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China Zenix Auto International Limited Reports Financial Results for 2019 Second Quarter

ZHANGZHOU, China, Aug. 15, 2019 /PRNewswire/ -- China Zenix Auto International Limited (ZXAIY) ("Zenix Auto" or "the Company"), the largest commercial vehicle wheel manufacturer in China in both the aftermarket and OEM market by sales volume, today announced its unaudited financial results for the second quarter ended June 30, 2019.

Financial Highlights

Second Quarter 2019:

  • Revenue was RMB799.0 million (US$116.4 million), down 12.0% year-over-year;
  • Sales to the Chinese OEM market decreased 16.3% year-over-year;
  • Aftermarket sales increased by 0.4% year-over-year;
  • Gross margin maintained at 12.2%;
  • Profit and total comprehensive income for the period was RMB 10.2 million (US$1.5 million) compared with a loss and total comprehensive loss in the second quarter of 2018.

First Six Months of 2019

  • Revenue was RMB1,468.3 million (US$213.9 million), a decrease of 14.8% year-over-year compared with RMB1,723.8 million in the first six months of 2018;
  • Tubeless steel wheel sales decreased by 13.7% year-over-year;
  • Sales of aluminum wheels decreased by 13.8% year-over-year;
  • Gross margin was maintained at 12.2%;
  • Net profit and total comprehensive income for the period was RMB5.7 million (US$0.8 million) with basic and diluted earnings per American Depositary Share ("ADS") of RMB0.11 (US$0.02);
  • Bank balances and cash, pledged bank deposits and fixed bank deposits with maturity period over three months totaled RMB1,245.4 million (US$181.4 million).

Mr. Junqiu Gao, Deputy CEO and Chief Sales and Marketing Officer of Zenix Auto, commented, "In the midst of the slowdown of Chinese economy, Chinese commercial vehicle production during the quarter consisted of a 1.8% decline in April 2019, an 8.5% decrease in May 2019, and a 17.5% decline in June of 2019 according to statistics from the China Association of Automobiles ("CAAM"). In addition, major parts of the country implemented the stricter National VI emission standard starting July 1, 2019, resulting in retailers slashing prices to accelerate the sales of National V-compliant vehicles in their inventory before the new standard became law. This reduced production affected our OEM sales during the 2019 second quarter."

Mr. Martin Cheung, CFO of Zenix Auto, commented, "We were able to raise selling prices resulting in higher gross profit and margin in the second quarter of 2019. Our profit and total comprehensive income for the period was RMB 10.2 million (US$1.5 million) versus a loss in the second quarter in 2018. We ended the second quarter with bank balances and cash, pledged bank deposits and fixed bank deposits with maturity period over three months of RMB1,245.4 million (US$181.4 million). We will  protect and enhance our resources to meet our strategic goals."

2019 Second Quarter Results

Revenue for the second quarter was RMB799.0 million (US$116.4 million) from RMB907.6 million for the second quarter of 2018. The 12.0% decrease in revenue on a year-over-year basis was mainly due to the weaker demand from the OEM sector in China and international sales.

Sales to the Chinese OEM market decreased by 16.3% year-over-year to RMB444.5 million (US$64.7 million) in the second quarter of 2019 compared to RMB530.8 million in the same quarter of 2018. Total unit sales in the OEM market decreased by 20.6% year-over-year during the second quarter of 2019.

Aftermarket sales in China increased by 0.4% year-over-year to RMB269.1 million (US$39.2 million) in the second quarter of 2019 from RMB268.2 million in the second quarter of 2018. Total unit sales in the aftermarket decreased by 6.1% year-over-year as the softer economy affected the logistics sector.

International sales decreased by 21.4% year-over-year to RMB85.4 million (US$12.4 million) in the second quarter of 2019 compared to sales of RMB108.7 million in the second quarter of 2018. Total international unit sales decreased by 28.0% year-over-year in the second quarter of 2019 mainly due to continued weak demand in Southeastern Asian countries due to higher material costs.

