China Zenix Auto (ZX) Reports Q1 EPS of $0.08 on Revenues of $130.1M

China Zenix Auto (NYSE: ZX) reported Q1 EPS of $0.08. Revenue for the quarter came in at $130.1 million.

2018 First Quarter Results

• Revenue for the first quarter increased 21.8% to RMB816.2 million (US$130.1 million) from RMB 670.4 million in the first quarter of 2017. The increase in revenue on a year-over-year basis was mainly due to strong sales to the domestic truck OEM market which was driven by Chinese government\'s enforcement of its anti-truck overloading policy. The increase in total revenue was also attributable to the upward price adjustments in response to rising raw material costs.
• Sales to the Chinese OEM market increased by 33.8% year-over-year to RMB465.1 million (US$74.1 million) in the first quarter of 2018 compared to RMB347.6 million in the same quarter of 2017. Total unit sales in the OEM market increased by 11.6% year-over-year during the first quarter of 2018.
• Aftermarket sales in China increased by 9.7% year-over-year to RMB253.9 million (US$40.5 million) in the first quarter of 2018 from RMB231.5 million in the first quarter of 2017. Total unit sales in the aftermarket increased by 1.7% year-over-year as the aftermarket wheel segment began to recover after two sluggish years.
• International sales increased by 6.5% year-over-year to RMB97.2 million (US$15.5 million) in the first quarter of 2018 compared to sales of RMB91.2 million in the first quarter of 2017. Total unit sales in the international sales decreased by 3.6% year-over-year in the first quarter of 2018 mainly due to continued weak demand in Southeastern Asian countries.
• In the first quarter of 2018, domestic OEM sales, domestic aftermarket sales and international sales contributed 57.0%, 31.1% and 11.9% of revenue, respectively.
• Sales of tubed steel wheels accounted for 45.7% of 2018 first quarter revenue compared to 44.9% in the same quarter in 2017. Tubeless steel wheel sales represented 41.3% of 2018 first quarter revenue compared to 45.4% in the same quarter of 2017. While tubed and tubeless steel wheel sales remain the main sources of revenue for the Company, sales of aluminum wheels increased by 99.1% year-over-year and accounted for 9.5% of first quarter revenue as compared to 5.8% in the same quarter a year ago. The tightened regulation by the Chinese government to curb emissions and increase road safety continued to fuel high demand for light-weight tubeless and aluminum wheels.
• First quarter gross profit increased by 19.1% to RMB125.9 million (US$20.1 million), compared to RMB105.7 million in the same quarter in 2017. Gross margin was 15.4%, compared with 15.8% in the first quarter of 2017. The decrease in gross margin on a year-over-year basis was mainly due to higher raw material costs. The Company raised selling prices during the first quarter in all markets. However, in order to capture the aftermarket recovery, the price adjustment in this segment was not high enough to offset the increase in raw material costs, causing a slight deterioration in overall gross margin.
• Selling and distribution expenses increased by 6.1% to RMB45.0 million (US$7.2 million) from RMB42.4 million in the first quarter of 2017. The increase in selling and distribution expenses was primarily caused by higher sales in the first quarter of 2018 compared with the same quarter last year. As a percentage of revenue, selling and distribution expenses were 5.5% in the first quarter of 2018, compared to 6.3% in the same quarter a year ago.
• Research and development (\"R&D\") expenses decreased by 8.3% to RMB12.9 million (US$2.0 million), compared to RMB14.0 million in the first quarter of 2017. R&D as a percentage of revenue was 1.6% in the first quarter of 2018, compared to 2.1% in the same quarter a year ago. As the Company\'s aluminum and new steel products continue to mature, R&D expenses were reduced.
• Administrative expenses decreased by 2.9% to RMB30.7 million (US$4.9 million) from RMB31.6 million in the first quarter of 2017. As a percentage of revenue, administrative expenses were 3.8%, compared to 4.7% of revenue in the first quarter of 2017.
• Net income and total comprehensive income were RMB26.1 million (US$4.2 million) in the first quarter of 2018 compared to net income and total comprehensive income of RMB12.9 million for the first quarter of 2017.
• Basic and diluted income per ADS were RMB0.51 (US$0.08) in the first quarter of 2018 compared to basic and diluted income per ADS of RMB0.25 in the first quarter of 2017.
• In the first quarter of 2018, the Company recorded net cash flow from operating activities of RMB39.3 million (US$6.3 million). Higher sales to the domestic OEM market increased total account receivables and inventories. Days Sales Outstanding (DSO) remained at 58 days in the first quarter of 2018, slightly increased from 57 days for the full year of 2017. The Company did not incur any capital expenditures for the purchase of property, plant and equipment in the first quarter of 2018.
• During the first quarter of 2018 and 2017, the weighted average number of ordinary shares was 206.5 million and the weighted average number of ADSs was 51.6 million.
• As of March 31, 2018, Zenix Auto had bank balances and cash of RMB783.7 million (US$124.9 million) and fixed bank deposits with a maturity period over three months of RMB290.0 million (US$46.2 million). Total bank borrowings were RMB558.0 million (US$89.0 million). Total equity attributable to owners of the Company was RMB2,572.8 million (US$410.2 million).

For earnings history and earnings-related data on China Zenix Auto (ZX) click here.

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