CBAK Energy Technology, Inc.

Q4 2023 Earnings Conference Call

3/15/2024

spk05: Today, ladies and gentlemen, thank you for standing by. Welcome to CBEC Energy Technologies' fourth quarter and full year of 2023 Earnings Conference Call. Currently, all participants are in listen-only mode. Later, we'll conduct question-and-answer sessions, and instructions will follow at that time. As a reminder, we're recording today's call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Thierry Lee, CFO and Secretary of the Board of Seabag Energy. Mr. Lee, please proceed.
spk07: Thank you, operator, and hello, everyone. Welcome to Seabag Energy's fourth quarter and full year of 2023 earnings conference call. Joining us today are Mr. Yunfei Li, Chief Executive Officer of Seabag Energy, myself, Chief Financial Officer and Secretary of the Board, and Jennifer, our interpreter. All right. Thank you. Thank you. 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 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 cabinet's public firings with the SEC. The cabinet doesn't assume any obligations to update any full-length statements except as required under applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are your stories. After that, let me now turn the call over to our CEO, Mr. Linfei Li. Mr. Li will speak in Chinese and I will translate his comments into English. Go ahead, Mr. Linfei Li. Hello, everyone.
spk08: Thank you for joining our fourth quarter and full year 2023 earnings conference call. Thank you, Mr. Lin. We are pleased to see a steady growth in performance again in the fourth quarter. In the year of 2023, with the continuous support of our major customers such as FACEMAN Group, Anker, Huabao, and Xinneng, our battery business continued to grow in the last quarter. In the fourth quarter, our revenue increased by 30.9% and reached $36.83 million. In terms of income, the battery income in the energy sector has reached $3,493 million, which is an increase of 84.3%. The battery income in the car industry has reached $52 million, which dropped by 88.8% in the same period as last year. The battery income in the light electric vehicle industry has reached $138 million, which is an increase of 69.5%. The main reason is that the competition in the current power market is very intense, and the price level is relatively low. In the current situation, we will strategically look at these two markets and continue to expand our sales in the energy sector. In terms of profits, our battery business, Maoli Li, has a historical high of 36% in the fourth quarter, It rose by 27.7% in 2022. In addition, we achieved net profit in two consecutive seasons. This season, we reached $6.62 million, which was significantly improved compared to the net loss from last year. According to the year-round data, the company's net profit in 2023 rose by 40.4% to $1.3 billion. We are pleased to announce another quarter of solid growth, rounding off fiscal year 2023 on a high note. With sustained orders from key clients, including Buseman Group,
spk07: Anchor Innovations, and Halotech. Our battery business maintained its growth momentum from the previous quarter, with fourth quarter revenues up 30.9% year-over-year to reach $36.83 million. Of these revenues, $34.93 million came from batteries used in energy storage applications, a surge of 84.3% year-over-year. while $0.52 million came from batteries used in electric vehicles, down 88.8% year-over-year. Moreover, revenues from batteries used in light electric vehicles were $1.38 million, a decline of 69.5% year-over-year, primarily attributable to intense competition and relatively low pricing across the power market. Accordingly, we will strategically monitor both sectors while further expanding ourselves in the energy storage sector. In terms of profitability, our battery business's gross margin rose to a historic high of 36% in the fourth quarter of 2023, up 27.7 percentage points year-over-year. Moreover, we achieved a second consecutive quarter of net income from battery business. recording a net income of $6.62 million in the fourth quarter of 2023, a notable improvement compared to a net loss in the same period last year. In full year 2023, our battery business generated revenues of $133 million, soaring by 40.4% year-over-year. We delivered a full year operating income of $10.44 million, with a net income of $13.37 million from the battery business. Based on this issue.
spk08: In 2023, our business has made progress in various areas. As we continuously improve our battery technology and increase the size of our supply chain production, we have accumulated a stable customer base to meet the customer needs. Currently, we are one of the top three home storage suppliers in Europe. One of the world's largest heat-saving device suppliers is FaceMath, the world's largest third-party Apple accessory manufacturer Anker, the world's largest outdoor mobile storage supplier, and the world's world-famous outdoor mobile storage supplier, the world's world-famous outdoor mobile storage supplier, We have also worked closely with the largest battery supplier in Europe, but according to the confidentiality agreement, we will not disclose the company's name. Based on this, we are discussing business cooperation with Canadian electric vehicles related companies, hoping to successfully reach an agreement, and in the same context as the client, we will talk to shareholders and investors to announce the relevant data. Not only that, we are also looking forward to working with the two-wheeled car industry in India to achieve cooperation in 2024. This series of cooperation and the potential opportunity to cooperate have proven that our battery technology and product quality have been recognized by the world's most advanced battery industry. In the future, we will continue to focus on technological innovation to improve our product competitiveness.
