Q4 2023 China Automotive Systems Inc Earnings Call
Okay.
Operator: Transcribed by https://otter.ai Greetings. Welcome to the China Automotive Systems fourth quarter and fiscal year 2023 conference. At this time, all participants are in a listening position. A question and answer session will follow the formal presentation. If you would like to ask a question, please press star one at any time during the presentation. If anyone should require operator assistance, please press star zero on your telephone. Please note this conference is being broadcast. I will now turn the conference over to your host, Kevin Theiss. Thank you, everyone, for joining us today.
[music].
Greetings welcome to the China automotive systems fourth quarter and fiscal year 2023 conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you would like to ask a question. Please press star one at any time during the conference.
If anyone should require operator assistance. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to your host Kevin Six you may begin.
Kevin Theiss: Thank you everyone for joining us today welcome to China automotive systems, 2023, fourth quarter and year conference call.
Kevin Theiss: Welcome to China Automotive Systems' 2023 fourth quarter and year conference call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation.
Kevin Theiss: Joining us today are Mr. Jay Li Chief Financial Officer of China Automotive systems. He will be available to answer questions. Later in the conference call with the assistance of translation.
Kevin Theiss: Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. 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 and Results of Operations in the company's data Form 10-K Annual Report for the year ended December 31, 2023, as filed with the Securities and Exchange Commission, and in other documents filed by the company from time to time with the securities in exchange. Any of these factors and other factors beyond our control could have an adverse impact on the overall business environment, cause uncertainties in the region 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.
Kevin Theiss: Before we begin I will remind all listeners that throughout this call. We may make statements that may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Kevin Theiss: Forward looking statements represent the company's estimates and assumptions.
Kevin Theiss: As of the date of this call 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.
Kevin Theiss: Also of operation in the company.
Kevin Theiss: Form 10-K annual report for the year ended December 31, 2023, that's filed with the Securities and Exchange Commission and in other documents.
Kevin Theiss: Documents filed by the company from time to time with the Securities and Exchange Commission.
Kevin Theiss: Any of these factors and other factors beyond our control could have an adverse impact on the overall business environment pause uncertainties in the region, where we conduct business.
Kevin Theiss: Our business the softer in ways, we cannot predict all materially and adversely impact our business financial condition and results of operations.
Kevin Theiss: A prolonged disruption or any unforeseen delay in our operations or the manufacturing, delivery, and assembly processes within any of our production facilities could result in delays in the shipment of products to our customers, increase costs, and reduce revenue. The company expressly disdains any duty to provide updates to any forward-looking statements made in this call, whether as a result of new information, future events, or otherwise. On this call, I'll provide a brief overview and summary of the fourth quarter and annual results for the period ended December 31, 2023. Management will then conduct a question and answer session.
Kevin Theiss: A prolonged disruption or any unforeseen delay in our operations or the manufacture and delivery.
Kevin Theiss: And if somebody processes within any of our production facility could result in delays in the shipment of products to our customers increased cost any of these revenue.
Kevin Theiss: The company expressly disclaims any duty to provide updates to any forward looking statements made in this call whether as a result of new information future events or otherwise.
None: On this call I'll provide a brief overview and summary of the fourth quarter and you gotta be adults for the period ended December 31 2023.
None: Management will then conduct a question and answer session.
Kevin Theiss: Excuse me, the 2023 fourth quarter results are unaudited. However, the year results are audited. Financial results are reported in U.S. GAAP accounting. For the purposes of our call today, I'll review the financial results in U.S. dollars. We'll begin with a review of some of the company's highlights, recent dynamics in the Chinese economy and automobile industry, and our market position. We are pleased to report that in 2023, we achieved record net sales of $576.4 million, our gross margin rose to 18%, operating income was 390% higher, and diluted net income per share increased by 81.2% to $1.25 per share. We ended the 2023 year on a high note with the fourth quarter results achieving the largest quarterly net sales of 2023 at $159.2 million, the largest quarterly percentage sales gain at 23.6% year over year for 2023, and the highest quarterly net income attributable to the parent company's common shareholders at 10 million, I'm sorry, $10.9 million during the year. We accomplished this in an unsettled economy in China. The Chinese GDP growth rate, Excuse me, accelerated to approximately 5.2% in the 2020s, in 2023, and up to 3% growth in 2022. Which period partially affected the lingering effects of post-COVID-19 recovery?
None: [laughter] excuse me, that's why 23 fourth quarter results are unaudited.
None: Your results are audited financial results are reported in U S GAAP accounting for.
None: For the purposes of our call today I'll review the financial results in U S dollars.
None: Well begin with review of some of the company's highlights recent dynamics of the Chinese economy automobile industry and our market positions.
None: We are pleased to report that 2023 achieved record net sales of $576 $4 million, our gross margin rose to 18% operating income was 390% higher than diluted net income per share increased by 81.2% to $1 25 per share.
None: We ended the 20th year on a high note with our fourth quarter results, achieving the largest quarterly net sales of 2023 at $159 $2 million the largest quarterly percentage sales gain at 23, 6% year over year for 2023.
And the highest quarterly net income attributable to parent company's common shareholders at 10 million sorry $10.9 million during the year.
None: When we accomplish these in an unsettled economy in China.
None: The Chinese GDP growth rate.
None: Excuse me accelerated to approximately five 2% in the 'twenty 2020 'twenty three.
