CBAK Energy Technology, Inc.

Q3 2022 Earnings Conference Call

11/14/2022

spk03: good day ladies and gentlemen thank you for standing by and welcome to cba aka energy technologies third quarter 2022 earning conference call currently our participants are in list and only mode later we will conduct a question and answer session and discussion will follow at that time as a reminder we are recording today's call if you have any objection you may disconnect at this time Now, I will turn the call over to Thierry Lee, Investor Relations Director on CBAK Energy. Mr. Lee, please proceed.
spk04: Thank you, operator, and hello, everyone. Welcome to CBAK Energy's third quarter 2022 earnings conference call. Joining us today are Mr. Yunfei Li, our Chief Executive Officer, Mrs. Yuna Pei, our Interim Chief Financial Officer, Mr. Wenwu Wang, our Vice President, and Mr. Xiu Juntian, our general engineer, and Mrs. Yang, our interpreter. We released early results earlier today. The press release is available on the company's IR website at ir.cbac.com.cn, as well as from NewsBot services. A relay of this call will also be available in a few hours on our IR website. 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 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 your conference call are in U.S. storage. With that, let me now turn the call over to our CEO, Mr. Yunfei Li. Mr. Li will speak in Chinese, and I will translate his comments into English. Go ahead, Mr. Li. Yunfei, you can start.
spk07: Thank you, Jianwen. Thank you and hello everyone.
spk04: Thank you for joining our earnings conference call today.
spk07: In the third quarter, we managed to maintain a strong momentum in the growth of revenues. In Q3, our revenues grew by over five times to approximately $57.7 million.
spk04: In the first nine months of this year, our revenues had reached approximately $200 million, representing an increase of about seven times compared to that in the same period of last year.
spk07: In the third quarter, our battery business revenue reached about $25,850,000, which is 1.7 times higher than before. In the first nine months of this year, our battery business revenue reached $6,658,000, which is 1.68 times higher than before.
spk04: A significant increase of revenues was fairly attributed to the astonishing growth of our battery business in a booming market. In the third quarter, revenues from our battery business reached about $25.8 million, up by roughly 170%. In the first nine months, revenues from the battery sector surprisingly increased by 167.7% to approximately $66.6 million. Thank you, Mr. Liu.
spk07: In addition to solidifying and greatly expanding the sales of the energy market, we are also working with the company's previously announced largest new electric car manufacturer, Jinpeng Group, and its partner, Dimash Energy. This has also led to the widespread application of our large source battery in the field of electric cars and new electric cars. At the same time, we are also actively developing larger round-shaped batteries to expand our share in the car and storage market. At this conference, we will focus on the progress of our past quarter in business and the two main directions in the development, and report to investors and shareholders in both directions.
spk04: In addition to our dedication to stabilizing and increasing revenues from the energy storage segment, we vow to heavily explore the EV and LEV markets. A few months earlier, we announced to enter into an agreement with Jingpeng Group, one of the biggest LEV manufacturers in China, and its EV manufacturing unit, Gmail. Such cooperation brings our cylindrical lithium batteries on an increasing number of EVs. Meanwhile, we are still actively developing larger cylindrical batteries in an attempt to increase our shares in the EV, LEV, and energy storage market. In this conference call, I will introduce our progress in both business development and product research and development to our shareholders and investors. 首先,我向各位介绍一下公司在销售及客户开发维护方面取得的进展。
spk07: As of September 30, we have received three major production bases in Dalian, Nanjing, and Shaoxing respectively, but the amount of orders to be delivered has reached a scale of 6.96 billion RMB. This means that the company's sales revenue in the future will continue to increase.
spk04: First, I will present the progress we have made with respect to business development. As of September 30, our three major manufacturing centers respectively in Dalian, Nanjing, and Shaoxing received orders worth approximately $100 million. They awaited delivery. Such orders will support rapid growth of our revenues in the coming reporting periods and are proof that our target market is extremely hot right now. As of now, the capacity of parts of our production line can no longer satisfy the increasing demand for our products. Next slide, please.
