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

Thank you for joining us today. Welcome to China Yuchai International Limited First Quarter 2012 Earnings [indiscernible]. My name is Kevin Theiss, and I'm with Grayling, China Yuchai's U.S. Investor Relations Adviser. Joining us today are Mr. Benny H. Goh, President; and Mr. Kok Ho Leong, Chief Financial Officer, respectively. 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, 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 are based on current expectations or beliefs, including, but not limited to, statements concerning the company's operation, financial performance and condition. This 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, including those discussed in the company reports filed with the Securities and Exchange Commission from time to time. The company specifically disclaims any obligation to maintain or update the forward-looking information, whether on the nature contained in the conference call or otherwise in the future. Mr. Goh will provide a brief overview and summary, and then Mr. Leong will review the financial results for the first quarter of 2012 ended March 31, 2012. Thereafter, we will conduct a question-and-answer session. For the purposes of today's call, the financial results are unaudited and they will be presented in RMB and U.S. dollars. Mr. Goh, please start your presentation.

Thank you, Kevin. The first quarter of 2012 continued to experience weak commercial vehicle sales, with diesel-powered commercial vehicle segment dropping approximately 12.3% compared with the first quarter of 2011, according to the China Association of Automobile Manufacturers, CAAM. During this period, overall sales of diesel-powered heavy-duty truck in China, including both truck and trailers, declined by 30% from the same quarter of 2011, despite lower inventories. The construction industry in China continues to be sluggish, reducing the amount for construction-related stocks. OEMs that mostly produce these construction-related vehicles reported sharper sales decline than other OEM truck producers. High fuel costs were also another factor contributing towards the decline in truck demand as truck operators were [indiscernible] impacted investments into new trucks. The bus segment perform better than the truck segment in the first quarter of 2012 compared with the same quarter 1 year ago. According to CAAM, total bus sales were flat, however, with sales of diesel-powered buses increasing 6.6%. Medium-duty bus sales were up 6.5%. China Yuchai remains one of the leading diesel engine manufacturers in the Chinese bus market. Bus sales continue to benefit from the ongoing expansion of the highway system and continued organization. In addition, following from a number of fatal accidents involving overloaded school buses and the use of substandard vehicles, the PRC government introduced new policies to improve the quality standards of school bus production and usage, which has contributed the growth in bus sales. While we are starting to see a gradual loosening of the Chinese government's monetary policy, in an attempt to counter the effects of a deepening Eurozone crisis and uncertain economy, these actions will gradually result in increased investment, spending and demand. However, we remain guarded over the short-term prospects of the diesel engine market, especially in the heavy-duty…

Thank you, Benny. Let me first walk you through our first quarter 2012 financial results. Our net revenue for the first quarter of 2012 was RMB 3.7 billion, USD 585 million, compared with RMB 4.2 billion, in the first quarter of 2011. The total number of diesel engines sold by our GYMCL subsidiary during the first quarter of 2012 was 131,697 units compared with 160,831 units in the first quarter of 2011, a decrease of 29,134 units or 18.1%. This was mainly due to weaker demand in the commercial vehicle market. The decline in net sales was RMB 550.4 million or 13%, as compared to the same period of 2011. Our gross profit was RMB 779.4 million, USD 123.8 million, compared with RMB 944.1 million in the first quarter of 2011. Gross margin decreased to 21.2% in the first quarter of 2012 as compared with 22.3% 1 year ago. In the first quarter of 2012, the lower gross margin was attributable to both higher depreciation expenses and a shift in the sales mix to more light-duty engines. Other income was RMB 26.0 million, USD 4.1 million, an increase of RMB 6.6 million from RMB 19.4 million in the first quarter of 2011. This increase was mainly due to higher interest earned on bank deposits, and a mark-to-market gain in our shareholding in Thakral Corporation Limited versus a loss in the first quarter of 2011. This increase was partially offset by a loss in the sale of property, plant and equipment. Research and development, R&D, expenses were RMB 81.9 million, USD 13 million, compared with RMB 78 million in the first quarter of 2011, an increase of 5%. As a percentage of net revenue, R&D spending rose to 2.2% compared with 1.8% in the first quarter of 2011. Selling, general and…

Operator, we are ready to begin the Q&A session.

