omniture

China Automotive Systems Reports 2008 Third Quarter Results

2008-11-12 18:41 1256

Net Sales Reached US$36.9 Million; Representing 18.4% Year-Over-Year Growth

WUHAN, Hubei, China, Nov. 12 /Xinhua-PRNewswire/ -- China Automotive Systems, Inc. (Nasdaq: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced financial results for the third quarter and nine months ended September 30, 2008.

2008 third Quarter Highlights:

-- Net sales increased to US$36.9 million, reflecting 18.4% year-over-year

growth;

-- Net sales from steering components for passenger and light-duty

vehicles increased to US$ 24.6 million, reflecting 22% year-over-year

growth;

-- Net sales from steering components for commercial vehicles increased to

US$8.8 million, reflecting an 8.8% increase year-over-year;

-- Net income was US$2.8 million, reflecting 7.2% year-over-year growth;

and

-- Diluted earnings per share were US$0.09, reflecting a decline of

US$0.02 per diluted share due to a greater number of weighted average

common shares outstanding;

-- Net cash flow provided by operations was US$4.4 million for the nine

month period

China Automotive Systems reported net sales of US$36.9 million for the third quarter ended September 30, 2008, compared with US$31.2 million in the same quarter in 2007, and US$46.5 million for the second quarter of 2008, reflecting an 18.4% year-over-year growth. Net income for the third quarter of 2008 was US$2.8 million, or US$0.09 per fully diluted share, versus US$2.6 million, or US$0.11 per fully diluted share in the same period a year ago, reflecting 7.2% year-over-year growth, and compared with US$4.7 million, or US$0.18 per fully diluted share for the second quarter of 2008.

Third quarter net sales for 2008 from steering products for passenger and light-duty vehicles increased by 22% year-over-year to US$24.6 million as compared with US$20.2 million reported in the same period for 2007. Net sales from steering products for commercial vehicles for the third quarter of 2008 increased to US$8.8 million, an 8.8% year-over-year gain compared with the US$8.1 million reported in the same period for 2007. Net sales from oil pumps and sensors for the 2008 third quarter increased to US$3.4 million as compared with US$2.9 million in the same period for 2007, reflecting 18.1% year-over-year growth.

"Our third quarter results were negatively impacted by the normal seasonality and Beijing Olympics. Many OEMs reduced the production and held off orders for components this summer. However, we continued to manage to generate growth in a slow market, as we continue to win new customers and expand our market share in China," said Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems.

Gross profit for the third quarter of 2008 was US$9.9 million compared with US$11.4 million in the same quarter in 2007, and US$14.5 million for the second quarter of 2008. Gross margin was 26.7% in the third quarter compared with 31.1% in the second quarter of 2008. Operating income for the third quarter of 2008 was US$3.7 million as compared with US$6.6 million reported in the same quarter of 2007 and compared with US$5.5 million for the second quarter of 2008. Lower operating income was partially due to lower gross profit resulting from higher raw material prices as well as higher labor and transportation costs related to rising sales. CAAS also invested more into Research & Development resources as more personnel were added to design new products. Further, greater operating expenses were reflected in higher depreciation and amortization expenses from additions to property, plant and equipment as well as increased supplies for continuing construction to build the Company's production capacity.

Net income was US$2.8 million compared with US$2.6 million in the third quarter of 2007, reflecting a 7.2% year-over-year increase. Earnings per share on a fully diluted basis in the third quarter of 2008 were US$0.09 as compared to US$0.11 in the same period of 2007. Total shares outstanding on a fully diluted basis were 31.4 million shares, as compared to 24 million in the 2007 third quarter. The share-count increase was mainly related to the US$ 35 million convertible note financing and the Henglong acquisition in early 2008. The conversion price of the convertible notes, which was US$8.8527 initially, was reset to a bottom of US$7.0822 on August 15, 2008. There will be no more conversion price reset thereafter.

Total cash and cash equivalents as of September 30, 2008 were US$27.2 million as compared with US$19.5 million as of December 31, 2007. Also, there was a US$9.2 million of pledged cash deposits, part of which is expected to turn into free cash in the fourth quarter. Total account and notes receivables were US$100.9 million reflecting higher sales. Notes receivables, which are guaranteed bank payments from customers, were US$40.5 million as of September 30, 2008. Stockholder's equity increased to US$80.8 million as of September 30, 2008 from US$67.2 million as of December 31, 2007. Working capital reached US$75 million. Property, plant equipment increased to approximately US$50 million. The long-term convertible notes payable was valued at US$32.8 million.

Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems, stated, "In response to the higher raw material costs during the summer, we have increased our selling prices to our customers, especially the commercial vehicle OEMs. With falling steel prices and our adjusted ASP, we are expecting a much improved gross margin in the fourth quarter. On the sales front, we expect the gradual recovery of domestic auto sales growth following the new emission standard introduction. We remain hopeful that the Chinese government's road and port infrastructure build-out plan along with US$ 586 billion stimulus package can benefit the domestic auto industry."

