China Automotive Systems Reports 40% Increase in Revenue and 84% Increase in Net Income for Fiscal Year 2007
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4th Quarter Revenue Grew 36% YoY And net Income Expanded by 52%
WUHAN, Hubei, China, March 25 /Xinhua-PRNewswire-FirstCall/ -- China Automotive Systems, Inc. , a leading power steering components and systems supplier in China, today announced 2007 fourth quarter and year financial results for the period ended December 31, 2007.
2007 Fourth Quarter Highlights:
-- Net sales increased to US$37.7 million, reflecting 36.3% year-over-year
growth;
-- Net income was US$2.2 million, reflecting 52.6% year-over-year growth;
and
-- Diluted earnings per share were US$0.09, reflecting 48% year-over-year
growth.
2007 Full Year Highlights:
-- Net sales increased to US$133.6 million, reflecting 39.5% year-over-
year growth;
-- Net sales from steering components for passenger and light-duty
vehicles increased to US$83.9 million, reflecting 39.3% year-over-year
growth;
-- Net sales from steering components for commercial vehicles increased to
US$35.8 million, reflecting 42.3% year-over-year growth;
-- Net income was US$8.9 million, reflecting 84.1% year-over-year growth;
and
-- Diluted earnings per share were US$0.37, reflecting 76.2% year-over-
year growth.
Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems, commented, "2007 was a strong year for China Automotive Systems as we demonstrated our ability to continue to grow revenue and expand market share, and also achieved scalability and increased our bottom line at a faster pace than revenues. With the established economies-of-scale, expanded tier 1 customer portfolio and the arrival of new capital, we are confident we can continue to leverage our state-of-the-art manufacturing facility to generate strong results and further build shareholders' value in 2008.''
Fourth Quarter 2007:
Total net sales for the fourth quarter of 2007 were US$37.7 million as compared with US$27.7 million reported in the same period for 2006 and US$31.2 million for the third quarter of 2007. This sales increase reflects 36.3% year-over-year growth and 20.8% quarter-over-quarter growth, respectively.
Gross profit for the fourth quarter of 2007 increased to US$12.7 million compared with US$8.5 million in the same period for 2006, and US$11.4 million for the third quarter of 2007, reflecting a 48% increase year-over-year and a 11.5% quarter-over-quarter growth, respectively. Operating income for the fourth quarter of 2007 was US$3.5 million, compared with US$3.6 million reported in the same period of 2006 and US$6.6 million for the third quarter of 2007, reflecting a decrease of 2.8% year-over-year and a decrease of 47.2% quarter-over-quarter, respectively. Higher fourth quarter operating expenses included R & D of $756,759 compared with $321,533 in the third quarter of 2007. Selling expenses rose due to a greater number of products shipped as well as higher fuel costs, and greater after sales service costs. General and Administrative expenses were also above last year's quarter due to more travel costs, more supplies to support a larger organization, bonuses to management and one-time repair fees for the 10th anniversary of Henglong, one of the Company's subsidiaries.
Net income for the fourth quarter of 2007 was US$2.2 million, or US$0.09 per diluted share as compared with US$1.4 million, or US$0.06 per diluted share in the same period a year ago and US$2.6 million, or US$0.11 per diluted share, for the third quarter of 2007.
Fiscal Year 2007:
2007 2006 Increase
Amount Amount Amount
(US$m) (US$m) (US$m) Percentage
Steering gears for commercial
vehicles 35.8 25.2 10.6 42.3%
Steering gears for passenger
vehicles 83.9 60.3 23.6 39.3%
Others 13.9 10.3 3.6 34.9%
Total Net sales 133.6 95.8 37.8 39.5%
Net Income 8.9 4.8 4 84.1%
Diluted earnings per share US$0.37 US$0.21 US$0.16 76.2%
Total net sales for the year 2007 increased to US$133.6 million, compared with US$95.8 million for the 2006 year, reflecting a 39.5% year-over-year growth. The Company's sales growth reflected China's rising economy and income levels generating a greater number of passenger and commercial vehicle sales in China during 2007.
Gross profit for the year 2007 increased to US$45.3 million compared with US$32.9 million for the year 2006, reflecting a 37.7% year-over-year growth. Operating income for the year 2007 was US$21.3 million, compared with US$12.8 million for the year 2006, reflecting a 66.6% year-over-year growth.
Net income for the year 2007 was US$8.9 million as compared with US$4.8 million, reflecting an 84.1% year-over-year growth. Diluted earnings per share for year 2007 were US$0.37 as compared with US$0.21, reflecting 76.2% year-over-year growth. There were an additional 748,000 diluted shares used in the calculation for the 2007 earnings per share compared with 2006.
Total cash and cash equivalents as of December 31, 2007 totaled US$19.5 million as compared to US$27.4 million as of December 31, 2006. Net cash flow from operations during the 2007 year was US$11.3 million compared with US$8.0 million for the 2006 period. Stockholder's equity increased to US$67.2 million as of December 31, 2007 from US$53.4 million as of December 31, 2006.