None: Up to 3% growth in 2022.
None: Each period, partially reflected the lingering effects of a post COVID-19 recovery.
Kevin Theiss: According to statistics from the Chinese Association of Automobile Manufacturers, CAAM, passenger automobile unit sales in China for the fourth quarter of 2023 included a growth of 11.4% year-over-year in October, an increase of 25.3% year-over-year in November, and a rise of 23.3% year-over-year in December. Commercial Vehicle Unit Sales during the fourth quarter of 2023 reflected an increase of 33.4% in October, followed by a 44.6% year-over-year rise in November and a 25.1% year-over-year increase in December. 2023 fourth quarter operating income from operations climbed to $13.6 million due to gross margin rising to 21.8% as the product mix changed and operating expenses declined by 12.4% year-over-year. Our increasing efficiency led to reduced selling, GNA, and R&D expenses in the fourth quarter of 2023.
None: According to statistics from the Chinese Association of automobile manufacturers C. H M passenger.
None: Passenger automobile unit sales in China for the fourth quarter of 2023, including the growth of 11, 4% year over year in October.
None: And then can you for 25, 3% year over year in November.
None: Analyze according to your 0.3% year over year in December.
None: Commercial vehicle unit sales during the fourth quarter 2022 we reflected an increase of 33, 4%.
None: In October followed by 44, 6% year over year rise in November and at 25, 1% year over year increase in December.
None: Okay.
None: R 2023 fourth quarter operating income.
None: From operations climbed to $13 $6 million due to gross margin rising to 21, 8% as the product mix changed and operating expenses declined by 12, 4% year over year.
None: Are we increasing efficiency led to reduced selling.
None: G&A and R&D expenses in the fourth quarter of 2023.
Kevin Theiss: The diluted income per share rose by 157.1% to $0.36 compared to 14%, I'm sorry, $0.14 in the fourth quarter of 2022. For 2023, CAAM reported passenger vehicle sales rose by 10.6% year-over-year, and commercial vehicle sales increased by 22.1% year-over-year. Our 2023 net sales increased by 8.8% in 2023 due to greater demand for Chinese passenger vehicles and a 22.9% year-over-year growth in net sales in Brazil with higher sales to Stellantis. However, sales in North America declined by 18.5% year-over-year to $115.9 million in 2023, partially reflecting the impact of the auto workers' strike in North America as production began to ramp up in the fourth quarter of 2023. Net sales of traditional steering products and parts were $381.6 million, up 2.2% year over year.
None: Diluted income per share.
None: Rose by 157, 1% to 36 cents compared to 14% I'm, sorry, 14 cents in the fourth quarter of 'twenty to 'twenty two.
None: For 2023 C. I a N reported passenger vehicle sales rose by 10.6% year over year in commercial vehicle sales increased by 21% year over year.
None: Our 2023 net sales increased by eight 8% in 2023 due to greater demand for Chinese passenger vehicles.
None: And at 22, 9% year over year growth in net sales in Brazil with higher sales to the Lantus sales.
None: Sales in the North America declined by 18.5% year over year to 115 nine.
None: Dollars in 'twenty, two 'twenty, three partially reflecting the impact of the autoworkers strike in North America as production began to wrap up and ramped up in the fourth quarter of 'twenty or 'twenty three.
None: Net sales of traditional steering products and parts or $381.6 million up 2.2% year over year.
Kevin Theiss: Net sales of electric power steering EPS grew by 24.6% year over year to $194.8 billion, an increase as a percentage of sales to 33.8% in 2023. Net product sales of other entities rose by 20.7% year-over-year to $112.1 million, primarily due to higher sales by Wuhan Jilong, our producer of steering columns. Our sales into the commercial vehicle market were essentially flat in 2020, partially due to reduced demand in certain market segments. As a percentage of total sales, domestic Chinese sales increased to 65.1% of our total sales in 2023. Sales in the United States declined to 19.3%, and other export markets increased to 15.6% of our total sales. Domestically, key customers included BYD, the largest EV producer in China, and Dongfeng Auto Group. DK Photon Motor Corp., and we are developing C-EPS, DP-EPS, and R-EPS products for BYD in addition to supplying traditional steering products.
None: Net sales of electric Power's theory E P S.
None: Grew by 24, 6% year over year to $194 $8 million, an increase as a percentage of sales to 33.8%.
None: In 2023 net product sales of other entities.
None: 27% year over year to $112 $1 million.
None: Mainly due to a higher sales by Wuhan belong or producer.
None: Steering columns.
None: Our sales into the commercial vehicle market were essentially flat in 'twenty.
None: Partially due to reduced demand in certain market segments.
None: As a percentage of total sales domestic Chinese sales increased to 65, 1% of our total sales in 2023 sales in the United States declined to 19, 3% and other exports markets increased to 15, 6% of our total sales domestically key customers, including BYD the.
None: Just eat producer in China, Dongfeng Auto group.
None: Vaca for photo Hilltop Motor Corp.
None: And we are developing C. E. P. S. D. P E. P. S. R E. P S products hard BYD and in addition to supplying traditional steering products.
Kevin Theiss: We are also working on new products for other current customers with the potential for new customers, including potential new customers, including other automobile OEMs and emerging technology companies entering the NEV space. The high performance and quality of our products has spurred our growth in markets beyond China. In North America, customers include Jeep, Ram, and Ford. In South America, Stylantos and Sherry Autos' Brazilian operations are our primary customers.
