China Yuchai International Limited Announces Good Performance for Q3 2004
SINGAPORE--Nov. 8, 2004--China Yuchai International Limited (CYI) today announced good performance for the three months ended September 30, 2004 with net income of Rmb101.6 million (US$12.3 million) as compared to net income of Rmb77.5 million (US$9.4 million) for the same period in 2003.Net sales of Rmb1,454.3 million (US$175.7 million) for the three months ended September 30, 2004 represents an increase of 56% compared to same period last year of Rmb929.3 million (US$112.3 million). Total unit sales of 45,617 diesel engines for the quarter ended September 30, 2004 was 29% higher than the same period last year of 35,427 diesel engines.
Net sales of Rmb4,181.0 million (US$505.2 million) for the nine months ended September 30, 2004 represents an increase of approximately 27% compared to Rmb3,303.3 million (US$399.1 million) for the same period last year. Total unit sales of 150,940 diesel engines for the nine months ended September 30, 2004 was approximately 16% higher than the same period last year of 130,631 diesel engines. This was due mainly to the strong unit sales in the first and third quarters 2004 arising from higher unit sales of Yuchai's 6112 heavy-duty diesel, 4-series light-duty diesel and industrial engines.
The overall gross margin of 28% for the nine months ended September 30, 2004 was 2% lower than the same period last year mainly due to product sales mix.
For the nine months ended September 30, 2004, selling, general and administrative expenses increased by approximately 12% due mainly to higher staff costs, transport charges and operating expenses arising from higher sales volume.
For the nine months ended September 30, 2004, trade account receivables and inventories increased as a result of higher sales volume and normal seasonality factors. Cash balances have decreased and bank borrowings have increased for the period ended September 30, 2004 mainly due to increased capital expenditure payments made and additional working capital requirements. During the quarter ended June 30, 2004 the amount due from Yuchai Marketing and Logistics Company Limited, a related company, was Rmb202.8 million. This amount has been reduced to Rmb173.4 million during the quarter ended September 30, 2004.
Basic and diluted net income per share for the six months ended June 30, 2004 was Rmb11.19 (US$1.35) compared to a basic and diluted net income per share of Rmb9.06 (US$1.09) for the same period in 2003.
Government industry statistics show that in the first nine months of 2004, there was an increase of approximately 16% in sales of trucks and buses in China compared to the same period last year. CYI believes that demand for new trucks and buses would have been higher if not for the implementation of the PRC Road Traffic legislation which came into effect on May 1, 2004, with heavy fines on overloading and non-compliance to vehicle standard specifications such as vehicle weight and length. Demand for new trucks returned in August 2004 with higher unit sales of heavy-duty trucks, buses and mini vans.
Mr Wrixon F. Gasteen, President and Director commented that "the good profit performance for the nine months ended September 30, 2004 was achieved due mainly to the strong unit sales recorded in the first and third quarters of 2004. Yuchai was able to achieve net income growth of approximately 24% for the nine months ended September 30, 2004 compared to same period last year. The market demand for diesel engines in China is expected to remain strong especially for heavy-duty trucks and buses due to continuing development of highways and improvements in logistical efficiency, notwithstanding the Chinese government's continued efforts at cooling its economy. We believe that CYI, as one of the top three manufacturers of diesel engines in China, should be able to take advantage of this growth demand."
CYI believes that Yuchai has a strong brand name in China with an extensive sales and marketing network. Yuchai's products are of good quality and provide reliable performance. Yuchai has established itself as a major manufacturer of diesel engines in China with a significant market share.
OTHER EVENTS
Special general meeting of shareholders
On October 11, 2004, CYI held a special general meeting of its shareholders in Hong Kong. This special general meeting had been convened pursuant to a written requisition by Coomber Investments Limited (Coomber) dated August 20, 2004 pursuant to Bye-Law 24 of CYI's Bye-Laws. Coomber had requested CYI's shareholders to approve resolutions to (i) appoint two nominees of Coomber to the CYI's board of directors, (ii) appoint a nominee of Coomber to become the Chairman of the CYI's board of directors, and (iii) cancel CYI's special share and effect corresponding amendments to CYI's Bye-Laws to reflect such cancellation. None of these resolutions were carried at this special general meeting.
Appointment of new director
CYI is pleased to announce the appointment of Mr. Teo Tong Kooi as a director of CYI. This appointment was made at the meeting of CYI's board of directors held on October 11, 2004 to fill a vacancy on the board of directors. Mr. Teo is the chief executive officer and a director of Hong Leong Asia Ltd. Mr. Teo is now an executive director of Tasek Corporation Berhad which forms part of the building materials companies within the Hong Leong Group, having served as the managing director of that company up to September 30, 2004. Between 1994 and 2002, Mr. Teo held various senior managerial positions with Hong Leong Bank Berhad, Malaysia. In September 2003, he was appointed a committee member with the Small Debt Resolution Committee of Bank Negara Malaysia, the central bank of Malaysia and served in that position for a year. Mr. Teo holds a bachelor of science degree in Marketing Management and a master of business administration, both from the Golden Gate University, San Francisco.
Corporate governance at Yuchai
As previously disclosed in the Form 20-F filed on June 29, 2004, although CYI owns 76.4% of Yuchai's shares, it requires the cooperation of Yuchai's Chinese shareholders in the daily management and operation of Yuchai in order to fully exercise its controlling interest in Yuchai. CYI also needs the assistance and cooperation of the Guangxi Yuchai Machinery Holdings Company (the State Holding Company) in dealing with various matters, including the implementation of corporate governance procedures, the payment of dividends, the holding of Yuchai board meetings and the resolution of employee-related matters. From time to time, CYI experiences certain problems in obtaining such cooperation.
Yuchai management has, for example, on a number of occasions taken action without obtaining the prior requisite corporate approvals from the Yuchai board of directors or applicable board committee, as required by Yuchai's articles of association, as described in CYI's annual report on Form 20-F filed with the U.S. Securities and Exchange Commission on June 29, 2004. At the meeting of the board of directors of Yuchai held on September 9, 2004, a majority of the Yuchai directors ratified the prior disbursement of Rmb205 million (approximately US$30.2 million) by the Yuchai management as a loan to Yuchai Marketing and Logistics Company Limited ("Yuchai Marketing", also sometimes translated as "Yuchai Logistics", which term was used in CYI's current Form 20-F filing), a related company majority-controlled by the State Holding Company and Coomber. This decision of the Yuchai board was discussed at a meeting of the CYI board of directors on October 11, 2004. CYI has called for a meeting of Yuchai's shareholders on December 6, 2004 to discuss this and other recent corporate governance developments at Yuchai.
CYI has been advised that the loan is repayable by Yuchai Marketing to Yuchai over three years, and repayment is to be guaranteed by the State Holding Company. CYI has also requested Yuchai's legal advisors to confirm the enforceability of the loan and the guarantee. CYI has not received such confirmation to date but it is continuing to liaise with the Yuchai management to determine the detailed terms of the loan and the security provided for the loan.
Yuchai management has also not to date implemented the corporate governance guidelines which were approved by Yuchai's board of directors in November 2003, and CYI understands that Yuchai's management has not to date taken steps to obtain the necessary government approvals required for their formal adoption. CYI continues to believe that the adoption of such guidelines as contemplated in the July 2003 Agreement is important and continues to be in dialogue with the Chinese stakeholders at Yuchai to have such guidelines implemented.
Although CYI hopes that implementation of the restructuring contemplated in the July 2003 Agreement will resolve the foregoing issues, CYI is not presently able to determine when or on what terms any such restructuring will be implemented, if at all. CYI remains committed to working towards an agreed plan with the parties to the July 2003 Agreement with the goal of enhancing value for its shareholders as expeditiously as possible, but CYI believes that the parties may not be able to implement a restructuring in the manner contemplated in the July 2003 Agreement in the near future. However, CYI continues to be in dialogue with and has received proposals from representatives of the Chinese stakeholders regarding implementation of the July 2003 Agreement. CYI is also considering other alternatives to address these difficulties so as to protect the interests of the CYI's shareholders and preserve the value of CYI.
As a result, no assurances can be given that disagreements with Yuchai's Chinese shareholders will not recur in future, or that CYI will continue to be able to fully exercise its controlling interest in Yuchai if such disagreements recur, the result of which could have a material adverse effect on our financial condition, results or operations, business or prospects, including CYI's inability to consolidate Yuchai's financial statements.
CYI has filed with the U.S. Securities and Exchange Commission a copy of this press release on Form 6-K. A copy of such filing has also been sent to The New York Stock Exchange. Reference is made to such filing for cautionary statements which identify factors that could affect the forward looking statements contained in this press release.
