 gigawatt hour.
<unk>, our dog and plant currently has a production capacity of one gigawatt hour and we expect it to move up to one four gigawatt hour by the end of the year.
Meanwhile, we will start building the production life of our series 46, bakeries potentially adding a production capacity of five six gigawatt hour for serious 46 by the end of 2025.
And further expanding our series 46 capacity by nine gigawatt hour by 2027.
And then the overall capacity of our Italian facilities will be elevated to 16 gigawatt hour. Please go ahead.
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Additionally, we have been sticking to scale up our sodium bakery production lines at present, our sodium basically production capacities 0.5 gigawatt hour and we have 10 gigawatt hour in the pipeline over the long run we expect to achieve full production of sodium beta <unk> in 2026.
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We are announcing a hard time.
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Next let me talk through our marketing strategy for business development. We are in close cooperation with <unk> group, a leading European provider of residential energy storage and we are a key supplier to the global leader of outdoor portable energy storage going forward, we will further advance.
Once both our residential and outdoor portable energy storage businesses and these two segments will become the company's major revenue outside news.
In the meantime, with our mass production and capacity ramp up of sodium <unk> bakeries, owing to their superior performance at low temperatures superb fast charging and discharging abilities and external cost efficiency more and more clients in our small size power batesville market that currently.
Lead acid batteries, as well as clients with demand outstanding fast charging and low temperature performance have taken great interest in our sodium beta with products. We have received numerous requests for samples from clients in the small sized power market and the energy storage sector.
At present, the demand for our sodium ion batteries have exceeded our supply with.
With the capacity ramp up soon up to where we were delivering more samples.
We have had to expand our market share.
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The mass production and geographic landscape of capacity and simple delivery of sodium ion batteries as well as regarding the significant efforts. We have actively taken to advanced this year with 46 medium bakeries looking.
Looking ahead, we will makes choice in the residential and outdoor portable energy storage segments and firmly built upon our agents in this series 46, lithium batteries and sodium <unk> Bay choice further preparing business growth in the power market, we remain positive about our expectations for the second half.
But this year and the years ahead.
Thank you Sir.
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Okay.
Now, let me turn the call over to our interim CFO .
Who will provide details on our financial performance.
Thank you Ms Thomas Thank.
Thank you everyone for joining our call today I will now go over our key financial results.
And the first half of <unk>.
For the full details of our financial results. Please refer to our earnings press release.
We're pleased to report John half year results.
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Thanks to our products John .
Optimize operating efficiency, our gross margin swapped out right now.
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Our solid balance sheet gives us flexibility to continue in last ecommerce in return.
By accelerating our research lab.
Across product lines as well as expand.
The expansion of our technology.
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During the first half of 2003, our document that Mr. John Roberts with growth of 19, 7% and national content. However, during the second quarter may began to experience a temporary slowdown.
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This decrease was primarily due to the decline 19 provenance.
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Our operating expense.
Target, 2% to seven times $7 million in the second quarter.
And Aladdin clients for reference in 2014 from maybe last on us in the first half.
Our research and development expenses increased 29, 6%.
Second quarter and decreased.
They plan to 1% to SaaS clients for many industries.
Industry top sales and marketing expenses increased by 38% to last many Rockstar.
In the second quarter.
Tim.
Kristen two one times seven maybe last honest.
General and administration expenses.
Increased by 46% Q3 upon six maybe.
Second quarter ended 29, 2% to six point Romney has started in the first half.
Our operating loss amounted to Chin sleep pond H, meaning.
In the second half here.
And Chi.
Operating income of 0.1, meaning.
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For maintenance in the first half compared to income.
Income attributable to shareholders of fleet.
Zero 118, and one plant to Miami.
<unk> and the rest of 2022.
That concludes our.
Remarks.
Let's now open the call for questions.
Operator. Please go ahead thanks.
Thank you.
Thank you.
Ladies and gentlemen, if you have a question. Please press star one one on your telephone.
You will then hear an automated message advising that Youre hand has been raised if your question has been answered or you wish to remove yourself from the queue Press star one again.
Once again to ask a question. Please press star one one.
One moment, please while we compile the Q&A roster.
Yeah.
And our first question comes from the line of Brian <unk>.
With Zacks small cap research.
Good evening.
Wondering if I could ask a couple of follow up questions.
First on the Chengdu lease I was wondering if you could provide any additional details on that facility.
Basically was it operational do you still expect it to be operational by the end of 2023.
