Wonder Auto Reports Its Fourth Quarter and Full Year 2008 Financial Results

JINZHOU CITY, China, March 2, 2009: Wonder Auto Technology, Inc. , a leading manufacturer of automotive electrical, suspension parts and engine accessories in China, today announced its financial results for the fourth quarter and full year ended December 31, 2008.

Highlights:

  -- Sales revenue increased 38.3% year-over-year to $141.2 million;
  -- Gross profit rose 42.2% year-over-year to $36.4 million;
  -- Net income increased 30.3% year-over-year to $18.9 million;
  -- Export sales reached $22.9 million, representing 16.2% of total sales
     revenue;
  -- Non-GAAP EPS was $ 0.73, representing 21.0% increase compared with
     $0.60 in 2007

  Business outlook

For the first quarter of 2009, sales revenue is expected to be approximately $40 million with net income to be about $4.0 million.

Financial performance

Sales revenue in 2008 rose to a record high of $141.2 million, which is a 38.3% increase from $102.1 million in 2007. Revenue from alternators and starters increased $20.6 million, the sales of rod and shaft products increased $10.8 million and engine valves valve tappets contributed $7.7 million to revenue. The increase was mainly attributable to the growing market demand for our cost effective and high quality products. Export sales increased by 135.1% to $22.9 million as compared to $9.8 million in 2007.

In 2008, gross profit increased 42.2% to a record of $36.4 million from a gross profit of $25.6 million in 2007. Gross margin was 25.8% in 2008 compared with 25.1% for year 2007. The increased gross margin was attributable to the advantage of economies of scale that emerged from the robust sales volume in the past year, and the lower raw material consumption and decreased per unit cost through our continuous improvement in R&D capabilities and optimized technical solutions.

Operating expenses for 2008 increased $5.3 million, or 66.1%, to $13.3 million from $8.0 million of 2007. The increase was primarily due to higher administrative expenses, research & development costs and higher selling expenses. The increased administrative expenses were primarily due to administrative expenses of the newly acquired subsidiaries, higher expenses on legal, audit, and due diligent work for acquisitions, maintenance fees as a Nasdaq listed company, especially the consulting and auditing costs for SOX 404 compliance work during 2008. In addition, a stock-based compensation of $706,295 was incurred from termination of the stock option plan. The increase of research and development costs is primarily attributable to the research and development of new and existing products. As a percentage of revenue, research and development costs were 1.2% in 2008 compared with 1.1% in 2007. Selling expenses increased to $4.1 million compared with $3.3 million in 2007. The increased selling expenses were mainly caused by commissions for increased sales volume and higher freight costs during the period of Beijing Olympic Games.

Income before income taxes increased $6.5 million, or 38.2%, to $23.5 million in 2008 from $17.0 million in 2007. Income before income taxes as a percentage of revenue was 16.7% in 2008 -- the same as in 2007.

Net income increased $4.4 million, or 30.3%, to $18.9 million in 2008 from $14.5 million in 2007. Non-GAAP EPS was $0.73, representing a 21.0% increase from $0.60 in 2007, without considering the stock-based compensation of $706,295 incurred from termination of the stock option plan.

As of December 31, 2008, Wonder Auto had $8.2 million in cash and cash equivalents and restricted cash of $24.2 million, a current ratio of 1.2-to-1, working capital of $26.4 million, and $16.1 million long term bank loan. Shareholders' equity increased to $102.1 million. As of December 31, 2008, the value of property, plant and equipment rose to $69.1 million from $22.5 million as of December 31, 2007.

Events overview

In January 2008, the Company acquired 50% equity interest in Jinzhou Hanhua Electrical System Co., Ltd., a manufacturer of armatures for starters.

In February 2008, the Company acquired 65% equity interest in Jinzhou Karham Electrical Equipment Co., Ltd., a producer of carbon brush assembly for starters.

In March 2008, the Company entered into a four-year supply agreement and received supply orders from a major North American OE automotive manufacturer with total value of the contracts exceeding $13.5 million.

In October 2008, the Company acquired 65% equity interest of Jinan Worldwide Auto Accessories Company, one of the largest engine valve and valve tappets manufacturer in China.

In November 2008, one of the Company's subsidiaries, Jinzhou Motor, signed a development agreement with Korean CT&T Co., Ltd. to develop electric motor and driver products for CT&T's electric vehicles with prototype deliveries to commence in March 2009. The total revenue will be approximately $330 million from 2010 to 2013.

In November 2008, the Company disposed its $5 million short-term investment in Money Victory Limited.

In December 2008, the Company signed development agreements with Shenzhen BYD Auto Co., Ltd and will develop starters and alternators for Shenzhen BYD with prototype deliveries to commence in March 2009.

In February 2009, the Company won the bid to supply starters to Dongfeng Automotive Co., Ltd with prototype deliveries for road testing to be commenced in 2009. The expected revenue under this agreement will be approximately $20 million during the period of 2011 to 2015 progressively.

"Wonder Auto is well-positioned to weather the current economic downturn. We delivered a very strong fiscal year highlighted by the increasing demand for our products. This was attributable to our market-oriented focus, stringent quality control, advanced technology, effective cost structure, as well as the favorable government policies to boost China's auto industry. Our strategic acquisitions also contributed to our market expansion and product portfolio optimization through cross-selling synergies. We are seeing growth momentum in the mid- to small-sized engine vehicle market in China and the growing market demand for alternative energy vehicles and parts, which will further our quest to bring exceptional value to our customers and our shareholders," commented Mr. Qingjie Zhao, Chairman and Chief Executive Officer of Wonder Auto.

Conference call

The company will host a conference call on Tuesday, March 3 at 8:00 a.m. U.S. Eastern Standard time. A question and answer session will follow management's presentation. Mr. Qingjie Zhao (Chairman & CEO), Mr. Ryan Yuan (CFO) and Ms. Lydia Zhao (Assistant CFO) will be the primary speakers for the call.

To participate, please call the following numbers ten minutes before the call start time:

  Phone number:  +1-866-242-1388 (United States)
  Phone number:  +852-800-968-831 (Hong Kong)
  Phone number:  +86-10-800-264-0084 (China)
  Phone number:  +86-10-800-640-0084 (China)
  Conference ID: 86242210

A live webcast of the conference call will be available on the investor relations page of Wonder Auto's web site at WATG.