None: We are also working on new products for other current customers with a potential with potential new customers, including other automobile Oems in emerging technology companies entering the any lease rates.
None: The high performance and quality of our products has spurred our growth in markets beyond China.
None: In North America customers include Jeep Ram and forward in South America, the Atlantis and Chery Auto's Brazilian operations are our primary customers.
Kevin Theiss: Mahindra and Mahindra is a large customer in the Indian automobile market. Our products are also beginning to penetrate the European market with companies such as Alfa Romeo and AB and through our subsidiary, Sympion AB, a Swedish automotive technology company. For 2023, we reduced our R&D by 19.1%, primarily due to the maturing of current new product development and less activity for additional new product development for traditional products. Our product portfolio includes Integral Rack and Pinion Steering, High Pressure Power Steering, Electric Power Steering, Advanced Driver Assist Systems, ADAS, Automotive Electronics, Intelligent Automotive Technologies, Automotive Motors and Electromechanical Integrated Systems, Vehicle Software and Motion Controls, High-Polymer Materials, as well as Developing New Cost-Saving Manufacturing Processes.
None: And Mahindra is a large customer and the Indian automobile market.
None: Our bikes are also beginning to penetrate the European market with companies such as Alfa Romeo.
And the a b and through our subsidiary Cynthia a be a Swedish automotive technology company.
None: Excuse me for 2023, we've reduced our R&D by 19, 1%.
None: Primarily due to the maturing of current new product development and less activity for additional new product development for the traditional products.
None: Our product portfolio includes integral rack and pinion steering high pressure power steering electric power steering.
None: Driver assist.
None: <unk> a D a S.
None: Automotive electronics intelligent automotive technologies odd.
None: Automotive motors and electromechanical integrated systems vehicle software and motion controls high polymer materials as well as developing new cost savings and manufacturing processes.
Kevin Theiss: We collaborate with our OEM customers to advance our technology base and develop products to meet their specific performance and quality requirements. Our expanded series of UPS products has gained greater market reception. Unknown Speaker Our change in sales has improved our margins. We look forward to our ADAS, our A-D-A-S, product standard, and greater commercial acceptance in the future. There are several trends that act as growth catalysts for our future. First, the Chinese automobile market. It's already the world's largest single market, and Chinese-branded vehicles are gaining market share from Western-based joint ventures in the domestic market.
None: We collaborate with our OEM customers to advance our technology base and develop products to meet their specific performance and quality requirements are expanding series E. P. S products have gained radar market reception.
None: Our changing sales mix has improved our margins.
None: We look forward to our a b S. R. A D. A S products' union greater commercial acceptance in the future.
None: There are several trends that act as growth catalyst for our future sales.
None: First the Chinese automobile market.
None: <unk> is already the world's largest single market.
None: And Chinese branded vehicles are gaining market share from western based JV in the domestic market.
Kevin Theiss: Second, China is also the world's leading EV market. 37.9% unit growth in 2023 in China, including 24.3% unit growth in battery-powered electric passenger vehicles. It's important to note that most Chinese EV operators have been self-developed without foreign participation.
None: Second China is also the world's leading EV market.
None: It was 37, 9% unit growth from 'twenty to 'twenty three.
None: In China Okay.
None: 24.3% unit growth in battery powered electric passenger vehicles.
None: Important to note that most Chinese E operators have been self developed without foreign participation.
Kevin Theiss: In China, there are standalone EV producers, traditional OEMs with both internal combustion engines and, and high-tech companies that have entered the EV marketplace. These tech companies are differentiating themselves by adding more technology, including advanced steering such as our ADAS. However, to capture more market share, Chinese OEMs are building lower-priced EVs to attract more buyers. With a wider price range, EV producers are better able to compete with internal combustion engine vehicles on price. Chinese EVs are also beginning to benefit from a growing economy of scale and strengthening EV supply chains, thus providing an advantage in global markets. In 2023, the CAAM statistics show that Chinese automobile unit exports jumped by 57.8% year-over-year, and recently, Chinese auto exports surpassed Japan to become the global automobile export leader. Chinese exports were mostly internal combustion engine vehicles in 2023, but China has also become the largest exporter of EVs as well. Now EV exports are smaller in number, the emergence of more affordable EV models will enhance Chinese EV export unit sales, especially in more advanced car markets, which are preparing to transition away from internal combustion engines.
None: In China, there are standalone EV producers traditional Oems with both internal combustion engine on Evs.
None: Oh, Hi Tech companies that have entered into the EV.
None: Marketplace.
None: These tech companies are differentiating themselves by adding more technology and features.
Living in advanced hearing such as our a D. A S systems.
None: However to capture more market share Chinese Oems are building lower priced E V to attract more buyers with a wider price range eating your producers are better able to compete with the internal combustion engine vehicles on a price basis.
None: Chinese my knees are beginning to benefit from a growing economy of scale will strengthen the EV supply chains does provide you an advantage in global markets.
None: 23 C. A a M statistics show that Chinese automobile unit exports.
None: Jumped by 57, 8% year over year, and recently Chinese auto exports surpassed Japan become the global automobile export leader.
