SORL Auto Parts Reports First Quarter 2009 Financial Results
ZHEJIANG, China, May 13, 2009 SORL Auto Parts, Inc. (''SORL'' or ''The Company''), a leading manufacturer and distributor of commercial vehicle air brake valves as well as related auto parts in China, announced financial results for the quarter ended March 31, 2009.
For the first quarter of 2009, net sales were $20.2 million, a 34.2% decrease compared to $30.7 million for the same period of 2008. Revenues from China's domestic OEM market were US$9.2 million, a 14.0% decrease over the same period in 2008. Revenues from China's domestic aftermarket were US$6.5 million, a 34.3% decrease over the same period in 2008. Revenues from international markets were US$4.6 million a 54.5% decrease from the same period in 2008. The decrease in sales was primarily due to weak global economic conditions, which lessened demand from our Chinese and international customers. In addition, prior to the implementation of the China III emission standard beginning on July 1, 2008, demand for commercial vehicles equipped with China II engines was significantly enhanced in the first half year of 2008. This resulted in higher than usual output and sales volume of commercial vehicles in the first and second quarter of 2008.
Gross profit decreased 36.2% to $5.5 million for the first period of 2009, from $8.6 million for the same period of 2008. Gross margin decreased 100 basis points to 27.2% from 28.2%. The decrease in gross margin was primarily the result of decreased output without a commensurate decline in certain fixed production costs, such as depreciation. SORL is committed to increasing management efficiency, improving the technologies of products, and improving its product portfolio to increase gross margins. Meanwhile, SORL expects its expansion to the higher-profit bus market will also help to increase gross profit margins.
Operating expenses decreased 1.1% to $4.1 million for the first quarter of 2009 from $4.2 million for the same period of 2008. As a percentage of revenue, operating expenses increased to 20.4% in the first quarter 2009 from 13.7% in the same period of 2008 primarily as a result of decreased sales output offset by increased R&D expense as the Company enhanced research and development activities on new products for the bus and agricultural vehicle market segments.
Operating income decreased 69% to $1.4 million for the first quarter 2009 from $4.5 million for the same quarter last year. Operating margin decreased 770 basis points to 6.8% for the first quarter 2009 from 14.5% in the first quarter of 2008 as a result of the decrease in sales and gross margin, offset by the increase in operating expenses as a percent of revenue.
Net income attributable to stockholders for the first quarter of 2009 decreased 73.2%, to $0.94 million, or $0.05 per share from $3.5 million, or $0.19 per share in the first quarter of 2008.
''The first quarter of 2009 proved to be a challenging quarter for SORL,'' said Xiaoping Zhang, SORL Auto Parts' CEO and Chairman. ''Sales growth in China and internationally was negatively affected by global economic conditions. Demand in the global auto market was significantly weaker and the output and sales of our Commercial Vehicle business and the demand for air brake valves from our domestic OEM customers and international customers declined in the first quarter of 2009. In response to the implementation of the China III emission standard beginning July 1, 2008, sales of trucks equipped with China II engines accelerated before the policy was enforced in the first half of the year, which will cause difficult year over year comparisons for the first and second quarters of 2009.
''As I indicated, we have been through a very difficult time. We believe that the economic conditions are showing signs of stabilization and we remain confident about the long-term viability of the global market and China's auto market.'' Mr. Zhang continued, ''We have actively pursued the bus and agricultural vehicle market to broaden our product reach into high growth, high margin business segments. We continue to invest in research and development to fund exciting new products for these market segments. The financial position of our company remains solid, with $10.7 million of cash on the balance sheet and no long-term debt, and we generated $3.1 million of cash flow from operations during the quarter.
''In addition, we strongly believe that the second quarter of 2009 will be better compared with the first quarter. The Chinese government's stimulus plan has already induced increased demand in the auto market, which we believe will boost our performance in the second half this year. The stabilizing market is starting to show a positive impact on our sales, reflected in improved sales performance in April.''
Management will host a conference call at 8:30 am ET, on Wednesday May 13, 2009 to discuss its first quarter 2009 financial results. Listeners may access the call by dialing # 1-888-726-2458 or +1-913-312-0940 for international callers. A live webcast of the conference call will also be available at SORL.
A replay of the call will be available from May 13 to May 20, 2009. Listeners may access the replay by dialing 1-888-203-1112 or +1-719-457-0820; passcode: 4571737.