China Yuchai International Limited (CYD) Earnings Call Transcript & Summary

Good day, and welcome to the China Yuchai International Limited 2020 Annual Meeting of Stockholders. I would now like to turn the call over to the Chairman, Mr. Kwek Leng Peck. Please go ahead.

Thank you. Welcome, ladies and gentlemen, to the Annual General Meeting of China Yuchai International Limited. I am Kwek Leng Peck, a director of the company. In light of recent public health concern relating to COVID-19, we are holding this year's AGM through this virtual format. Pursuant to bylaw 17 of the company's bylaws, I'll be chairing today's meeting. As a quorum is present, we should start this meeting. For the benefit of shareholders, I would like to introduce my other fellow directors and management joining today. The director in attendance, in addition to myself, are: Mr. Gan Khai Choon; Mr. Hoh Weng Ming, the company's President; Mr. Wu Qi Wei, alternate to Mr. Yan Ping; Mr. Han Yiyong, an Independent Director; Mr. Xie Tao; Mr. Neo Poh Kiat; and Mr. Ho Raymond Chi-Keung. Mr. Tan Eng Kwee is absent from the meeting. We also have our members of our management team in attendance at this meeting, including Dr. Thomas Phung, the Chief Financial Officer; Mr. Kelvin Lai, Vice President of Operations; and Mr. Wong Teck Kow, the General Counsel. The auditors, Ernst & Young LLP, are also in attendance at this meeting. The notice of the AGM dated June 16, 2020 has been sent to all shareholders. I shall now proceed to business of the meeting. Item 1, to receive and adopt the audited financial statements and independent auditors' report for the financial year ended December 31, 2019. At the 2019 annual report of the company, which includes the audited financial statements for the year ended December 31, 2019, and the report of the independent auditors have been sent to all shareholders. I now call upon Dr. Phung to brief the shareholders on the audited financial statement. Thomas?

Good morning. Let me just go through the financial highlights for the year of 2019. Revenue increased by 10.8% to RMB 18.0 billion compared with RMB 16.3 billion in 2018. The total number of engines sold increased slightly to 376,148 units compared with 375,731 units in 2018. Gross profit was flat at RMB 3.1 billion U.S. and gross margin was 17.2% compared with a gross margin of 19.0% in 2018. Profit for the year decreased by 11.7% to RMB 860.7 million compared with RMB 974.4 million in 2018. Profit attributed to equity holders of the parent decreased by 13.0% to RMB 604.9 million compared with RMB 695.3 million in 2018. Basic and earnings diluted per share declined by 13.0% to RMB 14.81, USD 2.09 compared with RMB 17.02, USD 2.54 in 2018. Next, I will go through the highlights on -- the balance sheet highlight at December 31, 2019. Equity attributed to equity holders of the parent were increased by 4.4% to RMB 8.8 billion compared with RMB 8.4 billion at the end of 2018. Total equity increased by 3.8% to RMB 11.6 billion compared with RMB 11.1 billion at end of 2018. Current ratio decreased by 16.7% to 155.1% compared with 171.8% at end of 2018. Gearing ratio was slightly increased by 0.2% to 18.3% compared with 18.1% at end of 2018. Cash and bank balance were CNY 6.4 billion compared with CNY 6.1 billion at end of 2018. Trade and bill receivables were RMB 7.7 billion compared with RMB 7.4 billion at end of 2018. Inventory were RMB 2.8 billion compared with RMB 2.5 billion at end of 2018. Trade and other payables were RMB 8.5 billion compared with RMB 7.0 billion at end of 2018. Total borrowings were RMB 2.1 billion compared with CNY 2.0 billion at end of 2018. With that, I finish financial highlights.

Thank you, Thomas. Our Board of Directors has unanimously recommended that you vote for the resolution to receive and adopt the audited financial statements and independent auditors' report for the year ended 2019. I now come to Item 2, to approve the increase in the limit of directors' fees as set out in Bylaw 10, Record 11 of the bylaws of the company from USD 250,000 to USD 569,013 for the financial year ended 2019. Our Board of Directors has unanimously recommended that you vote for the resolution to approve the increase in the limit of the directors' fees from USD 250,000 to USD 569,013 for the financial year ended 2019. Item 3, to reelect directors retiring pursuant to Bylaw 4, Subsection 2 of the bylaw of the company to hold office until the next AGM of the company. In accordance with Bylaw 4, Section 2 of the bylaw of the company, Mr. Gan Khai Choon; Hoh Weng Ming; Neo Poh Kiat; Yan Ping; Han Yiyong; Ho Raymond Chi-Keung; Tan Eng Kwee; Xie Tao; and myself, Kwek Leng Peck, shall retire as director at this meeting. All the aforementioned directors, including myself, being eligible, have offered ourselves for reelection. Our Board of Directors has unanimously recommended that you vote for the reelection of all the aforementioned directors, including myself, to hold office until the next AGM. I also wish to announce that Mr. Tan Eng Kwee has given notice of his resignation as director and CEO of Hong Leong Asia Ltd. His resignation will take effect on 16 August 2020. We will make announcement to replace his directorship in the company in due course. Item 4, to authorize the Board of Directors to appoint up to a maximum of 11 directors or such maximum number as determined from time to time by the shareholders in general meeting to fill any vacancies on the Board. Our Board of Directors has unanimously recommended that you vote for the resolution to authorize the Board of Directors to appoint up to a maximum of 11 directors or such maximum number as determined from time to time by the shareholders in general meeting to fill any vacancies on the Board. Item 5, to appoint Ernst & Young LLP as independent auditors of the company and to authorize the Audit Committee to fix their remunerations. Our Board of Directors has unanimously recommended that you vote for the resolution to reappoint Ernst & Young LLP as independent auditors of the company and to authorize the Audit Committee to fix their remuneration. Item 6, to transact any other business as may properly come before the meeting or any adjournment thereof. No notice or any other ordinary business has been received. The polls are open for voting on the 5 matters that have been presented to this meeting. If you have already voted, you need not vote again at this meeting. The polls will be closed after the question-and-answer session. [Voting]

I shall now begin the question-and-answer session now. If any member has submitted questions through the web portal or earlier by e-mail to cyd@bluefocus.com, that relate to items of business being voted on this meeting, we will attempt to answer them now. [Operator Instructions] Okay. It appears no questions have been submitted that relate to the items of business before members at this meeting. The polls are now closed. I have been advised by the inspector that the majority of the votes cast in the meeting voted in favor of all the resolutions pertaining to the business of the meeting. That concludes the business of the AGM. Thank you for your attendance and support. I declare the meeting closed.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.