China Automotive Systems, Inc. announced yesterday its unaudited financial results for the second quarter and six months ended June 30, 2015.
China Automotive Systems, Inc. a leading power steering components and systems supplier in China.
Second Quarter 2015 Highlights:
- Net sales were US$109.2 million, compared to US$115.5 million in the second quarter of 2014;
- Gross margin was 20.0%, compared to 18.7% in the second quarter of 2014;
- Operating margin was 7.6%, compared to 14.3% in the second quarter of 2014. Excluding a one-time gain on the sale of land use rights (non-GAAP measurement), the operating margin would have been 7.8% in the second quarter of 2014;
- Net income attributable to parent company’s common shareholders was US$7.7 million, or diluted earnings per share of US$0.24, compared to net income attributable to parent company’s common shareholders ofUS$11.0 million, or diluted earnings per share of US$0.39, in the second quarter of 2014. Excluding the one-time gain on the sale of land use rights, net income and diluted earnings per share would have been US$5.9 million and US$0.21 respectively in the second quarter of 2014;
- Cash, cash equivalents and short-term investments were US$108.6 million and USUS$109.5 million as of June 30, 2015 and December 31, 2014, respectively.
First Six Months of 2015 Highlights:
- Net sales increased to US$232.6 million, compared to US$229.8 million in the first six months of 2014;
- Gross profit increased to US$43.5 million, compared to US$42.9 million in the first six months of 2014; gross margin was 18.7% in the first six months of 2015, equivalent to the same period last year;
- Operating margin was 7.6%, compared to 11.4% in the first six months of 2014. The operating margin in last year’s first six months benefitted from a gain in the sale of land use rights not present in the 2015 period. Excluding the one-time gain on the sale of land use rights, the operating margin would have been 8.2% in the first six months of 2014;
- Diluted earnings per share attributable to parent company’s common shareholders was US$0.50, compared to diluted earnings per share attributable to parent company’s common shareholders of US$0.63 in the first six months of 2014. Excluding the one-time gain on the sale of land use rights, the diluted earnings per share would have been US$0.45 in the first six months of 2014.
Mr. Qizhou Wu, chief executive officer of CAAS, commented, “We are pleased to report that sales were resilient in the face of headwinds in both the passenger and commercial vehicle markets in the second quarter of 2015. Our new products, especially electric power steering for the domestic market and steering products forNorth America, generated higher sales.
“Sales to North America accelerated by 15.2% compared to the same period last year. Our key customer, Chrysler, reported its 63rd consecutive month of year-over-year sales gains in June 2015. The Jeep® brand reported that June 2015 sales were the highest June sales in its history and it has achieved 21 consecutive months of year-over-year sale increases. The Jeep brand’s sales grew by 25% in June and Wrangler’s sales growth of 17% represented its best June sales ever. RAM® pickup truck sales increased by 1% in June, to its highest June sales in the last 11 years.”
“We believe our strategy of focusing on new product development and penetration of foreign markets positions us to capture market share in multiple markets,” Mr. Wu concluded.
Mr. Jie Li, chief financial officer of CAAS, commented, “We continued to generate positive cash flow from operations of over US$9.6 million in the second quarter of 2015 to enhance our financial strength. We are maintaining our leadership position in China as we expand our presence in North and South American markets. Our investment in research and development has led to new products that maintain and increase our market positions in China as we expand in overseas markets.”
Second Quarter of 2015
In the second quarter of 2015, net sales were US$109.2 million, compared to US$115.5 million in the same quarter of 2014. Net sales declined due to lower sales of domestic vehicles using the Company’s legacy hydraulic power steering, partially offset by higher sales to North America and sales of electric power steering (“EPS”) units inChina. Also, steering sales to the commercial vehicle market declined due to the economic slowdown in Chinaand the effects of the implementation of the stricter National IV emission standards in 2015.
Gross profit increased to US$21.8 million in the second quarter of 2015, compared to US$21.6 million in the second quarter of 2014. The gross margin was 20.0% in the second quarter of 2015, versus 18.7% in the second quarter of 2014 and 17.6% in the first quarter of 2015. The gross margin increased mainly due to greater efficiencies driving unit cost lower.