And.
What type of.
Batteries they have been presented in the past and then I'll follow up with additional questions. Thank you.
Yeah.
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Sure.
Thanks to them.
So yes, so that's a real plans.
I'd like to give you more detail about those as you know the production capacity of our Dalian.
<unk> is significantly in specific shipments we cannot meet the demands of our customers that is why we decided to rent and some shield better manufacturing plants.
State owned better plans and we've shared the center Iridex.
The equipment and devices in this.
Plans is also similar to our download plans.
Currently the production capacity of this plant is 100000 per day, and we are doing some innovation and English and an improvement in this plants and <unk>.
Expected that's equal.
Thats all.
Only totally normal.
Production and by the end of this year.
Okay.
Great. Thank you very much.
And I appreciate all the translation that's very helpful.
And if I could ask one follow up question.
The battery gross margins they.
So they've gone from 11% last year to 15, 4% this year.
Was that due to a shift in mix towards some of your newer products like the 30 to $1 40.
And away from some of the older products like the 21 700.
Hi, Sal lending lines, they're going to supply you Aman.
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So our intention.
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Thanks, Tim.
Tim.
Sure.
The channel.
Todd.
Yes.
Okay.
There were several reasons behind the increase of growth for us Michael one of the most important being done with that.
This year.
<unk> production capacity.
Darling and 19 production facilities have been increased and we can.
Chief of very high utilization rate of these plans.
For our Darling plans. It is almost reached full production capacity and for Nanjing.
The construction of the first phase of the plants in 'twenty, one and the completion of the <unk>.
Let's face it.
At the end of 2022 Oops now our production capacity can be released to a large extent and this production capacity growth also become a very important driving force for the reduction of the cost and secondly.
As we know in the second half of last year, we underwent a Ah Ah.
Yeah.
Albeit.
Fluctuation in the <unk>.
The peer price.
The increase of the raw material price also Lee also has a negative impact in our cost.
So.
Coast occupy to quite a big margin in our <unk>.
Profit margin.
Hi.
The second quarter of this year, we have seen that decline of raw material price and that also need lapped to the reduction of the cost which also contributes to the improve the gross margin.
Okay.
Thank you very much Greg.
Yeah.
Thank you Wade.
Thank you.
And as a reminder to ask a question. Please press star one one.
Okay.
And I'm seeing no further questions.
With that I would like to turn the call back to Mr. Young <unk> Li for closing remarks.
I apologize I apologize one moment please.
Do see we have a question that just came in the queue.
Okay.
And we have a question from the line of CECO with TPG.
Uh huh.
And that's you know that.
I am.
Hi, Albert.
This is Michael from TPG.
Can you hear me right now yes. Please proceed with your question.
Yeah, I will ask in Chinese.
For the company.
Okay.
Kung Yeung clients at all.
Sure.
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Okay.
You mentioned just now.
We have already have the capacity to <unk>.
<unk> 40, <unk> lithium battery and I'd like to know for what reason that you decided to deploy all of it.
<unk> 41154617, instead of 46800.
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It is the chance for you to mass produce 4680 L.
Joe <unk> tangible equity to IHOP.
Okay.
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Okay.
Actually we looked at <unk> based on our over reel lay outs of our OE business portfolio and for example, we take into consideration that.
So basically most of our energy storage market.
46110, the heights is about that you want and the the energy Star reach Heights is.
And as well as the model is more spending in the markets and 461, but sadly it is a bit higher than the 146115 and we can do a study.
30 to 35, and Ali and the cycling a bit.
<unk> 8000 to 10000, which we believe well meet the market.
B E.
And the Europe .
And remind me.
We may use the murphy material lithium ion.
As we know this is a very important to material and it has a superior.
G capacity.
Intensity, so the energy density and the REIT and currently we are not thinking about our choice mass produced $4 $6 eight of them.
It is with even high high a tall height speak of height, but it doesn't mean that we will not produce this at all.
When the time is appropriate we will also take into consideration that protects the beckman and production of 468.
Okay.
Okay. Thank you.
Thank you.
And I'm showing no further questions so with that I'll turn the call back over to Mr. Young <unk> Li for closing remarks.
Alright, alright.
There's always financing and the chocolate chip eyesight.
Uh huh.
Thanks for calling in equivalent to net income.
Thank you operator, and thank you all for participating in today's call and for your support we appreciate your interest and look for water reporting to you again next quarter on our progress.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Okay.
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Yes.