spk07: In 2023, we made significant strides in our business operations on all fronts, achieving progress at various stages. Through consistent refinement of battery technologies and production ramp-up, we effectively fulfilled customer orders and have nurtured a loyal, stable client base. We have fostered deep and robust partnerships with industry leaders worldwide. including Viewsman Group, a leading provider of residential energy storage application in Europe and one of the world's largest manufacturers of heating and cooling systems. Anker Innovations, the largest third-party accessory supplier for Apple Inc. products. Halotech, the largest supplier of outdoor portable energy storage globally and parent company of Jackery. PowerOAK, the world's leading portable power station manufacturer and parent company of top-rated portable power supply brand Blue TTI, an India-based Ensure Energy, among others. We have also forged a partnership with the largest battery manufacturer in Europe. However, due to confidentiality obligations, we cannot disclose their identity for now. In addition, we have been negotiating with key stakeholder in Canada's electric vehicle industry, exploring potential collaborations with the intention of formalizing agreements. We will keep our shareholders and investors informed of these developments after securing consent from our clients. Furthermore, we expect to establish a partnership with a leading India-based scooter manufacturer in 2024. These partnerships and potential alliances demonstrate the broad recognition of our battery technologies and product excellence by top-tier players in the global battery sector. Moving forward, we will remain committed to technological innovation to bolster our product competitiveness, delighting customers with safe and reliable products.
spk08: From the order demand, until March 8, 2024, we, Dalian, and Nanjing, two major production bases, and subsidiary Li battery materials supplier HaiChuang has reached, but the total order amount not paid has reached 7.71 billion yuan, about 1.07 billion US dollars. In addition, we have made good progress in the past with the revealed customer orders. As of March 8, 2024, the amount of the cooperation order amounted to about 61.6 million yuan, is estimated at $8.57 million. The order volume of the FACEMAN Group is 2.13 billion euros, which is estimated at $1.95 billion. In addition, the cooperation order volume of the world's largest two-wheeled and three-wheeled car manufacturer, Jinpeng Group, is estimated at $60.69 million yuan, which is estimated at $8.45 million. In addition to the cooperation order volume of the FACEMAN Group and Jinpeng Group, Turning to our order demand,
spk07: As of March 8, 2024, we have recorded RMB $771 million, or approximately $107 million, in the combined value of orders we have received but have yet to fulfill across our two main production facilities in Beidarian and Nanjing, and high-transparency materials. Additionally, we have made substantial strides in our previous disclosed client initiatives. As of March 8, 2024, our collaboration with PowerOAK has brought us orders amounting to roughly RMB 61.6 million, or approximately $8.57 million. Our partnership with Wilsman Group has generated orders totaling 213 million euros, or approximately $195 million. Furthermore, our collaboration with Ping Pong Group, the world's largest distributor and electric tricycle manufacturer, has brought Earth's orders amounting to roughly 60.69 million, or approximately 8.45 million dollars. In addition to the orders from these collaborations, We have progressively increased our substantial ordinance from annual innovation amounting to IMB 73.55 million, or approximately 10.44 million stores. The consistent growth in our total volume not only affects our global marketing force, but also leads to a firm foundation for the company's future advancement.
spk08: Next, I would like to introduce the company's development. In the third quarter of 2023, our company successfully realized the production of large-capacity Na battery. It is one of the few companies in the world with large-capacity Na battery production capacity. Our Na-li-ion battery production line is currently set up in Nanjing Production Base and has a production capacity of 0.5 GWh. Since the launch of mass production, we have not been able to supply the battery. Therefore, we are actively working with private investors to expand the production capacity of the battery. At the same time, we are also developing a larger version of the original Li battery, which includes 40140 and 46120 batteries. Currently, Next.
