Full Year 2023 China Yuchai International Ltd Earnings Call - Q&A
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Operator: Good day, and thank you for standing by. Welcome to China-Yuchai International Limited's second half and fiscal year 2023 financial results conference call. At this time, all participants are in the listen-only mode.
Good day, and thank you for standing by while come to China <unk> International Limited second half at fiscal year 2023 financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You then hear an automated message advising where your hand is. You can also submit your questions via the webcast.
Press Star one on your telephone you don't hear automated message advising Johan industries. You can also submit your questions via the webcast.
Operator: Please be advised that today's conference is being recorded. I would now like to turn the conference over to Kevin Seas. Please go ahead.
Please be advised that today's conference is being recorded I would now like to turn the conference over to Kevin <unk>. Please go ahead Sir.
Kevin Seas: Thank you for joining us today and welcome to China Yuchai International Limited's conference call and webcast for the six months and fiscal year ended December 31, 2023. Joining us today are Mr. Wei-Ming Ho and Mr. Chun-Sin Liu, President and Chief Financial Officer of CYI, respectively. In addition, we also have in attendance Mr. Kelvin Lai, VP of Operations of CYI. Before we begin, I will remind all listeners that, throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Delegation Reform Act of 1995. The words believe, expect, anticipate, project, target, optimistic, confident, that, continue to, predict, intend, aim, will, or similar expressions are intended to identify forward-looking statements. Therefore, all statements other than statements of historical fact are statements that may be deemed forward-looking statements.
Thank you for joining us today and welcome to the China UGI International Ltd Conference call and webcast.
Six months and fiscal year ended December 31.
23, <unk> joining us today are Mr. Wayne Wang Ho Electric Johnson, Lou President and Chief Financial Officer.
T Y I, respectively.
Addition, we also have in attendance, Mr. Kelvin Lai VP of operations and C. Yi.
Before we begin I will remind all listeners that throughout this call. We may make statements that may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, the words believe expect anticipate.
Jack.
Our gets optimistic confident that continue to predict intend aim.
Will or similar expressions are intended to identify forward looking statements.
All statements other than statements of historical facts.
Our statements that may be deemed forward looking statements.
Kevin Seas: These forward-looking statements include, but are not limited to, statements concerning the company's operations and financial performance and condition and are based on current expectations, beliefs, and assumptions, which are subject to change at any time. The company cautions that these statements, by their nature, involve risk and uncertainties; actual results may differ materially depending on a variety of important factors such as government and stock exchange regulation, 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. Results of Operations and Business Overview and in other reports filed with the Securities and Exchange Commission from time to time. All forward-looking statements are applicable only as of the date they are made, and the company specifically disclaims any obligation to maintain or update the forward-looking information, whether of the nature contained in the press release made during today's call or otherwise in the. Mr. Ho will provide a brief overview and summary, then Mr. Liu will review the financial results for the second half year and fiscal year ended December 31, 2023. Thereafter, we will conduct a question and answer session.
These forward looking statements include but are not limited to statements concerning the company's operations and financial performance and condition are based on current expectations beliefs, and assumptions, which are subject to change at any time.
The company cautions that these statements by their nature involve risks and uncertainties and actual results may differ materially depending on a 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 headings risk.
Factors.
Results of operations and business overview.
And in other reports filed with the Securities and Exchange Commission from time to time.
All forward looking statements are applicable only as of the date they are made.
And the company, specifically disclaims any obligation to maintain or update the forward looking information.
Whether of the nature contained in the press release made during today's call or otherwise in the future.
Mr. Hoh will provide a brief overview and summary, then Mr. Lu will review the financial results for the second half year and fiscal year ended December 31 2023.
Thereafter, we will conduct a question and answer session.
Kevin Seas: For the purposes of today's call, the 2023 and 2022 second half-year and the 2023 fifth-year financial results are unaudited, with the 2022 year financial results being audited, and they will be presented in RMB and U.S. dollars. All the financial information presented is reported using the International Financial Reporting Standards as issued by the International Accounting Standards Board. Mr. Ho, please begin your prepared remarks. Thank you, Calvin.
For the purposes of today's call the 'twenty, two 'twenty, three and 'twenty to 'twenty two.
Second half year, and the 2023 fiscal year financial results are unaudited with the 2022 year financial results being audited.
And they will be presented in RMB and U S dollars.
All the financial information presented is reported using international financial reporting standards as.
Issued by the International accounting standards Board.
Mr. Hoh. Please begin your prepared remarks.
Mr. Wei-Ming Ho: We are pleased to report that we achieved profitable revenue growth of 18.9% in the second half of 2023 and 12.6% for the full year 2023 in an unclear economy in China. Revenue growth resulted from modest unit volumes, increased higher sales of higher-rating engines, and favorable price realization. According to official data, the Chinese GDP growth rate accelerated to approximately 5.2% year-over-year in the fiscal year 2023, from 3% growth in 2022, which reflected the post-COVID-19 recovery. However, if economic growth is to materialize, a number of challenges, including the continued struggle of the important property market throughout 2023. Consumer confidence diminished in China as consumer prices declined for four straight months as of January 2024, and producer prices were also lower, according to statistics from the National Bureau of Statistics.
Thank you Kelvin.
Pleased to report that we achieved profitable revenue growth of 18, 9% in the second half of the three and 12, 6% growth for full year.
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Unclear ecommerce in China.
Revenue growth resulted from weather unit volumes and higher sales of higher rate.
Bold bright realization.
What is the market share data.
Chinese GDP growth rate Valerie haertel approximately.
32% year over year in the fiscal year, two zero to three 3% growth.
To which period reflected the post COVID-19 recovery.
However, if economic growth math.
A number of challenges, including the continued to struggle.
