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China Automotive Systems Reports 2017 Second Quarter Unaudited Financial Results

2017-08-10 18:00
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WUHAN, China, Aug. 10, 2017 /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, 2017.

Second Quarter 2017 Highlights

  • Net sales increased 16.5% to $117.7 million from $101.0 million in the second quarter of 2016;
  • Gross profit rose 32.6% to $24.1 million and the gross margin increased to 20.4% from 18.0% in the second quarter of 2016; 
  • Income from operations increased by 109.8% to $11.1 million with an operating margin of 9.4% compared with 5.2% in the second quarter of 2016;
  • Net income attributable to parent company's common shareholders rose 64.8% to $8.9 million, or diluted earnings per share of $0.28, compared to net income attributable to parent company's common shareholders of $5.4 million, or diluted earnings per share of $0.17, in the second quarter of 2016.

First Six Months of 2017 Highlights

  • Net sales grew 8.8% to $237.0 million, compared to $217.9 million in the first six months of 2016;
  • Gross profit increased by 16.6% to $45.7 million, compared to $39.2 million in the first six months of 2016; gross margin increased to 19.3% in the first six months of 2017, compared to 18.0% in the first six months of 2016;
  • Income from operations increased by 48.8% to $18.3 million with an operating margin of 7.7% compared with 5.6% in the second quarter of 2016;
  • Net income attributable to parent company's common shareholders grew 31.5% to $14.6 million from $11.1 million in the first six months of 2016; diluted earnings per share attributable to parent company's common shareholders was $0.46, compared to diluted earnings per share attributable to parent company's common shareholders of $0.34 in the first six months of 2016.
  • Net cashflow from operating activities increased to $19.2 million from a net use of $6.4 million in the first six months of 2016.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales in the second quarter of 2017 reflected economic growth in China, an increase in the sales of our traditional steering products as Chinese branded vehicles captured market share, and stronger growth in our international markets.  We are investing more in our research and development to strengthen our EPS product line and advance other new products to enhance sales growth."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to focus on building our financial strength and resources to build our operations in China and in international markets.  With our growing number of high quality steering products, we are well positioned to capture market shares in key markets in the future.  We generated free cash flow, added $9.5 million in working capital and improved our return on invested capital in the first half of 2017."

Second Quarter of 2017

In the second quarter of 2017, net sales increased 16.5% to $117.7 million, compared to $101.0 million in the same quarter of 2016. Net sales of traditional steering products grew by 32.8% and the Company sold more products to its North American customers.  Sales of electric power steering ("EPS") represented 22.6% of total net sales.

Gross profit increased 32.6% to $24.1 million in the second quarter of 2017, compared to $18.1 million in the second quarter of 2016. The gross margin was 20.4% in the second quarter of 2017, versus 18.0% in the second quarter of 2016 and 18.1% in the first quarter of 2017. The gross margin increased mainly due to a better revenue mix as total units sold to the international markets increased during the second quarter of 2017.

Gain on other sales increased to $4.6 million in the second quarter of 2017, compared to $1.2 million in the second quarter of 2016. The increase was mainly due to a one-time gain of $2.2 million on disposal of a building in the second quarter of 2017.

Selling expenses were $4.6 million in the second quarter of 2017, compared to $4.1 million in the second quarter of 2016. Selling expenses represented 3.9% of net sales in the second quarter of 2017 compared to 4.1% in the same quarter of 2016. The increase was mainly due to higher logistics expenses related to increased sales during the quarter.

General and administrative expenses ("G&A expenses") were $5.3 million in the second quarter of 2017 compared to $3.9 million in the second quarter of 2016. G&A expenses represented 4.5% of net sales in the second quarter of 2017 compared to 3.9% in the second quarter of 2016. The increase was mainly due to the increased allowance for doubtful accounts of $1.1 million and higher payroll expenses.

Research and development expenses ("R&D expenses") increased 28.3% to $7.7 million in the second quarter of 2017, compared to $6.0 million in the second quarter of 2016. R&D expenses continue to focus on the development of the Company's EPS and other new products. R&D expenses represented 6.5% of sales in the second quarter of 2017, compared with 5.9% in the 2016 second quarter.

Net financial income in the second quarter of 2017 was $0.6 million compared with $0.1 million in the second quarter of 2016.

Income from operations rose 109.8% to $11.1 million in the second quarter of 2017, compared to $5.3 million in the same quarter of 2016. The increase was primarily due to higher gross profit and a gain on other sales. As a percentage of net sales, the operating margin was 9.4% in the second quarter of 2017, compared to 5.2% in the second quarter of 2016.

Income before income tax expenses and equity in earnings of affiliated companies was $11.1 million in the second quarter of 2017, compared to $6.5 million in the second quarter of 2016. 

Net income attributable to parent company's common shareholders rose 64.8% to $8.9 million in the second quarter of 2017, compared to net income attributable to parent company's common shareholders of $5.4 million in the corresponding quarter of 2016. Diluted earnings per share were $0.28 in the second quarter of 2017, compared to diluted earnings per share of $0.17 in the second quarter of 2016. The weighted average number of diluted common shares outstanding was 31,649,322 in the second quarter of 2017, compared to 32,087,634 in the second quarter of 2016.

