Lentuo International Announces First Quarter 2013 Financial Results

BEIJING, June 14, 2013 /PRNewswire/ -- Lentuo International Inc. (NYSE: LAS) ("Lentuo" or the "Company"), a leading non-state-owned automobile retailer headquartered in Beijing, today reported its financial results for the first quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights

  • Revenues decreased 7.4% to RMB700.5 million ($112.8 million), from RMB756.8 million in the first quarter 2012.
  • Vehicles sold increased 5.5% to 3,855 vehicles, from 3,655 vehicles in the first quarter 2012.
  • Vehicles serviced increased 17.7% to 46,486 vehicles, from 39,487 vehicles in the first quarter 2012.
  • Net loss was RMB8.1 million ($1.3 million), compared to net income of RMB16.8 million in the first quarter of 2012.

"Despite significant challenges from a difficult market environment, we continued to move our business forward as our earlier decisions to focus on the high-end car market and expand outside Beijing begin to bear fruit," commented Mr. Hetong Guo, Founder and Chairman of Lentuo. "While disappointing, our performance during the quarter did yield solid growth in the number of vehicles sold and number of vehicles serviced. I believe these results validate our expansion strategy and represent the positive direction that our business is moving. As we implement our strategy, we expect that our top and bottom line will continue to improve and become more representative of the significant progress we have made both operationally and strategically in the past year."

"As our business gains momentum and builds to scale, we are increasingly focused on the sale of more high-end vehicles where we see enormous market potential. Our joint-venture project with Itochu Corporation received approval from the Beijing Government last month which marks an important step in the series of government approvals we must first obtain before operations can begin. This strategic partnership places Lentuo in a unique position and provides substantial financial and managerial resources to capitalize on the growing demand for premium cars in China. With the recent addition of Ms. Jennifer Chen, our previous chief financial officer, the joint-venture will certainly act as a significant growth driver for Lentuo."

Mr. Hetong Guo concluded, "Looking forward, I believe that our position and ability to compete in this market has further improved and that we are on the cusp of seeing the full benefits of our strategy. With the additional financial resources provided by our joint venture agreement with Itochu and the strategic agreements with First Automobile Finance, we have built a solid base to support the new revenue drivers we created with our new centralized pre-owned car center, the soon to be officially opened FAW-VW flagship store, and the upcoming Audi dealership in south Beijing. We are confident that all these initiatives will enable us to deliver further growth and benefits for our shareholders."

First Quarter 2013 Financial Performance

Revenues for the three months ended March 31, 2013 decreased by 7.4% to RMB700.5 million ($112.8 million) from RMB756.8 million in the first quarter of 2012.

Revenues from automobile sales decreased by 11.8% to RMB591.0 million ($95.2 million) during the first quarter of 2013 from RMB670.4 million during the same period in 2012. The Company sold 3,855 vehicles, a 5.5% increase from 3,655 vehicles in the first quarter of 2012. The decrease in revenues from automobile sales was primarily due to a change in the production structure of the automobile manufacturers in an effort to introduce more lower-priced models to meet rising market demand. This in turn led to lower average unit prices.  

The average new vehicle unit price for the first quarter of 2013 was RMB153,299 ($24,683), a 16.4% decrease from RMB183,412 in the same period in 2012.

Revenues from repair and maintenance services in the first quarter of 2013 decreased by 2.0% to RMB73.4 million ($11.8 million) from RMB74.9 million during the same period in 2012. The Company serviced 46,486 vehicles during the three months ended March 31, 2013, a 17.7% increase from the 39,487 vehicles serviced in the first quarter of 2012. The decrease in revenues from repair and maintenance services was primarily due to the decrease in unit price of each car serviced as well as the introduction of lower priced models by the automobile manufacturers.



