CBAK Energy Technology, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; this is an annual report, not a standalone fourth-quarter filing. The company manufactures lithium- and sodium-ion batteries and, through Hitrans, battery cathode materials and precursors. Most operations are in China.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $204.4 million | $248.7 million |
| Gross profit / margin | $31.7 million / 15.5% | $18.1 million / 7.3% |
| Operating loss | $7.3 million | $11.5 million |
| Net loss | $8.5 million | $11.3 million |
| Net loss attributable to CBAK shareholders | $2.4 million | $9.4 million |
| Operating cash flow | $46.5 million | $15.1 million |
| Investing cash flow | $(42.3) million | $(7.9) million |
| Financing cash flow | $18.6 million | $5.6 million |
| Cash, cash equivalents and restricted cash at year-end | $58.8 million | $37.4 million |
| Total assets / total equity | $281.2 million / $113.5 million | $244.0 million / $124.4 million |
Revenue fell 18%, but gross profit rose 75% and gross margin improved by 8.2 percentage points. Management attributed the margin improvement mainly to higher battery selling prices for certain customers. The company remained loss-making, while the parent-company-attributable loss narrowed. Cash from operations increased substantially; working-capital movements included higher payables and lower inventories.
At December 31, 2023, current assets were $128.4 million and current liabilities were $160.5 million, a $32.1 million working-capital deficit. Short-term bank borrowings were $32.6 million; total reported bank borrowings across short- and long-term facilities were $87.8 million. Trade and bills payable totaled $82.4 million, including $55.7 million of bank acceptance bills. Cash availability is constrained: $54.2 million was pledged, principally to secure bills payable. The filing reports $2.8 million of unused committed banking facilities.
Revenue mix and material changes
- Residential energy storage and UPS battery revenue increased 49% to $124.5 million.
- Cathode and precursor revenue decreased 54% to $71.4 million, reflecting lower raw-material prices and pressure on product pricing.
- Electric-vehicle battery revenue decreased 39% to $2.9 million; light-electric-vehicle revenue decreased 13% to $5.6 million.
- Geographic mix shifted: mainland China revenue fell to $119.3 million from $198.1 million, while Europe revenue rose to $78.6 million from $50.4 million. The filing states overseas sales were 42% of FY2023 revenue, versus 20% in FY2022.
- Segment results diverged: the battery segment reported $133.0 million revenue and $10.7 million operating income; Hitrans reported $71.4 million revenue and a $17.0 million operating loss.
- Hitrans long-lived-asset impairment was $7.1 million, versus $4.8 million in FY2022. The company also recorded a $2.4 million impairment on an equity-method investment and $3.6 million of inventory write-downs.
Cash needs, outlook and risks
- Going concern: The auditor’s report includes a substantial-doubt paragraph, citing the working-capital deficit, recurring losses and short-term debt maturities. Management plans to improve profitability, renew loans and seek further borrowing or equity financing; success is not assured.
- Investment plans: FY2023 capital expenditures were approximately $31.1 million. Management estimates FY2024 capital expenditures of approximately $30 million for plants, production lines and battery-module packing lines. Nanjing Phase II is planned to add 18 GWh of annual capacity, with completion targeted by the end of 2027, subject to market conditions. The new Hitrans plant is expected to begin operating in the first half of 2025.
- Contractual commitments: The filing reports approximately $300.1 million of contracted capital commitments at year-end, including $267.6 million of capital injections, $31.4 million of equipment purchases and $1.1 million for construction. These commitments are significant relative to cash and liquidity.
- Customer concentration: The top five customers accounted for 59.2% of revenue, compared with 69.5% in FY2022. One customer represented 32.7% of FY2023 revenue; Zhengzhou BAK represented 13.6%. The company has no long-term customer purchase commitments.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective. The auditor issued an adverse opinion on internal control, citing weaknesses in accounting for key agreements and insufficient technically skilled U.S. GAAP accounting staff.
- China-related risks: The company relies on PRC subsidiaries for operations and cash. PRC regulatory changes, foreign-exchange controls and limits on moving funds offshore may affect operations, financing and distributions. The PCAOB currently has inspection access, but future HFCAA restrictions remain a risk if access changes.
- Other risks and items: Competition and pricing pressure, raw-material costs, product safety and lack of product-liability insurance, and reliance on suppliers and customers are material risks. A longstanding construction dispute was dismissed in November 2023; the company continues to seek recovery of an approximately RMB3 million ($0.5 million) acquisition-related deposit. It has no current dividend plan.
Important facts for investors to verify
- Whether cash generation and renewals or new financing can cover near-term maturities, pledged deposits, working-capital needs and the large capital commitments.
- Whether Hitrans can improve performance and whether its recorded impairments adequately reflect operating prospects.
- How much of the revenue decline and improved gross margin reflect sustainable volume, pricing and product-mix changes.
- Customer and related-party exposure, including collections from Zhengzhou BAK and the proposed BAK SZ equity purchase; confirm the remaining purchase obligations and transaction status.
- Progress in remediating the material weaknesses and restoring effective financial-reporting controls.
- Reconcile disclosed manufacturing capacity: the filing gives differing Dalian capacity figures (1 GWh in the business discussion and 2 GWh in MD&A) and differing Nanjing lithium/sodium capacity descriptions.
- Confirm reported electric-vehicle revenue: the detailed table gives $2.883 million, while narrative passages round the amount differently.