China Automotive Systems Reports Unaudited 2020 Third Quarter Results
WUHAN, China, Nov. 12, 2020 /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, 2020.
Third Quarter 2020 Highlights
- Net sales increased 13.8% to $114.4 million compared with $100.5 million in the third quarter of 2019;
- Gross profit decreased to $13.6 million and gross margin declined to 11.9% from 17.2% in the third quarter of 2019;
- Income from operations was $0.1 million compared to income from operations of $4.4 million in the third quarter of 2019;
- Net income attributable to parent company's common shareholders was $2.4 million, or diluted earnings per share of $0.08, compared to net income attributable to parent company's common shareholders of $4.3 million, or diluted earnings per share of $0.14, in the third quarter of 2019;
- Approximately 322,000 shares of common stock were repurchased.
First Nine Months of 2020 Highlights
- Net sales were $271.2 million compared to $315.5 million in the first nine months of 2019;
- Gross margin was 12.0% compared with 14.8% in the same period last year;
- Diluted loss per share attributable to parent company's common shareholders was $0.06 compared to diluted earnings per share attributable to parent company's common shareholders of $0.26 for the first nine months of 2019;
- Net cash flow from operating activities was $52.7 million compared with $4.1 million for the first nine months of 2019;
- Cash and cash equivalents and pledged cash deposits were $113.5 million as of September 30, 2020.
Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Our sales regained growth momentum in the third quarter as the Chinese economy has quickly rebounded from the worst effects of the COVID-19 pandemic. According to statistics from the China Association of Automobile Manufacturers ("CAAM"), new passenger car sales rose by 8.5% year-over-year in the month of July, by 6.0% in August and by 8.0% in September. As a leading supplier of steering products for Chinese-branded vehicles, I am pleased that our sales growth outpaced the overall market. We still have work to do but we are encouraged by the positive signs on our way to a strong recovery."
"With the worst behind us in China, we believe the government will continue to promote policies to ensure continued economic growth and to introduce incentives for domestic consumption which will benefit the automobile industry," Mr. Wu concluded.
Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "Our operations continued to generate positive operating cash flow and we purchased less capital production equipment in the third quarter of 2020 as our capacity remains sufficient. Maintaining our financial strength has been one of our highest priorities as we continue to strengthen our balance sheet by reducing bank borrowing and controlling inventory. During the 3rd quarter, we also purchased approximately 322,000 shares of common stock in the open market that demonstrates our commitment to enhancing long-term shareholder value."
Third Quarter of 2020
In the third quarter of 2020, net sales rose 13.8% to $114.4 million compared to $100.5 million in the same quarter of 2019. The increase in net product sales was mainly due to a change in the product mix and higher domestic sales volume of the Company's hydraulic products combined with increased sales to North American customers. Net product sales to North America grew by 9.8% to $37.0 million compared to $33.8 million for the same quarter in 2019. Net product sales for the Company's electric power steering ("EPS") products were $16.7 million, or 14.6% of net sales.
Gross profit was $13.6 million in the third quarter of 2020, compared to $17.3 million in the third quarter of 2019. Gross margin was 11.9% compared to 17.2% for the same period of 2019, mainly due to higher unit costs for EPS and export products compared to the third quarter last year.
Selling expenses were $3.8 million in the third quarter of 2020, compared to $3.6 million in the third quarter of 2019. Selling expenses represented 3.3% of net sales in the third quarter of 2020, compared to 3.6% in the third quarter of 2019.
General and administrative expenses ("G&A expenses") were $5.1 million in the third quarter of 2020, compared to $4.4 million in the same quarter of 2019. The increase was primarily due to higher office expenses. G&A expenses represented 4.5% of net sales in both the third quarter of 2020 and the third quarter of 2019.
Research and development expenses ("R&D expenses") were $6.1 million in the third quarter of 2020, compared to $6.0 million in the third quarter of 2019. R&D expenses represented 5.3% of net sales in the third quarter of 2020 compared with 6.0% in the third quarter last year. The lower R&D percentage was mainly due to more strict cost controls over R&D expenditures.
Net financial expense was $2.3 million in the third quarter of 2020 compared to net financial income of $1.6 million in the third quarter of 2019, which was mainly due to foreign exchange losses compared with foreign exchange gains in last year's third quarter.
Income from operations was $0.1 million in the third quarter of 2020, compared to income from operations of $4.4 million in the same quarter of 2019. The lower income from operations was mainly due to reduced gross profit and lower gross margin in the third quarter of 2020.
