China Automotive Systems Reports 2020 First Quarter Results

    WUHAN, China, June 23, 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 first quarter ended March 31, 2020.

    First Quarter 2020 Highlights

    • Net sales decreased 32.6% to $73.6 million from $109.2 million in the first quarter of 2019 primarily due to the impact of the COVID-19 pandemic lockdown in China
    • Net sales of electric power steering ("EPS") products declined 63.5% to $8.1 million from $22.2 million in the first quarter of 2019
    • Net product sales to Fiat Chrysler and Ford in North America were $28.1 million consistent with the same quarter last year
    • Gross margin increased to 15.2% compared with 12.9% in the first quarter of 2019
    • Net income attributable to parent company's common shareholders was $0.05 million, compared to $1.5 million in the first quarter of 2019
    • Total cash and cash equivalents and pledged cash were $132.6 million

    Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our extraordinary sales decline reflects the devastating impact of the COVID-19 pandemic on China's economy and especially the domestic Chinese automobile industry.  China's GDP declined by 6.8% year-over-year, and car sales were down 42% in the first quarter of 2020 compared to the first quarter of 2019 according to the China Association of Automobile Manufacturers ("CAAM").  Internationally, our sales to our tier-1 North American customers remained constant.  Also, our innovative, new powerpack brushless motors are about to start commercial production to add a new revenue channel."

    Mr. Jie Li, chief financial officer of CAAS, commented, "Even during the most difficult quarter in our Company's history, our operations continued to generate positive cash flow and our cash position improved.  Our gross margin increased in the first quarter and we have maintained net profitability during this crisis.  With our strong balance sheet and effective cashflow management, we remain financially sound."

    First Quarter of 2020

    In the first quarter of 2020, net sales were $73.6 million compared to $109.2 million in the same quarter of 2019, reflecting a 32.6% year-over-year decline.  The decrease in net sales was mainly due to lower sales volume for legacy hydraulic products due to coronavirus lockdown and lower average selling prices in the domestic markets during the pandemic crisis.

    Gross profit was $11.2 million in the first quarter of 2020 compared with $14.0 million in the first quarter of 2019. The gross margin increased to 15.2% in the first quarter of 2020 compared to 12.9% in the first quarter of 2019, mainly due to changes in the product mix.

    Gain on other sales was $0.6 million in the first quarter of 2020 compared to $1.3 million in the first quarter of 2019, reflecting lower scrap volume.

    Selling expenses were $2.1 million in the first quarter of 2020, compared to $3.1 million in the first quarter of 2019. The decrease was primarily due to the lower freight expenses, resulting from the suspension of the Company's operations for most of the quarter due to the outbreak of the COVID-19 pandemic. Selling expenses represented 2.9% of net sales in the first quarter of 2020 compared to 2.8% in the first quarter of 2019.

    General and administrative expenses ("G&A expenses") were $3.4 million in the first quarter of 2020, compared to $4.6 million in the same quarter of 2019.  The decrease was primarily due to lower office expenses.  G&A expenses represented 4.6% of net sales in the first quarter of 2020 compared with 4.2% in the first quarter of 2019.

    Research and development expenses ("R&D expenses") were $5.1 million in the first quarter of 2020, compared to $6.6 million in the first quarter of 2019.  R&D expenses represented 6.9% of net sales in the first quarter of 2020 compared to 6.0% in the first quarter of 2019.  Lower R&D expenses were primarily due to increased cost controls.

    Other income was $0.1 million for the three months ended March 31, 2020 compared to $1.4 million for the three months ended March 31, 2019, representing a decrease of $1.3 million, primarily due to lower governmental subsidies and a donation made to combat COVID-19 pandemic in the first quarter of 2020.

    Income from operations was $1.2 million in the first quarter of 2020, compared to $1.0 million in the same quarter of 2019. The increase was primarily due to higher gross margin and decreased operating expenses offsetting the impact of lower sales volume in the first quarter of 2020.  

    Interest expense was $0.4 million in the first quarter of 2020 compared to $0.6 million in the same quarter of 2019. The decrease was primarily due to decreased loans.

    Net financial expense was $0.5 million in the first quarter of 2020 compared to $0.7 million in the first quarter of 2019. The increase in net financial expense was primarily due to a decrease in foreign exchange loss in the first quarter of 2020.

    Income before income tax expenses and equity in earnings of affiliated companies was $0.4 million in the first quarter of 2020, compared to $1.2 million in the first quarter of 2019. The decrease in income before income tax expenses and equity in earnings of affiliated companies in the first quarter of 2020 was mainly due to lower income from operations and lower other income.

