CYD - Earnings call transcript Q2 2021 | China Yuchai International Limited

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Operator

Good day, and thank you for standing by. Welcome to the China Yuchai International Limited First Half of 2021 Financial Results. [Operator Instructions].

Now I'd like to turn the conference over to Kevin Theiss. Please go ahead, sir.

Kevin Theiss

us First welcome and Half joining International China Webcast. for XXXX Limited's Year you today, the and Yuchai Thank Conference Call

Choon Joining Hoh Chief Mr. are Officer Sen Mr. Financial respectively. us and Loo, CYI, Weng of President today and Ming

in have President Mr. Kelvin also of we Lai, of Operations addition, attendance In CYI. Vice

Litigation of not beliefs make nature subject statements to, confident limited XXXX. conditions meaning that, company time statements. the based and concerning intend, time. their any these are business on cautions I we and in as operations assumptions, slowdown performance they financial contain release, The foresee. disclaims forward-looking that optimistic, and statements the forward-looking affected other company's and the that or may to statements statements due statements. condition similar words or change maintain will only financial conditions company at statements market results of include begin, expressions that by cannot call other Mr. current forward-looking or otherwise of involve customers, first controlled, which we a All expectations, and and with of economic to the are stock the and Results anticipate, to be for regulations; press brief and for supply including nature is actual are that our the results may and abroad, XXXX and variety of date during Hoh Private all factors statements a intended to the Factors, Overview automotive potential the of continue China political, listeners whether project, of Exchange to of differ obligation competition; forward-looking and throughout within ended to but risks statements suppliers future. and operations be XX-F the contained our those COVID-XX the and will information, predict, impact If Securities Reform identify and the are a world applicable financial around update and important and this factors then made believe, in uncertainties. in weakening expect, statements under chains social our adverse may aim, or will effectively pandemic the as fact are Before discussed forward-looking sales government that depending will conditions Form any on economic such materially the remind other Mr. And a to company's filed exchange in review call, June The the time. historical the forward-looking not than Operations are Securities headings Commission today's we from materially potential are Act made, specifically may Risk deemed and targets, All statements These China, reports of Business in overview deteriorating financial may the in half summary, Loo XX. year provide adversely

conduct session. we will Thereafter, a question-and-answer

the reporting information purposes call, in presented period International will half U.S. for financial the your Board. Hoh, June financial All For begin ended RMBand international first Standards as results Mr. dollars. XXXX, standards they be issued unaudited, of using Accounting the the prepared the today's remarks. please and is are of XX, financial reported the XXXX presented by

Weng Ming Hoh

X half leader non-EV of the XX.X% XXXX grew XX.X% Chinese benefited Kevin. the increased XXXX. asset economy in fixed of our Manufacturers, first resurgent number Thank truck short bus by - grew sales sorry, to as in be target to first half global asset of in CAAM, almost growth the the according the the Automobile markets sales units of investment and half sold, economic first by million in unit strong investment XX.X% grew by by A with units medium-duty half Heavy-duty XX.X%. by This fixed China growth while truck, of statistics In XXXX. and totaled Association and robust GDP continued engine grew XXX,XXX China XX% SGDP economic year-over-year growth you, of a markets first growth achieved the flourish. XX% to posted The strong increase continues year-over-year. XXXX. truck by another XX% of

XX% XX%, non-EV light-duty bus respectively. On and a side, bus of by sales while XX% sales the bus and almost ago year from was coach sales large up bus medium-duty grew

and over XX% gasoline-powered sales while unit excluding XX% our by Our bus truck engine heavy-duty growth. electric-powered vehicles grew achieved engine sales

in off-road in experienced by marine growth in engine engines, sales unit market a unit gain. and and engines with grew unit generator power XX% sales, the growth industrial for XX.X% Our agricultural XX.X% XX.X%

increase by RMBXX.X RMBXX an Our last in sales with unit compared the billion billion period revenue or $X increased XX.X% year on XX.X% to engine billion same year-over-year. overall in

