Q4 2024 China Automotive Systems Inc Earnings Call
Theiss, Jie Li, Hanlin Chen
Speaker Change: Thank you everyone for joining us today welcome to China, automotive Systems' 'twenty 'twenty, four fourth quarter and fiscal year conference call. Joining us today are Mr. Daly, Chief Financial Officer of China Automotive systems. He will be available to answer questions. Later in the conference call with the assistance of trio.
Speaker Change: Relation 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.
Speaker Change: Result, the company's actual results could differ materially.
Speaker Change: It is contained in these forward looking statements due to a number of factors, including those under the heading risk factors and results of operations in the company's Form 10-K annual report for the year ended December 31, 2024 as filed with the Securities and Exchange Commission.
Speaker Change: And then the other documents filed by the company from time to time with the Securities and Exchange Commission and you have these factors and other factors beyond our control could have an adverse effect on the overall business environment cause uncertainties in the regions, where we conduct business.
Speaker Change: Does that business just soccer in ways, we cannot predict and materially and adversely impact our business financial condition and results of operations, the prolonged disruption or any unforeseen delay in our operations or the manufacturing delivery and assembly processes within any of our production facility could result.
Speaker Change: And delays in the shipment of products to our customers increased costs and reduced revenue. 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.
Speaker Change: On this call I will provide a brief overview and summary of the fourth quarter and the 'twenty 'twenty four annual results for the period ended December 31 2024.
Speaker Change: Management will then conduct a question and answer session. The 'twenty 'twenty four fourth quarter results are unaudited and the 'twenty 'twenty four annual results are audited each.
These financial results are reported using U S. GAAP accounting for the purposes of our call today I will review a review of the financial results in U S dollars.
Speaker Change: We'll begin with review of some of the accordingly business highlights recent dynamics of the Chinese economy, and automobile industry and our market position.
Speaker Change: Our net sales of steering products increased by 18, 6% year over year in the fourth quarter of 'twenty 'twenty four comparable to the 19, 6% increase in the 'twenty 'twenty four third quarter.
Speaker Change: For the 'twenty 'twenty four year net sales rose by 12, 9% year over year to a record 659.
Speaker Change: $9 million or traditional steering products grew by four 3% year over year with our electric power steering E. P. S. Robotic sales rising by 29, 9% year over year from 'twenty to 'twenty four.
Speaker Change: Our subsidiary Headlong reported domestic sales per passenger vehicles were up 20% in 2024 with sales to Chery auto 18, 2% higher and our K Y D. C. L. A S E. T. S products was up by 27, 2% in the Chinese commercial vehicle market our sales grew modestly.
Speaker Change: The $71 $6 million.
Speaker Change: Our North American operations were the only segment with 40 and lower sales in 'twenty 'twenty four primarily due to reduced demand by Starwood. This who's your overall sales declined in 2020 for our Brazilian.
Speaker Change: Sales experienced a five 7% increase in 2020 four.
Speaker Change: For the macro economy Chinese GDP increased by five 4% in the fourth quarter of 2024 up from four 6% year over year in the third quarter of 'twenty 'twenty four.
Speaker Change: The 'twenty 'twenty four.
Speaker Change: I'm, sorry for 'twenty 'twenty, four Chinese GDP rose by 5% inline with expectations, while the Chinese economy has stabilized somewhat it's still has.
Speaker Change: Facing challenges such as declining population sluggish consumer demand and confidence deflationary pressures low fixed asset and investment.
Speaker Change: Overcapacity, and some industries and strained relationship with major trading partners.
Speaker Change: According to the statistics from the China automotive systems, I'm, Sorry, China Association of automobile manufacturers C. I N. The combined unit sales of passenger and commercial vehicles increased by four 5% year over year to 31.4 million units during 'twenty 'twenty four.
Speaker Change: Of this total.
Speaker Change: Passenger car unit sales grew five 8% year over year to 27.6 million units, while commercial vehicles.
Speaker Change: Vehicles declined three 9% year over year to $3 9 million units, New energy vehicle unit sales grew 35.5% year over year to $12 9 million units as any knees gained a 49%.
Speaker Change: Share of the total motor vehicle market in China.
Speaker Change: Exports of law maiden vehicle units increased by 19, 3% in 2024.
Speaker Change: Purchase subsidy subsidies by the central and local government private OEM incentives and better audio loan terms created a more favorable vehicle policies to help aid the purchases of new vehicles.
Speaker Change: Besides the automotive industry is large and important itchy driver in the Chinese economy is expected Chinese government will continue to create policy is helpful to promote the success of the automotive industry.