None: Chinese exports exports were mostly internal combustion engine vehicles in 'twenty two 'twenty three but China has also become the largest exporter of E as well.
None: Well I E. The exports are smaller in number the emergence of more affordable E model will enhance Chinese EV export unit sales, especially in more advanced car markets.
None: We are preparing to transition away from internal combustion engines.
Kevin Theiss: Increased competition among Chinese vehicle OEMs, greater access to overseas markets, and more vehicle models creates greater growth opportunities as we are a leading developer and producer of steering systems for Chinese branded vehicles. Let me review the financial results and the fourth quarter of 2023. In the fourth quarter of 2023, net sales increased by 23.6% to $159.2 million compared to $128.8 million in the same quarter of 2022. The net sales increase was mainly due to a change in the product mix and higher demand for passenger automobiles and commercial vehicles in the fourth quarter of 2023 compared to the fourth quarter of 2022. Gross profit increased by 38.8% to $34.7 million in the fourth quarter of 2023 compared to $25 million in the fourth quarter of 2022.
None: Increased competition among Chinese vehicle Oems.
None: Greater access to overseas markets and more vehicle models creates greater growth opportunity as we are a leading developer and producer of steering systems to Chinese branded vehicles.
None: Okay.
None: Let me review the financial results and fourth quarter of 2023.
Fourth quarter 2023, net sales increased by 23, 6%.
None: Do you want her $59.2 million compared to $128 $8 million.
None: Quarter of 2022 the net sales increase was mainly due to a change in the product mix and higher demand for passenger automobiles and commercial vehicles in the fourth quarter of 2023 compared to the fourth quarter 2022.
None: Gross profit increased by 38, 8% to $34 $7 million in fourth quarter 2023, compared to $25 million in the fourth quarter 2022.
None: Margin in the fourth quarter of 2023 was 21, 8% compared to 19, 4% in the fourth quarter of 2022, primarily due to a change in product mix.
None: Selling expenses were $4 6 million in the fourth quarter 'twenty to 'twenty, three which is stable compared with $4 $6 million in the fourth quarter of 2022 salary expenses represented two 9% of net sales in the fourth quarter of 2023 compared to three 6% in the fourth quarter of 2022.
Kevin Theiss: Gross margin in the fourth quarter of 2023 was 21.8% compared to 19.4% in the fourth quarter of 2022, primarily due to a change in product mix. Down expenses were $4.6 million in the fourth quarter of 2023, which is stable compared with $4.6 million in the fourth quarter of 2022. Selling expenses represented 2.9% of net sales in the fourth quarter of 2023 compared to 3.6% in the fourth quarter of 2022. General Administrative Expenses, or G&A, were $9.4 million in the fourth quarter of 2023, compared to $10.8 million in the same period in 2020.
General and administrative expenses G&A were $9 $4 million in the fourth quarter 2023, compared to $10 $8 million in the same periods in 2022.
None: G&A expenses represented five 9% of net sales in the fourth quarter of 'twenty to 'twenty three compared to eight 4% of net sales in the fourth quarter 2022.
None: Research and development expenses R&D were $9 $3 million in the fourth quarter 2023 <unk>.
None: Compared to $10.6 million in the fourth quarter of 2022 R&D expenses represented.
Five 8% of net sales in the fourth quarter of 2023 compared to eight 2% in the fourth quarter of 2022.
None: Mainly due to a decrease in new product development expenses for the traditional products.
Kevin Theiss: TNA expenses represent 5.9% of net sales in the fourth quarter of 2023 compared to 8.4% of net sales in the fourth quarter of 2022; research and development expenses (R&D) for $9.3 million in the fourth quarter of 2023, compared to $10.6 million in the fourth quarter of 2022. R&D expenses represented 5.8% of net sales in the fourth quarter of 2023 compared to 8.2% in the fourth quarter of 2022. This is mainly due to a decrease in new product development expenses for the traditional product.
None: Operating income was $13 $6 million in the fourth quarter of 2023 compared to a loss from operations of $2 $6 million in the fourth quarter 2022.
None: Higher operating income was primarily due to increased gross profit and lower operating expenses in 2023.
None: The fourth quarter compared with the same period last year.
None: Interest expense was point $3 million in both the fourth quarter of 2023 and 2022.
None: Financial income was $1 million in the fourth quarter of 'twenty to 'twenty three.
None: Compared to $1 $4 million in the fourth quarter with what you wanted to do.
None: Due to lower foreign exchange gains.
None: Income before income tax expenses and equity in earnings that we get any companies.
None: $15 million and.
None: Fourth quarter of 2023 compared to a loss.
None: Oh $2.7 million in the fourth quarter of 2022.
None: Income tax expense was $2 $1 million in the fourth quarter of 2023 compared to an income benefit of $1 $9 million in the fourth quarter of 2022.
Kevin Theiss: Operating income was $13.6 million in the fourth quarter of 2023 compared to a loss from operations of $2.6 million in the fourth quarter of 2022. Higher operating income was primarily due to increased gross profit and lower operating expenses in 2023. Fourth quarter, compared with the same period last year, interest expense was $0.3 million in both the fourth quarter of 2023 and 2022. Financial income was $1 million in the fourth quarter of 2023, compared to $1.4 million in the fourth quarter of 2022, due to lower forward exchange gains.
