CAAS - Earnings call transcript Q2 2020 | China Automotive Systems, Inc.

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Operator

Greetings. Welcome to China Automotive Systems' Second Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. turn over I'll Kevin time, this the to conference Theiss. At may begin. you Kevin,

Kevin Theiss

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

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

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

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

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

government of disrupted by which the the New the to X.X% first pandemic. were infections. X.X% due actions In today, and as recent China U.S. with GDP China's Year of the the industry For market operations tragically mid-March, our XXXX, restrict late of Chinese From compared COVID-XX quarter automobile dollars. the of was economy We in the impacted review quarter the impact the in was a results of economy, purposes with review our January I'll of rebounded contraction second severely economic Chinese the to the of financial XXXX, call begin COVID-XX Automotive's the growth to position. dynamics

other COVID-XX quarter the pandemic materials closed the was interrupted activities unprecedented effects became in accessible XXXX China. began and available from supply rebuild of and the to to As daily transportation ended, as more slowly factories networks to first disrupted began reopen, began of rebound

to the limited to sales first the the of countries continued early in travel of and the the customers quarter China recovery. economic second to among lockdown stage transportation be However, was ease XXXX, In restrictions.

were economic economy higher including infrastructure lending and government projects to reopen, reserve and reduced. approved Chinese the the incentives As to spending bank growth more began enacted fiscal promote requirements rates continued

Statistics. according declined COVID-XX to the and period. X.X% which However, economic the wave, XXXX lingering between Association total and U.S. in automobile CAAM XX.X% retail to second rose According growth limit slower continuing of tensions half in to April by fell in Manufacturers, year-over-year. Automobile first spending China Per the past continued the same fears in of of China by than sales, a consumer National X.X% of capita sales XXXX Bureau the the

XX% However, sedan sales and crossover April. passenger vehicle was by declined in sale XX.X% down were X.X%. car MPVs sales also reduced of by The

New in by sales, in energy year-over-year lower by were of sales XX.X% the April. MPV passenger X.X% new May automobile declined sedan of and car a XXXX, also In vehicles of sales with sale XX.X% reported month vehicle declined but increase CAAM XX.X% by energy sales XX.X%. and down

passenger with were by XX.X%. – down energy automobile MPV and XX.X% with down June, sales of new XX.X% month X.X% sales sales vehicle sedan the sales car up down decreased sales For year-over-year

six XX.X%. sales sales XX.X%. were declined last MPV sales months and XXXX the the sedan passenger SUV period were than For declined same sales with XX% vehicles reports reduced XX.X% cars lower down sales year. CAAM by by of automobile by XX.X% crossover that

down New energy XX.X%. sales were vehicle

production COVID-XX reopened mid-March, we headquarters. Wuhan the lockdown full our Our after in and to restrictions capabilities were or centers back

year-over-year. due power were million the sales XXXX Fiat declined steering prices in some $XX.X electric competition. our the Ford average suspended reduced million North COVID-XX. by the to XXXX, second of quarter traditional quarter steering $XX.X by Net due experienced declined with sales million EPS production by products net second million of XXXX of of for with of first Given $X.X Net was of industry in of compared this and and sales in as XXXX. quarter background, quarter sales in company's the compared million $XXX.X We markets to and decreased selling second to Sales year-over-year. or and $XX.X Chrysler XX.X% or parts decreased much million American XX.X% $XX.X the customers volume

strategic reduced sheet generate Our We achieve maintaining over positive million. a resources to focused to continues with strong flow still operations on of $XX.X our cash time. balance remain goals the

and cash slowly but improving were globally June there of China, $XXX June conditions pledged As total XXXX, company million, equity XXXX. Economic still of in is uncertainty. are stockholders' as equivalents XX, was cash cash parent million. Total great and $XXX.X XX,

remains So our clouded. outlook

and However, global we XXXX stimulate economy domestic government year expect incentives stabilize. progress over the remainder to Chinese of economy begin the the the as

