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On behalf of the board (the “Board”) of directors (the “Directors“) of the Company, I am pleased to present to shareholders the annual results of the Group for the year ended 31 December 2016 (the “Year“).

In 2016, the Group developed its businesses aggressively and achieved remarkable results as follows:

  • The business maintained steady growth with revenue reaching RMB21,455 million and gross profit margin increased to 14.4%.
  • The industry leadership remained solid and topped its industry peers among the “Fortune Top 500 Chinese Companies (《財富》 中國500強)”, “Top 500 Chinese Enterprises (中國企業500強)” and “Top 500 Chinese Private-owned Enterprises (中國民營企 業500強)”. The Group was also on the “Top 100 Enterprises in China Light Industry (中 國 輕 工 業 百 強 企 業 榜 單)” list and placed first in “Top 10 Enterprises of New-energy Battery Industry in China Light Industries (中國輕工業新能源電池行業 十強企業)”.
  • The Group continued to boast industry-leading technological strengths and was accredited as a “National Model Enterprise of Technology Innovation (國 家 技 術 創 新 示 範 企 業)” and “National Model Enterprise of Intellectual Property (國家知識產 權示範企業)”.

These achievements and awards are testament to the leading position and brand advantage of the Group in the industry, with advanced technologies, and shrewd judgement and strategic vision. The remarkable results of the Group during the Year were mainly attributable to the following factors:

  • INDUSTRY REMAINING STABLE WITH PROFITS REBOUNDING

    In recent years, the PRC government has stepped up efforts in inspection and verification of environmental protection work and encouraging optimization and upgrade in the industry. These efforts bore fruits in 2016. At the regulatory policies introduced by the authority and the industry making adjustments, competition, which had been fierce in the past several years, has eased and the lead-acid motive battery industry has seen its profit rebound in general.

    As a leading enterprise in the industry, the Group not only focuses on pushing for organic growth, but also places major efforts on promoting healthy and orderly development of the industry. During the Year, the Group actively responded to the policies and guidelines issued by the PRC government and also enhanced control over its production capacity. In addition to absorbing the market share released from eliminated production capacities, the Group strived to increase profits and worked hard at helping the industry rebound to its historical peak.

  • DIVERSIFYING BUSINESS AND EXPLORING NEW GROWTH DRIVERS

    During the Year, the Group actively expanded its business and product mix and refined the new-energy industrial chain, gave itself a more diversified operation with constituents having sound growth potential. On 29 February 2016, the Group officially launched the CHILWEE Black Gold Series High-energy Value-regulated Lead-acid (VRLA) Battery (the “BG Battery”), the industry’s first successful attempt at applying Graphene technology into a commercially viable, mass produced rechargeable lead-acid battery. Market response to the BG Battery has been very positive as users are impressed by the advanced technology it embeds and also its outstanding high power performance.

    Seeing huge growth potential of the domestic energy storage market, the Group established a cooperative relationship with General Electric Company (“GE Company”) on 30 December 2016. The two parties agreed to set up a joint venture to undertake research and development (“R&D”), production and sale of energy storage product using proprietary technology and know-how. With the joint venture having the complementary strengths of the two partners, the Group has formally forayed into a new market with substantial growth potential.

    In addition, the lithium-ion battery and start-and-stop battery businesses of the Group recorded satisfactory progresses. To meet the increasing market demand for lithium-ion battery, the Group has continuously expanded its production capacity for the battery. Production of start-and-stop batteries commenced in the fourth quarter of 2016.

  • ENCOURAGING TECHNOLOGICAL INNOVATION AND ENHANCING RESEARCH AND DEVELOPMENT

    The Group’s products excel those of its peers in the market and have been well received by the industry and consumers. This achievement is owed much to the effective R&D system and outstanding technological advantages of the Group. The Group has persisted on product innovation and focused on R&D. It has set up various technological innovation platforms, including a nationally-recognised technology centre, a nationally-accredited laboratory, a national environmental protection engineering technology centre and provincial key research institute, and also an overseas research institute in Germany. In 2016, the Group enhanced its technological strengths and made remarkable achievements in technological R&D.

    The Group is open to exchange and cooperation with international academic institutes and enterprises with advanced and sophisticated technologies as well as professional talents. In 2016, the Group cooperated with Stanford University (“Stanford University”) in the United States in developing the new generation of lithium-ion battery, and that has enhanced our lithium-ion battery technology. Such landmark partnerships which give birth to new technologies and new applications will consolidate our leading technological advantages and fortify our foundation for future growth.

  • OPTIMIZING SALES NETWORK AND STRENGTHENING BRAND VALUE

    The Group is one of the largest suppliers of motive batteries in the world and has a nationwide sales network in the PRC. It will continue to optimize production capacity, advance production technique and enhance technological innovation so as to solidify its industry leadership.

    To buttress sales, the Group has expanded both the primary and secondary distribution markets. In addition to maintaining cooperation with various leading electric vehicle manufacturers, the Group in the Year has increased the number of independent distributors in the secondary market to 2,135. Furthermore, the Group has implemented lean management by refining and removing layers in sales channels, boosted the loyalty of customers to the “CHILWEE” brand. Our marketing strategy has been expanded from promoting channel expansion to cover also brand building, which means reputation of the “CHILWEE” brand will be enhanced with dedicated efforts, helping it gain market attention and praise as well as strengthen customer loyalty.

Looking forward, having the leverage of supportive government policies and with green living gaining endorsement by all in the community, plus the industry itself going through integration and reorganization and also a rapidly growing electric vehicle market, the industry has promising prospect. The Group will closely monitor the market and keep abreast of industrial trends, and timely and proactively adjust its production and marketing strategies to seize every appropriate business opportunity and consolidate its industry leader standing. In addition, the Group will continue to enhance brand building efforts, its R&D capacity, employee training and strategic cooperation with international business partners, as well as improve its industrial layout and new-energy industrial chain.

The year of 2016 was a significant strategic milestone year for the Group. Various projects made exciting achievements. On behalf of the Group, I would like to express my gratitude to our shareholders, customers and business partners for their long-standing support and faith in the Group. I would also like to thank the Board, the management team and our staff for their wholehearted commitment to the Group’s success. With the community giving us attention and encouragement and the diligence and wisdom of our staff, the Group looks forward to taking its business to new heights in 2017.

 

Zhou Mingming
Chairman and Chief Executive Officer
25 March 2017

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