None: Net income attributable to parent company's common shareholders rose by 153, 5% to $10 $9 million in the fourth quarter 2022 three compared to net income attributable to parent company's common shareholders.
None: [laughter].
None: That's $4 $3 million in the fourth quarter of 2022.
None: Diluted income per share was 36 cents in the fourth quarter of 2023 compared to 14 in the fourth quarter of 2022.
None: The weighted average number of diluted common shares outstanding was $30 million 189421.
None: Fourth quarter of 2023, compared with 30.229 million 987 minutes.
None: Fourth quarter of 2022.
None: Now I will review the highlights for the 2023 years.
Kevin Theiss: Income for income tax expenses and equity and earnings of affiliated companies was $15 million in the fourth quarter of 2023 compared to a loss of $2.7 million in the fourth quarter of 2022. Income tax expense was $2.1 million in the fourth quarter of 2023, compared to an income benefit of $1.9 million in the fourth quarter of 2022. Net income attributable to the parent company's common shareholders rose by 153.5% to $10.9 million in the fourth quarter of 2023, compared to net income attributable to the parent company's common shareholders in the previous year. Unknown Speaker 0.0.0 $4.3 million in the fourth quarter of 2020. Diluted income per share was $0.36 in the fourth quarter of 2023 compared to $0.14 in the fourth quarter of 2022. The weighted average number of diluted common shares outstanding was $30,189,421, in the fourth quarter of 2023 compared with $30,229,987 in the fourth quarter of 2022. Now we'll review the highlights for the 2023 year.
None: Yes.
None: Net sales increased by 8.8% to $576 $4 million in 2023.
None: Compared to $529 $6 million in 2022. This increase was mainly due to higher sales.
None: Singer vehicles in China as total sales.
None: Yeah.
None: The company's EPS systems increased by 24, 6% year over year.
None: And sales of the Companys headlong subsidiary vehicle steering systems to the Chinese vehicle passenger market increased by 10, 1%.
None: Year over year, Brazil.
None: <unk> net sales.
None: Grew by 22, 9% year over year to $48 $3 million in 2023.
None: This growth, partially offset an 8.5.
None: <unk> percent year over year sales reduction by North American customers in 2023.
None: E. P. S. O sales represented 33, 8% of total revenue in 2023 compared to 29, 5% 2022.
None: Yeah.
None: Okay.
None: Gross profit in 2023 increased by 24, 5% year over year to $103 $8 million.
None: [laughter].
None: Compared to $88 4 million now 2022.
None: Gross margin increased to 818% and 15, 7% in 2018, mainly due to a change in our product mix for the year ended December 31 2023.
None: Net gain on other sales in 2023 increased to $5 $8 million.
Kevin Theiss: Net sales increased by 8.8% to $576.4 million in 2023. Compared to $529.6 million in 2022, this increase was mainly due to higher sales of passenger vehicles in China. As total sales of the company's EPS system increased by 24.6% year over year, and sales of the company's Henlong subsidiary vehicle steering systems to the Chinese vehicle passenger market increased by 10.1% year over year, Brazil Henlong net sales grew by 22.9% year over year to $48.3 million in 2023. This growth partially offsets an 8.5% year-over-year sales reduction by North American customers in 2023.
None: $3 $7 million in 2022 mainly due to an increase R&D revenue.
None: [laughter].
None: Excuse me.
None: Selling expenses declined by seven 7% year over year to $15 $6 million in 2020 three compared to $16 9 million in 2022.
None: Mainly due to a decrease in transportation expenses.
None: Selling expenses represented two 7% of net sales in 2023 compared to three 2% in 2022.
None: G&A expenses decreased by two 3% year over year to $25 $5 billion in 2023 compared to $26 one.
None: $1 million in 'twenty to 'twenty two.
None: G&A expenses represented four 4% of net sales in 2023 compared to four 9% of net sales in 2020 to this.
Kevin Theiss: EPS sales represented 33.8% of total revenue in 2023 compared to 29.5% in 2022. Gross profit in 2023 increased by 24.5% year over year to $103.8 million. Unknown Attendee, China Automotive Systems Inc., compared to 83.4 million in 2022. Gross margin increased to 18% from 15.7% in 2022, mainly due to a change in our product mix for the year ended December 31, 2023.
None: This decrease was mainly due.
None: Two the decrease of allowances for credit losses.
None: R&D expenses declined by 19, 1%.
None: $99.2 million in 2023 compared to $36 $1 million in 2022.
None: The decrease was primarily due to the decreased R&D activities for new projects or traditional products R&D expenses were five 1% of sales in 2023 compared to six 8% of net sales in 2022.
None: Operating income increased by 390 per cent to $39 $2 million in 'twenty, two 'twenty three compared to $8 million in 2022.
Kevin Theiss: Net gain on other sales in 2023 increased to $5.8 million, compared to $3.7 million in 2022, mainly due to an increased R&D revenue. Excuse me, selling expenses declined by 7.7% year over year to $15.6 million in 2023 compared to $16.9 million in 2022, mainly due to a decrease in transportation expenses. Selling expenses represented 2.7% of net sales in 2023 compared to 3.2% in 2022. G&A expenses decreased by 2.3% year over year to $25.5 billion in 2023 compared to $26.1 million in 2022. G&A expenses represented 4.4% of net sales in 2023 compared to 4.9% of net sales in 2022. These three queries were mainly due to the decrease of allowances for credit loss.
