Weichai Power 2016 Interim Results Disclaimer
This document has been prepared by Weichai Power Company Limited (hereinafter as the “Company”) and has not undergone independent verification. This document does not contain any express or implied representations or warranties, and also does not guarantee the accuracy, neutrality or completeness of information contained herein. The Company and its affiliates, consultants or representatives do not take any responsibility in terms of the loss caused by the information, which could be expressed in any forms in the document. Forward-looking statements are subject to certain risks and uncertainties, most of which go beyond the Company’s control. Content
1 Financial Highlights Part 2 Business Review Part 3 Industry Overview Part 4 Outlook and Strategies Part Maintained stable growth in business scale
Sales Revenue Net Assets Attributable to the Parent Unit: RMB 100 million Unit: RMB 100 million 1,000 400
800 300 600 200 400
200 100
0 0 2012 2013 2014 2015 2015H1 2016H1 2012 2013 2014 2015 2015H1 2016H1
Net Profit Attributable to the Parent Cash and Equivalents
Unit: RMB 100 million Unit: RMB 100 million 60 300
40 200
20 100
0 0 2012 2013 2014 2015 2015H1 2016H1 2012 2013 2014 2015 2015H1 2016H1 4 Operating performance bottomed out
Return on Equity Total Asset Turnover Ratio 15% 净资产收益率 0.80
10% 0.40
5%
0% 0.00 2012H1 2013H1 2014H1 2015H1 2016H1 2012H1 2013H1 2014H1 2015H1 2016H1
Inventory Turnover Ratio Receivables Turnover Ratio 3.50 8.00
6.00 2.50 4.00
1.50 2.00 2012H1 2013H1 2014H1 2015H1 2016H1 2012H1 2013H1 2014H1 2015H1 2016H1
5 Content
1 Financial Highlights Part 2 Business Review Part 3 Industry Overview Part 4 Outlook and Strategies Part Core Business – Excellent performance and steady enhancement in market position
112,900 units of high-power engines were sold (including 83,800 units of HDT engines, up 29.2% y-o-y and accounting for a 24.6% market share, representing an increase of 3.2ppt compared with 2015; 15,600 units of engines for wheel loaders with a load capacity of 5 tonnes, accounting for over 60% of market share; and 7,900 units of medium and large-sized passenger vehicle engines, accounting for 10.8% of market share); 245,900 units of Fast gearboxes were sold, up 7.2% y-o-y; HDT engines’ market share reached nearly 70%; Shaanxi Heavy-duty Motor(“SXHDM”) sold 37,700 units of HDT, up 35.1% y-o-y; its market share increased by 1ppt from 2015, ranking the fourth in the industry; Hande Axle sold 151,300 units of axles, up 26.9% y-o-y
13.3% 7.2%
Engine Gearbox
10,000 10,000 Units Units
35.1% 26.9% SXHDM Axle 10,000 10,000 Units Units
7 Superior Products – Leading the industry trend with product structural adjustment
Sales Volume Proportion Sales Volume Proportion Sales Volume Proportion of haulage vehicle and trucks of 12/13L Engines of 12-16 Speed Gearbox
31.5% 25.4% 43.6% 59.6% 40.4% 43.6% 56.4% 51.4% 68.5% 56.4% 48.6% 74.6%
2015H1 2015H1 2015H1 2016H1 2016H1 2016H1
SXHDM Weichai Engine Fast Gearbox
Transformed from a construction lead the industry upgrade towards high- Continued to lead the industry to specialist to a logistics specialist capacity and high-power products develop multi-speed gearboxes
8 New Products Marketing – Forge ahead to deliver a new national driving force
Light-duty Engines Heavy-duty Engines Detailed construction drawing design for our self-developed 9H/10H Products: durability of 1.80 million km/ 30k hours – highest standard of WP3 four-valve diesel engine was approved; high-speed engines in China; Dedicated to developing the quietest engine – WP4.1 Baudouin Engines: M26.3 electronic-control engine filled the gaps of high power National V diesel engines were launched for sales, 15L marine engines; partial support to 6M33 electronic-control land-based engine representing the new drive of profit growth for the Company; to break the monopoly in the power generation industry; Diesel engine, which meets off-road Stage III emission WP17 with High-Capacity: lead the highest capacity market in China by the self- standards, passed national-level accreditation designed heavy-duty automotive diesel engine market
Delong X3000, a heavy-duty tractor for large-sized object transportation with 500 HP which meets National V New products such as 12JS260A, C9JSQXL110T, C6DSXL110T and FJ7500 standards, broke the monopoly in the imported vehicles passed provincial-level accreditation; market in China; More than 10,000 gear boxes for passenger vehicles including 6DS were sold, up Heavily promoted the golden version of X3000 and the 16.7% y-o-y. They have the advantage of saving energy while being new M3000. 5000 of the golden version of X3000 (WP13) environmentally friendly and lightweight were sold in 20161H HDT Gear Box 9 R&D and Innovation – Aiming high to achieve major technological breakthroughs
