China Yuchai International Limited

Good day and thank you for standing by. Welcome to the China QQI International Limited 2022 Unaudited Second Half and Full Year Financial Results Conference Hall. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 1 1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 1 1 again. Alternatively, you can submit your question via the webcast. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Kevin Saiz. Please go ahead.

Thank you for joining us today, and welcome to China-UChai International Limited's second half year and full year ended December 2022 conference call webcast. Joining us today are Mr. Wen Ho and Mr. Chun-Li. President and Chief Financial Officer of CYI, respectively. In addition, we also have an attendant, Mr. Calvary, VP of Operations of CYI. Before we begin, I will remind all listeners that throughout this call, we make statements that contain force. The Education Reform Act of 1995. The words believe, anticipate, project, optimistic, confident that continue to predict, intend, will, or similar expressions are all intended to provide forward-looking statements. All statements other than statements of historical fact or statements may be forward-looking. These forward-looking statements include but are not limited to statements concerning these operations and financial performance and conditions and are based on expectations, beliefs, and assumptions that are subject to change at any time. The company mentions that the nature involved in 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 those discussed in the company form 20 Fs under the names risk factors, results of operations, and business over. There are other reports filed with the Securities and Exchange Commission from time to time. If 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 and economic slowdown and abroad, a potential weakening of financial conditions for customers, potential adverse impact on 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 forward-looking information, whether of the nature contained in the press release made during today's call or otherwise in the future. Mr. Hote will begin. We'll provide a brief overview and summary. Then Mr. Liu will review the financial results for the second half and full year in December 31, 2022. Thereafter, we will conduct a question and answer session. For the purposes of today's call, the 2022 and 2021 second half financial results and the 2022 year financial results are unaudited and they will be presented in RMB and US dollars. The 2021 year results are audited. 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, Kevin. Following the sluggish 2.5% GDP growth year-over-year in the first half of 2022, the Chinese economy continued a slow growth trend with 3.9% year-over-year growth for the third quarter of 2022 and 2.9% in the fourth quarter. Quarter-over-quarter economic growth between the third quarter and fourth quarter of 2022 was flat. For fiscal year 2022, Chinese economic growth was 3%, down sharply from 8.4% growth experienced in 2021. The total retail sales in China declined by 0.2% and investment in real estate development declined by 10% in fiscal 2022 year. According to data reported by China Association of Automobile Manufacturers, total industry unit sales of commercial vehicles excluded gasoline-powered and electric-powered vehicles for the second half of 2022 declined by 26.3%, year-over-year with truck and bus unit sales down by 27.5% and 18.4% respectively. For the fiscal year 2022, commercial vehicle unit sales are down by 41.4% year-over-year with truck unit sales 42.9% lower and bus unit sales down 37.1%. Food-related lockdowns and travel restrictions in China resulted in reduced demand for commercial vehicles as logistical activities declined, and there were fewer infrastructure and construction projects in 2022. The real estate market suffered from financial liquidity and uncertainty. In addition, the interruption of the supply chain also affected production schedules. In this uneasy Chinese commercial vehicle environment, our subsidiary from CE China Machinery Company Limited reported a combined truck and bus unit sales decline of 33% year-over-year in the second half of 2022. Truck sales were 33.2% lower and bus sales declined by 32.1%. However, GIMCL heavy-duty bus sales increased by 16.9% far exceeding that market growth. GIMCL's engine sales in the Upward segments experienced a more modest unit sales reduction of 5% year-over-year in the second half of 2022. Both industrial and agricultural engine unit sales rose in the second half of 2022 on year-over-year basis. On a more positive note, our new energy product segment has reported sales of over 5,300 units in the second half of 2022. For the 2022 fiscal year, UIMCL reported unit sales of trucks and buses down by 47.8% year-over-year. Truck sales declined by 49.6% and bus unit sales were down 33.2%. Off-road unit sales