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China Automotive Systems Reports 2019 Second Quarter Unaudited Financial Results

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WUHAN, China, Aug. 8, 2019 /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, 2019.

 Second Quarter 2019 Highlights

  • Net sales decreased 15.9% to $105.7 million from $125.8 million in the second quarter of 2018;
  • Gross profit declined 10.8% to $15.2 million and the gross margin increased to 14.4% from 13.5% in the second quarter of 2018;
  • Income from operations increased 369.2% to $2.7 million with an operating margin of 2.6% compared with $0.6 million and an operating margin of 0.5% in the second quarter of 2018;
  • Net income attributable to parent company's common shareholders increased to $2.5 million or diluted earnings per share of $0.08, compared to net income attributable to parent company's common shareholders of $0.8 million, or diluted earnings per share of $0.03, in the second quarter of 2018.

First Six Months of 2019 Highlights

  • Net sales decreased 17.3% to $214.9 million, compared to $259.8 million in the first six months of 2018;
  • Gross profit decreased to $29.2 million, compared to $38.7 million in the first six months of 2018; gross margin decreased to 13.6% in the first six months of 2019, compared to 14.9% in the first six months of 2018;
  • Income from operations decreased to $3.8 million from $5.2 million with an operating margin of 1.8% compared with 2.0% in the second quarter of 2018;
  • Net income attributable to parent company's common shareholders was $4.0 million compared to $5.2 million in the first six months of 2018; diluted earnings per share attributable to parent company's common shareholders was $0.13, compared to diluted earnings per share attributable to parent company's common shareholders of $0.16 in the first six months of 2018.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales in the second quarter of 2019 reflected the slowing economy in China and softer consumer spending. As a leading supplier of steering products to the Chinese automobile market, our sales are affected by the performance of the OEM market. Automobile production has been disrupted by a pre-buy of less expensive National V-compliant vehicles before the stricter National VI emission standards are nationally implemented. Chinese-branded passenger vehicle sales declined by 27.9% year-over-year in April 2019 followed by a decline in May 2019 of 28.1% year-over-year. We anticipate that our new product development with Hyoseong Electric Co. Ltd. to sell electric motors for electric power steering systems, and a new development program for a recirculating-ball steering system with a major client's autonomous vehicle development, will offer new growth opportunities for the future. We continue to build advanced steering products and broaden our product line to meet the needs of the marketplace and ensure our leadership position."

Second Quarter of 2019

In the second quarter of 2019, net sales decreased 15.9% to $105.7 million, compared to $125.8 million in the same quarter of 2018. Net sales of traditional steering products declined by 15.9% as demand weakened in the Chinese domestic brand automobile market. Additionally, Company's sales to its North American customers declined by $1.1 million. Sales of electric power steering ("EPS") represented 21.4% of total net sales.

Gross profit decreased to $15.2 million in the second quarter of 2019, compared to $17.0 million in the second quarter of 2018. The gross margin was 14.4% in the second quarter of 2019, versus 13.5% in the second quarter of 2018. The gross profit decrease was mainly due to lower sales, higher unit cost and a change in product mix.

Gain on other sales was $2.5 million in the second quarter of 2019, compared to $1.0 million in the second quarter of 2018.

Selling expenses were $3.9 million in the second quarter of 2019, compared to $4.9 million in the second quarter of 2018. The decrease was mainly due to lower logistics expenses related to decreased sales during the quarter. Selling expenses represented 3.7% of net sales in the second quarter of 2019 compared with 3.9% in the second quarter of 2018.

General and administrative expenses ("G&A expenses") were $4.4 million in the second quarter of each of 2019 and 2018. G&A expenses represented 4.2% of net sales in the second quarter of 2019 compared to 3.5% in the second quarter of 2018. The percentage increase was mainly due to reduced sales in the second quarter of 2019.

