China Automotive Systems Reports a 91.7% Increase in Diluted Net Income Per Share in Fiscal Year 2022

– Electric Power Steering (“EPS”) Sales Increased by 35.6% in 2022 –

WUHAN, China, March 30, 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 fourth quarter and the audited results for the fiscal year ended December 31, 2022.

Fourth Quarter 2022 Highlights

  • Net sales were $128.8 million
  • Gross profit increased by 26.9% to $25.0 million from $19.7 million.  Gross margin increased to 19.4% from 14.2% in the fourth quarter of 2021
  • Loss from operations was $2.6 million, compared to income from operations of $0.6 million in the fourth quarter of 2021
  • Net income attributable to parent company’s common shareholders was approximately $4.3 million, or diluted net income per share of $0.14, compared to net income of $5.0 million, or diluted income per share of $0.16 in the fourth quarter of 2021.

Fiscal Year 2022 Highlights

  • Net sales increased by 6.3% to $529.6 million compared to $498.0 million in 2021
  • Gross profit increased by 15.7% to $83.4 million compared to $72.1 million in 2021. Gross margin increased to 15.7% from 14.5% in 2021
  • Operating income increased by 45.5% to $8.0 million compared to $5.5 million in 2021
  • Diluted net income per share increased by 91.7% to $0.69 in 2022 compared to $0.36 in 2021
  • Total cash and cash equivalents, pledged cash and short-term investments were $171.8 million at year end
  • Net cash flow provided by operating activities was $48.0 million compared to $28.3 million in 2021.

Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, “The Chinese economy continued to grow slowly with 2.9% year-over-year growth in the fourth quarter of 2022 and 3.0% growth for the full year, down significantly from the 8.4% growth in 2021.  COVID-related lockdowns and travel restrictions in China resulted in supply chain disruptions and slowed automobile sales growth in 2022.  According to the China Association of Automobile Manufacturers, overall sales of automobiles in China declined by 3.3% year-over-year in the fourth quarter of 2022 and increased by only 2.1% year-over-year for 2022.”

“Despite all the challenges, we continued to grow our top and bottom lines in 2022.  Our sales in the domestic Chinese passenger market improved and revenue from North America was steady.  Sales to Chery Automobile and our Brazilian operations achieved over 50% year-over year sales growth in 2022.  Additionally our EPS revenue increased 35.6% year-over-year in 2022.”

“Investment in research and development was 28.0% higher as we increased product development for the New Energy Vehicle (“NEV”) market and autonomous driving programs, such as our expanded relationship with BYD Auto for new customized EPS products and our ongoing collaboration with Sentient AB in Sweden.”

“We are cautiously optimistic that recent government policy changes in 2023, which greatly removed COVID-19 lockdowns and travel restrictions, will be a catalyst to boost the business environment in China,” Mr. Wu concluded.

Mr. Jie Li, Chief Financial Officer of CAAS, commented, “Our margin continued to improve throughout the year.  We maintained our financial strength as total cash and cash equivalents, pledged cash and short-term investments increased to $171.8 million, or approximately $5.69 per share at year end.  We enhanced our profitability and generated strong free cashflow in 2022. We repurchased 666,074 common shares in 2022.” 

Fourth Quarter of 2022

In the fourth quarter of 2022, net sales decreased by 7.2% to $128.8 million compared to $138.8 million in the same quarter of 2021.  The net sales decrease was mainly due to a change in the product mix and lower demand for passenger automobiles and commercial vehicles in the fourth quarter of 2022 compared to the fourth quarter of 2021. 

Gross profit increased by 26.9% to $25.0 million in the fourth quarter of 2022, compared to $19.7 million in the fourth quarter of 2021.  Gross margin in the fourth quarter of 2022 was 19.4% compared to 14.2% in the fourth quarter of 2021, primarily due to a change in product mix.

Selling expenses were $4.6 million in the fourth quarter of 2022, compared to $3.4 million in the fourth quarter of 2021. Selling expenses represented 3.6% of net sales in the fourth quarter of 2022, compared to 2.4% in the fourth quarter of 2021.

