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China Automotive Systems Reports 2018 Second Quarter Unaudited Financial Results

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China Automotive Systems Reports 2018 Second Quarter Unaudited Financial Results

PR Newswire

WUHAN, China, Aug. 9, 2018 /PRNewswire/ -- China Automotive Systems, Inc. ("CAAS" or the "Company") (NASDAQ:CAAS), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the second quarter and six months ended June 30, 2018.

Second Quarter 2018 Highlights

  • Net sales increased 6.9% to $125.8 million from $117.7 million in the second quarter of 2017;
  • Gross profit declined 29.3% to $17.0 million and the gross margin decreased to 13.5% from 20.4% in the second quarter of 2017;
  • Income from operations decreased to $0.6 million with an operating margin of 0.5% compared with 9.4% in the second quarter of 2017;
  • Net income attributable to parent company's common shareholders declined to $0.8 million, or diluted earnings per share of $0.03, compared to net income attributable to parent company's common shareholders of $8.9 million, or diluted earnings per share of $0.28, in the second quarter of 2017.

First Six Months of 2018 Highlights

  • Net sales grew 9.6% to $259.8 million, compared to $237.0 million in the first six months of 2017;
  • Gross profit decreased to $38.7 million, compared to $45.7 million in the first six months of 2017; gross margin decreased to 14.9% in the first six months of 2018, compared to 19.3% in the first six months of 2017;
  • Income from operations decreased to $5.2 million from $18.3 million with an operating margin of 2.0% compared with 7.7% in the second quarter of 2017;
  • Net income attributable to parent company's common shareholders was $5.2 million from $14.6 million in the first six months of 2017; diluted earnings per share attributable to parent company's common shareholders was $0.16, compared to diluted earnings per share attributable to parent company's common shareholders of $0.46 in the first six months of 2017;
  • Net cashflow used in operating activities was $5.4 million compared with net cashflow provided of $22.1 million in the first six months of 2017.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales in the second quarter of 2018 reflect higher sales of our traditional steering products.  We continue to invest more resources to develop new generations of electric power steering ("EPS") products and other advanced steering products for future growth."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to enhance our financial resources while we build advanced steering products to offer a broader line of steering products to meet the changing requirements of our customers."

Second Quarter of 2018

In the second quarter of 2018, net sales increased 6.9% to $125.8 million, compared to $117.7 million in the same quarter of 2017. Net sales of traditional steering products grew by 8.5% and the Company sold more products to its North American customers. Sales of electric power steering ("EPS") represented 21.4% of total net sales.

Gross profit decreased to $17.0 million in the second quarter of 2018, compared to $24.1 million in the second quarter of 2017. The gross margin was 13.5% in the second quarter of 2018, versus 20.4% in the second quarter of 2017. The gross margin decreased mainly due to a lower sales price, higher unit cost and the change in product mix. 

Gain on other sales was $1.0 million in the second quarter of 2018, compared to $4.6 million in the second quarter of 2017. The decrease was due to the fact that during the second quarter of 2017, the Company disposed of a building located in Jingzhou and recognized a gain of $2.2 million.

Selling expenses were $4.9 million in the second quarter of 2018, compared to $4.6 million in the second quarter of 2017. The increase was mainly due to higher logistics expenses related to increased sales during the quarter. Selling expenses represented 3.9% of net sales in the second quarter of 2018 and in the second quarter of 2017. 

General and administrative expenses ("G&A expenses") were $4.4 million in the second quarter of 2018 compared to $5.3 million in the second quarter of 2017. G&A expenses represented 3.5% of net sales in the second quarter of 2018 compared to 4.5% in the second quarter of 2017. The decrease was mainly due to a lower allowance for doubtful accounts. 

Research and development expenses ("R&D expenses") increased 5.2% to $8.1 million in the second quarter of 2018, compared to $7.7 million in the second quarter of 2017. R&D expenses continue to focus on the development of the Company's EPS and other new products. R&D expenses represented 6.4% of sales in the second quarter of 2018, compared with 6.6% in the 2017 second quarter.

Net financial income in the second quarter of 2018 was $0.9 million compared with $0.6 million in the second quarter of 2017.