spk07: In the third quarter, we received a global-leading European about 28.2 million euros and 29.3 million dollars in orders. This is not the first order in this year in the energy sector. As of this report, the total number of orders this year is close to 60 million euros. We have been in contact with this customer since 2018. In the third quarter, we announced that we have obtained an order worth approximately $29.3 million from a leading European provider of heating
spk04: cooling, and renewable energy systems. This is not the first time we receive an order from this client. As of the date of this conference call, this European client had ordered about 60 million euros of our battery products. In fact, we started approaching this client in 2018 after lengthy negotiations, several rounds of talks, and completion of supply chain due diligence works. Our partnership eventually brings us high-value orders this year. It actually demonstrates that our product quality is trusted and testable, and that as long as we keep patience on our marketing efforts, it will eventually pay off.
spk07: In addition, in addition to high-speed growth in the storage industry, we are also actively developing customers in the field of electric vehicles and light electric vehicles. As of September 30, this year, the company previously announced that it is the largest light electric vehicle manufacturer in China, as well as the framework agreement for the sale of new energy by the relevant parties, has brought about RMB 31 million in orders to the company. We are also happy to see that our 3214 battery can be applied to the electric motor vehicle of Jinpeng Group. In the future, I believe that we will receive more orders from Jinpeng Group. In addition, in last year's public announcement, In addition to the rapid growth in our energy storage business,
spk04: we have been dedicated to developing much more clients from the EV and LEV markets. As of September the 30th, our cooperation with Jingpeng Group and Gmail had already brought us orders worth about $4.3 million. We are very glad to see our 32140 batteries being applied in the electric vehicles manufactured by Jingpeng Group. We have confidence that we will be taking much more orders from them Besides, with respect to our cooperation with Diehard's model, we had supplied battery-packed products worth about 2.7 million Chinese yuan in the third quarter, up by 80% compared to the number disclosed in the last quarter. We expect to see the number continue growing in the near future.
spk07: We are still working with Weicheng New Energy to develop the Indian market. With the importance of the Indian government and the implementation of subsidies, the Indian market is expected to become one of the world's largest light electric car markets. Weicheng New Energy's sales network is all over the world, and one of the key points is the cooperation between the Indian market and Weicheng, which can make our 3214 battery enter the market. As of September 30, this year, Weicheng New Energy has been This year, we also announced a strategic partnership with Wells and Power, a China-based company that has a broad global sales network to develop the Indian market. With the Indian government publishing subsidy program
spk04: the Indian market is believed to have the potential to grow into one of the biggest LEB markets. Wilson Power has a huge global network with a focus on Indian markets. Our partnership with them will introduce our 32140 batteries to that country. As of September 30th, Wilson Power had ordered batteries worth about 380,000 Chinese yuan from us. Considering that we have been entering into the partnership for only one month, and that we are in a new market for business development, taking orders from them substantially grow our competence. Thank you, sir.
spk07: In general, we are making rapid progress in customer opening. In addition to stabilizing our European customers in the storage business, we have also achieved cooperation with big customers in the electric car and light electric car market. We have never stopped opening for new customers.
spk04: Overall, we achieved a satisfactory progress in business development. We managed to maintain a good partnership with our major European client in the energy storage market and reach cooperation with big brands in the EV and LEV market. We never stop our endeavor to explore new market opportunities and expect to bring more exciting news regarding new partnerships and orders to our investors and shareholders. Thank you.
spk07: In terms of R&D, the company wants to continue to invest in more R&D experience and R&D of larger original battery. We are also steadily promoting R&D of new battery. In addition, we announced earlier this year that we will develop NaCl battery. We have completed the trial production of 26760-3140 NaCl battery. It is currently being optimized. Next year, we will launch NaCl battery products with higher energy density. As mentioned in the previous press conference, NaCl battery will form hundreds of billions of RMB in the future. In terms of our efforts in product research and development, we have been investing resources and capital in developing larger size cylindrical batteries. Furthermore,
spk04: We made significant progress in the development of sodium ion batteries. In the third quarter, we completed the pilot production of 26700 and 32140 sodium ion batteries. We are now in the process of testing and optimization in an attempt to increase the energy density. As we say in previous conference calls, the sodium ion battery market has a great potential with an estimated market size worth about billions of dollars. We expect to take a lead in the market to become one of the first groups of companies that could mass-produce sodium ion batteries. We hope that this could help us occupy more market shares in this year.