First Six Months of 2017

Net sales increased 8.8% to were $237.0 million in the first six months of 2017, compared to $217.9 million in the first six months of 2016. Six-month gross profit increased 16.6% to $45.7 million, compared to $39.2 million in the corresponding period last year. Six-month gross margin was 19.3% in the 2017 period compared to 18.0% in the corresponding period in 2016. The gain on other sales of $5.3 million was in the first six months of 2017 compared with $2.0 million in the 2016 period. Income from operations climbed 48.8% to $18.3 million in the first six months of 2017, compared to $12.3 million in the first six months of 2016. Operating margin was 7.7% in the first six months of 2017, compared to 5.6% for the corresponding period of 2016. 

Net income attributable to parent company's common shareholders increased 31.5% to $14.6 million in the first six months of 2017, compared to $11.1 million in the corresponding period in 2016. Diluted earnings per share were $0.46 in the first six months of 2017, compared to diluted earnings per share of $0.34 for the corresponding period in 2016.

As of June 30, 2017, cash and equivalents, pledged cash and short-term investments were $98.2 million. Total accounts receivable including notes receivable were $307.4 million. Accounts payable were $226.2 million and bank and government loans were $67.4 million. Total parent company stockholders' equity was $321.8 million as of June 30, 2017, compared to $300.5 million as of December 31, 2016.

Net cash provided by operating activities increased significantly to $19.2 million from a net use of $6.4 million in the first six months of 2016. The increase was mainly attributable to the improvement of account receivable management. Payments to acquire property, plant and equipment was reduced to $10.2 million from $18.5 million in the first six months of 2016.

Business Outlook

Management has increased its revenue guidance for the full year 2017 to US$490 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 August 10, 2017 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: +86-400-1202-840

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 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 30, 2017, 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
+1-646-726-6511
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,




2017



2016


Net product sales ($8,583 and $10,054 sold to related parties for the three months
ended June 30, 2017 and 2016)


$

117,660



$

101,017


Cost of products sold ($6,283 and $6,168 purchased from related parties for the three
months ended June 30, 2017 and 2016)



93,599




82,869


Gross profit



24,061




18,148


Gain on other sales



4,555




1,185


Less: Operating expenses









Selling expenses



4,555




4,128


General and administrative expenses



5,283




3,942


Research and development expenses



7,707




5,987


Total operating expenses



17,545




14,057


Income from operations



11,071




5,276


Other income, net



152




1,219


Interest expense



(644)




(127)


Financial income, net



550




148


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



11,129




6,516


Less: Income taxes



2,186




1,196


Equity in (loss)/earnings of affiliated companies



(62)




195


Net income



8,881




5,515


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



(40)




151


Net income attributable to parent company's common shareholders


$

8,921



$

5,364


Comprehensive income:









Net income


$

8,881



$

5,515


Other comprehensive income:









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



5,814




(7,946)


Comprehensive income/(loss)



14,695




(2,431)


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



155




(164)


Comprehensive income/(loss) attributable to parent company


$

14,540



$

(2,267)











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


















Basic -


$

0.28



$

0.17











Diluted-


$

0.28



$

0.17


Weighted average number of common shares outstanding









Basic



31,644,004




32,085,822


Diluted



31,649,322




32,087,634


 

 

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,




2017



2016


Net product sales ($18,121 and $18,639 sold to related parties for the six months
ended June 30, 2017 and 2016)


$

236,968



$

217,871


Cost of products sold ($13,646 and $13,043 purchased from related parties for the
six months ended June 30, 2017 and 2016)



191,278




178,711


Gross profit



45,690




39,160


Gain on other sales



5,343




1,986


Less: Operating expenses









Selling expenses



8,623




8,433


General and administrative expenses



9,637




8,257


Research and development expenses



14,472




12,126


Total operating expenses



32,732




28,816


Income from operations



18,301




12,330


Other (expense)/income, net



(102)




575


Interest expense



(875)




(323)


Financial income, net



882




470


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



18,206




13,052


Less: Income taxes



3,376




2,249


Equity in earnings of affiliated companies



(11)




257


Net income



14,819




11,060


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



184




(13)


Net income attributable to parent company's common shareholders


$

14,635



$

11,073


Comprehensive income:









Net income


$

14,819



$

11,060


Other comprehensive income:









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



7,443




(6,296)


Comprehensive income



22,262




4,764


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



433




(249)


Comprehensive income attributable to parent company


$

21,829



$

5,013











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


















Basic -


$

0.46



$

0.34











Diluted-


$

0.46



$

0.34


Weighted average number of common shares outstanding









Basic



31,644,004




32,103,420


Diluted



31,649,615




32,105,611


 

 

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)



June 30, 2017



December 31, 2016


ASSETS









Current assets:









Cash and cash equivalents


$

36,473



$

31,092


Pledged cash



34,468




30,799


Short-term investments



27,239




30,475


Accounts and notes receivable, net - unrelated parties



288,985




285,731


Accounts and notes receivable, net - related parties



18,459




20,984


Advance payments and others - unrelated parties



7,473




10,203


Advance payments and others - related parties



30,558




624


Inventories



65,470




68,050


Current deferred tax assets



7,652




7,946


Total current assets



516,777




485,904


Non-current assets:









Long-term time deposits



6,790




865


Property, plant and equipment, net



108,646




101,478


Intangible assets, net



544




617


Other receivables, net - unrelated parties



2,212




2,252


Advance payment for property, plant and equipment - unrelated parties



13,961




14,506


Advance payment for property, plant and equipment - related parties



3,361




5,005


Long-term investments



17,552




16,431


Non-current deferred tax assets



4,241




4,641


Total assets


$

674,084



$

631,699











LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:









Bank and government loans


$

67,379



$

40,820


Accounts and notes payable - unrelated parties



221,371




216,993


Accounts and notes payable - related parties



4,814




6,803


Customer deposits



699




700


Accrued payroll and related costs



7,128




6,971


Accrued expenses and other payables



34,598




35,882


Accrued pension costs



3,919




4,130


Taxes payable



5,397




11,674


Amounts due to shareholders/directors



324




312


Advances payable (current portion)



391




382


Current deferred tax liabilities



171




193


Total current liabilities



346,191




324,860


Long-term liabilities:









Long-term bank loan



-




608


Advances payable



347




339


Total liabilities


$

346,538



$

325,807











Commitments and Contingencies (See Note 29)


















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, 2017 and December 31, 2016,
respectively


$

3



$

3


Additional paid-in capital



64,306




64,764


Retained earnings-









Appropriated



10,673




10,549


Unappropriated



243,474




228,963


Accumulated other comprehensive income/(loss)



6,235




(892)


Treasury stock – 694,298 and 694,298 shares as of June 30, 2017 and
December 31, 2016, respectively



(2,907)




(2,907)


Total parent company stockholders' equity



321,784




300,480


Non-controlling interests



5,762




5,412


Total stockholders' equity



327,546




305,892


Total liabilities and stockholders' equity


$

674,084



$

631,699


 

 

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,




2017



2016


Cash flows from operating activities:









Net income


$

14,819



$

11,060


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









Depreciation and amortization



7,809




7,351


Increase in/(reversal of) provision for doubtful accounts



1,008




(49)


Inventory write downs



2,101




1,902


Deferred income taxes



971




(27)


Equity in earnings of affiliated companies



11




(257)


Gain on disposal of Fujian Qiaolong



-




(698)


Gain on fixed assets disposals



(2,202)




(14)


Changes in operating assets and liabilities









(Increase) decrease in:









Pledged cash



(2,881)




6,528


Accounts and notes receivable



6,570




(50,973)


Advance payments and others



1,241




(1,437)


Inventories



2,104




(5,956)


Increase (decrease) in:









Accounts and notes payable



(2,932)




25,885


Customer deposits



(7)




(908)


Accrued payroll and related costs



(2)




152


Accrued expenses and other payables



(3,028)




456


Accrued pension costs



(307)




407


Taxes payable



(6,069)




276


Advance payable



-




(75)


Net cash provided by/(used in) operating activities



19,206




(6,377)


Cash flows from investing activities:









Increase in other receivables



137




1,438


Proceeds from disposition of a subsidiary, net of cash disposed of $1,063



-




1,953


Cash received from property, plant and equipment sales



2,334




719


Payments to acquire property, plant and equipment (including $3,497and $4,603
paid to related parties for the six months ended June 30, 2017 and 2016,
respectively)



(10,178)




(18,454)


Payments to acquire intangible assets



-




(60)


Purchase of short-term investments



(8,069)




(14,797)


Purchase of long-term time deposit



(5,836)




-


Proceeds from maturities of short-term investments



11,923




1,827


Investment under equity method



(730)




(3,013)


Loan to a related party



(29,044)




-


Net cash used in investing activities



(39,463)




(30,387)


Cash flows from financing activities:









Proceeds from bank and government loans



59,088




11,541


Repayments of bank and government loans



(34,128)




(5,138)


Repurchases of common stock



-




(454)


Net cash provided by financing activities



24,960




5,949


Effects of exchange rate on cash and cash equivalents



678




(997)


Net increase/(decrease) in cash and cash equivalents



5,381




(31,812)


Cash and cash equivalents at beginning of period



31,092




69,676


Cash and cash equivalents at end of period


$

36,473



$

37,864


 

 

 

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,




2017



2016


Cash paid for interest


$

354



$

180


Cash paid for income taxes



4,172




1,253



SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:



Six Months Ended June 30,




2017



2016


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


$

10,310



$

7,580


Accounts payable for acquiring property, plant and equipment



709




845


Dividends payable to non-controlling interests



608




464


 

 

 

View original content:http://www.prnewswire.com/news-releases/china-automotive-systems-reports-2017-second-quarter-unaudited-financial-results-300502563.html

Source: China Automotive Systems, Inc.

Related stocks: NASDAQ-SMALL:CAAS

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