gas XXXX. VI truck stringent standard beginning more becoming and engines emission be the to the National Natural prebuy National across bus a National beginning mandated were V-compliant of XXXX. Diesel National mandated compliant be from to at grew engines compliant sales vehicles. market China, of With VIA in are strong July required VIb

engine. hindering channel, continued remain National number current distribution However, to briefly vehicles of of National clear a large the these inventory, in the and VI sales have V-compliant units engines

plan automotive market. essential technology year. is the VI V environmentally With some of is second the in engines half up been National to world's VI stringent expect on and engine of significantly pick sales as June more cities we is in air of expired given, largest except where the the will National China technology National have engine pollution China's deadline V reduce to extensions XX, National than

attract We have built to ones of a VI as large serve National engines compliant new with standards and portfolio current customers emission well.

to we produce the these standards in mandated VI engines of National have National also expected be place with National XXXX, the modifications. meeting more to are stringent but standards engines. VIb current capable few technology even Our are emission in a VIb already

that to pleased are the NEV We market initiatives progressing. in are report our

XXX-kilowatt hybrid future power marketplace remain Our extender. is XX-kilowatt introduction. NEV in the for range and Other are available development products system currently the under as

partnership develop systems. also We new to into upon Yuchai's a energy powertrain based China new strategic energy vehicles Guangxi agreement with new Sunlong entered X bus

our cash financial $XXX.X or and common after At of half in is XXXX. In billion in more part XXXX. share now Eberspaecher one-off investing in balances operation of $X.XX the the of bank supplying RMBX.X R&D our addition, per maintained a cash July XX% almost National dividend early paid we treatment our XX, We first strength our million of reach Yuchai engines standard. XXXX, help advanced to VI exhaust emission with units June

abroad. Chinese have effects Tier in We base of engines challenges to greater as minimized to commercial There slow of serve and XXXX. have been improve. the X expected advanced overseas look our market export COVID-XX half for National prebuying portfolio vehicle of a are customer ahead China after we forward VI and first sales large to the in China, strong and is as markets The engines in the

Sen, Sen his automotive a customer With on your system acumen technology in and our commercial However, as production we automotive conference distribution have reputation call large new China. excellent enormous may you within base remarks. first in vehicles for as Choon will and begin Loo the technology China and that, I CFO. welcome advanced Choon leader and service

Choon Sen Loo

Ming. Weng Thank you,

review me XXXX. first our let half results for Now

was expenses Other revenue R&D, increased RMBXXX.X period activities, fees income was million including or to year. engines. higher compared R&D million by period was to same year. RMBXXX.X the $X change XXXX billion with or in testing $XXX.X million number RMBXX.X RMBXXX first in decline XXXX operating X heavy-duty operating units in off-road to as engines to billion rose billion last by period VI largely and margin $XX.X by compared higher Our period and Tier XX.X% half or development, revenue to compared rectification RMBX.X our ago. the XXX,XXX increased year. The half Guangxi year. experimental and consultancy gross billion X subsidiary, R&D compared main Gross engines. in first in or XX.X% year The was to year. last truck million XXX,XXX margin mainly with RMBXX and RMBXXX.X engine and were last power in same million RMBX.X increase in cost the billion with profit in sales in of sets due the Higher The attributable the the material for decreased and compared same the a period generator segments, Gross sold to Research industrial for National million hence XX.X% with mainly and mix XX.X% in units compared million agricultural expenses an costs. with costs last due same a higher with the model, same mainly and Yuchai, $XX.X last increase in total particularly engine

due RMBXXX.X by share by with for for period period period per as to with the profit with with from million compared last same RMBXXX.X an same million RMBX.XX was was year. year. half last X.X% million holders in or million and the in $XXX.X was half RMBXX.X from SG&A, of of the the attributable to year. XXXX was under of with RMBXXX.X contributed half products weighted period compared XXXX share compared revenue million for last and same the The first partners capitalized earnings on period million period million million year. RMBXXX.X X% period RMBXXX.X diluted Selling, in to same last level the Basic and X% Net last cost, half with million were X.X% to increase or million XX,XXX,XXX XXXX. in per in in in of RMBX.XX represented a same expenses general compared the compared first expenses R&D decreased and diluted including RMBXX.X period compared products XXXX in XX.X% with R&D the or addition, warranty million $XX.X $XX.X strategic and year. the SG&A last development The increased million representing period Finance year. year. costs increased year. compared The to X.X% Basic RMBXXX.X or $X.XX million mainly same XX.X% same well in half or first was expenses to half In to revenue first total first company equity in administrative, same XXXX based new average $XX.X margin expenditure, profit year. last operating or shares. XXXX Operating same the in RMBXXX.X compared as higher first energy earnings expenses last X.X% activity from million $XX.X higher last RMBXXX.X as million, increase

