Good day, ladies and gentlemen. Thank you for standing by, and welcome to the CBAK Energy Technology first quarter 2022 earnings conference call. Currently, all participants are in listen-only mode. Later, we will conduct a question answer section, and instruction will follow at the 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 Jiewei Li, Investor Relations Director of CBAK Energy. Mr. Li, please proceed.
Thank you, operator, and hello everyone. Welcome to CBAK Energy's first quarter 2022 earnings conference call. Joining us today are Mr. Yunfei Li, our Chief Executive Officer, and Mrs. Yuna Pei, our Chief Financial Officer. 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. A relay of this call will also be available in a few hours on our IR website. On the call with me today are Mr. Yunfei Li, Mrs. Yuna Pei, Mr. Qiujin Qian, who is our general engineer. Mr. Weng Wang, who is our vice president, and our interpreter, Jennifer. 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 inherent risks and uncertainties.
As such, the company's actual results may be materially different from the expectations expressed today. 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 US 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. Thank you, and hello everyone. Thank you for joining our earnings conference call today. Next, let's move on to our recent product developments and production. We continue to develop large cylindrical batteries to target at the LEV and passenger vehicle EV markets.
并将根据计划稳步推进。
In addition to efforts to continue optimizing the performance of our current cylindrical battery products, we are working to produce a prototype for Model 42140 steel shell battery. At this moment, we have already designed the research and development plans for the Model 42140 battery and will expect steady progress as planned.
我们也欣喜地看到，市场对我们的产品的反响非常积极正面。截至2022年5月9日，公司目前的交付电池订单接近CNY 4亿，约合USD 5,900万。我们主要的大连工厂目前处于满产状态。同时我们正在积极扩大南京工厂的生产。此前我们还宣布了从我们其中的一个重要客户那里收获了价值USD 3,000万的订单，这也体现了我们产品的质量和性能正在得到世界级客户的认可。
We are also happy to see that market feedback for our power battery products has been strong and positive. As of May 9th, we have outstanding battery orders worth approximately CNY 400 million, or about $59 million. With these orders, our main factory in Dalian is in full production and we are increasing production at our Nanjing plant. We also announced the receipt of orders from one of our major clients worth about $30 million, which further suggested that the quality and performance of our products are being widely recognized by key global players.
在第二季度，我们的主要业务焦点仍然是保持不间断电源电池业务以及原材料业务收入的稳定。另外，我们会继续通过获得更多轻型电动车以及乘用车电动车厂商新订单的方式来提高大型圆柱形电池的收入份额。
In the second quarter, our main focus will be on maintaining stable revenues from batteries used in uninterruptible power supplies and the raw material business. In addition to that, we will also continue expanding the revenue share of large cylindrical batteries by signing new contracts with LEV and EV manufacturers.
现在我们来介绍一下收购Hitrans带来的材料业务的发展情况。和之前预期的一样，Hitrans的业务成为了并表后公司总收入的主要部分，这部分业务受益于材料价格的上涨，依靠领先的技术和供应的产品优势，Hitrans已经积累了一大批战略客户，目前处于满产的状态。在我们在2022年Hitrans材料业务的运营上保持着乐观，并计划进一步提高Hitrans运作和技术的专业性。Hitrans也会加大R&D和产品创新方面的投入，生产可以提高电动汽车的安全性能和续航里程的高镍正极材料。Hitrans的目标是成为全球一流的新能源动力锂电池正极材料开发商。
Now let's turn to our material business resulted from the acquisition of Hitrans. As expected, the business is a major stream of our current revenues and is benefiting from material price inflation. By leveraging its advanced technology and reliable quality, Hitrans has accumulated a number of strategic customers and is now in full production. In 2022, we will maintain Hitrans's material business operations while strengthening its core value and professionally. Hitrans will make further investments into research and development and product innovations to make high-nickel cathode materials that can improve safety and range for electric vehicles. As we seek to make Hitrans become a world's first-class manufacturer of cathode materials for new energy power lithium batteries.
