Wonder Auto Technology Reports Record Quarterly Sales and Net Income
 |
JINZHOU CITY, China, Aug. 6, 2008 -- Wonder Auto Technology, Inc. ("Wonder Auto" or the "Company"), a leading manufacturer of automotive electrical and suspension parts in China, today announced record quarterly financial results for the second quarter ended June 30, 2008.
Q2 Highlights:
-- Sales revenue increased 55.6% year-over-year to a record US$36.7
million
-- Gross profit rose faster at 68% year-over-year to a record US$9.5
million
-- Net income increased 37.4% year-over-year to US$5.3 million
-- Export sales represented 14% of the higher total revenues
-- EPS rose 25% over same period last year to US$0.20, on 3 million more
weighted average shares outstanding.
Second quarter sales revenue rose to a record US$36.7 million, a 55.6% increase from the 2007 second quarter revenue of US$23.6 million. The sales revenue increase was primarily due to the increased demand for the Company's alternators and starter products from OEMs in China.
With the rising price of gasoline, Chinese consumers regained interest in small-sized automobiles. As a result, the smaller engine market continued to demonstrate solid growth in the first half of 2008. This growing market trend benefited the sales of Wonder Auto's high performance alternators and starters for smaller engines. Additionally, the central government has initiated a number of incentives and policies to encourage the purchase of smaller vehicles with low-emission engines to help the environment. In addition, the Company's sales growth also benefited from the strong sales growth of its key customers. After a lackluster 2007, Beijing Hyundai staged a robust comeback and posted a record setting 50% year-over-year unit sales growth.
2008 second quarter gross profit increased 68% to a record US$9.5 million from a gross profit of US$5.7 million in the same quarter of 2007. Gross margin was 25.9% in the 2008 second quarter compared with 24.0% for the same period last year. The gross margin increase was a combination of higher sales in the 2008 second quarter generating greater economies-of-scale than a year ago and effective cost saving programs. Additionally, the Company's research and development continues to develop technology and methods to lower raw material usage and component consumption per unit of production.
Operating expenses for the 2008 second quarter were US$2.7 million as compared to US$1.8 million in the same period of 2007, reflecting a 48.4% increase. The higher expenses were mostly from more administrative spending primarily because of the consolidation of Jinzhou Hanhua and Jinzhou Karham since the first quarter of 2008, and the increased professional expenses of being a public company. Because both companies are Wonder Auto's suppliers, the addition of these two companies increased our administrative costs, but did not increase the sales revenue. As a percentage of sales revenue, administrative expenses remained at 3.9% of sales for the three months ended June 30, 2008, the same percentage as in the 2007 quarter. Selling expenses of US$994,993 were higher in the second quarter due to the increased warranty provision reflecting higher sales, greater sales commission and more traveling expenses due to increased gas prices. The selling expenses were 2.7% as a percentage of revenue in the 2008 quarter compared with 3.0% in the 2007 second quarter. Research and development costs increased to US$290,665 from US$214,174 for the same period in 2007. As a percentage of revenue, research and development costs were 0.8% in the second quarter. The investment in research and development is expected to continue to rise and remain around 1% of sales revenue.
Income from operations was US$6.8 million, a 77.4% increase from US$3.8 million in the second quarter of 2007.
Net income increased 37.4% to a quarterly record of US$5.3 million from US$3.8 million in the same quarter of 2007. Fully diluted earnings per share for the second quarter were US$0.20 versus US$0.16 in the 2007 second quarter. As of June 30, 2008, the weighted average number of shares outstanding on a diluted basis increased by 12.5% to 26,959,994 shares, as compared to 23,959,994 diluted shares outstanding in the same quarter of 2007.
"We continued our strong growth in the 2008 second quarter as starter sales were strong and export sales augmented our growth in the Chinese domestic market. Our investment into our new facilities provide us with more production capacity for further expansion, as we are targeting bigger customers and additional new markets," said Chairman and CEO, Mr. Qingjie Zhao.
Financial Condition
As of June 30, 2008, Wonder Auto had US$28.4 million in cash and cash equivalents (including US$6.0 million restricted cash), a current ratio of 1.9 to 1, working capital of US$55.0 million and US$19.4 million long-term debt. Shareholders' equity increased to US$91.4 million. Net trade receivables rose in the second quarter reflecting the higher sales volumes and inventories also increased to accommodate future sales growth. Wonder Auto is also building new facilities. As of June 30, the value of its buildings rose to $11.4 million from $6.9 million at December 31, 2007 and plant and equipment rose to $27.2 million from $20.1 million at the end of 2007.
Events Overview
In April 2008, Wonder Auto's Board of Directors adopted the 2008 Equity Incentive Plan. As part of the Plan, the compensation committee of the Board granted stock options to approximately 65 Wonder Auto managers to be vested upon the achievement of pro forma net income results, approximating 40% annual growth, over the next three years. Such plan was approved by shareholders at Wonder Auto's 2008 annual meeting of stockholders.
Wonder Auto announced that is has joined the Russell 2000 Index when Russell Investments changed its indexes on June 27, 2008.
During the second quarter, the Company also made investor presentations at the Roth 3rd Annual China Discovery Tour and the Piper Jaffray Industrial Growth Conference.
At the 2008 Annual Meeting of Stockholders held on Friday, June 20, 2008 in Beijing, Mr. Qingjie Zhao, Wonder Auto's Chairman and Chief Executive Officer, Mr. Meirong Yuan, the Company's Chief Financial Officer and Treasurer, Mr. Larry Goldman, Mr. David Murphy, and Mr. Xingye Zhang, were all re-elected to the Board of Directors. Also, the Wonder Auto Technology, Inc. 2008 Equity Incentive Plan was approved by shareholders, and PFK Hong Kong, Certified Public Accountants, was ratified as the Company's independent registered public accounting firm.
Wonder Auto announced it will exhibit at the Automotive Aftermarket Products Expo (AAPEX), at the Sands Expo Center in Las Vegas, Nevada, between November 2-4, 2008. Wonder Auto will highlight its advanced starter and alternator products, especially those designed and targeting the global markets, as well as its suspension parts. The AAPEX exhibition is the world's largest trade event for the automotive aftermarket.
Business Outlook
For the third quarter to end September 30, 2008, the Company expects sales revenues to grow strongly to US$39.0 million with the gross margin to exceed 25.5%.
Conference Call
The Company will host a conference call, to be simultaneously Webcast on Thursday, August 7 at 8:30 a.m. Eastern Daylight Time / 8:30 p.m. Beijing Time. A question and answer session will follow the management presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO), Miss Lydia Zhao (assistant CFO) and Mr. Yuechun Xie (Investor Relations Manager) will be the primary speakers for the call.
To participate, please call the following numbers ten minutes before the call start time:
Phone Number + 1 (877) 407-9210 (North America)
Phone Number + 1 (201) 689-8049 (International)
A live Webcast of the conference call will be available on the Investor Relations page of Wonder Auto's web site at http://www.watg.cn/ . Please visit the Web site at least 15 minutes early to register for the Webcast and download any necessary audio software.
A replay of the call will be available through Thursday, August 21, 2008, at 11:59 p.m. Eastern Daylight Time/11:59 a.m. Beijing Time, on August 22. For the replay, please call:
Phone Number +1 (877) 660-6853 (North America)
Phone Number +1 (201) 612-7415 (International)
Account Number: 286
Conference ID Number: 292425
