China Automotive Systems Reports Q3 2006 Results

Third Quarter 2006 Highlights: -- Total net sales for the period increased to US$22.7 million, reflecting a 54% year-over-year growth; -- Net sales from steering components for passenger and light-duty vehicles increased to US$13.6 million, reflecting a 49% year-over-year growth; -- Net sales from steering components for commercial vehicles increased to US$6.4 million, reflecting an 73% increase year-over-year; -- Operating income for the third quarter of 2006 increased to $3.4 million, reflecting a 22% year-over-year growth; -- Net income rose to $1.5 million, reflecting a 42% year-over-year growth; and -- Diluted earnings per share was US$0.07, an increase of 40% year-over- year.

WUHAN, Hubei, China, Nov. 13 /Xinhua-PRNewswire/ -- China Automotive Systems, Inc. (NASDAQ: CAAS), a leading power steering components and systems supplier in China, today announced 2006 third quarter financial results.

(Logo: http://211.154.41.99:9080/xprn/sa/200611131509.jpg )

Total net sales for the third quarter of 2006 was $22.7 million, compared with $14.8 million reported in the same period of 2005 and $ 24.7 million for the second quarter of 2006, reflecting a 54% year-over-year growth and an 8% quarter-over-quarter decline respectively. Net income for the third quarter of 2006 was $1.5 million, or $0.07 per diluted share, compared with $1.1 million, or $0.05 per diluted share in the same period last year and $0.75 million, or $0.03 per diluted share, for the second quarter of 2006, reflecting a 40% year-over-year growth and a 104% quarter-over-quarter increase, respectively.

Net sales from steering products for passenger and light-duty vehicles for the third quarter of 2006 increased to $13.6 million, compared with $9.1 million reported in the same period of 2005 and $ 15.8 million for the second quarter of 2006, reflecting a 49% year-over-year growth and a 14% quarter- over-quarter decline respectively. Net sales from steering products for commercial vehicles for the third quarter of 2006 increased to $6.4 million as compared with $3.7 million reported in the same period of 2005 and $6.0 million for the second quarter of 2006, reflecting a 73% increase year-over- year and a 7% quarter-over-quarter increase, respectively.

"Third quarter is normally a slow season in Chinese passenger vehicle market due to the summer. However, we see little sign of slow-down in the sedan market. Our key customers, Chery Auto and Geely Auto continue to gain market share in China's domestic market with their economy cars. Due to the roll-out of consumption taxes, luxury and mid size sedan sector experienced further pricing pressure while the economy cars held in the third quarter. On the export front, we are excited to report that our products have been installed in Geely and Chery's exported vehicles. With the further economic development and growing export, the commercial vehicle sector is also experiencing further recovery. Our sales to commercial vehicle sector rose to 30% of our total revenue in this quarter." said Mr. Hanlin Chen, Chairman and Chief Executive Officer of China Automotive Systems.

Gross profit for the third quarter of 2006 increased to $8.2 million, compared with $5.7 million reported in the same period for 2005 and $9.3 million for the second quarter of 2006, reflecting a 45% increase year-over- year and a 12% quarter-over-quarter decline, respectively. Operating income for the third quarter of 2006 was $3.4 million, compared with $2.8 million reported in the same period of 2005 and $ 3.0 million for the second quarter of 2006, reflecting a 22% year-over-year growth and a 12% quarter-over-quarter growth respectively.

Total cash and cash equivalents as of September 30, 2006 totaled $18.4 million as compared to $12.4 million as of December 31, 2005. Stockholder's equity increased to $46.1 million as of September 30, 2006 from $36.9 million as of December 31, 2005.

Mr. Daming Hu, Chief Financial Officer stated, "During this quarter, we incurred higher Selling, General and Administrative expenses (SG&A) as compared to the same period last year. Our rapid sales growth and facility expansion triggered higher SG&A expenses including selling expenditure, doubtful debt provision and depreciation. We carefully measure the expenses in accordance with our top line growth. With the solid relationship with our customers, we are confident that we will be able to collect the payment. Meanwhile, as we increase technology investment, government raised subsidy to our interest payment to the local commercial banks. As a result, our non-operating income increased as compared to the same period last year."

About CAAS

Based in Hubei Province, People's Republic of China, China Automotive Systems, Inc. is a leading supplier of power steering components and systems to the Chinese automotive industry, operating through seven Sino-foreign joint ventures. The Company offers a full range of steering system parts for passenger automobiles and commercial vehicles. The Company currently offers 4 separate series of power steering and 307 models of power steering with an annual production capacity of 800,000 sets, steering columns, steering oil pumps and steering hoses. Its customer base is comprised of leading Chinese auto manufacturers such as China FAW Group, Corp., Donfeng Auto Group Co., Ltd., Brilliance China Automotive Holdings Ltd., Beiqi Foton Motor Co., Ltd. and Chery Automobile Co., Ltd. etc. For more information, please visit: http://www.caasauto.com .

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products, pricing and new technology; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time.


                        China Automotive Systems, Inc.
         Condensed Consolidated Statements of Operations (Unaudited)


                                         Three Months Ended September 30,
                                          2006                      2005
    Operating revenue:
    Net product sales              $   22,399,673            $   14,262,933
    Net other sales                       341,225                   525,167

                                       22,740,898                14,788,100
    Operating cost:
    Cost of product sales              14,266,514                 8,754,017
    Cost of other sales                   284,991                   373,010

                                                                  14,551,505                                  9,127,027

        Gross  profit                                                8,189,393                                  5,661,073

        Operating  expenses:
        Selling  expenses                                        1,540,030                                  1,151,638
        General  and
          administrative
          expenses                                                      2,139,440                                      846,238
        R&D  expenses                                                    206,732                                      261,711
        Depreciation  and
          amortization                                                  904,622                                      607,392

                                                                                4,790,824                                  2,866,979

        Income  from  operations                            3,398,569                                  2,794,094
        Non-operating  income                                      93,632                                        18,518
        Financial  (expenses)                                  (295,121)                                  (333,885)

        Income  before  income
          taxes                                                            3,197,080                                  2,478,727
        Income  taxes                                                    470,617                                      597,427

        Income  before  minority
          interests                                                    2,726,463                                  1,881,300
        Minority  interests                                    1,194,340                                      804,388

        Net  income                                          $        1,532,123                        $        1,076,912

        Basic                                                    $                  0.07                        $                  0.05

        Diluted                                                $                  0.07                        $                  0.05
        Weighted  average
          number  of  common
          shares  outstanding  -
                  Basic                                                  23,287,049                                22,574,542
                  Diluted                                              23,287,782                                22,574,207



                                                China  Automotive  Systems,  Inc.
                  Condensed  Consolidated  Statements  of  Operations  (Unaudited)

                                                                                          Nine  Months  Ended  September  30,
                                                                                                2006                                  2005
        Operating  revenue:
        Net  product  sales                                        $      68,112,037            $      45,002,692
        Net  other  sales                                                      1,154,242                      1,248,758

                                                                                          69,266,279                    46,251,450
        Operating  cost:
        Cost  of  product  sales                                        43,762,536                    28,496,684
        Cost  of  other  sales                                                  897,406                      1,048,245

                                                                                          44,659,942                    29,544,929

        Gross  profit                                                          24,606,337                    16,706,521

        Operating  expenses:
        Selling  expenses                                                    5,419,420                      3,818,669
        General  and  administrative
          expenses                                                                  6,529,130                      4,010,754
        R&D  expenses                                                                647,873                          757,660
        Depreciation  and  amortization                          2,846,716                      1,992,163

                                                                                          15,443,139                    10,579,246

        Income  from  operations                                        9,163,198                      6,127,275
        Non-operating  income                                                  94,257                            27,183
        Financial  (expenses)                                              (806,984)                      (941,486)

