APRIL 21 2008
Sinotruk (Hong Kong) Limited
Annual Result Presentation
We had an extraordinary year…
Turnover grew by 67% to RMB 21.3 billion
Sold 84,481 units of heavy trucks, an increase of 64% Truck sales grew by 67% to RMB 20.0 billion Exported 15,715 units of heavy trucks, an increase of 168% Export sales grew by 168% to RMB 4.2 billion, representing 20% of total turnover
Gross profit rose by 74% to RMB 3.9 billion
Gross margin improved from 17.5% in 2006 to 18.3% in 2007
Net profit grew by 142% to RMB 1.1 billion¹
Net margin improved from 3.6% in 2006 to 5.2% in 2007
Domestic market share expanded to 20.8%
We have become the #1 heavy truck manufacturer in China
In recognition of the outstanding performance, the Board of Directors announces dividends of HK$0.071per share to our shareholders
¹ Net profit refers net profit attributable to equity holders in the Company. 2006 adjusted figures exclude impacts from one-time actuarial gain of 180mm
1
Section
Agenda
Financial review Operational review Acquisition and integration 2008 outlook and development plan Q&A
Rapid sales growth and overseas expansion
Rapid sales growth Rapid sales growth
(RMB mm)
66 .8 %
Export revenue and contribution Export revenue and contribution
Export revenue (RMB mm)
21,297
Gr ow
% of total revenue
16 7. 6% ra te =
th
ra te
4,182
=
12,767 10,164 9,114
Gr ow
19.6%
11.5%
12.2%
1,563
1,052
1.0%
97
2004 2005 2006 2007
2004
2005
2006
th
2007
3
Improved profitability
Gross profit and gross margin Gross profit and gross margin
Gross profit (RMB mm) Gross margin (%)
74 .4 %
Net profit and net margin¹ Net profit and net margin¹
Net profit (RMB mm) Net margin (%)
41 .9 %
ra te
th
Gr ow
17.5% 14.5% 12.4%
18.3%
3.0%
3,903
Gr ow
3.6%
th
ra te
5.2%
=
=1
1,109
2,238 1,469 1,131
0.9% 301 78
458
2004
2005
2006
2007
2004
2005
2006 adjusted
2007
¹ Net profit refers net profit attributable to equity holders in the Company ² 2006 adjusted figures exclude impacts from one-time actuarial gain of 180mm
4
Enhanced operating efficiency
Inventory turnover days1 Inventory turnover days1 Accounts receivable turnover days2 Accounts receivable turnover days2
107
22 20 89 17 72 12
73
2004
1
2005
2006
2007
2
2004
2005
2006
2007
Inventory turnover days = (Average inventory/COGS) * 365
Accounts receivable turnover days = (Average receivable/sales) * 365
5
Increasing returns
Return on total assets¹ Return on total assets¹ Return on capital deployed² Return on capital deployed²
15.0% 5.7% 13.5% 11.2% 4.1%
2.6%
3.4% 0.5%
2004
2005
2006
2007
2004
2005
2006
2007
¹ Return on total assets = net profit/total assets
² Return on capital deployed = EBIT/(total equity + total debt)
6
Actual allocation of IPO proceeds and capital expenditure plan
Actual allocation of IPO proceeds Actual allocation of IPO proceeds
(HK$ mm)
General working capital, 943 Expanding engine manufacturing capacity, 1,200 Expanding forging capacity, Repayment of borrowings and trade payables, 2,898 800
Historical capital expenditure Historical capital expenditure
(RMB mm)
1,869 1,163
963
975
2004
Expanding truck manufacturing capacity, 1,300
2005
2006
2007
Future capital expenditure Future capital expenditure
Domestic and Research & development, 1,233 overseas market expansion, 1,057
(RMB mm)
Truck 1,300 40 790
Engine
Others
1,075 100 605
Total = HK$9,430.1mm
470 2008
370 2009
7
Section
Agenda
Financial review Operational review Acquisition and integration 2008 outlook and development plan Q&A
Rapid growth of China’s heavy truck industry
China heavy truck industry’s rapid development China heavy truck industry’s rapid development attributes to increasing Chinese macro economy attributes to increasing Chinese macro economy
Sales volume (000s unit) GDP Fixed asset investment (RMBbn)
Heavy truck sales CAGR: 22.1% Fixed asset investment CAGR: 24.3% Average GDP growth rate: 14.5%
Growth rate of China’s heavy truck export exceeds Growth rate of China’s heavy truck export exceeds that of China’s automotive export that of China’s automotive export
Heavy truck export volume (unit)
04—07 Heavy truck export CAGR: 131% 04—07 Automotive export CAGR: 101%
Automotive export volume
600
30,000 487
28,000 25,200
700,000 600,000
500
25,000
21,000
400
354 307
20,000
500,000 400,000 300,000
300
248
256
15,000 237 10,000
