China BAK Battery Q2 2023 Earnings Report

China BAK Battery EPS Results

• Actual EPS: -$0.03
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

China BAK Battery Revenue Results

• Actual Revenue: $42.42 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

China BAK Battery Announcement Details

• Quarter: Q2 2023
• Date: 8/9/2023
• Time: N/A
• Conference Call Date: Wednesday, August 9, 2023
• Conference Call Time: 8:30AM ET

China BAK Battery (NASDAQ:CBAT) Inc. (NASDAQ: CBAT) is a China-based developer and manufacturer of rechargeable lithium-ion batteries and related power solutions. The company’s core product lines include small, medium and large format batteries, battery modules and pack assemblies designed for consumer electronics, electric vehicles, energy storage systems and other industrial applications. China BAK Battery offers polymer lithium-ion cells, prismatic and cylindrical cells, as well as integrated battery systems tailored to meet the performance requirements of its clients.

Founded in 2001 and headquartered in Shenzhen, China BAK Battery has expanded its manufacturing footprint and research and development capabilities over the years to serve customers across Asia, Europe and North America. The company has invested in multiple production facilities and quality control centers, securing certifications from international standards bodies. It collaborates with original equipment manufacturers (OEMs) in the mobile, power tool and electric mobility markets, and has established partnerships with global technology firms seeking high-performance energy storage solutions.

China BAK Battery’s ongoing R&D efforts focus on enhancing energy density, safety and cycle life of its products. The company allocates resources to develop next-generation battery chemistries and advanced pack management systems. With an emphasis on sustainability, China BAK Battery implements environmental controls and energy-efficient processes in its manufacturing operations. Its management team brings together professionals with expertise in electrochemistry, materials science and industrial engineering, guiding the company’s strategy in a rapidly evolving energy storage landscape.

China BAK Battery Q2 2023 Earnings Call Transcript

Key Takeaways

• In the first half of 2023, Seabac Energy’s battery segment generated $51.84 million in revenue, up 27.2% year-over-year, including a 309.9% surge in light electric vehicle batteries and a 6,454× increase in EV battery sales.
• Second-quarter net revenues fell to $42.4 million, a 24.7% decrease year-over-year as lithium carbonate price volatility prompted clients to delay new orders.
• Gross margin improved notably to 12.8% (up 3.4 pp YoY), with the CFO reporting a rise to 15.4% from 11% thanks to lower raw material costs and higher plant utilization.
• The company plans to expand capacity dramatically, targeting 20 GWh in Nanjing and 16 GWh in Dalian by 2027, plus scaling sodium-ion battery capacity from 0.5 GWh to 10 GWh by 2026.
• R&D and partnerships advanced with the launch of the industry-first mass-producible large cylindrical sodium-ion Model 32,140 and a RMB 251 million strategic cooperation with Halotech for an advanced sodium-ion battery.

Presentation

[Operator]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to CBAK Energy Technology second quarter and first half 2023 earnings conference call. Currently, all participants are in a listen-only mode. Later, we'll conduct a question and answer session, and instructions will follow at that time. 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, Investor Relations Director of CBAK Energy. Mr. Li, please proceed.

[Thierry Li, Investor Relations Director at CBAK Energy Technology]

Thank you, operator, and hello, everyone. Welcome to CBAK Energy's second quarter and first half of 2023 earnings conference call. Joining us today are Mr. Yunfei Li, our Chief Executive Officer; Mrs. Xiangyu Pei, our Chief Financial Officer; Mr. Xiujun Tian, our General Engineer; and Jennifer, our interpreter. We released results earlier today. The press release is available on the company's IR website at ir.cbak.com.cn, as well as from newswire services. Later, a recording will also be available in a few hours on our IR website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve the inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today.

[Thierry Li, Investor Relations Director at CBAK Energy Technology]

Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company doesn't assume any obligations 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. Yunfei Li. Mr. Li will speak in Chinese, and I will translate his comments into English. Go ahead, Mr. Li.

[Yunfei Li, CEO at CBAK Energy Technology]

Thank you, and hello, everyone. Thank you for joining our earnings conference call today. Thank you, and hello, everyone. Thank you for joining our earnings conference call today. 2023, lithium battery market is full of uncertainty. Due to the significant price fluctuations of key raw material lithium carbonate, our overall business was somewhat affected.

[Yunfei Li, CEO at CBAK Energy Technology]

Despite this, we have still made good progress in our core business of lithium battery sales. In the first half of the year, our battery business revenue reached $51.84 million, an increase of 27.2% year-over-year. Among these revenues, $46.76 million came from batteries used in energy storage applications, up 17% year-over-year, while $3.12 million came from batteries used in light electric vehicles, a surge of 309.9% year-over-year. Moreover, revenues from batteries used in electric vehicles reached $1.96 million, an impressive increase of 6,454 times compared to the same period last year.