In the second quarter of 2019, domestic OEM sales, domestic aftermarket sales and international sales contributed 55.6%, 33.7% and 10.7% of revenue, respectively.

Sales of tubed steel wheels comprised 46.6% of 2019 second quarter revenue compared to 47.2% in the same quarter in 2018. Tubeless steel wheel sales represented 41.4% of 2019 second quarter revenue compared to 42.4% in the same quarter of 2018. While tubed and tubeless steel wheel sales remain the main sources of revenue for the Company, sales of aluminum wheels accounted for 8.2% of second quarter revenue as compared to 7.5% in the same quarter a year ago.

Second quarter gross profit increased by 16.1% to RMB97.7 million (US$14.2 million), compared to RMB84.2 million in the same quarter in 2018. Gross margin was 12.2%, compared with 9.3% in the second quarter of 2018. The increase in gross margin on a year-over-year basis was mainly due to the Company raised selling prices during the second quarter while raw material costs remained stable.

Selling and distribution expenses decreased by 10.3% to RMB43.9 million (US$6.4 million) from RMB48.9 million in the second quarter of 2018. The decrease in selling and distribution costs was primarily due to lower transportation expenses associated with lower sales volume. As a percentage of revenue, selling and distribution costs were 5.5% in the second quarter of 2019, compared to 5.4% in the same quarter a year ago.

Research and development ("R&D") expenses increased by 8.4% to RMB14.9 million (US$2.2 million), compared to RMB13.7 million in the second quarter of 2018. R&D as a percentage of revenue was 1.9% in the second quarter of 2019, compared to 1.5% in the same quarter a year ago.

Administrative expenses decreased by 12.9% to RMB26.6 million (US$3.9 million) from RMB30.5 million in the second quarter of 2018. As a percentage of revenue, administrative expenses were 3.3%, compared to 3.4% of revenue in the second quarter of 2018.

Net profit and total comprehensive income were RMB10.2 million (US$1.5 million) in the second quarter of 2019 compared to a net loss and total comprehensive loss of RMB5.8 million for the second quarter of 2018. 

Basic and diluted earnings per ADS were RMB0.20 (US$0.03) in the second quarter of 2019 compared to basic and diluted loss per ADS of RMB0.11 in the second quarter of 2018.

In the second quarter of 2019, the Company recorded net cash outflows from operating activities of RMB47.3 million (US$6.9 million). Days Sales Outstanding (DSO) was at 63 days in the second quarter of 2019, in comparison with 54 days during the full year of 2018. The Company did not incur meaningful capital expenditures for the purchase of property, plant and equipment in the second quarter of 2019.

During the second quarter of 2019 and 2018, the weighted average number of ordinary shares was 206.5 million and the weighted average number of ADSs was 51.6 million.

2019 First Six Months Results

Revenue for the first six months ended June 30, 2019 was RMB1,468.3 million (US$213.9 million) compared with RMB1,723.8 million in the first six months of 2018.

Sales to the Chinese OEM market decreased by 20.2% year-over-year to RMB794.8 million (US$115.8 million) and represented 54.1% of revenue. Aftermarket sales decreased by 2.4% year-over-year to RMB509.7 million (US$74.2 million) in the first six months of 2019 and represented 34.7% of total six-month revenue. International sales decreased by 20.4% year-over-year to RMB163.8 million (US$23.9 million) compared with the same period last year and represented 11.2% of revenue.

Tubed steel wheel sales for the first six months ended June 30, 2019 decreased by 17.9% compared with the same period in 2018 and accounted for 44.8% of revenue. Tubeless steel wheel sales decreased by 13.7% from the same period a year ago and accounted for 42.4% of revenue. Aluminum wheel sales decreased 13.8% from the same period a year ago and accounted for 8.5% of revenue. Construction equipment wheel sales increased by 39.0% and accounted for 2.3% of revenue.

