DigitalCFO Newsroom | 31 March 2022
China Automotive Systems Inc., today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended December 31, 2021.
China Automotive Systems Inc., 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, 2021.
Fourth Quarter 2021 Highlights
- Net sales declined by 5.3% to $138.8 million from $146.5 million in the fourth quarter of 2020
- Gross margin was 14.2% compared with 15.6% in the fourth quarter of 2020
- Income from operations was $0.6 million compared to loss from operations of $4.0 million in the fourth quarter of 2020
- Net income attributable to parent company’s common shareholders was $5.0 million, or diluted net income per share of $0.16, compared to a net loss of $3.2 million, or diluted loss per share of $0.10 in the fourth quarter of 2020.
Fiscal Year 2021 Highlights
- Net sales were $498.0 million compared to $417.6 million in 2020
- Gross profit increased by 30.4% to $72.1 million compared to $55.3 million in 2020. Gross margin increased to 14.5% from 13.3% in 2020
- Operating income was $5.5 million compared to operating loss of $8.1 million in 2020
- Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020
- Total cash and cash equivalents, pledged cash and short-term investments were $161.3 million
- Net cash flow provided by operating activities was $28.3 million.
Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, “We are pleased to report that our operations returned to profitability in the fourth quarter in a challenging macroeconomic environment. According to the China Association of Automobile Manufacturers, overall sales of automobiles in China only grew by 3.8% in 2021. Our net sales increased by 19.3% year-over-year to $498.0 million in 2021 as sales in the domestic Chinese passenger market, our revenue from North America and our Brazilian operations all had strong growth. Our electric power steering (“EPS”) revenue increased 86.0% year-over-year and represented 23.2% of total revenues in 2021 compared with 14.8% a year ago. To enhance our New Energy Vehicle (“NEV”) products, we purchased a 40% interest in Sweden’s Sentient AB, and we also developed new steering for Alfa Romeo’s first luxury plug-in-hybrid SUV, the model 2021 Tonale.”
“We are encouraged for the 2022 year as passenger vehicle sales have risen in the first two months of 2022 and government policies have become more growth oriented,” Mr. Wu concluded.
Mr. Jie Li, Chief Financial Officer of CAAS, commented, “We maintained our financial strength as total cash and cash equivalents, pledged cash and short-term investments were $161.3 million, or approximately $5.23 per share at year end. We continued to generate strong free cashflow.”
Fourth Quarter of 2021
In the fourth quarter of 2021, net sales decreased by 5.3% to $138.8 million compared to $146.5 million in the same quarter of 2020. The net sales decrease was mainly due to a change in the product mix and lower demand for automobiles in the fourth quarter of 2021 compared with the fourth quarter of 2020.
Gross profit was $19.7 million in the fourth quarter of 2021, compared to $22.8 million in the fourth quarter of 2020. Gross margin in the fourth quarter of 2021 was 14.2% compared to 15.6% in the fourth quarter of 2020, primarily due to lower sales volume and a change in product mix.
Gain on other sales was $1.8 million in the fourth quarter of 2021, compared to $1.4 million in the fourth quarter of 2020.
Selling expenses were $3.4 million in the fourth quarter of 2021, compared to $5.6 million in the fourth quarter of 2020. Selling expenses represented 2.4% of net sales in the fourth quarter of 2021, compared to 3.8% in the fourth quarter of 2020.
General and administrative expenses (“G&A expenses”) were $7.6 million in the fourth quarter of 2021, compared to $14.3 million in the same period in 2020. G&A expenses represented 5.5% of net sales in the fourth quarter of 2021, compared to 9.8% of net sales in the fourth quarter of 2020. The significantly higher G&A expenses in the fourth quarter of 2020 were mainly attributable to a one-time, non-recurring expected credit loss provision of $6.4 million related to a customer’s bankruptcy reorganization proceeding.
Research and development expenses (“R&D expenses”) were $9.9 million in the fourth quarter of 2021, compared to $8.3 million in the fourth quarter of 2020. R&D expenses represented 7.1% of net sales in the fourth quarter of 2021, compared to 5.7% in the fourth quarter of 2020. Higher R&D expenses were mainly related to higher investments in EPS and NEV products.
Income from operations was $0.6 million in the fourth quarter of 2021, compared with a loss from operations of $4.0 million in the fourth quarter of 2020. Increase in the income from operations in the fourth quarter of 2021 was mainly due to a 25.9% year-over-year decrease in total operating expenses as both selling and G&A expenses declined significantly.
Interest expense was $0.5 million in the fourth quarter of 2021, compared to $0.4 million in the fourth quarter of 2020.
Financial expense was $1.5 million in the fourth quarter of 2021, compared with $2.0 million in the fourth quarter of 2020.
