PR Newswire | Nov 12, 2021 06:00AM EST

11/12 05:00 CST

China Automotive Systems Reports Unaudited 2021 Third Quarter Results WUHAN, China, Nov. 12, 2021

WUHAN, China, Nov. 12, 2021 /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, 2021.

Third Quarter 2021 Highlights

* Net sales decreased 5.4% to $108.2 million compared with $114.4 million in the third quarter of 2020; * Electric power steering ("EPS") product sales increased by 76.0% to $29.4 million; * Gross profit increased 23.5% to $16.8 million and gross margin increased to 15.5% from 11.9% in the third quarter of 2020; * Income from operations was $0.6 million compared with income from operations of $0.1 million in the third quarter of 2020; * Net loss attributable to parent company's common shareholders was $0.3 million, or diluted loss per share of $0.01, compared to net income attributable to parent company's common shareholders of $2.4 million, or diluted earnings per share of $0.08, in the third quarter of 2020.

First Nine Months of 2021 Highlights

* Net sales rose by 32.4% to $359.2 million compared to $271.2 million in the first nine months of 2020; * Gross profit increased 60.8% to $52.4 million and gross margin increased to 14.6% from 12.0% in the first nine months of 2020; * Income from operations was $4.9 million compared with loss from operations of $4.1 million in the first nine months of 2020; * Net income attributable to parent company's common shareholders was $6.1 million, or diluted income per share of $0.20, compared to net loss attributable to parent company's common shareholders of $1.8 million, or diluted loss per share of $0.06, in the first nine months of 2020; * Cash and cash equivalents and pledged cash were $115.0 million as of September 30, 2021.

Mr. Qizhou Wu, the Chief Executive Officer of CAAS, commented, "Passenger car sales declined by 13% in the third quarter of 2021 while commercial vehicles sales declined by 24.0%, according to statistics from the China Association of Automobile Manufacturers. U.S. auto sales were down approximately 13% for the third quarter of 2021 and September monthly sales decreased by 26% as a chip shortage further reduced production."

"Our activity in Europe has accelerated. During the third quarter of 2021, we developed a new steering system for one of Europe's leading auto brands, Alfa Romeo. The 2021 Tonale is Alfa Romeo's first luxury plug-in-hybrid SUV model. Purchase orders for approximately 100,000 annual units are expected for this new CAAS steering system. In July 2021, we received the SGS TV ISO26262:2018 ASIL-D certification from SGS TUS, which is headquartered in Germany. The D certification is the highest and most stringent safety standard. And our related party, Swedish Sentient AB's technology is receiving significant interest especially for its autonomous driving capabilities."

"While both the Chinese and North American auto markets are temporarily disrupted due to the shortage of chips, our EPS sales are growing stronger and our South American operations are booming."

Mr. Jie Li, the Chief Financial Officer of CAAS, commented, "We maintained our strong financial position as cash and cash equivalents and pledged cash was $115.0 million and working capital was $145.6 million at September 30, 2021. We have sufficient production capacity so our capital spending has been reduced. Our investment in new technologies will lead us to new growth products in the future."

Third Quarter of 2021

In the third quarter of 2021, net sales decreased by 5.4% to $108.2 million compared to $114.4 million in the same quarter of 2020. The decrease in net product sales was mainly due to the decline in market demand as a result of the chips shortage and other overall auto market trends. Sales of the Company's hydraulic products decreased 19.3%. Net product sales for the Company's EPS products increased by 76.0% to $29.4 million, or 27.2% of net sales, compared with $16.7 million, or 14.6% of net sales, in the third quarter of 2020. Net product sales to North America decreased by 16.2% to $31.0 million, due to lower sales volumes, compared with $37.0 million for the same quarter in 2020.

Gross profit was $16.8 million in the third quarter of 2021, compared to $13.6 million in the third quarter of 2020. Gross margin was 15.5% compared to 11.9% for the same period of 2020, mainly due to changes in the product mix.

Selling expenses were $4.8 million in the third quarter of 2021, compared to $3.8 million in the third quarter of 2020. The higher selling expenses were mainly related to higher personnel and logistics expenses. Selling expenses represented 4.4% of net sales in the third quarter of 2021, compared to 3.3% in the third quarter of 2020.