[Yunfei Li, CEO at CBAK Energy Technology]

In the first half of 2023, the gross margin of our battery business reached 12.8%, up 3.4 percentage points year-over-year. Since a significant number of clients were expected to place orders over the second half of the year, our revenue growth in the second quarter was relatively flat. As we see it, that won't be the case going forward. We have high expectations for our revenues over the next two quarters and the full year 2023. Our battery business will remain solid. As we gradually expanded our brand influence and continuously elevated our R&D capabilities, we have received orders from an array of leading companies worldwide.

[Yunfei Li, CEO at CBAK Energy Technology]

Looking ahead, we will actively market our capacity and provide high quality products for new and existing clients alike, further propelling our revenue growth over the long run. 魏 总, 您 继 续.

[Yunfei Li, CEO at CBAK Energy Technology]

我 来 给 各 位 介 绍 一 下 我 们 公 司 近 期 的 业 务 发 展 情 况 。 截 至 到 July 31, 2023, 我 们 Dalian 和 Nanjing 两 个 主 要 生 产 基 地 ， 和 我 们 的 子 公 司 锂 电 池 材 料 供 应 商 Hitrans 已 经 收 到 但 还 未 交 付 的 订 单 金 额 已 达 RMB 1.1 billion, RMB 1.1 billion. 在 过 去 披 露 过 去 的 客 户 订 单 方 面 ， 截 至 至 July 31, 2023, 我 们 和 全 球 最 大 的 LEV 制 造 商 Jinpeng Group 合 作 的 订 单 金 额 已 达 到 约 RMB 54.16 million. 目 前 ， 此 前 披 露 的 和 全 球 便 携 式 电 源 市 场 领 先 的 企 业 PowerOak 旗 下 的 品 牌 BLUETTI 的 合 作 也 非 常 顺 利 ， 我 们 合 作 订 单 已 经 达 到 RMB 48.05 million.继 我 们 和 Echom 在 今 年 July 达 成 了 3 年 的 战 略 合 作 之 后 ， 我 们 也 持 续 接 到 来 自 Echom 的 订 单 ， 目 前 订 单 的 金 额 已 达 到 RMB 5.42 million. 考 虑 到 Echom 客 户 储 ， 移 动 储 能 业 务 刚 刚 起 步 ， 我 们 预 计 未 来 Echom 的 订 单 金 额 会 随 着 时 间 以 及 对 应 这 项 业 务 的 持 续 展 开 而 陆 续 增 多 。 公 司 更 早 期 曾 经 公 告 过 的 给 日 本 Daihatsu Motor 供 货 的 合 作 项 目 上 ， 我 们 目 前 为 止 已 收 到 约 RMB 3.65 million 的 订 单 。

[Translator]

First off, I would like to introduce the recent developments in our business. As of July 31st, 2023, we have recorded RMB 1.1 billion in the combined value of orders we have received, but have yet to fulfill across our two main battery production facilities based in Dalian and Nanjing, together with Hitrans, our subsidiary that supplies lithium battery materials. Regarding client initiatives already announced, as of July 31st, 2023, our collaboration with Jinpeng Group, the largest LEV manufacturer around the world, has brought us orders amounting to roughly RMB 54.16 million.

[Translator]

We also make great progress in our partnership with PowerOak, the world's leading portable power station manufacturer, and BLUETTI, the brand owned by PowerOak, which has brought us orders totaling around RMB 48.05 million. In addition, since we enter into the 3-year strategic partnership with Echom this July, we have received multiple orders from Echom, totaling approximately RMB 5.42 million. Since Echom is still early in its outdoor portable energy storage business, we expect orders placed by it to steadily increase over time alongside its business expansion. Also, for the cooperation with Daihatsu Motor, as we noted before, we have taken in orders with a total value of around RMB 3.65 million so far. 魏 总 ， 您 继 续 。

[Yunfei Li, CEO at CBAK Energy Technology]