Revenues
(in thousands of Renminbi)





1Q 13


1Q 12


% Increase

(Decrease)

Sales of automobiles







  Beijing


482,391


552,410


(12.7)%

  Outside Beijing


108,576


117,962


(8.0)%

Total


590,967


670,372


(11.8)%








Repair and maintenance services







  Beijing


56,736


60,164


(5.7)%

  Outside Beijing


16,671


14,741


(13.1)%

Total


73,407


74,905


(2.0)%

 



Revenues
(in thousands of Renminbi)





1Q 13


1Q 12


% Increase

(Decrease)

Sales of automobiles







  German Branded


392,698


434,208


(9.6)%

  Japanese Branded


198,269


236,164


(16.0)%

Total


590,967


670,372


(11.8)%








Repair and maintenance services







  German Branded


45,989


45,590


0.9%

  Japanese Branded


27,418


29,315


(6.5)%

Total


73,407


74,905


(2.0)%

 



Percent of Total Revenues

Revenue Category


1Q 13


1Q 12

Sales of automobiles


84.3%


88.6%

Automobile repair and maintenance

services


10.5%


9.9%

Sales of leased automobiles


4.3%


0.9%

Other services


0.9%


0.6%

Total


100%


100%

Cost of goods sold decreased by 4.4% to RMB654.7 million ($105.4 million) in the first quarter of 2013 from RMB684.4 million in the same period of 2012 as a result of lower revenue.

Gross profit decreased by 36.6% to RMB45.9 million ($7.4 million) in the first quarter of 2013 from RMB72.4 million in the same quarter of 2012. The decrease in gross profit was mainly due to the decrease in overall gross profit margin and revenue.

Overall gross margin for the first quarter of 2013 decreased to 6.6% from 9.6% in the first quarter of 2012. Specifically, the gross margin for automobile sales decreased to 2.8% in the first quarter of 2013 from 5.5% in the same period of 2012, while the gross margin of repair and maintenance services decreased to 33.9% as compared to 46.6% for the same period in 2012. The decrease in gross margin for automobiles sales was due primarily to the introduction of lower priced models by the automobile manufacturers which yield smaller gross margins. Gross margin for repair and maintenance services declined primarily due to various promotional campaigns launched by the Company aimed at increasing customer loyalty and improving customer satisfaction, as well as inflation-driven increases in wages for repair and maintenance staff.

Selling, marketing and distribution expenses increased by 15.8% to RMB23.5 million ($3.8 million) in the first quarter of 2013 from RMB20.3 million during the same period of 2012. The increase was primarily due to additional staff at the new dealerships and wage inflation. As a percentage of revenues, selling, marketing and distribution expenses increased to 3.4% in the first quarter of 2013 from 2.7% in the first quarter of 2012.

General and administrative expenses increased by 21.7% to RMB15.7 million ($2.5 million) in the first quarter of 2013 from RMB12.9 million during the same quarter of 2012. The increase was primarily the result of the addition of staff for the new dealerships. As a percentage of revenues, general and administrative expenses increased to 2.2% in the first quarter of 2013 from 1.7% in the first quarter of 2012.

Operating income for the first quarter of 2013 was RMB6.7 million ($1.1 million), compared to operating income of RMB39.1 million for the same period in 2012.

Operating margin for the first quarter of 2013 was positive 1.0%, compared to positive 5.2% for the same quarter in 2012. The decrease in operating margin was primarily attributable to the 300 basis point decrease in overall gross margin and the 120 basis point increase in operating expenses as a percentage of revenue.

Net loss attributable to controlling interest was RMB8.1 million ($1.3 million) for the first quarter of 2013, compared to net income of RMB16.8 million for the same period in 2012.

Basic and diluted loss per ordinary share were RMB0.14 ($0.02) for the first quarter of 2013 compared to basic and diluted earnings per ordinary share of RMB0.28 for the first quarter of 2012. This translates into basic and diluted loss per ADS of RMB0.28 ($0.04) in the first quarter of 2013. Each ADS represents two ordinary shares. Weighted average ordinary shares outstanding in the first quarter of 2013 remained unchanged from one year ago at 58,937,912.

