China Automotive (CAAS) reports weak results on higher costs, soft car market (4Q04 earnings)

Includes: BCAHY, CAAS
by: Ezra Marbach

China Automotive
Systems (ticker: CAAS), a China-based supplier of power
steering components and systems to the Chinese automotive
industry announced Q4 2004 results today. Here are the details:

Q4 Results:

(all percentage changes and comparisons are year on year, unless stated otherwise)

  • Net sales increased 3.3% to $17.3 million.
  • Gross profit decreased 26% to $6.2 million.
  • Operating profit decreased 4.8% to $2.1 million.
  • Net income increased 250% to $2.0 million - due to the effects of non-operating income.
  • Diluted EPS of $0.09
    compared with $0.03.

China auto market:

  • Continued softness in the Chinese auto market.
  • Reduction in selling prices of auto
    parts in China, and increased raw material costs.

CEO Hanlin Chen:

....results for 2004 were sustained by management's ability
to shift the company's sales focus to higher margin truck
related products in order to address softness in the Chinese
automotive market, which has been spurred over the past
few quarters, in part, by the government's tightening credit

2005 Guidance:

  • International expansion will continue
    to be a key focus in 2005.
  • New product opportunities: electronic power
    steering technology and automotive sensors.

Quick thought: As Brilliance China (ticker: CBA) reminded us this week, the Chinese auto market is suffering. And just a couple of days ago, the head of GM China's operations resigned, as GM sales fell (WSJ subscription required) 5.9% in the first two months of 2005 vs the same period in 2004. So it is no surprise that China Automotive is struggling, and looking for new growth channels. Like Chery Automobile, it is looking internationally.

China Automotive Systems stock market performance: