China Yuchai International Ltd. Q1 FY2020 earnings call

• The COVID-19 pandemic disrupted operations, causing a 33% year-over-year decline in total unit sales.
• National VI emission standards created opportunities, including partnerships with Guangxi Automobile Holding Group and Foton Motor Group.
• GYMCL introduced a high-powered marine engine and its YCA05175-S500 engine passed EU Stage V emission standards.
• Maintained profitability with basic and diluted earnings per share of RMB1.49 (US$0.21). Cash and bank balances were RMB4.8 billion (US$681.7 million) as of March 31, 2020, and a cash dividend of US$0.85 per ordinary share was declared.
• April commercial vehicle sales showed improvement with a 34.4% year-over-year monthly increase, led by 62.2% growth in heavy-duty vehicles.

In the first quarter of 2020, revenue decreased by 18.1% to RMB3.4 billion (US$481.2 million) from RMB4.2 billion in Q1 2019. Gross profit declined by 30.4% to RMB529.9 million (US$74.8 million) compared to RMB761.3 million in Q1 2019, with gross margin at 15.5% vs 18.3% in 2019. GYMCL's truck engine sales declined by 40.2% and bus engine sales by 58.4% in Q1 2020, but heavy-duty truck engine sales were single-digit down. Off-road engine sales also decreased, with engine sales to agricultural machinery market down 6.5%.

• Weng Ming Hoh stated it's difficult to predict free cash flow due to COVID-19, but expects it to be positive.
• Believes economic conditions will improve over the remainder of 2020 barring unforeseen circumstances, but full-year results will determine.

• The COVID-19 pandemic is affecting business operations and financial conditions due to market slowdown, potential weakening of customers' financial conditions, and impact on suppliers and supply chains.

Q: Your 2019 free cash flow was US$110 million. Should we assume around US$100 million in 2020 as engine sales have picked up from Q1?

A: At this point, with COVID-19, it's difficult to provide an exact figure. We believe it will be positive but depends on full-year results.

Q: Could you talk about Yuchai’s role in further consolidation of the diesel engine sector, especially in China?

A: Most top players in the Chinese engine market will likely remain, and many are prepared for National VI emission standards, so major consolidation is not expected.

Q: Could you talk about growth drivers for your gas engines, electric powertrain and hybrid truck business?

A: Gas engines are driven by demand in heavy-duty trucks and restricted areas due to National VI readiness. Electric drivetrain and hybrid truck business face delays as products are in trial or need OEM testing.

Q: JV income was around US$700,000 in Q1. Should we expect same or higher quarterly trend in 2020?

A: Joint ventures were affected by COVID-19, but Q1 was a tough quarter; performance should be better than Q1 for the rest of the year.

Q: In light of the political tensions, why isn’t CYD Board looking more closely into having a second listing in Shenzhen or Hong Kong?

A: There are no plans for another listing at this time; the company prefers to stay on the U.S. Stock Exchange where it has been since 1994.