Important property market throughout Q3.
Consumer confidence remains in China as customer prices declined for four straight months as of January two two or two full and part.
Producer prices were also lower.
According to statistics from the National Bureau of Statistics.
Mr. Wei-Ming Ho: Overall, Chinese exports declined by 4.6% in 2023, representing the first yearly decline since 2016. According to data reported by China Association of Automobile Manufacturers' Camp, total industry unit sales of commercial vehicles excluding gasoline-powered and electric-powered vehicles for the second half of 2023 increased by 38.2% year-over-year, as the sales of trucks and buses increased by 28% and 29.5%, respectively. In this Chinese commercial vehicle environment, our combined truck and bus unit engine sales increased by 4% for the second half of 2023, with truck engine unit sales down slightly year-over-year and bus unit engine, Mass Engineering sales 34.5% higher year-over-year. However, our heavy-duty truck engine unit still improves as seasonal demand, including cold transportation, increases new truck mark demand in the second half of 2023. Increased logistical demand resulted in a medium-duty truck engine.
Chinese export declined by four 6% in two zero to three representing yearly decline to 016.
According to data reported by China Association of automobile manufacturers Tam total industry unit sales of commercial vehicle, excluding gasoline powered electric powered vehicles.
Two zero to three increased by to date by 2% year over year as the sales of trucks and buses.
Increased by 38% 39, 5% respectively.
Chinese commercial vehicle environment outcome by truck and bus.
This increased by 4%.
Second half of two to three this truck engine unit sales.
Slightly year on year and bus engine.
Nothing given it still fell by 5% higher year over year.
However, our heavy duty truck engine unit Joseph S demand seasonality.
Is there a demand including coal transportation increased new truck demand in the second half.
Two three.
Increased logistical demand resulted in a medium duty truck engine sales.
Bill.
And growth year over year.
Unit sales in the off road market experienced a gain of <unk>, 2% in the second half of two zero to three led by a 32.
3% increase in marine and power.
Power generation engine unit sales.
Demand for datacenter, including positive script count.
Industrial engine unit sales went up by 43% year over year this sale increases.
Client and other culture.
So those are two three Camden I reported total sales of commercial vehicles excluding.
Mr. Wei-Ming Ho: Its sales also experienced growth year-over-year. Engine unit sales in the off-road market experienced a gain of 4.2% in the second half of 2023, led by a 22.3% increase in marine and power generation engine unit sales with higher demand for data centers, including for artificial intelligence. Industrial engine unit sales went up by 14.3% year-over-year.
Gasoline powered and electric powered.
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8%.
But then get unit sales grew by four 8% led by the 101, 4% increase in heavy duty bus engine.
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Clothing industry growth medium and light duty bus.
Engine unit sales of produced also the sales growth for the year off Road engine unit sales declined by six 3% at two zero to three.
Mr. Wei-Ming Ho: These sales increases offset the decline in agricultural engine unit sales. For 2023, CAM data reported total sales of commercial vehicles excluding jet gasoline-powered and electric-powered vehicles increased by 17.2% year-on-year, with truck sales 15.6% higher and the smaller market sales up by 28.8%. Bus engine unit sales grew by 48%, led by a 101.4% increase in AV duty bus engine sales, excluding industry growth. Medium and light duty bus engine unit sales also produced positive sales growth for the year. Off-road engine unit sales declined by 6.3% in 2023.
Kayla Marine engine and generator power generation unit sales industrial equipment.
Sales.
Increased sales volume.
Partially offsetting lower agriculture engine.
Lower agriculture equipment.
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Total R&D expenditure, including capitalized costs were RMB, one $1 billion $153 million.
As our initiatives continue to enhance the quality and performance of our national six be at tier four emission standards compliant engine.
Continue to emphasize further development of new energy product.
Our portfolio of these products.
Our new energy vehicle includes a greater use of alternative Phil.
Bill efficiency and enhanced emission reduction.
Mr. Wei-Ming Ho: However, marine engine and power generation unit sales and industrial equipment engine unit sales reported increased sales for 2023, partially offsetting lower agricultural engine sales. Lower agricultural equipment. In 2023, total R&D expenditures including capitalized costs were RMB1.1 billion or USD$150.3 million. As our initiatives continue to enhance the quality and performance of our National 6B and Tier 4 emission standard compliant engineers, we continue to emphasize further development of new energy products to expand our portfolio of these products. Our new energy goal includes the greater use of alternative fuels to improve fuel efficiency and enhance emission reduction.
We expect more technology enhancement and more powertrain systems and components.
Phil to be introduced.
Example of ultimate it's bill.
Our two hydrogen powered it.
Z renewable hydrogen as the key talent.
During the second half of two to three.
Dr. MTL subsidiary is <unk>, New energy power Technology company.
<unk> introduced the <unk> F 600 kilowatt be one parallel hybrid power system for Sunny group 12 cubic meter excellent truck.
So 600 kilowatt hour <unk> hybrid powertrain shifts ultimately to Arkoma optimize engine performance looking at environment changed.
Another example of a new innovation.
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350 horsepower hybrid electric drive continuously variable transmission.
Mr. Wei-Ming Ho: We expect more technology enhancements and more powertrain systems and components using alternative fuels to be introduced. An example of our alternative fuel products include our two hydrogen-powered engines using renewable hydrogen as the key propellant. During the second half of 2023, GRMTL subsidiary, Yichai Xinglan New Energy Power Technology Company, Yichai Xinglan, in short, introduced the Yichai Xinglan SO600KW-C1 parallel hybrid powertrain system for Sunny Group's 12-cubic-meter mixer truck. The SO600KW-P1 hybrid powertrain shifts automatically to optimize engine performance as working environment changes.
