CIMC Vehicles Delivers Stable Results in 1H 2020
CIMC Vehicles (Group) Co., Ltd. (“CIMC Vehicles” or “the Group”; stock code:1839.HK), a leader in the global semi-trailer industry, is pleased to announce its unaudited interim results for the six months ended 30 June 2020.
In the first half of 2020, with global economic severely affected by the COVID-19 pandemic and the Sino-US trade dispute leading to additional tariffs, the Group’s global development has been further impacted. While there were uncertainties in the overseas markets, conditions in China were more favorable. New national standards for the second-generation semi-trailers came into force in 2020. The Chinese government has proactively promulgated a special remediation inspection on illegally modified trucks , and hence will promote the comprehensive replacement of second-generation semi-trailers. With the resumption of production, the urban dump trucks and cement mixer trucks business that the Group has been operating will benefit from China's strong infrastructure investments and the Chinese government’s vigorous promotion of “environmental protection” as well as crackdown on “overload vehicles”. Moreover, in the wake of COVID-19, the surge in demand for fresh food deliveries, as well as low-temperature transport of pharmaceutical supplies and biological products have stimulated the refrigerated van market.
Despite of the impact of COVID-19, the Group has recorded a stable interim results. Revenue generated during the first half of 2020 amounted to RMB11.2 billion, and profit for the period totaled RMB696.6 million. As at 30 June 2020, the Group maintained a healthy financial position with total assets and net assets amounting to RMB20.9 billion and RMB10.0 billion, respectively. While return on equity was 6.9% in the first half of 2020. The cash inflows from operating activities was RMB1.1 billion, representing a year-on-year increase of 25.7%.
During the period, the Group sold a total of 51,056 units semi-trailers worldwide. A total of 24,580 sets of truck bodies for urban dump trucks and cement mixers and 2,345 refrigerated van truck bodies were sold in China. Revenue from the global sales of semi-trailers and specialty vehicle parts and from the components business amounted to RMB758.4 million.
As a leading global semi-trailer manufacturer, the Group is directly affected by macro-economic conditions as well as fluctuations in demand from China, North America and Europe – the three major semi-trailer markets. The Group duly lowered its expectations at the beginning of 2020. Although the sudden outbreak of COVID-19 has had an inestimable impact on the global economy, the Group’s global semi-trailer business has performed according to expectations, owing to a solid foundation built by the Group over the years as part of its “Global Operation” initiative, as well as the benefit of “Local Manufacturing” that its subsidiaries possess.
In the first half of 2020, despite the tremendous impact brought by COVID-19 in the first quarter of 2020, the Group was able to prevail over its influence, particularly in the Chinese market by employing an efficient remote office model, as well as by observing scientific management in controlling the resumption of work and production activities. The Group actively implemented core measures to upgrade its “Product Module”, and continued to upgrade and improve “Light Tower” Plants in China, and hence boosted the sales of tank trailers significantly in China. Revenue from the semi-trailer business in China increased to RMB3.0 billion, a significant year-on-year increase of 31.3%, and the gross profit margin increased to 13.7%, a year-on-year increase of 2.8 percentage points.
As regards the semi-trailers business in North America, the Group produced and delivered a total of over 10,000 semi-trailers during the period. The average gross profit margin of its three principal products has reached 13.0%. The localization of production has accelerated, with the chassis trailer production lines of CIE Manufacturing, located in California and Virginia, already commencing operation. As for the new CRTI refrigerated trailer plant located in Indiana, it will be completed in 2020 as planned.
With reference to the semi-trailer business in Europe; LAG, a wholly-owned subsidiary of the Group, secured a solid number of orders in the first quarter of 2020 prior to the outbreak. However, its deliveries and sales were impacted to some extent due to work and production disruptions in the second quarter of 2020. Nonetheless, with ample orders and excellent supply chain management measures, combined with production efficiency and order deliveries that gradually returned to normal following the resumption of work and production in the second quarter, gross profit margin increased significantly. As for SDC, it produced and delivered over 1,500 semi-trailers, and completed production line upgrades for the semi-trailer assembly plant in Mansfield, England, thus laying a good foundation for increasing production and improving efficiency in the future.
The sales performance of the Group’s truck bodies for specialty vehicles has generally remained stable during the period. As the epidemic was brought under control, the Group launched intelligently manufactured and intelligent cement mixer trucks, while maintaining a leading position in the Chinese market. For the urban dump truck body business, the supply chains of certain tractor manufacturer partners in China were impacted in the first quarter, resulting in a shortage of truck chassis. Separately, the industry-leading automated coating production line located in the Luoyang plant commenced operation, representing a significant breakthrough in the upgrade of production lines for truck bodies of specialty vehicles. The production line will significantly improve the coating of products as well as lead towards the automation and rise in intelligence of the coating system.
In the first half of 2020, Shandong CIMC, QDRV, Zhenjiang Truck Body Plant and Yangzhou Tonghua of the Group produced and delivered a total of 2,345 refrigerated van truck bodies. It is worth mentioning that Shandong CIMC actively carried out new retail activities during the outbreak, thus securing sufficient orders and increasing its gross profit margin. The gross profit margin in the first half of 2020 increased to 23.0%, representing an increase of 5.9 percentage points compared with the same period of last year.
Looking ahead, the Group will capitalize on opportunities for strengthening its solid position in the environmentally friendly urban dump trucks segment, and place greater efforts in working with tractor manufacturers so as to enhance the scale of manufacturing and procurement, and create value for tractor manufacturers. The Group will also seize opportunities for strengthen its leading position in the light and durable cement mixer trucks segment, seek to jointly design such vehicles with tractor manufacturers in order to cut down Total Ownership Cost. Furthermore, it will jointly conduct new marketing campaigns with tractor manufacturers so as to bring better purchasing experiences to users. In addition, the Group will continue to expand its presence in manufacturing plants that are engaged in the production of bodies for refrigerated van trucks; accelerate development of new-generation product modules and production technologies in order to be prepared for forthcoming developments; seize opportunities for upgrading semi-trailers in China by capitalizing on new marketing and retail channels; and improve sales of second-generation trailers, as well as seek to enhance the gross profit margin of products.
Entering the second half of 2020, the Group will more actively promote localized manufacturing of refrigerated trailers and chassis trailers in North America. The Group will also seek to mitigate the epidemic’s impact, as well as keep its plants in operation through such major approaches as active investment in digital modeling design, upgrading of “Light Tower” Plants and investment in a global supply chain management system based on EPS (electronic procurement system) among semi-trailer manufacturers in North America and Europe.
The Group will seize the opportunity to issue additional A-shares at Shenzhen Stock Exchange, improve governance structure, build a long-term incentive mechanism for core talent, and develop existing teams. It will also attract more fresh talent to participate and concertedly establish a CIMC sophisticated manufacturing system with Upgrade of the “Product Module”, Improvement in “Light Tower” Plants, Kick-off of “Sales and Marketing Transformation” and Promotion of “Organizational Development” as its cornerstones.