HKSE: 2338 SZSE: 000338
2009 Interim Results
August 2009
1 Disclaimer
This document has been prepared by Weichai Power Company Limited (hereinafter as the “Company”) and has not undergone independent verification. This document doesn’t contain any express or implied representations or warranties, and also does not guarantee the accuracy, neutrality or completeness of information contained herein. Company and its affiliates, consultants or representatives don’t take any responsibility in terms of the loss caused by the information, which could be expressed in any forms in the document. Such forward-looking statements are subject to certain risks and uncertainties, most of which go beyond the Company’s control.
2 Achievements In A Challenging Economic Environment
Operating indicators in market leading positions on product strengths;
Key financial indicators continued to rebound on effective internal controls;
Further enhancement in product mix and market positioning;
Enrich value chain through innovative capital management and competitive strengths.
3 Agenda
1 2009 Interim Results Highlights
2 Business Review
3 Industry Review
4 2H 2009 Outlook
4 2009 Interim Results Highlights Key Financial Highlights (HKFRS)
As at 30 June 2008 RMB Million (except EPS) 2009 Change(%) (restated) Turnover 15,646.7 20,789.7 -24.7
Gross Profit 3,014.5 3,996.1 -24.6
Operating Profit 1,790.9 2,633.0 -32.0 Net Profit (attributable to equity holders of the company) 1,222.0 1,659.2 -26.3 Basic Earnings Per Share (RMB) 1.47 1.99 -26.1
6 Key Financial Highlights (PRC GAAP)
As at 30 June RMB Million (except EPS) 2009 2008 Change(%)
Turnover 15,797.3 20,978.7 -24.7
Gross Profit 3,400.1 4,553.2 -25.3
Operating Profit 1,605.6 2,434.9 -34.1 Net Profit (attributable to parent company) 1,222.0 1,660.8 -26.4
Basic Earnings Per Share (RMB) 1.47 1.99 -26.1
7 Revenue Down On Economic Slowdown
Under HKFRS Under PRC GAAP
RMB Million RMB Million
25,000 25,000 20,789.7 20,978.7 20,000 20,000 15,646.7 15,797.3 15,000 15,000
10,000 10,000
5,000 5,000
0 0 2008 1H 2009 1H 2008 1H 2009 1H
China’s growth eased on cyclical adjustment in home market and global financial crisis Sales in heavy-duty vehicles and construction machinery down sharply on keen competition and market transition Overall performance indicators continued to top peers; industry leading position consolidated on product strengths
8 Quarterly Profits Up On Sequential Basis
Gross Profit (Under HKFRS) Net Profit (Under HKFRS)
RMB Million RMB Million
3,000 1,000 950 900 861 2,323 800 2,231 2,188 711 700 2,000 600 1,415 500 1,212 400 357 361 1,000 731 300 200 100 -86 0 0 081Q 082Q 083Q 084Q 091Q 092Q -100 081Q 082Q 083Q 084Q 091Q 092Q
Overall profitability down YoY on sharply lower sales and a higher base in the previous year Government stimulus measures promote fixed capital investment, creating conditions for growth in the heavy duty vehicle and construction machinery markets Overall profitability recovered most of the lost ground from previous quarters through effective internal controls
9 Other Financial Data
HKFRS
RMB Million 2009 1H 2008 1H Change (%)
Total Assets 34,371.0 29,949.9 +14.8
Net Assets 9,259.2 7,997.8 +15.8
Assets – Liabilities Ratio (%) 63.1 62.2 +1.4 Liquidity Ratio (%) 117.7 113.4 +3.8
PRC GAAP 2008 1H RMB Million 2009 1H Change (%) (restated) Total Assets 34,275.1 29,267.7 +17.1
Net Assets 9,259.2 7,997.8 +15.8
Assets – Liabilities Ratio (%) 63.0 61.3 +2.8 Liquidity Ratio (%) 123.0 119.3 +3.1
10 Business Review Signs Of Recovery After Market Fluctuations
Industry and market trends
300,000 200,000 100,000 0 081Q 082Q 083Q 084Q 091Q 092Q
Heavy-duty Truck Industry Wheel Loaders with a Load Capacity of 5 Tonnes Fastgear Gearbox Weichai Engies Shaanxi Zhongqi
2008: volatile operating environment and new industry rules led to fluctuations in heavy-duty trucks and loaders markets; after reaching their heights in Q2, the markets began to come under pressure in the 2nd half before plunging to their lowest levels in Q4 2009: the government’s 4 trillion stimulus package led to strong growth in scraper and project car markets; the recovery was followed by rebounds in logistics transport vehicles and construction machinery markets later Sales of Weichai Power engine, Shaanxi Fast Auto Drive gearbox, and Shaanxi Auto heavy trucks met expectations; product strengths of engines and gearboxes further enhanced
12 Engines Business – Solid Market Leadership
As at 30 June
Unit 2009 1H 2008 1H Change (%)
Heavy-duty Truck 101,569 137,075 -25.9%
Construction Machinery 41,382 60,355 -31.4%
