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

Thank you for joining us today, and welcome to China Yuchai International Limited 2021 Second Half Year and Fiscal Year ended December 31, 2021 Conference Call and Webcast. Joining us today are Mr. Weng Ming Hoh and Mr. Choon Sen Loo, President and Chief Financial Officer of CYI respectively. In addition, we also have in attendance Mr. Kelvin Lai, VP of Operations 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 meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, project, targets, optimistic, confident that, continue to or 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 maybe deemed forward-looking statements. These forward-looking statements include but are not limited to statements concerning the company's operations and financial performance and conditions and 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-F under the headings Risk Factors, Results of Operations and Business Overview and in other reports filed with Securities and Exchange Commission from time-to-time. If the COVID-19 pandemic is not effectively controlled, our business operations and financial conditions maybe materially adversely affected due to a deteriorating market for automotive sales and economic slowdown in China and abroad, a potential weakening of the financial condition of our customers, potential adverse impact to our suppliers and supply chains or other factors that we cannot foresee. 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 the press release, made during today's call or otherwise in the future. Mr. Hoh will provide a brief overview and summary, then Mr. Loo will provide the financial results for the second half and the fiscal year ended December 31, 2021. Thereafter, we will conduct a question-and-answer session. For the purposes of today's call, the 2021 financial results for both periods are unaudited and they will be presented in RMBand US dollars. All financial information presented is reported using the International Financial Reporting Standards as issued by the International Accounting Standards Board. Mr. Hoh, please begin your prepared remarks.

Thank you, Kevin. The Chinese economy in the 2021 year can best be described as experiencing two very different growth parts. In the first half of 2021, Chinese GDP expanded by 12.7% as China continues its resurgent economic growth. However, a number of factors negatively impacted the Chinese economy in the second half of 2021, which substantially reduced economic growth. Construction activity declined in the second half of 2021 and manufacturing a key business driver earlier in 2021, slowed at power shortages off-road ongoing COVID-19 restrictions affected supply chain and disrupted supply of critical computer chips or diminished production activity. According to data from China Association of Automobile Manufacturers, CAAM, sales of commercial vehicles, excluding gasoline-powered and electric-powered vehicles, decreased by 36.5% year-over-year in the second half of 2021. Total truck sales declined by 39.5%. In addition to slowing economy, truck sales were also impacted by a large pre-buy of National V-compliant, commercial vehicles before the stricter National VI emission standards were nationally mandated in July. Higher truck sales and accumulated distributor inventory before July resulted in reducing demand in the second half of the year. Supply chain disruptions also impeded the flow of vehicle components in the second half of 2021. In such a difficult market environment, our truck engine sales decreased by 41.9%. While the truck market is resolving its issues, our main subsidiary Guangxi Yuchai Machinery Company Limited or GYMCL, that saw success in other markets consistent with this market diversification strategy. In a relatively smaller bus market, GYMCL achieved a 55.6% rise in bus engine sales. While the overall bus market reported a 5% unit sales decline in the second half of 2021. GYMCL bus engine unit sales increased in each of its engine size categories with its new National VI-compliant engine. GYMCL's engine sales in…

Thank you, Weng Ming. Now let me review our second six months results ended December 31, 2021. Revenue was RMB8.6 billion or US$ 1.4 billion compared with RMB10.6 billion in the same period of 2020. The total number of engines sold by GYMCL in second half of 2021 declined by 21% to 171,449 units compared with 217,138 units in the same period last year. The decrease was mainly due to lower engine sales in the truck market, partially offset by higher sales of engines in bus, passenger vehicle and marine and power generation applications. According to data reported by the China Association of Automobile Manufacturers, CAAM, in second half of 2021 commercial vehicle unit sales, excluding sales of gasoline-powered and electric-powered vehicles decreased by 36.5% compared to second half 2020 as unit sales of trucks and buses declined by 39.5% and 5% respectively. Gross profit was RMB1.3 billion or US$ 208.3 million compared with RMB1.7 billion in the same period last year. Gross margin decreased to 15.4% as compared with 16.1% a year ago but increased compared to 12.9% in the first half of 2021. The decline in gross margin was mainly attributable to the lower unit volume sold, a change in the revenue mix, transition to National VI-compliant engines and higher material costs. These factors were partially offset by cost reductions during the year. Other operating income decreased by 25.2% to RMB204.5 million or US$ 32.1 million compared with RMB273.3 million in second half 2020. The decrease resulted from lower bank interest income and reduced government grants. Research and development, R&D expenses increased by 28.9% to RMB533.1 million or US$ 83.6 million compared with RMB413.5 million in the same period last year due to lower capitalization. In addition to further development of National VI and Tier 4 engines products…

