WUHAN, China, Aug. 11, 2023 /PRNewswire/ -- China Automotive Systems, Inc. (NASDAQ: CAAS) ("CAAS" or the "Company"), a leading power steering components and systems supplier in China, today announced its unaudited financial results for the second quarter and six months ended June 30, 2023.

Second Quarter 2023 Highlights

• Net sales rose 8.1% year-over-year to $137.4 million from $127.2 million in the second quarter of 2022.
• Gross profit was $22.7 million, which is consistent with the $22.7 million in the second quarter of 2022.
• Income from operations was $7.8 million, compared to income from operations of $7.2 million in the second quarter of 2022.
• Net income attributable to parent company's common shareholders was $10.5 million, or diluted earnings per share of $0.35, compared to net income attributable to parent company's common shareholders of $9.4 million, or diluted earnings per share of $0.31 in the second quarter of 2022

First Six Months of 2023 Highlights

• Net sales grew by 6.1% year-over-year to $279.7 million, compared to $263.6 million in the first six months of 2022.
• Gross profit increased by 18.4% year-over-year to $44.3 million, compared to $37.4 million in the first six months of 2022.
• Income from operations rose by 171.9% year-over-year to $15.5 million compared to income from operations of $5.7 million in the first six months of 2022.
• Net income attributable to parent company's common shareholders was $17.3 million, compared to net income attributable to parent company's common shareholders of $9.4 million in the first six months of 2022;
• Diluted earnings per share attributable to parent company's common shareholders increased by 90.0% year-over-year to $0.57, compared to diluted earnings per share attributable to parent company's common shareholders of $0.30 in the first six months of 2022.
• Cash and cash equivalents, and pledged cash were $125.5 million, or approximately $4.16 per share, as of June 30, 2023.

Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, "Our revenue growth accelerated in the second quarter.  Most of our divisions reported higher sales and most encouragingly, net sales of our advanced electric power steering ("EPS") grew by 28.4% year-over-year."

"According to statistics from the China Association of Automobile Manufacturers, overall automobile sales in China increased by 17.9% year-over-year in the second quarter of 2023 with passenger vehicles sales rising by 19.3% year-over-year and commercial vehicle sales up 10.1% year-over-year.  For the six months ended June 30, 2023, overall car sales increased by 9.8% year-over-year as passenger vehicle sales grew 8.8% year-over-year and commercial vehicle sales grew by 15.8% year-over-year."

"Chinese GDP growth rate for the first half of 2023 was 5.5% year-over-year. The Chinese government recently announced a plan to increase economic growth through policy changes and incentives. The automobile, housing and real estate, tourism and other services sectors were highlighted as key parts of this plan. We are hopeful that new changes and forthcoming policies can help boost consumer confidence and further improve the automotive market," Mr. Wu concluded.

Mr. Jie Li, Chief Financial Officer of CAAS, commented, "We maintained a strong balance sheet with cash and cash equivalents plus pledged cash of $125.5 million, with working capital of $153.3 million at June 30, 2023. In the first six months of 2023, we used approximately $5.4 million to acquire property, plant and equipment. During the second quarter, we also managed cost reductions by reducing spending in selling, and general and administrative, and research and development expenses."

Second Quarter of 2023

Net sales increased by 8.1% year-over-year to $137.4 million in the second quarter of 2023, compared to $127.2 million in the second quarter of 2022.  Net sales of traditional steering products and parts increased by 1.1% year-over-year to $95.8 million for the second quarter of 2023, compared to $94.8 million for the same quarter in 2022.  Net sales of EPS products rose 28.4% year-over-year to $41.6 million from $32.4 million for the same period in 2022.  EPS product sales were 30.3% of the total net sales for the second quarter of 2023, compared to 25.5% for the same period in 2022.  Export net sales to North American customers decreased by 24.5% year-over-year to $28.9 million in the second quarter of 2023, compared to $38.3 million in the second quarter of 2022. North American sales declined due to less demand and the effects of foreign exchange fluctuations.  Sales in Brazil rose 43.5% year-over-year to $12.2 million in the second quarter of 2023 from $8.5 million in the second quarter of 2022.

Gross profit was $22.7 million, which is stable to $22.7 million in the second quarter of 2022. Gross margin in the second quarter of 2023 was 16.5%, compared to 17.9% in the second quarter of 2022. The decrease in gross margin was mainly due to the changes in the product mix.

Gain on other sales was $0.7 million, compared to $2.1 million in the second quarter of 2022.

Selling expenses decreased by 6.7% year-over-year to $3.8 million compared to $4.1 million in the second quarter of 2022, primarily due to lower marketing and office expenses. The appreciation of the USD against RMB also affected expense levels.  Selling expenses represented 2.8% of net sales in the second quarter of 2023, compared to 3.2% in the second quarter of 2022.

General and administrative expenses ("G&A expenses") decreased by 6.9% year-over-year to $5.3 million compared to $5.7 million in the second quarter of 2022, primarily due to reversal of credit losses and the impact of appreciation of the USD against the RMB. G&A expenses represented 3.9% of net sales in the second quarter of 2023, compared to 4.5% of net sales in the second quarter of 2022.  

Research and development expenses ("R&D expenses") decreased by 16.2% year-over-year to $6.6 million compared to $7.9 million in the second quarter of 2022.  R&D expenses represented 4.8% of net sales in the second quarter of 2023 compared to 6.2% in the second quarter of 2022.

Other income, net was $2.0 million for the second quarter of 2023, compared to $2.8 million for the three months ended June 30, 2022. 

Income from operations was $7.8 million in the second quarter of 2023, compared to income from operations of $7.2 million in the second quarter of 2022. The increase was primarily due to lower operating costs.

Interest expense was $0.3 million in the second quarter of 2023, compared to $0.4 million in the second quarter of 2022.

Net financial income was $4.0 million in the second quarter of 2023, compared to net financial income of $2.5 million in the second quarter of 2022.  The change in net financial income was primarily due to the appreciation of the USD against RMB.  

Income before income tax expenses and equity in earnings of affiliated companies was $13.4 million in the second quarter of 2023, compared to income before income tax expenses and equity in earnings of affiliated companies of $12.2 million in the second quarter of 2022.

Net income attributable to parent company's common shareholders was $10.5 million in the second quarter of 2023, compared to net income attributable to parent company's common shareholders of $9.4 million in the second quarter of 2022.  Diluted earnings per share was $0.35 in the second quarter of 2023, compared to $0.31 per share in the second quarter of 2022.

The weighted average number of diluted common shares outstanding was 30,189,537 in the second quarter of 2023, compared to 30,849,009 in the second quarter of 2022.

First Six Months of 2023

Net sales increased by 6.1% year-over-year to $279.7 million in the first six months of 2023, compared to $263.6 million in the first six months of 2022. Six-month gross profit was $44.3 million, compared to $37.4 million in the corresponding period last year. Six-month gross margin was 15.9%, compared with 14.2% in the first six months of 2022.  Gain on other sales was $1.4 million in the first six months of 2023, compared to $3.0 million in the corresponding period last year.  Income from operations was $15.5 million in the first six months of 2023, compared with income from operations of $5.7 million in the first six months of 2022. 

Net income attributable to parent company's common shareholders was $17.3 million in the first six months of 2023, compared to net income attributable to parent company's common shareholders of $9.4 million in the corresponding period in 2022.  Diluted earnings per share increased by 90.0% year-over-year to $0.57 in the first six months of 2023, compared to diluted earnings per share of $0.30 in the first six months of 2022.

Balance Sheet

As of June 30, 2023, total cash and cash equivalents, and pledged cash were $125.5 million, total accounts receivable including notes receivable, were $234.0 million, accounts payable including notes payable, were $216.7 million and short-term loans were $38.5 million. Total parent company stockholders' equity was $317.8 million as of June 30, 2023, compared to $311.7 million as of December 31, 2022.

Business Outlook

Management has reiterated its revenue guidance for the full year 2023 of $560.0 million. This target is based on the Company's current views on operating and market conditions, which are subject to change.

Conference Call

Management will conduct a conference call on August 11, 2023 at 8:00 A.M. EDT/8:00 P.M. Beijing Time to discuss these results. A question and answer session will follow management's presentation. To participate, please see the dial-in information below, enter the call 10 minutes before the call start time and ask to be connected to the "China Automotive Systems" conference call:

Phone Number: +1-888-506-0062 (North America)

Phone Number: +1-973-528-0011 (International)

Mainland China Toll Free: +86-400-120-3199

Code: 235847

A replay of the call will be available on the Company's website under the investor relations section.

About China Automotive Systems, Inc.

Based in Hubei Province, the 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 eight Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers four separate series of power steering with an annual production capacity of over 6 million sets of steering gears, columns and steering hoses. Its customer base is comprised of leading auto manufacturers, such as China FAW Group, Corp., Dongfeng Auto Group Co., Ltd., BYD Auto Company Limited, Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. in China, and Fiat Chrysler Automobiles ("FCA") and Ford Motor Company in North America.  For more information, please visit: http://www.caasauto.com. 

Forward-Looking Statements

This press release contains statements that are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. As a result, the Company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 30, 2023, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Any of these factors and other factors beyond our control, could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations. A prolonged disruption or any further unforeseen delay in our operations of the manufacturing, delivery and assembly process within any of our production facilities could continue to result in delays in the shipment of products to our customers, increased costs and reduced revenue.  We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.

For further information, please contact:

Jie LiChief Financial OfficerChina Automotive Systems, Inc.jieli@chl.com.cn

Kevin TheissAwaken Advisors+1-212-521-4050Kevin@awakenlab.com 

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SOURCE China Automotive Systems, Inc.