CBD our system was designed for the contractor and for heavy duty agriculture and industrial applications.
Also Joanne C L.
<unk> time, Lorena and Powergen Cup delimited mpg's shots of three one a new contract in two to three to install <unk> update our generation system.
The production plan, which specializes in silicon manganese.
Production this system utilizes up debt discharged from the smelting process as the <unk>.
Power <unk>, Phil eliminating Green House gas.
That commission.
And our new <unk> lifestyle that was.
And hybrid engine was chosen to power 10 meter gas electric hybrid hybrid buses and 90, a major city in China.
Manufactured by E comm growth of dealing with it more than 1200 buses with HIV engine have been ordered all local public transportation operator.
Mr. Wei-Ming Ho: Another example of our new energy innovation is Yuchai Shinglan's new 350 horsepower hybrid electric drive continuously variable transmission or hybrid CVT powertrain system. It was designed for the Liukong tractor and for heavy-duty agricultural and industrial tractor applications. Also, GYMCL, Guangxi Yuchai Marine and Power Genset Company Limited, MPG for short, won a new contract in 2023 to install Yuchai's off-gas power generation system at a production plant which specializes in silicon manganese alloy production. This system utilizes off-gas discharges from the smelting process as a power generation fuel, eliminating greenhouse house gas emissions.
Keith.
We continue to reorganize our current operations to improve focus and resource efficiency and new capabilities have been added as well.
Shell combined marine and power generation businesses to enhance this company through a new subsidiary.
On the Chi Marine and volatile set sensor.
<unk> power company limited, but it did subsidiary incorporated the MTO joint venture.
India MTV series, 4000 engine and other related products or services.
Mcl subsidiary <unk>.
With our research and development of New LNG technologies.
<unk>, new energy product to about.
<unk> will also incorporate that new subsidiary, while assessing cloud technology, coupled with Coca Cola in the development of proprietary.
Mr. Wei-Ming Ho: And our new Yuchai model YCL-A07N hybrid engine was chosen to power 10-meter gas-electric hybrid buses in Nanjing, a major city in China. Manufactured by Yitong Group Company Limited, more than 1,200 buses with Yuchai engines have been ordered for local public transportation operators in Nanjing. We continue to reorganize our current operations to improve focus and resource efficiency, and new capabilities have been added as well. Here is MCL's combined marine and power generation businesses to enhance this compact instance through a new subsidiary. Huang Xi, Chai Marin, and Bao Zhenzhen.
Cloud based control system for on and off road vehicles machinery at the end of two zero to three we also saw a 100% equity holding in ethane remanufactured switch.
The limited.
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Gross profit operating.
Gross profit operating profit and earnings per share all increased by double digits, and we maintain a strong balance sheet.
So the first December two drugs to treat our exit bank.
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U S dollar, 152%, we continued to generate positive cash flow from operations and free cash flow.
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Board of directors declared a test fleet within the U S to drop by two cents per ordinary share Vishal paid on August 720 to three.
Our diverse product portfolio provides opportunity to supply.
The level of end market in China and abroad LNG products are continually updated to Brian what dynamics solution that will be eco efficient and improved performance.
Mr. Wei-Ming Ho: Zhenzhen Power Company Limited. This subsidiary incorporated the MTU joint venture, producing the MPU series 4000 engines and other related production services. GYMCO subsidiary Yichai Xinlan will accelerate the research and development of new energy technologies as well as enhance new energy products. UIMCL also incorporated new subsidiary Guangxi Xingyun Cloud Technology Company Ltd. to quicken the development of proprietary, cloud-based control systems for on- and off-road vehicles and machineries. At the end of 2023, we also saw our 100% equity holding in Yuchang Remanufacturing Services Social Capital Limited. For 2023, our gross profit, operating profit, and earnings per share all increased by double digits, and we maintained a strong balance. As of 31st December 2023, our cash and bank balance was RMB60,000, or US$152.7 billion.
Our growing number of any deeper that addresses the need.
While more effective two could help adequate environment.
With that I would now like to turn the call over to tooth taken Lou <unk>, Our Chief Financial Officer, who will provide more details on our financial results.
Please begin.
Okay.
Thank you remain now let me review our.
Six months results and the December.
December 31st who is zero to treat them.
Nir was RMB, eight 9 billion or U S dollar $1 3 billion compared with RMB seven 5 billion in second half 2022.
And so in second half two zero to three increased by five 2% 247007 current units compared with 140345 units in the second half 'twenty to 'twenty two.
The increase was mainly due to higher heavy and medium duty engines shoes in the truck and bus markets as well as increased use in the marine and power generation and industrial markets.
According to data reported by China Association of automobile manufacturers C. A M. In second half 2023 commercial retail unit sales.
Mr. Wei-Ming Ho: We continue to generate positive cash flow from operations and free cash flow in 2023. The Board of Directors declared a cash dividend of US 0.28 cents per ordinary share, which was paid on August 7, 2023. Our large, diverse product portfolio provides opportunities to supply and service a number of end markets in China and abroad. Our engine products are continually updated to provide more dynamic solutions, lower vehicle emissions, and improve performance. A growing number of NEB products address the need for more effective tools to help the existing environment.
In China, excluding Stewart.
Gasoline powered electric powered vehicles increased by 28, 2% compared to two.
222, as sales of trucks and buses increased by 8% and 29.5% respect deeply.
Gross profit was RMB, one 4 billion or USD, $202 4 million compared with RMB, one 2 billion.
222 gross margin was 16, 2% in second half 2023, compared with 16, 1% in second half 2022.
Other operating income increased by 21, 8% to RMB $306 2 million or U S. Dollar 43, 2 million compared with RMB 251, 3 million in second half 2022.
