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China Automotive Systems (CAAS)

Participants
Kevin Theiss IR
Jie Li CFO
William Gregozeski Greenridge Global
Call transcript
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Operator

Good day ladies and gentlemen, and welcome to the China Automotive Systems Third Quarter 2021 Earnings Conference Call. At this time all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Kevin Theiss. Sir, the floor is yours.

Kevin Theiss

joining for everyone, you, us today. Thank China to Automotive Systems call. conference quarter third XXXX Welcome

are Li, to Mr. of today with us Joining Jie translation. of Systems. in conference will the later assistance China Chief He be questions available answer the call Automotive Officer Financial

we remind that all Before throughout may we call, begin, statements. that statements I'll make may listeners this contain forward-looking

of estimates Forward-looking assumptions only date the the company's and this represent statements of call. as

foresee. the reduced any that impact Exchange contained prolonged not business customers our adverse overall could factors factors and As other our those we operations ended year outbreak business revenue. and of forward-looking in could a financial Risk be our of customers, materially to Securities those the company's shipment cause results will Commission uncertainty summary The a the have that financial for environment, provide other materially result, other result report delivery to GAAP to the number conduct assembly I described is company slowdown where predict A including and and Commission. first brief controlled, XX-K will processes financial economic of events whether outlook statements sales, of further of for any the Form our of disclaims business to with overview automobile provide increased COVID-XX to and Exchange of unaudited, heading call, these cannot XX, by of third our delays results in factors or quarter our effectively as call adversely in from The we products Q&A cause nine Securities facilities the new weakened due operations. conduct If XXXX ended factors, differ reported liquidity a accounting. XX, these expressly delay actual the with result using period any the future On the U.S. time-to-time production to months a manufacturing, for nine the suffer XXXX, growth, September any the this effect XXXX. then and otherwise. third regions the and Factors this quarter beyond cannot statements we Management in following condition results annual the duty from could our and a and in company's or as of filed and in control deteriorating condition the our forward-looking in the Any filed an information, result of costs on the December or within documents results first in updates materially financial months under continue and as business unseen in and disruption session. ways a are business, and of affected in company condition made and adversely market timely operations and are may regional

of XX% quarter to commercial passenger U.S. XXXX For industry automobile today, Chinese of third begin China the declined results market financial our call and year-over-year by a in in declined revenue of quarter market decreased purposes Association our and Chinese sales with year-over-year, year-over-year will auto Manufacturers, X.X% sales according was third of the - China Automotive's approximately of auto vehicle U.S. the economy, dynamics Auto year-over-year headwinds, a as player in by dollars. our position. the of the review sales recent I review Chinese declined XX% by We'll in car by statistics the quarter the business parts the affected XX% the in by major in Automobile of the third from but only XXXX CAAM. also segment, XXXX.

decrease demand shortage semiconductor China automobile of weaker chips. Our the reflected widespread and in sales

to $XX.X XX.X% market sales XX.X% quarter of in sales the products and of declined, to were the of uneven the total by $XX.X the year-over-year XX.X% year. in XX% Net million, by to declined sales auto newer the sales commercial markets last while hydraulic million climbed Our third year-over-year total of XX.X% in our of EPS large net represented quarter sales vehicle traditional to XXXX. steering third models XXXX. Net year-over-year quarter net net versus sales of third by Chinese

year to our XXXX, the year. sales our in of the of Brazil In by X.X% [indiscernible] increased by major million third Our XXXX. third XXX% XX.X% compared compared while XX.X% margin grew XX.X% a North declined net in of net China increase decreased year-over-year products into another Net Shenyang cost America in were year-over-year the sold manufacturer slightly sales quarter to over $X.X year-over-year. gross our Brilliance quarter XXX.X% with by Jinbei automotive sales as million $X.X grew customer of sales to

For passenger up due X.X%. to market rose sales the sales, a sales. truck to XX% sales, a XX% first increase XXXX partially ended in decline the larger With vehicle CAAM rose months commercial X.X% September and nine according automobile X.X% offsetting from a XX in of sales bus statistics vehicle

nine rose of New first XXXX. XXX.X% months in the sales energy vehicle

to gross period of XX.X% our by months increased by XX.X% in For to Gross the $XX.X to increased corresponding net to year-over-year margin compared increased year-over-year XX.X% million. profit million XX% the $XXX.X for XXXX. first XXXX, sales nine and

growth products, we of are encouraged continue as our by to even hydraulic traditional our upgrade our We EPS products.

