China Zenix Auto International Limited Reports 2020 Third Quarter Financial Results
ZHANGZHOU, China, Dec. 1, 2020 /PRNewswire/ -- China Zenix Auto International Limited (OTC: ZXAIY) ("Zenix Auto" or "the Company"), one of the largest commercial vehicle wheel manufacturers in China in both the aftermarket and OEM market by sales volume, today announced its unaudited financial results for the third quarter ended September 30, 2020.
Financial Highlights
Third Quarter 2020:
- Revenue was RMB488.3 million (US$71.9 million), down 8.2% year-over-year
- Sales to the Chinese OEM market increased by 19.7% year-over-year
- Sales of tubeless steel wheels represented 55.0% of the third quarter revenue
- Sales of aluminum wheels accounted for 11.7% of total sales
- Net loss and total comprehensive loss was RMB101.6 million (US$15.0 million) with basic and diluted loss per American Depositary Share ("ADS") of RMB1.97 (US$0.29) compared with net loss and total comprehensive loss of RMB40.3 million for the third quarter of 2019 with basic and diluted loss per ADS of RMB0.78 in the third quarter of 2019;
- Net cash inflow from operating activities was RMB47.2 million (US$7.0 million).
First Nine Months of 2020:
- Revenue was RMB1,311.1 million (US$193.1 million), a decrease of 34.5% year-over-year compared with RMB2,000.2 million in the first nine months of 2019;
- Tubeless steel wheel sales decreased by 17.9% year-over-year;
- Sales of aluminum wheels decreased by 13.9% year-over-year;
- Net loss and total comprehensive loss for the period was RMB240.8 million (US$35.5 million) with loss per ADS of RMB4.66 (US$0.69);
- Bank balances and cash, pledged bank deposits and fixed bank deposits with maturity period over three months totaled RMB991.0 million (US$146.0 million).
Mr. Junqiu Gao, Deputy CEO and Chief Sales and Marketing Officer of Zenix Auto, commented, "Our lower sales is a result of slower economic growth in China, uncertainties resulting from the COVID-19 affecting business decisions in China and continuing weakness in international markets. While the Chinese economy grew in the third quarter of 2020, it was at a much slower rate than in the past. International markets remain weak in the face of COVID-19, which has affected inventory planning and pricing policies across many industries in China."
"As the leading manufacturer in the commercial wheel industry in China with a broad customer base, we made proactive adjustments to respond to the new market environment. We realigned our resources to further improve our manufacturing efficiency through greater production automation and focusing on high-demand wheels to partially offset the effect of price reductions across the industry. We continue to generate positive cash flow from operations during the third quarter and first nine months of 2020 and to focus on maintaining a sound financial standing," Mr. Gao concluded.
Mr. Martin Cheung, CFO of Zenix Auto, commented, "We maintained our financial strength with solid bank balances of US$99.9 million and US$42.7 million in fixed bank deposits. These amounts represented US$2.76 in cash and fixed bank deposits per ADS on September 30, 2020 including positive operating cash flow from operations of US$7.0 million generated in the third quarter of 2020. We will continue to review our options that will best utilize our financial resources to create long-term value for shareholders."
2020 Third Quarter Results
Revenue for the third quarter was RMB488.3 million (US$71.9 million) compared to RMB531.9 million in the third quarter of 2019. The decrease in revenue on a year-over-year basis was mainly due to a combination of the negative impact of weaker demand and price reductions in the domestic aftermarket segment and international markets.
Sales to the Chinese OEM market were RMB348.7 million (US$51.3 million) compared to RMB291.4 million in the same quarter of 2019. Total unit sales in the OEM market increased by 32.1% year-over-year during the third quarter of 2020. The higher sales to the OEM market was mainly attributable to the strong growth in the Chinese truck market.
Aftermarket sales in China were RMB99.0 million (US$14.6 million) compared to RMB185.0 million in the third quarter of 2019. Total unit sales in this market decreased by 36.0% year-over-year. The lockdown in the first quarter of 2020 and the slowdown in domestic traffic in the second quarter had a material adverse effect on the domestic auto repair shop industry and many owners were forced to close down permanently. During the third quarter of 2020, weak demand from the international markets forced many local export-oriented wheel producers to offload their inventories into an already struggling domestic aftermarket.
International sales were RMB40.6 million (US$6.0 million) compared to sales of RMB55.5 million in the same quarter of 2019, but up from RMB35.6 million in the second quarter of 2020. Total unit sales in the international sales decreased by 17.9% year-over-year in the third quarter of 2020. The COVID-19 pandemic continues to create a challenging environment in many of the world's important automotive markets.
In the third quarter of 2020, domestic OEM sales, domestic aftermarket sales and international sales contributed 71.4%, 20.3% and 8.3% of revenue, respectively.
Sales of tubed steel wheels comprised 29.4% of the 2020 third quarter revenue compared to 45.5% in the same quarter in 2019. Tubeless steel wheel sales represented 55.0% of the third quarter revenue compared to 41.2% in the same quarter of 2019. Sales of aluminum wheels accounted for 11.7% of the third quarter revenue as compared to 9.4% in the same quarter a year ago.
Third quarter gross loss was RMB25.6 million (US$3.8 million), compared to a gross profit of RMB32.9 million in the same quarter in 2019. The negative gross margin in the 2020 third quarter was mainly due to the significant drop in sales volume in both the aftermarket in China and international markets, and the wider-than-normal price cuts following the unprecedented impact from the COVID-19 outbreak. However, the production utilization rate remains at a high level.
Selling and distribution expenses increased by 13.2% to RMB39.0 million (US$5.7 million) from RMB34.5 million in the third quarter of 2019. As a percentage of revenue, selling and distribution costs were 8.0% in the third quarter, compared to 6.5% in the same quarter a year ago. The increase in selling and distribution costs as a percentage of revenue in the third quarter of 2020 was primarily due to the significantly higher shipping costs and increased marketing campaign expenses compared with the same quarter last year.
Research and development ("R&D") expenses increased by 25.7% to RMB17.6 million (US$2.6 million), compared to RMB14.0 million in the third quarter of 2019. R&D as a percentage of revenue was 3.6% in the third quarter of 2020, compared to 2.6% in the same quarter a year ago. The increase in R&D as a percentage of revenue in the third quarter of 2020 was primarily due to lower sales and increased new product development projects compared with the same quarter last year. The Company increased its R&D initiatives for new product development, associated new materials development, new light-weight product design, and new production equipment development.
Administrative expenses were RMB36.0 million (US$5.3 million), an increase of 14.9% from RMB31.3 million in the third quarter of 2019. The increase in administrative expenses in the third quarter of 2020 compared with the same quarter last year was primarily due to increased salaries to retain the core team members, increased medical benefits for the staff and new staff dormitory fees. As a percentage of revenue, administrative expenses were 7.4%, compared to 5.9% of revenue in the third quarter of 2019. The increase in administrative expenses as a percentage of revenue was primarily due to significantly lower sales in the third quarter of 2020 compared with the same quarter last year.
Net loss and total comprehensive loss were RMB101.6 million (US$15.0 million) in the third quarter compared to net loss and total comprehensive loss of RMB40.3 million for the same quarter of 2019.
Basic and diluted losses per ADS were RMB1.97 (US$0.29) compared to basic and diluted losses per ADS of RMB0.78 in the third quarter of 2019.
In the third quarter of 2020, the Company recorded net cash inflow from operating activities of RMB47.2 million (US$7.0 million) compared with a net cash inflow of RMB146.3 million in the third quarter of 2019. Capital expenditures for the purchase of property, plant and equipment in the third quarter were RMB28.8 million (US$4.2 million). The quick ratio in the third quarter was 1.52 to 1.
During the third quarter of 2020 and 2019, the weighted average number of ordinary shares was 206.5 million and the weighted average number of ADSs was 51.6 million.
2020 First Nine Months Results
Revenue for the first nine months ended September 30, 2020 was RMB1,311.1 million (US$193.1 million) compared with RMB2,000.2 million in the first nine months of 2019.
Sales to the Chinese OEM market decreased by 20.4% year-over-year to RMB864.5 million (US$127.3 million) and represented 65.9% of revenue generated in the first nine months ended September 30, 2020. Aftermarket sales decreased by 53.5% year-over-year to RMB322.9 million (US$47.6 million) and represented 24.6% of total first nine-month revenue. International sales decreased by 43.6% year-over-year to RMB123.7 million (US$18.2 million) compared with the same period last year and represented 9.5% of revenue.
Tubed steel wheel sales for the first nine months ended September 30, 2020 decreased by 53.5% compared with the same period in 2019 and accounted for 31.9% of revenue. Tubeless steel wheel sales decreased by 17.9% from the same period a year ago and accounted for 52.7% of revenue. Aluminum wheel sales decreased 13.9% from the same period a year ago and accounted for 11.5% of revenue. Construction equipment wheel sales decreased by 32.4% and accounted for 2.2% of revenue.
Gross loss for the first nine months ended September 30, 2020 was RMB31.9 million (US$4.7 million) compared with a gross profit of RMB211.8 million during the same period in 2019.
Net loss and total comprehensive loss for the first nine months ended September 30, 2020 was RMB240.8 million (US$35.5 million) compared with a net loss and total comprehensive loss of RMB34.5 million during the same period in 2019. Basic and diluted losses per ADS for the first nine months ended September 30, 2020 were RMB4.66 (US$0.69), compared with basic and diluted losses per ADS of RMB0.67 during the same period in 2019.
As of September 30, 2020, Zenix Auto had bank balances and cash of RMB678.0 million (US$99.9 million) and fixed bank deposits with a maturity period over three months of RMB290.0 million (US$42.7 million). Accounts receivables were RMB408.5 million (US$60.2) compared to RMB369.7 million at the end of 2019. Total bank borrowings were RMB558.0 million (US$82.2 million). Total equity attributable to owners of the Company was RMB2,193.0 million (US$323.0 million).
Conference Call Information
The Company will host a conference call on Tuesday, December 1, 2020 at 8:00 a.m. EST/9:00 p.m. Beijing Time. Please dial in five minutes before the call start time and ask to be connected to the "China Zenix Auto" conference call. Interested parties may participate in the conference call by dialing:
Phone Number: +1-877-407-0782 (North America)
Phone Number: +1-201-689-8567 (International)
Phone Number: +86-400-120-2840 (Mainland China)
A telephone replay of the call will be available after the conclusion of the conference call through December 31, 2020. The dial-in details for the replay are: U.S. Toll Free Number +1-877-481-4010 and International dial-in number +1-919-882-2331 using Conference ID "38554" to access the replay.
Exchange Rate Information
The United States dollar (US$) 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 RMB6.7896 to US$1.00, the effective noon buying rate as of September 30, 2020 in The City of New York, and 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 one of the largest commercial vehicle wheel manufacturers in China in both the aftermarket and OEM market by sales volume. The Company offers approximately 883 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 67 distributors in more than 28 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 September 30, 2020. 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 consequences of the coronavirus outbreak to economic conditions and the automobile industry in general, and the financial position and operating results of our company in particular, have been material in the first nine months of 2020, are changing rapidly, and cannot be predicted. 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
Awaken Advisors
Tel: +1-(212) 521-4050
Email: [email protected]
-- Tables Follow --
China Zenix Auto International Limited Unaudited Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income (Loss) For the three months ended September 30, 2020 and 2019 (RMB and US$ amounts expressed in thousands, except number of shares and per share data) |
||||||
2019 |
2020 |
2020 |
||||
RMB' 000 |
RMB' 000 |
US$' 000 |
||||
Revenue |
531,875 |
488,340 |
71,925 |
|||
Cost of sales |
(498,972) |
(513,928) |
(75,693) |
|||
Gross profit (loss) |
32,903 |
(25,588) |
(3,768) |
|||
Other operating income |
4,200 |
3,008 |
443 |
|||
Net exchange gain(loss) |
1,115 |
(1,023) |
(151) |
|||
Selling and distribution costs |
(34,464) |
(39,020) |
(5,747) |
|||
Research and development |
(13,982) |
(17,576) |
(2,589) |
|||
Administrative expenses |
(31,348) |
(36,031) |
(5,307) |
|||
Finance costs |
(6,202) |
(6,157) |
(907) |
|||
Loss before taxation |
(47,778) |
(122,387) |
(18,026) |
|||
Income tax credit |
7,499 |
20,773 |
3,060 |
|||
Loss and total |
(40,279) |
(101,614) |
(14,966) |
|||
Loss per share |
||||||
Basic |
(0.20) |
(0.49) |
(0.07) |
|||
Diluted |
(0.20) |
(0.49) |
(0.07) |
|||
Loss per ADS |
||||||
Basic |
(0.78) |
(1.97) |
(0.29) |
|||
Diluted |
(0.78) |
(1.97) |
(0.29) |
|||
Shares |
206,500,000 |
206,500,000 |
206,500,000 |
|||
ADSs |
51,625,000 |
51,625,000 |
51,625,000 |
|||
China Zenix Auto International Limited Unaudited Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income (Loss) For the nine months ended September 30, 2020 and 2019 (RMB and US$ amounts expressed in thousands, except number of shares and per share data) |
||||||
2019 |
2020 |
2020 |
||||
RMB' 000 |
RMB' 000 |
US$' 000 |
||||
Revenue |
2,000,223 |
1,311,088 |
193,102 |
|||
Cost of sales |
(1,788,422) |
(1,342,968) |
(197,798) |
|||
Gross profit (loss) |
211,801 |
(31,880) |
(4,696) |
|||
Other operating income |
13,144 |
8,617 |
1,269 |
|||
Net exchange gain(loss) |
1,108 |
(1,105) |
(163) |
|||
Selling and distribution costs |
(117,850) |
(102,402) |
(15,082) |
|||
Research and development |
(42,198) |
(47,685) |
(7,023) |
|||
Administrative expenses |
(86,525) |
(98,985) |
(14,579) |
|||
Finance costs |
(18,230) |
(18,278) |
(2,692) |
|||
Loss before taxation |
(38,750) |
(291,718) |
(42,966) |
|||
Income tax credit |
4,202 |
50,936 |
7,502 |
|||
Loss and total |
(34,548) |
(240,782) |
(35,464) |
|||
Loss per share |
||||||
Basic |
(0.17) |
(1.17) |
(0.17) |
|||
Diluted |
(0.17) |
(1.17) |
(0.17) |
|||
Loss per ADS |
||||||
Basic |
(0.67) |
(4.66) |