Loss before income tax expenses and equity in earnings of affiliated companies was $2.3 million in the third quarter of 2020, compared to income before income tax expenses and equity in earnings of affiliated companies of $5.3 million in the third quarter of 2019. The loss before income tax expenses and equity in earnings of affiliated companies was mainly due to lower gross profit and the lower income from operations in the third quarter of 2020 compared with the third quarter of 2019.
Net income attributable to parent company's common shareholders was $2.4 million in the third quarter of 2020, compared to net income attributable to parent company's common shareholders of $4.3 million in the third quarter of 2019. Diluted earnings per share were $0.08 in the third quarter of 2020, compared to diluted earnings per share of $0.14 in the third quarter of 2019.
The weighted average number of diluted common shares outstanding was 31,113,374 in the third quarter of 2020, compared to 31,492,035 in the third quarter of 2019.
First Nine Months of 2020
Net sales for the first nine months of 2019 were $271.2 million, compared to $315.5 million in the first nine months of 2019, reflecting the impact of the COVID-19 pandemic on the automobile industry in China and globally. Nine-month gross profit was $32.6 million, compared to $46.6 million in the corresponding period last year. Nine-month gross margin was 12.0%, compared to 14.8% for the corresponding period in 2019. For the nine months ended September 30, 2020, gain on other sales amounted to $2.9 million, compared to $4.9 million for the corresponding period in 2019. Loss from operations was $4.1 million compared to income from operations of $8.1 million in the first nine months of 2019.
Net loss attributable to parent company's common shareholders was $1.8 million compared with net income attributable to parent company's common shareholders of $8.2 million in the corresponding period last year. Diluted loss per share was $0.06 in the first nine months of 2020, compared to diluted earnings per share of $0.26 for the corresponding period in 2019.
As of September 30, 2020, total cash and cash equivalents and pledged cash deposits were $113.5 million. Total accounts receivable including notes receivable were $209.0 million. Accounts payable including notes payable were $201.4 million, and short-term loans were $44.6 million. Total parent company stockholders' equity was $293.2 million as of September 30, 2020, compared to $289.3 million as of December 31, 2019.
Net cash provided by operating activities was $52.7 million in the first nine months of 2020 compared with net cash provided by operating activities of $4.1 million in the first nine months of 2019. Payments to acquire property, plant and equipment were $8.9 million compared with $23.6 million in the first nine months of 2019. Approximately 322,000 shares of common stock were repurchased during the third quarter of 2020, and the Company expects to repurchase more shares in the future, reflecting market conditions.
Business Outlook
Management has increased its revenue guidance from $360 million to $390 million for the full year 2020. 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 12, 2020 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:
Phone Number: +1-877-407-8031 (North America)
Phone Number: +1-201-689-8031 (International)
Mainland China Toll Free: +86-400-120-2840
A replay of the call will be available on the Company's website under 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 Chrysler Group LLC 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 28, 2019, 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.
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
+1-212-521-4050
Email: Kevin@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 September 30, | ||||||||
2020 | 2019 | |||||||
Net product sales ($16,840 and $12,277 sold to related parties for the three | $ | 114,417 | $ | 100,542 | ||||
Cost of products sold ($7,012 and $6,474 purchased from related parties for | 100,842 | 83,225 | ||||||
Gross profit | 13,575 | 17,317 | ||||||
Gain on other sales | 1,497 | 1,102 | ||||||
Less: Operating expenses | ||||||||
Selling expenses | 3,800 | 3,563 | ||||||
General and administrative expenses | 5,142 | 4,429 | ||||||
Research and development expenses | 6,072 | 5,988 | ||||||
Total operating expenses | 15,014 | 13,980 | ||||||
Income from operations | 58 | 4,439 | ||||||
Other income | 350 | 171 | ||||||
Interest expense | (403) | (787) | ||||||