        Income  before  income  taxes                                8,450,471                      5,212,972
        Income  taxes                                                            1,522,067                      1,150,750

        Income  before  minority
          interests                                                                6,928,404                      4,062,222
        Minority  interests                                                3,550,247                      1,617,073

        Net  income                                                      $        3,378,157            $        2,445,149

        Basic                                                                $                  0.15            $                  0.11

        Diluted                                                            $                  0.15            $                  0.11

        Weighted  average  number  of
          common  shares  outstanding  -
                  Basic                                                              23,076,215                    22,574,542
                  Diluted                                                          23,084,675                    22,585,732



                                                China  Automotive  Systems,  Inc.
                            Condensed  Consolidated  Balance  Sheets  (Unaudited)

                                                                                              September  30,          December  31,
                                                                                                      2006                          2005

        ASSETS
        Current  assets:
        Cash  and  cash  equivalents                              $        18,424,513        $    12,374,944
        Pledged  cash  deposits                                                  3,533,732                1,185,660
        Accounts  and  notes  receivable,  net                      50,702,026              41,580,320
        Advance  payments  and  other                                        1,475,131                1,029,892
        Inventories                                                                    17,514,260              12,385,833

        Total  current  assets                                                  91,649,662              68,556,649

        Long-term  Assets:
          Property,  plant  and  equipment,  net                    38,349,268              39,796,033
        Intangible  assets,  net                                                3,111,854                3,503,217
        Other  receivables,  net                                                5,104,002                6,503,629
        Advance  payment  for  property,
          plant  and  equipment                                                    3,040,858                1,096,121
        Long-term  investments                                                        67,832                      74,074

        Total  assets                                                        $      141,323,476        $  119,529,723

        LIABILITIES  AND  STOCKHOLDERS'  EQUITY
        Current  liabilities:
        Bank  loans                                                            $        16,229,713        $    14,814,815
        Accounts  and  notes  payable                                      35,103,991              31,375,599
        Customer  deposits                                                              288,564                    157,919
        Accrued  payroll  and  related
          costs                                                                                1,504,462                1,418,093
        Accrued  expenses  and  other
          payables                                                                          6,119,563                5,191,617
        Accrued  pension  costs                                                  2,900,333                2,653,064
        Taxes  payable                                                                  5,206,614                4,172,212
        Amounts  due  to
          shareholders/directors                                                  259,525                    766,642

        Total  current  liabilities                                        67,612,765              60,549,961
        Long-term  liabilities:
        Advances  payable                                                                301,552                    301,614

        Total  liabilities                                              $        67,914,317        $    60,851,575

        Minority  interests                                                      27,343,634              21,751,043

        Stockholders'  equity:
        Preferred  stock,  $0.0001  par
          value-
        Authorized  -  20,000,000  shares
        Issued  and  outstanding  -  None
        Common  stock,  $0.0001  par
          value-
        Authorized  -  80,000,000  shares
        Issued  and  outstanding-
        23,289,495  and  22,574,543
          shares  at  September  30,  2006
          and  December  31,  2005,
          respectively
        Common  stock,  $0.0001  par
          value-                                                                                      2,329                        2,257
        Additional  paid-in  capital                                      23,305,514              18,146,721
        Retained  earnings-
          Appropriated                                                                  5,078,584                4,923,262
          Unappropriated                                                            15,745,015              12,522,181
          Accumulated  other  comprehensive
            income                                                                            1,934,083                1,332,684

        Total  stockholders'  equity                                      46,065,525              36,927,105

        Total  liabilities  and
          stockholders'  equity                                      $      141,323,476        $  119,529,723


        For  more  information,  please  contact:

          Mr.  Jie  Li
          Investor  Relations  and  Communications
          China  Automotive  Systems,  Inc.
          Tel:      +86-27-5981-8527
          Email:  
  Email  Contact  

          Christopher  Chu
          The  Global  Consulting  Group
          Tel:      +1-646-284-9426
          Email:  
  Email  Contact  
 


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