Emission Reduction Upgrade Self-Developed Application of ECU Marketing High-Pressure Common Rail WP4.1 diesel engines, which R&D Competence Our self-developed electronic meets off-road Stage III Strengthened control system WISE15 series, emission standards, passed which meet the State IV and State national type testing and certification, and was launched; Major breakthroughs in the V emission standards, partially Won the second prize of integrated applications of supported WP 13 and off-road Completed the development and National Science and high pressure common rail diesel engines. 4,000 of those are strengthened the economic Technology Progress Award in key technology and system; sold monthly; value of the products which the "Key technologies of low- Our self-developed electronic- meet the State V emission noise diesel engine design and The high pressure common control system which meet the standards; the WP7/12 series application“ that the Company rail system, whose Euro VI emission standards, received Taiwan Stage 5 has participated in; development was led by partially supported various engines certificate (台湾第五阶段证书); the Company, provided Kicked-off the construction of and moved into a new stage of Car testing in alpine cold regions partial support to the the State Key Laboratory of proprietary application; for WP5/7/10H/12 test vehicles, WP4.1/WP10 models, Internal Combustion Engine which meet the Euro VI which meet off-road Stage Our self-developed platform Reliability; emission standards, showing the III emission standards; version of hydraulic controlling Moved towards high-end engines provided partial support to consolidated leadership of the technology – Weichai started Oil pumps and common rail some bulldozers of Xuanhua Company in Euro VI emission up several high-end engine pipes were verified by the Construction, which also helped technology in China projects including WP13, WP market accelerate the collaboration with 17 and the D series Linde Hydraulics 10 Market Development – Calibrated to steadily increase market share
Market Enhanced Win-win Expansion Marketing
Cultivate Strategic Client Resume Market Share Deeply Develop Segmented Market
Reached agreement with Shandong Market share of engines used by heavy- 488 promotion activities about heavy- CLAAS Jinyee and developed agricultural duty trucks increased to 24.6%, heavy- duty engines were held, reaching a machine market; duty complete vehicles remained the 4th population of 37,000; Entered into strategic cooperation in the industry; Engine business held the series of agreement with Chongqing Wanyun Group Weichai recorded improvement in the “Progress towards high-end with 100 to develop passenger vehicle market; support rate for the strategic clients, days of intensive work” activities; Entered into strategic cooperation including SXHDM, Dayun, FAW and Shaanxi Heavy-duty Motor has held agreement with Wuzheng Group to Dongfeng “Golden Campaign” and “Fight North develop agricultural equipment market Campaign” in segmented markets
11 New Energy Products – Coordinated force to grasp new opportunities in the industry
01 Self-developed plug-in hybrid powertrain cored by self-developed electronic control system HCU, integrating powertrain core technology with excellent performance indicators; 12-metre public transportation hybrid power system was awarded 2015 Shandong Energy Saving Award 02 Fast developed 5 tonnes and 13 tonnes wheel-side reducers, suitable for new energy passenger vehicles and commercial vehicle; Hande HDE5t central motor integrated drive axle became the first pure electrical axle with mass production in the industry
03
During 1H 2016, we actively developed new energy markets, 367 units of new energy powertrain were sold; Actively developed first external clients; entered cooperation agreements with several clients; gradually improved the support rate
12 Smart Manufacturing – Set the industry benchmark and create smart industry chain
Smart Manufacturing Model
Guided by strategy, to build three core competitiveness, Energy saving heavy- Sino-German including quality, cost and technology. High-ended diesel engine smart plant construction duty truck transmission cooperation in the high- To cater clients' personalized needs smart manufacturing end hydraulic parts with low cost, high efficiency and high quality based on equipment
intellectualized and pilot demonstration smart factory pilot
Smart Manufacturing Goal industrial big data demonstration
Collaborative Smart After-sales 【MIIT】 【MIIT】 【MIIT】 R&D Production Market Services
Projects Undertaken by Management of Product Supply Chain Plan Life Cycle the Company in 1H 2016 Procurement Storage Service Client Sourcing Logistics Client
Marketing Sales Production New energy saving Internet-based 3D Smart manufacturing Capacity Operation Operation agricultural engine printing manufacturing new mode of complex development innovative applications equipment parts with cloud service platform quick customization and 【Department of personalization Science & Technology 】 【MIIT】 【MIIT】 Basic facilities, network, information security
13 After-sales Market – Integrated innovation and achieved information technology services
After-sales product system One point: Using after-sales market as the entry point, innovative business model + e-commerce platform + customer service platform; Two horizontals: management standardization + resource synergy, achieving an integrated industry chain; enhancing IT process capability, achieve refined operation management and control; One vertical: According to the principle of "interconnection, integration, data, service, innovation and transformation“, facilitate information process including interconnecting the production facilities and products, end- to-end process within corporate structure, resource sharing among corporates
