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Chaowei Power’s Interim Profit Doubled to RMB 322 million

(Hong Kong, 27 August 2012) Chaowei Power Holdings Limited (“Chaowei Power” or the “Group,” stock code: 0951), a leading electric bike motive battery manufacturer in China, announced its unaudited interim results for the six months ended 30 June 2012 (“the period”).

Benefiting from the strengthened industry consolidation policy as well as the sustained strong market demand, Chaowei Power recorded strong growth in its interim results for the first six months of this year. The Group’s revenue for the period amounted to RMB4,209 million, a year-over-year increase of 117.0%. The increase was primarily attributed to the growth of sales volume of lead-acid motive batteries and an increase in the average selling price per unit of battery. The increase in sales volume also contributed to a surge of 94.9% in the gross profit, which amounted to RMB 1,141 million for the period. However, the gross profit margin slightly decreased by 3.1 percentage points to 27.1% due to the increase in OEM arrangement as compared to the same period in 2011. The profit attributable to the owners of the Group effectively doubled with an increase of 127.1% to RMB322 million. The basic earnings per share were RMB0.32 (2011: RMB0.14). The Board does not propose to declare interim dividend.

The MIIT and the MEP implemented the “Entry Requirements of the Lead-acid Battery Industry” (《鉛蓄電池行業准入條件》) (the “Entry Requirements”) effective 1 July 2012, aiming at increasing the entry requirements for the battery industry and eliminating those companies running outdated production capacity. The Entry Requirements clearly stipulate that operations engaged in the production of lead-acid batteries and lead-based components with cadmium content higher than 0.002% or arsenic content higher than 0.1% must be suspended by the end of 2013. In addition, the application of traditional battery formation process is forbidden in projects established, converted and expanded after 31 December 2012. Chaowei Power is the only lead-acid battery manufacturer who has successfully applied the process of multi-stage enclosed battery formation for lead-acid cadmium-free batteries in large scale production, in compliance with State industrial policy. As at 30 June 2012, the Group has applied this process in approximately 67% of its production, and it plans to complete transformation of its entire production to utilise the cadmium-free enclosed battery formation process by the end of 2013, underscoring the Group’s industry leadership.

Thanks to the enhancement of distribution network and operational efficiency, as well as the expansion of production capacity and increase in the market share, the Group has become the market leader in electric bike motive battery market in terms of revenue and sales volume. Sales revenue from the primary market grew by 87.5% year-over-year to RMB1,895 million. The Group sells batteries to leading electric bike manufactures, and the customer base is constantly expanding. Sales revenue from the secondary market grew by 160.7% year-over year to RMB 2,267 million. In order to seize a bigger secondary market share, the Group adopted a thorough management approach by restructuring the national distribution network into 21 areas to improve the overall management and terminal sales capability. As at 30 June 2012, the Group had 892 dedicated distributors across the country.

As for the new business, the Group’s sales revenue from motive batteries for new-energy vehicles (including electric cars and other special purpose vehicles, such as electric tourist coaches, electric golf carts, electric forklifts and electric tricycles) increased significantly by 45.8 times to RMB310 million as compared with the corresponding period of 2011. Under the “Twelfth Five-year Plan for Technological Development of Electric Vehicles” (《電動汽車科技發展「十二五」規劃》) and the “2020 Development Plan of Energy-saving and New-energy Automotive Industry” (《2020年節能與新能源汽車産業發展規劃》), national policies continue to support the industrialisation of the new-energy automobile, and the Group believes that the new energy market has a promising future. To capitalise on this business opportunity, Chaowei Power has initiated business cooperation with major manufacturers of electric vehicles, such as Dongfeng Xiaokang Motor, Wuling Automobile and Geely Automobile, and plans new collaborative research and development (“R&D”) projects.

Chaowei Power Announces 2012 Interim Results
To meet the strong market demand, the Group continued to enhance production capacity, build new production facilities, identify and evaluate appropriate enterprises for strategic acquisition. As at 30 June 2012, the Group’s annual production capacity for lead-acid motive batteries was 75 million units. Subsequent to the commencement of production in 2011, production capacity of the new production facilities in Ningyang County, Shandong Province, and Shanggao County, Jiangxi Province, continued to increase in 2012. In January 2012, the Group also commenced investment and construction of new production facilities in Changxing County, Zhejiang Province, which are expected to have an annual capacity of 12 million units of battery upon completion. The Group also intends to expand its production facilities to Hebei Province. It has entered into a letter of intent with the Government of Xinhe County, Hebei Province, in April 2012 in relation to the construction of a new production facility in the region. The annual production capacity of lead-acid motive batteries of the Group is expected to increase by another 12 million units of battery upon completion of the first phase of the project. In addition, upon the successful acquisition of an 85% equity interest in Qinyang Libiao Plate Co., Ltd. (沁陽市立標隔板有限公司) (“Qingyang Libiao”) from Henan Yifeng Industry Group Co., Ltd. (河南屹峰實業集團有限公司) by Henan Chaowei Power Co., Ltd. (河南超威電源有限公司), an indirect non-wholly owned subsidiary of the Group, Qinyang Libiao became an indirect non-wholly owned subsidiary of the Group, supplying quality electrode plate dividing paper to the Group. This acquisition is expected to benefit the Group in enhancing battery quality and reducing production costs.

Strong R&D capability is one of the key engines which power the Group’s competitive advantages. Chaowei Research Institute has been upgraded to a provincial-level corporate research institute in Zhejiang Province. Following completion of the first phase of fundamental research on plastic batteries by the Group’s post-doctorate science research workshop, applications of the new technology have been developed and production has successfully commenced. The second phase of research focusing on a long-life high-capacity battery is currently underway. As at 30 June 2012, the Group had a total of 244 registered patents, (invention patents: 14), an increase of 52 patents from 31 December 2011. Among the three newly acquired invention patents, two are industry’s significant inventions.

With the benefits of ease-of-use, environmental friendliness, saving energy and low utility costs, the electric bike has led the way to a new lifestyle that uniquely meets the needs of people when they go out. The electric bike lead-acid battery market is expected to grow at a CAGR of 16.9% from 2011 to 2013. The Group believes that the accelerating industry consolidation in the second half of the year will further strengthen the Group’s core competitiveness. Based on its current competitive advantages, the Group will continue to enlarge its market share and maintain its leadership position in the industry by taking parallel measure of expanded production capacity, reinforced marketing efforts and intensified R&D.



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