Le Lézard
Classified in: Transportation, Business
Subjects: ERN, CCA, ERP

China Automotive Systems Reports Unaudited 2018 Third Quarter Results


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

Third Quarter 2018 Highlights

First Nine Months of 2018 Highlights

Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Sales of our traditional hydraulic products continued to anchor our sales in the Chinese automotive market in the third quarter of 2018.  Our advanced hydraulic steering products remain the primary sales driver to Chrysler and Ford for use in the North American markets with sales rising by 22.2% in the third quarter of 2018 compared to the same quarter last year.  Sales of our steering columns also grew to help offset softness in the Chinese passenger vehicle and heavy-duty truck markets."   

"We continue to be optimistic about our electric power steering ("EPS") business as our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., with KYB (China) Investment Co., Ltd., will receive all the EPS business in China from both joint venture partners. Our new joint venture will enhance EPS research and development and production capabilities at CAAS's compound in Jingzhou City."   

Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We continue to focus on our financial strength and cash flow from operations to invest in new products and increase our market penetration."

Third Quarter of 2018

In the third quarter of 2018, net sales were $112.1 million compared to $118.4 million in the same quarter of 2017. The decrease in net product sales was mainly due to a change in the product mix and lower domestic sales volume due to softer demand in the Chinese domestic brand automobile market. Net product sales to North America grew 22.2% to $30.3 million compared to $24.8 million for the same quarter in 2017.  The increase in export sales to North America was mainly due to higher sales of the Company's more advanced products.

Gross profit was $15.4 million in the third quarter of 2018, compared to $22.5 million in the third quarter of 2017.  Gross margin was 13.7% compared to 19.0% for the same period of 2017, mainly due to an increase in the cost of raw materials and the changes in the product mix.

Selling expenses were $3.4 million in the third quarter of 2018, compared to $4.5 million in the third quarter of 2017.  Lower selling expenses were mainly due to lower unit sales as well as utilizing lower cost shippers. Selling expenses represented 3.0% of net sales in the third quarter of 2018, compared to 3.8% in the third quarter of 2017.

General and administrative expenses ("G&A expenses") were $3.7 million in the third quarter of 2018, compared to $4.4 million in the same quarter of 2017. The decline was primarily due to lower personnel expenses. G&A expenses represented 3.3% of net sales in the third quarter of 2018 compared with 3.7% in the third quarter of 2017.

Research and development expenses ("R&D expenses") were $7.0 million in the third quarter of 2018, compared to $9.2 million in the third quarter of 2017. R&D expenses represented 6.2% of net sales in the third quarter of 2018 compared with 7.8% in the third quarter last year. The lower R&D expenses were mainly due to greater cost controls over R&D expenditures and the transfer of some research projects to our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., for electric power steering.

Net financial income was $0.8 million in the third quarter of 2018 compared to net financial income of $1.0 million in the third quarter of 2017.

Income from operations was $1.8 million in the third quarter of 2018, compared to $4.9 million in the same quarter of 2017. The decrease was mainly due to lower gross profit and lower gross margin.  

Income before income tax expenses and equity in earnings of affiliated companies was $1.8 million in the third quarter of 2018, compared to $5.7 million in the third quarter of 2017. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower operating income in the third quarter of 2018 compared with the third quarter of 2017.

Net income attributable to parent company's common shareholders was $0.4 million in the third quarter of 2018, compared to net income attributable to parent company's common shareholders of $5.1 million in the third quarter of 2017. Diluted earnings per share were $0.01 in the third quarter of 2018, compared to diluted earnings per share of $0.16 in the third quarter of 2017.

The weighted average number of diluted common shares outstanding was 31,645,556 in the third quarter of 2018, compared to 31,644,271 in the third quarter of 2017.

First Nine Months of 2018

Net sales for the first nine months of 2018 were $371.9 million, compared to $355.3 million in the first nine months of 2017. Nine-month gross profit was $54.0 million, compared to $68.2 million in the corresponding period last year. Nine-month gross margin was 14.5%, compared to 19.2% for the corresponding period in 2017. For the nine months ended September 30, 2018, gain on other sales amounted to $3.0 million, compared to $5.9 million for the corresponding period in 2017. Income from operations was $7.0 million compared to $23.2 million in the first nine months of 2017. Operating margin was 1.9%, compared to 6.5% for the corresponding period of 2017.

Net income attributable to parent company's common shareholders was $5.5 million compared with $19.7 million in the corresponding period last year. Diluted earnings per share were $0.17 in the first nine months of 2018, compared to diluted earnings per share of $0.62 for the corresponding period in 2017.

Balance Sheet

As of September 30, 2018, total cash and cash equivalents, pledged cash deposits and short-term investments were $144.1 million, total accounts receivable including notes receivable were $249.6 million, accounts payable including notes payable were $196.6 million, and short-term loans were $70.9 million. Total parent company stockholders' equity was $309.5 million as of September 30, 2018, compared to $306.1 million as of December 31, 2017. 

Business Outlook

Management has reduced its revenue guidance for the full year 2018 to US$510 million from US$520.0 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

Conference Call

Management will conduct a conference call on November 9, 2018 at 8:00 A.M. EST/9:00 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)

A replay of the call will be available on the Company's website under 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 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: [email protected]

Kevin Theiss
+1-212-521-4050
Email: [email protected]

 

- 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 September 30,



2018


2017

Net product sales ($8,207 and $7,563 sold to related parties for the
     three months ended September 30, 2018 and 2017)


$

112,084


$

118,365

Cost of products sold ($4,659 and $6,549 purchased from related
     parties for the three months ended September 30,
     2018 and 2017)



96,718



95,878

     Gross profit



15,366



22,487

Gain on other sales



482



553

Less: Operating expenses







Selling expenses



3,353



4,537

General and administrative expenses



3,708



4,390

Research and development expenses



6,957



9,194

Total operating expenses



14,018



18,121

     Income from operations



1,830



4,919

Other (expense)/income, net



(461)



100

Interest expense



(431)



(318)

Financial income, net



815



1,027

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



1,753



5,728

Less: Income taxes



326



991

Equity in losses of affiliated companies



(1,049)



491

Net income



378



5,228

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



1



169

     Net income attributable to parent company's common
     shareholders


$

377


$

5,059

Comprehensive income:







Net income


$

378


$

5,228

Other comprehensive income:







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



(13,012)



6,705

Comprehensive (loss)/income



(12,634)



11,933

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



(619)



386

Comprehensive (loss)/income attributable to parent company


$

(12,015)


$

11,547








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














Basic -


$

0.01


$

0.16








Diluted -


$

0.01


$

0.16

Weighted average number of common shares outstanding







Basic



31,644,004



31,644,004

Diluted



31,645,556



31,644,271

 

 

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)




Nine Months Ended September 30,



2018


2017

Net product sales ($29,909 and $25,684 sold to related
     parties for the nine months ended September 30, 2018 and 
     2017)


$

371,884


$

355,333

Cost of products sold ($20,336 and $20,195 purchased from
     related parties for the nine months ended September 30, 2018
     and 2017)



317,858



287,156

     Gross profit



54,026



68,177

Gain on other sales



2,972



5,896

Less: Operating expenses







Selling expenses



14,067



13,160

General and administrative expenses



12,574



14,027

Research and development expenses



23,349



23,666

Total operating expenses



49,990



50,853

     Income from operations



7,008



23,220

Other income/(expense), net



760



(2)

Interest expense



(1,647)



(1,193)

Financial income, net



947



1,909

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



7,068



23,934

Less: Income taxes



1,116



4,367

Equity in (losses)/earnings of affiliated companies



(546)



480

Net income



5,406



20,047

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



(130)



353

     Net income attributable to parent company's common
     shareholders


$

5,536


$

19,694

Comprehensive income:







Net income


$

5,406


$

20,047

Other comprehensive income:







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



(17,237)



14,148

Comprehensive (loss)/income



(11,831)



34,195

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



(814)



819

Comprehensive (loss)/income attributable to parent
     company


$

(11,017)


$

33,376








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














Basic -


$

0.17


$

0.62








Diluted -


$

0.17


$

0.62

Weighted average number of common shares outstanding







Basic



31,644,004



31,644,004

Diluted



31,645,622



31,647,833

 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)




September 30, 2018


December 31, 2017

ASSETS







Current assets:







Cash and cash equivalents


$

95,788


$

64,558

Pledged Cash 



26,115



31,535

Short-term investments



22,241



29,587

Accounts and notes receivable, net - unrelated parties



232,114



274,989

Accounts and notes receivable, net - related parties



17,522



19,086

Advance payments and others - unrelated parties



14,160



12,790

Advance payments and others - related parties



413



20,841

Inventories



87,769



79,217

     Total current assets



496,122



532,603

Non-current assets:







Property, plant and equipment, net



124,823



126,033

Intangible assets, net



605



661

Other receivables, net - unrelated parties



1,609



2,188

Advance payment for property, plant and equipment - unrelated 
     parties



8,657



9,657

Advance payment for property, plant and equipment - related
     parties



6,566



5,264

Long-term investments



30,874



27,596

Deferred tax assets



12,680



13,367

     Total assets


$

681,936


$

717,369








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Short term loans


$

70,900


$

72,711

Accounts and notes payable - unrelated parties



192,146



233,048

Accounts and notes payable - related parties



4,468



7,168

Customer deposits



950



1,128

Accrued payroll and related costs



7,488



8,577

Accrued expenses and other payables



39,251



40,127

Accrued pension costs



3,587



4,051

Taxes payable



8,855



5,927

Amounts due to shareholders/directors



316



343

Advances payable (current portion)



363



383

     Total current liabilities



328,324



373,463

Long-term liabilities:







Long-term loans



291



306

Advances payable



342



359

Other long-term payable



9,568



-

Long-term tax payable



29,874



32,719

Deferred tax liabilities



4,029



4,393

     Total liabilities


$

372,428


$

411,240








Commitments and Contingencies














Stockholders' equity:







Common stock, $0.0001 par value - Authorized - 80,000,000
     shares; Issued - 32,338,302 and 32,338,302 shares as of
     September 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



214,872



209,459

Accumulated other comprehensive income



1,227



17,780

Treasury stock ? 694,298 and 694,298 shares as of September 30,

     2018 and December 31, 2017, respectively



(2,907)



(2,907)

Total parent company stockholders' equity



288,431



299,448

Non-controlling interests



21,077



6,681

     Total stockholders' equity



309,508



306,129

Total liabilities and stockholders' equity


$

681,936


$

717,369

 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)




Nine Months Ended September 30,



2018


2017

Cash flows from operating activities:







Net income                                                                                                 


$

5,406


$

20,047

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







Depreciation and amortization



13,590



10,933

Share-based compensation



-



100

Increase in provision for doubtful accounts



253



1,034

Inventory write downs



4,971



4,436

Deferred income taxes



(134)



1,354

Equity in earnings/(losses) of affiliated companies



546



(480)

(Loss)/gain on fixed assets disposals



6



(2,204)

Changes in operating assets and liabilities







(Increase) decrease in:







Accounts and notes receivable



29,758



32,807

Advance payments and others



(1,604)



(1,527)

Inventories



(18,220)



(6,441)

Increase (decrease) in:







Accounts and notes payable



(28,744)



(3,023)

Customer deposits



(148)



158

Accrued payroll and related costs



(756)



182

Accrued expenses and other payables



3,513



(6,216)

Accrued pension costs



(237)



443

Taxes payable



807



(9,806)

Net cash provided by operating activities



9,007



41,797

Cash flows from investing activities:







Increase in other receivables



453



159

Cash received from property, plant and equipment sales



263



2,351

Payments to acquire property, plant and equipment
     (including $6,747 and $7,656 paid to related parties for
     the nine months ended September 30, 2018 and 2017,
     respectively)



(24,295)



(19,187)

Purchase of short-term investments



(19,974)



(25,017)

Purchase of long-term time deposit



-



(5,836)

Proceeds from maturities of short-term investments



26,793



33,749

Investment under equity method



(5,957)



(7,629)

Cash received for related party loan repayment



20,430



-

Loan to a related party



-



(29,044)

Net cash used in investing activities



(2,287)



(50,454)

Cash flows from financing activities:







Proceeds from bank loans



67,938



69,635

Repayments of bank loans



(69,025)



(39,271)

Proceeds from sale and leaseback transaction



11,758



-

Repayments of the borrowing for sale and leaseback
transaction



(2,181)



-

Dividends paid to non-controlling shareholder



(524)



-

Cash received from capital contributions by non-
     controlling shareholder



15,728



-

Net cash provided by financing activities



23,694



30,364

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



(4,603)



2,859

Net increase in cash, cash equivalents and pledged cash



25,811



24,566

Cash, cash equivalents and pledged cash at beginning of
     period



96,093



61,891

Cash, cash equivalents and pledged cash at end of period


$

121,904


$

86,457

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:




Nine Months Ended September 30,



2018


2017

Cash paid for interest                                                                                    


$

706


$

573

Cash paid for income taxes



731



4,343

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:




Nine Months Ended September 30,



2018


2017

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


$

11,666


$

12,331

Accounts payable for acquiring property, plant and equipment



614



890

Dividends payable to non-controlling interests                                           



-



621

 

SOURCE China Automotive Systems, Inc.


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