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highpower international inc. (hpj) ceo george pan on …
At 10: 00 a. m. on March 28, 2019, ETCompany participant syuanmei Ma-2018 Earnings Call
Director George Pan
Chairman and ceo Pan
Dawson James Securities operator welcomes you to the haipower international conference call on revenue 2018 for the fourth quarter and throughout the year.
At this time, all the participants were listening. only mode. A question-and-
An answer session will be held after the official speech. [
As a reminder, the meeting is being recorded.
I would now like to hand over the meeting to our host, Ma Yuanmei, Director of IR. Thank you. You may begin.
Thank you, operator. Good morning, everyone!
Thank you for attending our full year earnings conference call for the fourth quarter and 2018 today.
Before we begin, I ask you to refer to the Safe Harbor Statement in our earnings release, which also applies to our call today as we will move forward --
Look at the report.
With us today is George Pan, Chairman and CEO of Pan power; and Mr.
Sunny pot, high power chief financial officer.
After the management is ready to speak, we will have a Q & A meeting.
I will transfer the call to Sir now. George Pan.
Please note that George speaks Mandarin first and I will attach the English translation of his comments later.
Please continue, George. George Pan[
Good Morning, everyone. Welcome to our 2018 and full-year earnings conference call. [
In 2018, we maintained the growth trend of last year.
Due to the growing quality and high demand, we have also achieved our top guidanceresistant [ph]
Charging Battery and overall solution.
The growth of high demand has driven the growth of high demand.
End customer products, industrial obligations, artificial intelligence and mature [1 [ph]
Especially in the product industry.
This growth shows initial success in our strategy of focusing on target applications and customers. [
In 2018, we experienced fluctuations in raw material prices and exchange rates.
In addition, macro uncertainty will also affect our business.
However, we are able to maintain growth by improving our production efficiency and scale.
In 2019, we expect constant challenges and opportunities from changes in the macro environment and industry supply chain.
But we are optimistic about our growth.
Our mission is to produce high quality and safe battery products and services.
We are still committed to focusing on the strategy of applications and customers, and with our core strength, we can maximize value in these applications and customers.
We will also continue to manage our operations and customer expectations to minimize the impact of external forces. [
Now, I want to transfer the call to Sir.
Sunny Pan, chief financial officer of Haiquan, will give a more detailed account of our financial results.
Sunshine, please continue.
Good morning everyone, thank you all for joining us on our phone.
Let me show you our financial results for 2018 and the whole year.
Please note that all figures are shown in the United States unless otherwise statedS.
The dollar terms and all the comparisons were made last year. over-year basis.
Net sales rose to $ 12% in the fourth quarter of 2018, to $88.
7 million of $79. 2 million.
This growth is driven by our lithium business and sales of nickel
Metal hydrogen battery business.
Our lithium business has grown by $18. 4 million or 38. 5% to $66.
3 million and our nickel
The metal hydrogenation business grew by $7. 5 million or 50. 2% to $22.
3 million this quarter.
Excluding Ganzhou\'s high power, net sales increased by 40. 7% to $88.
$7 million and $63 million.
Net sales increased by 20 in 2018. 4% to $293.
$9 million, $244. 2 million.
Excluding Ganzhou high power, net sales increased by 33 throughout the year. 1% to $293.
$9 million, $215. 9 million.
The increase in net sales is mainly due to our own optimization. structure [ph].
Gross profit increased by 73 in the fourth quarter. 5% to $20.
5 million of $11. 8 million.
Gross profit margin increased to 23 this quarter. 1% from 14. 9%.
Excluding Ganzhou\'s high power, gross profit increased by 91% this quarter to $20.
5 million from $10. 7 million.
Gross profit margin rose to 23. 1% from 17%.
Gross profit increased by 20 this year. 1% to $56.
9 million from $47. 4 million.
Gross profit margin is 19. 3% and 19.
In 2018, 4% and 2017 respectively.
Excluding Ganzhou, the gross profit of 2018 increased by 29. 2% to $56.