Income from operations was $0.6 million in the second quarter of 2018, compared to $11.1 million in the same quarter of 2017. The decrease was primarily due to lower gross profit and lower gain on other sales. As a percentage of net sales, the operating margin was 0.5% in the second quarter of 2018, compared to 9.4% in the second quarter of 2017.

Income before income tax expenses and equity in earnings of affiliated companies was $1.3 million in the second quarter of 2018, compared to $11.1 million in the second quarter of 2017. 

Net income attributable to parent company's common shareholders was $0.8 million in the second quarter of 2018, compared to net income attributable to parent company's common shareholders of $8.9 million in the corresponding quarter of 2017. Diluted earnings per share were $0.03 in the second quarter of 2018, compared to diluted earnings per share of $0.28 in the second quarter of 2017. The weighted average number of diluted common shares outstanding was 31,647,305 in the second quarter of 2018, compared to 31,649,322 in the second quarter of 2017.

First Six Months of 2018

Net sales increased 9.6% to $259.8 million in the first six months of 2018, compared to $237.0 million in the first six months of 2017. Six-month gross profit was $38.7 million, compared to $45.7 million in the corresponding period last year. Six-month gross margin was 14.9% in the first six months of 2018 compared to 19.3% in the corresponding period in 2017. The gain on other sales was $2.5 million in the first six months of 2018 compared with $5.3 million in the corresponding period last year. Income from operations was $5.2 million in the first six months of 2018, compared to $18.3 million in the first six months of 2017. Operating margin was 2.0% in the first six months of 2018, compared to 7.7% in the corresponding period of 2017. 

Net income attributable to parent company's common shareholders was $5.2 million in the first six months of 2018, compared to $14.6 million in the corresponding period in 2017. Diluted earnings per share were $0.16 in the first six months of 2018, compared to diluted earnings per share of $0.46 in the corresponding period of 2017.

As of June 30, 2018, cash and equivalents, pledged cash and short-term investments were $112.4 million. Total accounts receivable including notes receivable were $283.6 million. Accounts payable were $219.4 million and short-term loans were $57.1 million. Total parent company stockholders' equity was $306.4 million as of June 30, 2018, compared to $306.1 million as of December 31, 2017.

Net cash used in operating activities was $5.4 million in the first six months of 2018 compared with net cash provided by operating activities of $22.1 million in the first six months of 2017. Payments to acquire property, plant and equipment were $17.3 million compared with $10.2 million in the first six months of 2017.

Business Outlook

Management reiterated its revenue guidance for the full year 2018 of US$520 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

About China Automotive Systems, Inc.

Based in Hubei Province, the People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through eight Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers four separate series of power steering with an annual production capacity of over 6 million sets of steering gears, columns and steering hoses. Its customer base is comprised of leading auto manufacturers, such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., BYD Auto Company Limited, Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. in China, and Chrysler Group LLC in North America. For more information, please visit: http://www.caasauto.com.

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. These forward-looking statements include statements regarding the qualitative and quantitative effects of the accounting errors, the periods involved, the nature of the Company's review and any anticipated conclusions of the Company or its management and other statements that are not historical facts. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. As a result, the Company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Form 10-K annual report filed with the Securities and Exchange Commission on March 29, 2018, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.

For further information, please contact:

Jie Li
Chief Financial Officer
China Automotive Systems, Inc.
Email: jieli@chl.com.cn

Kevin Theiss
+1-212-521-4050
kevin.theiss@awakenlab.com

 

(Tables Follow)

 


China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

(In thousands of USD, except share and per share amounts)







Three Months Ended June 30,




2018



2017


Net product sales ($10,856 and $8,583 sold to related parties for the three months
ended June 30, 2018 and 2017)


$

125,782



$

117,660


Cost of products sold ($7,428 and $6,283 purchased from related parties for the
three months ended June 30, 2018 and 2017)



108,761




93,599


Gross profit



17,021




24,061


Gain on other sales



977




4,555


Less: Operating expenses









Selling expenses



4,887




4,555


General and administrative expenses



4,442




5,283


Research and development expenses



8,085




7,707


Total operating expenses



17,414




17,545


Income from operations



584




11,071


Other income



600




152


Interest expense



(801)