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

Thank you. [Operator Instructions] We have the first question from William Gregozeski from Greenridge Global. Sir, please go ahead.

Hi. You mentioned that you saw a gross margin improvement from the first half due in part to the economies of scale from the National VI engines. Is that something we can expect to see in 2022 continued margin improvement?

Okay. Yes. In 2021, definitely we sold more National VI engines. And the National VI engines margin has been increasing and improving month and month, every month right up to December. So, for the year 2022, we will still be continuing with our cost reduction initiative program to reduce further costs as much as possible. And as we go to National for 2022 we should be selling even more National VI engines. In fact, most of the engines sold in China, which is National VI. So yes, we think we will still be able to improve the margin from where it is today.

Okay, great. The press release mentioned higher warranty costs. Was that any kind of significant issue? And what did that relate to?

Okay. The higher warranty cost is actually relating to one of our gas engines where we had some quality issues. We have been addressing it. In the last two years, I think we've got -- it's under control now but there will still be some going into next year but it should be much less than this year.

Okay. On the R&D side, it was quite a bit higher than it's been in the past whether you're talking just the expense or the capitalized. Can you break out what is towards the traditional engines and how much is for your new energy platforms?

[Indiscernible] 29:50 : But we also have to spend now some cost on getting our engine ready for the Tier 4 emission standard for off-road engine. This new emission standards will be effective from the end of this year. So, we still be looking -- spending some money on that to bring it up to that level. And we believe we'll be able to get there in time without an issue. And on top of that, we'll also be looking at spending some on the new energy vehicle. So whilst the reduction -- there will be some reduction in the National VI, R&D cost this will be sub-channel to other areas. I think this is the same question you asked earlier as well as one or two conference calls before.

Yes. So, I mean what -- should we expect similar R&D levels for this year and beyond as -- what you did for all of 2021?

Yes. In 2022, I think we should be looking at about same level of R&D costs because of the emission upgrade to Tier 4 and also the new energy vehicles. So, I think we'll be spending more money there. Obviously some of this will be capitalized line item.

Right. Okay. Okay. At the end of December, you announced the hydrogen engine. Is there any update on when that's going to be commercially ready for sale?

I think we are a bit early yet for that. The market is not quite ready. So we are developing sort of -- the way we're going right now is this one done. So we will probably start to develop a few more engines. I think that will be the focus for this year and next year rather than commercialization. Of course, at the same time, we will be working with our OEMs to try to spec into the vehicle. To really get to commercialization, I think it will take a bit more time.

Okay. And last question is what kind of impact did the chip shortage have on you guys in the second half? And what do you expect for this year?

Okay. The chip shortages, the impact on our whole last year was quite severe in the middle of last year and up until the third and fourth and beginning of the fourth quarter, largely because of the COVID in Malaysia where most of the chip comes from but we caught up. So, overall impact last year was about 16,000 to 18,000 units of engine impact for the full year. Going into this year, there are still some issues. But depending on the demand if one of the market comes down as we expect it to for, especially for truck market, then the impact shouldn't be that severe as last year, I think we should be able to manage this. Although there will still be some impact.

Okay. All right. Great. Thank you.

All right.

For the moment, we have no more questions. [Operator Instructions] No other question. We have now reached the end of our Q&A session, and I will turn the call back over to Mr. Hoh.

Thank you all for participating in our conference call. We wish, each of you, good health and please be safe during this pandemic. We look forward to speaking with you again. Bye for now.