    Net income attributable to parent company's common shareholders was $0.05 million in the first quarter of 2020, compared to $1.5 million in the first quarter of 2019. Diluted earnings per share were nil per share in the first quarter of 2020, compared to $0.05 in the first quarter of 2019.

    The weighted average number of diluted common shares outstanding was 31,174,119 in the first quarter of 2020, compared to 31,513,297 in the first quarter of 2019.

    Balance Sheet

    As of March 31, 2020, total cash and cash equivalents and pledged cash were $132.6 million, total accounts receivable including notes receivable were $196.5 million, accounts payable were $165.8 million and bank and government loans were $51.1 million. Total parent company stockholders' equity was $283.8 million as of March 31, 2020, compared to $289.2 million as of December 31, 2019.

    Business Outlook

    By mid-March, most of the Company's production operations were up and running after the lockdown restrictions were lifted by the respective local governments as the COVID-19 outbreak subsided in China. In April, the Company regained its full operating capacity and reopened its Wuhan headquarters after a temporary relocation to Jingzhou City in March.

    Mr. Qizhou Wu, chief executive officer of CAAS, further commented, "Industry data show that April and May auto sales in China experienced a strong rebound. We remain cautiously hopeful that the resilience of Chinese economy and large consumer base will propel a reasonable recovery of the auto sector in the remaining part of the year."

    Management reiterates its revenue guidance for the full year 2020 of $360 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 June 23, 2020 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:

    US Toll Free:       

    +1-877-407-8031

    International:                      

    +1-201-689-8031

    China (toll free):                 

    + 86 400 120 2840

    A replay of the call will be available on the Company's website under the investor

    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 May 14, 2020 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: [email protected]

    Kevin Theiss
    Investor Relations
    +1-212-521-4050
    Email: [email protected]

     

     

    -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 March 31,




    2020



    2019


    Net product sales ($7,494 and $12,836 sold to related parties for the three
    months ended March 31, 2020 and 2019)


    $

    73,555



    $

    109,193


    Cost of products sold ($3,134 and $5,504 purchased from related parties for
    the three months ended March 31, 2020 and 2019)



    62,403




    95,148


    Gross profit



    11,152




    14,045


    Gain on other sales



    600




    1,269


    Less: Operating expenses









    Selling expenses



    2,118




    3,085


    General and administrative expenses



    3,429




    4,590


    Research and development expenses



    5,053




    6,602


    Total operating expenses



    10,600




    14,277


    Income from operations



    1,152




    1,037


    Other income, net



    117




    1,407


    Interest expense



    (365)




    (568)


    Financial expense, net



    (531)




    (665)


    (Loss)/income before income tax expenses and equity in earnings of
    affiliated companies



    373




    1,211


    Less: Income taxes



    514




    198


    Equity in (loss)/earnings of affiliated companies



    (347)




    211


    Net (loss)/income



    (488)




    1,224


    Net loss attributable to non-controlling interests



    (533)




    (243)


    Net income attributable to parent company's common shareholders


    $

    45



    $

    1,467


    Comprehensive income:









    Net (loss)/income


    $

    (488)



    $

    1,224


    Other comprehensive income:









    Foreign currency translation (loss)/income, net of tax



    (4,961)




    6,363


    Comprehensive (loss)/income



    (5,449)




    7,587


    Comprehensive (loss)/income attributable to non-controlling interests



    (897)




    214


    Comprehensive (loss)/income attributable to parent company


    $

    (4,552)



    $

    7,373











    Net income attributable to parent company's common shareholders per share


















    Basic -


    $

    -



    $

    0.05











    Diluted -


    $

    -



    $

    0.05


    Weighted average number of common shares outstanding









    Basic



    31,174,045




    31,507,487


    Diluted



    31,174,119




    31,513,297


     

     

    China Automotive Systems, Inc. and Subsidiaries

    Condensed Unaudited Consolidated Balance Sheets

    (In thousands of USD unless otherwise indicated)




    March 31, 2020



    December 31, 2019


    ASSETS









    Current assets:









    Cash and cash equivalents


    $

    108,171



    $

    76,708


    Pledged cash                                                                                                                                            



    24,398




    29,688


    Accounts and notes receivable, net - unrelated parties



    182,873




    211,841


    Accounts and notes receivable - related parties



    13,625




    21,164


    Inventories



    71,158




    82,931


    Other current assets



    16,885




    18,833


         Total current assets



    417,110




    441,165


    Non-current assets:









    Property, plant and equipment, net



    134,261




    140,437


    Land use rights, net



    10,121




    10,346


    Long-term investments



    40,790




    39,642


    Other non-current assets



    27,395




    28,374


          Total assets


    $

    629,677



    $

    659,964











    LIABILITIES AND STOCKHOLDERS' EQUITY









    Current liabilities:









    Short-term loans


    $

    44,057



    $

    46,636


    Accounts and notes payable - unrelated parties



    157,376




    180,175


    Accounts and notes payable - related parties



    8,391




    6,492


    Accrued expenses and other payables



    47,547




    45,337


    Other current liabilities



    24,115




    25,134


         Total current liabilities



    281,486




    303,774


    Long-term liabilities:









    Long-term government loans



    7,057




    7,167


    Other long-term payable



    3,938




    4,948


    Long-term tax payable



    26,693




    26,693


    Other non-current liabilities



    7,901




    8,010











         Total liabilities


    $

    327,075



    $

    350,592











    Stockholders' equity:









    Common stock, $0.0001 par value - Authorized - 80,000,000 shares;
    Issued - 32,338,302 and 32,338,302 shares as of March 31, 2020 and
    December 31, 2019, respectively


    $

    3



    $

    3


    Additional paid-in capital



    64,400




    64,429


    Retained earnings-









    Appropriated



    11,265




    11,265


    Unappropriated



    220,493




    221,237


    Accumulated other comprehensive income



    (8,059)




    (3,462)


    Treasury stock –1,164,257 and 1,164,257 shares as of March 31, 2020
    and December 31, 2019, respectively



    (4,261)




    (4,261)


    Total parent company stockholders' equity



    283,841




    289,211


    Non-controlling interests



    18,761




    20,161


         Total stockholders' equity



    302,602




    309,372


         Total liabilities and stockholders' equity


    $

    629,677



    $

    659,964


     

     

    China Automotive Systems, Inc. and Subsidiaries

    Condensed Unaudited Consolidated Statements of Cash Flows

    (In thousands of USD unless otherwise indicated)




    Three Months Ended March 31,




    2020



    2019


    Cash flows from operating activities:









    Net (loss)/income


    $

    (488)



    $

    1,224


    Adjustments to reconcile net (loss)/income from operations to
    net cash provided by/(used in) operating activities:









    Depreciation and amortization



    5,100




    3,987


    Reversal of provision for doubtful accounts



    (1)




    (355)


    Deferred income taxes



    (34)




    (84)


    Equity in loss/(earnings) of affiliated companies



    347




    (211)


    Government subsidy reclassified from government loans



    287




    -


    Loss on fixed assets disposals



    52




    -


    (Increase)/decrease in:









    Accounts and notes receivable



    33,303




    (1,977)


    Inventories



    10,430




    (121)


    Other current assets



    (3,455)




    2,387


    Increase/(decrease) in:









    Accounts and notes payable



    (18,047)




    (21,299)


    Accrued expenses and other payables



    2,557




    (2,208)


    Other current liabilities



    (824)




    443


    Net cash provided by/(used in) operating activities



    29,227




    (18,214)


    Cash flows from investing activities:









    Increase in demand loans and employee housing loans
    included in other non-current assets



    (212)




    (249)


    Cash received from property, plant and equipment sales



    242




    834


    Payments to acquire property, plant and equipment (including
    $242 and $760 paid to related parties for the three months
    ended March 31, 2020 and 2019, respectively)



    (1,976)




    (8,777)


    Payments to acquire intangible assets



    -




    (1,194)


    Investment under the equity method



    (2,579)




    -


    Purchase of short-term investments



    -




    (15,563)


    Proceeds from maturities of short-term investments



    5,781




    14,901


    Cash received from long-term investment



    448




    -


    Net cash provided by/(used in) investing activities



    1,704




    (10,048)


    Cash flows from financing activities:









    Proceeds from bank loans



    14,368




    15,275


    Repayments of bank loans



    (16,247)




    (11,881)


    Repayments of the borrowing for sale and leaseback transaction



    (1,028)




    (1,063)


    Repurchase of common shares



    -




    (342)


    Net cash (used in)/provided by financing activities



    (2,907)




    1,989


    Effects of exchange rate on cash, cash equivalents and pledged
    cash



    (1,851)




    1,980


    Net increase/(decrease) in cash, cash equivalents and pledged
    cash



    26,173




    (24,293)


    Cash, cash equivalents and pledged cash at beginning of the
    period



    106,396




    115,969


    Cash, cash equivalents and pledged cash at end of the period


    $

    132,569



    $

    91,676


     

     

    Related Links :

    http://www.caasauto.com

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