Liquidity and Capital Resources

As of March 31, 2013, the Company had cash and cash equivalents of RMB58.1 million ($9.4 million), compared to RMB318.9 million as of December 31, 2012.

Expansion Strategy Update

Construction of the new FAW-Volkswagen flagship store in Beijing has been completed and is currently going through trial-operations. The flagship store is expected to officially open during the third quarter of 2013.

Part of the FAW-VW flagship store will house Lentuo's centralized pre-owned car center which will sell used vehicles and provide other value added services. Previously managed by individual dealerships, the pre-owned car center will consolidate and centralize the pre-owned car business activities and bring them under the management of Lentuo's headquarters. As the Company continues its dealership expansion outside Beijing, the pre-owned car business will span across various regions enabling low-end vehicles traded-in at Lentuo's Beijing dealerships to be sold in tier two and tier three cities in China. The pre-owned car center will officially launch at the same time as the flagship store.

The Company's joint venture agreement with Itochu, a Fortune Global 500 company, received approval from the Beijing government in May 2013. The approval marks the most critical step in the series of government approvals the Company must first obtain before operations can begin. The joint-venture will focus on the expansion of Lentuo's high-end car dealerships across China, starting with the new Audi 4S dealership located in southern Beijing, the construction of which was announced by the Company in November, 2012. The joint-venture will also scale up its higher margin repair and maintenance services. 

Conference Call

Lentuo's management will host a conference call to discuss the results at 8:00 a.m. Eastern Daylight Time on June 14, 2013 (8:00 p.m. Beijing time on the same day).

The dial-in details for the live conference call are:

U.S. Toll Free

+1 877-941-1427

International Dial In

+1 480-629-9664

A telephone replay of the call will be available after the conclusion of the conference call at 11:00 a.m. Eastern Daylight Time on June 14, 2013 through 11:59 p.m. Eastern Daylight Time on June 21, 2013. The dial-in details for the replay are:

U.S. Toll Free

+1 877-870-5176

International Dial In:

+1 858-384-5517

Passcode:

4625504

A live webcast of the conference call will be available on the investor relations section of Lentuo's website at: http://lentuo.investorroom.com/ or alternately at http://ViaVid.net.

Exchange Rate

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB 6.2108 to US $1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on March 29, 2013.

About Lentuo International Inc.

Lentuo is a leading non-state-owned automobile retailer headquartered in Beijing. Lentuo operates 11 franchise dealerships, 10 automobile showrooms, one automobile repair shop, and one car leasing company.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

For more information, please contact:

Ms. Jiangyu Luo
Acting CFO
Lentuo International Inc.

Email: luojiangyu@lentuo.net

Christensen
Mr. Christian Arnell 
Telephone +86 10 5826 4939 in Beijing 
Email: carnell@christensenir.com

Ms. Linda Bergkamp
Phone:  +1-480-614-3004 (U.S.A.)
Email: lbergkamp@christensenir.com

 

 

Lentuo International Inc. 

Consolidated Statements of Income and Comprehensive Income

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for

number of shares and per share data)



For the three months ended


Mar 31, 2012


Mar 31, 2013


RMB


RMB


 US$ 

Revenues






  Sales of automobiles

670,372


590,967


95,152

  Automobile repair and maintenance
services

74,905


73,407


11,819

  Sales of leased automobiles

6,636


29,914


4,816

  Other services

4,887


6,258


1,008

Total revenues

756,800


700,546


112,795







Cost of goods sold






  Sales of automobiles

(633,581)


(574,132)


(92,441)

  Automobile repair and maintenance
services

(39,974)


(48,524)


(7,813)

  Sales of leased automobiles

(10,611)


(31,838)


(5,126)

  Other services

(265)


(156)


(25)

Total cost of goods sold

(684,431)


(654,650)


(105,405)







Gross profit

72,369


45,896


7,390







Operating expenses






  Selling, marketing and distribution

expenses

(20,341)


(23,545)


(3,791)

  General and administrative expenses

(12,886)


(15,684)


(2,525)

Total operating expenses

(33,227)


(39,229)


(6,316)







Operating income

39,142


6,667


1,073







Interest expenses

(16,942)


(18,972)


(3,055)

Other income, net

261


3,574


575







Income before income tax expenses

22,461


(8,731)


(1,406)

Income tax expenses

(6,368)


(228)


(37)







Net income and comprehensive income

16,093


(8,959)


(1,442)

Net income and comprehensive income
attributable to non-controlling interest

(673)


(908)


(146)







Net income and comprehensive income
attributable to controlling interest

16,766


(8,051)


(1,296)







Earnings per ordinary share:






Basic and diluted earnings per ordinary
share

0.28


(0.14)


(0.02)







Weighted average ordinary shares
outstanding:






Basic and diluted

58,937,912


58,937,912


58,937,912

 

 

Lentuo International Inc. 

Consolidated Balance Sheets

(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for

number of shares and per share data)




December 31,
2012


Mar 31, 2013


RMB


RMB


 US$ 

Assets






Current assets






  Cash and cash equivalents

318,909


58,071


9,350

  Restricted cash

437,875


317,246


51,080

  Accounts receivable (net of allowance for doubtful
  accounts of nil as of September 30, 2012 and

  December 31, 2011)

41,399


27,693


4,459

  Inventories, net

432,722


494,692


79,650

  Leased automobiles held for sale, net

206,604


224,847


36,203

  Advances to suppliers

316,067


318,055


51,210

  Prepaid expenses and other current assets

35,148


53,430


8,602

  Amounts due from related parties

57,830


221,483


35,661

  Deferred tax assets

6,756


9,776


1,574

Total current assets

1,853,310


1,725,293


277,789







Non-current assets






  Property and equipment, net

560,700


554,451


89,272

  Land use rights, net

18,256


18,254


2,939

  Intangible assets, net

106,058


105,414


16,973

  Goodwill

73,634


73,634


11,856

  Long-term prepayments

26,500


26,500


4,267

  Long-term investment

11,250


11,250


1,810

  Deferred tax assets

9,624


9,624


1,550

Total non-current assets

806,022


799,127


128,667







Total assets

2,659,332


2,524,420


406,456







Liabilities and Stockholders' Equity






Current liabilities






  Accounts payable

6,458


23,400


3,768

  Bills payable

887,100


607,765


97,856

  Advances from customers

49,974


43,420


6,991

  Accrued expenses and other current liabilities

444,553


444,256


71,530

  Amounts due to related parties





0

  Unrecognized tax benefits

4,963


4,963


799

  Taxes payable

54,369


53,470


8,609

  Short-term loans

365,274


509,667


82,061

Total current liabilities

1,812,691


1,686,941


271,614







Non-current liabilities






  Deferred tax liabilities

31,770


31,567


5,083

Total non-current liabilities 

31,770


31,567


5,083







Total liabilities

1,844,461


1,718,508


276,697







Shareholders' Equity






  Ordinary shares, par value US$0.00001 per share






Authorized – 500,000,000 shares as of  September 30,

2012 and December 31, 2011 Issued and outstanding –

58,937,912 shares as of September 30, 2012 and

December 31, 2011

4


4


1

  Additional paid-in capital

469,761


469,761


75,636

  Retained earnings

329,147


321,096


51,699







Total equity for controlling interest

798,912


790,861


127,336

Non-controlling interest 

15,959


15,051


2,423

Total shareholder's equity

814,871


805,912


129,759







Total liabilities and stockholder's equity 

2,659,332


2,524,420


406,456

 

SOURCE Lentuo International Inc.



RELATED LINKS
http://lentuo.investorroom.com
http://ViaVid.net

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