China Yuchai International Ltd (CYD) 2009 Q4 法說會逐字稿

Thank you for standing by, and welcome to the full year 2009 China Yuchai International earnings webcast.

There will be a management presentation to be followed by a question-and-answer session.

I would now like to hand the call over to Mr.

Kevin Theiss of Grayling.

Please go ahead sir.

Thank you for joining us today and welcome to China Yuchai International Limited's full year 2009 earnings webcast.

My name is Kevin Theiss, and I am from Grayling, China Yuchai's US investor relations agency.

Joining us today are Mr.

Boo Guan Saw, President; and Mr.

Weng Ming Hoh, Chief Financial Officer.

Before we begin, I will remind all listeners that throughout this call we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act Of 1995.

The words, "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will," or similar expressions are intended to identify forward-looking statements.

All statements other than statements of historical fact are statements that may be deemed forward-looking statements.

These forward-looking statements are based on current expectations or beliefs including but not limited to statements concerning China Yuchai's operations, financial performance, and condition.

China Yuchai cautions that these statements, by their nature, involve risk and uncertainties and actual results may differ materially depending on a variety of important factors, including those discussed in China Yuchai's reports filed with the Securities and Exchange Commission from time to time.

China Yuchai specifically disclaims any obligation to update the forward-looking information in the future.

Mr.

Saw will provide a brief overview and summary of the industry, and Mr.

Hoh will review the fourth quarter and full year 2009 financial results.

Thereafter we will conduct a question-and-answer session.

For the purposes of today's call, the financial results will be presented in RMB and US dollars.

Mr.

Saw, please start your presentation.

Thank you, Kevin.

We are very pleased that China Yuchai closed Q4 2009 and full year 2009 with a strong performance and improved fundamentals across all areas from sales and product development through strategic partnerships and financial management.

China's economy grew by 8.7% in 2009.

According to the National Bureau of Statistics, the Chinese government's primary stimulus measures in 2008 and in 2009 revitalized the domestic automotive sector and boosted the economy, especially in inland China, which will likely become the growth engine for China in the next five years.

After a lackluster first half, commercial vehicle sales and production rebounded in the second half of 2009.

With the continued growth in our infrastructure expansion, such as high-speed railways, intercity highways, ports, hospitals, and airports, we benefited from this favorable macroeconomic trend.

In China, the increasingly stringent emissions standards are also driving commercial vehicle sales as the government strives to curb pollution, which has led to the early implementation of the National IV emission standards in the main cities of Beijing and Shanghai in 2008 and 2009 respectively.

China Yuchai has gained a reputation for being a technology innovator in China with the production of our diesel engines compliant with National IV and National V emission standards, and the development of alternative fuels and environmentally friendly hybrid engines with better fuel efficiency.

In 2009, China Yuchai maintained its number one ranking in the unit sales with total sales volume of 467,899 units, an increase of 26% over unit sales volume of 372,000 in 2008.

Our heavy-duty unit sales volume increased by 16.8% compared to 2008.

Medium-duty and light-duty engine sales volume increased by 24% and 32.7% respectively.

Since I joined as the President of China Yuchai in July 2009, we have implemented several key initiatives, and I would like to take this opportunity to update everyone on their progress.

As announced in October 2009, construction of our new research and development institute designed to meet the national-Level Enterprise Technology Center standards has commenced.

The R&D institute is located next to the Guangxi University in Nanning, the capital city of Guangxi Province.

It will be the leading research institute in China focused on diesel engine and alternative fuel technologies, which will enable us to enhance our technology, to maintain our industrial leadership as well as position our diesel engine technology for further advancement.

During 2009, we undertook to grow our capacity through implementing new efficiency methods of -- at our primary manufacturing facilities in Yulin city.

In our foundry investment at Yulin city, we will partially operate [its] new foundry facility in Yulin city in mid-March 2010, after completion of construction work and equipment installation.

At Xiamen Yuchai we completed phase I of our new diesel engine assembly factory in Xiamen, Fujian Province in September 2009.

After ramping up production, Xiamen Yuchai assembled 10,500 engines in 2009.