[Operator Instructions] Your first question comes from the line of Alex Potter with Piper Jaffray.

I was wondering, first, if you could comment on your capacity utilization, your overall capacity utilization. And then related to that, what your CapEx requirements are for the rest of the year and what you intend to be spending that CapEx on.

Okay, Alex. By and large we can not reveal our expectation [ph]but what we want to say is that obviously the pressure or the demand -- or the lack of demand for engines has impacted us somewhat. Having said that, we are still looking good in terms of our production. We -- our guys are still fully engaged, and we are not to lay off any people for that matter. And in terms of CapEx requirements, we are looking, our CapEx firstly, to support the long-term goals, which is a natural gas and high horse power engines, but we are also looking at some of the CapEx to be a portion for upgrade of existing lines and equipment. But definitely, we are not going to go put CapEx for increase in our capacity at this point in time.

Okay, yes, that make sense. What -- just, I guess, in general or a ballpark figure, how much do you expect to spend in CapEx for 2012? If you have an estimate.

Our estimate is still the same as with previous year, it's around at RMB 700 million.

Okay. And then I was wondering if you could comment a bit on the mix between heavy- and medium- and light-duty engines in the quarter. It sounds like things obviously have been shifting a little bit toward light and medium and away from heavy. I was just wondering if you could give a little bit more detail around the specific mix in the quarter.

For China Yuchai, that's definitely the case. Our mix is shifting the other way around. Last year, our mix of 4 to 6 cylinders was, in 2010, was almost 60-40 and then last year was close to 50-50. And now we're coming back to about the other way around, it's almost 55 and 45, where 55 is more on the 4 cylinders and 45 on 6 cylinders. This is the natural way it's going because you can see that heavy-duty engine are definitely going through a very bad patch right now. While having said that, our heavy-duty numbers are much smaller in comparison to our total numbers, so we are not less impacted by that. However, the medium-duty is also looking at some pressure. And so that's why we are shifting more towards the light-duty engines.

Okay. And then, two, I was -- by end market or end application, I know that you can clearly -- you can divide it up between medium, heavy and light. I was wondering if you have a little bit more color on, I guess, the heavy-duty, medium- and light-duty for construction application versus for logistics or hauling applications. It sounds like the construction end markets are doing worse, I guess, or faring less well, I guess, than the logistics and hauling segments. Is that accurate?

That's absolutely right. Because we are seeing a lot of pressures on our construction site, so the application for engines in the area of wheel loader, bulldozer, excavators are going through a lot of pressure right now. But having said that, again, we do not have such a big portion of that engines from our total volume that we sell. So we are still not adversely [ph]affected.

Okay. And then, in terms of recent order volume and visibility, does that -- have things improved at all to give you some confidence that here, over the next quarter or 2, things could potentially be turning around? Or is it just still too difficult to say?

Okay, let me just rephrase the sentence somewhat. Because I know you guys have spoken to me in March, that'll be in New York, you are saying that the things will brighten up, our first 2 quarters are tough. I still stand our [indiscernible], the first 2 quarters are going to be tough. In fact, it will be darker than we thought. And the last 2 quarters, we're hoping for things to improve because things are lining up, because of the change in government and so forth. But this could be stretched out somewhat at the rate it's going.

Okay. So in general, you still think that the second half is going to be better than the first half, but still a lot of uncertainty? Is that...

Again, I will say it's a cautious optimism but we're still facing a lot of headwinds right now. And I think there's -- some of these segments, there's some bright spots right now actually the bus market. The bus markets continue to look very promising. The increase in potential transportation segment looks good and we are catching some growth over there.

Okay. And then my last question, is pricing getting impacted at all through this weakness in the markets? Are you getting downward pricing pressure? Is most of the pressure on margin coming from depreciation and increased cost of goods sold?

It is more. In fact, this is a buyer's market right now. Everyone is chasing for the same order. The environment is especially tough. But we are also looking at how we can expand our productivity and offset our pricing [ph] pressure.