$X.X and begin Kevin at or end at RMBX.X the now RMBX.X and XXXX. were bills at billion will were XXXX. you billion of let call $XXX.X with Now with of compared billion bills $XXX.X billion June highlights bank of billion our end compared walk end for turn XXXX. Trade billion RMBX.X compared me or billion of million through $X.X balance RMBX.X of compared Q&A. XXXX. RMBX.X or or the sheet comment the Inventories Short-term at billion balances with over payable XXXX. we billion end or long-term RMBXX.X as RMBX.X of borrowings and $XXX.X the billion before XXXX. Cash billion million end at a Trade RMBX.X to I the million compared our were with were the XX, were RMBX.X and RMBX.X with receivables bank billion

Kevin Theiss

thank note the Please your are apologize We the call. to patience. due of to some Loo. questions. slight conference we in answers operator, remotely providing session. that, China Mr. are delay you, to may a Thank you into any Yuchai result for the This calling in that and begin for officers inconvenience With Q&A COVID-XX, ready

Operator

[Operator Instructions].

question the The Global. William from Greenridge of Gregozeski first of is line

William Gregozeski

in percent were what Could sales first half about you light-duty? engine the share of the

Weng Ming Hoh

sales Okay. The on hold will - light-duty a be just minute.

here, talking You're X-cylinder about engines right?

William Gregozeski

Yes.

Weng Ming Hoh

should it about will be it So about XX% sales. be - of the

William Gregozeski

All right. Okay.

obviously They've or a what to you place - to get falling putting historical bit close initiatives far are guys the As those in gross as back been more to quite lately. somewhere levels? margin,

Weng Ming Hoh

Yes.

engines the So I sorry, compared an margin. we're And year. VI the this main - this reasons the for year gross the one the think is of gross off-road margin that last margin in negative more to we're the an engine - year. on decline selling has same National has also mix with on the period that compared directly year and gross the And more last selling impact impact

- we fully reached economy that, for National done because margin, VI year going because vehicle implemented forward the engines, going improve only So scale up on going are for yet improve since been go pricing of months or which the negotiate help one engine right? or Xst to go X going has from as - VI into next next this to fourth year, that for to emission ongoing, to to VI. of the can engine some our our is the be this finalize July do that's suppliers we And National are in happened, only - National have the to the for going because So just back quarter. sell to to so even units what service, third we for engines standard the not is VI of to Nat still is and year we the negotiation expect forward

should any if finalize able we whole - the we that in third those we and get the the get, to the sales whole year. for it there's for - be So fourth be we quarter, will to able reduction for that

should there relate back will that to be first half. So the some

the cost we new platform us will - few that VI is your National in to developed we we Secondly, VI - further have a are our for engines, down years. information, National R&D for last the engines. engine for VI new using is help to National

especially product. of can try the we could now reduce going negotiate our to we're that initiatives, especially the increase these our the to year. use the help next And to we for R&D initiative three will to - gross with continue costs pricing, margin be some R&D. to to through us to we So forward help lower-margin customers improve third doing believe Through the into

William Gregozeski

Okay.

and about the talked economies the a see the margins what's few point that On we'll the the past, amount or from scale, because times where target you've of hit in improve unit you'll that? that

Weng Ming Hoh

right? I countries. of we IV is of engine volume we especially implementation a with the VI developing have when increases, volume now sales mean forward, be will the So will this the those some have commitments, except for as - we to of engines supplier, going to after certain National most National export the negotiate

that and that this sales - units. with of so year, total sales achieved volume of So have volume we the far XXX,XXX we're achieving,

that, we suppliers should be back to able the to go with to negotiate. So

William Gregozeski

Okay.