Sales of heavy-duty truck engines down 25.9% YoY to 101,569 units, outperformed market average by 2.1 percentage points; market share of heavy-duty trucks (14 tonnes and above) reached 37.1%, up 0.6 percentage point YoY Sales of engines for construction machinery down 31.4% YoY to 41,382 units; wheel loaders (5 tonnes) continued to dominate the market with an 80.9% share
13 Engines Business – Stable Growth In Key Markets
Sales of Coach Engine Sales of Diesel Generator Unit Unit
3,000 2,778 2,500
2,000 1,927 1,976 2,000 1,500 1,368
1,000 1,000 500
0 0 2008 1H 2009 1H 2008 1H 2009 1H
Diverse product mix and market positioning: passenger cars, diesel generator units, yacht and other ancillary products Weichai Power’s coach engines are preferred by major coach makers such as Yutong, Jinlong for their fuel efficiency and overall quality; sales of coach engines up 39.6% YoY during the period Sales of diesel generators up 40.2% YoY
14 Engine Business – Value Chain and Product Mix Enhanced
Launched WP5/7 motor products in year-end 2008 targeting the commercial vehicals and construction machinery markets; this line of products are in their second round of development and testing, and are being rolled out in small batches to test the market To consolidate its market leadership, Weichai acquired Moteurs Baudouin, a French maker of high-power 16-33L engines, at an attractive price in January 2009 Achieved optimum positioning in the 5L to 33L markets, furthering enhancing our competitive edge and market strength
15 Engine Business — Market Share Expanded
Weichai Power provides common rail system and internal/external EGR National III engine products, which provide customers with a diverse range of system solutions. Developed the ―Landking‖ common-rail engine with energy-efficient, reliable, and environmental protection characteristics; sales in the first half of 2009 reached 60,000 units; sales to date since launch totaled more than 120,000 units, by far the best seller in the high-pressure common rail engine market Signed agreements with Bosch for long-term strategic cooperation
16 Engine Business- 12L High-Power Engines Lead Market
Market trends of engines
60% 40% 20% 0% 2006 2007 2008 2009 240 260-270 280-290 300-340
Popularity of 260-270 horsepower engines waned over the years; 280-290 horsepower engines remained market leaders; 300-340 horsepower engines in steady rise to market dominant position 12L ―Landking―, the only mature platform for high power engines, is set to dominate the heavy-duty truck market over time
17 Engine Business – Technology For The Future
―Landking‖ National IV Engine is being rolled out in small batches to test the market and proved to be compatible with Foton vehicles. National IV is the first Weichai engine to have met the country’s emission standards, and it is compatible with Shaanxi Auto’s heavy-duty trucks The technology of National IV is comparable to international standards Sales of alternative energy engines were good, paving the way for future development
18 Gear Boxes
Sales of Gear box（Fastgear） Sales of gear box down sharply on industry downturn, although leader position remained Unit solid in the heavy-duty vehicle market
12-16 speed gear boxes are leaders in the upgrades market
Full range of gear box products in 7 speed, tiny 8 speed, mini 8 speed, 8 speed, 9 speed, 12 speed and 16 speed
Products cover the full range of light-medium heavy-duty trucks, agricultural-use vehicles and passenger cars
Shaanxi Fast is the world’s largest gearbox maker with annual production capacity of 600,000 units, and it has topped the industry on a number of performance indicators for seven consecutive years, and the largest gearbox maker in the world for three years in a row. Its products are sold worldwide
19 Axle & Heavy-duty Truck Engines
Sales of Heavy-duty Truck Sales of Axle (Shaanxi Hande) (Shaanxi Zhongqi) Unit Unit 150,000 50,000 132,296 42,814 40,000 100,000 30,000 27,544 75,233
20,000 50,000
10,000
0 0 2008 1H 2009 1H 2008 1H 2009 1H
Shaanxi Hande is China’s No.1 axle brand, with a strong focus on R&D. It is the first such company to export assembly technology to India Sales of heavy trucks by Shaanxi Zhongqi reached 27,544 units, with stable market share. Profits of Shaanxi Auto up sharply on lower raw material costs
20 Export Market – A Key Growth Driver
Export Sales on Weichai and Major Industry Comparison
Unit 2008 1H 40,000 2009 1H 30,000
20,000
10,000
0 Weichai Engines Shaanxi Zhongqi Heavy-duty Truck Wheel-loader Industry Industry