呃 ， 简 单 介 绍 了 和 更 新 了 我 们 一 些 客 户 的 情 况 之 后 ， 我 也 想 再 介 绍 一 下 我 们 在 研 发 方 面 的 进 展 。 首 先 必 须 要 提 及 到 钠 离 子 电 池 的 情 况 。 第 二 季 度 ， 我 们 借 公 司 的 投 资 者 开 放 日 召 开 了 钠 离 子 电 池 发 布 会 ， 向 投 资 人 、 媒 体 及 客 户 介 绍 了 我 们 的 钠 离 子 电 池 产 品 。 我 们 这 款 三 二 一 四 零 大 圆 柱 钠 离 子 电 池 是 目 前 行 业 内 首 个 能 够 量 产 的 大 圆 柱 钠 离 子 电 - 电 池 型 号 ， 我 们 也 是 世 界 范 围 内 首 家 量 产 大 圆 柱 钠 离 子 电 池 的 公 司 。 该 电 池 一 发 布 便 得 到 了 行 业 内 外 人 士 投 资 人 的 关 注 ， 以 及 对 我 们 公 司 的 研 发 能 力 以 及 大 圆 柱 电 池 的 制 造 能 力 方 面 的 肯 定 。 截 至 目 前 ， 由 于 公 司 已 经 具 备 量 产 能 力 ， 我 们 已 经 收 到 了 多 个 客 户 对 于 这 款 钠 离 子 电 池 样 品 的 需 求 ， 预 计 后 续 产 能 ， 呃 ， 释 放 以 后 会 陆 续 收 到 订 单 。 除 此 之 外 ， A 股 上 市 公 司 ， 嗯 ， 华 宝 新 能 源 锂 电 小 二 ， 就 ， 呃 ， just 那 个 ， 那 个 母 公 司 也 已 经 与 中 比 新 能 源 签 署 战 略 合 作 协 议 ， 华 宝 新 能 源 将 支 付 两 千 五 百 万 元 的 研 发 费 ， 定 制 一 款 能 量 更 高 的 钠 离 子 电 池 。 双 方 也 共 同 约 定 了 这 款 定 制 电 池 的 量 产 时 间 ， 同 时 也 附 带 有 价 值 数 亿 元 的 潜 在 的 供 应 量 。 目 前 就 华 宝 新 能 源 定 制 的 这 款 产 品 ， 我 们 已 经 送 出 A 样 ， 在 A 样 得 到 客 户 确 认 ， 确 认 后 ......

[Yunfei Li, CEO at CBAK Energy Technology]

继 续 通 过 B 样 阶 段 之 后 ， 该 产 品 将 会 如 约 量 产 。 在 锂 电 池 研 发 方 面 ， 公 司 同 样 取 得 了 突 破 ， 对 于 行 业 及 资 本 市 场 高 度 关 注 的 46 型 号 的 系 列 电 池 ， 我 们 已 经 处 在 B 样 阶 段 ， 预 计 今 年 年 底 即 可 具 备 量 产 能 力 。 预 计 初 步 发 布 的 型 号 将 是 46115 和 46157 。 公 司 也 会 在 未 来 市 场 的 状 况 ， 决 定 是 否 规 模 化 生 产 4680 电 池 。 公 司 46系 的 系 列 的 更 大 的 产 能 将 在 明 年 布 局 。

[Translator]

Those are the latest developments in our current initiatives. Let's move on to the R&D. First, I'd like to talk about our development of sodium-ion batteries. In the second quarter of 2023, we launched our sodium battery at our corporate open day, fully showcasing the company's sodium battery products to investors, media, and clients. Our model 32140 large cylindrical sodium battery marks the first model of its kind, industry-wide, that can be mass produced on a large scale. We are also leading the industry worldwide by pioneering the mass production of large cylindrical sodium-ion batteries. Immediately upon its launch, model 32140 garnered high visibility among professionals, investors, and stakeholders from other industries. Our R&D capabilities and production capacity for large cylindrical batteries have been warmly applauded.

[Translator]

Up until now, empowered with mass production capabilities, we have received requests from numerous clients for samples of this sodium-ion battery. We expect orders to meaningfully increase following our production ramp up. In addition, we entered into a strategic cooperation agreement with A-share listed company Shenzhen Hello Tech Energy Company Limited, the parent company of Jackery, a leading global portable power supplier. Hello Tech will invest RMB 25 million for us to tailor the research, development, and production of a more advanced sodium-ion battery, with an agreed target time for mass production and potentially hundreds of millions RMB worth of products to be supplied. Currently, we have delivered the prototype A of this customized product. Upon receiving Hello Tech's confirmation of the quality and performance of prototype A and subsequent approval through the prototype B stage, the mass production will proceed as scheduled.

[Translator]

Moreover, we make breakthroughs in the research and development of lithium batteries. We are currently in the phase of prototype B development of the Series 46 lithium batteries, which has attracted immense attention from investors and peers alike. We expect mass production of our Series 46 batteries to be available by the end of the year, and the models to be rolled out will be model 46110, 46115 or 46157. Depending on market dynamics, we will also assess the potential to mass produce the model 46800. Next year, we will ramp up the production of our Series 46 batteries. This one is issue

[Yunfei Li, CEO at CBAK Energy Technology]