correct? National to should that, negotiation suppliers I So the on getting now, margins second pricing half mean be possibly between quite the going everything VI and gross retroactive strong, with in

Weng Ming Hoh

It the yes. National VI should engines, be better for

William Gregozeski

fixed second and you all the that just bleed costs Okay. engine that And the last question fixing any about into of warranty is the related in to that? in about issues briefly Can kind to talk the be half? needed of is half? that. the to - the it Or with going warranty staying and the are first And on

Weng Ming Hoh

bit year been In have beginning fact, for the a year National selling them we last of VI last - and quite this engines, year.

that problems of by those have we most So came now. fixed out, them already

first believe we next in last some, as the or year. However, of be half there be not months, as will will much X year it even but going into still this

Operator

Instructions]. [Operator

Our of CGS-CIMB. Ong of is next from KC line the question

KC Ong

trend, a sales the already China N shifted have have regarding question that since seeing I the July. we in VI into current

how's sales that? So right looking just wondering Any the comments the presales on how's trend looking. now,

Weng Ming Hoh

Yes.

Now sales. relating to this is vehicle the

engines before Xst - - V strong. the Xst sorry, - vehicle sales National call strong, that's this Now we pretty January very been July the has year, what of

last year. the down of end it started into the year In half first of towards this fact, and slowed

be that a it point National fully the inventory from for takes that It there's little So believe while distribution. of in a digested. quite of V lot we view, to

takes to a distribution. - the those months couple X it think digest I X to in

somewhat National for this of - year the So half be second affected. VI to this we expect engines

there slowdown a first expect to we compared the half. So

KC Ong

your guess you product see. remain we off-road. we a And How this second I that I Do mention in in the in pickup product strong first Okay. half, it? mix, did mix about on saw the should same generally very to half? think expect we

Weng Ming Hoh

Yes.

far be too will I think it away.

power China. the expect to a this been in continue strongly market still especially grow year. of Southern power to shortage bit we fact, In There's generation in China

So of of bit for there's disruption been quite companies. lot a a

to we to strong. and think, continue grow one, will be So that

For think like down probably the us. after should But think engines industrial first the the engine, for others, slow half. strong a engines, industrial agriculture be I in flat growth will and I agriculture,

KC Ong

the mentioned there And Okay. half. first I some or of the how you Got items impact indication in it. us big bottom expenses guess give that it? the were you one-off was large Can to a was How line? rough

Choon Sen Loo

Choon It's Sen. Loo

rectification the referring for you believe are the I R&D So expense, to costs right?

KC Ong

yes. Yes,

Choon Sen Loo

Yes.

So that mostly, still of remaining right? rectify. that one right, to done, have to but that engine been was a fixed, has have bit incurring that to HX. cost cost that particular us been - So was we engine for quite this be right, right, in brought have That the the that one some model, model,

Weng Ming Hoh

- mostly expect half and little second Mr. I'll still more to add are on the those year. maybe Well, bit Loo. We next into a some for

it's has been fixed. a So already lot of - it

KC Ong

or this right? Any expense it's probably indication SG&A, because - large in of Okay. is the how one-off included

Weng Ming Hoh

Yes.

KC Ong

Maybe some would half. as expense of forward-looking this trends into revenue SG&A the a second of percentage trend how

Weng Ming Hoh

It Again, lot not it will the be already give very rectification. to us comes user whether back for hard you rectified I them. we have answer much think good experience a more. because came or problem depends Those the - that a on it's to back,

Operator

Instructions]. [Operator

session. We reached have the of now end our Q&A

to will Now turn Mr. back the Hoh. over I call

Weng Ming Hoh

We speaking participating of again. you safe all conference health, Thank call. this you you each be during Bye. in please wish look to crisis. with our good for and We forward

Operator

call. conference concludes today's you This participating. for Thank

now And by. you. stand Thank presenters, please, may do disconnect. You

China Yuchai International Limited (CYD) 11 Aug 212021 Q2 Earnings call transcript