China exported 20,994 units of heavy-duty trucks in1H 2009, down 46.5% yoy due to the global recession. Exports of loaders down 59.8% YoY to 5,642 units Weichai achieved better-than-market performance in exports thanks to its synergistic business model Exports of engine down 22.2% YoY to 12,390 units Exports of Shaanxi Zhongqi’s heavy-duty trucks reached 6,902 units on new market expansion; the company is the No.1 foreign currency earner in the automotive industry in China
21 Corporate Governance – Emphasis On Organic Growth & Innovative Management
The group places great emphasis on organic growth and innovative management through promoting leaner management structure and better internal controls
Introduced innovative appraisal system and overhauled employee compensation structure to motivate staff
Overhauled marketing functions and promotion management to help achieve long term growth
22 Industry Review
23 Improvement In Heavy-duty Trucks Market
2007-2009 monthly sales charts of heavy-duty truck industry (As at 30 June)
Unit 100,000 80,000
60,000 40,000
20,000 0 Jan Feb Mar Apr May Jun Jul Aug Spet Oct Nov Dec
2009 2008 2007
Source：Automobile Manufacturers Association In 1H 2009, affected by the economic crisis and the impact of cyclical adjustment of China's economy, the overall performance of China's heavy truck market declined. Total sales of heavy trucks reached 273,681 units, down by 27.7%. Taking into account the fast growth in national economy in the first half of 2008, and that the National III standards implementation led to early consumption and other factors, overall industry sales in the first half of 2009 was better than market expectations
24 Company’s Performance In Heavy-duty Truck Industry
Company’s performance in heavy-duty truck industry in 2009 (As at 30 June)
Others SAIC-Iveco Hongyan North-Benz Beiqi Futian Dongfeng Motor Shaanxi Zhongqi FAW Group Sinotruk Jan Feb Mar Apr May Jun
Since February, demand for project cars increased significantly following China’s 4 trillion stimiulus measures; strong demand for dumpers and other cars also help bring rapid growth in the industry. With the recovery in the logistics industry and roads vehicles, the monthly performance of the company’s major customers such as Beiqi Futian and FAW Group improved, which helped expand our market share
25 Steyr Platform Regains Market
Market Shares of Major Heavy-duty Truck Companies (As at 30 June)
2009 2008
Anhui JAC Motors Anhui Hualing North-Benz North-Benz 2.1% Hualing 3.3% Others 4.2% 2.2% 4.8% 4.4% JAC Motors Others Sinotruk Sinotruk Chongqing 2.0% 3.9% 24.5% Chongqing 18.3% Hongyan Hongyan 4.7% 4.6%
Beiqi Futian 9.8% Beiqi Futian 11.3% Shaanxi Shaanxi Zhongqi Dongfeng Faw Group Faw Group Zhongqi 11.4% Dongfeng Motor 17.8% 22.8% 11.8% Motor 15.7% 20.9%
Source：Automobile Manufacturers Association
Compared with the same period last year, enterprises of Steyr system regained market share to over 57% Total market share of the top 9 companies decreased slightly to 96.1% from 96.2% YoY, indicating that competition remains keen
26 Wheel Loaders
Sales of Wheel Loaders with a Load Total Sales of Wheel Loaders Capacity of 5 tonnes Unit Unit 120,000 80,000 106,286 68,540 100,000 60,000 80,000 71,556 48,065
60,000 40,000
40,000 20,000 20,000
0 0 2008 1H 2009 1H 2008 1H 2009 1H
Source: Machinery Industry Association First half of 2009, loader industry was severely impacted by factors including the global recession, lower demand for coal and iron ore, and fewer newly-developed real estate projects China is still expanding its economy, particularly in urban areas, and thus infrastructure construction has tremendous growth potential which will in turn create demand for loaders
27 Wheel Loaders Market Highly Concentrated
Market Shares of Major Wheel Loaders Companies（As at 30 June）
2009 2008
Changlin Changlin 3.6% Beiqi Futian 4.6% China Beiqi Futian Others China Others Infrastructure 4.6% Infrastructure 5.4% 6.9% 7.7% 18.6% 17.7% Chengdu Chengdu Construction Construction 7.1% 7.8%
Shangdong Shandong SEM SEM 5.5% 6.3% Guangxi Xuzhou Liugong Shangdong XGMA XGMA Guangxi Construction Shangdong 17.3% Xuzhou Lingong Machinery Machinery Liugong 6.5% Lingong Construction 12.1% 13.7% 20.7% 11.8% 15.7% 6.5%
Source: China Construction Machinery Association
Guangxi Liugong, China Infrastructure and XGMA Machinery have increased their market share to 52.9% from 50.7% last year on greater economies of scale. Shangdong Lingong has seen fast growth and is now a first-tier player Competition intensified; with more new product launches, the importance of marketing and promotion becomes more apparent
28 Coach Market