Gross profit for the first six months ended June 30, 2019 was RMB178.9 million (US$26.1 million) compared with RMB210.1 million during the same period in 2018, up 14.9% year-over-year. Gross margin was 12.2% compared with 12.2% in the same period last year.

Net profit and total comprehensive income for the first six months ended June 30, 2019 was RMB5.7 million (US$0.8 million) compared with RMB20.3 million during the same period in 2018.

Basic and diluted earnings per ADS for the first six months ended June 30, 2019 were RMB0.11 (US$0.02), compared with RMB0.39 during the same period in 2018.

As of June 30, 2019, Zenix Auto had bank balances and cash of RMB924.4 million (US$134.7 million) and fixed bank deposits with a maturity period over three months of RMB290.0 million (US$42.2 million). Pledged bank deposits were RMB31.0 million (US$4.5 million). Total bank borrowings were RMB558.0 million (US$81.3 million). Total equity attributable to owners of the Company was RMB2,544.4 million (US$370.6 million).

Conference Call Information

The Company will host a conference call, to be simultaneously webcast, on Thursday, August 15, 2019 at 8:00 a.m. ET/ 8:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-0782 (U.S. Toll Free) or +1-201-689-8567 (International). Please dial in five minutes before the call start time and ask to be connected to the "China Zenix Auto" conference call.

A replay will be available shortly after the conclusion of the conference call through September 15, 2019, at 8:00 a.m. ET. Interested parties may access the replay by dialing +1-877-481-4010 (U.S. Toll Free) or +1-919-882-2331 (International) and using Conference ID 51554 to access the replay.

Exchange Rate Information

The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. All translations from RMB to U.S. dollars are made at a rate of RMB6.8650 to US$1.00, the effective noon buying rate as of June 28, 2019 in The City of New York, for cable transfers of RMB as set forth in the H.10 weekly statistical release of the Federal Reserve Board. The percentages stated are calculated based on RMB amounts.

About China Zenix Auto International Limited

China Zenix Auto International Limited is the largest commercial vehicle wheel manufacturer in China in both the aftermarket and OEM market by sales volume. The Company offers more than 834 series of aluminum wheels, tubed steel wheels, tubeless steel wheels, and off-road steel wheels in the aftermarket and OEM markets in China and internationally. The Company's customers include large PRC commercial vehicle manufacturers, and it also exports products to over 78 distributors in more than 30 countries worldwide. With six large, strategically located manufacturing facilities in multiple regions across China, the Company has a designed annual production capacity of approximately 15.5 million units of steel and aluminum wheels as of June 30, 2019. For more information, please visit: www.zenixauto.com/en.

Safe Harbor

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. The Company may make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding these risks is included in our filings with the SEC. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of the date of the press release, and the Company undertakes no duty to update such information, except as required under applicable law. 

For more information, please contact

Kevin Theiss
Investor Relations
Awaken Advisors
Tel: +1-(212) 521-4050
Email: kevin@awakenlab.com

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China Zenix Auto International Limited

Unaudited Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income

For the three months ended June 30, 2019 and 2018

(RMB and US$ amounts expressed in thousands, except number of shares and per share data)



2018 Q2


2019 Q2


2019 Q2


RMB' 000


RMB' 000


US$' 000







Revenue

907,621


798,998


116,387

Cost of sales

(823,407)


(701,253)


(102,149)

Gross profit

84,214


97,745


14,238

Other operating income 

4,003


6,038


880

Net exchange gain

2,484


1,253


183

Selling and distribution costs

(48,934)


(43,917)


(6,397)

Research and development expenses

(13,729)


(14,881)


(2,168)

Administrative expenses

(30,499)


(26,553)


(3,868)

Finance costs

(5,790)


(6,136)


(894)

(Loss) Profit before taxation 

(8,251)


13,549


1,974

Income tax expense

2,415


(3,319)


(483)







(Loss) Profit and total
comprehensive (loss) income
for the period

(5,836)


