China Automotive Systems Reports Fourth Quarter and Fiscal Year 2021 Results

WUHAN, China, March 30, 2022 /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 fourth quarter and the audited results for the fiscal year ended December 31, 2021.

Fourth Quarter 2021 Highlights

• Net sales declined by 5.3% to $138.8 million from $146.5 million in the fourth quarter of 2020
• Gross margin was 14.2% compared with 15.6% in the fourth quarter of 2020
• Income from operations was $0.6 million compared to loss from operations of $4.0 million in the fourth quarter of 2020
• Net income attributable to parent company's common shareholders was $5.0 million, or diluted net income per share of $0.16, compared to a net loss of $3.2 million, or diluted loss per share of $0.10 in the fourth quarter of 2020.

Fiscal Year 2021 Highlights

• Net sales were $498.0 million compared to $417.6 million in 2020
• Gross profit increased by 30.4% to $72.1 million compared to $55.3 million in 2020. Gross margin increased to 14.5% from 13.3% in 2020
• Operating income was $5.5 million compared to operating loss of $8.1 million in 2020
• Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020
• Total cash and cash equivalents, pledged cash and short-term investments were $161.3 million
• Net cash flow provided by operating activities was $28.3 million.

Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, "We are pleased to report that our operations returned to profitability in the fourth quarter in a challenging macroeconomic environment. According to the China Association of Automobile Manufacturers, overall sales of automobiles in China only grew by 3.8% in 2021. Our net sales increased by 19.3% year-over-year to $498.0 million in 2021 as sales in the domestic Chinese passenger market, our revenue from North America and our Brazilian operations all had strong growth.  Our electric power steering ("EPS") revenue increased 86.0% year-over-year and represented 23.2% of total revenues in 2021 compared with 14.8% a year ago. To enhance our New Energy Vehicle ("NEV") products, we purchased a 40% interest in Sweden's Sentient AB, and we also developed new steering for Alfa Romeo's first luxury plug-in-hybrid SUV, the model 2021 Tonale." 

"We are encouraged for the 2022 year as passenger vehicle sales have risen in the first two months of 2022 and government policies have become more growth oriented," Mr. Wu concluded.

Mr. Jie Li, Chief Financial Officer of CAAS, commented, "We maintained our financial strength as total cash and cash equivalents, pledged cash and short-term investments were $161.3 million, or approximately $5.23 per share at year end. We continued to generate strong free cashflow." 

Fourth Quarter of 2021

In the fourth quarter of 2021, net sales decreased by 5.3% to $138.8 million compared to $146.5 million in the same quarter of 2020. The net sales decrease was mainly due to a change in the product mix and lower demand for automobiles in the fourth quarter of 2021 compared with the fourth quarter of 2020.   

Gross profit was $19.7 million in the fourth quarter of 2021, compared to $22.8 million in the fourth quarter of 2020. Gross margin in the fourth quarter of 2021 was 14.2% compared to 15.6% in the fourth quarter of 2020, primarily due to lower sales volume and a change in product mix.

Gain on other sales was $1.8 million in the fourth quarter of 2021, compared to $1.4 million in the fourth quarter of 2020.

Selling expenses were $3.4 million in the fourth quarter of 2021, compared to $5.6 million in the fourth quarter of 2020. Selling expenses represented 2.4% of net sales in the fourth quarter of 2021, compared to 3.8% in the fourth quarter of 2020.

General and administrative expenses ("G&A expenses") were $7.6 million in the fourth quarter of 2021, compared to $14.3 million in the same period in 2020. G&A expenses represented 5.5% of net sales in the fourth quarter of 2021, compared to 9.8% of net sales in the fourth quarter of 2020. The significantly higher G&A expenses in the fourth quarter of 2020 were mainly attributable to a one-time, non-recurring expected credit loss provision of $6.4 million related to a customer's bankruptcy reorganization proceeding.

Research and development expenses ("R&D expenses") were $9.9 million in the fourth quarter of 2021, compared to $8.3 million in the fourth quarter of 2020. R&D expenses represented 7.1% of net sales in the fourth quarter of 2021, compared to 5.7% in the fourth quarter of 2020. Higher R&D expenses were mainly related to higher investments in EPS and NEV products.

Income from operations was $0.6 million in the fourth quarter of 2021, compared with a loss from operations of $4.0 million in the fourth quarter of 2020. Increase in the income from operations in the fourth quarter of 2021 was mainly due to a 25.9% year-over-year decrease in total operating expenses as both selling and G&A expenses declined significantly.

Interest expense was $0.5 million in the fourth quarter of 2021, compared to $0.4 million in the fourth quarter of 2020.

Financial expense was $1.5 million in the fourth quarter of 2021, compared with $2.0 million in the fourth quarter of 2020.

Loss before income tax expenses and equity in earnings of affiliated companies was $0.4 million in the fourth quarter of 2021, compared to a loss of $5.7 million in the fourth quarter of 2020.

Income tax expense was $0.7 million in the fourth quarter of 2021, compared to an income tax expense of $1.9 million for the fourth quarter of 2020, mainly due to a change in the valuation allowance recognized in the fourth quarter of 2021.