Choon Seng Loo: With that, I would now like to turn the call over to Choon Seng Loo, our Chief Financial Officer, who will provide more details on the financial results. Choon Seng, please begin your remarks. Thank you, Wing Ming.
Increase was mainly due to a gain of RMB $113 million on the disposal of a subsidiary.
Choon Seng Loo: Now let me review our unaudited six-month results as of December 31st, 2023. Revenue was RMB 8.9 billion or USD 1.3 billion compared with RMB 7.5 billion in the second half of 2022. The total number of engines sold in the second half of 2023 increased by 5.2% to 147,700 units compared with 140,345 units in the second half of 2022. The increase was mainly due to higher heavy and medium duty engine sales in the truck and bus markets, as well as increased sales in the marine and power generation and industrial markets. According to data reported by the China Association of Automobile Manufacturers, CAAM, in the second half of 2023, commercial vehicle unit sales in China, excluding sales of gasoline-powered and electric-powered vehicles, increased by 28.2% compared to 7.5% in 2022, as sales of trucks and buses increased by 28% and 29.5%, respectively.
Excluding this one off item.
The other operating income would have been RMB 100.
$93 2 million or U S dollar $27 3 million lower by RMB, $58 1 million compared with second half 2022.
Decline was mainly due to lower demand trends.
Research and development R&D expenses increased by nine 9% to RMB $475 million or U S dollar $66 4 million compared with <unk>.
$428 million in second half 2022, due to higher personnel salaries and with the expenses.
R&D expenditures, including capitalized costs were RMB 590.
$9 2 million or U S. Dollar 84, 6 million, representing six 8% of revenue instead have continued to retreat compared to.
<unk> $548 million, representing seven 2% of revenue is can have 2022 sorry.
General and administrative SG&A expenses increased by 31, 7% to RMB 1 billion or USD, <unk> 47, 9 million from RMB seven.
$195 3 million in 2022.
The increase was mainly due to increased personnel salaries due to the expenses and higher warranty and travel expenses compared with the same period last year.
SG&A expenses represented 11, 8% of revenue for 2023, compared with 10, 7%.
Choon Seng Loo: Gross profit was RMB 1.4 billion or USD 202.4 million compared with RMB 1.2 billion in second half 2022. Gross margin was 16.2% in second half 2023 compared with 16.1% in second half 2022. Other operating income increased by 21.8% to RMB 306.2 million, or USD 43.2 million, compared with RMB 251.3 million in the second half of 2022. The increase was mainly due to a gain of RMB113 million on the disposal of a subsidiary. Excluding this one item, the other operating income would have been RMB193.2 million or USD27.3 million, lower by RMB58.1 million compared with the second half of 2022. This decline was mainly due to lower government grants.
Percent for second half 2022.
Operating profit was RMB 20.
$31 8 million or U S dollar $31 3 million from RMB 251, 3 million in second half 2022.
The operating margin was two 5% compared with three 1% 22.
Finance costs increased by 15, 6% to RMB, $46 5 million or U S dollars $6 6 million from RMB $42 million in skip hop.
Two is due to two primary due to higher abuse discounting.
The share of financial results of the <unk> and <unk> inches.
And to a profit of RMB $32 5 million.
Our U S dollars $4 6 million compared with RMB. One 8 million is you can have two zero to two.
The improvement was mainly driven by higher profits.
<unk> High power company limited and significantly reduced losses at <unk> in June.
Company Limited and <unk> C program, you, China Automotive Technology Company limited.
Income tax expense was RMB, $37 9 million or U S $5 3 million compared with RMB, two 6 million in 2022. The change was mainly due to a net provision in prior years and higher equity income in the same period of 2022 23 sites.
Choon Seng Loo: Research and development R&D expenses increased by 9.9% to RMB $470.5 million, or USD $66.4 million, compared with RMB $428 million in the second half of 2022 due to higher personnel salaries and expenses. The total R&D expenditures, including capitalized costs, were RMB599.2 million, or US$84.6 million, representing 6.8% of revenue in Second Half 2023, compared to RMB540.8 million, representing 7.2% of Selling General and Administrative SG&A expenses increased by 31.7% to RMB1 billion, or US$147.9 million, from RMB195.3 million in StemHealth 2022. The increase was mainly due to increased personnel salaries and due to increased research and development expenses and high warranty and travel expenses compared with the same period last year. SG&A expenses represented 11.8% of revenue for the second half 2023 compared with 10.7% for the second half 2022. Operating profit was RMB$221.8 million, or US$31.3 million from RMB$231.3 million in the second half of 2022. The operating margin was 2.5% compared with 3.1% in Super Health 2022. Manis costs increased by 15.6% to RMB46.5 million or USD6.6 million from RMB40.2 million in StepUp 2022, primarily due to higher bills discounting.
Net profit attributable to equity holders of the company was RMB.
And $7 1 million or U S dollars, $15 1 million compared with RMB $124 9 million in second half two zero to two <unk>.
Basic and diluted earnings per share were RMB 262.
<unk> 37, compared with RMB three through six in second half 2022 basic and diluted earnings per share for second half 2023, and it's you can hop into me too were based on a weighted average of $40 million 858000, and 290 shares.
Now we reviewed our unaudited financial results for the <unk> fiscal year ended December 31 2023.
<unk> revenue was RMB 18 billion or U S dollar $2 5 billion compared with RMB 16 billion in <unk>.
Why two zero to two.
The total number of engines sold in FY 2023 decreased by two 4% to 313493 units compared with three.
<unk> hundred 21000, and terrific 25 six.
Dave.
256 units in FY <unk>.
The decrease was mainly due to lower sales in the truck and our culture of market.
Sally offset by increased sales in the past industry Marine and power generation and new energy markets.