Speaker Change: Gross profit in 'twenty 'twenty four it increased by five 2% year over year to one $9.2 million compared to $3 $8 million in 'twenty to 'twenty three the.
Speaker Change: Gross margin was 16, 8% compared with 18% in 2023.
Speaker Change: R&D expenses were $27 $6 million in 2024, this slightly lower amount reflects less investment in traditional product upgrades, there's more wasn't invested into E. P S and autonomous driving.
Speaker Change: Our customer B Y D is the largest easy producer in China, and we have been developing specific new products to improve their vehicles steering performance.
Speaker Change: Operating expenses rose by four 2% compared with a net sales increase of 12, 9%.
Speaker Change: Lower growth of operating expenses is clear evidence of management's focus.
Speaker Change: Operations and profitability.
Speaker Change: Net income attributable to parent company's.
Speaker Change: Common shareholders was $30 million or per share income of 99 cents.
Speaker Change: Well, it's like a 2024 compared to $37 $7 million or $1.25 per share for 'twenty to 'twenty three.
Speaker Change: Net cash provided by operating activities was $9 $8 million for 2024 cash paid to acquire property plant equipment and land use was $47 million.
Speaker Change: Partly offset by $25 million cash received from property plant and equipment sales.
Speaker Change: Total cash and equivalents pledged cash and short term investments were $129 $4 million or approximately $4.20 per share at year end 'twenty 'twenty four.
Speaker Change: Yeah.
Speaker Change: A special cash dividend of maiden cents per common share or approximately $22.4 million was paid in late August 2024 to reward our shareholders. This cash dividend was paid from internal funds and cash flow.
Speaker Change: This reflects our unwavering confidence or sustainable sales growth and our ability to generate positive cash flow.
Speaker Change: Lastly, we implemented the share buyback program of up to $5 million of our outstanding common shares in the open market at market prices not to exceed $5 50 per share.
Speaker Change: November 15th play 25.
Speaker Change: We celebrated our 20th anniversary.
Speaker Change: All of our NASDAQ listing in 'twenty 'twenty four from small domestic manufacturer, we have established a global presence, especially with tier one companies in North America, South America, Europe, India and Asia.
Speaker Change: It's 2024 net sales have grown from $58 2 million to 659 million in 2024.
Speaker Change: We look forward to the further growth of our company sales and operations as our traditional steering products continue to contribute to our sales and profits even as we further expand our E. P. S portfolio and we build our advanced driver assist.
Speaker Change: Our systems technologies with our Cynthia a b operations.
Speaker Change: Okay.
Speaker Change: We have positioned our company to benefit from two ongoing technology transitions.
Speaker Change: Internal combustion engines to electric powertrains and from human driving to all time autonomous driving.
Speaker Change: Now, let me review the financial results in the fourth quarter of 2024.
Speaker Change: In the fourth quarter of 2024, net sales increased by 18, 6% to $188 $7 million compared to $159 $2 million in the same quarter of 2023.
Speaker Change: The net sales increase was mainly due to a change in our product mix and a higher demand for passenger automobiles and commercial vehicles in the fourth quarter of 2024 compared to the fourth quarter 'twenty to 'twenty three.
Speaker Change: Gross profit was $29 $5 million in fourth quarter of 2024 compared to $34 $7 million in the fourth quarter of 2023.
Speaker Change: Gross margin in fourth quarter of 'twenty 'twenty, four was 15, 6% compared to 21, 8% in the fourth quarter of 'twenty to 'twenty three primarily due to a change in product mix.
Speaker Change: Salary expenses were $4 $8 million in the fourth quarter 2024, compared with $4 $6 million in the fourth quarter of 2023 selling.
Speaker Change: Selling expenses represented two 5% of net sales in the fourth quarter 2024, compared with two 9% in the fourth quarter of 2023 general and administrative expenses G&A were $9 $7 million in the fourth quarter 2024, compared to $9 $4 million in the same period in 2012.
Speaker Change: Three G&A expenses represented five 1% of net sales in the fourth quarter of 'twenty 'twenty four compared to five 9% of net sales in the fourth quarter of 2023.
Speaker Change: Research and development expenses, R&D were $7 $8 million compared with $9 $3 million in the fourth quarter of 2023.
Speaker Change: R&D expenses represented four 1% of net sales in the fourth quarter of 2024 compared to five 9% in the fourth quarter 2023.
Speaker Change: Mainly due to a decrease in miscellaneous development expenses.
Speaker Change: Operating income was $8 $7 million in the fourth quarter of 'twenty 'twenty, four compared to $13 $6 million in the fourth quarter of 'twenty to 'twenty three lower.
Speaker Change: Lower gross profit in 2020 for fourth quarter compared with the same period of last year was the main cause of this decline.