与此同时，原材料价格的上涨也侵蚀了下游电池业务的利润水平。为了主动应对这一影响，我们已经从三方面着手采取措施。首先，我们与一些主要供应商签订了长期的供应协议，确保在生产前能够锁定关键的材料价格。其次，我们也通过并购Hitrans，成功进入产业上游，这样我们能够掌控一些原材料，或者利用原材料上升的行情，对冲电池业务下降的毛利润。第三，我们也开始与下游客户重新协商价格，并且成功和一些重要客户协商好进行提价。由于价格传导需要时间，原材料价格上涨对现金流带来了一定的压力。然而我们认为这些都属于短期波动，随着原材料生产商逐步扩产，材料价格会逐渐下降，并回归合理水平。因此，我们预计公司毛利率会在未来得到提升。
Meanwhile, the material price hikes decreased the profits of our downstream battery business. In order to counter this impact, we have actively taken measures in three main aspects. First, we signed long-term supply agreements with some major suppliers to secure key materials in advance to ensure production. Second, we have expanded into the upstream with our merging of Hitrans so that we are capable of managing some raw materials or use the material price inflation to offset the decrease in the gross profits of the battery plants. Third, we started to renegotiate prices with our downstream customers and have successfully raised our prices for a few of our key customers. The rise in material prices added certain pressure to cash flow as it takes time to transmit the price increase to downstream customers. However, these are short-term fluctuations.
As the raw material manufacturers expand production, the prices of the materials will decrease and gradually return to a reasonable level. With that, we expect those profits to increase in the future. We aim to lead the lithium-ion production and electric energy solutions while maximizing value for our shareholders with our expansion into the raw material business and swift response to the market. Going forward, we will also actively search for quality assets and highly valuable targets along the upstream and downstream of the new energy industry to invest in an attempt to stabilize our supply chain and enhance our investment returns.
Now let me turn the call over to our CFO, Yuna Pei, who will provide details on our financial performance.
Okay. Thank you. Thank you, Mr. Li, and thank you everyone for joining our call today. I will now go over our key financial results for the first quarter of 2022. For the full details of our financial results, please refer to our earnings press release. Our significant revenue expansion validates the effectiveness of our growth strategy. The raw material price hikes remained as short-term headwinds to the battery business, but we've taken quick action in order to mitigate its impact. Additionally, we expanded our investments into our infrastructure with primary focus on sales and marketing as well as research and development for our next phase of growth. Moving on to our results.
In the first quarter, net revenue surged 742% to $80.2 million from the same period of 2021, primarily due to additional revenues from lithium battery materials brought by the acquisition of Hitrans and the strong sales of high power lithium batteries. Cost of revenues was $74.9 million in the first quarter, up 888% from the previous year. Gross profit was $5.3 million, an increase of 189% from the prior year. Gross margin was 6.6% in the first quarter compared with 19.5% in the same period of 2020 as raw material costs rose.
As noted earlier, we signed long-term contracts with certain suppliers, expanded into raw material business, and began renegotiation with our clients to tackle the price hikes. We expected the prices of raw materials to decrease while new capacity is being added by the industry. In the first quarter, our operating expenses rose 256% to $6.7 million, primarily due to growing headcounts and the acquisition of Hitrans. Within that, our research and development expenses increased 585% to $3.3 million. Sales and marketing expenses increased to 290%.
To $0.8 million, and the general and other administration expenses increased 69% to $2.2 million. Even with these increases, our operating expenses were held only 8.3% relative to our revenues, compared with 19.8% in the same period of 2021. Our change in fair value of warrants was $1.6 million in the first quarter compared to $28.4 million in the prior year. Thus, net income attributed to shareholders of CBAK Energy was $0.4 million during the period, compared to $29.6 million in the same period of 2021.
As of March 31, 2022, our cash and cash equivalents reached $5.6 million compared to $7.4 million as of the end of 2021. Looking ahead, we will remain committed to our long-term growth strategies for our development in the industry. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead. Thank you.
Thank you. We will now begin the question and answer section. All you participants with question to pose, please press zero one on your telephone keypad and you will place in a queue. To cancel the queue, please press zero two. Once again, zero one on your telephone keypad now. First question we have Lorna from Stoneship Group. Please go ahead.