下 面 我 来 具 体 介 绍 一 下 我 们 的 产 能 及 未 来 布 局 的 情 况 。 考 虑 到 公 司 研 发 方 面 的 突 破 ， 以 及 供 不 应 求 的 订 单 数 量 ， 公 司 目 前 正 在 积 极 进 行 积 极 的 扩 产 。 首 先 是 我 们 在 南 京 生 产 基 地 ， 目 前 南 京 生 产 基 地 的 产 能 是 零 点 七 G 瓦 ， 呃 ， 预 计 今 年 年 底 将 爬 升 到 两 ， 两 G 瓦 。 同 时 ， 我 们 南 京 二 期 项 目 正 在 建 设 阶 段 ， 预 计 二 零 二 四 年 将 新 增 两 G 瓦 时 的 产 能 。 南 京 生 产 基 地 的 总 产 能 将 达 到 四 G 瓦 时 。 到 二 零 二 七 年 ， 随 着 南 京 二 期 工 程 的 陆 续 完 工 及 产 线 的 铺 设 ， 预 计 总 产 能 将 达 到 二 十 G 瓦 时 。 在 大 连 工 厂 方 面 ， 我 们 目 前 拥 有 一 G 瓦 时 的 产 能 ， 预 计 年 底 将 扩 大 到 一 点 四 G 瓦 时 。 同 时 ， 我 们 将 在 明 年 开 始 布 局 四 六 系 电 池 的 产 线 ， 到 二 零 二 五 年 底 将 新 增 四 六 系 电 池 产 能 共 五 点 六 G 瓦 时 ， 到 二 零 二 七 年 将 新 增 九 G 瓦 时 的 四 六 系 电 池 产 能 。 大 连 生 产 基 地 的 总 共 产 能 将 达 到 十 六 G 瓦 时 。

[Translator]

I also want to specifically highlight our production capacity and geographic landscape. In view of our R&D breakthroughs and the overwhelming incoming orders that have already exceeded our supply, we are actively planning for capacity expansion. First off, our Nanjing facility currently boasts a production capacity of 0.7 GWh, and we expect it to advance to 2 GWh by the end of the year. In the meantime, our Nanjing Phase II project is under construction, potentially adding a production capacity of 2 GWh for us in 2024, elevating the overall capacity of our Nanjing facilities to 4 GWh. By 2027, with our Nanjing Phase II programs gradually completed and all the production lines in place, we expect the overall capacity to hit 20 GWh.

[Translator]

Our Dalian plant currently has a production capacity of 1 GWh, and we expect it to move up to 1.4 GWh by the end of the year. Meanwhile, we will start building the production lines of our Series 46 batteries, potentially adding a production capacity of 5.6 GWh for Series 46 by the end of 2025, and further expanding our Series 46 capacity by 9 GWh by 2027. By then, the overall capacity of our Dalian facilities will be elevated to 16 GWh.

[Yunfei Li, CEO at CBAK Energy Technology]

Uh, 与 此 同 时 ， 我 们 正 在 寻 求 机 会 布 局 钠 电 池 的 产 线 。 目 前 公 司 现 有 零 点 五 吉 瓦 时 的 钠 电 ， 电 池 量 产 产 能 ， 公 司 将 额 外 布 局 十 吉 瓦 时 的 钠 电 池 长 期 规 划 产 能 。 目 前 ， 目 前 预 计 在 二 零 二 六 年 将 达 满 产 能 。

[Translator]

Additionally, we have been seeking to scale up our sodium-ion battery production lines. At present, our sodium-ion battery production capacity is 0.5 GWh, and we have 10 GWh in the pipeline over the long run. We expect to achieve full production of sodium-ion batteries in 2026.

[Yunfei Li, CEO at CBAK Energy Technology]

在 市 场 开 拓 方 面 ， 在 市 场 上 面 ， 目 前 我 们 已 经 和 欧 洲 家 储 巨 头 Viessmann Group 深 度 合 作 ， 并 且 给 户 外 移 动 储 能 全 球 巨 头 供 货 。 目 前 我 们 将 继 续 在 家 庭 储 能 和 户 外 移 动 储 能 板 块 发 力 ， 预 计 这 两 块 业 务 将 成 为 公 司 业 绩 发 力 的 重 点 区 域 。 同 时 ， 随 着 低 温 性 能 的 更 好 ， 快 充 快 放 性 能 优 异 ， 同 时 成 本 更 具 优 势 的 sodium-ion batteries ， sodium-ion batteries 的 量 产 及 产 能 的 铺 设 ， 越 来 越 多 使 用 lead-acid batteries 的 小 动 力 市 场 客 户 ， 以 及 对 于 电 池 快 充 ， 低 温 性 能 有 要 求 的 客 户 ， 对 我 们 的 sodium-ion batteries 产 品 展 现 了 极 大 的 兴 趣 。 我 们 已 经 收 到 了 很 多 小 动 力 市 场 的 储 能 客 户 的 样 品 要 求 。 目 前 公 司 的 sodium-ion batteries 产 能 已 经 无 法 满 足 需 求 ， 随 着 后 续 产 能 的 扩 张 ， 我 们 将 陆 续 送 出 更 多 的 样 品 ， 希 望 能 尽 快 占 领 更 多 的 市 场 份 额 。