General and administrative expenses (“G&A expenses”) were $10.8 million in the fourth quarter of 2022, compared to $7.6 million in the same period in 2021.  G&A expenses represented 8.4% of net sales in the fourth quarter of 2022, compared to 5.5% of net sales in the fourth quarter of 2021, which was mainly due to the increase of provision of allowance for doubtful accounts.

Research and development expenses (“R&D expenses”) were $10.6 million in the fourth quarter of 2022, compared to $9.9 million in the fourth quarter of 2021. R&D expenses represented 8.2% of net sales in the fourth quarter of 2022, compared to 7.1% in the fourth quarter of 2021, mainly due to an increase in salaries and wages as a result of the increased R&D activities for new projects.

Loss from operations was $2.6 million in the fourth quarter of 2022, compared to income from operations of $0.6 million in the fourth quarter of 2021.

Interest expense was $0.3 million in the fourth quarter of 2022, compared to $0.5 million in the fourth quarter of 2021.

Financial income was $1.4 million in the fourth quarter of 2022 due to exchange fluctuations of the U.S. dollar to the Chinese RMB and the Brazilian Real, compared to financial expense of $1.5 million in the fourth quarter of 2021.

Loss before income tax expenses and equity in earnings of affiliated companies was $2.7 million in the fourth quarter of 2022, compared to a loss of $0.4 million in the fourth quarter of 2021.

Income tax benefit was $1.9 million in the fourth quarter of 2022, compared to an income tax expense of $0.7 million in the fourth quarter of 2021, mainly due to the loss before income tax expenses and equity in earnings of affiliated companies in the fourth quarter of 2022.

Net income attributable to parent company’s common shareholders was $4.3 million in the fourth quarter of 2022 compared to net income attributable to parent company’s common shareholders of $5.0 million in the fourth quarter of 2021.  Diluted income per share was $0.14 in the fourth quarter of 2022, compared to diluted income per share of $0.16 in the fourth quarter of 2021.

The weighted average number of diluted common shares outstanding was 30,229,987 in the fourth quarter of 2022, compared to 30,853,822 in the fourth quarter of 2021.

Fiscal Year 2022

Net sales increased by 6.3% year-over-year to $529.6 million in 2022, compared to $498.0 million in 2021. This increase was mainly due to higher sales of passenger vehicles in China, with sales to Chery Automobile up 54.5% year-over-year and total sales of electric power steering (“EPS”) systems increased by 35.6% year-over-year.  EPS sales represented 29.5% of total revenue in 2022 compared to 23.2% in 2021.  Net sales of vehicle steering systems to the Company’s North American customers was approximately the same in 2022, but Brazil Henglong’s net sales grew by 54.1% year-over-year to $39.3 million.

Gross profit in 2022 increased by 15.7% year-over-year to $83.4 million, compared to $72.1 million in 2021. The gross margin increased to 15.7% from 14.5% in 2021 mainly due to changes in the product mix. 

Gain on other sales in 2022 decreased to $3.7 million, compared to $4.4 million in 2021.

Selling expenses declined by 7.7% year-over-year to $16.9 million in 2022, compared to $18.3 million in 2021, mainly due to lower transportation expenses.  Selling expenses represented 3.2% of net sales in 2022, compared to 3.7% in 2021.

G&A expenses increased by 7.0% year-over-year to $26.1 million in 2022, compared to $24.4 million in 2021. G&A expenses represented 4.9% of net sales in 2022, compared to 4.9% of net sales in 2021.

R&D expenses were $36.1 million in 2022, compared to $28.2 million in 2021. The increase was primarily due to higher investment in EPS products and other new products.  R&D expenses were 6.8% of net sales in 2022, compared to 5.7% of net sales in 2021.

Operating income increased by 45.5% year-over-year to $8.0 million in 2022, compared to $5.5 million in 2021.  The increase in operating income was mainly due to higher gross profit.

Interest expense was $1.5 million in 2022, consistent with the $1.4 million in 2021.

Net financial income was $10.8 million in 2022, compared to net financial expense of $2.4 million in 2021, primarily due to an increase in foreign exchange gains as the U.S. dollar fluctuated against the Chinese RMB and Brazilian Real.