Financial (expense)/income, net | (2,313) | 1,552 | ||||||
(Loss)/income before income tax expenses and equity in earnings/(loss) of | (2,308) | 5,375 | ||||||
Less: Income tax (benefit)/expense | (189) | 948 | ||||||
Equity in earnings/(loss) of affiliated companies | 3,632 | (226) | ||||||
Net income | 1,513 | 4,201 | ||||||
Net loss attributable to non-controlling interests | (848) | (113) | ||||||
Accretion to redemption value of redeemable non-controlling interests | (3) | - | ||||||
Net income attributable to parent company's common shareholders | $ | 2,358 | $ | 4,314 | ||||
Comprehensive income: | ||||||||
Net income | $ | 1,513 | $ | 4,201 | ||||
Other comprehensive income: | ||||||||
Foreign currency translation income/(loss), net of tax | 12,774 | (9,703) | ||||||
Comprehensive income/(loss) | 14,287 | (5,502) | ||||||
Comprehensive income/(loss) attributable to non-controlling interests | 80 | (837) | ||||||
Comprehensive income/(loss) attributable to parent company | $ | 14,207 | $ | (4,665) | ||||
Net income attributable to parent company's common shareholders per | ||||||||
Basic | $ | 0.08 | $ | 0.14 | ||||
Diluted | $ | 0.08 | $ | 0.14 | ||||
Weighted average number of common shares outstanding - | ||||||||
Basic | 31,112,076 | 31,492,035 | ||||||
Diluted | 31,113,374 | 31,492,035 | ||||||
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) | |||||||||
Nine Months Ended September 30, | |||||||||
2020 | 2019 | ||||||||
Net product sales ($40,439 and $39,458 sold to related parties | $ | 271,156 | $ | 315,483 | |||||
Cost of products sold ($16,298 and $18,108 purchased from | 238,598 | 268,936 | |||||||
Gross profit | 32,558 | 46,547 | |||||||
Gain on other sales | 2,935 | 4,856 | |||||||
Less: Operating expenses | |||||||||
Selling expenses | 8,895 | 10,507 | |||||||
General and administrative expenses | 13,330 | 13,453 | |||||||
Research and development expenses | 17,390 | 19,343 | |||||||
Total operating expenses | 39,615 | 43,303 | |||||||
(Loss)/income from operations | (4,122) | 8,100 | |||||||
Other income, net | 1,724 | 1,131 | |||||||
Interest expense | (1,214) | (2,086) | |||||||
Financial (expense)/income, net | (2,903) | 2,439 | |||||||
(Loss)/income before income tax expenses and equity in | (6,515) | 9,584 | |||||||
Less: Income taxes | 294 | 1,820 | |||||||
Equity in earnings/(loss) of affiliated companies | 3,454 | (222) | |||||||
Net (loss)/income | (3,355) | 7,542 | |||||||
Net loss attributable to non-controlling interests | (1,590) | (688) | |||||||
Accretion to redemption value of redeemable non-controlling | (3) | - | |||||||
Net (loss)/income attributable to parent company's common | $ | (1,768) | $ | 8,230 | |||||
Comprehensive income: | |||||||||
Net (loss)/income | $ | (3,355) | $ | 7,542 | |||||
Other comprehensive income: | |||||||||
Foreign currency translation income/(loss), net of tax | 8,171 | (10,221) | |||||||
Comprehensive income/(loss) | 4,816 | (2,679) | |||||||
Comprehensive loss attributable to non-controlling interests | (1,059) | (1,454) | |||||||
Comprehensive income/(loss) attributable to parent company | $ | 5,875 | $ | (1,225) | |||||
Net (loss)/income attributable to parent company's common | |||||||||
Basic | $ | (0.06) | $ | 0.26 | |||||
Diluted | $ | (0.06) | $ | 0.26 | |||||
Weighted average number of common shares outstanding - | |||||||||
Basic | 31,153,162 | 31,498,553 | |||||||
Diluted | 31,153,619 | 31,501,108 | |||||||
China Automotive Systems, Inc. and Subsidiaries | ||||||||
Condensed Unaudited Consolidated Balance Sheets | ||||||||
(In thousands of USD unless otherwise indicated) | ||||||||
September 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 81,767 | $ | 76,715 | ||||
Pledged cash | 31,721 | 29,688 | ||||||
Accounts and notes receivable, net - unrelated parties | 189,144 | 211,841 | ||||||
Accounts and notes receivable - related parties | 19,881 | 21,164 | ||||||
Inventories | 82,011 | 82,931 | ||||||
Other current assets | 35,834 | 18,974 | ||||||
Total current assets | 440,358 | 441,313 | ||||||
Non-current assets: | ||||||||
Property, plant and equipment, net | 136,058 | 140,481 | ||||||
Land use rights, net | 10,392 | 10,346 | ||||||
Long-term investments | 49,754 | 39,642 | ||||||
Other non-current assets | 30,859 | 28,374 | ||||||
Total assets | $ | 667,421 | $ | 660,156 | ||||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' | ||||||||
Current liabilities: | ||||||||
Short-term loans | $ | 44,588 | $ | 46,636 | ||||