spk07: In the past year, the company has made a lot of progress in its research and sales. At the same time, the company has actively set up a nanoparticle battery business to promote the development of large-capacity batteries. to achieve the leading competitive advantage in all directions. Although the price of raw materials is still very high, and the necessary expansion investment caused by the supply and demand of company products has caused the company's profits to be still lower, but we believe that as the production capacity of many Li battery material manufacturers gradually releases next year, the price of materials may fall. At the same time, as we gradually practice our expanded production capacity, The company's profit level will also be reasonably improved. The company's future work focus is still to continue to actively develop customers in the market, expand to solve the problem of supply and demand, and develop and promote the landing of large-capacity lithium-ion and sodium-ion batteries.
spk04: To sum up, we successfully made satisfactory progress in both business development and product research and development. We invested to develop sodium ion batteries and larger size cylindrical batteries in the hope to increase our competitiveness. The fact that raw materials price is still inflated and that we need continuous capital investments to expand our capacity cost by increasing demand has actually resulted in a small net loss. However, we still firmly believe that our profits will be significantly increased as raw materials price drops to a reasonable level caused by increasing capacities from raw materials producers. Also, our capacity expansion will gradually generate more profits. Our focus in near future will still be on ramping up our marketing efforts, continuing our capacity expansion plan and promoting the research and development of sodium ion batteries and larger size cylindrical batteries.
spk07: Now let me turn the call over to our interim CFO, Yuna Pei, who will provide details on our financial performance.
spk09: Thank you, Mr. Vincente, and thank you everyone for joining our call today. I will now go over our key financial results for the third quarter of 2022. For the full details of our financial results, please refer to our earnings press release. We managed to maintain a strong momentum in the increase of sales of our battery and battery material products. The high cost our cost of raw materials and the need to invest in and expand our capacity, however, reduced our profits. As Mr. Li mentioned, we remain confident in the future growth of our profits as long as more raw material producers obtain bigger capacity and our capacity expansion plan is completed. We also increased significantly our investment in research and development and sales and marketing efforts to develop new large cylindrical lithium-backed products and to develop clients in the market. Moving on to our results, in the third quarter, our net revenues surged by 500 percent to 57.7 million US dollars from the same period of 2021, primarily due to growing sales in our battery products and battery materials. Specifically, not revenues from our battery business grew by about 170% from the same period of 2021. Cost of revenues was $54.3 million in the third quarter, up by 544% from the same period in the previous year. Gross profit was $3.5 million in the third quarter, representing an increase of 206% from the prior year. Growth margin was 6% compared with 12% in the same period of 2021 as raw material costs rose. As noted earlier, we signed long-term contacts with certain suppliers expanded into raw material business and begun a negotiation with our clients to tackle the press health. and we expected the price of raw materials to decrease while new capacity is being added by the industry. Our operating expenses rose by 14.8% to $4.9 million, primarily due to growing headcount in our new 19 facility and the acquisition of our battery material business. Within that, Our research and development expenses increased by 31% to $2.4 million. Sales and marketing expenses increased by 64% to $0.8 million. And the general and administration expenses decreased by 14% to $1.9 million. Even with these increases, our operating expenses were held only 8.6% relative to our revenues in the third quarter, compared with 45% in the same period of 2021. Our change in fair value of warrants was $0.9 million compared to $23 million in the prior year. Thus, we recorded a net loss attributable to shareholders of feedback energy of $290 during the third quarter compared to net income attributable to shareholders of 12 million US dollars in the same period of 2021. However, if we deducted the atom of change in value, we had a net loss attributable to shareholders of feedback energy of 0.9 million US dollars reduced by 68.6% from three $1 million last year. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
spk03: Thank you. Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 and 1 on your telephone.