Income before income tax expenses and equity in earnings of affiliated companies was $23.0 million, compared to $8.4 million in fiscal year 2021.  The change was primarily due to higher operating income and net financial income in 2022.

Income tax expense was $3.1 million in 2022, compared to $4.0 million in 2021.

Net income attributable to parent company’s common shareholders was $21.2 million in 2022, compared to net income attributable to parent company’s common shareholders of $11.1 million in 2021.  Diluted net income per share increased by 91.7% year-over-year to $0.69 in 2022 compared to $0.36 in 2021.

The weighted average number of diluted common shares outstanding was 30,641,274 in 2022 compared to 30,855,431 in 2021.

Balance Sheet

As of December 31, 2022, total cash and cash equivalents, pledged cash and short-term investments were $171.8 million.  Total accounts receivable including notes receivable were $224.3 million.  Accounts payable including notes payable were $235.1 million and short-term bank loans were $45.7 million.  Total parent company stockholders’ equity was $311.7 million as of December 31, 2022, compared to $321.0 million as of December 31, 2021.  Net cash flow from operating activities was $48.0 million in 2022, compared to $28.3 million in 2021.  Cash paid to acquire property, plant and equipment and land use rights was $20.3 million in 2022, compared to $9.3 million in 2021.

Business Outlook

Management provides revenue guidance for the fiscal 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 March 30, 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 call the following numbers 10 minutes before the call start time and ask to be connected to the “China Automotive Systems” conference call with pin 775394:

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 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, 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 Li

Chief Financial Officer

China Automotive Systems, Inc.

Email: [email protected]

Kevin Theiss

Investor Relations

Tel: +1-212-510-8922

Email: [email protected]

-Tables Follow –

China Automotive Systems, Inc. and Subsidiaries

Consolidated Balance Sheets

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




December 31,




2022



2021


ASSETS









Current assets:









Cash and cash equivalents


$

121,216



$

131,695


Pledged cash



37,735




27,804


Short-term investments



12,861




1,756


Accounts and notes receivable, net – unrelated parties (Allowance for credit losses of $14,359
and $11,961, respectively)



214,308




195,729


Accounts and notes receivable, net – related parties (Allowance for credit losses of $1,763
and $898, respectively)



10,016




14,607


Advance payments and others, net – unrelated parties (Allowance for credit losses of $115

and $
55, respectively)



10,907




12,696


Advance payments and others – related parties



1,439




600


Inventories



112,236




116,493


Total current assets



520,718




501,380


Non-current assets:









Property, plant and equipment, net



106,606




127,721


Land use rights, net



9,555




10,732


Intangible assets, net



1,273




1,812


Operating lease assets



477




138


Long-term time deposits






8,135


Other receivables, net (Allowance for credit losses of nil and $50, respectively)



46




358


Advance payment for property, plant and equipment – unrelated parties



6,331




2,284


Advance payment for property, plant and equipment – related parties



1,884




810


Long-term investments



59,810




36,966


Deferred tax assets



7,652




10,114


Other non-current assets






16,312


Total assets


$

714,352



$

716,762











LIABILITIES AND STOCKHOLDERS’ EQUITY









Current liabilities:









Short-term bank loans


$

45,671



$

47,592


Accounts and notes payable – unrelated parties



218,412




214,590


Accounts and notes payable – related parties



16,695




13,464


Customer deposits



5,654




2,400


Accrued payroll and related costs



11,628




10,984


Accrued expenses and other payables



48,311




50,332


Taxes payable



17,598




12,326


Operating lease liabilities – current portion



226




128


Total current liabilities



364,195




351,816


Long-term liabilities:









Advances payable



2,144




2,028


Operating lease liabilities – non-current portion



255




22


Long-term loans



528





Deferred tax liabilities



4,010




4,380


Long-term taxes payable



15,805




21,075











Total liabilities



386,937




379,321


Commitments and Contingencies


















Mezzanine equity:









Redeemable non-controlling interests



582




553











Stockholders’ Equity









Common stock, $0.0001 par value – Authorized – 80,000,000 shares issued – 32,338,302 and