We are working with dealers in China and international markets to further penetrate the marine and the power generation market segments.

In international sales, quarter four 2009 sales volume improved 95.9% compared to a lower volume in the same period in 2008.

Global economies are recovering, and we expect more exports to international markets in 2010.

Additionally, through our brand recognition as far as -- as a manufacturer of high quality products and R&D, we have formed strategic partnerships and expanded our operation with leading companies in the industry -- Caterpillar, CIMC-Chery Auto and Geely Auto.

In December 2009, we announced the entry into a joint venture agreement with Caterpillar China, a subsidiary of Caterpillar, Inc., to establish a new joint venture company in China to provide remanufacturing service for both Yuchai's diesel engines and components and certain Caterpillar's diesel engine components.

The joint venture company will use the remanufacturing technology of Caterpillar to provide state-of-the-art remanufactured engines and components to customer around the world.

Through the offering of remanufacturing services, we will provide high-quality cost-effective products for end-user customers as well as enhance the sustainability and improvement to the environment.

Our joint venture is poised to be the market leader in this technology in China.

We also established in the second half of 2009 another joint venture company, Y&C Engine Company Limited in Wuhu City located in Anhui Province with Jirui United Heavy Industry Company Limited, which is owned by China International Marine Containers Group Limited, CIMC, and Chery Automobile Company Limited.

This new joint venture company will focus on the production of YC6K diesel engines for use mainly in trucks of 12 metric tonnes and above as well as passenger coaches exceeding 12 meters in length.

The annual production capacity of the joint venture company is estimated to start at 50,000 heavy-duty diesel engines, ramping up to 200,000 units annually.

Yuchai and CIMC-Chery are the targeted customers of all the JV's manufactured diesel engines.

The higher margin heavy-duty engines are an important growth channel for China Yuchai.

For light -- for our light-duty diesel engines, our joint venture with Geely is progressing well, with the completion of phase I engine development, which met the emissions and performance requirements.

We are looking closely with Geely on finalizing the prototypes by the end of 2011.

And construction on the manufacturing facilities in Tiantai, Zhejiang Province, and Jining in Shandong Province have commenced.

Now, I'll turn the call over to our CFO, Weng Ming Hoh to provide you with a detailed review of the 2009 financial results and the fourth quarter results.

Thank you, Boo Guan.

The consolidated financial results for fiscal year 2009 have been prepared in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board, IFRS.

Prior to quarter four 2009, the Company prepared its consolidated financial results in accordance with Generally Accepted Accounting Principles in the United States, US GAAP, which differs in certain significant respects from IFRS.

The Company's Board of Directors approved the change in the Company's financial reporting standards from US GAAP to IFRS to more closely align China Yuchai's financial reporting with its main operating subsidiary, Guangxi Yuchai Machinery Company Limited, GYMCL, and HL Global Enterprises Limited, HLGE, as their financial results are prepared in accordance with PRC GAAP and Singapore Financial Reporting Standards respectively, which are closely aligned with IFRS.

HLGE is considered a subsidiary of China Yuchai under IFRS.

With retroactive effect from the beginning of FY '08, China Yuchai will be reporting its consolidated financial results using IFRS in its FY 2009 Form 20-F, which will be filed in accordance with the requirements of the US securities commission, SEC.

In March 2008, the SEC adopted rule amendments permitting foreign private issuers to file their financial statements in accordance with IFRS.

We will present key unaudited financial information for the fourth quarter of 2009.

Unaudited net revenues determined in accordance with IFRS for the fourth quarter of year 2009 was approximately CNY3.2 billion or $471 million.

The total number of diesel engines sold by GYMCL during the fourth quarter of 2009 was 101,000 compared with 114,000 units during the third quarter of 2009.

As a result of the conversion of the Company's accounts from US GAAP to IFRS in the fourth quarter of 2009, the foregoing fourth quarter information was compiled by the Company using summary IFRS accounting policies, and is not directly comparable with the Company's third quarter 2009 information, which was prepared in accordance with US GAAP.

Accordingly, investors are cautioned.

On an annual basis the consolidated financial results for fiscal year 2008 included in this press release was originally prepared in accordance with US GAAP, but have been restated on an audited basis in accordance with IFRS for the comparison purposes.