(644)


Financial income, net



897




550


Income before income tax expenses and equity in earnings of affiliated companies



1,280




11,129


Less: Income taxes



202




2,186


Equity in losses of affiliated companies



(82)




(62)


Net income



996




8,881


Net income/(loss) attributable to non-controlling interests



149




(40)


Net income attributable to parent company's common shareholders


$

847



$

8,921


Comprehensive income:









Net income


$

996



$

8,881


Other comprehensive income:









Foreign currency translation (loss)/gain, net of tax



(17,467)




5,814


Comprehensive (loss)/income



(16,471)




14,695


Comprehensive (loss)/income attributable to non-controlling interests



(431)




155


Comprehensive (loss)/income attributable to parent company


$

(16,040)



$

14,540











Net income attributable to parent company's common shareholders per share


















Basic –


$

0.03



$

0.28











Diluted-


$

0.03



$

0.28


Weighted average number of common shares outstanding









Basic



31,644,004




31,644,004


Diluted



31,647,305




31,649,322


 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

(In thousands of USD, except share and per share amounts)




Six Months Ended June 30,




2018



2017


Net product sales ($21,702 and $18,121 sold to related parties for the six months
ended June 30, 2018 and 2017)


$

259,800



$

236,968


Cost of products sold ($15,677 and $13,646 purchased from related parties for the six
months ended June 30, 2018 and 2017)



221,140




191,278


Gross profit



38,660




45,690


Gain on other sales



2,490




5,343


Less: Operating expenses









Selling expenses



10,714




8,623


General and administrative expenses



8,866




9,637


Research and development expenses



16,392




14,472


Total operating expenses



35,972




32,732


Income from operations



5,178




18,301


Other income/(expense), net



1,221




(102)


Interest expense



(1,216)




(875)


Financial income, net



132




882


Income before income tax expenses and equity in earnings of affiliated companies



5,315




18,206


Less: Income taxes



790




3,376


Equity in earnings/(losses) of affiliated companies



503




(11)


Net income



5,028




14,819


Net (loss)/income attributable to non-controlling interests



(131)




184


Net income attributable to parent company's common shareholders


$

5,159



$

14,635


Comprehensive income:









Net income


$

5,028



$

14,819


Other comprehensive income:









Foreign currency translation (loss)/gain, net of tax



(4,225)




7,443


Comprehensive income



803




22,262


Comprehensive (loss)/gain attributable to non-controlling interests



(195)




433


Comprehensive income attributable to parent company


$

998



$

21,829











Net income attributable to parent company's common shareholders per share


















Basic –


$

0.16



$

0.46











Diluted-


$

0.16



$

0.46


Weighted average number of common shares outstanding









Basic



31,644,004




31,644,004


Diluted



31,645,655




31,649,615


 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)




June 30, 2018



December 31, 2017


ASSETS









Current assets:









Cash and cash equivalents


$

58,682



$

64,558


Pledged cash



26,803




31,535


Short-term investments



26,902




29,587


Accounts and notes receivable, net - unrelated parties



262,733




274,989


Accounts and notes receivable, net - related parties



20,826




19,086


Advance payments and others - unrelated parties



12,464




12,790


Advance payments and others - related parties



1,006




20,841


Inventories



90,594




79,217


Total current assets



500,010




532,603


Non-current assets:









Property, plant and equipment, net



131,100




126,033


Intangible assets, net



549




661


Other receivables, net - unrelated parties



945




2,188


Advance payment for property, plant and equipment - unrelated parties



6,971




9,657


Advance payment for property, plant and equipment - related parties



6,672




5,264


Long-term investments



33,479




27,596


Deferred tax assets



13,270




13,367


Total assets


$

692,996



$

717,369











LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Short-term loans


$

57,073



$

72,711


Accounts and notes payable - unrelated parties



212,436




233,048


Accounts and notes payable - related parties



6,913




7,168


Customer deposits



762




1,128


Accrued payroll and related costs



7,372




8,577


Accrued expenses and other payables



41,499




40,127


Accrued pension costs



3,876




4,051


Taxes payable



10,408




5,927


Amounts due to shareholders/directors



336




343


Advances payable (current portion)