14,000
12,841
200
147
7,834 7,000 200,000 100,000 0 2004 2005 2006 2007
100
5,000
2,057 0
0 2001 2002 2003 2004 2005 2006 2007
0
9
Record sales volume
Sales volume (unit) Sales volume (unit)
63 .8 %
Export volume and contribution (unit) Export volume and contribution (unit)
Volume contribution
16 7. 8% th ra te
10.8% 3,817 0.5% 216 2004 2005
84,481
ra
te
15,715
=
Gr
ow th
51,573 43,216 35,378
2004
2005
2006
2007
Gr ow
11.4% 5,869 2006
=
18.6%
2007
10
Fastest growing heavy truck manufacturer
Sales volume of major domestic heavy truck manufacturers (thousand) Sales volume of major domestic heavy truck manufacturers (thousand)
140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 Sinotruk First Auto Dongfeng Motor Shaanxi Auto Beiqi Foton
11
Continued expansion in market share
Market share of domestic heavy truck manufacturers Market share of domestic heavy truck manufacturers
Others 16.1%
Dongfeng Motor 22.0%
Others 19.2%
Dongfeng Motor 18.0%
Beiqi Foton 10.4% Shaanxi Auto 10.6% First Auto 21.3% Shaanxi Auto 12.0% 19.6% 1 20.8% 1 Beiqi Foton 11.0% First Auto 19.0%
2006
2007
We are now the largest heavy truck manufacturer in China!
1
Market share represents Sinotruk Group
12
Section
Agenda
Financial review Operational review Acquisition and integration 2008 outlook and development plan Q&A
Overview of acquisition of gearbox assets
Sinotruk Jinan Power Co., Ltd. (our wholly-owned subsidiary) China National Heavy Duty Truck Group Co., Ltd. (our ultimate controlling shareholder) Gearbox manufacturing facilities with a forecast production capacity of 40,000 units p.a.
Acquirer
Seller
Target
Consideration
RMB 153.2 million in cash
Closing date
Dec 31, 2007
14
Strategic rationale of the acquisition
1
Further expand Further expand upstream; reduce upstream; reduce reliance on reliance on external suppliers external suppliers
2
Improve Improve profitability; profitability; reduce production reduce production costs costs
4
Minimize Minimize connected connected transactions; transactions; improve arm’s improve arm’s length operation length operation
3
Improve core Improve core competency & competency & product product competitiveness competitiveness
15
Most complete, integrated business model
Engines
HO W
O
Si
ta ie r
Ki n
Cabins
e gh an Hu
g
Axles
Gearbox
Frames
Sit a
ie r
16
Section
Agenda
Financial review Operational review Acquisition and integration 2008 outlook and development plan Q&A
Further expanded capacity
Sinotruk Jinan Commercial Truck completed its relocation and increased its annual production capacity to 50,000 units
Sinotruk Jinan Truck Co., Ltd., expanded its capacity to 100,000 units through technological innovation
Total capacity of 150,000 units per year in 2008!
18
Engine products
Sales revenue (RMB mm) Sales revenue (RMB mm)
h wt Gro e= 7 rat % 1.1 5,327
Capacity expansion Capacity expansion
3,114 1,609 1,414
2004
2005
2006
2007
Relocated engine manufacturing facility in Hangzhou, boosting annual production capacity to 100,000 units Production capacity of the engine manufacturing facility in Zhangqiu expanded to 50,000 units as a result of technological upgrade
19
Impact of “China III” on 2008 domestic sales
Chinese heavy truck industry will remain upbeat Chinese economy will continue to grow steadily, the demand for heavy trucks will remain high Despite the enforcement of China III emission standard, the price advantages of “quasi-heavy duty trucks” will remain in eclipse as a result of replacement needs An opportunity for Sinotruk Our cutting-edge technologies and lower-cost advantages will be highlighted following the full enforcement of China III
Sinotruk will maintain healthy growth in sales volume in 2008 With our cutting-edge technologies and lower-cost advantages, we will gain more market share amid enforcement of China III Our export competitiveness is highly anticipated in the long run with continuing strong growth
20
2008 growth strategies
Strategically lay out the sales outlets and build an ironclad sales network Aggressively explore the overseas market
4
1
Continue to develop new technologies and products Enhance operating efficiency and cost competitiveness
3
2
Our Vision:
A leading heavy truck manufacturer in the world
21
APRIL 21 2008
Sinotruk (Hong Kong) Limited
Q&A