General and administrative expenses ("G&A expenses") were $6.2 million in the third quarter of 2021, compared to $5.1 million in the same quarter of 2020. The increase was primarily due to the increased bad debt provision for accounts receivable. G&A expenses represented 5.7% of net sales in the third quarter of 2021 compared with 4.5% of net sales in the third quarter of 2020.

Research and development expenses ("R&D expenses") were $5.7 million in the third quarter of 2021, compared to $6.1 million in the third quarter of 2020. R&D expenses represented 5.3% of net sales in the third quarters each of 2021 and 2020. Lower R&D was mainly due to reduced personnel expenses.

Income from operations was $0.6 million in the third quarter of 2021, compared to income from operations of $0.1 million in the same quarter of 2020. The higher income from operations was mainly due to higher gross profit and higher gross margin in the third quarter of 2021.

Other income was $2.4 million in the third quarter of 2021 compared with $0.4 million in the third quarter of 2020 primarily due to higher government subsidies received in the third quarter of 2021.

Financial expense, net was $0.8 million in the third quarter of 2021 compared with $2.3 million in the third quarter of 2020 mainly due to lower foreign exchange losses.

Income before income tax expenses and equity in earnings of affiliated companies was $1.9 million in the third quarter of 2021, compared to loss before income tax expenses and equity in earnings of affiliated companies of $2.3 million in the third quarter of 2020. The increase of income before income tax expenses and equity in earnings of affiliated companies was mainly due to higher other income and lower financial expense compared with the third quarter of 2020.

Income tax expense was $2.4 million in the third quarter of 2021, compared to an income tax benefit of $0.2 million for the third quarter of 2020, which was mainly due to an increase in the valuation allowance recognized in the third quarter of 2021.

Net loss attributable to parent company's common shareholders was $0.3 million in the third quarter of 2021, compared to net income attributable to parent company's common shareholders of $2.4 million in the third quarter of 2020. Diluted loss per share was $0.01 in the third quarter of 2021, compared with diluted earnings per share of $0.08 in the third quarter of 2020.

The weighted average number of diluted common shares outstanding was 30,851,776 in the third quarter of 2021, compared to 31,113,374 in the third quarter of 2020.

First Nine Months of 2021

Net sales for the first nine months of 2021 increased by 32.4% to $359.2 million, compared to $271.2 million in the first nine months of 2020. Gross profit for the first nine months of 2021 increased by 60.8% to $52.4 million, compared to $32.6 million in the corresponding period last year. Gross margin for the first nine months of 2021 was 14.6%, compared to 12.0% for the corresponding period in 2020. For the nine months ended September 30, 2021, gain on other sales amounted to $2.5 million, compared to $2.9 million for the corresponding period in 2020. Income from operations was $4.9 million compared to loss from operations of $4.1 million in the first nine months of 2020.

Net income attributable to parent company's common shareholders was $6.1 million compared with net loss attributable to parent company's common shareholders of $1.8 million in the corresponding period last year. Diluted income per share was $0.20 in the first nine months of 2021, compared to diluted loss per share of $0.06 for the corresponding period in 2020.

As of September 30, 2021, total cash and cash equivalents and pledged cash deposits were $115.0 million. Total accounts receivable including notes receivable were $227.3 million. Accounts payable including notes payable were $215.1 million, and short-term loans were $42.2 million. Total parent company stockholders' equity was $326.3 million as of September 30, 2021, compared to $319.4 million as of December 31, 2020.

Net cash used in operating activities was $5.9 million in the first nine months of 2021 compared with net cash provided by operating activities of $52.7 million in the first nine months of 2020. Payments to acquire property, plant and equipment were $5.3 million compared with $8.9 million in the first nine months of 2020.

Business Outlook

Management reiterated its revenue guidance of $495 million for the full year 2021. 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 12, 2021 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 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: +1-888-506-0062 (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 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 ten 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. These forward-looking statements include statements regarding the qualitative and quantitative effects of the accounting errors, the periods involved, the nature of the Company's review and any anticipated conclusions of the Company or its management and other statements that are not historical facts. 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 Form 10-K annual report filed with the Securities and Exchange Commission on March 30, 2021, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of a deteriorating market outlook for automobile sales, a slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. 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+1-212-521-4050Email: Kevin@awakenlab.com

- Tables Follow -

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and ComprehensiveIncome

(In thousands of USD, except share and per share amounts)

