China Automotive Systems Reports 2018 First Quarter Results

WUHAN, China, May 10, 2018 /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, 2018.

First Quarter 2018 Highlights

• Net sales increased 12.3% to $134.0 million from $119.3 million in the first quarter of 2017
• Net income attributable to parent company's common shareholders was $4.3 million, or diluted earnings per share of $0.14, compared to $5.7 million, or diluted earnings per share of $0.18 in the first quarter of 2017
• Total cash and cash equivalents, pledged cash and short-term investments were $124.5 million

Mr. Qizhou Wu, chief executive officer of CAAS, commented, "Our sales continue to benefit from increased demand for our advanced products and exports. We are pleased to report that our sales to North America grew by 84.5% in the first quarter of 2018 compared with the same quarter last year.  As we continue to invest in our electric power steering and other advanced steering technologies to position the Company for the future, our broad portfolio of steering products provides solutions to meet our customers' needs across all automotive segments."

Mr. Jie Li, chief financial officer of CAAS, commented, "We continue to focus on building our financial strength to support our growing sales volume." 

First Quarter of 2018

In the first quarter of 2018, net sales were $134.0 million compared to $119.3 million in the same quarter of 2017, reflecting a 12.3% year-over-year growth. The increase in net sales was mainly due to increased sales volume, especially for legacy products for the North American and heavy-duty vehicle markets, and the effect of foreign currency exchange. The Company adopted ASC Topic 606 "Revenue from Contracts with Customer" as of January 1, 2018.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605 "Revenue Recognition". No significant impact to the consolidated financial statements as a result of the adoption.

Gross profit was $21.6 million in the first quarter of each 2018 and 2017. The gross margin was 16.1% in the first quarter of 2018 compared to 18.1% in the first quarter of 2017 due to changes in the product mix.

Gain on other sales was $1.5 million in the first quarter of 2018 compared to $0.8 million in the first quarter of 2017, reflecting higher scrap volume.

Selling expenses were $5.8 million in the first quarter of 2018, compared to $4.1 million in the first quarter of 2017. The increase was primarily due to higher logistics fees reflecting higher sales volume and increased marketing expenses. Selling expenses represented 4.3% of net sales in the first quarter of 2018 compared to 3.4% in the first quarter of 2017. 

General and administrative expenses ("G&A expenses") were $4.4 million in the first quarter of 2018, compared to $4.4 million in the same quarter of 2017. G&A expenses represented 3.3% of net sales in the first quarter of 2018 and 3.7% in the first quarter of 2017. 

Research and development expenses ("R&D expenses") were $8.3 million in the first quarter of 2018, compared to $6.8 million in the first quarter of 2017. R&D expenses represented 6.2% of net sales in the first quarter of 2018 compared to 5.7% in the first quarter of 2017. The increase in R&D expenses was due to increased investment in EPS product research and development such as brushless motor and Advanced Driver Assistance Systems (ADAS) related projects.

Income from operations was $4.6 million in the first quarter of 2018, compared to $7.2 million in the same quarter of 2017. The decrease was primarily due to lower gross margin and higher selling and research and development expenses.

Interest expense was $0.4 million in the first quarter of 2018 compared to $0.2 million, in the same quarter of 2017. The increase was due to new bank borrowings at higher interest rates.

Net financial expense was $0.8 million in the first quarter of 2018 compared to net financial income of $0.3 million in the first quarter of 2017. The increase of net financial expense was primarily due to an increase in foreign exchange rates related to higher export sales in the first quarter of 2018.

Income before income tax expenses and equity in earnings of affiliated companies was $4.0 million in the first quarter of 2018, compared to $7.1 million in the first quarter of 2017. The decrease in income before income tax expenses and equity in earnings of affiliated companies was mainly due to lower income from operations. 

Net income attributable to parent company's common shareholders was $4.3 million in the first quarter of 2018, compared to $5.7 million in the first quarter of 2017. Diluted earnings per share were $0.14 per share in the first quarter of 2018, compared to $0.18 in the first quarter of 2017.  

The weighted average number of diluted common shares outstanding was 31,644,004 in the first quarter of 2018, compared to 31,649,908 in the first quarter of 2017.

Balance Sheet

As of March 31, 2018, total cash and cash equivalents, pledged cash and short-term investments were $124.5 million, total accounts receivable including notes receivable were $304.7 million, accounts payable were $237.6 million and short-term bank and government loans were $63.2 million. Total parent company stockholders' equity was $316.5 million as of March 31, 2018, compared to $299.4 million as of December 31, 2017.   

Business Outlook

Management has raised its revenue guidance for the full year 2018 to US$520 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

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 29, 2018, 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]

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

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SOURCE China Automotive Systems, Inc.