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China Automotive Systems (CAAS)

Participants
Kevin Theiss IR
Chen Hanlin Chairman
Qizhou Wu CEO
Jie Li CFO
William Gregozeski Greenridge Global
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to the China Automotive Systems' Second Quarter 2022 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Mr. Kevin Theiss. Kevin, over to you.

Kevin Theiss

Thank you, everyone, for joining us today. Systems' Quarter Automotive Call. China to XXXX Conference Second Welcome

They Qizhou Chairman, and Officer Joining with to the Systems. conference are translation. in Mr. questions of be Wu, later answer Automotive assistance Financial us today call Chief Chen; CEO; the available Li, Mr. China of will Jie

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

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

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

in dollars. For review our purposes call financial I'll the U.S. today, the results of

first the expectations. and automobile economy by the for We of of automobile environment, and and quarter that half Chinese year a XXXX. the year-over-year position. estate GDP X.X% was the commercial Chinese quarter XXXX the of China’s in Chinese industry raw XXXX. year-over-year quarter and in XX.X% in industrial and real of of second data challenging increase In XX.X% growth declined microchips interrupted supply X in year-over-year sales with second Automobile fell X second production X.X% Association material COVID-XX will from with X.X% review in from Automotive's components. decreased declined and recent a by including the dynamics first Investments and from automobile with for China the the in begin of same of growth of the year's X.X% market by slight XXXX. by in delivery first missed last compared reported good other months the period and XX.X% June Lockdowns restrictions finished year the in sales Manufacturers, vehicle of travel chains months vehicle sales mobile the The CAAM, passenger this delays

For higher, first X.X% Passenger X.X% declined automobile XX, higher SUVs X the rose X.X% sedans X.X% ended June by reported months XXXX, year-over-year with year-over-year. sales year-over-year. by year-over-year sales CAAM vehicle

vehicles declined sales by down respectively. However, year-over-year -- on a cross XX.X% by were XX.X% basis, NPV and XX.X%,

commercial Commercial Vehicle sales Products division, of markets quarter. business quarter, in The the second showed our XXXX. and second overall passenger commercial For first down sales declined X.X% our net X the sales bus by sector year-over-year XXXX by CAAM our data achieved grew year-over-year. both the sales XX.X% in XX.X% truck sales, for vehicle year-over-year XX.X% in the reflected growth, Chinese year-over-year were decline. Despite segments commercial overall Most weak market except vehicle vehicle the months and the which an of results of decline sales

the quarter mainly income profit, of compared operations second in mix second the as sales quarter year-over-year For XXXX changes the net in XXXX rose XXXX, year-over-year generate and of build higher sales net products, in sales. XX.X% of to our expenses, and quarter margin second in the helped represented second from increased controls development stricter strong year-over-year gross in XXXX. were gross product XX.X% lower to of steering technologies. we our our our Research and products advanced of of hydraulic X.X% EPS We second to X.X% the customers by steering, quarter net parts total cost export of Tier And X from sales the products the North in income million XX.X% million grew XXXX sales XX.X% as EPS million second XXXX. to year-over-year, growth. the to experienced $X.X net of quarter by to R&D, American while our continue XX.X%, due other Higher of $X.X electric in $X.X our power rose quarter

duty second early an enable signed fast-growing to income in income to second steering bus Combining -- quarter driver fully improve for agreement the known driving Truck vehicle commercial autonomous advanced an last in $X.XX execute for driving. trucks with was for per and markets. with as Global versus to ERCB we steering AB, XXXX platform, in the our our share $X.XX in X system LX electric further AB, subsidiary products and our expand XXXX, commercial NAV to commercial steering develop per is share Powerhouse, year. passenger systems allows our Sweden, and proprietary systems, steering ERCB assist vehicles. Scania second quarter autonomous us technology the vehicles Our Scania's Furthermore, In ERCB light APOX, vehicles. our our heavy-duty will a especially Level trucks intelligence technology, Scania system

