CBAK Energy Technology Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 15, 2024

There are 4 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Seabag Energy Technologies 4th Quarter and Full Year of 2023 Earnings Conference Call. Currently, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Operator

As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Thierry Li, CFO and Secretary of the Board of SeaPac Energy. Mr. Li, please proceed.

Speaker 1

Thank you, operator, and hello, everyone. Welcome to Seabed Energy's 4th quarter and full year of 2023 earnings conference call. Joining us today are Mr. Yun Fei Li, Chief Executive Officer of Seabed Energy myself, Chief Financial Officer and Secretary of the Board and Jennifer, our Interoperator. Before we continue, please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of the U.

Speaker 1

S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC.

Speaker 1

The company doesn't assume any obligation to update any forward looking statements except as required under applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U. S. Dollars. With that, let me now turn the call over to our CEO, Mr.

Speaker 1

Yun Fei Li. Mr. Li will check-in Chinese and our Chairman's comments into English. Go ahead, Mr. Li.

Speaker 1

Please Hello, everyone. Thank you for joining our Q4 and full year 2023 earnings conference call. Sorry, I muted myself. We are pleased to announce another quarter of solid growth, rounding off fiscal year 2023 on a high note. With sustained orders from key clients, including Bismarck Group, Anchor Innovations and HelloTech, our Battery business maintained its growth momentum from the previous quarter with 4th quarter revenues up 30.9% year over year to reach $36,83,000 Of these revenues, dollars 34,930,000 came from batteries used in energy storage applications, a surge of 84.3% year over year, while $0.52 million came from batteries used in electric vehicles, down 88.8% year over year.

Speaker 1

Moreover, revenues from batteries used in light electric vehicles were $1,380,000 a decline of 69.5 percent year over year, primarily attributable to intense prediction and relatively low pricing across the power market. Accordingly, we were strategically monitoring both sectors while further expanding our sales in energy storage sector. In terms of profitability, our battery business' gross margin rose to a historic high of 30 6% in the Q4 of 2023, up 27.7 percentage points year over year. Moreover, we achieved a 2nd consecutive quarter of net income from the Baytree business, recording a net income of $6,620,000 in the Q4 of 2023, a notable improvement compared to a net loss in the same period last year. In full year 2023, our Battery business generated revenues of $133,000,000 soaring by 40.4% year over year.

Speaker 1

We delivered a full year operating income of $10,440,000 with a net income of $13,370,000 from the Beitou business. In 2023, we made significant strides in our business operations on all fronts, achieving progress at various stages. Through consistent refinement of battery technologies and production ramp up, we effectively fulfill customer orders and have nurtured a loyal, stable client base. We have fostered deep and robust partnerships with industry leaders worldwide, including Busemann Group, a leading provider of residential energy storage application into Europe and one of the world's largest manufacturers of heating and cooling systems. Anker Innovations, the largest third party accessory supplier for Apple Incorporated's products HelloTech, the largest supplier of outdoor portable energy storage globally and parent company of Jackery.

Speaker 1

Power OAK, the world's leading portable power station manufacturer and the parent company of top rated portable power supply brand, BlueTTI, an India based and Sure Energy among others. We have also forged a partnership with the largest battery manufacturer in Europe. However, due to confidentiality obligations, we cannot disclose their identity for now. In addition, we have been negotiating with key stakeholders in Canada's electric vehicle industry, exploring potential collaborations with the intention of formalizing agreements. We will keep our shareholders and investors informed of these developments after securing consent from our clients.

Speaker 1

Furthermore, we expect to establish a partnership with a leading India based scooter manufacturers in 2024. These partnerships and potential alliances demonstrate the broad recognition of our battery technologies and product excellence by top tier players in the global battery sector. Moving forward, we will remain committed to technological innovation to bolster our product competitiveness, delighting customers with safe and reliable products. Turning to our order demand, as of March 8, 2024, we have recorded RMB771 1,000,000 or approximately $107,000,000 in the combined value of orders we have received, but have yet to fulfill across our 2 main production facilities Beitallion and Nanjing and Hytrends our targeted digital ADD materials. Additionally, we have made substantial strides in our previously disclosed client initiatives.

Speaker 1

As of March 8, 2024, our collaboration with Power OAK has brought us orders amounting to roughly RMB61.6 million or approximately $8,57,000 Our partnership with Vielsmann Group has generated orders totaling €213,000,000 or approximately €195,000,000 Furthermore, our dollars. In addition to orders from lease fleet operations, we have progressively fewer substantial orders from entering location The consistent growth in our Jadora Odeo volume not only reflects our global marketing efforts, but our user leverage affirmations Next, let me walk you through our latest R and D developments. In the Q2 of 2023, we successfully commenced mass production of large surgical sodium ion batteries, emerging as one of the few companies worldwide with the capacity to mass produce sodium ion batteries. Our sodium ion battery production lines are currently located at our Nanjing facility, which features a 0.5 gigawatt hour capacity. Since we commenced mass production, demand for our sodium ion batteries has outstripped supply.