你好，非常感谢。想问一下，公司此前也曾经公告过关于46系列电池的开发速度，那市场是普遍比较关心46800型号的这个电池方面的具体情况，可以具体地介绍一下吗？
Before the company had once released your progress about the production of the 46-series, nowadays the markets are all very interested in the development progress of the 46800 battery. Could you give us more updates on the development of the 46800? Thank you.
谢谢Lorna，这个问题让我们田总来负责回答。
好的，这个问题我来回答一下。此前我们也公告过我们投入了46800电池的研发，那么现阶段的话，我们的A样开发已经完成，已经满足了我们的原设计要求。现在的话，这个电芯的循环仍在继续，我们会稳步地推进这个电池的开发计划。以上。
Mm-hmm.
Okay, yes, we did release our announcements on the development of 46800, and as well as the investments of R&D on this battery model 46800. At present we have already finished the development of the prototype, and we can find that this development, this prototype can well satisfy the original design requirements. We are going to continue to proceed steadily in our development, in our further development.
好的，非常感谢。那我的第二个问题是关于理解公司就是在南京工厂方面生产的一个情况，可否具体地介绍一下，这个未来三到四个季度之内，公司是否会在南京工厂生产的产品，这个客户开拓当中取得一些进展呢？
Okay. My second question concerning the company's development plan and customer development progress in the Nanjing plant. I would like to know more about the production situation in the Nanjing plant. In the coming three to four quarters, what will be the major products to be produced in Nanjing plant? Could you share with us some updates in the development of the customers targeting at the products that will be produced in Nanjing?
这个问题让王总来回答一下吧。
好的，实际上我们南京的产能也是从2022年开始逐渐地提升。那我们市场开拓这一块呢，也是按照我们产品和市场需求来稳步推进。目前已经有批量的订单导入，但是量呢，可能是在二季度末和三季度开始就会逐渐地加大。目前我们这一款产品呢，主要还是目前的这个主要的市场方向还是在两轮三轮的像换电呀、租赁啊，以及我们的这个目前我们也都在这一块，换电租赁我们也都已经接近谈成的大单，有可能是在六月底下的，就是也是一笔单子就可能是100到150万只，也就是5,000万以上的人民币的一个销售额。那其他的就是在储能方向呢，我们目前市场也对我们这款产品的关注度比较高，已经有数家客户已经在测试，有个别已经开始在小批量使用了。那也预计是在三季度会有一个批量的订单会导进来，而且数量也会越来越多。那我们下一步的计划呢，就是在这个未来的低速车以及A00级，还有其他的叉车和物流车这块，我们目前也已经内部也有两到三个大的项目在打，然后这样就是能够为我们第二条产线的投产，我们预计是在四季度投产之后，这些大的项目导进，同时也为我们二期18个吉瓦时的前期的建设的这个明年新投的产能也打下了这个批量的大客户的这个基础。预计呢全年就是我们争取是在未来的三个季度内，我们销售额是做到3亿的这个目标。
Okay, so if we talk about the production capacity of Nanjing, we are happy to see that the production capacity have been increasing since the beginning of year, and we have been exploring and developing the markets, and we can see according to the market demand, and we are happy to see that as orders have been coming to us, and we believe that from the end of the second quarter or the beginning of the third quarter, there will be more and more orders expected to arrive. If we have a product, we always develop our product according to the market demand and at present we mainly focus on developing products for two wheelers and three wheelers, and the main business will be focused on the swapping of batteries and leasing.
In this sector of business we have already almost reach a deal with a big client, and we expect the client to place the order at the end of June. The total sales amount brought by this order is expected to be about $1 million-$1.5 million, so it will be a big order. When it comes to energy storage, the market has been paying close attention to our business in this regard, and several customers have already started their shakedown test with us, and even a small bunch of them have already started the small lot production already. It is expected that in the third quarter, we are going to receive orders, bigger orders, and the quantity, the sales quantity will keep increasing after that.
If we have a look at the future, we plan to develop our products focusing on low speed vehicle or A00 grade passenger vehicle, forklifts, as well as some vehicles for logistics. We estimate that we're going to have two to three projects introduced for these areas of business, and they will fulfill our two new production lines in the fourth quarter. Secondly, we also try to develop more customers so that after the 18 gigawatt production capacity is well ready, then we can have enough customers or enough orders from big customers. We believe that our efforts that we have been making will lay a solid foundation for securing more orders from bigger customers. For the rest of this year or let's say in the coming three quarters, our sales target is to reach $300 million. That's it, thank you.
