XCMG 2023 Annual Report: What Achievements Did We Make Last Year?

At the end of April, XCMG disclosed its 2023 annual report. The company achieved an operating income of 92.848 billion yuan, which was basically flat compared to 2022. The net profit attributable to the parent company was 5.326 billion yuan, an increase of 23.51% year-on-year, and the net profit after deducting non-recurring gains and losses was 4.497 billion yuan, an increase of 29.47% year-on-year. Both revenue and profit continued to maintain the leading position in the domestic industry.

In 2023, under the leadership of the new board of directors and management team, XCMG comprehensively promoted the transformation and upgrading of the industry towards "high-end, intelligent, green, service-oriented, and internationalized" directions. The achievements we made mainly include the following highlights:

1.Stabilizing the Overall Situation and Responding to Challenges

Facing multiple difficulties and challenges such as the continuous contraction of domestic sales volume and the slowing growth rate of exports in the industry, XCMG achieved relative stability in operating income, double-digit growth in net profit, and simultaneous increases in gross profit margin and sales net profit margin. Receivables and inventory were both reduced, with most product market shares continuing to rise. The number of products leading the domestic industry increased by two, reaching a cumulative total of sixteen. Revenue from strategic emerging industries experienced high growth, with a contribution rate exceeding 20%. Revenue from new energy doubled for two consecutive years, contributing nearly 10%. International revenue increased by nearly ten billion, with a contribution rate surpassing 40%, reaching a historical high in international revenue.

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2.Firmly Establishing a Modernized Industrial System for Construction Machinery

Steady Development of Traditional Industries: Traditional industries remain the core pillar of XCMG's development.

Thriving Development of Emerging Industries: Emerging industries are flourishing in both quantity and quality. Revenue increased by nearly 30%, with a 4.5 percentage point increase in proportion.

Independently Controllable Parts Industry: XCMG's hydraulic, transmission, and other components have played an important role in technological independence and cost control.

Empowering Platform Enterprises: The marketing headquarters transformed its system, enhancing market insights, sales operations, risk control, and integrated management of major clients. The supply company set up a global procurement center, shifting towards value-based procurement. The equity company executed multiple investment projects to empower platform enterprises comprehensively.

3.Strengthening the Construction of International Operational Systems and Enhancing Capabilities

Advancing the implementation of international operational system reforms. Establishing an international business headquarters to build an international operational system. Enhancing the layout of overseas financial systems, establishing XCMG International Investment Development Company to oversee the integration of production and finance, overseas financial asset management, and currency management. Under the strategic direction of internationalization, the international business has experienced rapid growth, with revenue increasing by over 30% and its proportion rising by more than 10 percentage points.

4.Implementing Innovative System Reforms and Technology Achievements Transformation

XCMG has established a '1+6+N' innovation system layout, where the central research institute plays a leading role, closely coordinating with six global headquarters R&D institutions and various industry R&D institutions to form an efficient?R&D structure. In terms of establishing our overseas R&D centers, XCMG?have progressively perfected centers in Europe, the United States, Brazil, Australia, and more. These centers focus on enhancing localized product capabilities and thoroughly verify the standards, compliance, and adaptability of construction machinery in their respective locales. Meanwhile, each research institute at XCMG concentrates on the research and development of cutting-edge technology areas. The company has developed 10 new energy components, 15 hydraulic components, 18 transmission components, and 3 electronic control components; landmark new products such as the world's largest tonnage all-terrain crane and pure electric loaders have been successively developed; 25 national standards, 3 industry standards, and 5 group standards have been completed; over 800 new invention patents have been granted.

5.Leading Reform to Stimulate Vitality, Standardizing Operations

The headquarters' organizational structure was restructured, transitioning from a strategic holding type to a platform-empowering type, highlighting the functions of headquarters governance and platform empowerment. The professional manager system was fully deepened, implementing term limits and contractual management in the company and its 32 subsidiaries. A restricted stock incentive plan was implemented to promote the construction of a community of interests between the company and its employees. Compliance construction was strengthened, coordinating compliance management with legal risk prevention, discipline inspection, supervision, audit, internal control, and other related work. A comprehensive financial responsibility delegation management system covering both domestic and international appointments of financial principals was established. Continuous efforts were made to transform the safety management model towards preventive measures, issuing ten safety "high-voltage lines" to ensure the company's high-quality development.