Gross profit margin of 9 million $44 million was 19.
2018 was 3% per cent, compared to 20 per cent. 4% in 2017.
R & D costs for the fourth quarter of 2018 were $3.
8 million is $3. 1 million.
R & D expenses increased to 4 as a percentage of net sales. 3% from 3. 9%.
R & D costs for the year 2018 were $13. 5 million or 4.
6% of net sales compared to $9. 5 million or 3. Net sales of 9%.
We are still committed to R & D excellence and as we continue to recruit key positions and new [we expect R & D] costs to increase in the futureindiscernible].
Sales and distribution costs for the fourth quarter were $3.
4 million, $2. 3 million.
Sales and distribution expenses increased to 3 as a percentage of net sales. 8% from 2. 9%.
Sales and distribution costs are $10. 1 million or 3.
Net sales for the whole year were 4% compared to $7. 5 million or 3. Net sales of 1%.
The growth is mainly due to the expansion of the business scale, including the marketing expenses of more brand customers.
General and administrative expenses for the fourth quarter were $5.
5 million, $5. 4 million.
General and administrative expenses fell to 6 as a percentage of net sales. 2% from 6. 8%.
G & A costs $19 throughout the year. 3 million or 6.
6% of net sales compared to $15. 4 million of 6. Net sales of 3%.
The main reason for the increase is the increase in expenses related to wages and the amortization of shares
Based on compensation.
Net income attributable to the company rose to $5 in the fourth quarter.
4 million from $4. 8 million.
Net income increased to $5, excluding Ganzhou.
4 million from $4. 5 million.
The company\'s diluted net income per share increased to $0. 35 from $0. 31.
Net income attributable to the company fell to $13 this year.
2 million from $16. 8 million.
Net income per diluted share for the whole of 2018 was $0.
84 compared to $1. 09.
Excluding Ganzhou, net income for 2018 and 2017 was $13.
$2 million and $15.
7 million respectively.
EBITDA fell by 3 in the fourth quarter. 4% to $8.
$6 million and $9 million.
EBITDA is $23 this year.
Compared to $27, 2 million.
2017 8 million.
Transfer to balance sheet;
Our cash balance as at December 31, 2018 was $24.
9 million compared to $14.
As at December 31, 2017, 5 million per cent.
Our total assets are $288.
1 million, our total share capital is $77. 1 million.
In the first quarter of 2019, we expect net income to grow by about 20%-over-year.
Gross margin is expected to be around 20%.
We will continue to pay close attention to all potential risks and uncertainties related to the US trade conflictS.
And China, raw material prices and exchange rates.
This concludes our prepared remarks.
We will now enter the Q & A session.
Please note that we will take a little time to translate the problem into Mandarin.
Then we reply in English.
Operator, please open the line if you have any questions. Thank you. Question-and-
Our first question comes from Alan [ph]
With AAC Capital.
Good morning. Unidentified.
I have a question about R & D and capital expenditure;
And it looks like it has increased a lot a year. over-year.
I would like to make some comments on this.
Also, what are your expectations for capital spending and R & D over the next year? Thank you. George Pan[
As we have studied before, Haiwei focuses on our Chinese customers, the Fortune 500 and the top 10 in each segment.
Therefore, international brands put forward higher requirements for battery safety and technological progress.
Therefore, we need to keep our R & D investment in order to further improve our safety and battery quality. Of course, these R & D costs need to be proved through our delivery to our customers, this will add value to our customers and we will get more and more orders from international brands, which will require us to expand our production capacity.
We plan to invest in expanding our production capacity and will be updated according to our customers\' orders and our capital status [ph].
But we believe in our investment in indiscernible]
More than last year. Thank you.
An unidentified analyst
On the issue of sales in various regions.
I mean, regional sales in Asia and other countries have grown a lot, but in China, it\'s flat this year. on-year.
If there are customers, like different [ph]--
A year to push this changeon-year? George Pan[
Our market is global and international. -
It seems our [indiscernible]
There are a lot in Asia, but as you know, many international brands have their own OEMs and CMs in China.