spk07: Let me walk you through our latest R&D developments. In the second quarter of 2023, we successfully commenced mass production of large cylindrical sodium ion batteries, emerging as one of the few companies worldwide with the capacity to mass produce sodium ion batteries. Our sodium ion battery production lines are currently located at our Nanjing facility, which features a 0.5 GWh capacity. Since we commenced mass production, Demand for our sodium ion batteries has outstripped supply. As a result, we have been actively engaging with PE investors to ramp up sodium ion battery production capacity. In the meantime, we have also been developing larger cylindrical lithium ion battery models, including model 40140 and 46120. Model 40140 is in prototype A sample stage. and model 46120 is already in prototype B sample stage. We expect model 46120 to complete prototype B sample stage and become ready for mass production by the latter half of 2024. We will continue to fine-tune these models in response to market demand dynamics, potentially leading to modifications before the start of production.
spk08: we have also made the appropriate layout and planning in terms of production capacity. Currently, we have three production lines in Dalian's production base, mainly producing 260050-type lead-acid iron batteries. The annual production capacity can be up to 1GW. In order to meet the needs of customers and ease the situation in which the Dalian factory is not in demand, in 2023, we will rent a battery factory located in Shangqiu, Henan, is used to produce 26700-type batteries. Currently, the production capacity of Shangqiu Factory is 0.5 gigawatts, which can meet the needs of some of our customers. This approach has further increased our production capacity and provided customers with more stable and reliable product supply. In terms of Nanjing Factory, Nanjing's Yiqi Factory has two production lines, one for fixed production, and one for 32140-type. The other one has the ability to produce Na-li-zium-bonded battery. When two production lines produce Li-battery at the same time, the production capacity of Nanjing's first factory will reach 2 gigawatts. When one of the two production lines produces Na-battery, the production capacity of the factory will reach 1.5 gigawatts. In addition, the second phase of the Nanjing project is under construction. It is planned to build three large factories, After all the work is completed and used, the total production capacity will reach 18 GWh. Currently, the first factory room of the project has been sealed and is undergoing internal renovation. We want to increase the production line of NaCl or LiCl in the factory room according to the customer demand. In the future, we want to continue to optimize the production layout and improve production efficiency to ensure that we can
spk07: We have also strategically optimized our production capacity with a well-coordinated production line layout. Currently, at our Dalian facility, we operate three production lines, primary manufacturing model 26650 lithium ion phosphate batteries, with a total annual production capacity of 1 gigawatt hour. to better address customer needs and mitigate supply shortages at our Dalian facility caused by excessive demand. In 2023, we leased a battery plant located in Shangqiu, Henan for producing Model 26700 batteries. Today, our Shangqiu facility is equipped with a production capacity of 0.5 GWh, sufficient to fulfill part of our customer demand. This strategic move further boosted our production capacity, ensuring a more stable and reliable supply of products to clients. Regarding our Nanjing facility, the Nanjing Phase 1 project consists of two production lines, one dedicated to production product model 32140 cylindrical lithium ion batteries, and the other outfit to produce either cylindrical lithium batteries or cylindrical sodium ion batteries. The project's capacity is up to 2 GWh when both lines are producing lithium-ion batteries, or up to 1.5 GWh when one production line is dedicated to sodium-ion battery production. Furthermore, construction of our Nanjing Phase II project is in full swing, with three large factories in the pipeline. Once all three are completed and operational, the total capacity of Nanjing Phase II project is expected to be up to 18 gigawatt hours. Thus far, the first factory has been moved and interior decoration is underway. We will determine whether to outfit this factory with production lines for sodium ion or lithium ion batteries based on customer demand. Moving forward, we will further optimize our production line layout to enhance production efficiency, ensuring that we can respond swiftly to market the market shifts and order fluctuations.
spk03: We don't need to share. We don't need to share.
spk08: I'm sorry, I was too quiet just now. Anyway, in terms of the entire environment, In the context of the downfall of the battery business, our battery business still shows a strong growth pattern and resilience. This growth is not only reflected in financial data, but also reflects the stable customer structure of our company and the rich hands-on orders. More importantly, our company has received sufficient recognition for its leading position and technical advantages in the industry. including Europe's most advanced battery stations, have become our customers. As one of the first companies to produce NaCl battery production capacity, we have huge potential and competitive advantages in the new energy sector. As of 2024, we will continue to expand our investment in R&D and production, and plan to cooperate with more world-class customers. In summary, despite the attempted macroeconomic environment and downward pressures across the battery sector,
spk07: Our battery business consistently demonstrated robust growth momentum and resilience in the full year 2023. The vitality was reflected both in our strong financial metrics and in the stability of our client base and the wealth of orders in our pipeline. More importantly, the company's industry leadership and technological age have been fully acknowledged across the industry, evidenced by the adoption of our products by the most advanced battery facility in Europe. As a pioneer in the sodium ion battery production, we possessed immense potential and competitive advantages in the renewable energy field. Looking ahead to 2024, we will further increase our investments in research, development, and production capacity. Also, by fostering more and deeper collaborations with globally renowned clients, We will further augment our market share and elevate the company's global influence and visibility. We are confident that these synchronized endeavors will segment our position as frontrunner in the competitive industry for years to come.