Your next question comes from the line of Sandy Mehta with Value Investment.

I noticed that your receivables were down 12%, March versus December, which is a good trend. And -- but you're still -- they're still high at $934 million. And normally, historically, it's been at about $350 million to $500 million range. And I understand because interest rates are high, then it makes the factoring less attractive. But now that rates are coming down in China, do -- should we see our receivables continue to come down going forward? And will it get back to your, sort of, normal level of 350 million to 500 million? And then, will that release cash so your cash balances would increase on your balance sheet?

Yes. This is Leong here. Yes, you are right to say that our accounts receivable and the bills receivable are coming down. But you also have to see in the total -- totality in terms of our borrowings as well. If you look at our borrowings, it has also come down. The borrowing has come down. If you look at the our presentation just now, it should show that this is largely as the result of the repayment of the first's tranche of the short-term financing bond. As traditionally, we have a full variety of funding instruments, inclusive of accounts receivable factoring, bills, payables and all the accounting. Yes, and that is the reason why upon the repayment of these short-term refinancing bond, we have ran into accounts receivable factoring. That's why you see a corresponding drop. And you are right to say that in the first quarter, there is a very slight softening in the bills discounting, AR -- accounting receivable factoring rates, although we saw a lot, but this -- some encouraging signs for us. Although in other part of the loan interest rate, we have not seen a major shift, yes. That accounts for it. As your question about the future, it is still not easy for us to predict, although we have seen some news about the change in reserve ratios. But if you look at some of the official China websites, you can see that these have gone -- lead to a major shift in the interest rate change or even a jam in the loan, in that sense, based on what we have read, this news that just come out just 4 days ago. You have to be -- the new reserve ratio change is to be implemented on the 18th of this month. So that's how we see -- we are -- there's no clear [indiscernible]. Although there are some signs, but it is not easy to see how it has been unfolded.

So right now your net cash on the balance sheet, so your cash minus your short- and long-term debt, it's about $290 million. And if interest rates in China were to come down, say, 100 or 200 basis points, then we would see your receivables balance to gradually come down, right?

Well, if the interest rate is favorable, we will sure go for the factoring as well as the bills receivable discounting. But that also depending on our funding, if there's no funding needs, the best way to do is not to incur additional finance costs.

[Operator Instructions] Your next question comes from the line of Gerwin Ho with Citigroup.

I just have 3 questions. First of all, what is -- given we are now 5 months into the year, what's your latest view on heavy-duty truck market in terms of growth for this year? And when does we expect positive year-over-year growth to come back because I think in the first 4 months, we're still negative year-over-year growth? The second question is have we gained market share in the heavy-duty truck engine market this year? And if so, who is getting market share and how is that being achieved? And the third question, lastly, is in terms of a key driver behind the truck market weakness, what do you think needs to change for the truck market to be stronger?

Okay, Gerwin, thanks for your questions. The first question is regarding the forecast of the heavy-duty trucks. Now the heavy-duty truck is very much correlated to the infrastructure and real estate development in China. As you can see, things are now very much on brakes right now. And so at this point, the visibility is pretty low because we do not see any instances for this segment to be back on track. And in general, the consensus on heavy-duty is basically flat for the whole of this year -- I should say that's last year, in 2011. And I think the change in government towards the end of the year may have some impact but that will be a bit much later in the year. And your second question, let me just look at my notes here, you're basically asking who -- or if ever have we gained any market share. Our numbers for the heavy-duty trucks remain somewhat essential. Indeed, we have gained some share because the whole pie has actually come down. And so we have remained the same, so we have gained some share. But again, as I stated, Alex, our heavy-duty portion is also not very large. So we do not actually benefit a great deal from that as well. So -- and lastly, what needs to change? We are very much -- is in line with the fact that the new government is put in place more policies on investment projects and also to kind of pump-prime the economy. Otherwise, things will still look very bleak and desolate.

Your next question is a follow-up question from Sandy Mehta with Value Investment.