None: Kris and operating income was mainly due to a 24, 5% increase in gross profit combined with a 11, 1% decrease in operating expenses.
None: Interest expense was $1 million in 2023 compared to $1 5 million from 'twenty to 'twenty, two primarily due to a decrease in borrowing rates.
None: Net financial income was $4 $7 million in 'twenty to 'twenty, three compared to net financial income of $10 $8 million in 2022, primarily due to a decrease in the foreign exchange gains contributed by the foreign exchange volatility in 2020 three.
None: Income before income tax expenses and equity in the earnings.
None: Earnings of affiliated companies Rose by 109, 6% to $48 $2 million compared to $23 million in 'twenty 'twenty. Two the change was primarily due to higher operating income in 2023.
None: Income tax expense was $5 $1 million in 'twenty, and 'twenty, three as compared to $3 $1 million.
None: For the year ended December 31, 2022, representing an increase of $2 million, which is mainly due to the increase in G. I L. T I tax expenses.
Kevin Theiss: R&D expenses declined by 19.1% to $29.2 million in 2023 compared to $36.1 million in 2022. The decrease was primarily due to decreased R&D activities for new projects for traditional products. R&D expenses were 5.1% of sales in 2023 compared to 6.8% of net sales in 2022. However, operating income increased by 390%. $39.2 million in 2023 compared to $8 million in 2022. The increase in operating income was mainly due to a 24.5% increase in gross profits combined with an 11.1% decrease in operating expenses. Interest expense was $1 million in 2023 compared to $1.5 million in 2022, primarily due to a decrease in borrowing rates. Net financial income was $4.7 million in 2023 compared to net financial income of $10.8 million in 2022, primarily due to a decrease in the foreign exchange gains contributed by the foreign exchange volatility in 2023. Income for income tax expenses and equity in the earnings of affiliated companies rose by 109.6% to $48.2 million compared to $23 million in 2022.
None: Net income attributable to parent company's common shareholders was $37 $7 million in 'twenty two 'twenty three.
None: Compared to net income attributable to parent company shareholders of $21.2 million in 2022 diluted net income per share increased by 81, 2% to $1 25, and 2023 compared to 69 cents in 2022.
None: The weighted average number of diluted common shares outstanding was 31.
None: 189421, and 2023 compared to $30 million 641274 in 2022.
None: Balance sheet items.
None: 31, 2023, total cash cash equivalents pledged cash and short term investments were 160 <unk> Paul.
None: $3 million or approximately $5 50 per share.
None: Our current ratio was almost 1.5 and long term loans were $1 2 million.
None: Total accounts receivable, including notes receivable with $269 $4 million accounts payable, including notes payable were $253 $6 million total parent company stockholders equity was $344.5 million as of December 31, 2023.
None: Compared to $311 $7 million as of December 31, 2022.
None: Net cash provided by operating activities was $19 $9 million in 2023.
None: Compared to net cash provided by operating activities of $48 million in 2022 payments to acquire property plant and equipment were $18 $2 million compared to $23 million in 'twenty to 'twenty two.
Kevin Theiss: The change is primarily due to higher operating income in 2023. Income Tax Suspense was $5.1 million in 2023, as compared to $3.1 million for the year ended December 31, 2022, representing an increase of $2 million, which is mainly due to the increase in the GILTI tax. Net income attributable to parent companies common shareholders was $37.7 million in 2023 compared to net income attributable to parent companies shareholders of $21.2 million in 2020; diluted net income per share increased by 81 The weighted average number of diluted common shares outstanding was $30,189,421 in 2023 compared to $30,641,274 in 2022, balance sheet items.
None: The business outlook management applied your revenue guidance for the full year 2000 $24 million to $605 million. This target is based on the company's current view on operating and market conditions, which are subject to change.
None: With that operator, we are ready to begin the Q&A.
None: Yeah.
None: Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
None: Confirmation tone will indicate your line is in the question queue.
None: You May press Star two if you would like to remove your question from the queue.
None: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
None: Your first question for today is from Margaret Wilson, a private investor.
Kevin Theiss: As of December 31, 2023, total cash, cash equivalents, pledged cash, and short-term investments were $160,000. Unknown Speaker $0.3 million, or approximately $5.50 per share. Our current ratio is almost 1.5, and long-term loans were $1.2 million. Total accounts receivable, including notes receivable, were $269.4 million. Accounts payable, including notes payable, were $253.6 million.
None: Yes.
Margaret Wilson: What products are you selling.
Margaret Wilson: To be wide T.
Margaret Wilson: Please.
Margaret Wilson: Joe do you want to.
Joe: Two zero Monte Carlo and tissue woman Nasally, my guess be IV nasal hunting.
A woman so he is all set up yet.
Joe: Jimmy another guy.
Joe: So that's a hold on why she so he's long genes that can go on to American manpack, Draglines hunting, sometimes I'll beat our tongues. Other so Hong Kong is you'd have a fact I'm sitting at fighting shape out each year out of Hawaii in the midterm.
Kevin Theiss: Total parent company stockholders' equity was $344.5 million as of December 31, 2023, compared to $311.7 million as of December 31, 2022. Net cash provided by operating activities was $19.9 million in 2023, compared to net cash provided by operating activities of $48 million in 2022. Payments to acquire property, plants, and equipment were $18.2 million, compared to $20.3 million in 2020.