spk02: Next, let's welcome our CFO, Mr. Jiewei, to introduce the company's financial performance to the investors.
spk07: Now let me turn the call over to our CEO, Mr. Lee, who will provide details on our financial performance. Thank you everyone for making the time to join our earnings conference call today. As our CEO mentioned earlier, we concluded the year with a robust fourth quarter financial performance from our battery business, where we achieved a double digit increase in net revenues and positive income for the second consecutive quarter. We are pleased to see continued growth momentum in our battery business. Building on our solid fundamentals, we remain confident in our growth trajectory through 2024 and anticipate a full year net profit for our battery business. We will provide more details on our net income guidance at the appropriate time. Turning now to HITRANS, our current battery material unit. which we strategically acquired in 2021. At the time of the acquisition, HITRANS boosted a strong client base and a higher level of revenue. Following the acquisition, we retained HITRANS' core management team and refrained from interfering in its day-to-day operations. We have no additional financial obligations to HITRANS, and its financial health will not materially affect the financial standing of our company. as it's only reflected in our consolidated financial statements. That's why we have focused on reporting financial results solely from our battery business in our earnings release and earnings conference call to provide investors and shareholders with a clear understanding of our performance. We are currently talking with private equity investors for high trends and sodium ion battery business, and we hope to complete a private placement financing to support the development of our business. These investors, whether they're interested in high-trans or the sodium ion battery business, are consistently valuing the individual businesses' materials and sodium ion batteries at more than the current market capitalization of our entire public company. Notably, their valuations do not take into account our core lithium battery business. indicating that our market value is currently significantly underestimated. I will now provide an overview of our 2023 fourth quarter financial results. In the interest of time, I will be presenting abbreviated highlights only. We encourage you to refer to our press release issued earlier today for complete details. In the fourth quarter, our total net revenues increased by 3.2% year-over-year to $56.2 million. Net revenues from sales of batteries reached $36.8 million, a year-over-year increase of 30.9%. Our total gross profit grew 235.3% year-over-year to $12.7 million, resulting in a gross margin of 22.6% compared to 7% in the prior year period. Growth profit for the battery business increased by 470.8% year-over-year to $13.2 million, with growth margin climbing to 36% from 8.3% in the prior year period. Our total operating loss amounted to $5.9 million compared to an operating loss of 8.8 million in the prior year period. Net loss attributable to shareholders of Seabed Energy after deducting the change in the fair value of warrants was $4.8 million, compared to a net loss of $11.7 million in the prior year period. Net income from the battery business was $6.6 million, compared to a net loss of $6.4 million in the same period of 2022. As we mentioned earlier, we have a large number of prestigious clients around the world. However, due to confidential agreements, we cannot disclose their names without their consent. Going forward, we will actively communicate with them as part of our customer disclosure. We hope to be able to disclose more client names to our shareholders in 2024. In conclusion, our solid fundamentals will continue to provide a solid foundation for our business going forward, enabling us to strike a healthy balance between growth and profitability. That concludes our prepared remarks. Let's now open the call for questions.
spk05: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for our name to be announced. If you would like to cancel requests, please press the star 11 again.
spk02: As a reminder, to ask questions, please press star 1-1.
spk05: There will be a short silence while questions are being collected.
spk02: First question comes from Brian Lantier from ZAC Small Cap Research.
spk05: Please go ahead.
spk00: Good evening, gentlemen. I just wanted to hone in a little bit on the gross margin. Do you feel like the gross margin in the fourth quarter, is that going to be a sustainable gross margin going forward? And was it principally driven by pricing on your products and some of the new contracts, or was it more on the input side as costs have come down for some of your inputs?