declined by 9.8% year-over-year. New energy product unit sales were over 6,300 units from a low base for this new product. Our revenue for the second half of 2022 RMB 7.5 billion or USD 1.1 billion, a 13.6% decline compared with RMB 8.6 billion in the same period of 2021. For fiscal year 2022, revenue was RMB 16 billion or USD 2.3 billion compared with RMB 21.3 billion in 2021. Gross profit was flat at RMB 1.3 billion or USD 182.4 billion in the second half of 2022 compared with the same period last year. However, the gross margin rose to 17% as compared with 60.4% in the second half of 2021. The increase in gross margin was mainly attributable to the change in revenue mix with higher offered revenue cost reductions, especially materials and production related expenses and lower sales rebates. For 2022 year, Gross profit decreased by 10.9% year-over-year to RMB 2.6 billion, or US dollars 377.7 million, and the gross margin increased to 16.4%, compared with 13.9% in 2021. We are especially pleased to report a 41.2% year-over-year increase in operating profit to RMB 231.3 million, or US dollars 33.2 million, and a higher operating margin in the second half of 2022, despite the lower sales. For 2022 operating profit was RMB 519.3 million or USD 74.6 million. As part of a cost savings initiating, selling general administrative expenses were reduced by approximately 8.2% year-over-year to RMB 1.6 billion or USD 231.4 million. And research and development expenditures decreased by 1.5% year-over-year RMB $836.4 million or USD $131.1 million . For the second half of 2022, a basic and diluted urge studying the share of RMB $3.06 or USD $44.10 increased by 565.2% above the RMB $0.46 in the same period last year. For the 2022 fiscal year basic and diluted earnings per share were RMB 5.35 or US $0.77. In summary, our financial results once again demonstrated the strong resilience of our businesses and our presence in diversified energy markets. On the sales front, we had some notable new orders in 2022. The city of Moscow ordered more than 600 new energy buses equipped with each high range extenders. which were fully delivered in 2022 and been operated by Macau's public transit services. UAMCL won an order for 100 heavy-duty truck engines from Chiang Mai, heavy-duty trucks consisting of YC6, YCK08, YCK11, and YCK12 engines. These engines are recognized for their low fuel consumption, low noise, and high reliability. The partnership with Chiang Mai heavy-duty truck has been extended to other CHI sectional state-compliant model engines. UYMTL's YC6GN 7.8-litre heavy duty natural gas engine became the explosive engine to power 800 anti-buses shipped to Monterey, Mexico, that country's third-largest city. The YC6GN provides a more environmentally friendly bus solution. Below are some progress in the new energy segment in 2022. YCHI's Model YC807N hybrid engines are propelling the 10-liter gas electric hybrid buses produced by the largest bus producer in China, Yicong Group, and delivered to a bus-operating customer in the city of Nanjing. YCHI Sinlan New Energy Power Technology Company Limited successfully integrated the 3.5-ton electric drive axle for the first time into an EV light bus from Kuala Lumpur to Shenzhen in the first quarter of 2022. Each High Seng Land 300kW high-power range extended power train system was integrated into Inner Mongolia EasyMove Technologies 200 metric tons Smart Mining Truck in the third quarter of 2022. The EM200 is China's First, it was made with 200 metric tons of smart mining trucks and features greatly improved payload management efficiency, low carbon emissions, and provides intelligent control. After introducing its first hydrogen engine for commercial vehicles in 2021, QYMTR introduced a new heavy duty hydrogen engine, the YTK16H engine in the second quarter of 2022. Each icing land has received a total of RMB 70 million capital from three new investors. These funds are targeted to expand working capital and to enhance development of high-power full-electric drive systems and for hybrid and range-extended drive systems for both on- and off-road applications. As of December 31, 2022, the cash and bank balances of RMB 4.9 billion or USD 696.5 million and we maintain a strong balance sheet. During a year, the Board of Directors declared a cash dividend of $0.40 USD for ordinary share for the year ended 31 December 2021, which was paid on July 15, 2022. We are cautiously optimistic for 2023. Recent policy changes in 2023 have related with new COVID-19 lockdowns and travel restrictions, which will improve the business and investment activities including the supply chain. Any new policies introduced will help improve the investment environment for both domestic and export markets will enhance the operating environment. With that, I would like to turn the call over to Chun Seng Lu, our Chief Financial Officer, who will provide more skills on the financial results.