China Automotive Systems Reports Higher Net Sales and Profit in the 2016 Third Quarter

WUHAN, China, Nov. 10, 2016 /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, 2016.

Third Quarter 2016 Highlights

• Net sales increased 4.2% to $94.6 million, compared to $90.8 million in the third quarter of 2015;
• Gross margin increased to 21.1% compared to 17.5% in the third quarter of 2015;
• Net income attributable to parent company's common shareholders was $5.7 million, or diluted earnings per share of $0.18, compared to net income attributable to parent company's common shareholders of $4.3 million, or diluted earnings per share of $0.13, in the third quarter of 2015.

First Nine Months of 2016 Highlights

• Net sales were $312.5 million, compared to $323.5 million in the first nine months of 2015;
• Gross margin was 18.9%;
• Diluted earnings per share attributable to parent company's common shareholders was $0.52;
• Cash and cash equivalents, pledged cash deposits and short-term investments were $99.5 million as of September 30, 2016;
• Net cash flow from operating activities was $13.1 million.  

Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "We are encouraged to see all of our subsidiaries' operations achieved growth in the third quarter of 2016 despite continuing lackluster growth in the Chinese economy. We continued to grow our electric power steering ("EPS") business which grew by 26.1% and represented 27.0% of net sales compared with 22.4% in the same period last year. We remain optimistic about our EPS business and continue to expand our product portfolio and production capabilities. Even our traditional hydraulic steering products reversed its declining trend and registered an increase."

"Internationally, our Brazilian assembly plant has completed its trials and begun commercial production to serve our Tier-1 customer in Brazil and Chinese OEMs operating in the region. We anticipate that our North American operations will continue to expand in the years ahead." Mr. Wu concluded.

Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We maintain a strong balance sheet while continuing to invest in our products and production capacity to position CAAS to further penetrate the Chinese auto market and international markets as well. From a financial reporting perspective, the significantly weakening Chinese currency RMB against the US dollars negatively affected our third quarter results by 6.4%, as we still generate a majority of our sales in Mainland China while we report in US dollar. As part of our commitment to building long-term shareholder value, we continued to repurchase shares. As of September 30, 2016, approximately $1 million has been used to repurchases of  260 thousand shares and $4 million of additional shares may yet be repurchased under our share repurchase program."

Third Quarter of 2016

In the third quarter of 2016, net sales increased 4.2% to $94.6 million, compared to $90.8 million in the same quarter of 2015. This increase was mainly due to higher volumes and a change in the product mix to more electric power steering systems (EPS).

Gross profit was $20.0 million in the third quarter of 2016, compared to $15.9 million in the third quarter of 2015. The gross margin was 21.1% in the third quarter of 2016, versus 17.5% in the third quarter of 2015.

Selling expenses were $3.8 million in the third quarter of 2016, compared to $3.3 million in the third quarter of 2015. Greater unit sales led to higher transportation expenses in the third quarter of 2016. Selling expenses represented 4.1% of net sales in the third quarter of 2016, compared to 3.7% in the third quarter of 2015.

General and administrative expenses ("G&A expenses") were $3.7 million in the third quarter of 2016, compared to $3.1 million in the same quarter of 2015. G&A expenses represented 4.0% of net sales in the third quarter of 2016 and 3.4% in the third quarter of 2015.

Research and development expenses ("R&D expenses") were $6.7 million in the third quarter of 2016, compared to $5.4 million in the third quarter of 2015. R&D expenses represented 7.1% of net sales in the third quarter of 2016 compared with 6.0% in the third quarter of 2015. The higher R&D expenses as a percentage of revenue was mainly due to continued development of new EPS products and acquiring advanced production equipment.

Net financial income was $0.8 million in the third quarter of 2016 compared to net financial income of $0.6 million in the third quarter of 2015.

Income from operations increased 15.2% to $5.7 million in the third quarter of 2016, compared to $5.0 million in the same quarter of 2015. The increase was mainly due to higher net sales and gross profit.

Income before income tax expenses and equity in earnings of affiliated companies was $6.7 million in the third quarter of 2016, compared to $5.2 million in the third quarter of 2015. The increase in income before income tax expenses and equity in earnings of affiliated companies was mainly due to higher operating income, lower interest expense and higher net financial income in the third quarter of 2016 compared with the third quarter of 2015.

Net income attributable to parent company's common shareholders was $5.7 million in the third quarter of 2016, compared to net income attributable to parent company's common shareholders of $4.3 million in the third quarter of 2015. Diluted earnings per share were $0.18 in the third quarter of 2016, compared to diluted earnings per share of $0.13 in the third quarter of 2015.

The weighted average number of diluted common shares outstanding was 31,911,722 in the third quarter of 2016, compared to 32,134,839 in the third quarter of 2015.

First Nine Months of 2016

Net sales for the first nine months of 2016 were $312.5 million, compared to $323.5 million in the first nine months of 2015. Nine-month gross profit was $59.1 million, compared to $59.4 million in the corresponding period last year. Nine-month gross margin was 18.9%, compared to 18.4% for the corresponding period in 2015. For the nine months ended September 30, 2016, gain on other sales amounted to $2.0 million, compared to $3.2 million for the corresponding period in 2015. Income from operations was $18.0 million compared to $22.6 million in the first nine months of 2015. Operating margin was 5.8%, compared to 7.0% for the corresponding period of 2015.

Net income attributable to parent company's common shareholders was $16.8 million compared with $20.5 million in the corresponding period last year. Diluted earnings per share were $0.52 in the first nine months of 2016, compared to diluted earnings per share of $0.64 for the corresponding period in 2015.

Balance Sheet

As of September 30, 2016, total cash and cash equivalents, pledged cash deposits and short-term investments were $99.5 million, total accounts receivable including notes receivable were $279.4 million, accounts payable were $210.0 million and bank and government loans were $39.9 million. Total parent company stockholders' equity was $312.2 million as of September 30, 2016, compared to $299.0 million as of December 31, 2015. Net cash flow from operating activities was $13.1 million for the first nine months of 2016. 

Business Outlook

Management has increased its revenue guidance for the full year 2016 to US$450 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 10th 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) China Toll Free: +86-400-1202-840

A replay of the call will be available on the company's website in 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 over5.5 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: 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 30, 2016, 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: [email protected]

Investor Relations Email: [email protected]

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SOURCE China Automotive Systems, Inc.