(0.69) |
|||
Diluted |
(0.67) |
(4.66) |
(0.69) |
|||
Shares |
206,500,000 |
206,500,000 |
206,500,000 |
|||
ADSs |
51,625,000 |
51,625,000 |
51,625,000 |
|||
China Zenix Auto International Limited Unaudited Condensed Consolidated Statements of Financial Position (RMB and US$ amounts expressed in thousands) |
||||||
December 31 |
September 30 |
September 30 |
||||
RMB'000 |
RMB'000 |
US$' 000 |
||||
ASSETS |
||||||
Current Assets |
||||||
Inventories |
129,641 |
168,083 |
24,756 |
|||
Trade and other receivables and |
596,359 |
564,307 |
83,113 |
|||
Pledged bank deposits |
14,900 |
23,000 |
3,388 |
|||
Fixed bank deposits with maturity |
290,000 |
290,000 |
42,712 |
|||
Bank balances and cash |
906,840 |
678,008 |
99,860 |
|||
Total current assets |
1,937,740 |
1,723,398 |
253,829 |
|||
Non-Current Assets |
||||||
Property, plant and equipment |
1,076,731 |
1,042,679 |
153,570 |
|||
Right-of-use assets |
357,599 |
350,530 |
51,627 |
|||
Long term prepayments |
- |
13,000 |
1,915 |
|||
Deferred tax assets |
54,641 |
99,379 |
14,637 |
|||
Intangible assets |
17,000 |
17,000 |
2,504 |
|||
Deposits paid for acquisition of |
61,618 |
62,598 |
9,220 |
|||
Total non-current assets |
1,567,589 |
1,585,186 |
233,473 |
|||
Total assets |
3,505,329 |
3,308,584 |
487,302 |
|||
EQUITY AND LIABILITIES |
||||||
Current Liabilities |
||||||
Trade and other payables and accruals |
410,764 |
468,179 |
68,955 |
|||
Amount due to a shareholder |
10,557 |
- |
- |
|||
Taxation payable |
982 |
- |
- |
|||
Short-term bank borrowings |
558,000 |
558,000 |
82,185 |
|||
Total current liabilities |
980,303 |
1,026,179 |
151,140 |
|||
Non-current liabilities |
||||||
Deferred tax liabilities |
85,150 |
83,908 |
12,358 |
|||
Deferred income |
6,106 |
5,509 |
812 |
|||
Total non-current liabilities |
91,256 |
89,417 |
13,170 |
|||
Total liabilities |
1,071,559 |
1,115,596 |
164,310 |
|||
EQUITY |
||||||
Share capital |
136 |
136 |
20 |
|||
Paid in capital |
392,076 |
392,076 |
57,747 |
|||
Reserves |
2,041,558 |
1,800,776 |
265,225 |
|||
Total equity attributable to owners |
2,433,770 |
2,192,988 |
322,992 |
|||
Total equity and liabilities |
3,505,329 |
3,308,584 |
487,302 |
|||
China Zenix Auto International Limited Unaudited Condensed Consolidated Statement of Cash Flows For the three months ended September 30, 2020 (RMB and US$ amounts expressed in thousands) |
|||||||
Three Months Ended |
|||||||
September 30, 2020 |
|||||||
OPERATING ACTIVITIES |
RMB' 000 |
US$' 000 |
|||||
Loss before taxation |
(122,387) |
(18,026) |
|||||
Adjustments for: |
|||||||
Depreciation of right-of-use assets |
2,356 |
347 |
|||||
Depreciation of property, plant and equipment |
31,811 |
4,685 |
|||||
Release of deferred income |
(199) |
(29) |
|||||
Finance costs |
6,157 |
907 |
|||||
Loss on disposal of property, plant and equipment |
586 |
86 |
|||||
Interest income |
(2,449) |
(361) |
|||||
Operating cash flows before movements in working capital |
(84,125) |
(12,391) |
|||||
Increase in inventories |
(3,286) |
(484) |
|||||
Decrease in trade and other receivables and prepayments |
45,929 |
6,765 |
|||||
Increase in trade and other payables and accruals |
86,126 |
12,685 |
|||||
Cash generated from operations |
44,644 |
6,575 |
|||||
Interest received |
2,574 |
380 |
|||||
NET CASH FROM OPERATING ACTIVITIES |
47,218 |
6,955 |
|||||
INVESTING ACTIVITIES |
|||||||
Purchase of property, plant and equipment |
(28,848) |
(4,249) |
|||||
Withdrawal of pledged bank deposits |
95,000 |
13,992 |
|||||
Placement of pledged bank deposits |