IT for After-sales Services Service dispatch APP will optimize the dispatch management, real-time information, data exchange, on-site real- time upload and service tracking etc., becoming the most advanced full service center system, annual dispatch order reached more than 400,000 with the rate of satisfaction with maintenance service reaching 98%; WeChat account “Weichai Mall” was launched officially, with functions including real-time product enquiry, policy enquiry, integrated security code scanning and easy repairing service requests Promotion and Exhibition Activities In 1H 2016, the after-sales product system — comprising installation parts, maintenance parts and remanufacturing parts — revenue increased 16.15% y-o-y. among which, sales of maintenance parts reached approximately 140 million, increasing more than 100% y-o-y; As of the end of June, we held nearly 380 activities in total, with approximately 11,000 participants and on-site orders of RMB150 million
14 Overseas Market – Expand in multiple regions by accelerating market layout
SXHDM successfully Baudouin’s high- Overseas subsidiary Several marine Fast transmission Enranger actively launched its first power power- - Indian company engines and marine exports reached 4,200 cooperated with localized assembly generating project exported its locally gen-set products, units in 1H 2016, overseas clients and of loader truck commenced selling made marine including WP10, standing at US$18.61 partner with distributors chassis in the Saudi prototypes and engine for the first WP12 and WP13, million, mainly to in countries including market. The Saudi partial support in 12 time, entering the received BKI by countries and regions Peru, Bolivia and Egypt, market localization overseas markets Bangladesh market Indonesian such as the US, to enter the local project was Classification Eastern Europe and markets implemented Bureau South America
15 Linde Hydraulics – Expand both international and domestic markets together
Localization Continuous Expansion
Testing of the second domestic assembly line was Linde Hydraulics’ factory in Aschaffenburg, Germany, completed, it is now ready to start production; commenced production, providing strong support for Equipped for Shantui's DH17 hydrostatic bulldozer Linde’s independent development and market and launched in the market; competitiveness enhancement; HBXG’s bulldozer is equipped with Linde Hydraulics’ The Chinese and German teams cooperated to 230HP SD7K high-powered electronic-control develop Linde Hydraulic CMF80 bend motor, which hydrostatic; optimized the product spectrum; The WISE40 hydraulic control system, which has full Linde Hydraulics (China) received ISO9001:2015 proprietary technologies, was successfully developed certification and supported the construction machinery sector
16 KION’s Contribution – Stable growth with the revealing effects of supporting strategies
1H 2016 Forklift Global Market Vs KION 1H 2016 2Q 2016 (10,000 units；%) Market Kion Market Kion €2.724billion €2.565billion Western +11.9% +5.4% +11.3% +4.7% Europe Up 6.2% y-o-y Up 5.9% y-o-y Eastern +18.4% +9.3% +28.6% +5.6% Europe Order Intake Revenue
+2.6% +3.3% -1.2% +3.9% China €239million €97million -11.9% -7.2% -5.1% +6.3% Latin Up 14.1 % y-o-y Up 2.9% y-o-y America 59.10 8.92 29.75 4.56 Adjusted EBIT Net Income Global +2.7% +4.4% +1.8% +3.9%
In 21 June 2016, KION and Dematic signed the agreement and KION announced to acquire all the shares of Dematic. The deal is expected to complete in the fourth quarter this year. After the acquisition, KION will become a global leader in the smart intralogistics solution sector; KION’s new factory in Czech was completed, which produces Linde’s reach trucks and equips with an electronic connection system and a well developed material flow, building an intelligent factory; WP2.7/3.2 forklift engine can support KION Baoli forklift. Weichai strengthened cooperation with Baoli’s forklift in aspects including product upgrades, marketing and service support; In 1H2016, KION’s profit attributable to the Company was €280 million 17 Dematic – Synergize and Integration of intelligent logistics chain
Automated Internal Supply Fleet Data Warehousing Electric- Guided Vehicle Combustion Global Distribution of KION and Dematic Business Chain Management Forklift powered System Forklift Forklift
U.S. Asia-Pacific
Europe, Middle East and Africa
Warehousing Palletizing Transmission Collection Sorting System System System System System
Provided by KION’s Forklift Provided by Provided by Dematic brands Egemin