Speaker Change: Interest expense was $1 $1 million in the fourth quarter of 2024, compared with $23 million in the fourth quarter of 2023.
Speaker Change: Financial income was <unk> 8 million in the fourth quarter, 'twenty 'twenty, four compared with $1 million in the fourth quarter of 2023.
Speaker Change: Income before income tax expenses and equity in earnings of affiliated companies was $8 $8 million in the fourth quarter 2024.
Speaker Change: $215 million in the fourth quarter of 2023.
Speaker Change: Net income.
Speaker Change: That was $2 million in the fourth quarter of 2024 compared to income tax expense of $2 $1 million in the fourth quarter of 2023.
Speaker Change: Net income attributable to parent company's common shareholders was $9 $1 million in the fourth quarter 'twenty 'twenty four compared to net income attributable to parent company's common shareholders of $10 $9 million in the fourth quarter of 2023.
Speaker Change: Diluted income per.
Speaker Change: Sure. It was 30 cents in the fourth quarter was 24 compared to diluted income per share of 36 cents in the fourth quarter of 2023.
Speaker Change: The average weighted number of diluted common shares outstanding was $30 million 180947, compared to $30 million 185007.
Speaker Change: In the fourth quarter of 2023.
Speaker Change: Now well review the results for fiscal year 2024, net sales increased by 12, 9%.
Two $659 million in 2024 compared to $576 $4 million in 2023.
Speaker Change: This increase was mainly due to higher sales of passenger vehicles in China. That's total sales of the Companys E. P. S systems increased by 29, 9% year over year and sales of the headlong subsidiaries curious systems due to the Chinese passenger vehicle market increased by 20% year over year.
Speaker Change: Brazil had long is that sales grew by five 7% year over year to $51 million.
Speaker Change: This growth, partially offset a sales reductions by north American customers in 2024.
Speaker Change: E. P. S sales represented 38, 9% total revenue in 2024 compared to 33, 8% in 2023.
Speaker Change: Gross profit in 2024 increased by five 2% year over year to one $9.2 million compared to $103 $8 million in 'twenty to 'twenty three the gross margin was 16, 8% compared with 18% when he twenty-three mainly due to a change in our product mix and lower average.
Speaker Change: Selling prices for the year ended December 31 2024.
Speaker Change: Net gain on other sales in 'twenty 'twenty, four was $4 $3 million compared to $5 $8 million in 2023, mainly due to lower material sales in 2024.
Speaker Change: Selling expenses rose by 14.4% year over year to $17 $90 million in 2024 from $15 $6 million in 2020 three.
Speaker Change: Mainly due to an increase in marketing and office expenses.
Speaker Change: <unk> expenses represented two 7% of net sales in 'twenty, 'twenty, four and 'twenty to 'twenty three.
Speaker Change: G&A expenses increased by $8 $7 million year over year to $27 $7 million in 2024 compared to 25 million.
Speaker Change: $25 5 million in 2023 gene a expenses represented four 3% of net sales in 'twenty 'twenty four compared to four 4% of net sales in 2023. This expense increase was mainly due to higher office property and other taxes and maintenance and repair expenses.
R&D expenses were $27 $6 million in 2024 compared to $29 $2 million in 2023.
Speaker Change: R&D expenses reflect lesser investment traditional product upgrades and miscellaneous research expenses R&D expenses were four 2% of net sales in 2024 compared to five 1% of net sales in 'twenty to 'twenty three.
Speaker Change: Operating income increased by two 6% to $43 million in 2024 compared to $39 $2 million in 2023. The increase in operating income was mainly due to a five 2% increase in gross profit combined with a change in R&D expenses.
Speaker Change: Interest expense was $1 $8 million in 2024 compared to $1 million in 'twenty to 'twenty three primarily due to an increase in bank loans in 'twenty 'twenty four compared with 2023.
Speaker Change: Net financial expense was 0.0 9 million in 2024 compared to financial income of $4 $7 million of for 'twenty to 'twenty three the decrease in financial income of $4 $8 million was primarily due to higher foreign exchange gains in 2023.
Speaker Change: Income before income tax expenses and equity in earnings of affiliated companies was $44 million in 2024, compared with $48 $2 million in 2023. The change was primarily due to lower operating income in 2020 for income tax expense was $5 $9 million in 'twenty.
Speaker Change: 24, compared to $5 $1 million in 'twenty to 'twenty. Three this increase was mainly due to a valuation allowance reversal.
Speaker Change: One time income tax expense settlement from subsidiaries in the PRC and the U S. This year.