Key Establishments in 2007:
On February 6, 2007, the Company announced the establishment of its first office in North America. The US operation is based in Troy, Michigan, and will focus on market development, R&D and after-sales service in North America.
In May 2007, the Company announced that its subsidiary, Jingzhou Henglong Automotive Parts Co., entered into an agreement with FAW Volkswagen to supply high-quality power steering products. The agreement commenced immediately, with a term of one year and an option to extend for a further two years. The power steering products are being installed in Volkswagen's Jetta vehicles manufactured in China. The first commercial shipment was delivered on May 21, 2007. With this supply agreement, China Automotive Systems has entered into Volkswagen's global sourcing system and became a tier 1 supplier to one of the largest auto makers in China.
In October 2007, the Company announced it formed a new wholly owned subsidiary, Jingzhou Hengsheng Automotive Systems Co. Ltd., to focus on opportunities with Sino-foreign joint venture OEMs in China and OEMs in international markets. Hengsheng is based in Jingzhou City, Hubei Province, and the Company expects to invest approximately US$30 million in Hengsheng over the next 3 years. As a wholly owned foreign enterprise, Hengsheng will benefit from an income tax exemption through 2010 followed by preferential tax treatment (at a 15% rate) for the following 3 years thereafter. The first phase of the new facilities, with a capacity of 700,000 power steering units, is expected to be fully constructed by the end of 2008. Hengsheng will gradually install new equipment, complete testing and ramp up production capacity in the next 3 years to reach a designed capacity of 1.3 million units by 2010. This expansion will more than double China Automotive Systems' current capacity of approximately 1.1 million units. Hengsheng will focus its quality assurance to meet the stringent standards required by many global OEMs.
In December 2007, China Automotive Systems announced its plan to consolidate an additional 36.5% of Jingzhou Henglong Automotive Parts Co., Ltd. ("Henglong"). Henglong, currently 44.5% owned by China Automotive Systems, is engaged in manufacturing power steering systems and components for China's rapidly growing passenger vehicle market. Henglong's main customers include Chery Auto, Brilliance Auto, BYD Auto, Geely Auto and FAW Volkswagen. When completed, management expects that the acquisition will be immediately accretive to net earnings. This transaction is expected to be completed in the first quarter of 2008.
In December, the Company entered into its first aftermarket supply contract in the United States with R&B, a major aftermarket supplier. China Automotive Systems has officially entered the U.S. auto parts aftermarket. R&B conducted a strict selection process in China before entering into the agreement with China Automotive Systems. Since May 2006, both companies' engineering teams collaborated closely on the design and development of two power steering models. One model is intended as a replacement power steering product for the Volvo S40 automobile.
Mr. Hanlin Chen, Chairman of China Automotive Systems said, "During 2007, we made some major breakthroughs and important strategic moves to increase our competitiveness and strengthen our shareholders' value. With our momentum in attracting global auto makers' joint ventures to install our superior products in China, we are aiming at a higher goal in 2008 -- to break into the global OEM market. Our total attention is focused on improving our margins which will pay off in the long run. Our mission is to establish a world-class automotive steering powerhouse."
Recent Developments
In February 2008, China Automotive Systems announced that it closed a previously reported transaction for senior convertible notes with warrants in a private placement. The Company received funding from Lehman Brothers for US$30 million and from YA Global Investments for US$5 million. The proceeds are planned to support the Company's acquisitions, capital expenditures for expansion and working capital for future growth.
Also in February 2008, China Automotive Systems announced that its subsidiary, Jingzhou Henglong Automotive Parts Co., passed Dongfeng Peugeot Citroen Automobile Company Ltd.'s safety test and road test for its power steering gears and started preparing its initial shipment of model Dongfeng Peugeot 206 to DPCA. The power steering gears for the Dongfeng Peugeot 206 have already passed the French UTAC safety test. Trial production has begun in March 2008 and commercial production is expected to commence in May 2008. The Dongfeng Citroen Elysee and Dongfeng Citroen new Xsara Picasso steering gears are currently undergoing inspections. We expect to receive commercial orders for the Dongfeng Citroen Elysee power steering gears by June 2008 and for the Dongfeng Citroen new Xsara Picasso power steering gears beginning in October 2008.
Management will conduct a conference call on at 8:00 a.m. Eastern Daylight Time today 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: +1-877-407-9205 (North America) Phone Number: +1-201-689-8054 (International)
In addition, the conference call will be broadcast live over the Internet at: http://www.caasauto.com/ or http://investor.shareholder.com/media/eventdetail.cfm?mediaid=30330&c=CAAS&med iakey=5FFBFE7DAB7A4250B716FB3D67283F0D&e=0
Please go to the web site at least 15 minutes early to register, download and install any necessary software.
A telephone replay of the call will be available after the conclusion of the conference call through 11:59 PM Eastern Time on April 8, 2008. The dial- in details for the replay are: U.S. Toll Free Number +1-877-660-6853, International dial-in number +1-201-612-7415; using Account "286" and Conference ID "279088" to access the replay. The internet audio stream will also be available until 11:59 pm Eastern Time on Tuesday, April 8, 2008.
About CAAS Based in Hubei Province, 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 seven Sino- foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 1.1 million sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd., etc. For more information, please visit: http://www.caasauto.com/
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition and the impact of acquisitions on its financial performance. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in demand for the Company's products; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, delays and cost overruns related to developing and opening new production facilities; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.
(Tables to follow)
China Automotive Systems, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2007 and 2006 (audited, U.S. dollars)
December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $19,487,159 $27,418,500
Pledged cash deposits 4,645,644 3,484,335
Accounts and notes receivable, net, including
$1,869,480 and $1,770,933 from related
parties at December 31, 2007 and 2006,
net of an allowance for doubtful accounts
of $3,827,838 and $4,086,218 at December
31, 2007 and 2006 82,022,643 57,234,383
Advance payments and other, including
$55,323 and $487,333 to related parties
at December 31, 2007 and 2006 922,578 837,014
Inventories 20,193,286 15,464,571
Total current assets $127,271,310 $104,438,803
Long-term Assets:
Property, plant and equipment, net $46,585,041 $40,848,046
Intangible assets, net 589,713 3,140,548
Other receivables, net, including $638,826
and $738,510 from related parties at
December 31, 2007 and 2006, net of an
allowance for doubtful accounts of
$652,484 and $898,203 at December 31,
2007 and 2006 888,697 966,715
Advance payment for property, plant and
equipment, including $1,560,378 and
$488,873 to related parties at December
31, 2007 and 2006 6,260,443 2,640,708
Long-term investments 73,973 73,718
Deferred income taxes assets 1,315,510 --
Total assets $182,984,687 $152,108,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans $13,972,603 $15,384,615
Accounts and notes payable, including
$1,134,817 and $640,405 to related
parties at December 31, 2007 and 2006 47,530,383 37,647,913
Customer deposits 135,627 146,171
Accrued payroll and related costs 2,664,464 1,506,251
Accrued expenses and other payables 14,938,055 11,078,186
Accrued pension costs 3,622,729 3,266,867
Taxes payable 9,080,493 5,914,362
Amounts due to shareholders/directors 304,601 358,065
Total current liabilities $92,248,955 $75,302,430
Long-term liabilities:
Advances payable 334,600 313,151
Total liabilities $92,583,555 $75,615,581
Minority interests $23,166,270 $23,112,667
Stockholders' equity:
Preferred stock, $0.0001 par value - Authorized
- 20,000,000 shares Issued and Outstanding
- None $-- $--
Common stock, $0.0001 par value - Authorized -
80,000,000 shares Issued and Outstanding -
23,959,702 shares and 23,851,581 shares
at December 31, 2007 and 2006, respectively 2,396 2,385
Additional paid-in capital 30,125,951 28,651,959
Retained earnings-
Appropriated 7,525,777 6,209,909
Unappropriated 23,591,275 16,047,237
Accumulated other comprehensive income 5,989,463 2,468,800
Total stockholders' equity $67,234,862 $53,380,290
Total liabilities and stockholders' equity $182,984,687 $152,108,538
China Automotive Systems, Inc. and Subsidiaries Consolidated Statements of Operations Years Ended December 31, 2007 and 2006 (audited, U.S. dollars)
Year Ended December 31
2007 2006
Net product sales, including $5,472,509 and
$3,278,444 to related parties at years
ended December 31, 2007 and 2006 $133,597,003 $95,766,439
Cost of product sold, including $5,472,595
and $2,850,283 purchased from related
parties at December 31, 2007 and 2006 88,273,955 62,856,625
Gross profit $45,323,048 $32,909,814
Add: Gain on other sales 554,150 279,216
Less: Operating expenses
Selling expenses 9,674,476 7,772,068
General and administrative expenses 9,026,717 7,810,187
R&D expenses 1,666,274 1,066,050
Depreciation and amortization 4,243,930 3,776,003
Total Operating expenses 24,611,397 20,424,308
Income from operations $21,265,801 $12,764,722
Add: Other income, net 38,462 94,257
Financial (expenses) (566,986) (832,844)
Income before income taxes 20,737,277 12,026,135
Less: Income taxes 2,231,032 1,669,081
Income before minority interests 18,506,245 10,357,054
Less: Minority interests 9,646,339 5,545,350
Net income $8,859,906 $4,811,704
Net income per common share -
Basic and diluted $0.37 $0.21
Weighted average number of common shares
outstanding -
Basic 23,954,370 23,198,113
Diluted 23,958,705 23,210,675
China Automotive Systems, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income Years Ended December 31, 2007 and 2006
Year Ended December 31
2007 2006
Net income $8,859,906 $4,811,704
Other comprehensive income:
Foreign currency translation gain 3,520,663 1,136,116
Comprehensive income $12,380,569 $5,947,820
For further information, please contact:
Jie Li
Chief Financial Officer
China Automotive Systems
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9409
Email: ktheiss@hfgcg.com