Yes. Can you comment generally, what is the state of inventories in the channel in terms of engine as well as end products such as trucks and buses? Has there been reduction of inventory?

Yes. I think if you look at the inventory status compared to the last quarter of 2011, the inventories have come down, indeed. In fact, I -- we are speculating there are too much inventories in the system. But because the end customers are not making any more purchases, so that has kind of like lack of food [ph] to sales that we see, and that's the situation as we envisage. Okay, we've got some questions coming online here, a couple of questions. The goal for school bus engines was 6000 for 2012, where do we stand in regards to that goal? What is the outlook for the school bus segment for this and the future years. Yes, very much so. The school bus segment is -- continues to be a bright spot in the full horizon for the diesel engines. And [indiscernible] is in very good condition because of our capability, both in terms of the emission standards. We have our National 4 standards, which meets the requirements. And also, we are also putting in place our natural gas for the bus engines as well. So the outlook for us is actually very favorable in this segment.

There's another question from [indiscernible]. When will the dividend be announced? This is because GYMCL has announced in the China announcement. And as far as CYD, or China Yuchai International, is concerned, we have not made any announcement. We will make an announcement in due course when the board has approved the plan. As for our past trend, you can look at our website. You can see how we have been paying dividends year-on-year, in the previous year.

You have a follow-up question from Gerwin Ho with Citigroup.

Just a follow-up. In terms of -- obviously the visibility right now is not high, but if we were to hazard a guess for when the truck market could go back to positive year-over-year growth, what's our best guess? Would it be sometime in third quarter? Or would it be as late as fourth quarter? And the second question is in terms of the market share -- we did gain some market share, congratulations. And why do we see that? Is it because of our customer exposure? Or is it because on pricing-wise, we're more competitive than our competitors?

Okay. So hazard a guess, I think that whole heavy-duty truck market is really going through a very tough time and headwinds are still very strong. And to hazard a guess, I wouldn't envisage any growth until towards the very last part of the year, if any at all. Again, as I say, it's correlated to the pump-priming and policies of the government. So if that happens sooner, we will then see some -- silver lining in the cloud. Market share, what we have done -- actually, again, because our numbers are very small, so we've managed to maintain our units sold. So that helped us in terms of our market share. And in general, because of our good relationship that we have with our core customers and that has preserved the situation that we have created. Maybe, let's take some more web questions. We have a question here, which is the goal for the CNG/LPG engines in 2012 was about 26,000 units. The revenue spend in regard to that goal for this year, it was almost for [indiscernible]. Again, this is something which we are also quite excited about because the CNG/LPG market segment is one area that we are engaging into. And our goal actually has been quite aggressive. And we are looking at our growth in this area to be almost double of what we had last year, albeit it's a very small number right now. Although for future years, I think the outlook it looks very good because the natural gas segment is one area which the government is promoting. That is to also compensate for the fact that diesel is actually expensive and not environmentally friendly. So the only key to this whole thing is make sure that the infrastructure are in place, that we're filling points between cities. Otherwise, this is going to be a major area of growth.

We have a follow-up question from Alex Potter with Piper Jaffray.

I just wanted to follow up on that natural gas point there. I was wondering if you have kind of a full portfolio of your own self-produced engines in that segment, kind of what the source of the technology was. Was that all kind of internally developed? And then if you can also give a little more detail around how specifically the government is supporting growth in the natural gas space, I'd be interested to hear that as well.

Okay, Alex. Yes, we are going to have our full portfolio. In fact, right now we have a couple of platform engines that is really running on natural gas. And that supports a lot of the municipal buses projects that we have won, particularly in Beijing, in Shanghai, also in Guangzhou during the major events like the Olympics, the Asian Games and also the Shanghai Expo. We will continue to produce that using our own proprietary technology, we own an IP for that. And this will lead us to have a full range of products. And that actually steps the capability to really engage in all segments when the regulations are in place.

Okay, great. And then, also one last question just on housekeeping here. What sort of tax rate expectations do you have for the rest of the year?

