China Automotive Systems Reports 2016 Second Quarter Financial Results

WUHAN, China, August 11, 2016 /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, 2016.

Second Quarter 2016 Highlights

• Net sales were $101.0 million, compared to $109.2 million in the second quarter of 2015;
  
• Net income attributable to parent company's common shareholders was $5.4 million, or diluted earnings per share of $0.17, compared to net income attributable to parent company's common shareholders of $7.7 million, or diluted earnings per share of $0.24, in the second quarter of 2015.

First Six Months of 2016 Highlights

• Net sales were $217.9 million, compared to $232.6 million in the first six months of 2015;
  
• Gross profit was $39.2 million, compared to $43.5 million in the first six months of 2015; gross margin was 18.0% in the first six months of 2016, compared to 18.7% in the first six months of 2015;
  
• Diluted earnings per share attributable to parent company's common shareholders was $0.34, compared to diluted earnings per share attributable to parent company's common shareholders of $0.50 in the first six months of 2015.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales in the second quarter of 2016 continued to reflect the effect of currency volatility, slower economic growth in China and the trend in product mix toward electric power steering ("EPS") products. China's GDP growth in the second quarter of 2016 remained at 6.7%, representing the slowest growth since 2009. The stronger dollar versus the Chinese Renminbi contributed to the year-over-year topline decline, as the vast majority of our sales are in China but our financial results are reported in US dollars. We continue to participate in the growth of the EPS market in China and our EPS sales in the second quarter of 2016 represented 27.8% of total sales. We are investing more in our research and development to broaden our EPS product line and improve our technology to enhance sales growth."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to focus on maintaining our financial strength while we broaden our portfolio of advanced steering products and invest to improve our Chinese operations. As part of our growth strategy, we are leveraging our leadership in China to expand internationally in North America and with our Brazilian joint venture in our efforts to become a global supplier. As part of our commitment to building long-term shareholder value, we began repurchasing shares under our stock repurchase plan in the second quarter of 2016. As of June 30, 2016, approximately $0.5 million were used for repurchases of 115 thousand shares and there were $4.5 million may yet be purchased.

Second Quarter of 2016

In the second quarter of 2016, net sales were $101.0 million, compared to $109.2 million in the same quarter of 2015. Net sales declined mainly due to the impact of foreign currency translation as the value of the Renminbi depreciated compared to the US dollar. While the company's net sales declined by 7.5% in the second quarter, RMB suffered approximately a 6.5% year-over-year depreciation. Also, lower sales of domestic vehicles using the Company's legacy hydraulic power steering were partially offset by higher sales of EPS units in China.

Gross profit was $18.1 million in the second quarter of 2016, compared to $21.8 million in the second quarter of 2015. The gross margin was 18.0% in the second quarter of 2016, versus 20.0% in the second quarter of 2015 and 18.0% in the first quarter of 2016. The gross margin decreased mainly due to changes in the product mix.

Selling expenses were $4.1 million in the second quarter of 2016, compared to $4.0 million in the second quarter of 2015. Selling expenses represented 4.1% of net sales in the second quarter of 2016 compared to 3.7% in the same quarter of 2015. The increase was mainly due to more marketing activities conducted during the quarter.

General and administrative expenses ("G&A expenses") were $3.9 million in the second quarter of 2016 compared to $3.8 million in the second quarter of 2015. G&A expenses represented 3.9% of net sales in the second quarter of 2016 compared to 3.5% in the second quarter of 2015.

Research and development expenses ("R&D expenses") were $6.0 million in the second quarter of 2016, compared to $6.4 million in the second quarter of 2015. R&D expenses continue to focus on the development of the Company's EPS products. R&D expenses represented 5.9% of sales in the second quarter of each of 2016 and 2015.

Net financial income in the second quarter of 2016 was $0.1 million compared with $0.7 million in the second quarter of 2015. The decrease was mainly due to the decrease in interest income and foreign exchange gain.

Income from operations was $5.3 million in the second quarter of 2016, compared to $8.3 million in the same quarter of 2015. The decrease was primarily due to the lower revenue and gross profit combined with higher operating expenses in the second quarter of 2016 compared with the same quarter in 2015. As a percentage of net sales, the operating margin was 5.2% in the second quarter of 2016, compared to 7.6% in the second quarter of 2015.

Income before income tax expenses and equity in earnings of affiliated companies was $6.5 million in the second quarter of 2016, compared to $9.2 million in the second quarter of 2015.

Net income attributable to parent company's common shareholders was $5.4 million in the second quarter of 2016, compared to net income attributable to parent company's common shareholders of $7.7 million in the corresponding quarter of 2015. Diluted earnings per share were $0.17 in the second quarter of 2016, compared to diluted earnings per share of $0.24 in the second quarter of 2015. The weighted average number of diluted common shares outstanding was 32,087,634 in the second quarter of 2016, compared to 32,138,438 in the second quarter of 2015.

First Six Months of 2016

Net sales were $217.9 million in the first six months of 2016, compared to $232.6 million in the first six months of 2015. Six-month gross profit was $39.2 million, compared to $43.5 million in the corresponding period last year. Six-month gross margin was 18.0% in the 2016 period compared to 18.7% in the corresponding period in 2015. The gain on other sales of $2.0 million was in the first six months of 2016 compared with $2.4 million in the 2015 period. Income from operations was $12.3 million in the first six months of 2016, compared to $17.6 million in the first six months of 2015. Operating margin was 5.6% in the first six months of 2016, compared to 7.6% for the corresponding period of 2015.

Net income attributable to parent company's common shareholders was $11.1 million in the first six months of 2016, compared to $16.2 million in the corresponding period in 2015. Diluted earnings per share were $0.34 in the first six months of 2016, compared to diluted earnings per share of $0.50 for the corresponding period in 2015.

As of June 30, 2016, total cash, cash equivalents, pledged cash and short-term investments were $95.8 million. Total accounts receivable including notes receivable were $314.1 million. Accounts payable were $221.3 million and bank and government loans were $42.2 million. Total parent company stockholders' equity was $303.6 million as of June 30, 2016, compared to $299.0 million as of December 31, 2015.

Business Outlook

Management revised the revenue guidance for the full year 2016 to US$430 million due to the depreciation of RMB. 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 11, 2016 at 8:30 A.M. EDT/8:30 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 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, Beijing Henglong Automotive System Co., Ltd. (for 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, 2016, 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

Investor Relations
+1-646-726-6511
caas@compassbell.com

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