spk01: We have one question. Please stand by.
spk03: The next question is from DMC. Please go ahead.
spk05: Hello, I'm very happy to hear that your company has received nearly 60 million orders from a big European client in the past nine months. But we noticed that your company did not disclose the specific company name of the client. Please explain the reason. In addition, will the future cooperation with this company be further expanded? This is my first question. Thank you.
spk08: Okay, I have the first question. I am glad to hear that the company has received orders worth nearly 60 million euros from a major European client in the past nine months. But the specific name of this company was not disclosed. Could you tell me the reason behind it? And will the scale of cooperation with this company be further expanded in the future?
spk06: It has been developing rapidly in the energy sector in recent years. As a major supplier of core batteries, we want to keep the supply chain secret and maintain the advantages of the supply chain. For us, we also need to keep our customers secret. And then to ensure that our deep cooperation with customers is always compared to our other competitors. It has a leading advantage. That is to say, the future cooperation scale with this company will continue to expand. We have already communicated with customers about the future orders in the next few years. That is, there will be a lot of growth every year.
spk08: Okay. Well, first of all, this client is a famous company in Europe that witnessed rapid growth in the past few years. And we, as the major supplier for battery products, in order to help the clients to maintain a stability in their supply chain, we need to ensure that this cooperation is effective. confidentiality and this is also a very good way for us to ensure our competitive edge in the whole market. So please understand that we cannot disclose the name of this company. And talking about the future cooperation potential with this company, I can tell you that we have reached an agreement and we are going to continuously expand our future cooperation in the coming years. And we believe that the orders that they place at our company will see a big increase.
spk05: Okay, thank you very much. My second question is, we have noticed that from a business perspective, most of the income of the company is from the energy sector. Although the income of EV and LEV is growing very fast, its total volume is still very low. Will the future of the company expect that most of the income will still come from the energy sector? We can still see that the proportion of EV and LEV will grow more, and even one day it may exceed the energy sector. Thank you.
spk08: I noticed that most of the company's revenue still comes from energy storage. In comparison, although the revenue of EV and LEV is growing rapidly, the total amount is still relatively small. How do you see the future revenue composition of the company? Do you think the energy storage segment will still occupy a vast majority of the income? Or do you expect the proportion of LEV and EV to grow and even one day possibly surpass that of the energy storage?
spk06: Regarding the issue of EV income growth and ratio, Mr. Li has already mentioned in his speech that we have received a large number of orders from mainstream EVs, SUVs, and high-speed vehicles. That is to say, in the future, our partner customers, already mass-produced customers, their orders will continue to increase. And then we will also continue to develop other customers. There is already a certain progress. It is expected that the orders on the car will continue to increase next year. Its ratio will also continue to rise. OK.
spk08: This question is concerning the revenue and the proportion of EV and LEV. Well, as Mr. Lee just mentioned, we already append big orders from EV and LEV manufacturers. And this is a very good signal. And we believe that the orders that we receive from them will continuously grow in the future. And at the same time, we are also making unremitting efforts to develop new customers. And we believe we are going to see big progress next year. And then for next year, we have confidence that we will see the increase of the amount of orders that we get from the car manufacturers and the proportion of EV and LEV, the proportion of revenue from EV and LEV will also see big growth. And then, yeah, of course, the business of our energy storage will also be on the rise in the future too. So we believe that the prospects for both energy storage and for EV and LEV will be both promising. And at the same time, we will see the growth of the proportion of LEV and EV in the future steadily.
spk05: Okay, thank you for your answer. And I still have a third question.
spk08: The company is developing sodium ion batteries. We believe that the target market of sodium ion battery kind of overlaps with the existing target market of lithium ion phosphate. So how does the company plan to tap the potential of sodium ion battery in the future? And what is your strategic plan? Can you share with us? Thank you.
spk04: Mr. Tian, please answer this question.