那我的最后一个问题呢，就是关于，一个是当前的供应链紧张，再一个是新一波的疫情带来了很多城市封城、居家隔离，那这对于公司第二季度以及全年是有哪些影响呢？
Okay, my last question is concerning the serious situation brought by the COVID pandemic. On the one hand, we can see there has been tightness in the supply chain. Secondly, we also noticed that in China, due to the surge of the pandemic, quite a lot of cities are undergoing lockdown at the moment. We would like to know what kind of impact it will bring to the performance of the company in the second quarter as well as the rest of the year.
这问题请裴总回答一下。
目前的疫情对国内工厂的影响，确实存在一些不可预测的因素。从2020年年初到现在，我们的大连、南京和绍兴三处工厂，目前并没有受到疫情封城的影响。我们不排除后续如果有突发的疫情，封城会带来一定的影响，但是目前来看是没有受到过多的影响。目前的工厂也是会...
目前的工厂基地在国内也是比较分散在三个基地，那么如果一旦出现有封城的影响，那么我们会积极采取应对的措施。谢谢。
We admit that the pandemic has brought some uncertainties to the running of the factory. However, as we know, since the outbreak of COVID-19 at the beginning of 2020, our three plants located in Dalian, Nanjing and Shaoxing respectively haven't been affected by the COVID-19 or lockdown. Although in the future we cannot exclude the possibility of a lockdown due to the pandemic. However, we have to say so far so good. We also feel lucky that our three plants are sparsely located. The plants are located in three different places. If in the future, if one day, the lockdown is happening in one of the cities, then we can have the confidence to take active measures to mitigate the impact.
好了，我没有更多问题了，谢谢。
That's it for my question.
Thank you, Lorna. Thank you. Next question is Howard from Linton. Please go ahead.
大家好，我想问一个问题，是公司在收购完了这个Hitrans之后，还有没有其他拓展这个电池上下游产业的计划？这个大概是出于一个什么样的动机或者什么样的战略因素啊？能简单介绍一下吗？
Okay, after the acquisition of Hitrans, does the company have other plans to acquire or merge other battery plants upstream or downstream? If yes, could you also share with us what is the motive behind it? It is out of what kind of strategic factors that you are considering doing this kind of acquisition?
这个问题还是请裴总来回答一下。
谢谢您的提问。从目前的我们经营业绩来看，Hitrans的这个收购还是一项较为成功的一项收购。我们后续公司也是非常希望有能够跟类似Hitrans这样的产业上下游的企业在能够在股权上或者是战略上有更深一步的合作。那么主要是基于从我们的财务投资的角度，还有从我们核心业务的发展的战略角度，这两个角度去考虑的。从财务投资的角度呢，其实在这个大的背景，就是在全球倡导这个绿色清洁能源、低碳生活的背景下呢，我们都知道，在这个未来很长一段时间内，就包括我们中国在内的全球各国都普遍将这个新能源的产业作为国家重要扶持的重点行业。那么这个新能源上下游的，尤其是锂电上下游的这种行业发展，是具有非常大的潜力空间的。所以从财务投资的角度我们认为会有比较高的增长空间。那从增强公司核心竞争力的角度来看呢，我们作为这个深耕锂电行业二十多年的高端锂电电池制造商，我们知道这个锂电上下游企业，尤其是锂电关键原材料的供应商的这个产品品质和生产的稳定性对于我们生产高品质电池具有非常重要的作用。那么对锂电上下游产业的拓展就有利于我们把握关键原材料的品质和供数量的稳定，也有助于我们核心的锂电业务的发展。谢谢。
好的。
Yes. Thank you for your question. We have to say that our recognition of Hitrans is a successful acquisition and it is our hope that we can have more cooperation with companies like Hitrans in terms of equity or in terms of strategic cooperation. We have interest in this kind of cooperation because of two perspectives. The first one is financial investment. The second one is the development of the core business of our company. If we have a look at the financial perspective of financial investment, as we know, nowadays, a large number of countries in the world, including China, are advocating the development of green and clean energy as well as low carbon development. We believe that new renewable energy and clean energy will be a pillar industry and a promising industry in the future.
