I would now like to turn the conference over to Mr. Kevin Theiss. Please go ahead, sir.

Thank you for joining us today and welcome to China Yuchai International Limited Fourth Quarter 2019 Conference Call and Webcast. Joining us today are Mr. Weng Ming Hoh, and Dr. Thomas Phung, President and Chief Financial Officer of CYI respectively. In addition, we also have in attendance Mr. Kelvin Lai, of CYI. Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, optimistic, confident that, continue to, predict, intend, aim, will or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that may be deemed forward-looking statements. These forward-looking statements, including, but not limited to, statements concerning the company's operations, financial performance and conditions, are based on current expectations, beliefs and assumptions, which are subject to change at any time. The company cautions that these statements, by their nature, involve risks and uncertainties and actual results may differ materially depending on a variety of important factors, such as government and stock exchange regulations, competition; political, economic and social conditions around the world and in China, including those discussed in the company's Form 20-Fs under the headings Risk Factors, Results of Operations and Business Overview, and other reports filed with the Securities and Exchange Commission from time to time. All forward-looking statements are applicable only as of the date they are made and the company specifically disclaims any obligation to maintain or update the forward-looking information whether of the nature contained in a release made on today’s call or otherwise in the future. Mr. Hoh will provide a brief overview and summary, then Dr. Phung will review the financial results for the fourth quarter and fiscal year ended December 31, 2019. Thereafter, we will conduct a question-and-answer session. For the purposes of today's call, the financial results for the fourth quarter and fiscal year ended December 31, 2019 are unaudited and they will be presented in RMB and US dollars. All the financial information presented is reported using International Financial Reporting Standards as issued by the International Accounting Standards Board. Mr. Hoh, please begin your prepared remarks.

Thank you, Kevin. For the four quarter 2019, China's GDP was 6%, the same growth rate at in the third quarter 2019. For the full year 2019 GDP growth was 6.1% which was the slowest annual growth in the last 29 years. According to data reported by the China Association of Automobile Manufacturers, CAAM, in the fourth quarter of 2019, unit sales of commercial vehicles excluding gasoline-powered and electric-powered vehicles increased by 2.9% overall compared with same quarter in 2018. This growth included a 2% sales increased in the truck segment and 10.4% increase in the bus segment. Unit sales of heavy duty truck increased by 13.6%, while the medium duty truck sales declined by 10.4% compared with diesel [ph] fourth quarter of 2018. Heavy duty bus sales increased by 17.9% and medium duty bus sales rose by 18.1% compared with [indiscernible] fourth quarter. From the full year perspective, [indiscernible] from CAAM show that overall unit sales of autos in China sales 8.2% in 2019 from 2018 with [indiscernible] 35.8 million vehicle sold in 2019. This declined followed a 2.8% decrease in 2918. In the commercial vehicle market [indiscernible] China, CAAM as reported at 2019, annual unit sales, excluding gasoline-powered and electric-powered vehicles increased by 4.5% overall compared with the 2018. This included a 4.7% decline in the truck segment and an 2.6% decrease in unit bus sales. Sales of heavy duty trucks increased by 2.1% while the medium-duty truck sales declined by 21.7%. Heavy duty bus sales increased by 8% and medium duty bus sales declined by 2.3%. Auto sales have been affected by slower economic growth in 2019. In addition, the first stage of the National VI emission standards was implemented nationwide in July 1, 2019 for gas engine-driven vehicles. This early launch of the National VI emission…

Thank you, Weng Ming. Let me review our fourth quarter results for 2019. The revenue for the fourth quarter of 2019 increased by 25.4% to RMB 5.7 billion, US$814.6 million from RMB4.5 billion for the fourth quarter of 2018. The revenue increase was mainly due to a change in product mix. According to data reported by the China Association of Automobile Manufacturers, CAAM, in the fourth quarter of 2019, sales of commercial vehicles, excluding gasoline-powered and electric-powered vehicles increased by 2.9%, truck sales increased by 2.0% with heavy-duty truck sales increased by 13.6%. GYMCL's heavy-duty truck engine sales in the fourth quarter of 2019 increased by 49.8%. The CAAM bus market increased by 10.4% in the fourth quarter of 2019. GYMCL's bus engine sales growth exceed the market growth as the sales of medium-duty bus engines grew significantly. GYMCL's off-road engine sales rose in the fourth quarter of 2019, led by higher sales in the industrial engine market. Gross profit increased by 28.5% to RMB1.1 billion, US$158.8 million compared with RMB0.9 billion in the fourth quarter of 2018. Gross margin was 19.5% in the fourth quarter of 2019 compared with 19.0% in the fourth quarter of 2018. The growth in the gross margin was mainly attributable to product mix, and was partially offset by higher production costs related to the National VI engines in the fourth quarter of 2019. Other operating income was RMB104.4 million, US$ 15.0 million compared with RMB64.4 million in the fourth quarter of 2018. The increase was mainly due to higher interest income and government grants. Research and development, R&D expenses increased by 111.7% to RMB228.0 million, US$32.7 million from RMB107.7 million in the fourth quarter of 2018. Higher R&D expenses were mainly due to the further development of a portfolio of next-generation National VI and…

