CBAK Energy Technology Inc (CBAT) 2011 Q3 法說會逐字稿

Good evening, everyone, and thank you for joining us on China BAK Battery's third quarter of fiscal year 2011 and at June 30, 2011 conference call. During today's call we will provide details on the Company's third quarter fiscal year 2011 results, as well as provide a corporate update about recent activities. Today's call will be limited to an hour.

With me today on the call are Mr. Xiangqian Li, China BAK's Chairman, Chief Executive Officer; Dr. Huanyu Mao, China BAK's Chief Technology Officer and General Manager of BAK Tianjin; and Mr. Ke Marcus Cui, China BAK's Chief Financial Officer. Mr. Li, Dr. Mao and Mr. Cui will be available to answer questions during the Q&A session.

Our agenda for today is as follows. CEO, Mr. Li, will make remarks about the Company's business outlook. And then, on behalf of the management team, CFO, Mr. Cui, will comment on the Company's financial performance and discuss current business strategy. Finally, we will open the call to your questions.

Before we get started I would like to remind our listeners that management's comments today will contain forward-looking statements and management may take additional forward-looking statements in response to your questions. Such written and verbal disclosures are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risk and uncertainty that could cause actual results to differ materially from the anticipated results.

These types of statements and underlying factors, as well as risks and uncertainties, are listed in filings with the Securities and Exchange Commission, as well as the news release that was distributed earlier today. Statements made on this call are made of August 2, 2011 and the Company undertakes no obligations to update any of the forward-looking statements contained herein, whether as a result of new information, future events, changes in expectations or otherwise.

With those initial formalities out of the way, it is my pleasure to turn the call over to Mr. Li who will provide some initial remarks that will be translated by Mr. Cui. Mr. Li, you may proceed.

(interpreted) Thank you, operator. I would like to welcome all of our shareholders to the China BAK's third quarter fiscal year 2011 earnings conference call.

Our revenue performance during the quarter compared to the year ago period was largely impacted by a [54.6%] decline in sales of aluminum-case cells, resulting from the significant decrease in our sales volume in the domestic market.

We experienced [falling growth] in our cylindrical and high-power lithium battery cells business during the quarter, which is in line with our expectations. Revenue from our high-power lithium battery cells revenue more than doubled in the third quarter of fiscal 2011, in comparison with the year ago period. Sales from the EV and [e-bike] industry increased [13] times as compared to Q3 fiscal year 2010, due to improved maturity of our technology and higher demand for such products.

The e-bike business is up more than [120%] as compared to Q3 fiscal year 2010, driven by high demand fueled by Government initiatives to control pollution and closure of lead-acid battery production. We are encouraged by the positive feedback from Dongfeng-Yulon Motor Sales Company, which delivered its pure electric vehicles powered by China BAK's battery cells to the public transportation authority of the city of Hangzhou in June 2011.

During the third quarter we strengthened our management team with the promotion of Mr. Ke Marcus Cui to Chief Financial Officer, (inaudible) and Secretary in May 2011. Mr. Cui brings a wealth of experience in management accounting, [quality], financial analysis and reporting. As he has a strong understanding of our business and operations we are confident in his ability. With him, the management team, as a whole, shall continue work hard to steer China BAK through this turnaround period.

It is now my pleasure to hand over to the call to Marcus. Marcus, you may proceed.

Thank you, Mr. Li. Now, I would like to review this quarter's financial performance in further detail.

During the third quarter of fiscal year 2011 we generated $47.1 million in net revenues, which is up almost 1% from $46.7 million last quarter, and down 19.5% from $58.6 million for the same quarter in fiscal year 2010.

Revenues from prismatic products, including aluminum-case cells and battery packs, which are used in mobile phones and certain personal electronic devices, were $25.8 million, which is down 11.3% from $29 million last quarter, and down almost 40% from $42.8 million for the same period last year.

Revenues from cylindrical cells used in notebook computers were $17.3 million, up 13.8% from $15.2 million last quarter, and up 35.4% from $12.8 million for the same period last year. As a result of the earthquake in Japan, Korean and Chinese batteries are being (inaudible) since April 2011. We have also seen a strong growth in the gross margin for our cylindrical battery cells in Q3 2011.

Revenues from lithium polymer battery cells, which is used in personal electronic devices such as PDAs, MP3 players and Bluetooth devices, were $2 million, up almost 20% from last quarter and down 11.7% from the same period in fiscal 2010.

Revenues from high-power lithium battery cells, used in electric vehicles, electric bicycles, power tools, uninterruptible power supplies and other applications, which are manufactured at our Tianjin facility, were $2.1 million, up 161% from last quarter and up almost 200% from the same period in fiscal 2010.

Operating expenses totaled $8.9 million, or 18.9% of revenue, in the third quarter compared to $6.3 million, or 13.4% of revenue, in the last quarter and $17.2 million, or 29.4% of revenue, in the third quarter of fiscal 2010.

We reported an operating loss of $5.3 million in comparison with $1.8 million in the last quarter and $18.4 million in the same quarter of fiscal 2010.

Net loss was $7.2 million, or diluted loss per share of $0.12, in the third quarter of fiscal 2011 compared to a net loss of $4.1 million, or diluted loss per share of $0.06 in the last quarter and a net loss of $18.3 million, or diluted loss per share of $0.29, in the same quarter last year.

Now, I would like to briefly discuss key balance sheet items. On June 30, 2011 we had $17.1 million in cash and cash equivalents.

For the third quarter of fiscal year 2011, days sales outstanding decreased to 140 days (sic - see press release) from 177 days last quarter and days sales of inventory increased to 151 days from 143 days last quarter.

Short-term bank loans and long-term bank loans totaled $176.1 million as compared to $173 million on March 31, 2011.

Shareholders' equity totaled $142.1 million. We had $64 million available for borrowing under its credit facilities. We generated $3.3 million from cash flow from operating activities in the third quarter of fiscal 2011, reflecting the progress in receivables' collection strategy.

We also remained focused on our turnaround strategy and are working towards implementing a more stringent receivables' collection policy to strengthen our cash position, reducing costs and increasing sales volumes of our prismatic products and improving profit margins of our cylindrical products.

Finally, a few updates on (inaudible) industry development. We are experiencing a surge in customer demand of our e-bike battery business at our Tianjin facility due to the Government's suspension of lead-acid battery manufacturing in China. We anticipate growth in others from potential customers of our e-bike business in the coming quarters.

In the near term we are focusing our efforts on our prismatic business to increase our market share of the mobile phones industry in the domestic markets. We are also taking matters to improve the profitability of our prismatic cells and cylindrical cells through cost control and yield increment.

Lastly, I would like to mention that we will be holding an investor event on September 13, 2011 at our headquarters in Shenzhen, China. We will also arrange for a facilities tour and investor meetings on September 16 and September 19, 2011 at our Tianjin facility. Throughout the event our senior management will be available to discuss China BAK's business and the growth strategy. We sincerely invite our investors, shareholders and industry analysts to participate in our investor events.

On that note, I would like to thank you all for your participation on the call today. Mr. Li, Dr. Mao and I are very happy to answer any questions you may have. Operator?

(Operator Instructions)

So if there is no further questions on management we may end this call. Thank you all for joining us. Thank you, bye-bye.

On behalf of the entire China BAK Battery team, thank you for your interest and participation on this call. This concludes the China BAK Battery's third quarter fiscal year 2011 earnings conference call.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.