Three Months Ended

September 30,

2021 2020

Net product sales ($14,691 and $16,840 sold to related parties for the three $ 108,231 $ 114,417 months ended September 30, 2021 and 2020)

Cost of products sold ($6,505 and $7,012 purchased from related parties for the 91,439 100,842 three months ended September 30, 2021 and 2020)

Gross profit 16,792 13,575

Gain on other sales 487 1,497

Less: Operating expenses

Selling expenses 4,802 3,800

General and administrative expenses 6,174 5,142

Research and development expenses 5,712 6,072

Total operating expenses 16,688 15,014

Income from operations 591 58

Other income 2,407 350

Interest expense (255) (403)

Financial expense, net (821) (2,313)

Income/(loss) before income tax expenses and equity in earnings of affiliated 1,922 (2,308) companies

Less: Income taxes expense/(benefit) 2,441 (189)

Add: Equity in earnings of affiliated companies 251 3,632

Net (loss)/income (268) 1,513

Less: Net income/(loss) attributable to non-controlling interests 42 (848)

Accretion to redemption value of redeemable non-controlling interests (7) (3)

Net (loss)/income attributable to parent company's common shareholders $ (317) $ 2,358

Comprehensive income:

Net (loss)/income $ (268) $ 1,513

Other comprehensive income:

Foreign currency translation (loss)/income, net of tax (1,338) 12,774

Comprehensive (loss)/income (1,606) 14,287

Comprehensive (loss)/income attributable to non-controlling interests (40) 77

Accretion to redemption value of redeemable non-controlling interests (7) (3)

Comprehensive (loss)/income attributable to parent company $ (1,573) $ 14,207

Net (loss)/income attributable to parent company's common shareholders per share -

Basic $ (0.01) $ 0.08

Diluted $ (0.01) $ 0.08

Weighted average number of common shares outstanding -

Basic 30,851,776 31,112,076

Diluted 30,851,776 31,113,374

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Operations and ComprehensiveIncome

(In thousands of USD, except share and per share amounts)

Nine Months Ended

September 30,

2021 2020

Net product sales ($47,016 and $40,439 sold to related parties for the ninemonths $ 359,176 $ 271,156 ended September 30, 2021 and 2020)

Cost of products sold ($21,916 and $16,298 purchased from related parties forthe nine 306,807 238,598 months ended September 30, 2021 and 2020)

Gross profit 52,369 32,558

Gain on other sales 2,528 2,935

Less: Operating expenses

Selling expenses 14,857 8,895

General and administrative expenses 16,852 13,330

Research and development expenses 18,318 17,390

Total operating expenses 50,027 39,615

Income/(loss) from operations 4,870 (4,122)

Other income, net 5,636 1,724

Interest expense (892) (1,214)

Financial expense, net (878) (2,903)

Income/(loss) before income tax expenses and equity in earnings of affiliated 8,736 (6,515) companies

Less: Income taxes expense 3,280 294

Add: Equity in earnings of affiliated companies 435 3,454

Net income/(loss) 5,891 (3,355)

Less: Net loss attributable to non-controlling interests (219) (1,590)

Accretion to redemption value of redeemable non-controlling interests (21) (3)

Net income/(loss) attributable to parent company's common shareholders $ 6,089 $ (1,768)

Comprehensive income:

Net income/(loss) $ 5,891 $ (3,355)

Other comprehensive income:

Foreign currency translation income, net of tax 1,977 8,171

Comprehensive income 7,868 4,816

Comprehensive loss attributable to non-controlling interests (92) (1,062)

Accretion to redemption value of redeemable non-controlling interests (21) (3)

Comprehensive income attributable to parent company $ 7,939 $ 5,875

Net income/(loss) attributable to parent company's common shareholders pershare -

Basic $ 0.20 $ (0.06)

Diluted $ 0.20 $ (0.06)

Weighted average number of common shares outstanding -

Basic 30,851,776 31,153,162

Diluted 30,855,967 31,153,162

Share-based compensation included in operating expense above is as follows:

General and administrative expenses 88 -

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Balance Sheets

(In thousands of USD unless otherwise indicated)

September 30, December 31, 2021 2020

ASSETS

Current assets:

Cash and cash equivalents $ 80,729 $ 97,248

Pledged cash 34,272 30,813

Accounts and notes receivable, net - unrelated parties 200,221 216,519

Accounts and notes receivable - related parties 27,055 17,621

Inventories 106,427 88,325

Other current assets 28,762 25,132

Total current assets 477,466 475,658

Non-current assets:

Property, plant and equipment, net 129,249 141,004

Land use rights, net 10,623 10,774

Long-term investments 40,742 49,766

Other non-current assets 28,066 30,358

Total assets $ 686,146 $ 707,560

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term loans $ 42,210 $ 44,238

Accounts and notes payable - unrelated parties 203,132 212,522

Accounts and notes payable - related parties 11,975 12,730

Accrued expenses and other payables 52,293 55,607

Other current liabilities 22,228 29,387

Total current liabilities 331,838 354,484

Long-term liabilities:

Other long-term payable - 1,126

Long-term tax payable 21,074 23,884

Other non-current liabilities 6,437 8,151

Total liabilities $ 359,349 $ 387,645

Mezzanine equity:

Redeemable non-controlling interests 544 523

Stockholders' equity:

Common stock, $0.0001 par value - Authorized - 80,000,000 shares; Issued -32,338,302 and 32,338,302 shares as of September 30, 2021 and December 31, $ 3 $ 32020,respectively

Additional paid-in capital 63,731 64,273

Retained earnings-

Appropriated 11,303 11,303

Unappropriated 221,580 215,491

Accumulated other comprehensive income 19,263 17,413

Treasury stock -1,486,526 and 1,486,526 shares as of September 30, 2021 and (5,261) (5,261)December 31, 2020, respectively

Total parent company stockholders' equity 310,619 303,222

Non-controlling interests 15,634 16,170

Total stockholders' equity 326,253 319,392

Total liabilities, mezzanine equity and stockholders' equity $ 686,146 $ 707,560

China Automotive Systems, Inc. and Subsidiaries

Condensed Unaudited Consolidated Statements of Cash Flows

(In thousands of USD unless otherwise indicated)

Nine Months Ended

September 30,

2021 2020

Cash flows from operating activities:

Net income/(loss) $ 5,891 $ (3,355)

Adjustments to reconcile net income/(loss) from operations to net cash (usedin)/provided by operating activities:

Share-based compensation 88 -

Depreciation and amortization 19,686 15,935

Provision/(reversal) of credit losses 1,644 (360)

Deferred income taxes 2,573 464

Equity in gain of affiliated companies (435) (3,454)

Government subsidy reclassified from government loans - 287

Loss on fixed assets disposals 71 67

(Increase)/decrease in:

Accounts and notes receivable 6,631 29,454

Inventories (17,500) 2,644

Other current assets (129) 1,214

Increase/(decrease) in:

Accounts and notes payable (11,506) 10,493

Accrued expenses and other payables (2,325) 2,451

Long-term taxes payable (2,809) (2,809)

Other current liabilities (7,462) (289)

Other non-current liabilities (285) -

Net cash used in operating activities (5,867) 52,742

Cash flows from investing activities:

(Decrease)/increase in demand loans included in other non-current assets (357) 44

Repayment of loan from a related party 154 -

Cash received from property, plant and equipment sales 252 1,444

Payments to acquire property, plant and equipment (including $929 and$1,677 paid to (5,344) (8,879) related parties for the nine months ended September 30, 2021 and 2020,respectively)

Payments to acquire intangible assets (505) (422)

Investment under the equity method (308) (5,360)

Purchase of short-term investments and long-term time deposits (46,212) (42,716)

Proceeds from maturities of short-term investments 40,016 21,626

Cash received from long-term investment 10,116 448

Net cash used in investing activities (2,188) (33,815)

Cash flows from financing activities:

Proceeds from bank loans 42,700 39,586

Repayments of bank loans (44,854) (50,550)

Repayments of the borrowing for sale and leaseback transaction (3,328) (3,078)

Cash received from capital contributions by non-controlling interest holder - 722

Deemed distribution to shareholders - (88)

Acquisition of non-controlling interest (538) (81)

Repurchase of common shares - (1,000)

Net cash used in financing activities (6,020) (14,489)

Effects of exchange rate on cash, cash equivalents and pledged cash 1,015 2,647

Net (decrease)/increase in cash, cash equivalents and pledged cash (13,060) 7,085

Cash, cash equivalents and pledged cash at beginning of the period 128,061 106,403

Cash, cash equivalents and pledged cash at end of the period $ 115,001 $ 113,488

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SOURCE China Automotive Systems, Inc.