Thank you, Thomas. Please note that due to COVID 19 some officers of China Yuchai are remotely calling into the conference call because of travel restrictions. This may result in a slight delay in providing answers to some questions. We apologize for any inconvenience and thank you for your patience. Operator, we are now ready for the Q&A.

One moment please for the first question [Operator Instructions] Your first question comes from the line of William Gregozeski from Greenridge Global. Please ask your question.

Hi, guys. Great quarter. Can you talk about how you were able to get such high heavy duty sales in the quarter and the year relative to the market?

Okay, hi. This is Ming here. In the first - I think that it has a lot to do with the gas engine that were implemented call in the later - from 1st July 2019. So a lot of the heavy duty engines that we sold in the fourth quarter are actually gas engine.

Okay. And is that - are you expecting to see similar growth on that going forward?

Well, we will see [indiscernible] gas engines - recall in this coming year. Now that's partly because of the - call the government push to have a better environment. So we do expect to see, but again a lot of it depends on all the oil prices as well.

Okay. And it looked like you end the quarter with a pretty good inventory balance. Have you had any interruptions in shipping or part availability or anything like that related to the lock downs in different areas of China?

Well, okay. No. – so break it down in two months now. The month of January before Chinese New Year there were no problems at all, after Chinese New Year when the coronavirus or COVID outbreak were at its peak, yes, we had problems getting components, but we have since improved now, not very – we see it improved. And things are gradually getting back to normal in China. A lot of our suppliers are also now starting to gear up and beef up their production.

Okay. And then what kind of impact have you - I mean, have you seen any other direct impact from this. I presume you know, first quarter sales are going to be quite a bit lower just because of the different shut down. I know you can't go too much into detail on that, but can you just kind of talk generally about the impact other than the part availability on the company?

Okay. Yeah, sure. Now that the whole country was under lock down, especially the Hubei province, Wuhan, there is kind of a Chicago of China. So some of the critical components came from that region, plus all our components are from Hubei. So without certain product components we can produce. We can use up what inventories that we have in the warehouse, okay. And also with the whole country under lockdown, all other parts of China too the components for other parts of China too were affected. So for the month of February I think - I think generally is not just for ourselves but for the general economy, and most of many other businesses. So from the supply chain has been badly affected.

Okay. And you think – yeah, and you think that is pretty much back to normal. You know now start going into the fourth quarter or sorry the second quarter?

Yeah, I mean it's not 100% yet though. Yeah, I think from what we have seen, our own production has improved a lot compared to February. So we are gradually getting there, I think by second quarter we should come mostly there, if not this quarter.

Okay. And last question is what was the amount of the write-offs of receivables in the quarter and then for the full year?

Yeah. Thomas, you wan to answer that?

Sorry. William, could you repeat your question again?

Yeah. What was the amount of the receivable write-offs in the quarter and for the full year?

Its – it was actually happened in the last quarter on impairment is approximately RMB25 million.

I assume that’s RMB?

Yes, RMB.

Thank you, guys…

Yeah. I think – essentially, we made a provision for it because there's a delay in payment and having some issue with the customer. So we will take some actions to try to recover it.

Okay. Thank you.

All right.

Your next question comes from the line of Don Espey of Shah Capital. Please ask your question.

Good morning, all. Don Espey with Shah Capital here. You provided color on National VI, but please provide an update on your electric powertrain and natural gas engines?

Okay. Firstly, as natural gas engine, as I mentioned earlier, the natural gas - National VI emission standards was implemented from 1st July 2019 and since then we have so far [indiscernible] natural gas engine. So in total with – for the full year of 2019 we probably sold about 21,000 unit, most of them in the second half.

Is 20,000?

22,000. Now as for the new energy powertrain, the one of that shows that – they seem to have a lot of interest - a lot of customers have a lot of interest in is the ratio standard. So we are working with our OEMs to try to – to get this built into their system, vehicles and there is a lot of interest in the marketplace for that particular powertrain. Now the other - the others are not so well advanced, especially for the fuel cell. I mean the market is not quite there yet but we are progressing with it. We are also working with OEMs to start off with their prototype - to build prototype the OEMs to test products that we are going to have.

