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May 15, 2008

CHINA: China Automotive Systems net profit up 169%

Power steering specialist China Automotive Systems has increased 2008 first quarter net profit net income by 169% year on year to US$4.4m.

Power steering specialist China Automotive Systems has increased 2008 first quarter net profit net income by 169% year on year to US$4.4m.

Operating income rose 30.8% to $6.8m on sales up 46.1% to $41.5m. Sales of steering components for passenger and light-duty vehicles increased 44% to $30.2m. Sales of commercial vehicle steering components rose 51.9% to $11.3m.

CEO Qizhou Wu said: “We are excited to report a strong quarter witnessed by the high sales volume growth in particular from the accelerating sales in the commercial vehicle sector due to the forthcoming nationwide Euro III adoption.”

Gross margin declined to 29.5% from 32.4% in the first quarter a year ago due to higher material cost.  The supplier said its R&D unit is “revising production techniques to reduce material waste and improve production efficiency, and price increase negotiations are under way”. The annual gross margin goal is to achieve not less than 30%.

Operating expenses in the first quarter of 2008 were US$5.6m compared with US$4.1m in the same quarter in 2007 and US$9.4m in the fourth quarter of 2007.

Selling expenses rose 55.3% to US$2.5m from US$1.6m in the same quarter last year due to higher sales and the related increase in warranty costs as well as higher transportation expenses.

Chief financial officer Jie Li said: ”During the first quarter, we experienced high cost especially with our steering products for commercial vehicles, mainly due to price appreciation in our raw materials, particularly steel.

“We have successfully negotiated with our customers to raise our average selling price accordingly in the second quarter. Our efforts in expense control and economies-of-scale management continue to propel a stronger growth in the operating line. We are now fully reflecting our robust top line growth in our bottom line.”

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