10,230


1,490







(Loss) Earnings per share






Basic

(0.03)


0.05


0.01

Diluted

(0.03)


0.05


0.01







(Loss) Earnings per ADS






Basic

(0.11)


0.20


0.03

Diluted

(0.11)


0.20


0.03







Shares

206,500,000


206,500,000


206,500,000

ADSs

51,625,000


51,625,000


51,625,000

 

 

China Zenix Auto International Limited

Unaudited Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income

For the six months ended June 30, 2019 and 2018

(RMB and US$ amounts expressed in thousands, except number of shares and per share data)



2018


2019


2019


RMB' 000


RMB' 000


US$' 000







Revenue

1,723,828


1,468,348


213,889

Cost of sales

(1,513,701)


(1,289,450)


(187,830)

Gross profit

210,127


178,898


26,059

Other operating income 

8,177


8,944


1,303

Net exchange gain(loss)

27


(7)


(1)

Selling and distribution costs

(93,949)


(83,386)


(12,147)

Research and development expenses

(26,584)


(28,216)


(4,110)

Administrative expenses

(61,206)


(55,177)


(8,037)

Finance costs

(11,460)


(12,028)


(1,752)

Profit before taxation 

25,132


9,028


1,315

Income tax expense

(4,820)


(3,297)


(480)







Profit and total
comprehensive income for
the period

20,312


5,731


835







Earnings per share






Basic

0.10


0.03


0.00

Diluted

0.10


0.03


0.00







Earnings per ADS






Basic

0.39


0.11


0.02

Diluted

0.39


0.11


0.02







Shares

206,500,000


206,500,000


206,500,000

ADSs

51,625,000


51,625,000


51,625,000

 

 

China Zenix Auto International Limited

Unaudited Condensed Consolidated Statements of Financial Position

(RMB and US$ amounts expressed in thousands)



December 31,
2018


June 30,
 2019


June 30,
 2019


RMB'000


RMB'000


US$' 000

ASSETS






Current Assets






Inventories

172,111


217,504


31,683

Trade and other receivables and prepayments

776,473


879,707


128,144

Prepaid lease payments

9,425


9,425


1,373

Pledged bank deposits

33,500


31,000


4,516

Fixed bank deposits with maturity period over
three months

290,000


290,000


42,243

Bank balances and cash

933,250


924,409


134,655

Total current assets

2,214,759


2,352,045


342,614

Non-Current Assets






Property, plant and equipment

1,099,003


1,031,257


150,220

Prepaid lease payments

357,599


352,886


51,404

Deferred tax assets

40,272


42,517


6,193

Intangible assets

17,000


17,000


2,476

Total non-current assets

1,513,874


1,443,600


210, 293

Total assets

3,728,633


3,795,705


552,907

EQUITY AND LIABILITIES






Current Liabilities






Trade and other payables and accruals

611,463


586,891


85,490

Amount due to a shareholder

9,911


10,558


1,538

Taxation payable

2,477


3,687


537

Bank borrowings

473,000


558,000


81,282

Total current liabilities

1,096,851


1,159,136


168,847

Deferred tax liabilities

86,239


85,694


12,483

Deferred income

6,903


6,504


947

Total non-current liabilities

93,142


92,198


13,430

Total liabilities

1,189,993


1,251,334


182,277

EQUITY






Share capital

136


136


20

Paid in capital

392,076


392,076


57,112

Reserves

2,146,428


2,152,159


313,497

Total equity attributable to owners of the
company

2,538,640


2,544,371


370,629

Total equity and liabilities

3,728,633


3,795,705


552,907







 

 

China Zenix Auto International Limited

Unaudited Condensed Consolidated Statement of Cash Flows

For the three months ended June 30, 2019

(RMB and US$ amounts expressed in thousands)



Three Months Ended


June 30, 2019

OPERATING ACTIVITIES

RMB' 000


US$' 000

Profit before taxation

13,549


1,974

Adjustments for:




Amortization of prepaid lease payments

2,357


343

Depreciation of property plant and equipment

33,847


4,930

Release of deferred income

(200)


(29)

Finance costs

6,136


894

Loss on disposal of property, plant and equipment

1


-

Interest income

(3,612)


(526)

Operating cash flows before movements in working capital

52,078


7,586

Decrease in inventories

10,892


1,587

Decrease in trade and other receivables and prepayments

(106,752)


(15,549)

Decrease in trade and other payables and accruals

(3,568)


(520)

Cash used in operations

(47,350)


(6,896)

Interest received

2,865


417

PRC income tax paid

(2,766)


(403)

NET CASH USED IN OPERATING ACTIVITIES

(47,251)


(6,882)

INVESTING ACTIVITIES




Purchase of property, plant and equipment

(384)


(56)

Placement of pledged bank deposits

(332,500)


(48,434)

Withdrawal of pledged bank deposits

333,400


48,565

Proceeds on disposal of property, plant and equipment

1


-

Placement of fixed bank deposits with maturity periods over
three months

(50,000)


(7,283)

Withdrawal of fixed bank deposits with maturity periods over
three months

50,000


7,283

NET CASH FROM INVESTING ACTIVITIES

517


75

FINANCING ACTIVITIES




Interest paid

(6,203)


(904)

Advance from a shareholder

634


92

NET CASH USED IN FINANCING ACTIVITIES

(5,569)


(812)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(52,303)


(7,619)

Cash and cash equivalents at beginning of the period

977,239


142,351

Effect of foreign exchange rate changes

(527)


(77)

Cash and cash equivalents at end of the period

924,409


134,655

 

 

China Zenix Auto International Limited

Unaudited Condensed Consolidated Statement of Cash Flows

For the six months ended June 30, 2019

(RMB and US$ amounts expressed in thousands)



Six Months Ended


June 30, 2019

OPERATING ACTIVITIES

RMB' 000


US$' 000

Profit before taxation

9,028


1,315

Adjustments for:




Amortization of prepaid lease payments

4,713


687

Depreciation of property plant and equipment

68,079


9,917

Release of deferred income

(399)


(58)

Finance costs

12,028


1,752

Loss on disposal of property, plant and equipment

2


-

Interest income

(5,957)


(868)

Operating cash flows before movements in working capital

87,494


12,745

Increase in inventories

(45,393)


(6,612)

Decrease in trade and other receivables and prepayments

(103,043)


(15,010)

Decrease in trade and other payables and accruals

(24,618)


(3,586)

Cash generated from operations

(85,560)


(12,463)

Interest received

5,974


870

PRC income tax paid

(5,243)


(764)

NET CASH USED IN OPERATING ACTIVITIES

(84,829)


(12,357)

INVESTING ACTIVITIES




Purchase of property, plant and equipment

(384)


(56)

Placement of pledged bank deposits

(332,500)


(48,434)

Withdrawal of pledged bank deposits

335,000


48,798

Proceeds on disposal of property, plant and equipment

49


7

Placement of fixed bank deposits with maturity periods over
three months

(290,000)


(42,243)

Withdrawal of fixed bank deposits with maturity periods over
three months

290,000


42,243

NET CASH FROM INVESTING ACTIVITIES

2,165


315

FINANCING ACTIVITIES



-

New bank borrowings raised

340,000


49,527

Repayment of bank borrowings

(255,000)


(37,145)

Interest paid

(11,982)


(1,745)

Advance from a shareholder

647


94

NET CASH FROM FINANCING ACTIVITIES

73,665


10,731

NET DECREASE IN CASH AND CASH EQUIVALENTS

(8,999)


(1,311)

Cash and cash equivalents at beginning of the period

933,250


135,943

Effect of foreign exchange rate changes

158


23

Cash and cash equivalents at end of the period

924,409


134,655

 

Cision

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