Speaker 1

As a result, we have been actively engaged engaging with PE investors to ramp up sodium ion battery production capacity. In the meantime, we have also been developing larger synergical lithium ion battery models, including model 40,140 and 46,120. Model 4,140 is in prototype A sample stage and model 46120 is already in prototype B sample stage. We expect model 46120 to complete prototype B sample stage and become ready for mass production by the latter half of twenty twenty four. We will continue to fine tune these models in response to market demand dynamics, potentially leading to modifications before the start of production.

Speaker 1

We have also strategically optimized our production capacity with a well coordinated production line layout. Currently at our Dalian facility, we operate 3 production lines, primarily manufacturing Model 26,650 lithium ion phosphate batteries with a total annual production capacity of 1 gigawatt hour. To better address customer needs and mitigate supply shortages at our Dalian facility caused by excessive demand. In 2023, we leased a battery plant located in Shangqiu, Henan for producing Model 26,700 batteries. Today, our Changzhou facility is equipped with a production capacity of 0.5 gigawatt hour sufficient to fulfill part of our customer demand.

Speaker 1

This strategic move further boosted our production capacity, ensuring a more stable and reliable supply of products to clients. Regarding our Nanjing facility, the Nanjing Phase 1 project consists of 2 production lines, one dedicated to production product model 32,140, cylindrical, medium ion batteries, and the other outfit should produce either cylindrical lithium batteries or cylindrical sodium ion batteries. The project's capacity is up to 2 gigawatt hours when both lines are producing lithium ion batteries or up to 1.5 gigawatt hours when one production line is dedicated to sodium ion battery production. Furthermore, construction of our Nanjing Phase 2 project is in full swing with 3 large factories in the pipeline. Once all three are completed and operational, the total capacity of Nanjing Phase 2 project is expected to be up to 18 gigawatt hours.

Speaker 1

Thus far, the first factory has been moved and interior decoration is underway. We will determine whether to outfit this factory with production lines for sodium ion or lithium ion batteries based on customer demand. Moving forward, we will further optimize our production line layout to enhance production efficiency, ensuring that we can respond swiftly to market to market shifts and order fluctuations. In summary, despite the tepid macro economy environment and downward pressures across the battery sector, Our Baytree business consistently demonstrated robust growth momentum and resilience in the full year of 2023. The vitality was reflected both in our strong financial metrics and in the stability of our client base and the wealth of waters in our pipeline.

Speaker 1

More importantly, the company's industry leadership and technological age have been fully acknowledged by across the industry, evidenced by the adoption of our products by the most advanced battery facility in Europe. As a pioneer in the sodium ion battery production, we possessed immense potential and competitive advantages in the renewable energy field. Looking ahead to 2024, we will further increase our investments in research, development and production capacity. Also, by fostering more and deeper collaborations with globally renowned clients, we will further augment our market share and elevate the company's global influence and visibility. We are confident that these synchronized endeavors will segment our position as front runner in the competitive industry for years to come.

Speaker 1

Now let me turn the call over to our CEO, Mr. Li, who will provide details on our financial performance. Thank you, everyone, for making the time to join our earnings conference call today. As our CEO mentioned earlier, we concluded the year with a robust 4th quarter financial performance from our Beitry business, where we achieved a double digit increase in net revenues and positive income for the 2nd consecutive quarter. We are pleased to see continued growth momentum in our Baytree business.

Speaker 1

Building on our solid fundamentals, we remain confident in our growth trajectory through 2024 and anticipate a full year net profit for our BayTree business. We will provide more details on our net income guidance at the appropriate time. Turning now to Hytrends, our current battery material unit, which we strategically acquired in 2021. At the time of the acquisition, HiTrans boosted a strong client base and a higher level of revenue. Following the acquisition, we maintained HiTran's core management team and refrain from interfering in its day to day operations.

Speaker 1

We have no addition, no financial obligations to HiTrent's and its financial health will not materially affect the financial standing of our corporate group as is only reflected in our consolidated financial statements. That's why we have focused on reporting financial results solely from our BATREY business in our earnings release and earnings conference call to provide investors and shareholders with a clear understanding of our performance. We are currently talking with private equity investors for HiTrans and Sodium Imbatory Business, and we hope to complete a private placement financing to support the development of our business. These investors, whether they are interested in Hytrend's or the sodium ion battery business, are consistently valuing the individual businesses materials and on sodium ion batteries at more than the current market capitalization of our entire public company. Notably, their valuations do not take into account our core lithium battery business, indicating that our market value is currently significantly underestimated.

Speaker 1

I will now provide an overview of our 2023 Q4 financial results. In the interest of time, I will be presenting abbreviated highlights only. We encourage you to refer to our press release issued earlier today for complete details. In the 4th quarter, our total net revenues increased by 3.2 percent year over year to $56,200,000 Net revenues from sales of batteries reached $36,800,000 a year over year increase of 30.9%. Our total gross profit grew 235.3 percent year over year to $12,700,000 resulting in a gross margin of 22.6% compared to 7% in the prior year period.