The Company's auditors are in the process of completing their audits of our IFRS financial statements for 2008 and 2009.

Net revenues for 2009 increased 26.3% to CNY13.1 billion or $1.9 billion from CNY10.4 billion, or $1.5 billion in 2008.

The total number of diesel engines sold by GYMCL for 2009 was 467,000 units -- 467,899 units, a 25.7% increase compared with 372,280 units sold in 2008.

The increase in net revenue was a result of greater unit volume across the board.

Gross profit in 2009 rose 24% to CNY2.5 billion or $372 million, from CNY2 billion or $300 million in 2008.

The gross margin was 19.3% versus 19.7% in 2008.

The slight decrease in gross margin was mainly due to a larger percentage of sales of lower margin smaller engines as well as higher cost in producing engines compliant with National III emission standards.

Smaller engines are commonly installed in agricultural-related vehicles such as farming equipment and pick-up trucks, which received a boost in demand from the Chinese government's stimulus measures.

In 2009, the Company continued to deploy more expenditure towards the research and development, R&D, of low emission, high fuel efficient engines, incurring CNY297 million or $43 million versus CNY184 million in 2008.

This represented a 60.9% increase year-on-year.

As a result, as a percentage on net revenues R&D spending was 2.3% of net revenues in 2009 and 1.8% in 2008.

Investments in these activities will better position the Company for future growth and contribute to the government's environmental initiatives.

In line with the increase in the number of engines sold in 2009, selling, general, and administrative expenses, SG&A, rose 15.8% in 2009 to CNY1.5 billion or $215 million compared with CNY1.3 billion in 2008.

SG&A expenses were 11.2% of 2009 revenue and this compared favorably with 12.2% in 2008.

Operating income rose 30.1% in 2009 to CNY776 million or $113 million, from CNY596 million in 2008.

The increase was mainly due to higher gross profit and more effective cost-control measures on SG&A expenses.

The operating margin was 5.9% in 2009 versus 5.7% in 2008.

Interest expense in 2009 was CNY77 million or $11.4 million compared with CNY150 million in 2008.

The lower interest expense was due to the Company's improved balance sheet, in particular lower bank borrowings, stronger cash flow generation, and higher trade credits from suppliers.

Other income in 2009 was CNY78 million or $11 million compared with CNY19.5 million in 2008, mainly due to higher interest income, dividend income, government grant and write-backs of payables.

There was a one-time write-back of approximately CNY203 million or $20.7 million (sic - see Press Release) from GYMCL's acquisition of the 100% equity of Yulin -- of Guangxi Yulin Hotel Company Limited, Yulin Hotel Company, to settle past loans by GYMCL worth an aggregate principal amount of CNY205 million.

Details of this transaction were previously recorded by the Company.

Net income in 2009 was CNY628 million or $92 million compared with CNY240 million or $35 million for 2008.

Earnings per share for 2009 were CNY16.85 or $2.47, compared with CNY6.44 or $0.94 in 2008.

Net income in 2009 excluding the one-time write-back from the acquisition of the 100% equity of Yulin Hotel Company as stated above was CNY472.9 million or $69.3 million, or earnings per share of CNY12.69 or $1.86.

The improvement in net income was mainly due to higher sales volume, better expense control, lower interest expense as well as higher other income.

As of December 31, 2009, a total of 37,267,673 shares were issued and outstanding.

In September 2009, China Yuchai declared a $0.10 per ordinary share cash dividend that was paid out on 16 October, 2009.

In view of the Company's performance in 2009, the Board of Directors has approved a quantum of $0.25 per ordinary share be paid out as cash dividend.

The declaration, record, and payment dates are to be determined at a later date, pending receipt of the Company's share of dividends from GYMCL for financial year 2009.

Cash and cash equivalent was CNY3.7 billion or $535 million on 31st December 2009, compared with CNY823 million at the end of '08.

Accounts receivable was CNY2.5 billion or $365 million at the end of 2009, equal to that in the previous year.

Inventory was CNY2.2 billion or $317 million at the end of 2009, which is the same as 2008.

Trade accounts payable increased from CNY2.6 billion in 2008 to CNY4.9 billion or $719 million as GYMCL, the Company's major operating subsidiary was able to more effectively utilize this source of financing.

Short- and long-term borrowing decreased from CNY1.3 billion at the end of 2008 to CNY953 million, or $139 million, at the end of December 31, 2009.

Let me now turn the call back to Mr.

Saw for closing remarks.

Okay, as you have heard from both of us that there was substantial accomplishment in 2009, and we see another exciting year ahead.

As further urbanization takes place in Central China, the usage of diesel-engine-powered trucks and buses is increasing.

As the China government continues to strengthen its enforcement of stringent emissions standards and the use of environmentally-friendly alternative fuels, China Yuchai's high quality environmental-friendly engines will gain further traction among our existing and future customers.

With our wide product offerings, strong R&D capability and partnerships with global powerhouse like Caterpillar and domestic industry leaders such as CIMC, Chery Auto, and Geely, we will further reinforce our leadership in the Chinese diesel engine sector in 2010.

With that, Operator, we are ready to begin the Q-and-A session.

Operator?

Okay, well, we --

Your first question comes from the line of David Raso with ISI Group.

Hi, hello everybody.

I wanted to ask a question regarding the Chinese government's recent decision to increase the bank reserve requirement in an overall tone of maybe slowing down the loan growth in the country.

How do you see those actions playing out in your market today if you've seen any impact yet?

And how are you factoring those decisions into your thoughts on revenue growth in 2010?

Yes.

Hi, David, this is Boo Guan Saw.

What you probably have heard a number of times previously was that the Chinese government was to maintain growth of at least 8% GDP for the whole year.

So in terms of how they really implement those fiscal policies as well as giving all these stimulus plans, that is really going to be a -- the government's implementation.

So I can [only predict] what they want to do, but more important thing is that it get for -- get our China Yuchai.

In my opinion that if there's really this GDP growth of 8% or above there will definitely be a lot of freight infrastructure development, things that really do require diesel engines.

So that really plays very well with China Yuchai.

And I see that in terms of this 2010 year, we really do see the continued demand for diesel engines.

So it has not really impacted very much on the -- our business moving forward in 2010.

So is it fair to say then you've not seen any impact at all?

That's correct.

So what we saw a few years ago when there was some desire to slow the economy down, in the construction equipment industry, for example, you did see a downturn in sales, albeit relatively brief period, that's not in the cards for 2010 as you see it right now?

So far, yes, we have not seen that -- anything that's slowed down.

And I must really add that you have really heard about, yes, the government is really tightening our credit and also the really excess capacity, but for our market, the automotive market especially we did not really see that thing happening.

So far, the order board is very strong as you can see in our news release that January has really been a very strong month, where we sold 83,000 units.

That was related in our news release this morning.

If you don't mind, I have two other quick questions.

The Caterpillar joint venture, do you see that expanding that relationship beyond remanufacturing of engines?

How would you lay out the vision of that relationship over the next -- not very long term, but say the next two, three, four years?

Well, David, as you probably know that well, the remanufacturing is essentially a service business, and we want to really provide excellent service for the customer.

Now, with Caterpillar, just really want to focus on service right now.

So there is really no discussion as to -- about there's really going to be expansion in terms of joint venture.

We have not really talked anything about that.

And the last one, which end markets are performing best or worst.

Obviously, it sounds like the automotive side is still strong; trucks and so forth.

How would you characterize farm equipment versus construction especially given this time last year that the stimulus was particularly geared toward the smaller farm tractors?

That I would assume is a relatively difficult year-over-year comparison.

So for the growth rate how should we think about the pecking order -- truck, construction, and farm equipment?

Well, yes, what you do see is that in terms of getting farm -- if I were to really look at the whole year of 2009, the first two quarter really started with very, very strong demand in terms of the farm equipment, and also the -- those small trucks.

And that really increased our sales in terms of the small engines.

So if -- then in the third quarter and the fourth quarter there was really a bigger demand for medium-duty and heavy-duty equipment.

But in terms of the farm equipment, yes, the percentage of our total sales is really not that big -- is really about 10% or so.

And then the equipment, the construction equipment, that is really also not really very big.

But in terms of the increase, in terms of the percentage, it is really -- they're quite high in terms of -- in the high teens and 20%.

So I would really categorize that as well, yes, the majority of our engine volume is really towards the automotive markets, which are really the mainly medium heavy-duty trucks and the light-duty trucks.

But we are really seeing growth in construction as well as farm equipment as well.

So in all our market segments we are pretty strong, in terms of the percentage growth.

I appreciate the time.

Thank you very much.

Thank you.

Your next question comes from the line of [Warren Ring with Hayman].

(Spoken in Chinese.)

Yes, Warren, let me really try to translate that as clearly as possible in your -- Chinese.

(Spoken in Chinese).

(Spoken in Chinese.)

The -- there's really two questions being asked.

One -- the first question is that is -- well, what is really the three-year capacity planning for Yuchai.

And then the second question is that for hybrid, as you know that the government is really encouraging environmentally friendly usage of automobile.

And then as Warren would like to know what is really the hybrid engine development from China Yuchai.

And then there's this -- there's also this electric vehicle supply in terms of the reviews of the pollution, and environmentally-friendly vehicles.

So I'll take up these two questions and briefly say that, in terms of the capacity, what you have heard are in terms of what we have really done -- there are really two significant joint ventures, with Geely and with this CIMC-Chery.

So that will really (inaudible) and the more current one is really Xiamen Yuchai.

As you know that Xiamen Yuchai is another production capacity where we are going to increase from last year that we produced 10,000 to another 50,000.

And -- but in terms of the Yulin, where -- the primary manufacturing facility, there are still room for capacity expansion.

So we believe that as well with the two joint ventures coming onstream and now with Xiamen Yuchai and added with the capacity that we have in Yulin, we will really be able to really cover for the next three years in terms of capacity.

Now, when we really talk about hybrid, so in electrical supply, electric supply -- so we are really not into that sort of markets, (inaudible) really electric.

But in terms of hybrid, we already have hybrid, which is really the diesel hybrid.

So in terms of diesel hybrid, right now we already have the product available, and we are really producing from 800 to 1,000 units, not very big in terms of the hybrid engines.

So we are really supplying to these municipal buses in China.

I believe that as well the Beijing municipal -- the Beijing Public Transportation will be purchasing some of those hybrid buses later on.

Now, let me really go back to speak in terms of Chinese.

Hey, Warren --

Hi.

(Spoken in Chinese.)

(Spoken in Chinese.)

You can write to us, okay?

Thank you.

Thank you.

Thank you, Warren.

Thank you.

Your next question comes from the line of Gerwin Ho with Citigroup.

Hi, Gerwin.

Hi, good morning.

Congratulations on the -- such strong results.

I just have some questions about the heavy-duty truck market.

First of all, in terms of unit sales, what was our heavy-duty truck engine unit sales in '09 versus '08?

Secondly, in terms of our heavy-duty truck engine right now, what's the proportion of EGR versus common rail?

And lastly, what is outlook for the heavy-duty truck market in China in 2010 in terms of overall market unit sales growth?

Thank you.

Well, you ask a lot of questions, Gerwin.

Anyway, I'll really try to answer that.

In terms of the heavy-duty engines, we have a increase about 16.8% as I already reported.

So -- but the heavy-duty engine will -- includes some of those in the construction.

But in terms of the truck, we are selling about 34,500 so far in 2009.

And then in terms of the proportion of EGR and common rail, currently most of the heavy-duty engine that we are really using, we are really using that transition in terms of IEGR and most of the -- I will say that most of the heavy-duty engine we use the EGR system.

So the common rail, yes, we do some.

But I do not really have the percentage or the proportion.

And then in terms of the outlook, we believe that if you look at the economy, what I really see is that well, if there is really infrastructure development and if the economy is still going to be maintaining at 8% or above in terms of GDP, then there will really be a lot of freight, a lot of freight and they will really need trucks.

And then also if there's really infrastructure development, there really is going to be requirements for more of these trucks.