Total Sales Volume Huge Potential Unit National Automotive 25,000 22,708 Revitalization Plan Introduced
20,000 Opportunity for Alternative 15,727 15,000 Energy Bus
10,000 The Development of Urban- Rural Integration
5,000 Rising of Export Demand 0 2008 1H 2009 1H Source：Automobile Manufacturers Association
Affected by the global economic downturn, sales in large-scale passenger car industry fell 30.7%. Top ten companies’ market share rose from 76.3% to 78.3% YoY. Marketing became more important At present, the large-scale passenger car market continues to be weak, and there is no sign of recovery in the near term
29 2H 2009 Outlook Market Outlook
Challenges As a result of China’s economic slowdown and the impact of the global financial crisis, companies are faced with challenges in external environment due to weak domestic demand, export and investor sentiments Competition in the heavy-duty truck market will intensify in the next few years
Opportunities China will remain one of the fastest-growing economies in the world with huge growth potential. Increased economic activities will help bring about a stable economic recovery The markets of construction machinery, engineering machinery and ancillary logistics vehicles are likely to benefit from the Central government’s 4-trillion stimulus package. As more property projects commence and government construction projects come through the pipeline, demand for loaders is likely to grow China’s economy remains healthy. The national stimulus package is set to drive recovery in the economy and help lift the freight and cargo business The implementation of fuel tax, a toll-by-weight policy and National III Emission Standard will lead to upgrades in industry infrastructure in high-tonnage heavy-duty trucks market With an overall decline in purchasing power in overseas markets, lower priced Chinese-made vehicles will become more competitive
Looking ahead in the second half of 2009, China’s economy will be relatively stable and healthy. Weichai Power is cautiously optimistic about the heavy-duty truck industry. In view of the effect of the national investment plan as well as increases in construction works in the real estate industry, the outlook for wheel loaders is optimistic
31 2009 Business Outlook
Further Strengthen Technology Resources And Build World-class R&D Platform of Power Assembly Products System As the earliest corporation to develop and research power assembly products system, Weichai can capitalize the opportunity of the state support of the Power Assembly Research Centre and achieve talent, technology, product aggregation edge advantages. In the field of assembly products system, industry competitive advantages in terms of new products, new processes, new technology etc can be created
Further Expand the Marketing of National III And The Implementation of National IV Products Leverage our advanced technology and quality products. The company will spare no effort in the marketing of its National III Emission Standard compliant high-power high-speed ―Landking‖ engines and promote the small quantities of National IV products to further maximize its market advantage
Further adjust product structure and market strategies Strengthen our research and development capability to create a full range of engine products. With the existing series of 5-33L engines, 7-16 speed gear boxes and axles products we can develop the markets of medium-duty trucks, construction machinery, commercial vehicles, shipping, power generation equipment, agricultural-used vehicles, etc. on an ongoing basis, further strengthening our products and competitive edge
32 2009 Business Outlook (Cont’d)
Drive further the Company’s management performance To enhance the operation of the company through advance management concept and management tools as well as better controls on costs and risks
Further enhance the Company’s capital and operational advantages At present, the company has strong cash flow and a very experienced management team. The company will make use of its financial strengths and look for M&A opportunities in the industry that are complementary to its businesses
The management is optimistic about its prospect in the second half of 2009. We will seize the appropriate market opportunities and further leverage the Company’s synergies from resources advantages to enhance our capability to resist risk. We aim to build the Company into a global leading transport and construction equipment supplier with power system as its core business‖
33 Thank You!
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