WUHAN, China, March 25 /PRNewswire-Asia-FirstCall/ -- China Automotive Systems, Inc., ("CAAS" or the "Company"), (Nasdaq: CAAS), a leading power steering components and systems supplier in China, today announced record financial results for the fourth quarter and fiscal year ended December 31, 2009.
Fourth Quarter 2009 Highlights
-- Net sales increased 118.9% YoY to a record $83.8 million;
-- Gross margin increased to 29% from 28% in Q4 2008 and 27% in Q3 2009;
-- Net income surged 1,199.5% YoY from $0.5 million to $6.5 million;
diluted EPS was $0.21;
-- Cash and equivalents were $43.5 million at December 31, 2009.
Fiscal Year 2009 Highlights
-- Net sales rose by 56.6% YoY to a record $255.6 million;
-- Net income grew 88.3% YoY to $23.4 million; diluted EPS was $0.78;
-- Net cash flow from operations was $35.0 million;
-- Free cash flow was $17.5 million in 2009.
Mr. Qizhou Wu, Chief Executive Officer of China Automotive Systems, commented, "We are pleased with our robust growth and continued track record of exceeding industry growth rate, which was 46% in 2009. We began shipping to Chrysler North America in mid-2009 representing our first penetration into the large global markets. As a tier one OEM supplier of key safety related components in a market requiring one of world's strictest automotive standards, this new relationship opens new opportunities and stamps a strong endorsement on our product quality and reliability. Additionally, we introduced the first domestically designed electric power steering system and have begun commercial production for customers. Our strong R&D capabilities and on-going development program continue to set entry barriers for our competitors. Overall, with China's huge market potential, and rapid quality and affordability improvements in the automotive market, we will continue to focus on expanding our market share and strengthening relationships with OEMs to grow our long-term, recurring revenue pipeline and maximize long-term shareholders' value."
Fourth Quarter 2009
Net sales for the fourth quarter of 2009 represented a 118.9% year-over-year increase to $83.8 million, the highest quarterly sales in the Company's history, versus $38.3 million in the 2008 fourth quarter. A breakdown of sales by categories is as follows:
4Q09 4Q08 YoY growth
Steering gear -
commercial vehicle 20,366,467 6,807,462 199%
Steering gear -
passenger vehicle 57,135,213 27,400,851 109%
Steering pumps 6,234,892 3,894,108 60%
Gross profit in the fourth quarter of 2009 rose by 127.3% to $24.3 million from $10.7 million for the same quarter in 2008. The gross margin in the fourth quarter of 2009 was 29.1% compared with 28.0% in the fourth quarter last year primarily due to a more favorable product mix, economies-of-scale and cost controls.
Selling expenses in the fourth quarter were $7.6 million as compared to $3.1 million in the same quarter a year ago mainly due to costs related to selling a higher volume of steering products. Selling expenses as a percentage of revenue for the fourth quarter of 2009 were 9.0% as compared to 8.2% for the same period in 2008. The higher selling expenses were primarily related to 1) a one-time bonus of approximately $500,000 to the sales team as sales far exceeded the sales goals for the fiscal year 2009 and they made major contributions to the Company's market share expansion in China, 2) higher transportation expenses of $1.2 million including export shipping cost related to the Chrysler contract, and 3) $4.4 million for non-cash warranty reserves related to the elevated sales volume in the quarter.
General and administrative (G&A) expenses in the 2009 fourth quarter grew by 27.7% to $5.5 million as compared to $4.3 million in the same quarter a year ago. G&A as a percentage of revenue for the fourth quarter of 2009 was 6.5% as compared to 11.2% for the same period in 2008 as sales growth outpaced the increase in G&A costs.
Research and development expenses were $1.1 million in the 2009 fourth quarter versus $0.85 million in the same quarter last year, as the Company continues to ramp up its research capabilities.
Operating income increased by 860.9% year-over-year to $9.3 million in the fourth quarter of 2009, compared with $0.96 million in the same quarter in 2008. The operating margin increased to 11.1% from 2.5% in the fourth quarter of 2008.
Net income was $6.5 million for the fourth quarter, or $0.21 earnings per diluted shares, compared with $0.5 million, or $0.02 per diluted shares in the same quarter in 2008.
Fiscal Year 2009
Annual net sales were $255.6 million for the fiscal year 2009, up 56.6% or $92.4 million from the fiscal year 2008 annual sales of $163.2 million. Sales growth was generated by China's continued economic expansion leading to higher income levels and greater passenger vehicle sales. The government's stimulus plans and investment in the national infrastructure helped to generate a greater number of commercial vehicle sales in China. Below is a break down of sales by major categories.