And I really see that as well the 2010 borrowing -- all these issues related to economies and other things.

So if the government maintain 8% or above of the GDP growth, then we're really going to see strong growth in terms of the heavy-duty truck market.

And one more follow-up question.

We already have heavy-duty truck engine production at our Yulin factory, is that correct?

That's correct.

So the purpose of the CIMC-Chery JV, the engines made at that JV, is it different from our current engines?

Well, what it is, is that as well, we are really currently manufacturing engines that is really up to about 10 liter; 10 liter, 10.3 liter.

Now, the joint venture with CIMC-Chery, it is really in the 12-13 liter which is really going up to above 550 horsepower.

So that is really in a different range and engine capacity.

So the 12- to 13-liter engines, have those been R&D'ed yet?

Well, we have done quite a lot of work, yes, we have done all this R&D.

We have got -- we have -- I think it's about a couple of trucks already running on the road and we are really doing all this prototype testing.

So it's more -- the 12- to 15-liter engine will be built at the CIMC-Chery JV and our existing facility will continue to make 10-liter engines?

Well, we'll really continue to make the full range, Gerwin.

Okay.

Thanks a lot.

Okay, thank you.

Your next question comes from the line of Melissa Cook with CLSA.

Question as far as bio-preference, I just wonder if you could update us on the more advanced technology engines.

Are you finding buyers willing to pay up for the higher technology or are they still looking for just the cheaper engine?

What it is, is that if you are really looking at the -- on highway engines and -- well, for the buyer, the very first important preference is really the cost.

So cost is really very important to them.

And what I do really see is that if there is really going to be an emissions requirement that say, for example, like the implementation of the National IV, which was really supposed to be January 2010; now it's really delayed to about July.

So if there's really implementation of more stringent emissions standards, then the higher price engine will prevail.

So that is really what I think that the customer in China will be looking for.

Cost is really very important to them.

Thank you.

If I could ask a follow-on about industry consolidation, it looks like market share is really being concentrated more among the largest engine-makers and I wonder what your view is on how that's going to look over the next few years.

Well, what it is, is that first of all, some of those diesel engine manufacturers, they are really state-owned enterprise.

And I really see that as well in terms of the state-owned enterprise manufacturing engines, then there will probably -- okay, some merging or joint venture in the future.

It's really -- the reason is really because there's really this jobs implication.

And in China, well, the state-owned enterprise, they're really going to -- really [have] all the people who are working.

So -- but again (inaudible) there is really this industry dynamics whereby -- okay, emissions become the key differentiator.

And once the emissions comes in and if people do not invest in technology to meet those emissions standards then it will really be very difficult for the diesel engine manufacturers to survive.

So there will really be some [shakeout] in terms of the diesel engine industry.

So I would really see that that would be really emerging.

There will really be a -- some shakeout in the industry if they don't really meet the emission standard.

And then the next dynamic I also see is really -- there's going to be really greater alignment with some of the key OEMs.

And that is really where you are really going to see it as well.

Okay, if you are really one of the capable and strong engine manufacturer, and then there will really be a clear alignment with the various OEMs.

That is really what I see in terms of the industry dynamics.

Thank you.

And one quick question, are the -- is the refining industry ready -- will it be ready for the Euro IV standards when they're put in place?

Well, okay, what I've read, and you probably have read that is -- that as well, the -- in January -- January 1st this year, the diesel has already -- and especially in Beijing and Shanghai.

So those diesel fuel specs has already reduced from 2,000 ppm sulfur, to 350 ppm sulfur.

But there's really this -- okay, 18 months ago but it's transitioned in terms of the -- this clean diesel.

So what I really see is that as well -- the refiners, especially, some of those -- Sinopec and the others, the oil company, they will be able to refine those fuel up to 350 ppm sulfur specifications.

The key thing is that it won't get a cost implication.

So again, (inaudible) is already in that.

And the oil industry is capable of doing it.

Thank you.

We've got a question here from the webcast.

The question is, what percentage of total units sold hit the final market in automobiles?

Question two, breakdown of unit sales in 2009 by engine type, size.

Question three, update on affiliated business and their ultimate liquidation.

Question four, revenue and unit sales outlook.