[Translator]

Next, let me talk through our marketing strategy for business development. We are in close cooperation with Viessmann Group, a leading European provider of residential energy storage, and we are the key supplier to the global leader of outdoor portable energy storage. Going forward, we will further advance both our residential and outdoor portable energy storage businesses, and these two segments will become the company's major revenue avenues. In the meantime, with our mass production and capacity ramp-up of sodium-ion batteries, owing to their superior performance at low temperatures, superb fast charging and discharging capabilities, and excellent cost efficiency. More and more clients in the small sized power battery market that currently use lead-acid batteries, as well as clients with demand outstanding fast charging and low temperature performance, have taken great interest in our sodium battery products.

[Translator]

We have received numerous requests for samples from clients in the small sized power battery market and the energy storage sector. At present, the demand for our sodium-ion batteries have exceeded our supply. With the capacity ramp-up soon afterward, we will deliver more samples for going ahead to expand our market share.

[Yunfei Li, CEO at CBAK Energy Technology]

总 的 来 说 ， 公 司 在 钠 电 池 的 研 发 ， 量 产 ， 产 能 布 局 ， 客 户 送 样 上 都 领 先 于 整 个 行 业 。 同 时 在 四 六 系 锂 电 池 方 面 的 也 在 积 极 布 局 ， 未 来 我 们 将 还 继 续 在 家 庭 储 能 及 户 外 移 动 储 能 板 块 发 力 ， 同 时 利 用 四 六 系 锂 电 池 和 钠 离 子 电 池 的 优 势 ， 拓 展 我 们 的 动 力 市 场 业 务 。 公 司 对 今 年 下 半 年 及 未 来 的 预 期 依 旧 保 持 积 极 的 预 期 。

[Translator]

In general, we are a top player in on multiple fronts, including the mass production, geographic landscape of capacity, and sample delivery of sodium-ion batteries, as well as regarding the significant efforts we have actively taken to advance the Series 46 lithium batteries. Looking ahead, we will make strides in the residential and outdoor portable energy storage segments, and firmly build upon our edges in the Series 46 lithium batteries and sodium-ion batteries, further propelling business growth in the power market. We remain positive about our expectations for the second half of this year and the years ahead.

[Yunfei Li, CEO at CBAK Energy Technology]

嗯 ， 接 下 来 请 我 们 的 CFO， 呃 ， 裴 总 给 投 资 者 介 绍 一 下 公 司 的 财 务 表 现 。

[Translator]

Now let me turn the call over to our Interim CFO, Xiangyu Pei, who will provide details on our financial performance.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

Thank you, Mr. Li, and thank you everyone for joining our call today. I will now go over our key financial results for the 2Q and the 1H of 2023. For the full details of our financial results, please refer to our earnings press release. We are pleased to report strong half-year results, marked by sustainable growth and increased profitability. Thanks to our product strength and optimized operating efficiency, our gross margin for battery business rose to 6-15 points for our present, compared with the 11% for the same period last year. As we progress throughout the year, our top priorities are to accelerate sales growth and improve profitability.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

Our solid balance sheet gives us the flexibility to continue investing in our future, by accelerating our research and development across product lines, as well as expanding our technology and business initiatives to create value for both our users and our shareholders. Turning to our financial performance, our net revenues were $42.4 million in the second quarter, and $84.8 million in the first half, representing a decrease of 24.7% and 37.8%, respectively, from the same period in 2022. This decline was primarily attributable to a decrease in sales of the battery business and has an indirect majority-owned subsidiary engaged in the production and sale of battery raw materials. During the first half of 2023, our battery business had strong revenue growth of 97% in the first quarter.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

However, during the second quarter, we began to experience a temporary slowdown in sales. Our second quarter battery sales declined by 13.5% year-over-year to $22.2 million. The decline was primarily driven by the price volatility of lithium carbonate, leading clients to hold off placing new orders during the quarter. Despite this short-term challenge, we remain confident that we will achieve strong full year 2023 revenue growth, as many of our clients will place new orders in the second half of the year as prices stabilize. Cost of revenues was $38.5 million in the second quarter and $78 million in the first half, representing a decrease of 24% and 37.9% respectively from the same period in 2022.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

This decrease was primarily due to the decline in match revenues. Gross profit was $3.9 million in the second quarter, and $6.8 million in the first half, representing a decrease of 29.8% and 37.4% respectively from the same period of 2022. Our operating expense rose by 42% to $7.7 million in the second quarter, and 11.4% to $13.4 million in the first half. Within that, our research and development expenses increased by 29.6% to $3 million in the second quarter, and decreased by 3.1% to $5.4 million in the first half.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

Sales and marketing expenses increased by 38% to $1 million in the second quarter, and 10.3% to $1.7 million in the first half. General and administration expenses increased by 46% to $3.6 million in the second quarter, and 29.2% to $6.1 million in the first half. Our operating loss amounted to $3.8 million in the second quarter, compared to an operating income of $0.1 million in the same period of 2022. Operating loss was $6.7 million in the first half, compared to $1.2 million in the same period of 2022.