It is very important for us strategically to integrate the resources upstream and downstream of new renewable energy, especially in terms of lithium battery. We believe that it will boast great potential in the future. From the perspective of financial investment, we believe that this will give us a bright future. We have a look at the second perspective, that is the development or the sharpening of our competitive edge. As we know, CBAK is a high-end trader in of lithium battery. Based on our 20 years experience, we are fully aware that the quality of raw material of the lithium battery, as well as the stability of production capacity, is crucial for the development of the company.
That is why we attach great importance to elaborating the resources upstream and downstream, so as to ensure the quality of our products and, in particular, the raw material of our products, as well as the stability of the supply chain, so as to ensure long-term development of our company's core capacity and core competitiveness in the market.
好的，非常感谢。我刚才在您的这个演讲中听到我们这个大连的工厂的产能基本上在满负荷地运转。那我们近期也有很多市场上有很多电池的工厂它也有新的这个产能的建设计划。今年2022年，我们在电池材料或者说电池的生产上，我们是如何规划我们新的产能的呢？
OK. From the report that you gave us just now, I realized that the production capacity in Dalian is full, it is in full capacity. I also noticed that recently quite a few battery manufacturers have their plans to build new production lines. I would like to know that for CBAK in the year 2022, in terms of battery material or battery production, what kind of a plan do you have for the development of new production lines?
这个问题请王总和裴总一起回答吧。
目前这个产能，每一家的，就是目前我们大家也能看到的，就是整个市场上，尤其是头部的一些企业，他们的产能扩张也是非常快的。那我们大连这边也一样，包括我们南京。其实这个是不冲突的，因为我们的市场的方向目前还是没有太多交叉的。像咱们刚才说到一些企业，它的应用主要是在汽车，或者是电动工具类似的一些应用。那我们大连的目前，我们的产品主要还是面向于储能以及这种小动力。我们现在的今年的这个大连产能的扩张呢，就是我们去年新建的产线，今年按照我们的计划是在有序地达到满产。同时呢，为应对就是后续客户需求的增加，我们也在部署新的、更多的产能的投入。那我们现在就是去年新增的这条产线，已经在产能上较我们原来的两条线，相当于是原来的总产能上面已经翻倍了。那这个我们现在的客户群体来说，我们目前在储能这块，我们新产线定向面对的这个储能领域的头部的三家客户，我们已经实现了两家客户已经接到批量订单，那未来有可能这个订单还会更大，我们这新增的产线也满足不了这些客户的需求。那就是说，大连的新增产能也在提上日程，也已经在开始投入了，就是这一块。那原材料的话，我们也是在积极地根据下游的需求，积极地在融资去扩张产能，满足这个客户的需求。主要是就您提到的这两个问题，我们这样回答。
Yeah, we also notice that the market, especially those major players in the market, are quickly expanding their production capacity. Our plants in Dalian and Nanjing are the same. I don't see any conflict in it, because our market, our customers are not overlapping, because for those other major players, they are focusing or they are supplying more to the vehicle manufacturers or electric tools. For us, for CBAK, we are focusing on energy storage and small power vehicles. Our production capacity has been increased sharply in Dalian and our new production lines are gradually entering into full production phase. In the future, if the customer demand kept increasing, it is also possible that we are going to allocate and invest more production, more new production lines.
So far our new production lines in Dalian have already doubled what we have in the past. In terms of energy storage, after our new production line come into operation, two out of three customers of ours have already placed orders, and we believe that the new production line in Dalian can well meet their requirements in the near future. If we have a look at the raw material, we will keep a close look at the customer need in the downstream. If they have the requirement to increase their orders, then we will also actively finance to extend our capacity so as to better satisfied their needs.
好，谢谢，我没有其他问题了。
I have no more questions. Thank you.
Thank you, Howard. Seems no more questions in the queue. Let me turn the call back to Yunfei Li for closing remarks.
袁飞总，您说一下终结语。
好，好。那感谢各位参加今天的电话会，我们期待下一季度再和各位汇报新的进展。
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.
Thank you all again. This conclude the call. You may now disconnect.
Thank you.