32,338,302 shares at December 31, 2022 and 2021, respectively



3




3


Additional paid-in capital



63,731




63,731


Retained earnings









Appropriated



11,851




11,481


Unappropriated



247,174




226,363


Accumulated other comprehensive income



(3,413)




24,717


Treasury stock – 2,152,600 and 1,486,526 shares at December 31, 2022 and 2021,

respectively



(7,695)




(5,261)


Total parent company stockholders’ equity



311,651




321,034


Non-controlling interests



15,182




15,854


Total stockholders’ equity



326, 833




336,888


Total liabilities, mezzanine equity and stockholders’ equity



714,352



$

716,762


China Automotive Systems, Inc. and Subsidiaries


Consolidated Statements of Income or Loss


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






Year Ended December 31,




2022



2021









Net product sales ($44,282 and $65,131 sold to related parties for the years ended December 31, 2022 and 2021)


$

529,551



$

497,993


Cost of products sold ($28,810 and $31,580 purchased from related parties for the years ended December 31,

2022 and 2021)



446,157




425,914


Gross profit



83,394




72,079


Net gain on other sales



3,696




4,368


Operating expenses:









Selling expenses



16,910




18,278


General and administrative expenses



26,120




24,423


Research and development expenses



36,109




28,228


Total operating expenses



79,139




70,929


Operating income



7,951




5,518


Other income, net



5,782




6,668


Interest expense



(1,450)




(1,437)


Financial income/(expense), net



10,753




(2,350)


Income before income tax expenses and equity in earnings of affiliated companies



23,036




8,399


Less: Income taxes



3,082




4,004


Add: Equity in earnings of affiliated companies



2,389




6,331


Net income



22,343




10,726


Net income/(loss) attributable to non-controlling interest



1,132




(352)


Accretion to redemption value of redeemable non-controlling interests



(30)




(28)


Net income attributable to parent company’s common shareholders



21,181




11,050











Net income attributable to parent company’s common shareholders per share –









Basic


$

0.69



$

0.36











Diluted


$

0.69



$

0.36











Weighted average number of common shares outstanding –









Basic



30,639,102




30,851,776


Diluted



30,641,274




30,855,431


China Automotive Systems, Inc. and Subsidiaries


Consolidated Statements of Comprehensive Income or Loss


(In thousands of USD unless otherwise indicated)






Year Ended December 31,




2022



2021









Net income



22,343




10,726


Other comprehensive income:









Foreign currency translation (loss)/gain



(29,934)




7,784


Comprehensive (loss)/income



(7,591)




18,510


Comprehensive (loss)/income  attributable to non-controlling interest



(672)




128


Accretion to redemption value of redeemable non-controlling interest



(30)




(28)


Comprehensive (loss)/income attributable to parent company


$

(6,949)



$

18,354


China Automotive Systems, Inc. and Subsidiaries


Consolidated Statements of Changes in Stockholders’ Equity


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






2022



2021


Common Stock









Balance at January 1, 2022 and 2021 – 32,338,302 and 32,338,302 shares, respectively


$

3


$


3


Balance at December 31, 2022 and 2021 – 32,338,302 and 32,338,302 shares, respectively


$

3



$

3











Additional Paid-in Capital









Balance at January 1


$

63,731


$


64,273


Share-based compensation






88


Acquisition of the non-controlling interest in Wuhu






(630)


Balance at December 31


$

63,731



$

63,731











Retained Earnings – Appropriated









Balance at January 1


$

11,481


$


11,303


Appropriation of retained earnings



370




178


Balance at December 31


$

11,851



$

11,481











Unappropriated









Balance at January 1


$

226,363


$


215,491


Net income attributable to parent company



21,211




11,078


Accretion of redeemable non-controlling interests



(30)




(28)


Appropriation of retained earnings



(370)




(178)


Balance at December 31


$

247,174


$


226,363











Accumulated Other Comprehensive (Loss)/Income









Balance at January 1


$

24,717



$

17,413


Net foreign currency translation adjustment attributable to parent company



(28,130)




7,304


Balance at December 31


$

(3,413)


$


24,717











Treasury Stock









Balance at January 1, 2022 and 2021 – 1,486,526 and 1,486,526 shares, respectively


$

(5,261)


$


(5,261)


