Industry Press Releases

China Automotive Systems Reports Record First-Quarter Net Sales and 25.6% Increase in Net Income

Friday, May 15, 2015
Pressreleases

China Automotive Systems, Inc., a leading power steering components and systems supplier in China, today announced its unaudited financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Highlights

  • •    Net sales increased by 8.0% to a first-quarter record of $123.4 million, compared to $114.3 million in the first quarter of 2014.
  • •    Gross margin was 17.6%, compared to 18.7% in the first quarter of 2014 and 17.7% in the fourth quarter of 2014.
  • •    Operating margin was 7.6%, compared to 8.5% in the first quarter of 2014 and 6.9% in the fourth quarter of 2014.
  • •    Net income attributable to parent company's common shareholders increased 25.6% to $8.5 million, or diluted earnings per share of $0.26, compared to net income attributable to parent company's common shareholders of $6.8 million, or diluted earnings per share of $0.24, in the first quarter of 2014.
  • •    Cash and cash equivalents and short-term investments were $105.0 million and $109.5 million as of March 31, 2015 and December 31, 2014, respectively.   
     

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "We are pleased to report that we have again exceeded the $100 million sales mark in the first quarter of 2015 as we continued to capture market shares in China and our sales increased in North America. Domestic sales were led by a 150% increase in sales of our electric power steering ('EPS") products to approximately $25.0 million, representing 20.0% of our total sales in the 2015 first quarter. Our 8.0% sales growth exceeded the 3.9% sales growth of vehicles in China in the first quarter of 2015.

"Sales to North America increased by 9.5% year-over-year as our key customer Chrysler reported its 60th consecutive month of year-over-year sales gains. The Jeep® brand reported that March 2015 was its best sales month ever, with 23% growth compared to March 2014 sales, and Wrangler announced its best ever sales in the month of March. Jeep has reported 18 consecutive months of year-over-year sales gains.

"In addition, we are further expanding our global reach with the construction of our assembly facility in Brazil. Once it is operational later in 2015, we will be positioned to better serve vehicle manufacturers in the South American markets and capture market share. We also will be supplying the emerging operations of our current Chinese customers and a Tier 1 OEM in these additional markets," Mr. Wu concluded.        

Mr. Jie Li, chief financial officer of CAAS, commented, "Positive cash flow was generated from operations and we maintained over $100 million in cash, cash equivalents and short-term investments in the first quarter of 2015. We are using our strong financial position to increase our research and development. We have expanded our electric power steering portfolio and are developing other new steering technologies to improve our growth in domestic and international markets. We are also positioning ourselves financially to improve our growth in the future."    

First Quarter of 2015

In the first quarter of 2015, net sales increased by 8.0% to a first-quarter record of $123.4 million, compared to $114.3 million in the same quarter of 2014. The net sales increase was mainly due to higher sales to the Chinese passenger vehicle markets including an increase in the sale of higher-priced, middle-level electric power steering units. EPS sales rose by 150.0% to $25.0 million in the first quarter of 2015. Sales to the North American market continued to increase in the first quarter of 2015 as well.  

Gross profit increased by 1.9% to $21.7 million in the first quarter of 2015, compared to $21.3 million in the first quarter of 2014. The gross margin was 17.6% in the first quarter of 2015, versus 18.7% in the first quarter of 2014 and 17.7% in the fourth quarter of 2014. The decrease in gross margin year-over-year was primarily due to a 17.8% decline in CAAS sales to the commercial vehicle market. Slower economic growth this year and higher purchases of trucks with the less expensive National III emission standards in last year's first quarter, reduced demand for trucks in the 2015 first quarter. The decreased sales to commercial vehicles lowered that factory's utilization resulting in a decline in the gross margin. Nationwide enforcement of the more strict National IV emission standards began on January 1, 2015.

Selling expenses increased by 20.0% to $3.6 million in the first quarter of 2015, compared to $3.0 million in the first quarter of 2014. Selling expenses represented 2.9% of net sales in the first quarter of 2015, compared to 2.7% in the first quarter of 2014. The increase was mainly due to higher personnel compensation and travel-related expenses.   

General and administrative expenses ("G&A expenses") increased by 25.7% to $4.4 million in the first quarter of 2015, compared to $3.5 million in the same quarter of 2014. The increase was mainly due to higher personnel costs and a rise in improvement expenses for offices and facilities. G&A expenses represented 3.6% of net sales in the first quarter of 2015 and 3.1% in the first quarter of 2014.

Research and development expenses ("R&D expenses") amounted to $5.9 million in the first quarter of 2015, the same as those in the first quarter of 2014. R&D expenses represented 4.8% of net sales in the first quarter of 2015 and 5.2% in the first quarter of 2014.

Income from operations was $9.4 million in the first quarter of 2015, compared to $9.8 million in the same quarter of 2014. As a percentage of net sales, the operating margin was 7.6% in the first quarter of 2015, compared to 8.5% in the first quarter of 2014 and 6.9% in the fourth quarter of 2014.