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

Our change in fair value of warrants was $0.04 million in the same quarter, and then $0.12 million in the first half, compared with $2.1 million and $3.76 million respectively in the same period of the prior year. As a result, net loss attributable to shareholders of CBAK Energy was $2.6 million in the second quarter, and $4 million in the first half, compared to the net income attributable to shareholders of CBAK Energy of $0.8 million and $1.2 million, respectively, in the same period of 2022. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead. Thank you.

[Operator]

Thank you. Ladies and gentlemen, if you have a question, please press star one one on your telephone. You will then hear an automated message advising that your hand has been raised. If your question has been answered or you wish to remove yourself from the queue, press star one one again. Once again, to ask a question, please press star one one. One moment please, while we compile the Q&A roster. Our first question comes from the line of Brian Lantier with Zacks Small Cap Research.

[Brian Lantier, Senior Research Analyst at Zacks Small Cap Research]

Good evening. I was wondering if I could ask a couple of follow-up questions. First, on the Shangqiu lease, I was wondering if you could provide any additional details on that facility. Basically, was it operational? Do you still expect it to be operational by the end of 2023? What type of batteries may have been produced there in the past? I'll follow up with additional questions. Thank you.

[Translator]

那 么 , your question is, the first question is about the sodium-.

[Translator]

Shangqiu, Shangqiu.

[Translator]

Sodium-ion battery, right? Okay. 好 ， 所 以 我 的 第 一 个 问 题 是 关 于 ... 我 想 多 了 解 一 下 ， 关 于 钠 离 子 电 池 方 面 的 一 些 具 体 的 信 息 ， 比 如 说 在 2023 年 的 话 ， 整 个 运 营 的 话 会 去 到 什 么 样 的 一 种 状 况 ， 然 后 我 还 想 多 了 解 ， 还 想 了 解 ， 比 如 说 有 什 么 类 型 的 相 关 的 电 池 。

[Company Representative at CBAK Energy Technology]

呃 ， 呃 ， 这 个 我 打 断 一 下 ， 那 个 Jennifer， 可 能 你 理 解 错 了 ， 那 个 她 要 的 是 那 个 商 丘 的 这 个 信 息 。 呃 ， 我 们 之 前 发 布 过 这 个 商 丘 的 这 个 ， 这 个 产 线 的 事 情 ， 然 后 她 想 要 知 道 ， 呃 ， 这 个 商 丘 是 一 个 ， 呃 ， 已 经 ， 已 经 就 是 这 个 电 池 厂 它 本 身 已 经 存 在 的 ， 呃 ， 然 后 它 现 -- 它 过 去 是 生 产 的 是 一 个 圆 柱 电 池 ， 还 是 方 形 电 池 ， 或 者 软 包 。

[Translator]

哦 ， 商 丘 是 个 地 名 吗 ？

[Company Representative at CBAK Energy Technology]

商 丘 ， 我 们 是 中 国 商 丘 的 一 个 城 市 ， 然 后 它 近 期 是 否 会 运 作 ， 什 么 时 候 会 投 入 运 营 ， 然 后 有 可 能 会 在 今 年 年 底 前 投 入 运 营 吗 ？ 这 个 问 题 我 们 让 那 个 飞 总 来 回 答 吧 。

[Yunfei Li, CEO at CBAK Energy Technology]

嗯 ， 那 那 个 ， 呃 ， 商 丘 是 张 总 刚 才 提 到 这 个 问 题 ， 就 商 丘 这 个 电 池 厂 这 块 ， 因 为 是 我 们 现 在 现 有 的 那 个 大 连 的 电 池 ， 嗯 ， 现 在 产 能 严 重 的 不 足 ， 不 足 然 后 很 多 满 足 不 了 很 多 客 户 的 那 个 ， 那 个 交 货 的 需 求 ， 因 为 我 们 这 样 是 一 个 ， 那 个 就 是 ， 呃 ， 租 用 了 一 个 大 ， 呃 ， 商 丘 的 一 个 一 家 国 企 的 一 个 电 池 制 造 厂 ， 这 家 电 池 以 前 它 就 是 也 是 做 我 们 同 类 的 产 品 ， 它 的 设 备 和 我 们 也 是 差 不 多 的 一 样 的 设 备 ， 然 后 产 能 是 每 天 十 万 只 ， 我 们 现 在 已 经 正 在 进 行 改 造 ， 我 们 改 造 和 那 个 检 修 阶 段 ， 预 计 我 们 在 年 底 能 达 到 生 产 。

[Translator]

能 达 到 生 产 ， 就 是 可 以 -

[Translator]

对.