I was wondering too.
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Commercial retail unit sales in China as tooling sales of Destiny power and electric powered vehicles increased by 17, 2% year over year in <unk>.
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Tree as Sears on trucks increased by 15, 6% and the smaller box market sales increased by 28, 8%.
Gross profit increased by 16, 7% to RMB, two 9 billion or U S. Dollar $411 7 million compared with RMB, two 5 billion in FY two zero to two gross.
Gross margin increased to 16, 2% compared with 15, 6% in FY 2022 the increase in gross margin was mainly attributable to higher revenue from heavy duty engines, and continuing cost reduction initiatives, partially offset by higher customer sales rebates.
Choon Seng Loo: The share of financial results of the Associates and John Rangers climbed to a profit of RMB32.5 million, or US dollar 4.6 million, compared with RMB 1.8 million in the second half of 2022. The improvement was mainly driven by higher profits at MTU Yuchai Power Company Ltd and significantly reduced losses at YNC Engine Company Limited and Guangxi Purim Yuchai Automotive Technology Company Limited. Income tax expense was RMB$37.9 million or USD$5.3 million compared with RMB$2.6 million in StemHouse 2022. The change was mainly due to unpaid probation in prior years and higher taxpayer income in the same period of 2023.
Other operating income increased by 31, 4% to RMB $442 4 million or U S. Dollar $62 5 million compared with RMB $336 8 million in FY two zero to two.
The increase was mainly due to a gain of RMB $130 million on disposal of a subsidiary excluding this one off item.
Other operating income would have been RMB, $309 4 million or U S. Dollar $46 5 million in FY two zero to treat.
R&D expenses increased by four 8% to RMB.
836, 6 million or U S dollar $123 8 million compared with RMB $836 4 million in FY two zero to two.
<unk> continued its initiatives to enhance engine quality and performance of its national and tier four emission standards compliant engines and to develop new energy products in.
Choon Seng Loo: Net profits attributable to equity holders of the company were RMB 107.1 million or USD 15.1 million compared with RMB 124.9 million in second half 2022. Basic and direct earnings per share were RMB 2.62 or USD 0.37 compared with RMB 3.06 in second half 2022. Basic and direct earnings per share for second half 2023 and second half 2022 were based on a weighted average of RMB 40,858,290 shares.
In FY, two zero to three quarter, R&D expenditures, including to blight costs well.
RMB, one 1 billion or USD, $150 3 million compared with RMB 1 billion in FY two zero to two <unk>.
Representing five 9% of revenue compared with six 4% in FY <unk> to two <unk>.
SG&A expenses were RMB, one 9 billion or U S. Dollar $264 3 million, representing 10, 4% of revenue compared with RMB, One 5 billion, representing nine 2% of the revenue in FY.
Due to.
This increase was mainly due to higher personnel expenses and warranty expenses compared with last year.
Operating profit grew by 17, 4% to RMB $609 4 million or U S. Dollar 86 million compared with RMB $519 3 million in FY <unk>.
Choon Seng Loo: Now we will review the unaudited financial results for the 2023 fiscal year ended December 31, 2023. Revenue was RMB 18 billion or USD 2.5 billion compared with RMB 16 billion in FY2022. The total number of engines sold in FY2023 decreased by 2.4% to 313,493 units compared with 321,225 six-cylinder engines, to define 256 units in FY2022. This decrease was mainly due to lower sales in the truck and agricultural markets, partially offset by increased sales in the bus, industry, marine, and power generation and new energy markets.
The operating margin was three 4% compared with three 2% in FY <unk>.
Finance cost increased by four 9% to RMB.
$2 million or U S dollars $14 1 million from RMB $95 5 billion in FY <unk> to share our financial results of the associates and joint ventures was income of RMB, $62 1 million or U S dollar $8 8 million.
Compared with a loss of.
RMB $39 1 million in FY, two zero to two.
Income was primarily generated by higher profit at MTO Ehi power company.
And the share of lower losses.
And Jean Company Limited and <unk> Pro revenue, China Automotive Energy Company limited.
Tax expense was RMB, $148 5 million or U S dollar $21 million as compared to beef.
RMB 59, 1 million in FY <unk> due to the increase was mainly due to under provision in prior years and higher taxable income in FY <unk> to treat <unk>.
Choon Seng Loo: According to CAM, commercial rated unit sales in China, excluding sales of gasoline power and electric power vehicles, increased by 17.2% year-over-year in FY2023, as sales of trucks increased by 15.6% and the smaller mass-market sales increased by 28.8%. Gross profit increased by 16.7% to RMB 2.9 billion or USD 411.7 million compared with RMB 2.5 billion in FY2022. Gross margin increased to 16.2% compared with 15.6% in FY2022. The increase in gross margin was mainly attributable to higher revenue from heavy-duty engines and continuing cost reduction initiatives partially offset by higher customer sales rebates. Other operating income increased by 31.4% to RMB442.4 million, or USD62.5 million, compared with RMB336.8 million in FY2022. The increase was mainly due to a gain of RMB$113 million on the disposal of a subsidiary, excluding this one-off item.
Net profit attributable to China, <unk> shareholders was RMB, $285 5 million or U S. Dollar $40 3 million compared with RMB $218 6 million in FY, two zero to two basis.
Basic and diluted earnings per share were RMB 699, or USD 99.
Compared with RMB 535 in FY, two zero to two basic and diluted earnings per share for FY <unk> and FY <unk> were based on a weighted average of $40 million 858000, and 219 shares.
Now we will go through our financial highlights as of December 31, 2023, cash and bank balances were RMB 6 billion.
All U S dollar $852 7 million compared with RMB four 9 billion at the end of FY two zero to two.