China Yuchai International Limited Executive Office 16 Raffles Quay #26-00 Hong Leong Building Singapore 048581 Tel: (65) 6220 8411 Fax: (65) 6226 0502
Contact persons: Mr Wrixon F. Gasteen, President Mr Philip Ting, Chief Financial Officer and Director
Note 1: CYI's functional and reporting currency is Renminbi, the translation of amounts from Renminbi to U.S. dollars is solely for the convenience of the reader. Translation of amounts from Renminbi to U.S. dollars has been made at the rate of Rmb 8.2766 = US$1.00, the rate quoted by the People's Bank of China at the close of business on September 30, 2004. No representation is made that the Renminbi amounts could have been, or could be, converted into U.S. dollars at that rate or at any other certain rate on September 30, 2004 or at any other date.
Note 2: All financial data (both in Renminbi and U.S. dollars) is unaudited.
CHINA YUCHAI INTERNATIONAL LIMITED
UNAUDITED CONSOLIDATED INCOME STATEMENTS
FOR THE PERIOD ENDED SEPTEMBER 30, 2004
(RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)
For Quarter ended For nine months ended
September 30, September 30,
--------------------------- ------------------------
2003 2004 2004 2003 2004 2004
---- ---- ---- ---- ---- ----
Rmb'000 Rmb'000 US$'000 Rmb'000 Rmb'000 US$'000
Net sales 929,328 1,454,281 175,710 3,303,289 4,181,013 505,161
Cost of
goods sold 632,920 1,116,387 134,885 2,304,259 2,998,282 362,260
------- --------- ------- --------- --------- -------
Gross profit 296,408 337,894 40,825 999,030 1,182,731 142,901
Research and
development
cost 23,140 30,883 3,731 53,149 87,252 10,542
Selling, general
and adminis-
trative
expenses 137,836 148,262 17,914 423,784 472,457 57,084
------- ------- ------ ------- ------- -------
Operating
income 135,432 158,749 19,180 522,097 623,022 75,275
Finance cost 3,972 6,654 804 14,136 20,461 2,472
Other net
expense/
(income) 3,989 239 28 (2,975) (5,641) (682)
------- ------- ------ ------- ------- -------
Income before
income taxes
and minority
interests 127,471 151,856 18,348 510,936 608,202 73,485
Income tax
expense 21,497 17,228 2,082 82,733 86,972 10,509
------- ------- ------ ------- ------- -------
Income before
minority
interests 105,974 134,628 16,266 428,203 521,230 62,976
Minority
interests
in income of
consolidated
subsidiaries 28,501 33,024 3,990 108,199 125,656 15,182
------- ------- ------ ------- ------- -------
Net income 77,473 101,604 12,276 320,004 395,574 47,794
======= ======= ====== ======= ======= =======
Net income
attributable to
common shares
Basic and Rmb Rmb US$ Rmb Rmb US$
diluted 2.19 2.88 0.35 9.06 11.19 1.35
======= ======= ====== ======= ======= =======
Note: The Company's functional and reporting currency is Renminbi,
the translation of amounts from Renminbi to U.S. dollars is solely for
the convenience of the reader. Translation of amounts from Renminbi to
U.S. dollars has been made at the rate of Rmb 8.2766 = US$1.00, the
rate quoted by the People's Bank of China at the close of business on
September 30, 2004. No representation is made that the Renminbi
amounts could have been, or could be, converted into U.S. dollars at
that rate or at any other certain rate on September 30, 2004 or at any
other date.
CHINA YUCHAI INTERNATIONAL LIMITED
SELECTED BALANCE SHEET ITEMS
(RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS)
As of As of
December 31, 2003 September 30, 2004
----------------- ------------------
(Audited) (Unaudited)
--------- -----------
RMB RMB US$
Cash Balances 631,938 543,973 65,724
Trade Accounts Receivable,
Net 849,611 1,336,126 161,434
Inventories, Net 877,334 1,070,082 129,290
Amount due from
related companies 32,886 173,435 20,955
Working Capital 962,804 1,342,280 162,178
Total Assets 4,033,632 5,219,996 630,693
Trade Accounts Payable 731,966 1,054,383 127,393
Short-Term and
Long-Term Borrowings 298,000 535,000 64,640
(including a loan from
a related party as
of December 31, 2003)
Shareholders' Equity 1,991,687 2,387,261 288,435
Note: The Company's functional and reporting currency is Renminbi,
the translation of amounts from Renminbi to U.S. dollars is solely for
the convenience of the reader. Translation of amounts from Renminbi to
U.S. dollars has been made at the rate of Rmb 8.2766 = US$1.00, the
rate quoted by the People's Bank of China at the close of business on
September 30, 2004. No representation is made that the Renminbi
amounts could have been, or could be, converted into U.S. dollars at
that rate or at any other certain rate on September 30, 2004 or at any
other date.