sales that percentage Our to believe continue. total EPS we and contributing are trend will higher products a our

a centering proprietary jam with lane phase technologies added lane driving we where Europe, with TJA as These traffic expect decertification Hubei the five. Great designation motors. Sentient's data communicate especially with acquisition is Henglong functions SGS steer-by-wire driver ASIL-D a vehicles' Romeos which APA, XXX,XXX autonomous also producers, software This to part to the for systems Auto, specializes to vehicle the high we more entered advanced units we automatic And product different the purchasing are the sell Auto, company units. Europe. Chinese Sentient in Group for is components into second and EPS hardware distinguishes program Sentient technology To of of production our LKA, products over us We fully Tool, safety of ISOXXXXX:XXXX the Sweden technology Chery In wholly-owned has parking we and or assistance assist new Automotive keeping technology ADAS system. assistance LCK OTOP, controller EPS AB. that's EV believe as for Off autonomous commonly referred market The into annual Beijing main for in has vehicle company's We XXXX for in and to more autonomous Systems marketplace. three since functions. especially our TÜV model, and electric level compact a many highest that earlier steering including received rate the years. sales for driving, driving EPS, Germany, software first Process new XXXX risk. This highest, is motion both of received We integrate design advance to on and the Alfa SUV to safety to and the orders the NHTSA the in the XXXX. the Wall, testifying approximately key control pleased company our create Romeos vehicle angle-overlay systems, into hardware base, Off plug-in-hybrid XXXX, products JAC are tested system our advance project subsidiary Tonale. powertrain for Alfa autonomous further been plug company's expectation first hybrid XX% and in is luxury XXX,XXX steering been Also in assist

developed a and technologies advanced have are large growing strong customers We financially. base of we

commercial markets leader in China. a large products and a are vehicle steering We in in

in we larger European, and However, with are OEMs as a is we penetration growing have our global America, a Indian African goal to developing South greater markets. North become global in and supplier, the auto presence and

due XX.X% in XXXX receivable. expenses quarter due Research let Selling of to quarter $XXX.X Income income profit expenses go sales lower $X.X to was of operations sales XXXX. affiliated of XXXX XXXX foreign of from in General quarter to in sales decreased each the was R&D compared expenses decrease XXXX. income million in to in $XX.X the third XXXX, quarter mainly with in and $XX X.X% income net $X.X of XXXX. XXXX. sorry by of in XXXX. $X.X The quarter G&A higher with and third third and of XXXX, X.X% $X.X net results the of Financial before in third personnel and to the by million XXXX, expenses million quarter expenses earnings to the quarter $X.X due expense and the the benefit to America in of in million operations of The before in an expenses the due the quarter per of million, $X.X the XX.X% of increased market of of Other of X.X% quarter the the of companies, expenses $X.X of expenses. XXXX market, of was net in quarter net third XXXX. primarily lower was compared to income diluted third financial with with quarter X.X% was expenses in million income the million to was shortage due XX.X% outstanding The and and compared the compared tax XXXX sales $X.X and equity sales Net of Diluted in sales in XXXX quarter million Income of same volume quarter XXXX. number lower Now loss were income G&A to third company's third XXXX, of in third XX,XXX,XXX of decreased quarter compared or third XXXX shares to attributable to XXXX. income of income in XXXX. XXXX. and earnings or the of quarter in compared million expense, was gross third quarter to equity expenses changes product parent decline quarter million in million compared quarter tax Gross X.X% XXXX third common XXXX XXXX exchange of the third mainly the $XX.X the mainly operations Income income allowance increase third over XXXX. of higher quarter third Lower the of in million million hire compared earnings tax million $X.X quarter loss for quarter Net the XXXX. but increased, quarter shareholders sales of to third other quarter profit same from products margin in the third in XX.X% affiliated me the the of million represented $X.X of quarter valuation XXXX. $XX third quarter XX.X%. compared higher million of compared of quarter million XXXX. in to $XXX.X were to was for income earnings third bad XX% higher was net losses. expenses. selling financial of $X.X sales in quarter mainly third to XXXX with decreased an million compared accounts in with in million Weighted net quarter X.X% of diluted personnel average quarter quarter in XXXX, the the compared were to million the the a margin third in $X.X due provision XXXX. XXXX net $X.X of quarter related to in of same and - of quarter common $XX.X third the the sales shares increase per was development of overall million due to North logistics third In Gross the $X.X Net to product primarily million mix. the companies third compared in to was chip mainly of $X.X in quarter was quarter of attributable product compared of quarter $XX of tax parent represent the The the million, third was result debt to of The sales in Sales reduce hydraulic XXXX. third increase due companies quarter third $X.X loss for due to by XXXX. in of the of Selling R&D million was net of higher million the in XXXX. the third higher of company's compared compared in in the period administrative auto before of same from XXXX. of a of XXXX, R&D mainly third of of which million quarter XX.X% XXXX net expenses in income for other gross market Net income share subsidies compared share products shares to due $X.XX to was $X.XX compared the expense XXXX. represented tax net affiliated third EPS of quarter third $XX.X third company's the the a - recognized common same shareholders the third of sales third government equity compared demand trends. in the the of received product in company's XX,XXX,XXX and before as to XXXX the and in mainly the for the the with to mainly to $X.X

months compared compared compared XXXX net Now XXXX XX% corresponding the XX.X%, XXXX. nine nine first for the period month months $XXX.X financial to was of in $XX.X Gross over first we'll for million in [indiscernible] margin the of to for last increased nine million by in to nine of first period profit corresponding $XXX.X $XX.X first by XX.X% the to nine go XXXX Gross year. the the months of XXXX. for XX.X% in to million highlights, million, increased months sales