Speaker Change: Net income attributable to common shareholders was $30 million in 2024 compared to $37 7 million in 2023 diluted net income per share was <unk> 99 cents in 2024 compared to $1 25 in 2023.
Speaker Change: The weighted average number of diluted common shares outstanding was $30 million 184513 in 'twenty 'twenty four compared with 30 million 189421 in 2020, now we'll provide some balance sheet and other financial highlights.
Speaker Change: As of December 31, 2020 for total cash cash equivalents pledged cash and short term investments were $129.4 million total accounts receivable, including notes receivable were $343 $5 million accounts payable, including notes payable were $292 $8 million.
Speaker Change: In short term bank loans were $72 $6 million.
Speaker Change: Total parent company stockholders' equity was $249 $6 million as of December 31, 24, compared to $344 $5 billion as of December 31, 23.
Speaker Change: Net cash flow from operating activities was $9 $8 million in 2020.
Speaker Change: Cash paid to acquire property plant and equipment land use rights was $43 $7 million in 2024 and cash received from the sale of property plant and equipment was $25 million.
Speaker Change: The business outlook management to provide revenue guidance for the full year 2025 or $700 million. This target is based on the company's current views on operating and market conditions, which are subject to change with that operator, we're ready to begin the Q&A.
Speaker Change: Thank you very much at this time, we will be opening the floor for questions. If you would like to ask a question you can do say by pressing star one on your phone keypad now to join the queue.
Speaker Change: Time will indicate that Youll line isn't the key you May press star two if you would like to run. These your question from the key to any meetings.
Speaker Change: She seems to be critical shipment it might be necessary to pick up your handset before you buy stickies. Please wait a moment off the poll for questions.
Jonathan Davies: Thank you. Your first question is coming from Jonathan Davies, who is a private investor Jonathan Your line is life.
Speaker Change: Jonathan can you hear me.
Speaker Change: Yes, I can hear you were going to you sorry can you guys hear you Sir.
Speaker Change: Yes, okay.
Speaker Change: Okay. I have a question is for 2025 year. The projection is for sales to grow by 50 million.
Speaker Change: What areas will generate this growth.
Speaker Change: Totally 25 right.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: This all in the Eagle Ford on the deal and teachers.
Speaker Change: Are they all when your M P already RCN syngenta with shell on the shelf, so well since hone Ali May go out in a quiet quarter with himself.
Speaker Change: Digger are or what are the big doesn't go with San Juan leads and that's where airlines have each of the EPA at some time, you can say oh courts handle the C. E. P. S. A T. P. P. O spoke I spoke about it seems like kind of how the R. E. P. S.
Speaker Change: And good well then you can see the one Ernie are warning that if he has settled out you'll be a slurry a sudden jaguar buttons.
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Speaker Change: Somebody that is what would you have to value the sensible at night. So he was on it you can see the apartments and good for you quite a bit of engineering do show our meetings with them.
Speaker Change: Susan.
Speaker Change: Okay. So.
Speaker Change: The majority of our.
Speaker Change: Sales increase.
Speaker Change: Increase.
Speaker Change: In conjunction with local.
Speaker Change: The contributor from the E. P. S sells electric power steering product that breaks down to a number of new product.
Speaker Change: E P. S. T E P. S E T S.
Speaker Change: Uh huh.
Speaker Change: On the volume, we're expecting 30% year over year increase in 2025.
Speaker Change: In terms of total volume we're.
Speaker Change: We're looking at.
Speaker Change: In terms of volume unit volume increase are we looking at another 400000.
Speaker Change: And its increase in 2025.
Speaker Change: You know what we're looking at.
Speaker Change: That will contribute to a significant or opening Grosso you were reporting right now.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay, Jonathan do you have any more questions.
No no no that's okay. Thank you very much.
Speaker Change: Just a reminder that is.
Speaker Change: Any remaining questions you can jump into the queue by pressing star one on your phone keypad.
Speaker Change: And then see if anyone jumps into the queue.
Speaker Change: Yeah.
Speaker Change: I'm not seeing any further questions.
Speaker Change: Okay.
Speaker Change: Nobody can come into the queue.
Speaker Change: Just a reminder to the audience you can press star one on your phone keypad, if he would like to ask a question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: We don't have anyone else.
Speaker Change: And the key.
Speaker Change: Hey, Ken.
Speaker Change: Back to the management team.
Speaker Change: Any closing comments.
Speaker Change: Yeah.
Speaker Change: Well, we thank you for your participation in today's conference call will be safe and we look forward to speaking with you in the future.
Speaker Change: Thank you very much. This does conclude today's conference call. You can disconnect. Your phone lines at this time and have a wonderful day. Thank you feels participation.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.