Lentuo International Reports Profitable Third Quarter 2014

BEIJING, Dec. 1, 2014 /PRNewswire/ -- Lentuo International Inc. (NYSE: LAS) ("Lentuo" or the "Company"), a leading non-state-owned automobile retailer headquartered in Beijing, today reported its financial results for the third quarter ended September 30, 2014.

First 9 Months 2014 Financial Highlights

• Net income was RMB40.8 million ($6.6 million), up 31.8% from RMB30.9 million in the first 9 months of 2013.
• Revenues from repair and maintenance services increased 17.0% to RMB336.2 million ($54.8 million) from RMB287.3 million in the first 3 quarters of 2013.
• As a percentage of revenues, revenues from repair and maintenance services increased to 13.9% from 11.9% in the same period of 2013.
• Gross margin for repair and maintenance services increased to 42.2% from 38.9% in the same period of 2013.
• Average new vehicle unit price was RMB175, 289 ($28,558) a 5.7% increase from RMB165, 849 for same period of 2013.
• Average unit price for repair and maintenance services was RMB 2,321($378) an 18.1% increase from RMB1, 966 for same period of 2013.

"We are extremely pleased to have delivered net profits of RMB40.8 million for the first nine months of this year compared to RMB30.9 million a year ago as recent adjustments to our strategy are paying off. Average unit prices for new cars sold increased as we continued to shift our focus to high-end cars.  After sales services revenues grew nicely both in absolute terms and as a percentage of total revenues with higher gross margins due primarily to a higher proportion of high-end cars serviced," commented Mr. Hetong Guo, Founder and Chairman of Lentuo International.

"Our high-end car expansion strategy received a strong vote of confidence from BMW in recognition of our twenty years of industry knowledge and leading customer service experience. Our first BMW dealership will be located in affluent Gaobeidian, a city in the heart of the Beijing-Tianjin-Hebei economic triangle. It represents another critical step in our development, not only because of the diversification and expansion upmarket but also because we continue to grow outside Beijing and increase our brand visibility and recognition geographically. Meanwhile we continue our discussions with other high-end brands and believe we will see more positive developments in the future," added Mr. Guo.

First 9 Months 2014 Financial Performance

Revenues for the first 9 months of 2014 were RMB2.4 billion ($395.1 million), a 0.5% increase compared to the first 9 months of 2013.

Revenues from automobile sales were RMB2.0 billion ($323.0 million), a decrease of 3.5% compared to the first 9 months of 2013 as the Company sold 11,748 vehicles, a 7.3% decrease from 12,670 vehicles for the same period of 2013. However, in line with the Company's strategic shift towards high-end cars, the average new vehicle unit price increased 5.7 % to RMB175, 289 ($28,558) from RMB165, 849 in the same period of 2013. The Company has identified the high-end car segment as one of the pillars of its growth strategy.

Revenues from repair and maintenance services increased 17.0% to RMB336.2 million ($54.8 million) from RMB287.3 million in the first 9 months of 2013. The Company serviced 144,850 vehicles, essentially flat when compared to the first 9 months of 2013. The average unit price for the Company's repair and maintenance services was RMB2,321 ($378), an 18.1% increase from RMB 1,966 during the same period in 2013. The increase in unit price is primarily the result of the higher proportion of high-end cars serviced as the Company strategically shifts toward premium cars.

Cost of goods sold were RMB 2.2 billion ($352 million), a 0.6% decrease from the first 9 months of 2013.

Gross profit increased by 10.4% to RMB262.0million ($42.7 million) from RMB237.2 million for the same period of 2013. The increase was mainly due to the increase in overall gross profit margin.

Overall gross margin increased to 10.8% from 9.8% for the same period of 2013. Specifically, gross margin for automobile sales were 4.8%, essentially flat when compared to the same period of 2013, while the gross margin of repair and maintenance services increased to 42.2% from 38.9% for the same period of 2013, mainly due to the optimization of the Company's service offering mix within repair and maintenance services towards higher-priced products which tend to have higher gross margin.

Selling, marketing, and distribution expenses decreased by 3.2% to RMB81.4 million ($13.3 million) from RMB84.1 million in the same period of 2013. As a percentage of revenues, selling, marketing and distribution expenses were 3.4%, a slight decrease from 3.5% during the first 9 months of 2013. Selling, marketing and distribution expenses decreased mainly due to the Company's effective cost control policies.

General and administrative expenses decreased by 6.9% to RMB53.7 million ($8.7 million) from RMB57.6 million in the same period of 2013. As a percentage of revenues, general and administrative expenses decreased to 2.2% from 2.4% in the same period of 2013. The decrease was primarily due to the Company's effective cost control policies.