Question five, plant expected production capacity.

The -- in terms of the percentage of total unit sales today in the final market in our automobile -- in our automotive industry, I would really look at it as that -- in -- the automotive is mainly in the trucks and buses.

So if you really look at it there's probably about I would say, 75% is probably trucks, and then about 15% -- 14%, 15% are all buses.

And the rest are the others.

So that is really what the percentage of total final market in the automotive market.

But in terms of our breakdown of our unit sales, I would really say that we have classified that under light-duty, medium-duty, and heavy-duty.

So in terms of that, it's really going to be about 49% light-duty, and the balance is really heavy duty.

It's 30% medium-duty.

And really -- okay, we are really looking at as well, there's really this industry -- industrial segment as well.

That includes the marine, power generation, and some other construction.

So I would really have that as others -- some of those others.

But heavy-duty is about 16%.

So it's 49%, 30%, 16%, and the rest is with others.

Okay, update on affiliated business, and the ultimate liquidation.

Okay, let me respond to that.

I think that there are -- basically, there are two major ones, one is the HL Global Enterprises, and the other one is Thakral.

Now, Thakral, I'm sure you have probably read some of our recent announcements.

We have made an announcement saying that Thakral will be returning some capital to the shareholders, and that will amount to about $0.05 per share.

That will be returned to the shareholders.

And we have also sold about 536 million shares to some new investors, okay?

So that one we have -- after the sale of shares, our shareholding of Thakral will come down to about 13%.

All right, that is -- then we will decide what to do with the balance.

As far as HL Global is concerned, I think we are still looking at ways to improve the performance, and to improve the -- and also explore options as to what to do with this investment.

Well, just to add again, in terms of the HLG is -- well, okay, yes, CYI is really the biggest shareholder.

And then again long term, we would really want to look at as well, what are really those opportunities in terms of business growth.

And if it is really a non-core, non-performing asset, well, then we will -- we'll look for the best way to divest it.

Okay, and then the next one is really revenue and unit sales outlook.

We don't really provide this forecast unfortunately.

But we look at areas as well -- if the economy is really doing well.

And as I really mentioned as well, we see that as well there is really some strong demand, again, especially in January.

So I believe that well, okay, this year the outlook is going to be good.

For plant expected production capacity, we have done various announcements, and we also really look at the Yulin which is really the primary manufacturing facilities.

We believe that -- well, as what somebody was asking that as well for the next three years.

Okay, we believe that, well, in the next three years we will really be able to really meet the demand.

But a more important thing is as well we also really need to get our key components manufactured within -- or nearby the primary manufacturing facility which is in Yulin.

So that's why just now I mentioned about, well, the foundry is really going to be ready.

And once it's ready, we will really be able to really meet increased capacity in the diesel engine manufacturing.

Okay, well --

I've seen a few questions on IFRS and US GAAP composition here.

Now, if you look at the -- our '08 numbers, particularly the profit, net income, and compare that to the 20-F, you'll see that the impact of this IFRS composition on the Company is about CNY[12] million, which is actually quite small, okay.

Now, the biggest impact comes from our treatment of HL Global, which we are now consolidating, as opposed to equity accounting for it under US GAAP.

So that's one of the major difference between -- that affected our account.

Okay, now -- I have a question here on our -- what we intend to do with Yulin Hotel Company.

Now, the Yulin Hotel Company consists of two major buildings.

One is Yulin -- what do you call -- buildings that Yulin Hotel is operating in.

Another one is the [Quiling] building that we are now attempting to sell, okay.

So that will account for a large part of the assets of Yulin Hotel Company.

Yes, there is really another question about my plan on going to a road show.

Yes, there is really a plan to go for the road show.

And I have not really scheduled that yet.

But again, the plan is really in there, that -- we would like to really meet with the institutional investors as well.

We have now reached the end of the Q-and-A session, and I will turn it back over to Mr.

Saw.

Thank you for all the -- okay, all those who are participating in this earnings webcast.

We look forward to speaking with you again.

And I wish you all a good day.

Thank you very much.

This concludes today's webcast.

You may now disconnect.

Presenters please hold.