Relating to the tax, if you -- our main operating unit is actually GYMCL. It is operating from this western zone of Guangxi of China. If you look at the -- how he has performed in the past, if you look at our 20-F, we also have elaborate debt. Guangxi, GYMCL has able to obtain this reduced tax rate of 15% under a different incentive policy, both under the Western Development Incentive as well as the High Technology Incentive. If you look at the announcement that we made in the 20-F, in 2011, we have obtained a high-tech certificate for the year 2011 to 2013. So that will secure us up to at least 2013 to have a 15% tax rate. Moving forward, the company can continue to apply, if successful, to be applicable for this 15% reduced tax rate. Just for our own identification, the Western Development Incentive, according to the government policy, will last up to 2020 and that's on the approval basis. That much I can share with you.

You have a follow-up question from Sandy Mehta with Value Investment.

You had a slight loss from the joint ventures. When do you expect that to break even? And also could you give us -- in terms of the end market where you're selling such as marine, power generation, do you have a breakup of your sales by end markets, please?

Sandy, our joint ventures when we conceived them a couple of years back in our plans. Actually, they are very much in the fruition, in our original plan. We look at it as a 5-year kind of timeframe before things are starting to reap the fruits of our labor. So right now, we are still investing more. And actually, if you look at it, because of the whole market, that has also kind of dampened up things somewhat. When you look at it, our joint venture, we can afford that. One is actually the Caterpillar, for example. The Caterpillar right now, we are actually going through some test engines at the Moscow operations. And in the beginning -- or end of the year, we're going to have the full facility in place. And this is where we start marketing and actually getting the remanufacturing done in a full-blown manner. In terms of Geely, the JV prototype, the project was somewhat delayed in the first-generation engine, that one cracked. And the second- and third-generation prototype will be by end of the year or early part of next year. So we expect full production again towards the middle of next year. So these are all, I think, moving on track as what we have planned. So we do not envisage much profit in returns at this point in time.

Your next question comes from the line of Gerwin Ho with Citigroup.

Just one last question. We did keep our market share, gain market share because of our relationship with the customers are good. Who are our top 3 customers in the heavy-duty truck engine side at the moment?

The customers are very much the same guys, we have Fung Fung [ph] which is one of our main customers. Yutong is also our customer as well and also, Wutien [ph] as well. Okay. Maybe take one last question, one webcast question. What are major projects for 2012? Well actually, as I mentioned earlier before, our major project for 2012 really are mostly we have planned to capture the markets in the future. This will be the high horse power project that we have and also the natural gas engine projects. And how does the government subsidy play into this? So naturally, the gas projects will be very beneficial, if the government subsidies continue to kick in. As of now, we are putting our plans in place to capture these markets as we see the market developing.

Your next question comes from the line of Bing Wang with Bank of America.

Actually, I have more market questions. Do you plan to increase the investment in Asia by HK [indiscernible] not only increasing the liquidity but also will be increase more investors [ph] that's my first question.

So can you please repeat the question?

Sure. I mean do you interest to on [indiscernible] Hong Kong again? In that sense, you can not only increase your liquidity but also control the [indiscernible] of outflow, more Chinese local investors? That's the first question.

Okay.

Okay. The second question is on your strategic alliance. Are you planning to build up more JV with truck makers? I mean, in other sense, you can provide more long-term growth like convincing China.

Right. I think the first question about listing in Hong Kong, our answer is right now we are listed in the U.S. and we are, in fact, proud to say that we one of the longest Chinese companies to be listed there. And we continue to want to remain so. Although we cannot comment anything right now. And for your second question, strategic partners, alliances, now there are also drawbacks maybe [indiscernible] China with truck makers. The reason is that our other competitors may -- of trucks -- manufacturers of trucks will see that the competition. So that may also have some sort of dampening effect. But I can say that, I think we're open to all kinds of initiatives that will actually lead our business to grow. Okay.

We have now reached the end of our Q&A session. And I will now turn the call back to Mr. Goh.

Okay. Thank you all for participating in our first quarter 2012 webcast. And we look forward to speaking to you again. Goodbye.

This does conclude today's conference call. You may now disconnect.