Power steering components and systems supplier China Automotive Systems (CAAS) on Thursday said second quarter 2012 gross profit increased 13.0% year on year to US$15.6m while gross margin rose to 19.4% from 17.7% and operating margin was 10.7% compared with 9.2%.

Opearting earnings per share rose to $0.21 from $0.13. Sales rose 2.8% to $80.4m.

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However, first half sales slipped to $161.3m, from $164.6m in the first six months of 2011. Gross profit also fell to $31.0m, from $32.5m and gross margin was down to 19.2% from 19.7%. Operating margin was 9.2%, compared with 11.0% and earnings fell to $0.31 from $0.38.

CAAS CEO Qizhou Wu said: “The passenger vehicle sector in China is gradually reaching its cyclical bottom. We are encouraged by the stability in both unit sales volume and raw material costs. We continue to increase our market share in both the passenger and commercial vehicle markets in China.”

He added that the supplier had “streamlined” its operations by selling its pump business.

CFO Jie Li added, “While we aggressively expanded our R&D programme to develop new products to address global market trends, our rigorous cost control measures showed results in many areas. Through our improved accounts receivable management, we continue to generate solid cash flow.”

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The supplier said the second quarter sales increase was due mainly to higher volume including exports to North America, higher sales to Chinese OEMs resulting from lower oil prices and government subsidies for low-emission and fuel-efficient domestic cars since May 2012, and the appreciation of the yuan against the US.

Outlook

CAAS said it had lowered its guidance for full year 2012 “due to a significant slacking of demand for automotive vehicles in the [PRC]” and now expects sales to be flat versus 2011.