Joe: So that you can pay it off some Thompson Medicare sheen collar sorts of after the ALJ get deep C. A R. E T S E T S Tennessee.
Joe: Okay.
Joe:
Joe: So BYD is our strategic partner the relationship goes a long way from the very early.
Joe: When they start to enter automotive industry.
Joe: Over the years.
Joe: We expanded and further on the partnership.
Joe: Now, they're they have become the largest E.
Joe: E D producer in.
Joe: In China.
Joe: And about to become.
Joe: Largest if you're making in the world.
Joe: In terms of the product we.
Kevin Theiss: The Business Outlook. Management provides revenue guidance for the full year 2024 of to $605 million. This target is based on the company's current view on operating and market conditions, which are subject to change.
Joe: Why are we so with clients with the traditional hydraulic.
Joe: And the steering systems, we also.
Joe: Suffice it on the E P S.
Joe: Our EPS product.
Operator: With that operator, we are ready to begin the Q&A. Certainly, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the queue. You may press star two if you would like to remove your question.
Joe: In terms of vehicle models.
Joe: There's a wide range.
Joe: Matos BYD models are using our steering assistance, that's including song.
Joe: Hong Kong goes us three.
Joe: Marquee product.
Joe: And also there are ocean serious product like a seal.
Operator: Participants using speakery. It may be necessary to pick up your handset before pressing the start button. One moment, please, while we pull for our first question for today is from Margaret Wilson, a private, Unknown Speaker. What product are you selling? to BYD, please.
Joe:
Joe: You can see this product are selling very well throughout China and also expanding globally.
None: Thank you.
None: Thank you.
None: Once again, if there are any questions. Please press star one.
None: Your next question for today is from Gary Nash, a private investor.
Unknown Executive: This is our first question, an investor question. His question is, what kind of product are we selling to BRD? We have established a strategic partnership relationship with BYD. We supply many of their cars. For example, Song, Han, Tang and their marine series, Hai Teng, Hai Bao, etc. We supply them. In terms of product models, there are mainly DP and R EPS, Ah, so BYD is our strategic partner. The relationship goes a long way from the very early days when they started to enter the automotive industry, and over the years, we have expanded and furthered our partnership. Now they have become the largest EV producer in China and are about to become the largest EV maker in the world. In terms of products, we supply to them the traditional hydraulic in the steering systems. We also supply to them CEPS, the REPS product. In terms of vehicle models, there is a wide range of models; BYD models are using our steering systems, including Song, Han, and Tang.
None: Okay.
Gary Nash: Good day everyone.
Gary Nash: First of all our congratulation strong performance given the challenges facing our alright fair enough.
Gary Nash: <unk> economy.
Gary Nash: Here's my question what is your expected capital expenditures for the 'twenty 'twenty four year and also what are your capital priorities in 2024.
Gary Nash: Okay.
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Gary Nash: Steve will Nokia with the capital priorities were superb.
Gary Nash: So you got somebody to towards that channel.
Gary Nash: What was it in the paper.
Gary Nash: In Acs shovels with Panther.
Unknown Executive: Those are three marquee products, and also their ocean series products, like Seal. You can see these products are selling very well throughout China and also expanding. Thank you. Again, if there are any questions, Star.
Gary Nash: To each has done just won't tune Danielle cut bothers you Sean.
Gary Nash: As soon as the Zhengzhou.
Gary Nash: Okay.
Gary Nash: Kansian Medici I'm thinking if I, so I'm going to get phased <unk> launch out until you get to get them to go and she was as he had seen that shifted to something Jim fish.
Unknown Attendee: Your next question for today is from Gary Nash, a private citizen. Good day, everyone. First of all, congratulations on the performance, given the challenges facing China and the Chinese economy. Here's my question.
Gary Nash: So you sometimes see in Egypt, so at all.
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Gary Nash: Jim.
Gary Nash: So again, so you only get kind of thought this year, but you are seeing each other times a day.
Unknown Attendee: What is your expected capital expenditures for the 2024 year? And also, what are your capital priorities in 2024? Okay, this is our investor. His question, first of all, congratulates us on this, to achieve superior performance, especially in the current environment, the environment in China, to achieve such excellent performance. He has a question.
Gary Nash: Also I R. C. P E. R. C D G I'm quantum Zynga Vik, what you saw since we begin shipments and wish him up on megawatt meeting she they will not take care of our older. They made that a G. G gives again, yeah J&J. So you can see their assignments.
Gary Nash:
Gary Nash: Okay.
Gary Nash: They don't want me it turns out once you do get inbound on.
Unknown Attendee: His question is mainly about our capital expenditure. In 2024, can you tell us how much capital expenditure we will have? He would like to know more about our capital priority, which is the order in which our capital expenditure is arranged.
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Gary Nash: So why.
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Unknown Attendee: Which projects will be placed at the forefront? These are the projects that we will focus on developing. Can you tell us in order?
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Gary Nash: I think as you get our E P S.
Unknown Executive: Unknown Speaker, Kevin Theiss, Unknown Attendee, China Automotive Systems Inc. Speaking of our capital expenditure for 2024, our total budget is about US$25 million. The focus of this US$25 million is to develop some new products. For example, IRCB and ERCB; these two are the leading products internationally.