Repurchase of common stock in 2022 and 2021 – 666,074 and nil shares, respectively



(2,434)





Balance at December 31, 2022 and 2021 – 2,152,600 and 1,486,526 shares, respectively


$

(7,695)



$

(5,261)











Total parent company stockholders’ equity


$

311,651



$

321,034











Non-controlling Interest









Balance at January 1


$

15,854


$


16,170


Net foreign currency translation adjustment attributable to non-controlling interest



(1,804)




480


Net income/(loss) attributable to non-controlling interest



1,132




(352)


Acquisition of the non-controlling interest in Wuhu






(444)


Balance at December 31


$

15,182



$

15,854











Total stockholders’ equity


$

326,833



$

336,888


China Automotive Systems, Inc. and Subsidiaries


Consolidated Statements of Cash Flows


(In thousands of USD unless otherwise indicated)






Year Ended December 31,




2022



2021


Cash flows from operating activities:









Net income


$

22,343



$

10,726


Adjustments to reconcile net income to net cash provided by operating activities:









Share-based compensation






88


Depreciation and amortization



25,173




27,113


Deferred income taxes



1.243




4,020


Allowance for credit losses



4.404




2,738


Impairment loss on prepayment for investment in Hefei Senye



2,676





Equity in earnings of affiliates



(2,389)




(6,331)


Government subsidy reclassified from advances payable






(1,253)


Loss on disposal of fixed assets



58




389


(Increase)/decrease in:









Accounts and notes receivable



(36,935)




26,560


Advance payments and others



(41)




1,439


Inventories



(5,368)




(25,684)


Increase/(decrease) in:









Accounts and notes payable



27,271




(2,801)


Customer deposits



3,580




870


Accrued payroll and related costs



1,628




(2,721)


Accrued expenses and other payables



1,158




(4,081)


Taxes payable



2,925




(4,501)


Advances payable



297




1,700


Net cash provided by operating activities



48,023




28,271











Cash flows from investing activities:









Purchase of short-term investments and long-term time deposits



(80,244)




(63,478)


Proceeds from maturities of short-term investments



75,144




69,351


Decrease/(increase) in demand loans and employee housing loans included in other receivables



292




(171)


Loan to a related party



(146)





Repayment of loan from a related party






154


Cash received from property, plant and equipment sales



1,514




150


Cash paid to acquire property, plant and equipment (including $3,445 and $1,965 paid to related parties for the

years ended December 31, 2022 and 2021, respectively)



(20,296)




(9,260)


Cash paid to acquire intangible assets



(188)




(642)


Cash received from long-term investment



3,986




20,621


Investment under equity method



(12,802)




(308)


Cash prepaid for investment under equity method






(13,454)


Net cash provided by/(used in) investing activities



(32,740)




2,963











Cash flows from financing activities:









Proceeds from bank loans



51,898




53,209


Repayment of bank loans and government loans



(49,917)




(50,803)


Repurchase of common shares



(2,434)





Repayments of the borrowing under sale and leaseback transaction



(1,130)




(4,450)


Acquisition of non-controlling interest






(1,075)


Net cash used in financing activities



(1,583)




(3,119)











Cash and cash equivalents affected by foreign currency



(14,248)




3,323


Net increase in cash and cash equivalents



(548)




31,438


Cash, cash equivalents and pledged cash at beginning of year



159,499




128,061


Cash, cash equivalents and pledged cash at end of year


$

158,951



$

159,499


China Automotive Systems, Inc. and Subsidiaries


Consolidated Statements of Cash Flows (continued)


(In thousands of USD unless otherwise indicated)




SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:






Year Ended December 31,




2022



2021


Cash paid for interest


$

1,492



$

1,843


Cash paid for income taxes


$

4,044



$

3,398






SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:




Non-cash investing activities:






Year Ended December 31,




2022



2021


Property, plant and equipment recorded during the year which previously were advance payments


$

2,473



$

8,543


Change in accounts payable for acquiring property, plant and equipment


$

985



$

1,510








Year Ended December 31,




2022



2021


Supplemental disclosure of acquisition of operating lease assets



477



$











SOURCE China Automotive Systems, Inc.


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