China Automotive Systems Reports 2017 Second Quarter Unaudited Financial Results

WUHAN, China, Aug. 10, 2017 /PRNewswire/ -- China Automotive Systems, Inc. ("CAAS" or the "Company") (NASDAQ: CAAS), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the second quarter and six months ended June 30, 2017.

Second Quarter 2017 Highlights

• Net sales increased 16.5% to $117.7 million from $101.0 million in the second quarter of 2016;
• Gross profit rose 32.6% to $24.1 million and the gross margin increased to 20.4% from 18.0% in the second quarter of 2016; 
• Income from operations increased by 109.8% to $11.1 million with an operating margin of 9.4% compared with 5.2% in the second quarter of 2016;
• Net income attributable to parent company's common shareholders rose 64.8% to $8.9 million, or diluted earnings per share of $0.28, compared to net income attributable to parent company's common shareholders of $5.4 million, or diluted earnings per share of $0.17, in the second quarter of 2016.

First Six Months of 2017 Highlights

• Net sales grew 8.8% to $237.0 million, compared to $217.9 million in the first six months of 2016;
• Gross profit increased by 16.6% to $45.7 million, compared to $39.2 million in the first six months of 2016; gross margin increased to 19.3% in the first six months of 2017, compared to 18.0% in the first six months of 2016;
• Income from operations increased by 48.8% to $18.3 million with an operating margin of 7.7% compared with 5.6% in the second quarter of 2016;
• Net income attributable to parent company's common shareholders grew 31.5% to $14.6 million from $11.1 million in the first six months of 2016; diluted earnings per share attributable to parent company's common shareholders was $0.46, compared to diluted earnings per share attributable to parent company's common shareholders of $0.34 in the first six months of 2016.
• Net cashflow from operating activities increased to $19.2 million from a net use of $6.4 million in the first six months of 2016.

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales in the second quarter of 2017 reflected economic growth in China, an increase in the sales of our traditional steering products as Chinese branded vehicles captured market share, and stronger growth in our international markets.  We are investing more in our research and development to strengthen our EPS product line and advance other new products to enhance sales growth."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to focus on building our financial strength and resources to build our operations in China and in international markets.  With our growing number of high quality steering products, we are well positioned to capture market shares in key markets in the future.  We generated free cash flow, added $9.5 million in working capital and improved our return on invested capital in the first half of 2017."

Second Quarter of 2017

In the second quarter of 2017, net sales increased 16.5% to $117.7 million, compared to $101.0 million in the same quarter of 2016. Net sales of traditional steering products grew by 32.8% and the Company sold more products to its North American customers.  Sales of electric power steering ("EPS") represented 22.6% of total net sales.

Gross profit increased 32.6% to $24.1 million in the second quarter of 2017, compared to $18.1 million in the second quarter of 2016. The gross margin was 20.4% in the second quarter of 2017, versus 18.0% in the second quarter of 2016 and 18.1% in the first quarter of 2017. The gross margin increased mainly due to a better revenue mix as total units sold to the international markets increased during the second quarter of 2017.

Gain on other sales increased to $4.6 million in the second quarter of 2017, compared to $1.2 million in the second quarter of 2016. The increase was mainly due to a one-time gain of $2.2 million on disposal of a building in the second quarter of 2017.

Selling expenses were $4.6 million in the second quarter of 2017, compared to $4.1 million in the second quarter of 2016. Selling expenses represented 3.9% of net sales in the second quarter of 2017 compared to 4.1% in the same quarter of 2016. The increase was mainly due to higher logistics expenses related to increased sales during the quarter.

General and administrative expenses ("G&A expenses") were $5.3 million in the second quarter of 2017 compared to $3.9 million in the second quarter of 2016. G&A expenses represented 4.5% of net sales in the second quarter of 2017 compared to 3.9% in the second quarter of 2016. The increase was mainly due to the increased allowance for doubtful accounts of $1.1 million and higher payroll expenses.

Research and development expenses ("R&D expenses") increased 28.3% to $7.7 million in the second quarter of 2017, compared to $6.0 million in the second quarter of 2016. R&D expenses continue to focus on the development of the Company's EPS and other new products. R&D expenses represented 6.5% of sales in the second quarter of 2017, compared with 5.9% in the 2016 second quarter.

Net financial income in the second quarter of 2017 was $0.6 million compared with $0.1 million in the second quarter of 2016.

Income from operations rose 109.8% to $11.1 million in the second quarter of 2017, compared to $5.3 million in the same quarter of 2016. The increase was primarily due to higher gross profit and a gain on other sales. As a percentage of net sales, the operating margin was 9.4% in the second quarter of 2017, compared to 5.2% in the second quarter of 2016.

Income before income tax expenses and equity in earnings of affiliated companies was $11.1 million in the second quarter of 2017, compared to $6.5 million in the second quarter of 2016. 

Net income attributable to parent company's common shareholders rose 64.8% to $8.9 million in the second quarter of 2017, compared to net income attributable to parent company's common shareholders of $5.4 million in the corresponding quarter of 2016. Diluted earnings per share were $0.28 in the second quarter of 2017, compared to diluted earnings per share of $0.17 in the second quarter of 2016. The weighted average number of diluted common shares outstanding was 31,649,322 in the second quarter of 2017, compared to 32,087,634 in the second quarter of 2016.

First Six Months of 2017

Net sales increased 8.8% to were $237.0 million in the first six months of 2017, compared to $217.9 million in the first six months of 2016. Six-month gross profit increased 16.6% to $45.7 million, compared to $39.2 million in the corresponding period last year. Six-month gross margin was 19.3% in the 2017 period compared to 18.0% in the corresponding period in 2016. The gain on other sales of $5.3 million was in the first six months of 2017 compared with $2.0 million in the 2016 period. Income from operations climbed 48.8% to $18.3 million in the first six months of 2017, compared to $12.3 million in the first six months of 2016. Operating margin was 7.7% in the first six months of 2017, compared to 5.6% for the corresponding period of 2016. 

Net income attributable to parent company's common shareholders increased 31.5% to $14.6 million in the first six months of 2017, compared to $11.1 million in the corresponding period in 2016. Diluted earnings per share were $0.46 in the first six months of 2017, compared to diluted earnings per share of $0.34 for the corresponding period in 2016.

As of June 30, 2017, cash and equivalents, pledged cash and short-term investments were $98.2 million. Total accounts receivable including notes receivable were $307.4 million. Accounts payable were $226.2 million and bank and government loans were $67.4 million. Total parent company stockholders' equity was $321.8 million as of June 30, 2017, compared to $300.5 million as of December 31, 2016.

Net cash provided by operating activities increased significantly to $19.2 million from a net use of $6.4 million in the first six months of 2016. The increase was mainly attributable to the improvement of account receivable management. Payments to acquire property, plant and equipment was reduced to $10.2 million from $18.5 million in the first six months of 2016.

Business Outlook

Management has increased its revenue guidance for the full year 2017 to US$490 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 August 10, 2017 at 9:00 A.M. EDT/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 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 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, 2017, 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 LiChief Financial OfficerChina Automotive Systems, Inc.Email: [email protected]

Kevin Theiss+1-646-726-6511[email protected]

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SOURCE China Automotive Systems, Inc.