Research and development expenses ("R&D expenses") decreased 18.5% to $6.6 million in the second quarter of 2019, compared to $8.1 million in the second quarter of 2018. R&D expenses continue to focus on the development of the Company's EPS and other new products. R&D expenses represented 6.2% of sales in the second quarter of 2019, compared with 6.4% in the second quarter of 2018.

Income from operations was $2.7 million in the second quarter of 2019, compared to $0.6 million in the same quarter of 2018. The increase was primarily due to a higher gain on other sales and lower operating costs. As a percentage of net sales, the operating margin was 2.6% in the second quarter of 2019, compared to 0.5% in the second quarter of 2018.

Net financial income in the second quarter of 2019 was $1.6 million compared with $0.9 million in the second quarter of 2018.

Income before income tax expenses and equity in earnings of affiliated companies increased 143.5% to $3.1 million in the second quarter of 2019, compared to $1.3 million in the second quarter of 2018.

Net income attributable to parent company's common shareholders increased 196.3% to $2.5 million in the second quarter of 2019, compared to net income attributable to parent company's common shareholders of $0.8 million in the corresponding quarter of 2018. Diluted earnings per share were $0.08 in the second quarter of 2019, compared to diluted earnings per share of $0.03 in the second quarter of 2018. The weighted average number of diluted common shares outstanding was 31,499,577 in the second quarter of 2019, compared to 31,647,305 in the second quarter of 2018.  

First Six Months of 2019 

Net sales decreased 17.3% to $214.9 million in the first six months of 2019, compared to $259.8 million in the first six months of 2018. Six-month gross profit was $29.2 million, compared to $38.7 million in the corresponding period last year. Six-month gross margin was 13.6% in the first six months of 2019 compared to 14.9% in the corresponding period in 2018. The gain on other sales was $3.8 million in the first six months of 2019 compared with $2.5 million in the corresponding period last year. Income from operations was $3.8 million in the first six months of 2019, compared to $5.2 million in the first six months of 2018. Operating margin was 1.8% in the first six months of 2019, compared to 2.0% in the corresponding period of 2018. 

Net income attributable to parent company's common shareholders was $4.0 million in the first six months of 2019, compared to $5.2 million in the corresponding period in 2018. Diluted earnings per share were $0.13 in the first six months of 2019, compared to diluted earnings per share of $0.16 in the corresponding period of 2018.

As of June 30, 2019, cash and equivalents, and pledged cash were $89.1 million. Total accounts receivable including notes receivable were $255.1 million. Accounts payable were $184.1 million and short-term loans were $71.0 million. Total parent company stockholders' equity was $308.5 million as of June 30, 2019, compared to $304.8 million as of December 31, 2018.

Net cash used in operating activities was $25.7 million in the first six months of 2019 compared with net cash used in operating activities of $5.4 million in the first six months of 2018. Payments to acquire property, plant and equipment were $10.3 million compared with $17.3 million in the first six months of 2018.

Business Outlook

Management revised its revenue guidance for the full year 2019 to $430 million from US$510 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

Unaudited Second Quarter 2019 Conference Call

Management will conduct a conference call on August 8, 2019 at 8:00 A.M. EDT/8:00 P.M. Beijing Time to discuss these results. A question and answer session will follow management's presentation. To participate, please call the following numbers 10 minutes before the call start time and ask to be connected to the "China Automotive Systems" conference call:

Phone Number: +1-877-407-8031 (North America)
Phone Number: +1-201-689-8031 (International)
China Toll Free: +86-400-120-2840

A replay of the call will be available on the Company's website in the investor relations section.

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 nine 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 28, 2019, 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
Investor Relations
+1-212-521-4050
Email: Kevin@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,




2019



2018


Net product sales ($14,310 and $10,856 sold to related parties for the three
months ended June 30, 2019 and 2018)


$

105,748



$

125,782


Cost of products sold ($6,130 and $7,428 purchased from related parties for
the three months ended June 30, 2019 and 2018)



90,563




108,761


Gross profit



15,185




17,021


Gain on other sales



2,485




977


Less: Operating expenses









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