Speaker 1

Gross profit for the Batyroid business increased by 470.8% year over year to $13,200,000 with gross margin climbing to 36% from 8.3% in the prior year period. Our total operating loss amounted to $5,900,000 compared to an operating loss of $8,800,000 in the prior year period. Net loss attributable to shareholders of CBA Energy after deducting the change in the fair value of warrants was $4,800,000 compared to a net loss of $11,700,000 in the prior year period. Net income from the BayTree business was 6,600,000 compared to a net loss of $6,400,000 in the same period of 2022. As we mentioned earlier, we have a large number of prestigious clients around the world.

Speaker 1

However, due to confidential agreements, we cannot disclose their names without their consent. Going forward, we will actively communicate with them as part of our customer disclosure. We hope to be able to disclose more client names to our shareholders in 2024. In conclusion, our solid fundamentals will continue to provide a solid foundation for our business going forward, enabling us to strike a healthy balance between growth and profitability. That concludes our prepared remarks.

Speaker 1

Let's now open the call for questions. Operator, go ahead.

Operator

Thank you. We will now begin the question and answer session. First question comes from Brian Lanier from Zacks Small Cap Research. Please go ahead.

Speaker 2

Good evening, gentlemen. I just wanted to hone in a little bit on the gross margin. Do you feel like the gross margin in the 4th quarter, was is that going to be a sustainable gross margin going forward? And was it principally driven by pricing on your products and some of the new contracts? Or was it more on the input side as costs have come down for some of your inputs?

Speaker 1

Let me respond to your question, Ryan. I think, as you may be aware that the current competition in the Beituan market is very intense and key players in this industry keep lowering down their price to gain much more orders and customers. We are completely different. Our batteries boosted a feature of highly stable and high safe characteristics and our biggest clients up to 3 years testing are completely satisfied by the performance of our battery products. That's why they're willing to give us a high price at this market condition.

Speaker 1

Coming back to your question, we believe that being affected by the current market condition, the price will also go down in the long term, but we are still confident that the gross margin that we will present to you in the coming reporting periods will still be higher than the market average. Thanks.

Speaker 2

Great. Thank you. And I know we've talked in the past about long term capacity goals, And I know that's a little bit influx right now because it will be based upon whether you're producing lithium batteries or sodium batteries. But do you have any long term capacity goals for 2024, 2025 that you can share with us at this point?

Speaker 3

Well, so in terms of capacity growth, well, we have steadily increased our capacity based on our cooperation with our clients and also we increased it according to the needs of our clients. So that is why in the past years, we have steadily ramped up our capacity in different production facilities. And as you can see from our 2024 to 2025 reports, we have introduced lots of big customers in the past year, and the introduction of the big customers will also boost our will require us to boost our production capacity so that we can well meet their demand. So in the future, we are going to continue to increase our production capacity. And when it comes to the sodium battery, well, I have to say this is a battery that enjoys a great future.

Speaker 3

For sodium ion battery, it has some good features that lithium ion battery cannot compete. For example, it is suitable to be used in low temperature condition effect here. So in the future, we believe that we will also steadily increase and expand the production capacity of sodium and battery, and we have a good expectation for that.

Speaker 1

Let me add one point. As we mentioned in our report that we have 3 major factories under construction for Nanjing Phase 2 and the first factory has been routed. So we are doing interior construction at this moment. If everything goes well, we will have one production line for this factory in 2024. But if it's we cannot determine if it will be producing a sodium ion batteries or lithium ion batteries.

Speaker 1

It's up to client demand. And also we are also talking to private equity investors about financing on the sodium mine project. So that would also affect our decision making. So it's a decision that we will make in this year and

Speaker 2

a lot

Speaker 1

of the factors affect this decision making.

Speaker 2

Okay, great. Thank you very much. I appreciate that. The last question that I have is, I guess, on outside investment. If you could give us some sort of idea as to how advanced these negotiations are, do you think this is a we could hear something in the first half of twenty twenty four or the back half of twenty twenty four, either regarding high trends or a sodium investment?

Speaker 1

Well, let me respond to this question. We hope that we can announce something really positive in the first half of twenty twenty four, but it's really depending on the private equity investors. I can the information I can share is that a lot of the investors from China are very interested in our sodium ion batteries because we are almost the only one that can mass produce the largest cylindrical sodium ion batteries. But we're also doing a lot of the math with them right now because investing in a new Baytree plant is very expensive, and we need to discuss with them about how much financing we need from them and what structure would suit the best need from us and also what are also doable for them. I just don't have to go into negotiation, but everyone is very interested.

Speaker 2

Great. Thank you.

Operator

Thank you for the questions. Seeing no more questions in the queue, let me turn the call back to Mr. Yoonseil Li for closing remarks.

Speaker 1

Thank you, you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

Operator

Thank you all. Again, this concludes the call. You may now disconnect your lines.

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Earnings Conference Call
CBAK Energy Technology Q4 2023
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