Operating income increased by 28.3% to RMB127.8 million ($20.8 million) from RMB99.6 million in the same period of 2013.

Operating margin increased to 5.3% from 4.1% in the same period of 2013. The increase in operating margin was primarily attributable to the 100 basis point increase in overall gross margin and the 30 basis point decrease in operating expenses as a percentage of revenue.

Net income attributable to controlling interest was RMB40.8 million ($6.6 million), an increase of 31.8% compared with RMB30.9 million in the same period of 2013.

Basic and diluted earnings per ordinary share were RMB0.63 ($0.10) compared with basic and diluted earnings per ordinary share of RMB0.52 in the same period of 2013. This translates into basic and diluted earnings per ADS of RMB1.26 ($0.21). Each ADS represents two ordinary shares.

Third Quarter 2014 Financial Highlights

• Net income was RMB18.0 million ($2.9 million), up 2.2% compared to net income of RMB17.6 million in the same period of 2013.
• Revenues from repair and maintenance services increased by 9.1% to RMB127.9 million ($20.8 million) from RMB117.3 million in the third quarter 2013.
• As a percentage of revenues, revenues from repair and maintenance services increased to 15.7% from 12.3% in the same period of 2013.
• Gross margin for repair and maintenance services increased to 44.4% from 41.1% in the same period of 2013.
• Average new vehicle unit price was RMB178, 956 ($29,155) a 4.9% increase from RMB170, 591 for the same period of 2013.
• Average unit price for repair and maintenance services was RMB 2,451($399) a 4.5% increase from RMB2, 346 for the same period of 2013.

Third Quarter 2014 Financial Performance

Revenues for the three months ended September 30, 2014 decreased 14.2% to RMB817.6 million ($133.2million) from RMB953.1 million in the third quarter of 2013.

Revenues from automobile sales decreased 22.3% to RMB636.7 million ($103.7 million) from RMB819.4 million during the same period in 2013. The number of vehicles sold decreased 21.6% to 3,795 vehicles, mainly as a result of the continuing impact from Beijing's policy to limit the number of new license plates issued annually. The Company expects this policy to remain in effect for the foreseeable future and has been shifting its focus towards increasing sales of high-end cars and expanding its geographic footprint outside Beijing. This strategic shift has already started to yield results with average unit price for new cars sold increasing 4.9% to RMB178, 956 ($29,155) from RMB170, 591 in the same period in 2013, and revenues from automobile sales outside Beijing increasing 25.4% during the third quarter of 2014.

Additionally, the Company's first BMW dealership in Gaobeidian will be another major step in Lentuo's strategy to diversify its business geographically, as well as expand its presence in the high-end segment. The Company's substantial customer base continues to increase and is becoming a robust platform that the Company will be able to leverage as it continues to enhance its after-sale services to capitalize on the long-term growth fundamentals of China's auto industry.

Revenues from repair and maintenance services increased by 9.1% to RMB127.9 million ($20.8 million) from RMB117.3 million during the same period in 2013. The Company serviced 52,200 vehicles, a 4.4% increase from the 49,979 vehicles serviced in the third quarter of 2013.

The average unit price for the Company's repair and maintenance services was RMB2, 451 ($399), a 4.5% increase from RMB 2,346 during the same period in 2013.  The increase was mainly due to the increasing proportion of high-end cars serviced as a result of the Company`s strategic shift towards high-end cars.

Cost of goods sold decreased by 15.2% to RMB724.4 million ($118.0 million) from RMB854.0 million in the same period of 2013 as a result of lower car sales.

Gross profit decreased by 5.9% to RMB93.2 million ($15.2 million) from RMB99.1 million in the same quarter of 2013. The decrease in gross profit was mainly due to decreased revenue.

Overall gross margin increased by 100 basis points to 11.4% from 10.4% in the third quarter of 2013. Specifically, the gross margin of repair and maintenance services was 44.4%, an increase from 41.1% for the same period in 2013. And as percentage to revenue, repair and maintenance services was 15.7%, an increase from 12.3% for the same period in 2013. 

Selling, marketing and distribution expenses decreased by 21.3% to RMB 27.2 million ($4.4 million) from RMB34.6 million during the same period of 2013. As a percentage of revenues, selling, marketing and distribution expenses decreased to 3.3% from 3.6% in the third quarter of 2013. The decrease was primarily due to decreased revenue and the Company's effective cost control policies.

General and administrative expenses decreased by 26.0% to RMB18.7 million ($3.1 million) compared with RMB25.3 million during the same quarter of 2013. As a percentage of revenues, general and administrative expenses decreased to 2.3% from 2.7% in the third quarter of 2013. The decrease was primarily due to the Company's effective cost control policies.

Operating income was RMB47.7 million ($7.8 million), an increase of 19.3% from operating income of RMB40.0 million for the same period in 2013.

Operating margin was 5.8%, an increase from 4.2% during the same quarter in 2013. The increase in operating margin was primarily attributable to the 100 basis point increase in overall gross margin and the 70 basis point decrease in operating expenses as a percentage of revenue.

Net income attributable to controlling interest was RMB18.0 million ($2.9million), an increase of 2.2% compared to RMB17.6 million for the same period in 2013.

Basic and diluted earnings per ordinary share were RMB0.28 ($0.04) compared to basic and diluted earnings per ordinary share of RMB0.27 for the third quarter of 2013. This translates into basic and diluted earnings per ADS of RMB0.56 ($0.09). Each ADS represents two ordinary shares. Weighted average ordinary shares outstanding were 65,137,912.

Liquidity and Capital Resources

As of September 30, 2014, the Company had cash and cash equivalents of RMB193.5 million ($31.5 million), compared to RMB266.6 million as of December 31, 2013.

Expansion Strategy Update

Premium cars expansion

The Company has been granted approval to become a BMW authorized dealer in October 2014. The dealership has been officially registered with the Gaobeidian Administration for Industry and Commerce.

The Company's first BMW dealership in Gaobeidian is another major step in the Company's strategy to expand sales and services of premium cars in China while continuing to diversify its business away from Beijing. This will be the first and only BMW dealership in Gaobeidian, a small, economically prosperous city located just south of Beijing in the Beijing-Tianjin-Hebei economic triangle. Marketing research by both BMW and the Company indicates substantial demand for premium cars in and around the city.

Pre-owned cars expansion

On August 28, 2014, the Company announced its joint venture with Bitauto and Uxin to create an O2O platform for high-end pre-owned cars in China. The pre-owned car dealership is currently under construction and is expected to be completed by the end of January 2015.

Conference Call

Lentuo's management will host a conference call to discuss the results at 8:00 a.m. Eastern Standard Time on Monday, December 1, 2014 (9:00 p.m. Beijing time on the same day).

The dial-in details for the live conference call are:

A telephone replay of the call will be available after the conclusion of the conference call at 11:00 a.m. Eastern Standard Time on December 1, 2014 through 11:59 p.m. Eastern Standard Time on December 8, 2014. The dial-in details for the replay are:

Exchange Rate

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB 6.1380 to US $1.00, as set forth in theH.10 statistical release of the Federal Reserve Board on September 30, 2014.

About Lentuo International Inc.

Founded in 1994, Lentuo Group ("Lentuo") is a leading Chinese automobile retailer headquartered in Beijing. Through its many subsidiaries, Lentuo operates 4S franchise dealerships, automobile showrooms, automobile repair shops, a car leasing company, automobile financing and a pre-owned car business.

Lentuo dealership brands include FAW Audi, FAW-Volkswagen, Shanghai VW, FAW Toyota, FAW Mazda, Honda, and Chang'an Mazda. Since its establishment, Lentuo has developed relationships with many other well-known domestic and overseas brands as it expands further into the luxury car market. Annual sales for Lentuo's dealership brands consistently rank among the top in Beijing and China. On December 10th, 2010, Lentuo was listed on the New York Stock Exchange as the first and only Chinese auto-dealership group.

Over the past 20 years, Lentuo has received various industry awards from the government, OEMs and industry associations. Lentuo has been recognized as a Famous Trademark by the Beijing Administration for Industry and Commerce (BAIC), a Top 50 Auto Dealer in China, a China Automobile Sales and Service Top Ten Enterprise Group, and has been awarded the Outstanding Contribution Award and Distinguished Contribution Award in the China Automobile Dealers Industry by CADA. It is the only triple A-rated Beijing Automobile Works dealership group in China to have been designated an FAW strategic partner, and awarded FAW Audi Sales Award, FAW Audi No. 1 Customer Satisfaction, FAW–Volkswagen National Sales Champion, FAW-Volkswagen Gold Award for Service Satisfaction, Shanghai Volkswagen 6 Star-Rated Franchise Dealer and FAW Mazda National Sales Champion.

For more information, please visit http://lentuo.investorroom.com/.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Contact:

Lentuo Investor Relations
Telephone +86-10-8735-8388
Email:  [email protected]

Christensen

Mr. Christian Arnell
Telephone +86-10-5900-1548 in Beijing
Email: [email protected]

Ms. Linda Bergkamp
Phone:  +1-480-614-3004 (U.S.A.)
Email: [email protected]

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SOURCE Lentuo International Inc.

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