Imbues receivable were RMB, seven 8 billion or U S. Dollar $1 1 billion compared with RMB six 8 billion at the end of <unk>.
Tuesday with tissue.
Inventories were RMB, four 6 billion U S.
$656 4 million compared with RMB four 9 billion at the end of FY two zero to two.
Trade and bills payables.
Choon Seng Loo: The other operating income would have been RMB$309.4 million, or US$46.5 million in FY2023. R&D expenses increased by 4.8% to R&D, $866.6 million, or US$ $123.8 million compared with RMB $836.4 million in FY2022. GMCL continues its initiatives to enhance the engine quality and performance of its national 6th and Tier 4 emission standard compliant engines and to develop new energy products.
RMB, seven 6 billion or U S dollar $1 1 billion compared with RMB six 9 billion at the end of financial year, two zero to two.
Short term and long term Lewis and borrowings were RMB, two 5 billion or U S. Dollar $358 7 million compared with RMB, two 3 billion at the end of FY <unk>.
I will now turn the call over to Kevin for a comment for train inspection.
Thank you Johnson.
Please note some offices of China <unk> are remotely calling into the conference call, which May result in a slight delay in providing answers to some questions.
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With that operator, we're ready to begin the Q&A session.
Thank you we will now begin the question and answer session.
Later to ask questions on the phone. Please press star one one and wait for a name to be announced you can also submit your questions. While ask a question tab on top of the webcast player. Please.
Choon Seng Loo: In FY2023, total R&D expenditures, including stabilized costs, will be RMB $1.1 billion or USD $150.3 million compared with RMB $1 billion in FY2022, representing 5.9% of the revenue compared with 6.4% in FY2022. SG&A expenses will be RMB $1.9 billion or USD $264.3 million, representing 10.4% of the revenue compared with RMB $1.5 billion, representing 9.2% of the revenue in FY2023. Who'
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Once again to ask questions on the phone please press star one.
One moment for the first question is from the line we have the call from pre Liam Craig caused dusky Trump Queen reached global Please go ahead.
Hi, guys can you talk about your outlook for 2024, and how you see the product mix, if it's going to be any different from 2023 or about the same.
Okay.
Hi, Bill.
Thank you.
Okay.
Mix was slightly but likely bid Paul FSA Bobby.
Choon Seng Loo: This increase was mainly due to higher personnel-related expenses and warranty expenses compared with last year. Operating profit grew by 17.4% to RMB 609.4 million or USD 86 million compared with RMB 519.3 million in FY2022. The operating margin was 3.4% compared with 3.2% in FY2022. Finance costs increased by 4.9% to RMB $100.2 million or USD $14.1 million from RMB $95.5 million in FY2022.
Hope to increase our vehicle.
Still in terms of two four.
We expect the market for vehicles, and especially for the heavy duty medium duty.
Bucket to grow by between 10% to 15%.
Zero to fall so with that growth, we have captured the bulk of the market and therefore site.
Assisted us in the penetration of OEM, hopefully that will result in some.
In truth Salesforce as well.
Other than that.
It will probably be the same as expected growth in.
Marine and power generation sales.
The agriculture sales that will help you get better just last year, there was too much.
Choon Seng Loo: The share of the financial results of the Associates and Joint Ventures was in terms of RMB $62.1 million or USD $8.8 million compared with a loss of INB$39.1 million in FY2022. The income was primarily generated by higher profits at MTU Yuchai Power Ltd and the share of lower losses at YNC Engine Ltd and Guangxi Puram Yuchai Automotive Energy Ltd. Income tax expense was RMB 148.5 million or USD 21 million as compared with RMB 59.1 million in FY2022. The increase was mainly due to under-provision in prior years and higher taxable income in FY2023. The net profit attributable to China Yuchai's shareholders was RMB 285.5 million or USD 40.3 million compared with RMB 218.6 million in FY2022. Basic and diluted earnings per share were RMB 6.99 or USD 0.99 compared with RMB 5.35 in FY2022. Basic and diluted earnings per share for FY2023 and FY2022 were based on a weighted average of 40,858,290 shares.
Incentive to Scotland, so hopefully if there is any.
So more better said is coming from <unk>, we see an improvement in that area.
Industrial engines is still being affected by.
With most in the building.
Building industry, especially.
The housing market so that one.
It's still a bit uncertain nothing, but then I don't think so.
Deteriorate much further.
Perfect.
Okay, and then what Pete.
Expectation for the higher medium duty and heavy duty sales. This year are you expecting growth margins.
Grief.
Previously the market increase.
Instead of 50%, though we will.
Martha.
Engine sales to have that improvement for this year.
Okay.
Okay, and then anything on the on the operating expense side.
That was up obviously for personnel and travel this year is that going to be continuing to grow with sales or.
Have you kind of made those expenditures indeed last year.
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Yes, thank you for questions, yes. So.
If you look at that.
<unk> be much desk.
So pressure.
The increase in debt.
Staff.
<unk> expenses, including a traveling right so.
With respect that is probably maintain the same or increase our repeat because of the market.
Drew calling me.
Let me add to that I think the increase in the.
Operating expenses.
Choon Seng Loo: Now we will go through our balance sheet highlights as of December 31, 2023. Cash and bank balances were RMB6 billion or USD852.7 million compared with RMB4.9 billion at the end of FY2022. Trade and bills receivable were RMB7.8 billion or USD1.1 billion compared with RMB6.8 billion at the end of FY2022. Inventories were RMB$4.6 billion or USD$656.4 million compared with RMB$4.9 billion at the end of FY2022. Trade and Bills Payables were RMB$7.6 billion or USD$1.1 billion compared with RMB$6.9 billion at the end of FY2022. Short-term and long-term loans and borrowings were RMB2.5 billion or USD358.7 million compared with RMB2.3 billion at the end of FY2022.