Therefore, our batteries are designed and designated by international customers, so we ship or deliver the batteries to CMs in China. The battery --
The Terminal Market is overseas.
The next question comes from Carlo Kexin of Dawson James Securities.
I don\'t know if you will comment, but this offer--
The advice provided is--from Mr.
In last June, Pan entered the special committee for almost a year, and now we have a year --End number.
Is this still worth [ph]
Is there a valuable suggestion or is it not appropriate? George Pan[
The proposal, which has been announced this year March 14, sir.
Pan and Essence International formed a consortium to reach an agreement.
For any further progress, we will disclose in accordance with [timely]indiscernible], as just --
It is an investment institution in the world. Thank you.
The next question is from Brad Lankford [ph]
My question is about the new factory.
How is it going, can we see some pictures? -
Progress picture, or can we see some picture after it is finished? Thank you. George Pan[
Thank you for your question.
We continue to improve our production capacity and, in fact, the second phase of construction is now under way --track.
Before we finish a new production line in Ganzhou factory, our goal is to produce 100,000 pieces per day
Our circuit in Ganzhou [ph]
The project will also increase production space by 30,000 m². Thank you. [
The second phase of construction will be completed in the third quarter of this year.
Unidentified analyst do you have a contract with an electric vehicle manufacturer? George Pan[
High power will focus mainly on the development of BMS, electric vehicle battery management system and electric vehicle market. [
The electric car market is big, but it also needs a lot of investment.
Considering the capital situation of our car series, we will still invest in technology research.
We do have a question from Alan [ph]with Capital.
I\'m sorry I have a tracking
Overall, on the price of the raw material, I saw it in--
In the last quarter, it was also in the first quarter of this year.
Is this helpful to your gross margin? Or how do you manage raw material prices in the future? George Pan[
In the first quarter of this year, raw materials and trends declined, but the macro environment was not optimistic.
Therefore, our budget for this year is also conservative and optimistic.
Highpower aims to serve the top 10 of Fortune 500 and each segment.
For our international customer brand, they are pursuing for a long time.
Long term cooperation, so we have selected some materials for them at a high level of material price before.
Material trends are now difficult to predict for the future, we need to monitor in these three to four months, but our customers intend to advance
Pay for some materials with our limited resources, if you mean to provide stable raw materials for our customers.
Our next question comes from John ·[ph]with J&J Group.
Unidentified analysts have seen you do a good job in developing your business, and have you considered stock buybacks since your cash flow quarterly rise --by-quarter? Thank you. George Pan[
Can you repeat your question? I\'m sorry.
An unidentified analyst
So your cash season has been growing. over-
Quarterly and business growth-over-
Your current cash reserves don\'t know if you want to buy--
Taking into account the direction of your business, do cash Stock buybacks at this level? George Pan[
Foreign languageYour --
When you mention stock purchases, are you referring to our privatization program?
Unidentified analysts don\'t, just average, because that\'s the level between your cash reserves and your current market capitalization?
The percentage of your cash and market value is--
Your cash reserves are quite high compared to your market value. George Pan[
Maybe let me answer that. This is Sunny.
Look at the financial reserves [ph]
Our sales have grown rapidly in the past year;
So the cash level is quite high.
But as George mentioned in answering other questions, he also mentioned that we still need to invest in R & D because we need to meet the needs of our customers and the demand for technology is growing.
These things also need to expand our production capacity to meet their different needs.
So we need to keep all this cash and expand our business further.
So the stock purchase, which I think will get more money, still doesn\'t apply, although we can\'t grow further yet. Operator[
There seems to be no additional question request, ladies and gentlemen.
I will now move the meeting back to management for a concluding statement. Thank you.
Sunshine PanOkay, thank you.
Thank you for joining us today.
We look forward to talking to you next quarter.
As always, we welcome your feedback on behalf of the entire High Power team and visit our facilities in China. Thank you.
Thanks, George pan. [
This concludes today\'s meeting.
The parties may be disconnected.
Have a good day.