378




383


Total current liabilities



341,053




373,463


Long-term liabilities:









Long-term loans



302




306


Advances payable



355




359


Other long-term payable



10,843




-


Long-term tax payable



29,874




32,719


Deferred tax liabilities



4,175




4,393


Total liabilities


$

386,602



$

411,240





























Stockholders' equity:









Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued
– 32,338,302 and 32,338,302 shares as of June 30, 2018 and December 31,
2017, respectively


$

3



$

3


Additional paid-in capital



64,406




64,406


Retained earnings-









Appropriated



10,830




10,707


Unappropriated



214,495




209,459


Accumulated other comprehensive income



13,619




17,780


Treasury stock – 694,298 and 694,298 shares as of June 30, 2018 and
December 31, 2017, respectively



(2,907)




(2,907)


Total parent company stockholders' equity



300,446




299,448


Non-controlling interests



5,948




6,681


Total stockholders' equity



306,394




306,129


Total liabilities and stockholders' equity


$

692,996



$

717,369


 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)




Six Months Ended June 30,




2018



2017


Cash flows from operating activities:









Net income


$

5,028



$

14,819


Adjustments to reconcile net income from operations to net cash provided by
operating activities:









Depreciation and amortization



8,837




7,809


Increase in provision for doubtful accounts



242




1,008


Inventory write downs



3,456




2,101


Deferred income taxes



(231)




971


Equity in earnings/(losses) of affiliated companies



(503)




11


Loss/(gain) on fixed assets disposals



9




(2,202)


Changes in operating assets and liabilities









(Increase)/decrease in:









Accounts and notes receivable



6,644




6,570


Advance payments and others



(1,374)




1,241


Inventories



(16,062)




2,104


Increase/(decrease) in:









Accounts and notes payable



(15,574)




(2,932)


Customer deposits



(345)




(7)


Accrued payroll and related costs



(1,153)




(2)


Accrued expenses and other payables



2,245




(3,028)


Accrued pension costs



(96)




(307)


Taxes payable



3,484




(6,069)


Net cash (used)/provided by operating activities



(5,393)




22,087


Cash flows from investing activities:









Increase in other receivables



1,190




137


Cash received from property, plant and equipment sales



199




2,334


Payments to acquire property, plant and equipment (including $5,694 and $3,497
paid to related parties for the six months ended June 30, 2018 and 2017,
respectively)



(17,299)




(10,178)


Purchase of short-term investments



(18,502)




(8,069)


Purchase of long-term time deposit



-




(5,836)


Proceeds from maturities of short-term investments



21,687




11,923


Investment under equity method



(5,957)




(730)


Cash received for related party loan repayment



20,430




-


Loan to a related party



-




(29,044)


Net cash provided/(used) in investing activities



1,748




(39,463)


Cash flows from financing activities:









Proceeds from bank loans



19,672




59,088


Repayments of bank loans



(35,664)




(34,128)


Proceeds from sale and leaseback transaction



11,758




-


Repayments of the borrowing for sale and leaseback transaction



(1,125)




-


Net cash (used)/provided by financing activities



(5,359)




24,960


Effects of exchange rate on cash, cash equivalents and pledged cash



(1,604)




1,466


Net (decrease)/increase in cash, cash equivalents and pledged cash



(10,608)




9,050


Cash, cash equivalents and pledged cash at beginning of period



96,093




61,891


Cash, cash equivalents and pledged cash at end of period


$

85,485



$

70,941


 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows (continued)

(In thousands of USD unless otherwise indicated)


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:




Six months Ended June 30,




2018



2017


Cash paid for interest


$

432



$

354


Cash paid for income taxes



637




4,172



SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:




Six months Ended June 30,




2018



2017


Property, plant and equipment recorded during the period which previously were
advance payments


$

5,419



$

10,310


Accounts payable for acquiring property, plant and equipment



107




709


Dividends payable to non-controlling interests



538




608


 

 

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SOURCE China Automotive Systems, Inc.

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