(100,500) |
(14,802) |
|||||
Proceeds on disposal of property, plant and equipment |
503 |
74 |
|||||
Deposits paid for acquisition of property, plant and equipment |
(980) |
(144) |
|||||
Placement of fixed bank deposits with maturity periods over three months |
(160,000) |
(23,565) |
|||||
Withdrawal of fixed bank deposits with maturity periods over three months |
160,000 |
23,565 |
|||||
NET CASH USED IN INVESTING ACTIVITIES |
(34,825) |
(5,129) |
|||||
FINANCING ACTIVITIES |
|||||||
New bank borrowings raised |
(80,000) |
(11,783) |
|||||
Repayment of bank borrowings |
80,000 |
11,783 |
|||||
Interest paid |
(6,164) |
(908) |
|||||
NET CASH FROM FINANCING ACTIVITIES |
(6,164) |
(908) |
|||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
6,229 |
918 |
|||||
Cash and cash equivalents at beginning of the period |
671,304 |
98,872 |
|||||
Effect of foreign exchange rate changes |
475 |
70 |
|||||
Cash and cash equivalents at end of the period |
678,008 |
99,860 |
|||||
China Zenix Auto International Limited Unaudited Condensed Consolidated Statement of Cash Flows For the nine months ended September 30, 2020 (RMB and US$ amounts expressed in thousands) |
||||||
Nine Months Ended |
||||||
September 30, 2020 |
||||||
OPERATING ACTIVITIES |
RMB' 000 |
US$' 000 |
||||
Loss before taxation |
(291,718) |
(42,966) |
||||
Adjustments for: |
||||||
Depreciation of right-of-use assets |
7,069 |
1,041 |
||||
Depreciation of property, plant and equipment |
98,890 |
14,565 |
||||
Release of deferred income |
(598) |
(88) |
||||
Finance costs |
18,278 |
2,692 |
||||
Loss on disposal of property, plant and equipment |
1,622 |
240 |
||||
Interest income |
(8,015) |
(1,180) |
||||
Operating cash flows before movements in working capital |
(174,472) |
(25,696) |
||||
Increase in inventories |
(38,442) |
(5,662) |
||||
Decrease in trade and other receivables and prepayments |
23,712 |
3,492 |
||||
Increase in trade and other payables and accruals |
54,554 |
8,035 |
||||
Cash used in operations |
(134,648) |
(19,831) |
||||
Interest received |
8,209 |
1,209 |
||||
PRC income tax paid |
(982) |
(145) |
||||
NET CASH USED IN OPERATING ACTIVITIES |
(127,421) |
(18,767) |
||||
INVESTING ACTIVITIES |
||||||
Purchase of property, plant and equipment |
(56,849) |
(8,373) |
||||
Withdrawal of pledged bank deposits |
244,000 |
35,937 |
||||
Placement of pledged bank deposits |
(252,100) |
(37,130) |
||||
Proceeds on disposal of property, plant and equipment |
503 |
74 |
||||
Deposits paid for acquisition of property, plant and equipment |
(8,158) |
(1,201) |
||||
Placement of fixed bank deposits with maturity periods over three months |
(450,000) |
(66,278) |
||||
Withdrawal of fixed bank deposits with maturity periods over three months |
450,000 |
66,278 |
||||
NET CASH USED IN INVESTING ACTIVITIES |
(72,604) |
(10,693) |
||||
FINANCING ACTIVITIES |
||||||
New bank borrowings raised |
420,000 |
61,859 |
||||
Repayment of bank borrowings |
(420,000) |
(61,859) |
||||
Interest paid |
(18,352) |
(2,703) |
||||
Repayment to a shareholder |
(10,557) |
(1,555) |
||||
NET CASH USED IN FINANCING ACTIVITIES |
(28,909) |
(4,258) |
||||
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(228,934) |
(33,718) |
||||
Cash and cash equivalents at beginning of the period |
906,840 |
133,563 |
||||
Effect of foreign exchange rate changes |
102 |
15 |
||||
Cash and cash equivalents at end of the period |
678,008 |
99,860 |
||||
SOURCE China Zenix Auto International Limited
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