Loss before income tax expenses and equity in earnings of affiliated companies was $0.4 million in the fourth quarter of 2021, compared to a loss of $5.7 million in the fourth quarter of 2020.
Income tax expense was $0.7 million in the fourth quarter of 2021, compared to an income tax expense of $1.9 million for the fourth quarter of 2020, mainly due to a change in the valuation allowance recognized in the fourth quarter of 2021.
Net income attributable to parent company’s common shareholders was $5.0 million in the fourth quarter of 2021 compared to net loss attributable to parent company’s common shareholders of $3.2 million in the fourth quarter of 2020. The net loss in the fourth quarter of 2020 was mainly due to a one-time, non-recurring $6.4 million expected credit loss provision for a customer’s bankruptcy reorganization, net of minority interests. Diluted income per share was $0.16 in the fourth quarter of 2021, compared to diluted loss per share of $0.10 in the fourth quarter of 2020.
The weighted average number of diluted common shares outstanding was 30,853,822 in the fourth quarter of 2021, compared to 31,851,776 in the fourth quarter of 2020.
Fiscal Year 2021
Net sales increased by 19.3% to $498.0 million in 2021, compared to $417.6 million in 2020. The increase was mainly due to the recovery in net sales in the first half of 2021 from the COVID-19 pandemic’s impact on automobile sales in China and North America. In 2021, sales of hydraulic products increased by 7.6% year-over-year while total sale of EPS systems increased by 86.0% year-over-year. EPS sales represented 23.2% of total revenue in 2021 compared with 14.8% in 2020. Net sales of vehicle steering systems to the Company’s North American customers increased by 10.4% year-over-year in 2021.
Gross profit in 2021 increased by 30.4% to $72.1 million, compared to $55.3 million in 2020. The gross margin increased to 14.5% from 13.3% in 2020 mainly due to changes in the product mix.
Gain on other sales amounted to $4.4 million, generally consistent with $4.3 million in 2020.
Selling expenses were $18.3 million in 2021 compared to $14.5 million in 2020, mainly due to higher transportation expenses. Selling expenses represented 3.7% of net sales in 2021, compared to 3.5% in 2020.
G&A expenses declined 11.6% to $24.4 million in 2021 from $27.6 million in 2020. The decrease was mainly due to a decreased provision of allowance for doubtful accounts related to one customer’s bankruptcy reorganization in November 2020, which was partially offset by higher personnel costs. G&A expenses represented 4.9% of net sales in 2021 compared to 6.6% of net sales in 2020.
R&D expenses were $28.2 million in 2021, compared to $25.7 million in fiscal year 2020. The increase was primarily due to higher investment in EPS products. R&D expenses were 5.7% of net sales in 2021, compared to 6.2% of net sales in 2020.
Income from operations was $5.5 million in 2021, compared to a loss from operations of $8.1 million in 2020. The income was mainly due to a 30.4% increase in gross profit, with an offsetting impact of a 4.6% increase in total operating expenses in 2021. The loss in 2020 was primarily due to lower net sales and a one-time, non-recurring expected credit loss provision related to a customer’s bankruptcy reorganization.
Interest expense was $1.4 million in 2021, a slight decline from the $1.6 million in 2020.
Net financial expense was $2.4 million in 2021, compared with $4.9 million in 2020, primarily due to a decrease in foreign exchange losses.
Income before income tax expenses and equity in earnings of affiliated companies was $8.4 million, compared to a loss before income tax expenses and equity in earnings of affiliated companies of $12.2 million in fiscal year 2020. The change was primarily due to generating income from operations and lower net financial expense in 2021.
Net income attributable to parent company’s common shareholders was $11.1 million in 2021 compared to net loss attributable to parent company’s common shareholders of $5.0 million in 2020. The loss in 2020 was mainly due to lower sales and a one-time, non-recurring $6.4 million expected credit loss provision from a customer’s bankruptcy reorganization, net of minority interests. Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020.
The weighted average number of diluted common shares outstanding was 30,855,431 in 2021 compared to 31,077,196 in 2020.
Balance Sheet
As of December 31, 2021, total cash and cash equivalents, pledged cash and short-term investments were $161.3 million. Total accounts receivable including notes receivable were $210.3 million. Accounts payable including notes payable were $228.0 million and short-term bank loans were $47.6 million. Total parent company stockholders’ equity was $321.0 million as of December 31, 2021, compared to $303.2 million as of December 31, 2020. Net cash flow from operating activities was $28.3 million in 2021, compared with $57.4 million in 2020. Cash paid to acquire property, plant and equipment and land use rights was $9.3 million in 2021, compared with $15.8 million in 2020.
Business Outlook
Management provides revenue guidance for the fiscal year 2022 of $510 million. This target is based on the Company’s current views on operating and market conditions, which are subject to change.
