WUHAN, China, Nov. 10, 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 third quarter and nine months ended September 30, 2023.

Third Quarter 2023 Highlights

• Net sales increased slightly to $137.5 million, compared to $137.2 million in the third quarter of 2022.
• Electric power steering ("EPS") product sales increased by 2.0% year-over-year to $45.7 million.
• Gross profit increased 18.7% to $24.8 million and gross margin rose to 18.0%, compared to 15.2% in the third quarter of 2022.
• Income from operations increased by 108.2% to $10.2 million, compared to $4.9 million in the third quarter of 2022;
• Net income attributable to parent company's common shareholders increased by 26.7% to $9.5 million, or diluted income per share of $0.31, compared to a net income attributable to parent company's common shareholders of $7.5 million, or diluted income per share of $0.24, in the third quarter of 2022.

First Nine Months of 2023 Highlights

• Net sales rose by 4.1% to $417.2 million, compared to $400.8 million in the first nine months of 2022.
• Gross profit increased 18.3% to $69.1 million and gross margin was 16.6%, compared to 14.6% in the first nine months of 2022.
• Income from operations increased 144.8% to $25.7 million, compared to income from operations of $10.5 million in the first nine months of 2022.
• Net income attributable to parent company's common shareholders was $26.8 million, or diluted income per share of $0.89, compared to net income attributable to parent company's common shareholders of $16.8 million, or diluted income per share of $0.55 in the first nine months of 2022.
• Cash and cash equivalents and pledged cash were $135.1 million as of September 30, 2023.

Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Our EPS product sales and our Brazilian operations continued to grow as we face headwinds in the global auto markets. Sales of both   traditional hydraulic and EPS steering products were stable in the third quarter of 2023. Sales into the U.S. were down slightly as one customer's orders declined. On the other hand, orders from our major customer in Brazil continued to increase."

"Chinese GDP grew at 4.9% year-over-year in the third quarter of 2023 according to the Chinese National Bureau of Statistics, exceeding the consensus estimate. The Chinese auto industry has rebounded but various market segments are experiencing differing growth trends. The Chinese government has implemented favorable policies to further revitalize the economy including purchase exemptions for EVs, with local governments also providing auto purchase incentives. We have maintained our position in the Chinese and North American auto markets and are well positioned for future growth."

Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We continued to generate profits and positive cash flow in the third quarter of 2023 as we reduced our operating expenses. At September 30, 2023, cash and cash equivalents and pledged cash totaled $135.1 million and working capital totaled $166.3 million. For the first nine months of 2023, our inventory level was $9.0 million lower and short-term loans declined by $7.1 million as compared to the end of our fiscal year 2022. At September 30, 2023, total current assets were $509.0 million, compared to total liabilities of $358.8 million."

Third Quarter of 2023

In the third quarter of 2023, net sales increased slightly to $137.5 million, compared to $137.2 million in the same quarter of 2022. The increase in net product sales was due to an increase of EPS net product sales and steering columns compared to the third quarter of 2022. EPS net sales were $45.7 million, or 33.2% of net sales, compared to $44.8 million, or 32.6% of net sales, in the third quarter of 2022. Net product sales to North America were $27.6 million, compared to $29.5 million in the third quarter of 2022, primarily due to lower product sales. Net product sales in Brazil rose by 15.7% to $13.3 million due to higher demand.

Gross profit increased by 18.7% to $24.8 million in the third quarter of 2023, compared to $20.9 million in the third quarter of 2022. Gross margin was 18.0%, compared to 15.2% for the same period of 2022, mainly due to a change in product mix and a decrease in unit cost. 

Selling expenses declined by 5.0% to $3.8 million from $4.0 million in the third quarter of 2022. Selling expenses represented 2.8% of net sales in the third quarter of 2023, compared to 2.9% in the third quarter of 2022.

General and administrative expenses ("G&A expenses") increased by 24.5% to $6.1 million in the third quarter of 2023, compared to $4.9 million in the same quarter of 2022. The increase was primarily due to higher marketing and office expenses, a one-time expense for the Company's 30th anniversary celebrations and the impact of the appreciation of the USD against the RMB. G&A expenses represented 4.4% of net sales in the third quarter of 2023, compared to 3.6% of net sales in the third quarter of 2022.

Research and development expenses ("R&D expenses") decreased by 27.4% to $6.9 million in the third quarter of 2023, compared to $9.5 million in the third quarter of 2022. R&D expenses represented 5.0% of net sales in the third quarter of 2023, compared to 6.9% of net sales in the third quarter of 2022. Lower R&D expenses were primarily due to higher R&D expenses in the third quarter of 2022 for the development of iRCB, eRCB and REPS new products.

Income from operations increased by 108.2% year-over-year to $10.2 million, compared to $4.9 million in the third quarter of 2022. Higher income from operations was mainly due to increased gross profit and an 8.2% year-over-year reduction in operating expenses in the third quarter of 2023.

Other income was $1.2 million in the third quarter of 2023, compared to $0.7 million in the third quarter of 2022, primarily due to more government subsidies received in the third quarter of 2023.

Net financial income was $0.2 million in the third quarter of 2023, compared to net financial income of $4.8 million in the third quarter of 2022, mainly due to a decrease in the foreign exchange gain due to the foreign exchange volatility. 

Income before income tax expenses and equity in earnings of affiliated companies increased by 12.0% to $11.2 million in the third quarter of 2023, compared to income before income tax expenses and equity in earnings of affiliated companies of $10.0 million in the third quarter of 2022. The higher income before income tax expenses and equity in earnings of affiliated companies was mainly due to increased income from operations compared to the third quarter of 2022.

Income tax expense was $0.7 million in the third quarter of 2023, compared to an income tax expense of $0.9 million for the third quarter of 2022, which was mainly due to a valuation allowance recognized in the third quarter of 2022.

Net income attributable to parent company's common shareholders was $9.5 million in the third quarter of 2023, compared to net income attributable to parent company's common shareholders of $7.5 million in the third quarter of 2022. Diluted income per share increased by 29.2% to $0.31 in the third quarter of 2023, compared to diluted income per share of $0.24 in the third quarter of 2022.

The weighted average number of diluted common shares outstanding was 30,189,363 in the third quarter of 2023, compared to 30,640,260 in the third quarter of 2022.

First Nine Months of 2023

Net sales for the first nine months of 2023 increased by 4.1% to $417.2 million compared to $400.8 million in the first nine months of 2022. Gross profit for the first nine months of 2023 increased by 18.3% to $69.1 million, compared to $58.4 million in the corresponding period last year. Gross margin for the first nine months of 2023 was 16.6%, compared to 14.6% for the corresponding period in 2022. For the nine months ended September 30, 2023, gain on other sales amounted to $3.6 million, compared to $5.3 million for the corresponding period in 2022. Income from operations increased 144.8% to $25.7 million compared to income from operations of $10.5 million in the first nine months of 2022.

Net income attributable to parent company's common shareholders was $26.8 million, compared to net income attributable to parent company's common shareholders of $16.8 million in the corresponding period last year. Diluted income per share was $0.89 in the first nine months of 2023, compared to diluted income per share of $0.55 for the corresponding period in 2022.

As of September 30, 2023, total cash and cash equivalents and pledged cash deposits were $135.1 million. Total accounts receivable, including notes receivable, were $241.5 million. Accounts payable, including notes payable, were $222.1 million. Total parent company stockholders' equity was $328.6 million as of September 30, 2023, compared to $311.7 million as of December 31, 2022. 

Net cash provided by operating activities was $10.7 million in the first nine months of 2023, compared to net cash provided by operating activities of $31.7 million in the first nine months of 2022. Payments to acquire property, plant and equipment were $12.2 million, compared to $11.8 million in the first nine months of 2022.

Business Outlook

Management reiterates its revenue guidance of $560 million for the full year 2023. 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 November 10, 2023 at 8:00 A.M. EST/9:00 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 with pin 235512.

Phone Number: +1-888-506-0062 (North America)Phone Number: +1-973-528-0011 (International)Mainland China Toll Free: +86-400-120-3199

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.Email: jieli@chl.com.cn

Kevin TheissInvestor Relations+1-212-510-8922Email: Kevin@awakenlab.com 

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