X Europe anticipate maintained in excellent market key future van also model for America. system the contributions addition, third product in new in our a domestic for Hyoseong North IVECO as newer leading in autonomous be the relationships ventures. brushless the new program we greater supplying well XXXX in recirculating Jeep In as America, preserving markets, We've our new North Tier steering from OEMs. steering starting our of small, late vehicles for steering Daily Motion, while our i-RCB our quarter three global positions with Mechatronics in one revenue FCA's System customers' motors, a powerpack used to

related net decreased of quarter second XXXX, the review quarter to me sales compared quarter of of XX.X% vehicle mobile million, the and in sales to XXXX. market, domestic weakened passenger In demand let of second $XXX.X the to the on declined the pandemic economy XXXX. COVID-XX sales. Net in by by million products Now, same $XX.X brand Chinese the traditional steering on XX.X% effects of as Chinese

before X.X% North Selling was to of XXXX. versus represented million decline increase in as of with Diluted In to income and new were the of as income expenses million net in in to the in second $X.X COVID-XX's XXXX. quarter focus of other profit $XX.X due in of expenses the share The the in XXXX, compared due addition quarter sales was the new vehicle expenses to quarter to from Hubei's lower shares second of income product for of of in number expenses and to the and much the in power Loss the Henglong's to million in XXXX quarter the in XXXX. production related of quarter per expenses the the was million $X.X expense second million to the second in companies due other was attributable in of common America R&D in Gain in compared XXXX, compared in second compared total impact in of COVID-XX of in million quarter products. quarter of was tax $X.X to compared decrease second gross in quarter sales -- Gross in of X.X% The administrative of outstanding compared was XX.X% quarter of in Sales Net quarter, million in $X.X second decrease with the XXXX, XX,XXX,XXX to the affiliated $X.X of suspension second affiliated of diluted the million XXXX. the to EPS sales. and $X.X corresponding second second in loss represented and and suspended quarter million was represented XXXX. profit and gross due in parent the Selling company's General America. freight the of second equity of sales. development Net of as compared million before quarter of to Loss resulting $X.X of shares of the company's the profit EPS second weighted share quarter equity American $X.XX $X.X XXXX compared expenses quarter $XX.X G&A second North the was expenses financial financial of tax second to of of COVID-XX $X.X XXXX. quarter million, of $X of office net of – primarily to quarter was was The XXXX, second XXXX. XXXX. economies X.X% continue XXXX decreased electric in expenses. the expenses of higher the quarter impact of XXXX. on same the in compared quarter second quarter well lower to of R&D compared second XXXX. quarter quarter impact quarter the quarter quarter the million, income diluted income mainly $X.X pandemic XXXX, expenses the North X.X% operations sales $X.X of pandemic steering sales in for resulting the mainly XXXX. of earnings of of of changes million the development automobile represented X.X% declined $X in second mix. and of of of of second $X.XX COVID-XX the the second gross million X.X% XXXX, million The company's in was second the XXXX. quarter the of income in G&A of XX,XXX,XXX second million quarter sales of impact XXXX, XX.X% the of on of of second XXXX XXXX. in the earnings/loss margin net from in the XXXX. million quarter in maintenance second expenses, was in compared loss from second earnings/loss average operations sales million in of due shareholders the quarter companies quarter the parent compared net in the much the in common most $X.XX quarter and lower to The quarter to of to income the net sales pandemic. common and shareholders to taxes XXXX, the were XXXX per XXXX by company's to XXXX. customers R&D Research to was compared second The quarter $X.X XXXX $X.X to million on the XXXX second second the second for of $X.X expenses operations decrease decreased to the to compared mainly attributable due X.X% the

parent million first Net of million share XXXX, in XX.X% compared $X.X to XXXX. the months common of of over to million to in Six six compared loss highlights. $X.X on $XXX.X XXXX. common sales was share XXXX, million, per the company's XXXX. was corresponding We'll six we'll Now in go months in the XX.X% corresponding million XX.X% company's per shareholders of in in last in operations period months six was months XXXX, to compared six million in of of period $X.XX some net in the six the was was XXXX, corresponding in compared profit in of parent balance the six million period six Diluted $X.X in XXXX, of XXXX, to now the months months over in the financial $X.XX months million Net year. was from $X.X of to Six flow margin and loss first period the other first sheet to decreased some first to gain XXXX. earnings shareholders six six months months first the in months income gross items. cash $X.X attributable compared XXXX. million $XX sales Loss of first attributable $XXX.X to month of the $XX.X compared the in operations corresponding from The go diluted to of first in period compared the income first million $X.X corresponding XXXX. gross

and $XXX million. cash $XXX.X June and equity $XX.X stockholders' of as $XXX.X Net in notes As as a was In XXXX. April, activities cash million. payable six cash regained the of cash six million December including to March. XXXX. in provided months $XX.X were were its with compared operating its operating of $X.X equivalents after XXXX, the used full XX, million accounts and was acquire by equipment compared Payments was company months outlook. relocation XX, Jingzhou of loans first Accounts short-term removed capacity June the to in first were and plant temporary The activities XX, $XXX reopened receivable restrictions and with $XX.X and of in six to notes pledged were $XXX.X million. $XX.X receivable XXXX, XXXX. after net months lockdown in parent business compared the City headquarters million, Total operating company of first Total of million million million property were million Wuhan

confidence With of million. year current operating guidance effects and American lingering growth, in economic it begin Management conditions, has COVID-XX's on the capacity However, chains its we're The taken economies on pandemic the time and China into of substantial $XXX change the the ready light subject North create view especially supply target are on to affect full which market of bring due continues to COVID-XX markets. China. is full based the COVID-XX, of Q&A. revenue the to and our operator, in restore for impact This U.S. that the the company's consumer to South and reiterates to

Operator

begin the session. you. now We’ll question-and-answer Thank you. Thank [Operator Instructions]

Greenridge is Please your first of question. the with from with proceed Our William line Gregozeski Global. coming question

William Gregozeski

second talk sales bit quarter? And Hi guys of like, looking? I a looking product a in how even you are little lower how gross for the with that the than bit quite was you the had, the the half guys. year, It was mix second the are about, also, margins more U.S.? looking seems for to Can

Jie Li

In the second half, you mean, right?

William Gregozeski

for more was bit that, then just sales Yeah. also, the a was just the second decline? in the since product Can in are the second And talk pretty from How the it mix. itself more than mix the for looking reason margin international, substantially, about gross quarter little seemed down half? you

Jie Li

half, everything normal. going first your question, will second Okay. to [Foreign back Language] for are that anticipating we So

And -- year going North So higher to with we America, second to -- we seeing business normalcy. will returned also return see, And period. the be our of we a as last international sales is the -- our business export matter believe are than customers production. fact, half same our to

the in second margin, question the quarter. the gross second On

our Our only -- To last quarter was period second some also. But was it's $XX this North quarter, revenue, color, last give affected, same gross by business you margin, million. the $XX heavily during America million. year

our their significant two customers So a that America months. X.X because factory loss North months, were was almost of closed revenue

know, And heavily we North are you customers America fixed facility our affected supplied a have negatively As the cost. affected. to and

international gross Our gross US$X for a our alone, margin, second mean, quarter, business -- business. profit the loss was triggered a North the America negative I down of That million. was for

look China year. same Now the equivalent you if at business, are margin the last gross domestic our period to actually

we second of of return business, year, should the with the half North comeback. America stage think we the a So

Jie Li

Okay.

question. your So

Language] Foreign

Jie Li

[Indiscernible]. Yeah. [Foreign Language] Go ahead.

Jie Li

Okay. custom was a one-time charge. there quarter the Also second to the event in related

– during DDP – Our million that's I America. North of Typically cause margin adjustment affected use some the mean, our quarter There America quarter, us the our during also the the to second a US$X that's also to customer duty our a gross and paid. charge which in deliver North – related are second quote quarter. changes second calculation

William Gregozeski

And a that is that's going to or Okay. guys you just will going impact onetime be then, event that something forward?

Jie Li

the is happen again. It event. will This one-time not

William Gregozeski

Okay.

to second year. said be will then for Okay. is business? sales that last And Is higher for America, the that North whole just or than clarify, half just you

Jie Li

year of business answer – pre The year the for year models yes, won this some same production. higher quarter put hasn't be and to we America a because models, Yes. second we is have referring the been going North Okay. what that than we – is some Yes. the last is the have new half second period we're of business part into

than the America is customers. last of the same half second period higher year order from So North it's going year to the the be book

William Gregozeski

you. right. Okay. Great. All Thank

Qizhou Wu

you. Thank

Operator

[Operator Instructions] you. Thank

Please question. a your Robert with of the Our next investor. question is private from proceed [ph], Polvich line

Unidentified Analyst

had Good question of I What in as motors at Thank as this more see versus venture the move venture. morning. that's And far second XXXX? into joint running – of brushless And And might we outside. are them prospects? just up of growth savings what as wondering status kind volume cost the what half kind into and by this believe joint the of say Hyoseong motors, I doing making from a is and the point. acquiring the it's savings would the move we on on you a I'm kind cost there? you. we as what I

Qizhou Wu

The started the in production [Foreign motor batch is or month XXXX, -- brushless in We produce of June. production the half production will the it Language] units. of we mass around XX,XXX in Okay. second anticipate

we ramp move Going to XXX,XXX expect REPS. will cost XX% product save to our will a or the is of -- on we is internally doing by XX% start had -- savings, to And -- motor we into units. The secure C-EPS will PEPS the in-sourcing, most then to continue important the supply -- increase up thing product the XXXX, design offering to brushless production And between and doing cost. and calculation by producing to chain. -- we speaking to producing this, with total

you such we domestic products a are shortage know content product. of these technology As and higher has -- are seeing

or brushless import And lot with those a are that companies there we have we can from to deal another sell bottleneck in goal of have to to of there our all demand market or of stage said, so can a enough for our we when to whatever and the addition, our get to our they supply have we customers. have -- meet And domestic sure to supply other is the shortage make that product. capacity being have lines country. peers been motor. And -- And on open to first to EPS our the internal either

Unidentified Analyst

know. to good That's Okay.

other question. next of I far wondering during about the as was, of within you your something And five we power versus year view with to several as did had be abating, over difficult the Another as your is are competitive changing? pressures we years, was do or over the is the EPS make Automotive see to percentage kind How going things question mix or you traditional I systems? what know are And two? hear Do we that How that I that years? call move something I kind competition. at looking the steering for see next dealing going from that? China what's

Qizhou Wu

Okay. [Foreign Language]

the passenger The first as five-year And the hydraulic large hydraulic first however, And product the China to market role. a -- I trend to steering. passenger in account the the play the vehicle continue we hydraulic, And when see on your the share is major would time, I will for -- EPS market sector. vehicle will very XX% commercial and that's in vehicle, heading. -- say question the you know power

new and our competitiveness such product, electric ERCB performance with and our and will in control help that also product units actively are technology with we IRCB However, adding the increase we and components introduced as market. the

So, and we at that commercial as five-year combining ,the the exceed steering sales overall -- say will XX% see China. we least time, vehicle, passenger in electric being said, XX% power in

the the at and year American, main in the Wall And are in there are are landscape, talking They the Bosch that aggressive respectively. business German, next those are domestic in bet. the as JPAC, our We're brand Great is GWs, competitive -- side competition BYDs names. those on And into and -- stage, are intense coming Japanese, international said by we led pretty the mentioned the China. about mostly past, is China. being On EPS in household is some current

on And fact we PEPS been quarters and we has with ties maintain and competitive Japanese China one strong our and are sales domestic very continue the in and be two think product mentioned relationship in the has pricing. venture other also quite to been want our our to product due goal and product. economic our on impact. expansion those into to brand But able sales expand environment cost pandemic now side to change in few very the our also their fluctuating we will However, REPS -- to I the names. last sales quality the is a the also technology lot terms of partner With international quality resource with high joint brand and global produce our their

be international ventures. that -- that to strengthen expand with joint it goal to also brands to So, our will presence domestic our brands continue and

Unidentified Analyst

Okay. it One And areas mean KYB question, where you in KYB, potential? as the automakers. supplying, for having I of with are a potentially all to has U.S., a brands the relates last do lot more of those see business time? I with ties outside the Japan, been the with KYB growth Japanese you can guess Japanese do [Foreign relationship long Language]

Qizhou Wu

Okay.

at technology forming joint -- our to venture for competitiveness China the main is with KYB Our the domestic strengthen technological continue goal market. time competitive of

so we and to maintain Japanese presence in to to only in be and able domestic one is And to not the China. compete want ventures priority but strengthen that's our joint also number continue brand, expanding

are well-established lift huge to markets, be because terms in Japanese where terms There we into. of And joint China. branding is the of very in and look and beyond opportunities, China can the potentially volume. get internationally, secondary goal will the that in market venture a So are many both

arrangement main the that's time into at we're to Japan, market. of the due to the signing, However, KYB's not go joint venture able because

market. place. large The still Japan, of very a is a large outside world So,

through connect those So, and China. to with see the ventures But joint there. a in Japanese KYB the step to potential our we product one able -- be connect we want relationship great is to

Unidentified Analyst

a I I KYB potential additional The situation. have, Language] I be renegotiated KYB and at your -- point thing some okay. be responses. may interesting with assume an all your good That's [Foreign would some It's appreciate that and for relationship but

Qizhou Wu

Thank you, Great. Robert.

Unidentified Analyst

Thank you.

Operator

this end turn any time, final the additional for our closing like and Thank I remarks. question-and-answers. Instructions] to of to reached would you. back And for management time floor At [Operator we've the

Kevin Theiss

and you speaking your thank to look safe you and in forward to Thank we We you. you wish call. today's well, again. conference participation with Well, be for

Qizhou Wu

Thank you.

Operator

everyone. today's you Thank conference. concludes This

your Thank participation. this your may at for time. lines You disconnect you

China Automotive Systems (CAAS) 14 Aug 202020 Q2 Earnings call transcript