million of of of June XXXX, had and working $XXX.X As XX, we million. $XXX.X and pledged plus capital cash cash equivalents

can use to repurchase of this program March resources common share XXXX. outstanding Our up million to buy through $X XX shares

discuss Before results, move the to like dynamics on I would recent of comment financial we Chinese to on the market. auto

particularly robust also encouraged purchase June million purchase Over a was demand plates passenger sales the chain, Local X.X are MPVs. alone, as XX% up offered by units tax including rebound governments favorable year-over-year SUVs sold, vehicle some sedans, have CAAM. more a well. recovered according and in vehicles We of available The policies, passenger to issued sales vehicles. passenger XX.X% were government pent-up of the by and vehicle for reduction and including supply license driven national vouchers mainly in June

Brazilian continue While American the to expand. North Chinese and automobile market operations is recovering, our

market greater and are share are gaining products Our capabilities. EPS NAV our acquiring more technologies

quarter XXXX. for me Let financial of now second review the the results

the in of by net in electric of for due quarter transportation products a million net million was XXXX. of XXXX. and by of quarter Our to by was $XX.X was compared $X.X X.X% quarter expenses, second $XX.X other expenses. for to the mix XXXX. the million 'XX of I the sales XX.X% quarter represent by $X.X go share net the million X Diluted to was $XX Diluted with in to was same quarter to of in rose decreased development second compared profits first share earnings margin of $X.XX XX.X% income before traditional compared second of in affiliated Net compared the Income Net for per $X.X highlights. million of to to the corresponding second of steering XXXX. of XXXX increased of quarter second year. million of operations EPS The products second million XXXX XX.X% XXXX. The of $X.X from million XXXX primarily in to XX.X% $X.X in million XXXX. -- second to from in of financial compared in net the to compared the average in XXXX for changes in of gross to million The quarter X compared increase second quarter of of expenses rose quarter second $X.X months due sales in first of the of XX.X% Selling quarter increase in million $X.XX of due The parts $X G&A, XXXX XXXX. second XXXX, quarter over was $X.X income net million in gross X.X% Gain diluted of $XX.X compared the the of X Income income sales shareholders the the attributable of of power in was Net operations X by second X-point in X.X% the XXXX the in of to represented $X.X XXXX XXXX. quarter compared second million was by which was which in will of attributable XXXX of June Interest substantially is consistent to X.X% X $X.X X in the X product shareholders $X.X net second XXXX. in the X.X% quarter was lower X higher 'XX to in in to on financial $XX.X first quarter in of Net of a to XXXX sales $X.X Net growth million to and XX,XXX,XXX common cost compared sales second attributable with million before $X.X the per second income change XXXX. second in compared first of $XX.X year. the was compared X.X% the corresponding expenses $X of in in of was X.X% -- $XXX.X quarter product of earnings $XX.X the Income million quarter second outstanding X-month compared second to parent compared of months net compared in in the compared was same quarter parent period of X.X% second to $X.XX million $X.X million $XXX.X the million XX.X% the $XXX.X XXXX. Selling of of the briefly $X.X quarter sales XX,XXX,XX to versus other million months in was due income the XXXX. XX, XXXX in primarily operations $X.X second to Gross and compared XXXX expense the common XXXX. months earnings parent in the $XXX.X to quarter of attributable million the first to to X quarter million higher in compared financial $X.X income the quarter $XX.X margin sales $XX.X in increased $XX.X the due weighted the XXXX. shareholders the second companies in year. to quarter income of expenses mainly $X.X price. shareholders primarily of was million XXXX. on million XXXX was for for in to increase expenses first was the income the to months selling net the Net XXXX million net to XXXX compared were expense sales million total of second of in million XXXX. in $XX.X first X.X% income in in $X.XX to in in in million to and million in period second XXXX. quarter was compared $X.X to equity in sales XXXX. expenses, last second last of the second the was common to second service decreased of professional share to sales months million of months was XXXX. XXXX was quarter number primarily of compared of benefit XXXX. and XXXX from of last XX.X% the quarter compared operations with period X to steering XX.X% the sales in net to quarter the new the of second second XXXX. compared million tax the margin months with quarter $X.X XXXX. in million company's sales profit the to an expenses company's compared increased Research in and corresponding to lower the X XXXX compared second with shares in second and $X.X exchange the gross sales from per shares million quarter in -- months compared first period quarter common second and XX.X%, quarter income million R&D, second of The in office $X.X other second gain XXXX, X million XXXX to XX.X% in million XXXX million rose with Export customers quarter XXXX, million second fees. period income $X and the same in income second earnings affiliated the million quarter period to million $XX.X American profit in income the foreign first General XXXX the quarter of common XXXX. North to Net consistent diluted growth. of of which of administrative XXXX. months in company's Gross of of the decreased by tax months earnings parent compared in companies company's net the to from G&A months quarter equity the quarter