Dematic is a leading global supplier of advanced integrated automation technology, software and services to optimize supply chains and to meet the material handling automation needs of its customers. The company ranks third in the world and is a leading player in the U.S. and Europe among automated enterprises. CAGR of revenue from 2013 to 2015 was approximately 12%; The businesses of KION and Dematic will form an effective complementarity and synergy, creating a leading edge in the field of industrial automation and digitalization. This also fits the company’s overall strategic objectives and global strategic layout, expanding the company’s global business layout especially in the North American market, diversifying regional businesses and enhancing its ability to mitigate risk 18 Content
1 Financial Highlights Part 2 Business Review Part 3 Industry Overview Part 4 Outlook and Strategies Part Impact of industry policies
Three-Year Action Plan of National V Emissions Major Construction National Urbanization One Belt, One Road Standards Projects in Transportation Plan (2014-2020) Strategy Infrastructure
From 1 Dec 2016, Off-road Phase Focus on pushing forward 303 Formulating an urbanization Under THE "One Belt, One Road" III Emission Standards will be transportation projects in respect of strategy based on “two strategy, the international implemented on all the agricultural railways, highways, waterways, horizontals and three verticals” cooperation will bring in new machinery nationwide; airports and urban rail transit from and development goals opportunities. Riding on the From 1 Jan 2017, State V Emission 2016 to 2018. in 2016, there will be for a resident population economic corridor base and Standards will be implemented on 131 projects with approximately urbanization rate of around 60% breakthrough in the transportation diesel-driven heavy-duty vehicles RMB 2.1 trillion investment; in 2017, and a household urbanization infrastructure, there will be an (passenger vehicles and vehicles there will be 92 projects with rate of 45%; infrastructure construction boom in for public transport, for medical and approximately RMB 1.3 trillion; in New urbanization construction the countries along the belt with environmental use and for postal 2018, there will be 80 projects with will bring in immense investment an expected total infrastructure use); and From 1 Jul 2017, State V approximately RMB 1.3 trillion demand in urban infrastructure, investment of more than US$8 Emission Standards will be investment; public service facilities and trillion; implemented on all diesel-driven The appearance of investment residential construction etc. this Transfer will alleviate domestic heavy-duty vehicles; From 1 Jan opportunities in new transportation will provide new opportunities in overcapacity, benefitting HDT and 2018, State V Emission Standards infrastructure in China will stimulate the industry construction and machinery will be implemented on all diesel- the demand in HDT and industry driven light-duty vehicles construction machinery market
20 HDT Industry – Rise in sales
HDT Industry – Yearly and Monthly Sales Trend
Unit
+15.16%
Source：China Association of Automobile Manufacturers In 1H 2016, with the marginal growth of the highway logistics market and increase in fixed-asset investments in the property sector, the HDT market started to gradually recover, with substantial growth in sales, delivering sales of 340,300 units in total, up 15.16% y-o-y
21 HDT Industry – Stable market concentration
1H 2015 1H 2016
17.6% 17.5% 17.6%
882.4%2.4% 82.5%
First Tier Second Tier First Tier Second Tier
Source：China Association of Automobile Manufacturers In 1H 2016, the first-tier players in the HDT sector slightly expanded their marketing teams, with the 5 largest players continuing to dominate the market and holding a total market share of 82.5%. The market concentration remains stable
22 Loader Industry – Performance remained weak
Loader Industry – Yearly and Monthly Sales Trend
Unit
-15.95%
Source: Machinery Industry Association In 1H 2016, due to the slowdown in domestic fixed-investment growth, the loader industry performance remained weak; sales of loaders reached 37,000 units, down 15.95% y-o-y
23 Large Passenger Vehicle Industry – Sustained steady growth
Large Passenger Vehicle Industry – Yearly and Monthly Sales Trend
Unit
+4.10%
Source：China Association of Automobile Manufacturers In 1H 2016, benefitting from the acceleration of urbanization, surge in the sales of new energy buses and the development of urban public transportation, sales of large passenger vehicles maintained steady growth; sales of large passenger vehicles reached 33,100 units, up 4.10% y-o-y 24 Light Truck Industry – Weakened demand
Light Truck Industry – Yearly and Monthly Sales Trend
Unit
-4.71%
Source：China Association of Automobile Manufacturers In 1H 2016, the light truck industry saw a decline in demand due to the upgrading of national emission standards; sales of light trucks reached 777,600 units, down 4.71% y-o-y
25 Content
1 Financial Highlights Part 2 Business Review Part 3 Industry Overview Part 4 Outlook and Strategies Part 2H 2016 Macro – Economic outlook
China Economy Is Executing Global Economy Downturn Reforms and Making Structural Lasts Longer Adjustments