[Yunfei Li, CEO at CBAK Energy Technology]

生 产.

[Yunfei Li, CEO at CBAK Energy Technology]

啊 ， 是 的 ， 是 的 。

[Translator]

目 前 产 能 是 100,000 每 天 。

[Yunfei Li, CEO at CBAK Energy Technology]

啊 ， 对 ， 是 的 。

[Translator]

Yes, Shangqiu battery plant. I would like to give you more detail about this. As you know, the production capacity of our Dalian plant is significantly insufficient. We cannot meet the demand of our customers. That is why we decided to rent this Shangqiu battery manufacturing plant. It is a state-owned battery plant, and we share the same products, and the equipment devices in this plant is also similar to our Dalian plant. Currently, the production capacity of this plant is 100,000 per day, and we are doing some renovation, and an improvement in this plant, and it is expected that it will be in fully, totally normal production by the end of this year.

[Brian Lantier, Senior Research Analyst at Zacks Small Cap Research]

Great. Thank you very much. And I appreciate all the translation. That's very helpful. If I could ask one follow-up question on the battery gross margins, they appear as though they've gone from 11% last year to 15.4% this year. Was that due to a shift in mix towards some of your newer products, like the 32140, and away from some of the older products, like the 21700?

[Translator]

还 想 问 另 外 的 一 个 问 题 ， 是 关 于 我 们 这 个 电 池 的 产 品 的 毛 利 率 的 一 个 增 长 的 。 我 们 刚 才 听 到 ， 我 们 所 讲 的 这 个 报 告 ， 今 年 的 话 ， 我 们 是 增 长 到 15.4% ， 我 想 知 道 一 下 ， 这 个 毛 利 率 的 增 长 背 后 的 原 因 是 什 么 呢 ？ 是 因 为 比 如 说 我 们 有 新 的 产 品 ， 像 是 32140 ， 或 是 其 他 什 么 原 因 ， 能 够 给 我 们 带 来 这 样 一 个 利 益 率 的 增 长 。

[Company Representative at CBAK Energy Technology]

好 ， 这 个 问 题 让 Pin Zong 回 答 一 下 。

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

... 呃 ， 好 的 ， 谢 谢 。 呃 ， 关 于 我 们 毛 利 率 的 增 长 ， 就 是 有 几 方 面 的 原 因 ， 那 最 重 要 的 一 点 是 由 于 ， 啊 ， 就 是 我 们 在 ， 啊 ， 今 年 的 这 个 产 能 ， 大 连 生 产 基 地 及 南 京 生 产 基 地 的 产 能 的 ， 呃 ， 这 个 利 用 率 的 提 升 ， 那 我 们 大 连 生 产 基 地 目 前 是 接 近 于 满 负 荷 的 生 产 ， 这 个 产 能 是 完 全 被 利 用 的 。 那 南 京 生 产 基 地 在 ， 嗯 ， 二 一 年 开 始 建 设 ， 那 在 二 二 年 年 底 ， 这 个 ， 啊 ， 随 着 二 二 年 年 底 的 建 设 完 成 ， 二 三 年 的 产 能 在 逐 步 地 ， 呃 ， 释 放 。 那 么 随 着 我 们 产 能 的 释 放 ， 利 用 率 的 提 升 ， 对 我 们 成 本 的 降 低 ， 啊 ， 有 一 个 非 常 大 的 一 个 促 进 的 作 用 ， 这 个 是 我 们 毛 利 率 增 长 的 一 个 重 要 原 因 。 啊 ， 那 另 外 还 有 就 是 ， 嗯 ， 关 于 价 格 波 动 的 影 响 ， 那 么 在 去 年 ， 呃 ， 下 半 年 的 时 候 ， 这 个 由 于 原 材 料 价 格 的 上 涨 ， 对 于 我 们 ， 啊 ， 呃 ， 成 本 的 影 响 ， 呃 ， 比 较 大 ， 那 对 于 我 们 毛 利 率 的 这 个 ， 这 个 ， 呃 ， 占 ， 占 用 我 们 的 毛 利 率 的 比 例 比 较 多 。 啊 ， 但 是 今 年 二 季 度 以 后 ， 随 着 原 材 料 的 ， 呃 ， 下 降 ， 我 们 的 这 个 ， 呃 ， 成 本 空 间 又 有 所 释 放 ， 然 后 毛 利 也 有 所 提 升 ， 啊 ， 这 个 是 ， 啊 ， 两 方 面 的 原 因 ， 啊 ， 谢 谢 。

[Translator]

嗯 ，OK， 啊 ，there were-

[Company Representative at CBAK Energy Technology]

南 京 建 成 是 指 预 期 。

[Company Representative at CBAK Energy Technology]

好.

