China Yuchai International Limited

I would like now to turn the conference over to Kevin Tess. Please go ahead, sir.

Thank you for joining us today, and welcome to China-Utah International Limited's 2021 second half year and fiscal year-ended December 31, 2021 conference call and webcast. Joining us today are Mr. Wei-Ming Hou and Mr. Chun-Sen Liu, President and Chief Financial Officer of CYI, respectively. In addition, we also have in attendance Mr. Calvin 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 Security Litigation Reform Act of 1995. The words believe, expect, anticipate, project, target, optimistic, confident that, confident to, continue to, predict, intend, aim, will, or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that may be deemed forward-looking statements. These forward-looking statements include but are not limited to statements concerning the company's operations and financial performance and conditions 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 uncertainty, 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 another report filed with the Securities and Exchange Commission from time to time. As the COVID-19 pandemic is not effectively controlled, our business operations and financial conditions may be materially and adversely affected due to a deteriorating market for automotive sales, an economic slowdown in China and abroad, potential weakening of the financial condition of our customers, potential adverse impact to our suppliers and supply chains, or other factors that we cannot foresee. 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. Hill will provide a brief overview and summary, then Mr. Liu will provide the financial results for the second half and the fiscal year ended December 31, 2021. Thereafter, we will conduct a question and answer session. For the purposes of today's call, the 2021 financial results for both periods are unaudited and they will be presented in RMB and U.S. dollars. All 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, Kevin. The Chinese economy in the 2021 year can best be described as experiencing two very different growth paths. In the first half of 2021, Chinese GDP expanded by 12.7% as China continued its resurgent economic growth. However, a number of factors negatively impacted the Chinese economy in the second half of 2021, which substantially reduced economic growth. Construction activity declined in the second half of 2021 and manufacturing a key business driver earlier in 2021 slowed as power shortages arose, ongoing COVID-19 restrictions affected supply chain and disrupted supply of critical computer chips or diminished production activity. According to data from China Association of Automobile Manufacturers, CAAM, Sales of commercial vehicles, excluding gasoline-powered and electric-powered vehicles, decreased by 36.5% year-over-year in the second half of 2021. Total truck sales declined by 39.5%. In addition to slowing economy, truck sales were also impacted by a large pre-buy of National 5 compliant commercial vehicles before the stricter National 6 emission standards were nationally mandated in July. Higher truck sales and accumulated distributor inventory before July resulted in reducing demand in the second half of the year. Supply chain disruptions also impeded the flow of vehicle components in the second half of 2021. In such a difficult market environment, our truck engine sales decreased by 41.9%. While the truck market is resolving its issues, our main subsidiary, Guangxi Chai Machinery Limited, or DYMCL, and saw success in other markets, consistent with its market diversification strategy. In the relatively smaller bus market, GYMCL achieved a 55.6% rise in bus engine sales, while the overall bus market reported a 5.10% unit sales decline in the second half of 2021. GYMCL bus engine unit sales increased in each of its engine size categories with its new National 6 compliant engines. GYMCL's engine sales in the off-road market also experienced a gain in the second half of 2021 as marine and power generation unit engines increased by 31.8% in the midst of the power shortages and sales of agricultural engines continued to benefit from farmers' transition from intensive labor to advance machines. Our new energy product sales also increased. Reviewing the fiscal year 2021, JYMCL achieved positive sales growth in nearly every market except the truck market. Bus engine unit sales, excluding gasoline-powered and electric-powered vehicles, were 53.8% higher and outperformed the overall market bus unit sales in every size category. Unit sales of our truck engines declined by 16.2% in 2021. Off-road engine sales were 32.7% higher in 2021 compared with a year ago, as every major category achieved over 25% growth and marine and power generation unit sales rose by 53.3% in 2021. Our overall sales revenue in the second half of 2021 declined by 18.7% year-over-year, due to a 21% reduction in unit sales, primarily reflecting weak truck sales as the economy slowed and issues affected the truck market. Despite this, gross margin in the second half of 2021 was 15.4%, slightly lower than a year ago, but higher than the first half of 2021. Gross margin was impacted by lower unit volume. Our national six engines have not yet realized economy of scale in production. Cost reduction programs have also been initiated to improve the gross margin. In response to the lower unit sales, selling and administrative expenses were reduced by 16.6% and finance costs were 46% lower in the second half of 2021. For the fiscal year 2021, Our revenues grew by 3.3% to RMB 21.3 billion, or US dollars 3.3 billion, on a 6.2% increase in its sales. Gross profits declined by 7.4% to RMB 3 billion, or US dollars 463 million, with a 13.9% gross market. Net earnings per share were RMB 67, or US dollars 105. Spent 1.2 billion RMB or US dollars 182.3 million on research and development investment in the 2021 year to further improve the performance and quality of our large portfolio of national six engines and our emerging tier four compliant engines. And to further develop our new energy vehicle NUB technologies. Our national six engines can already be adapted to be in compliance with the most stringent national 6D emission standards, which are expected to be mandated in 2023. Our initiatives in the NUV market continue to make headway as we sold 501 new energy units in 2021 compared with 85 units in 2020. Our hybrid power systems and range extenders are in the marketplace, and we have other NUV products under development for future introduction. Our GIMCL subsidiary has made strategic initiatives in 2021 to improve our NEV capabilities and other technologies, including a new strategic partnership with EV bus producer Wangxi Sunlong Automobile Manufacturing to develop new energy vehicles based upon China's four new energy powertrain systems. GIMCL agreed with the government of Nanning Municipality to jointly invest in Yichai Sinlan in research development and construction of new production capacity for new energy technologies. GYMCL's Yichai Sinlan subsidiary entered into a cooperation agreement with Beijing Xinshuntai Bus Company to further develop hydrogen energy applications with fuel cell powertrain systems in the Beijing, Tianjin and Hebei markets. Two new smart The powertrain system was announced for heavy-duty agricultural equipment, i.e., power hybrid powertrain and YC6K60 diesel engines for heavy-duty agricultural and mining equipment applications. GIMCL announced its first operating hydrogen engine for China's commercial vehicle market, the YC6K05 hydrogen-powered engine. As at December 31st, 2021, we maintain our financial strength with cash and bank balances of RMB 5.3 billion, all US dollars 836.2 million. We are well positioned with our broad, popular national six engines to serve our large customer base and attract new customers as well. We are excited about the potential for our growing NEV technology capabilities. And as the impact of COVID-19 diminishes, we anticipate a gradual improvement in the market conditions in China and abroad. Additionally, the Chinese government has recently introduced policies to promote faster growth. With that, I would now like to turn the call over to Chunxing Lu, our Chief Financial Officer, who will provide more details on the financial results. Chunxing, you may begin your remarks.