Power steering specialist China Automotive Systems (CAAS) booked second quarter sales of US$82.5m, compared with $85.1m a year ago; gross profit of $14.8m ($19.8m), gross margin of 17.9% (23.3%) and net income of only $3.9m, or $0.14 per share ($23.9m/$0.28).

CEO Qizhou Wu said in a statement: “With the expiration of government incentive policies and monetary tightening, China’s auto output and sales have slowed after two years of rapid growth. In this environment, we are focused on strengthening our relationships with key OEMs that we believe will lead the sector’s recovery.

We are confident that these strategies will position us to capitalise on the eventual recovery of the automotive market, which may start as early as the 2011 fourth quarter.”

The Q2 sales decline was mainly attributable to lower automotive vehicle sales in China and a reduction in the average selling price of the company’s products, CAAS said.

Sales in the first six months of 2011 increased 2.5% to $173.5m. Gross profit was $34.8m ($42.3m), gross margin was 20% (25%), income from operations $19.4m ($29.6m) and operating margin 11.2% (17.5%). Net income rose to $21.2m from $20.3m.

“Reflecting current conditions, management has lowered its guidance and now expects annual revenues to increase by 5% to 10% for 2011,” CAAS said.

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