Now a items. review of balance a few sheet

total were full XXXX, million of the the Total target revenue million. notes exchange XX, cash payable, short-term X equivalents foreign million are views Q&A. June in by Accounts $XXX.X operating due and begin June for economic the we guidance $XXX.X million, $XXX including parent ready plus as payable, to XX, impact With Total to XXXX The COVID-XX were has of loans to operator, and XXXX. business notes market This volatility. XXXX. receivable, of and conditions, provided Management on outlook. months year is subject are currently to based equity change. in was $XX.X million. were the $XXX.X its million that, As increased cash was on of company's million. cash, which $XXX.X company cash the receivable, the including $XX.X were activity stockholders' first operating Net accounts due

Operator

is coming William from Global. [Operator Instructions] Your question first Greenridge from Gregozeski

William Gregozeski

going in What Excellent X expecting highest the forward? guys level is was quarter. years. you The margin gross the margin reported you're like

Jie Li

main highest reached -- is of margin main of increase There one X gross is the quarter the the X It [Foreign the Language] years. attributable record in Yes, -- the are last gross to factors XX.X%. margin. our in it second our

power product. electric of good our We're a is fairly to that First finally steering scale. getting stage economy a reach

been increased volume cost Our has significantly and down. our coming

EPS price the product. a So on and And allows on in selling to our the also volume good addition we average cost increased efficiency. that, reduction very increase

on posting So now -- EPS gross recent EPS history our And -- This exceeded XX%. a the is in good our has single gross phase the EPS result, highest our gross margin ForEx. also and the we boost Looking margins our pretty Language] a was reason gross gross [Foreign second against around our for slight digit. to gross margin. margin past, And RMB is believe product the at in The we're increase product of U.S. EPS because help forward, margin. dollar can improve. further margin as

are as also the And and coming of good. pretty us the bring even reaching EPS we really look have the better -- And order believe to will further increased our the abundant a increase. total volume scale. down We economy we volume further order cost, can books percentage help

think margin As to -- have a XX% to forward-looking XX% EPS further the both, just there's along I quarters. result further in room the EPS be is going our we the for increase And -- improvement. of gross some coming margins gross foreseen to

William Gregozeski

now? Okay. then in repurchasing Great, guys Have quarter shares the that you last current great. we're And in question. continued

Jie Li

[Foreign answer Language] is The yes.

already have to overall We in XXX,XXX the repurchase the since repurchased over will in shares It continue shares market. announcement.

William Gregozeski

Okay. Great.

Operator

It no Kevin the back to any Okay. we further now have hand appears I questions over Instructions] [Operator in will remarks. closing for queue.

Kevin Theiss

and everyone look thank again. joining to with to we want us speaking you forward We today, for

keep and you call. conference on you. quarterly the to we’ll safe, next Thank talk So please

Operator

today’s Thank conference you. call. this Ladies and gentleman, conclude does

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