Net financial income increased by $0.1 million to $0.3 million in the first quarter of 2015, compared to $0.2 million in the first quarter of 2014.   

Income before income tax expenses and equity in earnings of affiliated companies was $9.7 million in the first quarter of 2015, compared to $10.2 million in the first quarter of 2014. The decrease in income before income tax expenses and equity in earnings of affiliated companies of $0.5 million in the first quarter of 2015 was mainly due to a decrease in operating income of $0.4 million.

Net income attributable to parent company's common shareholders was $8.5 million in the first quarter of 2015, compared to net income attributable to parent company's common shareholders of $6.8 million in the corresponding quarter of 2014. Diluted earnings per share were $0.26 in the first quarter of 2015, compared to diluted earnings per share of $0.24 in the first quarter of 2014. The weighted average number of diluted common shares outstanding was 32,134,732 in the first quarter of 2015, compared to 28,063,501 in the first quarter of 2014.

As of March 31, 2015, total cash and cash equivalents and short-term investments were $105.0 million, compared to $109.5 million as of December 31, 2014. Working capital was $203.4 million as of March 31, 2015, compared to $198.1 million as of December 31, 2014.

Business Outlook

Management reiterates its revenue guidance of 10% year-over-year growth for the full year 2015. 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 May 14, 2015 at 9:00 A.M. EDT/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)

China Toll Free:

864 001 202 840

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 P.M. EDT on June 14, 2015. The dial-in details for the replay are:

U.S. Toll Free Number

+1-877-660-6853

International dial-in number

+1-201-612-7415

Use Conference ID "13609142" to access the replay.

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 its subsidiaries and 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 5.0 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 Fiat Chrysler North America. For more information, please visit: http://www.caasauto.com.

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(Unaudited, in thousands of USD unless otherwise indicated)

           
   

March 31,
2015

   

December 31,
2014

         

(Audited)

ASSETS

             

Current assets:

             

Cash and cash equivalents

 

$

65,909

   

$

68,505

Pledged cash deposits

   

30,663

     

33,633

Short-term investments

   

39,084

     

41,017

Accounts and notes receivable, net - unrelated parties

   

295,215

     

282,348

Accounts and notes receivable, net - related parties

   

25,678

     

22,760

Advance payments and others - unrelated parties

   

3,561

     

2,124

Advance payments and others - related parties

   

623

     

741

Inventories

   

68,747

     

64,419

Current deferred tax assets

   

6,739

     

7,078

     Total current assets 

   

536,219

     

522,625

Non-current assets:

             

Property, plant and equipment, net

   

84,099

     

82,466

Intangible assets, net

   

3,262

     

3,419

Other receivables, net - unrelated parties

   

1,858

     

1,619

Other receivables, net - related parties

   

8

     

76

Advance payment for property, plant and equipment - unrelated parties

   

3,229

     

6,755

Advance payment for property, plant and equipment - related parties

   

2,554

     

2,085

Long-term investments

   

4,624

     

4,575

Goodwill

   

643

     

645

Non-current deferred tax assets

   

5,293

     

4,896

     Total assets 

 

$

641,789

   

$

629,161

               

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current liabilities:

             

Bank and government loans

 

$

41,187

   

$

43,988

Accounts and notes payable - unrelated parties

   

226,248

     

213,090

Accounts and notes payable - related parties

   

4,751

     

4,857

Customer deposits

   

1,279

     

1,885

Accrued payroll and related costs

   

7,227

     

7,554

Accrued expenses and other payables

   

34,471

     

35,429

Accrued pension costs

   

5,322

     

5,586

Taxes payable

   

11,801

     

11,557

Amounts due to shareholders/directors

   

378

     

380

Current deferred tax liabilities

   

156

     

189

     Total current liabilities 

   

332,820

     

324,515

Long-term liabilities:

             

Advances payable

   

3,691

     

6,156

Non-current deferred tax liabilities

   

310

     

321

     Total liabilities 

 

$

336,821

   

$

330,992

               

Stockholders' equity:

             

Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued–32,338,302
and 32,338,302 shares as of March 31, 2015 and December 31, 2014, respectively

 

$

3

   

$

3

Additional paid-in capital

   

64,522

     

64,522

Retained earnings-

             

Appropriated

   

10,178

     

10,178

Unappropriated

   

187,945

     

179,435

Accumulated other comprehensive income

   

34,927

     

36,119

Treasury stock – 217,283 and 217,283 shares as of March 31, 2015 and December 31, 2014, respectively

   

(1,000)

     

(1,000)

Total parent company stockholders' equity

   

296,575

     

289,257

Non-controlling interests

   

8,393

     

8,912

     Total stockholders' equity

   

304,968

     

298,169

     Total liabilities and stockholders' equity 

 

$

641,789

   

$

629,161

 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and Comprehensive Income

(Unaudited, in thousands of USD, except share and per share amounts)

     
   

Three Months Ended

March 31,

   

2015

   

2014

Net product sales, including $11,704 and $11,810 to related parties for the three months
ended March 31, 2015 and 2014

 

$

123,443

   

$

114,306

Cost of products sold, including $7,060 and $7,191 purchased from related parties for
the three months ended March 31, 2015 and 2014

   

101,772

     

92,969

     Gross profit

   

21,671

     

21,337

Gain on other sales

   

1,657

     

909

Less: Operating expenses

             

Selling expenses

   

3,624

     

3,042

General and administrative expenses

   

4,448

     

3,545

Research and development expenses

   

5,893

     

5,888

Total operating expenses

   

13,965

     

12,475

     Income from operations 

   

9,363

     

9,771

Other income, net

   

94

     

239

Interest expense

   

(474)

     

(278)

Financial income, net

   

753

     

491

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

   

9,736

     

10,223

Less: Income taxes

   

1,410

     

1,975

Equity in earnings of affiliated companies

   

66

     

63

     Net income 

   

8,392

     

8,311

Net income (loss) attributable to non-controlling interests

   

(118)

     

1,537

     Net income attributable to parent company's common shareholders 

 

$

8,510

   

$

6,774

Comprehensive income:

             

Net income

 

$

8,392

   

$

8,311

Other comprehensive income:

             

Foreign currency translation gain, net of tax

   

(1,275)

     

(2,397)

Comprehensive income

   

7,117

     

5,914

Comprehensive income (loss) attributable to non-controlling interests

   

(201)

     

1,136

Comprehensive income attributable to parent company

 

$

7,318

   

$

4,778

               

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

             
               

     Basic

 

$

0.26

   

$

0.24

               

     Diluted-

 

$

0.26

   

$

0.24

Weighted average number of common shares outstanding

             

Basic

   

32,121,019

     

28,043,019

Diluted

   

32,134,732

     

28,063,501

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(Unaudited, in thousands of USD unless otherwise indicated)

     
   

Three Months Ended March 31,

   

2015

   

2014

Cash flows from operating activities:

             

Net income

 

$

8,392

   

$

8,311

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

             

Depreciation and amortization

   

3,965

     

3,713

Increase (decrease) in allowance for doubtful accounts

   

(2)

     

2

Inventory write downs

   

756

     

1,080

Deferred income taxes

   

(145)

     

248

Equity in earnings of affiliated companies

   

(66)

     

(63)

Gain on fixed assets disposals

   

(10)

     

(35)

Changes in operating assets and liabilities:

             

(Increase) decrease in:

             

Pledged deposits

   

2,843

     

1,223

Accounts and notes receivable

   

(16,932)

     

(22,366)

Advance payments and others

   

(1,330)

     

(839)

Inventories

   

(5,328)

     

(5,992)

Increase (decrease) in:

             

Accounts and notes payable

   

13,876

     

4,594

Customer deposits

   

(602)

     

181

Accrued payroll and related costs

   

(300)

     

(312)

Accrued expenses and other payables

   

(236)

     

(56)

Accrued pension costs

   

(242)

     

202

Taxes payable

   

287

     

1,738

     Net cash provided by (used in) operating activities 

   

4,926

     

(8,371)

Cash flows from investing activities:

             

(Increase) in other receivables

   

(184)

     

(46)

Cash received from property, plant and equipment sales

   

559

     

152

Payments to acquire property, plant and equipment

   

(5,723)

     

(3,501)

Payments to acquire intangible assets

   

(7)

     

(3)

Purchase of short-term investments

   

(5,889)

     

(13,002)

Proceeds from maturities of short-term investments

   

7,667

     

12,259

Dividends from investment under cost method

   

-

     

11

     Net cash used in investing activities 

   

(3,577)

     

(4,130)

Cash flows from financing activities:

             

Proceeds from government and bank loan

   

2,249

     

5,146

Repayments of bank loan

   

(4,884)

     

(3,251)

Dividends paid to the non-controlling interest holders

   

(814)

     

-

Dividends paid to the holders of the Company's common stock

   

(252)

     

-

Increase in amounts due to shareholders/directors

   

-

     

52

     Net cash provided by (used in) financing activities 

   

(3,701)

     

1,947

Effects of exchange rate on cash and cash equivalents

   

(244)

     

(470)

     Net decrease in cash and cash equivalents 

   

(2,596)

     

(11,024)

Cash and cash equivalents at beginning of period

   

68,505

     

53,979

Cash and cash equivalents at end of period

 

$

65,909

   

$

42,955

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   

Three Months Ended
March 31,

   

2015

   

2014

Cash paid for interest

 

$

294

   

$

256

Cash paid for income taxes

   

336

     

1,204

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

   

Three Months Ended
March 31,

   

2015

   

2014

Advance payments for acquiring property, plant and equipment

 

$

2,203

   

$

5,337

Dividends payable to non-controlling interest holders

   

318

     

34

Government subsidies recorded as a reduction of property, plant and equipment cost

   

1,628

     

-

Accounts payable for acquiring property, plant and equipment

   

842

     

-

 

 

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