In the second half of 2016, the global economy will remain Domestically, China is now in a key stage of “executing reforms and on a weak note. The economic recovery in the US will slow making structural adjustments”, seeking to achieve the double goals down and the economic recovery in Europe is broadening of maintaining its minimum growth rate and carrying out supply-side structural reforms. With the increase of newly-commenced out. Although the economic recovery in the emerging construction projects in the PRC, investments in infrastructure economies will witness a rebound, the economy will remain facilities will grow at a more rapid rate. Eliminating excessive relatively weak from a global perspective; inventories contributes to fostering the development of the property Affected by external factors including the move by the market. While emerging industries and new consumption patterns United States Federal Reserve Board to raise interest rate, are rapidly developing, the change in economic structure will be the presidential election, Brexit, geopolitical conflicts and significantly expedited; the revival of terrorism, etc.. , the global economic is As a result of factors such as the diminishing effect from previous expected to grow at about 3.2% easing policies, the normalization of the property market, the persistently low private investments and the uncertain global macro environment, the GDP growth rate in the PRC is expected to further decline in the third and fourth quarters, with the economic y-o-y growth maintained at about 6.6%
27 Industry outlook for 2H 2016
HDT Market Construction Machinery Market
In 2H 2016, it is expected that the HDT market will grow In 2H 2016, the construction machinery industry will face steadily, develop sustainably and the sales of HDT may challenges including the decline in market growth rate, reach approximately 600,000 on a yearly basis; excessive capacity of the industry and the increasingly stringent safety and environmental regulations; By implementing projects including the “ One Belt and One Road” initiative, China will strengthen the Infrastructure projects in respect of railways, highways, international cooperation in production capability, waterways, airports and urban rail transit continue to implement the outline in relation to the joint development emerge. Regarding the international market, the continuous of Beijing, Tianjin and Hebei, accelerate the development implementation of the strategy of “One Belt One Road” of the Yangtze River Economic Zone, revitalize the brings new opportunities for international cooperation. strategy of old industrial bases in the northeast region of Regulations on emissions are increasingly tightened and the China, and renovate the slum areas, inland waterways upgrade of technology development is accelerating. Some and underground pipe networks. All this will be favorable segments of the market will experience a round of to the development of the heavy-duty truck market reshuffling and backward production capacities will be further eliminated
28 Business Outlook for 2H 2016
HDT - Service-based Engines - Innovation Driven Gear boxes - Strategic direction”5221” manufacturing strategies Promote structural adjustments, To be persistently driven by innovations, transformation and upgrade, to foster the Switch from being product-oriented to to strengthen fundamental technology development of traditional and mechanical customer-oriented in response to the research and further push forward the gear boxes (represented by S gear boxes) concerns over the full product life cycle and high-end engine projects, to implement towards being more high-powered, high-end full process in customer management so as the 10 items of advice on fostering an and light-weight, and intensify efforts on the to provide overall solutions while maximizing innovative atmosphere R&D of the four-in-one hydraulic-controlled value for customers mechatronic smart products
Commit to the development Accelerate the joint development of all goal of “developing a full series Under the principle of “Unified business segments, fully utilize the and range of comprehensive Strategy, Independent Operation, synergetic advantage of resources in the products and seeking to Resources Sharing” domestic and overseas companies and boost become the first in the world” the overall capacity to mitigate risks
Integration through informatization and Cost saving and efficiency enhancement - Internationalization - Resources Synergy industrialization - Smart manufacturing enhancement along the entire industry chain Strengthen the domestic and foreign Achieve breakthroughs in smart manufacturing Improve the mechanism for narrowing and subsidiaries, step up efforts in exploring base, realize the five major smart business areas— stopping losses, enhance management operation new overseas markets and establish a R&D technology, supply chain, marketing services, systems of subsidiaries and carry out the reform functions management and control and sound system of global sales and services of systems and mechanisms of pilot subsidiaries. infrastructure—in a comprehensive way and Promote WOS management operation system network, and actively participate in global promote corporate manufacturing agility with "low and engage in organizational reforms and uplift cost, high efficiency and high quality” competition the operational efficiency of the enterprise 29 Thank You