Accounts and notes payable - unrelated parties | 189,915 | 180,175 | ||||||
Accounts and notes payable - related parties | 11,518 | 6,492 | ||||||
Accrued expenses and other payables | 48,866 | 45,341 | ||||||
Other current liabilities | 25,918 | 25,135 | ||||||
Total current liabilities | 320,805 | 303,779 | ||||||
Long-term liabilities: | ||||||||
Long-term government loans | - | 7,167 | ||||||
Other long-term payable | 2,103 | 4,948 | ||||||
Long-term tax payable | 23,884 | 26,693 | ||||||
Other non-current liabilities | 8,013 | 8,010 | ||||||
Total liabilities | $ | 354,805 | $ | 350,597 | ||||
Mezzanine equity: | ||||||||
Redeemable non-controlling interests | 517 | - | ||||||
Stockholders' equity: | ||||||||
Common stock, $0.0001 par value - Authorized - 80,000,000 shares; | $ | 3 | $ | 3 | ||||
Additional paid-in capital | 64,273 | 64,466 | ||||||
Retained earnings- | ||||||||
Appropriated | 11,265 | 11,265 | ||||||
Unappropriated | 218,741 | 221,298 | ||||||
Accumulated other comprehensive income | 4,181 | (3,462) | ||||||
Treasury stock - 1,486,526 and 1,164,257 shares as of September 30, | (5,261) | (4,261) | ||||||
Total parent company stockholders' equity | 293,202 | 289,309 | ||||||
Non-controlling interests | 18,897 | 20,250 | ||||||
Total stockholders' equity | 312,099 | 309,559 | ||||||
Total liabilities, mezzanine equity and shareholders' equity | $ | 667,421 | $ | 660,156 | ||||
China Automotive Systems, Inc. and Subsidiaries | ||||||||
Condensed Unaudited Consolidated Statements of Cash Flows | ||||||||
(In thousands of USD unless otherwise indicated) | ||||||||
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss)/income | $ | (3,356) | $ | 7,542 | ||||
Adjustments to reconcile net (loss)/income from operations to | ||||||||
Depreciation and amortization | 15,935 | 13,052 | ||||||
Reversal of provision for doubtful accounts | (360) | (692) | ||||||
Deferred income taxes | 464 | (601) | ||||||
Equity in (earnings)/loss of affiliated companies | (3,454) | 222 | ||||||
Loss/(gain) on fixed assets disposals | 67 | (692) | ||||||
Government subsidy reclassified from government loans | 287 | - | ||||||
(Increase)/decrease in: | ||||||||
Accounts and notes receivable | 29,454 | 16,243 | ||||||
Inventories | 2,644 | (1,615) | ||||||
Other current assets | 1,214 | 4,725 | ||||||
Increase/(decrease) in: | ||||||||
Accounts and notes payable | 10,493 | (28,793) | ||||||
Accrued expenses and other payables | 2,451 | (4,374) | ||||||
Long-term taxes payable | (2,809) | (2,810) | ||||||
Other current liabilities | (1,330) | 1,882 | ||||||
Net cash provided by operating activities | 52,741 | 4,089 | ||||||
Cash flows from investing activities: | ||||||||
Decrease in demand loans and employee housing loans | 44 | 185 | ||||||
Cash received from property, plant and equipment sales | 1,444 | 1,164 | ||||||
Payments to acquire property, plant and equipment (including | (8,879) | (23,571) | ||||||
Payments to acquire intangible assets | (422) | (1,435) | ||||||
Investment under the equity method | (5,360) | (2,491) | ||||||
Purchase of short-term investments and long-term time | (42,716) | (19,647) | ||||||
Government subsidy received for purchase of property, plant | - | 1,898 | ||||||
Proceeds from maturities of short-term investments | 21,626 | 27,040 | ||||||
Cash received from long-term investment | 448 | 579 | ||||||
Net cash used in investing activities | (33,815) | (16,278) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from bank loans | 39,586 | 54,675 | ||||||
Repayments of bank loans | (50,550) | (52,486) | ||||||
Repayments of the borrowing for sale and leaseback transaction | (3,078) | (3,143) | ||||||
Dividends paid to non-controlling interest holders of non- | - | (333) | ||||||
Cash received from capital contributions by non-controlling interest holder | 722 | 3,542 | ||||||
Deemed distribution to shareholders | (88) | - | ||||||
Acquisition of non-controlling interest | (81) | - | ||||||
Repurchase of common shares | (1,000) | (443) | ||||||
Net cash (used in)/provided by financing activities | (14,489) | 1,812 | ||||||
Effects of exchange rate on cash, cash equivalents and pledged | 2,648 | (3,284) | ||||||
Net increase/(decrease) in cash, cash equivalents and pledged | 7,085 | (13,661) | ||||||
Cash, cash equivalents and pledged cash at beginning of the | 106,403 | 115,977 | ||||||
Cash, cash equivalents and pledged cash at end of the period | $ | 113,488 | $ | 102,316 | ||||
SOURCE China Automotive Systems, Inc.
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