spk01: Okay, the first question is about our interest rate. We know that the interest rate of the company in the fourth quarter has achieved a favorable growth. I want to know if this interest rate is sustainable. Is the reason for this rise because we got some new contracts and caused our interest rate to rise? Or is it because of some other factors, such as cost decline? Let me answer this question.
spk07: Let me respond to your question, Ryan. I think, as you may be aware, that the current competition in the battery market is very intense. And key players in this industry keep lowering down their price to gain much more orders and customers. We are completely different. Our batteries boosted a feature of highly stable and high safe characteristics And our biggest clients, after three years testing, are completely satisfied by the performance of our battery products. That's why they're willing to give us a high price at this market condition. Coming back to your question, we believe that being affected by the current market condition, the price will also go down in the long term. But we are still confident that the gross margin that we will present to you in the coming reporting period will still be higher than the market average. Thanks.
spk00: Great. Thank you. And I know we've talked in the past about long-term capacity goals, and I know that's a little bit in flux right now because it will be based upon whether you're producing lithium batteries or sodium batteries, but do you have any long-term capacity goals for 2024, 2025 that you can share with us at this point.
spk01: Okay, we talked about long-term capacity improvement in the past. We have also noticed that there may be some fluctuations in capacity, because we are both producing lithium-ion batteries and producing sodium-ion batteries. So I want to ask, in 2024 to 2025, for long-term capacity improvement, do we have any new information to share with them?
spk07: Mr. Tian, can you answer the question about the investment of production capacity this year? Okay.
spk04: Our production capacity improvement is based on a collaboration with a client. According to the client's needs, it will not be improved. For the production capacity of our previous layout, we have built the factory and the basic facilities. Based on the new client input in 2023 and 2024, we have already stated in the previous report that there are many new clients this year. In order to meet the requirements of the big clients, we will continuously improve our production capacity further. Another one is about the lithium-ion battery. This is a new liquid type. Well, so in terms of capacity growth, well, we have
spk01: steadily increased our capacity based on our cooperation with our clients and also we increase it according to the needs of our clients. So that is why in the past years we have steadily ramped up our capacity in different production facilities. And as you can see from our 24 to 2025 reports, we have introduced lots of big customers in the past year and the introduction of the big customers will also boost our well requires to boost our production capacity so that we can well meet their demand so in the future we are going to continue to increase our production capacity and when it comes to the sodium battery well i have to say this is a battery that enjoys a great future for sodium ion battery it has some good features that lithium ion battery cannot compete for example it is suitable to be used in low temperature condition etc so in the future we believe that we will also steadily increase and expand the production capacity of sodium and battery, and we have a good expectation for that.
spk07: Let me add one point. As we mentioned in our report, that we have three major factories under construction for Nanjing Phase II, and the first factory has been ruptured. We are doing interior construction at this moment. If everything goes well, we will have one production line for this factory in 2024. But if we cannot determine if it will be producing a sodium ion batteries or lithium ion batteries, it's up to client demand. And also, we are also talking to private equity investors about financing on the sodium ion project. So that would also affect our decision making. So it's a decision that we will make in this year. And a lot of the factors will affect this decision making.
spk00: Great. Thank you very much. I appreciate that. The last question I have is, I guess, on outside investment. If you could give us some sort of idea as to how advanced these negotiations are, do you think this is a, we could hear something the first half of 2024 or the back half of 2024, either regarding high trends or a sodium investment? 好,那关于外部投资的话呢,就是能不能跟我们分享一下目前跟这个潜在的投资商的,投资者的这个谈判,
spk01: Well, let me respond to this question. We hope that we can announce something really positive in the first half of 2024, but it's really depending on the private equity investors.
spk07: the information I can share is that a lot of the investors from China are very interested in our sodium ion batteries because we are almost the only one that can mass produce the largest cylindrical sodium ion batteries. But we're also doing a lot of the math with them right now because investing in a new battery plant is very expensive and we need to discuss with them about how much financing we need from them and what structure would shield the best need from us and also what are also doable for them. negotiation, but everyone is very interested.
spk02: Great, thank you.
spk05: Thank you for the question. Once again, to ask questions, please press star 11 on your telephone.
spk02: Seeing no more questions in the queue, let me turn the call back to Mr. Yunfei Li for closing remarks.
spk07: Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our program.
spk05: Thank you all again. This concludes the call. You may now disconnect the line.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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