Mostly come from.
Thanks, Paul.
Selling and distribution expenses.
We also had some increase in the warranty costs.
There is a description on top.
Staff cost at two two.
So those are the drivers of tier mainly increasing operating expenses.
We all have to see how this years go by we expect them to be broadly the same.
If the volume increases compared to last year, we would expect to see an increase in warranty expense provision as well.
Okay, Alright, great. Thank you guys.
Okay.
Okay.
Thank you for the questions. Once again to ask question. Please press star one on your telephone.
There is a question from a viewer passenger data collection group.
This is from.
Yes, three questions, there and I'll take that.
And all of that.
Sure.
The first question. The first question is Hawaii, and getting growth unit growth and unit growth.
It's been lagging.
That of the industry average.
The growth in those Blue tree came mainly from.
Kevin Seas: I will now turn the call over to Kevin for a comment for the Q&A section. Thank you, Tung-Hsien. Please note that some officers of China Yuchai are remotely calling into the conference call. This may result in a slight delay in providing answers to some questions.
Especially for the immediate.
Medium duty market from the trailer market.
This market is dominated by five Oems and final offer.
I fully understand all the five Oems have their own.
I'll, let Paul in housing is production.
Operator: We apologize for any inconvenience and thank you for your patience. With that operator, we're ready to begin the Q&A session. Thank you.
The direct action is a thoughtful.
Our focus is on production as well, but they also use us.
Thank you Jamie.
So that's.
This was mainly due to sales growth for this.
Operator: We will now begin the question and answer session. As a reminder, to ask questions on the phone, please press star 11 and wait for a name to be announced. You can also submit your questions via the Ask a Question tab on top of the webcast player.
Although they are too cheap came from and we will have it again is dominated by the Oems with Dublin in us production and the other part of the growth is from the guests in IOP.
Operator: Please stand by while we compile the Q&A roster. Once again, to ask questions on the phone, please press star 1. One moment for the first questions from the line. We have a call from William Greg Gorzeski from Greenreach Global. Please go ahead.
Our personal auto throttle CLO debt didn't register complete before we are likely to be filled.
So Glenn 220 to four and advancement dissipate questions.
How you see the current market conditions than what probably will.
William Greg Gorzeski: Hi guys. Can you talk about your outlook for 2024 and how you see the product mix, if it's going to be any different from 2023 or, you know, about the same? Hi, I'm Bill.
Yes.
Brian truckload brokerage with geography.
Alright.
With the continued growth in.
In the vehicle sales, especially in India.
And.
Medium duty market effort in getting to market.
With the coming into your portfolio.
Mr. Wei-Ming Ho: Our product mix will likely be more or less the same, but we hope to increase our vehicle engine sales in 2024. We expect the market for vehicle engines, especially for the heavy duty and medium duty market, to grow by between 10% to 15% in 2024. So with that growth, we hope to capture a bit more of the market, and we also have had some success in the penetration of some of the OEMs. Hopefully, that will result in some improved sales for us as well. Other than that, I think the others will probably be the same. However, we do expect some growth in marine and power generation sales. I hope you get better this year. Last year there wasn't too much incentive from the government, so hopefully, if there is any...
More complete set of products to offer.
Gas engines particular, so we do expect that to be true.
The sales of our fleet.
We will go to.
Okay.
I don't think our attrition tree, Brian what's the key reason for us.
Creasing opening two new tree.
And also how should we expect margins are trending in financial year 202 for Brian So for SG&A.
As mentioned earlier on so.
A few things here so one is that.
The warranty I wish unit at <unk>.
Costs increased Brian is also pretty much based on the.
The unit.
Nice update and our guys do a redeemable in period for the last 24 months.
And the other one is <unk>.
As mentioned that the salaries dose specific.
Mr. Wei-Ming Ho: So, more or less, as it's coming from Grumman, we see an improvement in that area as well. The industrial engines are still being affected by the weakness in the building industry, especially the housing market. So, that one, I'm still a bit concerned, I think, but then I don't think that it's going to deteriorate much further and never be affected.
Our projects are durable.
<unk>.
<unk> bonuses right. So that is a Walter Eva in the increase in <unk> and also <unk>.
<unk> due to the higher revenue as well right.
Pretty much a baseline.
To drive the <unk>.
<unk>.
What is the charter expenses right. So we have seen that.
They're pretty much aggressive in pushing the skus right.
Sure.
For the for the new customer opportunity customers for the product launching a new for the new engine or operate at June as well.
Mr. Wei-Ming Ho: Okay, and then with the expectation for higher medium duty and heavy duty sales this year? Are you expecting growth margins to increase? We expect the market to increase between 10-15%, so we will expect our own engine sales to have an improvement as well this year. OK, and then anything on the operating expense side? That was obviously up obviously for personnel and travel this year. Is that going to continue to grow with sales? Have you kind of made those expenditures you need less? Hi, Yichun Feng.
So is there any exceptional items right.
So to treat.
In terms of our margin expectation and also.
You can see we improved to 16, 2% for the full year right. So.
The product mix.
While the reason and also you are seeing in order our culture at June's margin actually.
Better, especially the tier four emission standard despite the overall volume in two to three was lower enthusiast due to buy.
I hope that that will continue.
Choon Seng Loo: Yeah, thank you for your questions. Yeah, so, you know, if you look at that, you know, 2023, pretty much there's quite a substantial increase in debt, you know, staff, you know, salaries, and expenses, including travel, right? So, you expect that it's probably maintained the same, right, or increased a little bit because of the market, you know, droop according to the. Let me add to that. I think the increase in operating expenses mostly comes from selling and distribution expenses.