Gary Nash: And he says I mean.
Gary Nash: So all those things out that Gary.
Gary Nash: On the way young Vinci gas condensate Johnson's yeah, I have to go to the games against I suddenly youll want to Alexey goods NIM. There are certain moments of entitlements you watch over here.
Gary Nash: Okay.
None: And first thank you for rest of nice.
None: All we have accomplished.
None: Like you said.
Unknown Executive: At present, we have acquired European, North American, and Asian top-of-the-line commercial vehicles. Unknown Speaker, Kevin Theiss, Unknown Attendee, China Automotive Systems Inc, Unknown Speaker, Kevin Theiss, Unknown Attendee, China Automotive Systems Inc. Unknown Speaker, Kevin Theiss, Unknown Attendee, China Automotive Systems Inc, Unknown Attendee, China Automotive Systems Inc Unknown Speaker, Kevin Theiss, Unknown Attendee, China Automotive Systems Inc, Okay. First, thank you for recognizing what we have accomplished. Like you said, in the environment we are operating the businesses overall has been a very challenging macro environment.
None: In this environment we are.
None: Operating the businesses overall has been.
None: There is a very challenging macro environment.
None: As you can see.
None: Understand.
None: But we're very proud what we have done well.
What we accomplished.
None: 2023, and we are very excited extremely excited.
None: For the new year and the prospect for us.
None: In 2024.
None:
None: And on your question Al.
None: Okay.
None: Capital expenditure.
None: And that's also tying to what's about to happen in the next few years. So we are.
Unknown Executive: As you can understand, but we're very proud of what we have done, what we accomplished in 2023. And we are very excited, extremely excited for the new year and the prospects for us in 2024. And on your question about capital expenditure, that's also tied into what's about to happen in the next few years.
None: We're extremely.
Excited and we're also very committed to the global expansion, it's about com.
None: The two hour how many customers.
None: For Capex in 2024.
None: We're targeting about 25 million U S.
None:
None: In terms of our priority on capital priority you mentioned.
Unknown Executive: So we are extremely excited, and we're also very committed to the global expansion. It's about to come for our many customers. For CapEx in 2024, we're targeting about $25 million.
We were.
None: We are on we will start off our $10 million.
None: Capex in the Ah.
None: I RCB E RCB product.
None: Those products are already having a borders from very large Oems.
Unknown Executive: In terms of a priority, a capital priority mentioned, we are, we will start off our $10 million U.S. dollars capex on the IRCB and ERCB products. Those products are already receiving orders from very large OEMs, global OEMs. So we are going to pick up more business in the international market, as well as from large domestic OEMs. So, and that's the first part.
None: Global Oems. So we are going to pick up more business in the international market as well as we are supplied.
None: Supply to the large domestic Oems.
None: So.
That's the first part and the second part is.
Unknown Executive: And the second part is under our EPS product; we're going to invest $10 million. The reason is we are seeing a rapid increase in orders for this type of product. And we definitely want to increase production to meet the demand. Of course, we have already maxed out our current production capacity for this product, and we are very excited to increase production capacity in 2024. And lastly, we're going to spend $5 million on upgrading the existing production line, fine-tuning some of the facilities, and making sure that while we're expanding on a new frontier, new markets, we're also taking care of our current customers. So that being said, it's a holistic approach.
None: Our EPS product.
None: We're going to invest $10 million a reason being.
None: We are seeing.
None: <unk>.
None: Rapid increase of orders.
None: For this type of product and we are definitely want to increase production to meet that demand.
None: We have already maxed out will occur.
None: Production capacity for this.
None: This product.
None: We are a very.
None: I'm excited and too.
None: Increased production capacity.
None: In 2024.
None: Lastly, as a set of $5 million.
None: Upgrading existing production line fine tuning and some.
None: Some of our facilities and making sure.
None: While we are expanding on our new <unk> and <unk>.
None: New frontier New markets, we also taking care of our current customers.
None: That being said, it's a holistic approach.
None: We are going to continue to.
Unknown Attendee: We are going to continue to maintain and to improve customer satisfaction. And, meanwhile, we're going to expand to meet the customer demand for new products. Thank you. That was quite helpful. Thank you very much. Thank you. As a reminder, if there are any questions, please press star 1. Once again, if you would like to ask a question, please press star. We have reached the end of the question and answer session, and I will now turn the call over to Kevin for closing. We want to thank everyone for joining us today. We hope you have a safe and happy day, and we look forward to speaking with you in the future. Thank you. This does conclude today's conference, and you may disconnect your lines at, Thank you for your purchase. Unknown Attendee, China Automotive Systems Inc., Unknown Speaker 0
None: Maintain.
None:
None: And to up the.
None:
None: Customer satisfaction.
None: And Meanwhile, we're going to expand.
None: To meet the customer demand for new product.
None: Oh.
None: Thank you.
None: That was quite helpful. Thank you very much.
None: Thank you.
None: Yeah.
None: As a reminder, if there are any questions. Please press star one.
Okay.
None: Once again, if he would like to ask a question. Please press star one.
None: We have reached the end of the question and answer session and I will now turn the call over to Kevin for closing.
None: Mark.
Kevin: I want to thank everyone for joining us today.
Kevin: Do you have a safe and happy day, and we look forward to speaking with you in the future. Thank you.
None: This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.