[Company Representative at CBAK Energy Technology]

我 补 充 一 下 ， 刚 刚 裴 总 说 的 南 京 建 成 是 指 预 期 。

[Translator]

好 的 ， 好 的 ， 就 二 零 二 二 年 建 成 ， 哦 ， 好 的 。

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

建 厂 ， 建 厂 ， 我 说 的 是 建 厂 。

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

建厂。

[Xiangyu Pei, Interim CFO at CBAK Energy Technology]

就 是, 产 能, 那 个, 那 个 厂 房 的 建 设.

[Translator]

OK， 好 的 。There were several reasons behind the increase of growth, gross margin. One of the most important reason is that since this year, the production capacity of our Dalian and Nanjing production facilities have been increased, and we can achieve a very high utilization rate of these plants. For our Dalian plants, it is almost reached full production capacity. For Nanjing, since the construction of the first phase of the plants in 2021, and the completion of the first phase of at the end of 2022, now our production capacity can be released to a large extent, and this production capacity growth also become a very important driving force for the reduction of the cost.

[Translator]

Secondly, as we know, in the second half of last year, we underwent a obvious fluctuation in the raw material price, and the increase of the raw material price also has a negative impact in our cost. So the cost occupied quite a big margin in our profit margin. However, since the second quarter of this year, we have seen the decline of raw material price, and that also led to the reduction of the cost, which also contributes to the improve of the growth margin.

[Brian Lantier, Senior Research Analyst at Zacks Small Cap Research]

Thank you very much. Have a great night.

[Translator]

好 ， 非 常 感 谢 你 两 位 的 回 答 。

[Operator]

Thank you. As a reminder to ask a question, please press star one, one. I am seeing no further questions. With that, I would like to turn the call back to Mr. Yunfei Li for closing remarks.

[Thierry Li, Investor Relations Director at CBAK Energy Technology]

There are-

[Operator]

I apologize. Well, I apologize. One moment, please. I do see we have a question that just came in the queue. We have a question from the line of [Saiko Wu] with TPG.

[Analyst at TPG]

你 好 ， 你 能 听 到 我 的 发 言 吗 ？Hi, operator, this is [Saiko] from TPG. Can you hear me right now?

[Operator]

Yes, please proceed with your question.

[Analyst at TPG]

Yeah, I will ask in Chinese for the company.

[Analyst at TPG]

好 ， 可 以 。

[Analyst at TPG]

想 问 一 下 ， 刚 刚 公 司 很 快 提 到 了 ， 就 是 现 在 咱 们 已 经 具 备 ， 就 是 量 产 Series 46 电 池 的 能 力 了 。 然 后 想 问 一 下 ， 公 司 是 基 于 什 么 原 因 考 虑 优 先 选 择 46115 或 者 是 46157 ， 而 不 是 46800 呢 ？ 然 后 未 来 4608 ， 46800 型号 电 池 的 可 能 性 会 有 多 大 ？

[Translator]

Okay, you mentioned just now, the company have already have the capacity to produce Series 46 lithium battery. I'd like to know for what reason that you decided to give priority to 46115 and 46157, instead of 46800? In the future, how big is the chance for you to mass produce 46800? Okay. Actually, we make this decision based on our overall layout of our, of our business portfolio. For example, we can take into consideration the business of our energy storage market. For 46110, the height is about 31, and the energy storage height is as well as the model is more standard in the market.

[Translator]

For 46157, it is a bit higher than one, 46115, and we can do 30-35 amp hour, and the cycling could be 8,000-10,000, which we believe will well meet the market of the U.S. and Europe. We mainly use the the material of lithium-ion, and as we know, this is a very important material, and it has a superior energy capacity in density, sorry, energy in density. Currently, we are not thinking about to mass produce 46800. It is with even high high taller height, bigger height. It doesn't mean that we will not produce this at all. When the time is appropriate, we will also take into consideration the development and production of 46800.

[Analyst at TPG]

Okay, thank you.

[Operator]

Thank you. I'm showing no further questions. With that, I'll turn the call back over to Mr. Yunfei Li, for closing remarks.

[Yunfei Li, CEO at CBAK Energy Technology]

Thank 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]

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Participants

Analysts

• Brian Lantier, Senior Research Analyst at Zacks Small Cap Research
• Thierry Li, Investor Relations Director at CBAK Energy Technology
• Xiangyu Pei, Interim CFO at CBAK Energy Technology
• Yunfei Li, CEO at CBAK Energy Technology
• Analyst at TPG
• Company Representative at CBAK Energy Technology
• Translator