Okay. What was your operating cash flow in Q4 and calendar year 2019 and an approximate U.S. dollar CapEx for 2020?

Thomas, you can take that, Thomas.

Okay. You are referring to the free cash - the operating cash flow, right?

Yes, that's right.

I mean, we - in the fourth quarter we do contribute to the positive cash flow of about RMB600 million and for the full year we have contribute about RMB1.5 billion.

And approximate U.S. dollar CapEx for 2020?

Kelvin, you wan to answer that?

Now we can break it down into two components. One is the cost of the maintenance CapEx, we hit about RMB300 million, I think that with somewhere about here by US$40 million and therefore the continuous - continuing development - development of the National VI and [indiscernible] probably needed now 3 million to 5 million, again about 40 million, 40 million to 60 million. So all in all looking about 80 million, maybe 90 million.

And we saw engine sales were up in March in China, same trend at CYD?

When you say up, compared to which period, compared to February is definitely up, compared for this year, you're talking about 2019, or 2020?

2020?

Yeah, I can’t go to too much detail because March final numbers are not really finalized yet, but compared to last month, yeah, we expect to be up.

Okay. We were glad to see the dollar plus dividend. However with CYD board with over US$50 million sitting in Singapore. Why is the board still not buying back shares trading under IPO share price and with net cash level?

Well I mean, I think we have gone through this many times, even if all you all, you this before in the past, I think the board has preferred to reward the shareholders through dividends as opposed to other methods. So I think that the board hasn't changed its approach yet up to date.

We don't understand why they're still electing to not do it even at these prices. I mean is the company planning on going private?

We haven't discussed any of this issue. I don't know. I think the board – its up to the board, our shareholders. Cash is very important to us in this very difficult environment right now. So especially for now we see COVID 19, the whole environment is very uncertain right now. So the more cash you have with us, the better its going to be.

Okay. Thank you. That's all I have.

All right.

[Operator Instructions]

We have a question here. How much will revenue - how much revenue do you expect to decline due to the virus. What is the impact on trade receivables? Are you able to elaborate for the other 300 million rise in the SG&A?

Now the impact on the - from the virus, it's actually in the month of February actually, what we feel in March. So for domestically in China we hope that things will get better in the second, third quarter and fourth quarter. So hopefully I think the second quarter. Now total revenue, very difficult right now to – due to the uncertainty to actually forecast the impact of the virus. Receivables, we do not expect to have too much of trade receivables. We always have been able to collect our receivables in the past and we don’t expect to be different this year. Thomas, would you want to respond on the SG&A?

I couldn’t read the questions, because it's so small.

I’ll read out to you. Are you able to elaborate further on the 300 million rise in SG&A?

That main increase on that is due to the warranty expenses as we had went into the National VI series introductions or lunch. We do expect to do to service the engine that is on the pilot run, so that is the major impact on the on the G&A.

Okay. Now we have another question here relating to MTU unit. Kelvin, maybe you want to add to that one.

What was the unit output revenue, gross margin of profit for MTU unit and what would be the target in 2020 for these numbers? Kelvin?

Yeah. This is Kelvin. Regarding on the operating profit engine it depends on the selling price. And so I don't think that we can specify and what margin we had to gain from their engine to - on selling to the customer here. But I would say and then the engine margin is better than then what we are doing and on the traditional Ricoh [ph] engine sales and then in the Yuchai engine. On the sales target for the year 2020, we are we are expecting an end to sell around 300 engine this year. Now it will be a question mark because of the revenue and then lose that first quarter on the sales due to the unusual marketing due to the coronavirus pandemic. So possibly and then we will be targeted but you try to sell as much as we can.

Final question would be, what will be the gross margin trend in 2020 before National VI sales?

The National VI sales contribution is gross margin is not very big at the moment. Simply because we are still - we have been selling a lot yet and we expect to sell more in 2020 but it will still not be large enough to give us the volume or the economy of scale that we need. So we expect - however we do expect the gross margin to improve for National VI in 2020.

We have another question here is the question is what will be the percentage National VI sale in 2020?

Well it's too early to tell right now especially with the COVID 19 outbreak. We had hoped to sell more than 13000 units which we did last year. We'll definitely be more than that but with the COVID 19 in the first quarter been affected by the COVID 19 it's going to be difficult for us to focus right now due to uncertainty. We do expect to sell more than anybody did last year. Operator?

Yes we have now reached the end of our Q&A session and I will turn the call back to Mr. Hoh. Please go ahead.

Thank you all for participating in this conference call. We wish each of you good health. And please be safe during this crisis. We look forward to speaking with you again. Bye.

Ladies and gentlemen that does conclude our conference for today. Thank you for participating. You may now all disconnect.+