China Automotive Systems, Inc. (NASDAQ:CAAS) Q4 2023 Earnings Call Transcript

China Automotive Systems, Inc. (NASDAQ:CAAS) Q4 2023 Earnings Call Transcript March 28, 2024

China Automotive Systems, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: 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. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Kevin Theiss. You may begin.

Kevin Theiss: Thank you, everyone for joining us today. 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. 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 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 and Exchange Commission. 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. A prolonged disruption or any unforeseen delay in our operations of the manufacturing delivery and assembly processes within any of our production facilities could result in delays in the shipment of products to our customers, increased cost 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.

Story continues

On this call, I’ll provide a brief overview and summary of the fourth quarter and year results for the period ended December 31, 2023. Management will then conduct a question-and-answer session. The 2023 fourth quarter results are unaudited. 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 of the Chinese economy and automobile industry, and our market position. 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 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 a $159.2 million, the largest quarterly percentage sales gain at 23.6% year-over-year for 2023, and 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 these in an unsettled economy in China. The Chinese GDP growth rate, excuse me, accelerated to approximately 5.2% in the 2020 — in 2023, up to 3% growth in 2022, which period partially affected the lingering effects of post-COVID-19 recovery. 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, filed by 44.6% year-over-year rise in November and a 25.1% year-over-year increase in December. Our 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, G&A and R&D expenses in the fourth quarter of 2023. Diluted income per share rose by 157.1% to $0.36 compared to 14% — 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. Sales in the North America declined by 18.5% year-over-year to $115.9 million in 2023, partially reflecting the impact of the autoworker’s 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. Net sales of electric power steering, EPS grew by…