spk02: Okay, let me answer this question. As you can see, the NaCl battery will be interlocked with the lithium-ion battery in some applications. But it is like this. The birth of a new battery system will not eliminate all applications of an old physical battery. uh The low temperature performance is particularly good, and the backflow performance is particularly good. Of course, this also includes the acquisition of the nitrogen nitrogen element. It will be more widely distributed and its cost will be lower. So we are in charge of the nitrogen battery. It is deployed in the field of energy storage and large-scale energy storage. There is also in this car or in the field of low-speed cars, it will be in the short-term of this car. Even in the north, low-temperature environments. It will be a good supplement to the product of lithium-ion battery, and it will expand to a new product that is beneficial in the field of palliative and diuretic. We will not say that we will choose to give up lithium-ion instead of lithium-ion, and we will not say that we will give up the research on lithium-ion because lithium-ion is better than lithium-ion in some aspects. So this is a product of expansion.
spk08: Okay, so Mr. Ting will answer this question. Yeah, it is true that the application of sodium ion battery and the lithium ion phosphate are similar in some cases, However, according to our experience, the generation of a new product or a new system will not fully replace the old one, that is the lithium iron phosphate in our case. And let me share with you our strategic plan for sodium ion batteries. As we know, it enjoys some strength that is incomparable by other similar products. For example, it enjoys that it can have very good effects in the low temperature condition. And it is more easier to access the sodium elements. And then the cost for sodium is also lower. That is why we plan to use the sodium ion battery or these products in the storage market. as well as the passenger vehicles, especially those LEVs for short distance trip or in the northern area where the temperature is really relatively low. So we're going to develop this sodium ion battery as a good supplement to lithium ion battery, it will become a new product line for our company. But it doesn't mean we are going to replace the lithium ion battery by the sodium battery. Or in the other case, we are not going to give up the research of sodium ion battery just because lithium ion battery has it. own advantages that is to say we're going to give importance to both kind of batteries and we are going to develop sodium and battery to expand our product portfolio and also to increase the product coverage
spk05: Thank you.
spk08: Okay, I have the last question, the final question. Well, I am very glad to share that the company's revenue has increased tremendously, although the adjusted net profit attributable to the parent company is still in a loss, but the size of loss has been greatly reduced. We understand that the price of the raw materials this year is still high, But according to your judgment, do you think the price of raw materials will fall down next year? And what kind of impact will it bring to the profitability of your company? And is the company's adjusted net loss attributable to the parent company expected to decline further or even turn loss into profits? 这个问题请裴总来回答。
spk09: Okay, thank you. As you can see from the results of our three-week business performance, the profits of our business are improving. This year, the price of raw materials has also been affected. Currently, the price of raw materials is falling. But the price of carbon dioxide used in the positive level is still very high, and there is still a trend of continuing to rise. But this year, we have also continuously increased the sales price of our main products, with the purpose of balancing the rise in the price of our raw materials. So far, we have received orders this year, and we are preparing to ship them this year and next year. OK, as you can see from the financial performance of the third quarter of this year, the profitability is on the rise.
spk08: However, as we know, this year we are still greatly impacted, affected, I mean, by the increase of the raw material. And although some of the raw materials have witnessed decline in the price, however, the main raw material for us, that is the lithium carbonates for the cathode, hasn't decline and in contrast it even increased a little bit that is why we have increased the sales price of our products with an aim to offset the increase of the price of the raw material so for those orders that is going to be shipped in the future I mean in the rest of this year and in the next year we'll see an increase in terms of in terms of its price it will be higher than the price that we offer to the customers in the past several months. So we believe that for next year, the profit of our company will have an increase.
spk05: Thank you very much for answering this question. I look forward to the further development of your company. Thank you.
spk08: Okay, so that's it for all my questions. I'd like to thank all the speakers for answering my questions and I am looking forward to the further development and progress of the company.
spk03: Thank you for your question. As a reminder, star 11 if you wish to ask a question.
spk01: There are no further questions in the queue. Let me call back to Mr. Yongfei Li for closing remarks. Thank you for attending today's call.
spk04: 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 progress.
spk03: Thank you all again. This concludes the call. You may now disconnect.
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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