Selling expenses decreased to US$4.0 million in the second quarter of 2015, compared to US$4.3 million in the second quarter of 2014. Selling expenses represented 3.7% of net sales in the second quarter of both 2015 and 2014. The decrease was mainly due to lower transportation expenses and reduced advertising costs.
General and administrative expenses (“G&A expenses”) were US$3.8 million in the second quarter of both 2015 and 2014. G&A expenses represented 3.5% of net sales in the second quarter of 2015 compared to 3.3% in the second quarter of 2014.
Research and development expenses (“R&D expenses”) increased by 23.1% to US$6.4 million in the second quarter of 2015, compared to US$5.2 million in the second quarter of 2014. The increase in R&D expenses was mainly due to higher expenditures for the development of the Company’s EPS products, and included higher personnel-related expenses and mold improvement costs. R&D expenses represented 5.9% of net sales in the second quarter of 2015, compared to 4.5% in the second quarter of 2014.
Income from operations was US$8.3 million in the second quarter of 2015, compared to US$16.5 million in the same quarter of 2014. The decrease was primarily due to the lower gain on other sales related to a US$7.5 million gain on the sale of land use rights recognized in the second quarter of 2014. Without the US$7.5 million gain on sale of land use rights, income from operations for the second quarter of 2014 would have approximated US$9.0 million. As a %age of net sales, the operating margin was 7.6% in the second quarter of 2015, compared to 14.3% in the second quarter of 2014. Without the US$7.5 million gain on sale of land use rights, operating margin for the second quarter of 2014 would have approximated 7.8%.
Net financial income in the second quarter of 2015 was US$0.7 million compared with US$0.5 million in the second quarter of 2014. The increase was mainly due to higher interest income from time deposits.
Income before income tax expenses and equity in earnings of affiliated companies was US$9.2 million in the second quarter of 2015, compared to US$16.6 million in the second quarter of 2014. The decrease of US$7.4 millionin the second quarter of 2015 was mainly due to the reduction in the gain on other sales related to the sale of land use rights in the second quarter of 2014.
Net income attributable to parent company’s common shareholders was US$7.7 million in the second quarter of 2015, compared to net income attributable to parent company’s common shareholders of US$11.0 million in the corresponding quarter of 2014. Diluted earnings per share were US$0.24 in the second quarter of 2015, compared to diluted earnings per share of US$0.39 in the second quarter of 2014. Excluding the one-time gain on the sale of land use rights, net income and diluted earnings per share would have been US$5.9 million and US$0.21 respectively in the second quarter of 2014. The weighted average number of diluted common shares outstanding increased by 14.5% to 32,138,438 in the second quarter of 2015, compared to 28,064,376 in the second quarter of 2014.
First Six Months of 2015
Net sales increased to US$232.6 million in the first six months of 2015, compared to US$229.8 million in the first six months of 2014. Six-month gross profit was US$43.5 million, compared to US$42.9 million in the corresponding period last year. Six-month gross margin was 18.7% in both 2015 and 2014. The gain on other sales of US$2.4 million in the first six months of 2015 compared with US$9.1 million in the 2014 period due to a gain of US$7.5 millionfrom the sale of land use rights in the second quarter of 2014. Income from operations was US$17.6 million, compared to US$26.3 million in the first six months of 2014. Without the gain from the sale of land use rights, income from operations would have approximated US$18.8 million in the second quarter of 2014. Operating margin was 7.6%, compared to 11.4% for the corresponding period of 2014. Without the US$7.5 million gain on sale of land use rights, operating margin for the first six months of 2014 would have approximated 8.2%.
Net income attributable to parent company’s common shareholders was US$16.2 million in the first six months of 2015, compared to US$17.8 million in the corresponding period in 2014. Diluted earnings per share were US$0.50 in the first six months of 2015, compared to diluted earnings per share of US$0.63 for the corresponding period in 2014. Excluding the one-time gain on the sale of land use rights, the diluted earnings per share would have been US$0.45 in the first six months of 2014.
As of June 30, 2015, total cash, cash equivalents and short-term investments were US$108.6 million, compared toUS$109.5 million as of December 31, 2014. Working capital increased to US$205.8 million as of June 30, 2015, compared to US$198.1 million as of December 31, 2014. Cash flow from operations was US$14.5 million for the six months ended June 30, 2015. Total parent company stockholders’ equity was US$314.0 million as of June 30, 2015, compared to US$298.2 million as of December 31, 2014.