Mr. Jie Li, Chief Financial Officer, stated, "As the global capital market continues to experience turbulence and the Chinese auto industry undergoes a transition year, we are carefully planning our growth strategy based on our financial strength, and focusing on strengthening our balance sheet. We have improved our cash position by managing account receivables and reducing capital expenditures. We want to continue to generate positive cash-flow, mitigate financial risks and enhance our long term shareholder's value."

Recent Developments

On October 23rd, founder and Chairman, Mr. Hanlin Chen, Chief Executive Officer, Mr. Qizhou Wu, Chief Financial Officer, Mr. Jie Li and other officers announced plans to invest US$500,000 to purchase the common shares of CAAS in the open market.

On October 14th, China Automotive Systems announced that its subsidiary, Jingzhou Henglong Automotive Parts Co. ("Henglong"), received orders from Dongfeng Peugeot Citroen Automobile Company Ltd. ("DPCA") for power steering gears for the Dongfeng Elysee. Henglong started development of three new power steering gears for DPCA in 2005. These three models are Peugeot 206, Elysee R23 and Picasso N68. Subsequently, all models have passed the French UTAC safety test, road tests and inspections. In July 2008, Henglong won the supply contract for the Peugeot 206 and has begun commercial production.

On September 2nd, the Company announced that its subsidiary, Jingzhou Henglong Automotive Parts Co. ("Henglong"), signed a supply agreement with ChangAn Auto Co. Ltd. ("ChangAn Auto"). Henglong successfully developed 4 different models of hydraulic power steering systems and one model of Electronic Power Steering for ChangAn Auto. Henglong is now a power steering system supplier to ChangAn Auto's CV6 model. Total shipments to ChangAn Auto for 2008 will be approximately 30,000 total units. According to the China Association of Automobile Manufacturers, ChangAn Auto Co. Ltd. produced and sold around 50,000 sedans and 250,000 SUVs in 2007. ChangAn Group has been consistently ranked as a top 5 automaker in China for many years.

Conference Call

Management will conduct a conference call today, November 12 at 8:00 a.m. Eastern Standard 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: +1-877-407-8035 (North America)

Phone Number: +1-201-689-8035 (International)

In addition, the conference call will be broadcast live over the Internet at: http://www.caasauto.com .

Please go to the web site at least 15 minutes early to register, download and install any necessary software.

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 PM Eastern Standard Time on Wednesday, November 26, 2008. 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; using Account "286" and Conference ID "301311" to access the replay. The internet audio stream will also be available until 11:59 pm Eastern Standard Time on Wednesday, November 26.

About CAAS

Based in Hubei Province, 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 seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.1 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd., etc. For more information, please visit: http://www.caasauto.com .

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and condition, and the impact of acquisitions on its financial performance. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.

China Automotive Systems, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended September 30,

2008 2007

Net product sales, including $967,591

and $1,635,676 sold to related parties

for the three months ended September

30, 2008 and 2007 $ 36,936,755 $ 31,202,731

Cost of product sold, including

$1,783,822 and $1,276,789 purchased

from related parties for the three

months ended September 30, 2008

and 2007 27,058,532 19,839,980

Gross profit 9,878,223 11,362,751

Add: Gain on other sales 343,326 102,371

Less: Operating expenses -

Selling expenses 2,309,064 2,094,157

General and administrative expenses 2,060,675 1,683,190

R&D expenses 665,552 321,533

Depreciation and amortization 1,488,842 735,810

Total Operating expenses 6,524,133 4,834,690

Income from operations 3,697,416 6,630,432

Add: Other income 123,167 --

Financial income (expenses) (446,261) (215,400)

Gain (loss) on change in fair value of

derivative 677,417 --

Income before income taxes 4,051,739 6,415,032

Less: Income tax expenses (benefits) 309,480 379,409

Income before minority interests 3,742,259 6,035,623

Less: Minority interests 983,480 3,461,205

Net income $ 2,758,779 $ 2,574,418

Net income per common share -

Basic $ 0.10 $ 0.11

Diluted $ 0.09 $ 0.11

Weighted average number of common

shares outstanding -

Basic 26,983,244 23,959,702

Diluted 31,431,026 23,962,356

China Automotive Systems, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended September 30,

2008 2007

Net income $ 2,758,779 $ 2,574,418

Other comprehensive income:

Foreign currency translation gain 662,475 --

Comprehensive income $ 3,421,254 $ 2,574,418

China Automotive Systems, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

Nine Months Ended September 30,

2008 2007

Net product sales, including

$3,766,078 and $3,711,504 sold to

related parties for the nine months

ended September 30, 2008 and 2007 $ 124,912,138 $ 95,898,461

Cost of product sold, including

$6,387,212 and $3,743,223 purchased

from related parties for the nine

months ended September 30, 2008

and 2007 88,358,541 63,249,998

Gross profit 36,553,597 32,648,463

Add: Gain on other sales 595,226 362,458

Less: Operating expenses -

Selling expenses 7,721,240 6,500,969

General and administrative expenses 7,828,458 5,272,795

R&D expenses 1,404,525 909,515

Depreciation and amortization 4,234,633 2,564,234

Total Operating expenses 21,188,856 15,247,513

Income from operations 15,959,967 17,763,408

Add: Other income 322,626 38,462

Financial income (expenses) (884,708) (626,892)

Gain (loss) on change in fair value

of derivative 1,672,570 --

Income before income taxes 17,070,455 17,174,978

Less: Income tax expenses 718,417 2,741,024

Income before minority interests 16,352,038 14,433,954

Less: Minority interests 4,418,730 7,761,281

Net income $ 11,933,308 $ 6,672,673

Net income per common share -

Basic $ 0.47 $ 0.28

Diluted $ 0.45 $ 0.28

Weighted average number of common

shares outstanding -

Basic 25,272,884 23,952,573

Diluted 28,734,809 23,958,547

China Automotive Systems, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Nine Months Ended September 30,

2008 2007

Net income $ 11,933,308 $ 6,672,673

Other comprehensive income:

Foreign currency translation gain 5,397,297 1,265,553

Comprehensive income $ 17,330,605 $ 7,938,226

China Automotive Systems, Inc.

Condensed Consolidated Balance Sheets

September December

30, 2008 31, 2007

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 27,188,579 $ 19,487,159

Pledged cash deposits 9,171,215 4,645,644

Accounts and notes receivable,

net, including $1,105,037 and

$1,869,480 from related parties

at September 30, 2008 and

December 31, 2007, net of an

allowance for doubtful accounts

of $3,666,432 and $3,827,838 at

September 30, 2008 and December

31, 2007 100,910,001 82,022,643

Advance payments and other,

including $65,746 and $55,323 to

related parties at September 30,

2008 and December 31, 2007 1,731,345 922,578

Inventories 29,933,712 20,193,286

Total current assets $ 168,934,852 $ 127,271,310

Long-term Assets:

Property, plant and equipment $ 49,987,163 $ 46,585,041

Intangible assets 563,558 589,713

Other receivables, net, including

$707,979 and $638,826 from related

parties at September 30, 2008 and

December 31, 2007, net of an

allowance for doubtful accounts of

$970,385 and $652,484 at September

30, 2008 and December 31, 2007 1,075,389 888,697

Advance payments for property, plant

and equipment, including $3,818,485

and $1,560,378 to related parties

at September 30, 2008 and December

31, 2007 8,587,824 6,260,443

Long-term investments 79,179 73,973

Deferred income tax assets 1,995,692 1,315,510

Total assets $ 231,223,657 $ 182,984,687

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Bank loans $ 5,865,103 $ 13,972,603

Accounts and notes payable,

including $851,631 and $1,134,817

to related parties at September

30, 2008 and December 31, 2007 59,732,630 47,530,383

Customer deposits 166,576 135,627

Accrued payroll and related costs 2,879,525 2,664,464

Accrued expenses and other payables 13,079,635 14,938,055

Accrued pension costs 3,757,655 3,622,729

Taxes payable 8,173,052 9,080,493

Amounts due to shareholders/directors 257,024 304,601

Total current liabilities $ 93,911,200 $ 92,248,955

Long-term liabilities:

Advances payable 234,542 334,600

Derivative liabilities 821,583 --

Convertible notes payable 32,800,183 --

Total liabilities $ 127,767,508 $ 92,583,555

Minority interests $ 22,618,205 $ 23,166,270

Related Party Translations

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.0001 par value -

Authorized - 20,000,000 shares,

Issued and outstanding - None $ -- $ --

Common stock, $0.0001 par value -

Authorized - 80,000,000 shares

Shares Issued and Outstanding -

26,983,244 shares and 23,959,702

shares at September 30, 2008 and

December 31, 2007, respectively 2,698 2,396

Additional paid-in capital 26,398,126 30,125,951

Retained earnings -

Appropriated 7,525,777 7,525,777

Unappropriated 35,524,583 23,591,275

Accumulated other comprehensive

income 11,386,760 5,989,463

Total stockholders' equity $ 80,837,944 $ 67,234,862

Total liabilities and stockholders' $

equity 231,223,657 $ 182,984,687

For further information, please contact:

Jie Li

Chief Financial Officer

China Automotive Systems

Email: jieli@chl.com.cn

Kevin Theiss

Investor Relations

Grayling Global

Tel: +1-646-284-9409

Email: ktheiss@hfgcg.com

Stacey Dimakakos

Financial Media Relations

Grayling Global

Tel: +1-646-284-9417

Email: sdimakakos@hfgcg.com

Source: China Automotive Systems, Inc.
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