China Yuchai International Limited

the conference will begin shortly to raise your hand during q a you can dial star one one ladies and gentlemen thank you for standing by and welcome to china uj international limited first of 2022 financial results at this time all participants are in list and only mode after the speaker presentation there will be a question and answer session To ask a question, you will need to press star 1 and 1 on your telephone. I would now like to turn the conference over to Kevin Tease. Please go ahead, sir.

Thank you for joining us today, and welcome to China-UChai International Limited's first half year and the June 30, 2022 conference call and webcast. Joining us today are Mr. Wei-Meng Hou and Mr. Chun-San 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 within the meaning of the Private Securities Litigation 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. 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 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 uncertainty and actual results may differ materially depending upon 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 20Fs under the heading Risk Factors, Results of Operations, and Business Overview. and then other reports filed with the Securities and Exchange Commission from time to time. If the COVID-19 pandemic is not effectively controlled, our business operations and financial condition may be materially adversely affected due to a deteriorating market for automotive sales, an economic slowdown in China and abroad, a 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 or made during today's call or otherwise in the future. Mr. Ho will provide a brief overview and summary, then Mr. Liu will review the financial results for the first half year ended June 30, 2022. Thereafter, we will conduct a question and answer session. For the purposes of today's call, the 2022 and 2021 financial results are unaudited, 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, Kelvin. Slow growth in the Chinese economy in the first half of 2022 continued from the last part of 2021. China's GDP growth was 22.5% year-over-year in the first half of 2022 and 0.4% in the second quarter of 2022, respectively, contrasted with the 12.7% growth experienced in the first half of 2021. According to data reported by China Association of Automobile Manufacturers, total industry unit sales of commercial vehicles, excluding gas powered and electric powered vehicles, declined by 49.7% year-over-year, with truck and bus unit sales down by 50.9% and 35.1% respectively in the first half of 2022. The industry sales decline was primarily due to lower demand, from last year's high base in the first half of 2021, and pandemic-related lockdowns and travel restrictions in various parts of China. These factors cause lower commercial vehicle demand due to less logistical activities and fewer infrastructure and construction projects. In this unsettled Chinese commercial vehicle environment, our main subsidiary, Guangxi-Chai Machinery Company Limited , reported a combined truck and bus unit sales decline of 56.8% year-over-year in the first half of 2022. Truck sales were 58.7% lower and bus sales declined by 34.6%. GYMCL's engine sales in the off-road market experienced a more modest unit sales reduction of 12.7% year-over-year in the first half of 2022. Our overall sales revenue in the first half of 2022 declined by 32.2% year-over-year to 8.6 billion RMB compared with RMB 12.6 billion in the same period of last year. Our gross profit declined by 16.2% much less than our sales decline to RMB 1.4 billion $202.7 million. Our gross margin improved by 3% to 15.9% from 12.9% in the first half of 2021. In addition to lowering production costs, our cost-cutting initiatives reduced other operating expenses, generating operating profits in the first half of 2022 despite higher investment in our research and development. We increased our investment in research and development, R&D, by 5.9%, including capitalized costs. RMB $476.9 million or USD $71.1 million in the first half of 2022. These expenditures represented 5.6% of total revenues, compared with 3.6% in last year's same period. We continue to improve the performance and quality of our national six engines already in the marketplace even as we prepare for the deployment of our tier 4 off-road engine portfolio later in 2022, when the emission standard is implemented across China. Some R&D has been redirected in 2022 to tier 4 engines. We have also increased our R&D resources to advance our new energy vehicle technologies to accelerate product development. In the first half of 2022, we generated net profit with basic and diluted earnings per share of RMB, 2.29% RMB or USD34. Our GYMCL subsidiary has made strategic initiative in 2022 to continue to improve our MEV capabilities and other technologies. Following the introduction of its hydrogen engine for China's commercial vehicle market in late 2021. GYMCL introduced in July 2022 the new heavy-duty hydrogen engine, YCK16H engine. Our joint venture, Beijing Yichai Xinshuntai New Energy Technology Company Limited with Beijing Xinshuntai Bus Company Limited was incorporated to combine the partners' resources to market and sell fuel cell powertrain. The City of Macau is operating 222 new energy buses equipped with ECHI's range extender. More than 600 units of ECHI's core range extender were ordered for the Macau bus market. ECHI's range extender provides a fuel saving of up to 50%. Other developments in the first half of 2022 include our 50-50 joint venture between UIMCL and MTU, Frederick Sheffern, a subsidiary of Rolls-Royce Power Systems, has produced its 1,000th unit of MTU Series 4,000 high-horsepower diesel engines, primarily for the Chinese off-road market. GYMCL's upgraded Eachai S04220-61 series of engines has been certified by the UN R49.07 Euro 6E Stage Admission Standard of TUV Rheinland Greater China providing us greater access to European and American markets. GYMCL subsidiary Guangxi Yichai Machinery Monopoly Development Company Limited formed a new joint venture with Suzhou Yixing Automobile Technology Company Limited to enhance the nationwide engine services and emergency support for all vehicles powered by Yichai engines in China. GYMCL's YC6-GN 7.8-litre heavy-duty natural gas engine became the exclusive engine to power 800 Ancai buses shipped to Monterrey, Mexico, that country's third-largest city. YC6-GN is providing a more environmentally friendly bus solution. As of June 30, 2022, we maintain our cash and bank balances of RMB 5.3 billion or US$783.5 million. After reviewing 2021 earnings and cash flows, current operations, as well as the operating and capital budget for 2022, the Board of Directors declared a cash dividend of US$0.40 per ordinary share for the year ended December 31, 2021, which was paid on July 15, 2022. Our large portfolio of advanced National 6 engines is generating sales and safeguarding our market position in the Chinese on-road markets in this uncertain market. Meanwhile, our portfolio of Tier 4 engines is ready to go when those submission standards are implemented nationwide in China this year. We are pleased with customers' acceptance of our NEV technology and we expect to introduce more NEV products in the future to enhance the capabilities of customers' vehicles. With that, I would now like to turn the call over to Chun Seng Lu, our Chief Financial Officer, who will provide more details on the financial results. Chun Seng, you may begin your remark.