Income other gain $X.X For the income first the to was to amounted in XXXX, loss corresponding million compared of on million, nine $X.X of from months the months compared period $X.X sales ended Net attributable in $X.X nine XXXX. for September to XX, to XXXX. million operations loss the $X.XX parent from operations income parent was net attributable the million nine of shareholders $X.X loss months share XXXX, share with compared million was in corresponding of in XXXX. common $X.XX to $X.X Diluted the per last common first shareholders corresponding company's company's in per period of for to year. diluted compared period million

Now a balance few go over items. we'll sheet

receivable XXXX, ready and notes the XXXX operator, XX, we're As year million million total Q&A. business equivalents equity to payable target of $XXX.X operating to The With were cash guidance $XXX.X million as Total that September to on full its stockholders' which company based market pledged conditions, of as outlook, management were XX, short-term XXXX. change. million. $XXX of December reiterated accounts subject cash including begin revenue were deposits million. for was the and XXXX. compared XX, parent This are current million. on cash, September $XXX.X $XXX views receivable were the is payable Total loans million including Accounts of $XXX.X notes $XX.X company's

Operator

Your is today announce your Instructions] pose Please affiliation from then William question question. [Operator your first coming for Gregozeski.

William Gregozeski

Hi guys, on chip segments impacted by can the on you were shortage the explain which that? most

Jie Li

impacted and very chips products shortage. - reason and power do EPS main semiconductor especially see the side. capability. have to we our our are automakers auto use unique are the these Yes, in industry product we The production widespread side quarter sourcing is supplier impact the a steering a in a one, are like particular shortage We our And because our product the of chip throughout see less experiencing two-folds for is we OEM definitely China. OEM decline phenomenon chips, us the electric product all

few have work channels We suppliers we a different and those closely. with very

our we're So sales going increased EPS the such this mitigate - see the during our significantly. able that's has difficult semiconductor change impact sector EPS time and to sales through especially a why you and

William Gregozeski

I U.S. there, was though impacted just was what most is to pretty it for segment shipments spread evenly operating was you it which Okay or or guys? mean the

Jie Li

in these Okay our of relatively of are U.S. product. in type volume China smaller terms customers mostly

William Gregozeski

Okay, all right.

On increase? JV can see that the the margins the looks XX% to KYB went above like we to expect quarter gross in continue

Jie Li

are are cost lower we we scale increasing turn will joint and per driven then mainly utilization anticipate gross climbing it the by will the we venture increase expectations seeing margin in margin. of see is will productions, is improve to we of to rate the the scalability, category the in this yes, improvement kinds unit Okay, mainly one gross as two and economy factors and help our continue you as these know,

the increased in joint hand, venture. other been has - content particular the technology On that also for

And first when terms a started we so, we CVPs of in product product. providing offerings, only

expanded we product, DP-EPS product Now have our product. EPS DP-EPS and

and product newer have - So, those contribution us and have range a meet to our a products now that a customer well. more as of product, we better of margin give wide also lot demand new more technologies are

William Gregozeski

all Are year kind where and Okay, year? year end next of able to traditional for it to any between guys EPS are you mix the and expected you you provide know right. end expect you this expect to

Jie Li

again the what it EPS mix. was Say question

William Gregozeski

mix EPS the of be end to of XXXX? the at end Yes, expect what traditional XXXX between you and and the mix that

Jie Li

for end the EPS third sells first nine sales total of the as XX.X% sales. of accounted So, quarter of months

still We XX% Hydraulic are about XXXX. will the this product takes increase of anticipating steering by take will to - sales. XX%

William Gregozeski

last coming have do up? And any you question plans CapEx all Okay, significant right.

Jie Li

increase on we don't CapEx. see a Okay, huge

capacity We will increase for product. EPS some of production the

maintenance put into money the some to continue will We CapEx.

CapEx we're together XXXX. seeing $XX about for So million

William Gregozeski

Thanks Okay, all guys. right.

Jie Li

you Thank

Operator

[Operator questions are no Instructions] There queue. in

Kevin Theiss

and again. with look safe for forward to you We like everyone be to today, thank participating speaking

Operator

today's does gentlemen, Thank and you conference conclude ladies call. this

for at a phone your you You participation. and lines day. wonderful this time may your Thank have disconnect