The same trend due to two for David can give some margin gain.
Two four.
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Thank you for your questions as a reminder to ask question you can press star one on your telephone and wait for a name to be announced but also submit your questions via the ask a question tab on top of the webcast player.
Once again to ask question. Please press star one on your telephone.
Okay.
Yes.
But.
Right.
Okay, Yes, we have a question here.
The other pressure until we expect each highs.
OPM as opposed to the operating margin to revert to longer term Irish in coming years.
Mr. Wei-Ming Ho: We also have some increase in warranty costs in selling and distribution on top of the sub-cost that Tsuen Seng has said. So those two are the drivers of the main increase in operating expenses. We'll have to see how these years go, but we expect them to be broadly the same. But if the volume increases compared to last year, we would expect to see an increase in warranty provision as well. OK, all right, great, thank you guys. OK. Thank you for your questions. Once again, to ask a question, please press star 11 on your telephone. There is a question from a viewer.
Seems the practice of using yes, what do we do.
We need to see for matches to revert to longer term average.
So if you look back.
Since the nationals.
Sixth emission space Center upgrade from National five so there was about two years ago right. Since then there were a lot of effort done to improve the marching to a current state right across the.
But that has not been reaching to the the previous national five end user margin level right. So.
The effort continue right it may not necessary.
We still had reached that margin level.
Those days right.
So that's where we are seeing right now right both of them.
Mr. Wei-Ming Ho: Perhaps you should take the question first. There are three questions there, and I'll take the first two, and I'll let you handle the first question. The first question is, why is each ice engine growing at a unique rate, I said unique growth, still significantly lagging behind that of the industry average? Now, the growth in 2023 came mainly from the, especially for the heavy and medium duty market, from the trailer market. This trader's market is dominated by 5 OEMs, and of the 5 OEMs, in fact, all 5 OEMs have their own what we call in-house engine production. The only exception is Tongfeng.
Much improvement.
We continue also very much depends on the.
The product mix or the revenue mix right. So we have been seeing the offload.
Our profile right compared to our group that actually for the last two years.
It's actually increased.
Sure.
So we hope that on road sales will we will.
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Mr. Wei-Ming Ho: Tongfeng has its own production as well, but it also uses some of our engines. So that's where the majority of the growth for this 42023 came from, and we were again, it's dominated by the OEMs with their own in-house production. And the other part of the growth is from the gas engine side of things. Unfortunately, in 2023, our gas engine range is not as complete as before, or as we'd like it to be. So going to 2024, and that's answering your second question of how you see the current market conditions and what are some levers you're intending to improve to drive stronger growth in 2024. So we see continued growth in vehicle sales, especially in the and medium-duty market, as well as the gas engine market.
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Mr. Wei-Ming Ho: So coming into 2024, we have a more complete set of products to offer for the gas engine, in particular. So we do expect that to help to improve sales, hopefully, in 2024. Okay, I will take question three, right?
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Choon Seng Loo: What's the key reason for the H&A increase in FY2023? You know, are there any extra items there? And also, how should we expect margins to trend in financial year 2024? Right, so for H&A, you know, as I mentioned earlier, there are a few things here. So one is that, you know, the warranty, I wish you needed a warranty cost increase, right? That's also pretty much based on the unit, engine unit out there, you know, that is still within the warranty period for the last 24 months, and the other one is, you know, as mentioned, the salaries and those specific projects and deliverables that trigger the, you know, employees bonuses, right? So that is one of the areas in increasing 2023 and also predominantly due to the high revenue as well, right? But that's pretty much the baseline, you know, to drive staff salaries. And then the third one is the travel expenses.
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Choon Seng Loo: So we have seen that they're pretty aggressive in boosting sales for new customers, for product launches, and for new engines or upgraded engines as well. So there isn't any exception item there in 2023. In terms of margin expectation, you can see we improved to 16.2% for the full year. So the product mix, that is one of the reasons.
Okay.
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Choon Seng Loo: And also, you are seeing our culture and genes margin actually better, especially with the Tier 4 emission standard, despite the overall volume in 2023 being lower than 2022. But we hope that that will continue the same trend in 2024, so we can get some margin gain in 2024, maintaining at least the same level as in 2023. For your questions, As a reminder, to ask questions, you can press star 11 on your telephone and wait for your name to be announced. You can also submit your questions via the Ask a Question tab on top of the webcast. If you would like to type in to ask a question, please press star 11 on your telephone. OK, yeah, we have a question here. Maybe I can read out a question. Can we expect Yuchai's answer?
Okay.
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Choon Seng Loo: Uh opm are supposed to opening margin to revert to longer-term average in coming years, but it seems depressed in recent years. What do we need to see for margins to revert to longer-term average? So, if you look back, since the National 6th Emissions Standards Upgrade from National 5th, so that was about two years ago; since then, there were a lot of efforts done to improve the margin to the current Of course, the debt has not been reaching the previous National 5th engines, the margin level. So, the efforts continue, but it may not necessarily be that we should have reached that margin level back in those days. So, that is where we are seeing right now, but the margin improvement will continue. It also very much depends on the product mix or the revenue mix.
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Choon Seng Loo: So, we have been seeing the off-road profile compared to on-road that, for the last two years, it's actually increased more than on-road. So, we hope that the on-road sales will. We didn't detect any input. Please try again or wait to be reconnected to the conference. We didn't detect any input.
Okay.
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Operator: Reconnecting you to the conference. This is a video of Yuchai's first time riding a bike. He's riding a bike in a park. He's riding a bike in a park. He's riding a bike in a park. He's riding a bike in a park. [inaudible] ?The end of the song? Soft music playing Soft music playing Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh Oh, Lenny Kavaliera www. LennyKavaliera.com, Twilight
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