FY2009 FY2008 YoY growth
Steering gear -
commercial vehicle 59,404,649 40,457,552 47%
Steering gear -
passenger vehicle 172,004,635 107,219,598 60%
Steering pumps 23,810,722 15,094,357 58%
Gross profit for the fiscal year 2009, increased by 53.8% to $72.7 million from $47.3 million for the 2008 year. Gross margin was 28.4%, slightly below a year ago. The decline in gross margin reflected decreased selling prices more than offsetting lower unit cost. The Company continues to take measures to mitigate lower selling prices. During 2009, costs were reduced as the Company's R&D personnel enhanced product design and production techniques to reduce material wastes, reduce machining time and improve manufacturing efficiency. The Company also was able to lower the price of certain sub-components it purchased.
Selling expenses in 2009 were $18.1 million compared with $10.9 million for 2008. As a percentage of sales revenue, selling expenses increased to 7.1% for the fiscal year ended December 31, 2009, as compared to 6.7% for 2008. The increase in selling expenses reflected higher sales with associated greater personnel costs and transportation expenses, and larger warranty reserves.
General and administrative expenses were $12.2 million for the 2009 year, in line with $12.1 million for the year ago. As a percentage of sales revenue, general and administrative expenses decreased to 4.8% for 2009 versus 7.4% for 2008.
Research and development (R&D) expense increased slightly to $2.6 million in 2009 as the Company continued to invest in new product development, with an emphasis on upgrading traditional hydraulic steering products and developing electric power steering. Also, R&D measures focused on improving manufacturing efficiencies.
Income from operations was $37.7 million for the 2009 year, a 122.6% improvement over the $16.9 million for the 2008 year.
The net income for the 2009 year increased by 88.3%, to $23.4 million from $12.4 million in 2008. Fully diluted earnings per share ("EPS") in 2009 were $0.78 compared with $0.46 per share in 2008.
As of December 31, 2009, total cash and cash equivalents were $43.5 million, as compared with $37.1 million as of December 31, 2008. Stockholder's equity increased to $132.8 million as of December 31, 2009 from $104.6 million as of December 31, 2008. Working capital increased by 45.2% to reach $61.0 million. Net cash flow from operations was $35.0 million for the fiscal year ended December 31, 2009. Free cash flow in 2009 was $17.5 million.
Key Accomplishments of 2009
In February 2009, China Automotive Systems' subsidiary, Wuhu Henglong Auto Steering Systems ("WHAS"), won two awards from China's leading independent domestic auto maker, Chery Automobile Co., Ltd. ("Chery Auto") as "Best Core Supplier" and "Best Auto Component Supplier" at its Supplier ceremony. China Automotive Systems supplied approximately 75% of the power steering units used by Chery Auto in 2008.
In April 2009, the Company's subsidiaries, Jingzhou Henglong Automotive Parts Co., Ltd. (Henglong) and Shashi Jiulong Power Steering Co., Ltd. (Jiulong) were both awarded the High-Tech Enterprise status from the Chinese government. The two subsidiaries will receive a preferential income tax rate of 15% through 2011.
In early 2010, China Automotive Systems announced that its first global OEM customer, headquartered in North America, is the Chrysler Group LLC ("Chrysler"). Since mid-2009, steering gears have been exported from China to the United States and installed in the award-winning Jeep Wrangler model. The Company also announced the ground breaking for the new Henglong Research and Development Center.
Also in early 2010, CAAS announced that it has begun production of its electronic power steering ("EPS") system. This new electronic power steering product and technology represents the first such steering system developed internally within China. The Company is currently supplying this EPS system at a rate of 2,000 units per month to Suzuki Auto Ltd. in China.
On January 27, 2010, China Automotive Systems signed a definitive agreement to form a joint venture ("JV") with the Beijing Hainachuan Auto Parts Co. Ltd., a subsidiary of Beijing Automobile Industrial Holdings ("Beijing Auto"). The new joint venture, Beijing Hailong Automotive System Co., Ltd., will design, develop and manufacture both hydraulic and electric power steering systems and parts at competitive prices to meet the growing power steering needs of Beijing Auto. A new production facility is expected to be completed and operational within 18 months with a designed capacity for 300,000 units of hydraulic and 200,000 units of electric power steering systems plus parts.
2010 Outlook
Management expects revenue growth to be 20% for the 2010 year. This target is based on the Company's current views on operating and market conditions, which are subject to change. This guidance follows the 56.6% growth in 2009. The Company will periodically update this guidance as it did in 2009.
Conference Call
Management will conduct a conference call on Thursday, March 25th at 8:00 a.m. Eastern Daylight Time 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.investorcalendar.com/IC/CEPage.asp?ID=156497
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 EDT on Thursday, April 1, 2010. 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 "347278" to access the replay. The internet audio stream will also be available until 11:59 pm EDT on Thursday, April 8.
About China Automotive Systems, Inc.
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 nine 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 with an annual production capacity of over 2.5 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., Dongfeng Auto Group Co., Ltd., BYD Auto Company Limited, Beiqi Foton Motor Co., Ltd., Geely Automobile Co., 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.
For further information, please contact:
Jie Li
Chief Financial Officer
China Automotive Systems, Inc.
Email: jieli@chl.com.cn
Kevin Theiss
Investor Relations
Grayling
Tel: +1-646-284-9409
Email: kevin.theiss@grayling.com