Net income attributable to parent company's common shareholders was $5.0 million in the fourth quarter of 2021 compared to net loss attributable to parent company's common shareholders of $3.2 million in the fourth quarter of 2020. The net loss in the fourth quarter of 2020 was mainly due to a one-time, non-recurring $6.4 million expected credit loss provision for a customer's bankruptcy reorganization, net of minority interests. Diluted income per share was $0.16 in the fourth quarter of 2021, compared to diluted loss per share of $0.10 in the fourth quarter of 2020.

The weighted average number of diluted common shares outstanding was 30,853,822 in the fourth quarter of 2021, compared to 31,851,776 in the fourth quarter of 2020.

Fiscal Year 2021

Net sales increased by 19.3% to $498.0 million in 2021, compared to $417.6 million in 2020. The increase was mainly due to the recovery in net sales in the first half of 2021 from the COVID-19 pandemic's impact on automobile sales in China and North America. In 2021, sales of hydraulic products increased by 7.6% year-over-year while total sale of EPS systems increased by 86.0% year-over-year. EPS sales represented 23.2% of total revenue in 2021 compared with 14.8% in 2020.  Net sales of vehicle steering systems to the Company's North American customers increased by 10.4% year-over-year in 2021.

Gross profit in 2021 increased by 30.4% to $72.1 million, compared to $55.3 million in 2020. The gross margin increased to 14.5% from 13.3% in 2020 mainly due to changes in the product mix. 

Gain on other sales amounted to $4.4 million, generally consistent with $4.3 million in 2020.

Selling expenses were $18.3 million in 2021 compared to $14.5 million in 2020, mainly due to higher transportation expenses. Selling expenses represented 3.7% of net sales in 2021, compared to 3.5% in 2020.

G&A expenses declined 11.6% to $24.4 million in 2021 from $27.6 million in 2020. The decrease was mainly due to a decreased provision of allowance for doubtful accounts related to one customer's bankruptcy reorganization in November 2020, which was partially offset by higher personnel costs. G&A expenses represented 4.9% of net sales in 2021 compared to 6.6% of net sales in 2020.

R&D expenses were $28.2 million in 2021, compared to $25.7 million in fiscal year 2020. The increase was primarily due to higher investment in EPS products. R&D expenses were 5.7% of net sales in 2021, compared to 6.2% of net sales in 2020.

Income from operations was $5.5 million in 2021, compared to a loss from operations of $8.1 million in 2020. The income was mainly due to a 30.4% increase in gross profit, with an offsetting impact of a 4.6% increase in total operating expenses in 2021. The loss in 2020 was primarily due to lower net sales and a one-time, non-recurring expected credit loss provision related to a customer's bankruptcy reorganization.

Interest expense was $1.4 million in 2021, a slight decline from the $1.6 million in 2020.

Net financial expense was $2.4 million in 2021, compared with $4.9 million in 2020, primarily due to a decrease in foreign exchange losses.

Income before income tax expenses and equity in earnings of affiliated companies was $8.4 million, compared to a loss before income tax expenses and equity in earnings of affiliated companies of $12.2 million in fiscal year 2020. The change was primarily due to generating income from operations and lower net financial expense in 2021.

Net income attributable to parent company's common shareholders was $11.1 million in 2021 compared to net loss attributable to parent company's common shareholders of $5.0 million in 2020. The loss in 2020 was mainly due to lower sales and a one-time, non-recurring $6.4 million expected credit loss provision from a customer's bankruptcy reorganization, net of minority interests. Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020.

The weighted average number of diluted common shares outstanding was 30,855,431 in 2021 compared to 31,077,196 in 2020.

Balance Sheet

As of December 31, 2021, total cash and cash equivalents, pledged cash and short-term investments were $161.3 million. Total accounts receivable including notes receivable were $210.3 million. Accounts payable including notes payable were $228.0 million and short-term bank loans were $47.6 million. Total parent company stockholders' equity was $321.0 million as of December 31, 2021, compared to $303.2 million as of December 31, 2020. Net cash flow from operating activities was $28.3 million in 2021, compared with $57.4 million in 2020. Cash paid to acquire property, plant and equipment and land use rights was $9.3 million in 2021, compared with $15.8 million in 2020.

Business Outlook

Management provides revenue guidance for the fiscal year 2022 of $510 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 March 30, 2022 at 8:00 A.M. EDT/8:00 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 with pin 435179:

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 ten 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 Fiat Chrysler Automobiles (FCA) and Ford Motor Company 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, 2021, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for automobile sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our control, could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. A prolonged disruption or any further unforeseen delay in our operations of the manufacturing, delivery and assembly process within any of our production facilities could continue to result in delays in the shipment of products to our customers, increased costs and reduced revenue.  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.
jieli@chl.com.cn

Kevin Theiss
Investor Relations
Tel: +1-212-510-8922 (new)
Tel: +1-212-521-4050 (old)
Email: Kevin@awakenlab.com

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