WUHAN, China, Nov. 9, 2018 /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 third quarter and nine months ended September 30, 2018.

Third Quarter 2018 Highlights

• Net sales were $112.1 million compared to $118.4 million in the third quarter of 2017;
• Gross margin decreased to $15.4 million from $22.5 million, and the gross margin declined to 13.7% from 19.0% in the third quarter of 2017;
• Income from operations was $1.8 million, with an operating margin of 1.6% compared with 4.2% in the same quarter last year;
• Net income attributable to parent company's common shareholders was $0.4 million, or diluted earnings per share of $0.01, compared to net income attributable to parent company's common shareholders of $5.1 million, or diluted earnings per share of $0.16, in the third quarter of 2017.

First Nine Months of 2018 Highlights

• Net sales increased 4.7% to $371.9 million, compared to $355.3 million in the first nine months of 2017;
• Gross margin was 14.5% compared with 19.2% in the same period last year;
• Diluted earnings per share attributable to parent company's common shareholders was $0.17 compared with $0.62 for the first nine months of 2017;
• Cash and cash equivalents, pledged cash deposits and short-term investments were $144.1 million as of September 30, 2018;
• Net cash flow from operating activities was $9.0 million.  

Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Sales of our traditional hydraulic products continued to anchor our sales in the Chinese automotive market in the third quarter of 2018.  Our advanced hydraulic steering products remain the primary sales driver to Chrysler and Ford for use in the North American markets with sales rising by 22.2% in the third quarter of 2018 compared to the same quarter last year.  Sales of our steering columns also grew to help offset softness in the Chinese passenger vehicle and heavy-duty truck markets."   

"We continue to be optimistic about our electric power steering ("EPS") business as our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., with KYB (China) Investment Co., Ltd., will receive all the EPS business in China from both joint venture partners. Our new joint venture will enhance EPS research and development and production capabilities at CAAS's compound in Jingzhou City."   

Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We continue to focus on our financial strength and cash flow from operations to invest in new products and increase our market penetration."

Third Quarter of 2018

In the third quarter of 2018, net sales were $112.1 million compared to $118.4 million in the same quarter of 2017. The decrease in net product sales was mainly due to a change in the product mix and lower domestic sales volume due to softer demand in the Chinese domestic brand automobile market. Net product sales to North America grew 22.2% to $30.3 million compared to $24.8 million for the same quarter in 2017.  The increase in export sales to North America was mainly due to higher sales of the Company's more advanced products.

Gross profit was $15.4 million in the third quarter of 2018, compared to $22.5 million in the third quarter of 2017.  Gross margin was 13.7% compared to 19.0% for the same period of 2017, mainly due to an increase in the cost of raw materials and the changes in the product mix.

Selling expenses were $3.4 million in the third quarter of 2018, compared to $4.5 million in the third quarter of 2017.  Lower selling expenses were mainly due to lower unit sales as well as utilizing lower cost shippers. Selling expenses represented 3.0% of net sales in the third quarter of 2018, compared to 3.8% in the third quarter of 2017.

General and administrative expenses ("G&A expenses") were $3.7 million in the third quarter of 2018, compared to $4.4 million in the same quarter of 2017. The decline was primarily due to lower personnel expenses. G&A expenses represented 3.3% of net sales in the third quarter of 2018 compared with 3.7% in the third quarter of 2017.

Research and development expenses ("R&D expenses") were $7.0 million in the third quarter of 2018, compared to $9.2 million in the third quarter of 2017. R&D expenses represented 6.2% of net sales in the third quarter of 2018 compared with 7.8% in the third quarter last year. The lower R&D expenses were mainly due to greater cost controls over R&D expenditures and the transfer of some research projects to our new joint venture, Hubei Henglong KYB Automobile Electric Steering System Co., Ltd., for electric power steering.

Net financial income was $0.8 million in the third quarter of 2018 compared to net financial income of $1.0 million in the third quarter of 2017.

Income from operations was $1.8 million in the third quarter of 2018, compared to $4.9 million in the same quarter of 2017. The decrease was mainly due to lower gross profit and lower gross margin.  

Income before income tax expenses and equity in earnings of affiliated companies was $1.8 million in the third quarter of 2018, compared to $5.7 million in the third quarter of 2017. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower operating income in the third quarter of 2018 compared with the third quarter of 2017.

Net income attributable to parent company's common shareholders was $0.4 million in the third quarter of 2018, compared to net income attributable to parent company's common shareholders of $5.1 million in the third quarter of 2017. Diluted earnings per share were $0.01 in the third quarter of 2018, compared to diluted earnings per share of $0.16 in the third quarter of 2017.

The weighted average number of diluted common shares outstanding was 31,645,556 in the third quarter of 2018, compared to 31,644,271 in the third quarter of 2017.

First Nine Months of 2018

Net sales for the first nine months of 2018 were $371.9 million, compared to $355.3 million in the first nine months of 2017. Nine-month gross profit was $54.0 million, compared to $68.2 million in the corresponding period last year. Nine-month gross margin was 14.5%, compared to 19.2% for the corresponding period in 2017. For the nine months ended September 30, 2018, gain on other sales amounted to $3.0 million, compared to $5.9 million for the corresponding period in 2017. Income from operations was $7.0 million compared to $23.2 million in the first nine months of 2017. Operating margin was 1.9%, compared to 6.5% for the corresponding period of 2017.

Net income attributable to parent company's common shareholders was $5.5 million compared with $19.7 million in the corresponding period last year. Diluted earnings per share were $0.17 in the first nine months of 2018, compared to diluted earnings per share of $0.62 for the corresponding period in 2017.

Balance Sheet

As of September 30, 2018, total cash and cash equivalents, pledged cash deposits and short-term investments were $144.1 million, total accounts receivable including notes receivable were $249.6 million, accounts payable including notes payable were $196.6 million, and short-term loans were $70.9 million. Total parent company stockholders' equity was $309.5 million as of September 30, 2018, compared to $306.1 million as of December 31, 2017. 

Business Outlook

Management has reduced its revenue guidance for the full year 2018 to US$510 million from US$520.0 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 November 9, 2018 at 8:00 A.M. EST/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:

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 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: https://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 29, 2018, 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
+1-212-521-4050
Email: kevin.theiss@awakenlab.com

 

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