China Zenix Auto International Reports 2020 First Quarter Financial Results

ZHANGZHOU, China, Aug. 20, 2020 /PRNewswire/ -- China Zenix Auto International Limited (OTC: 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 first quarter ended March 31, 2020.

Financial Highlights

First Quarter 2020:

  • Revenue was RMB320.8 million (US$45.3 million), down 52.1% year-over-year
  • Sales to the Chinese OEM market decreased by 51.9% year-over-year
  • Sales of aluminum wheels accounted for 10.1% of total sales
  • Net loss and total comprehensive loss was RMB60.6 million (US$8.6 million) with basic and diluted loss per American Depositary Share ("ADS") of RMB1.17 (US$0.17) compared with net loss and total comprehensive loss of RMB4.5 million for the first quarter of 2019 with basic and diluted loss per ADS of RMB0.09 in the first quarter of 2019.

Mr. Junqiu Gao, Deputy CEO and Chief Sales and Marketing Officer of Zenix Auto, commented, "The results of the first quarter of 2020 reflect the unprecedented challenges created by the COVID-19 pandemic.  The automotive industry has been disrupted as restrictions and lockdowns affected customers, entire supply chains,  workers, and service networks.  Our operations were effectively shut down from the Chinese New Year to late March 2020.  However, the economy and our operations gradually began to improve in April."

Mr. Martin Cheung, CFO of Zenix Auto, commented, "We maintained our strong cash base with bank balances and fixed bank deposits of approximately US$163 million as of March 31, 2020. We will continue to focus on maintaining our financial strength during this troublesome period."

2020 First Quarter Results

Revenue for the first quarter was RMB320.8 million (US$45.3 million) compared to RMB669.4 million in the first quarter of 2019. The decrease in revenue on a year-over-year basis was mainly due to the COVID-19 outbreak and subsequent unprecedented lockdown and travel bans significantly disrupted the Company's Chinese OEM, domestic aftermarket and international markets as well as the Company's production and procurement.

Sales to the Chinese OEM market were RMB168.4 million (US$23.8 million) compared to RMB350.4 million in the same quarter of 2019. Total unit sales in the OEM market decreased by 50.2% year-over-year during the first quarter of 2019.

Aftermarket sales in China were RMB104.8 million (US$14.8 million) from RMB240.5 million in the first quarter of 2019. Total unit sales in the aftermarket decreased by 49.0% year-over-year.

International sales were RMB47.6 million (US$6.7 million) compared to sales of RMB78.5 million in the first quarter of 2019. Total unit sales in the international sales decreased by 30.2% year-over-year in the first quarter of 2020.

The decrease in sales in all three segments was primarily due to the impact of COVID-19 on the economy and our supply chain.

In the first quarter of 2020, Chinese OEM sales, domestic aftermarket sales and international sales contributed 52.5%, 32.7% and 14.8% of revenue, respectively.

Sales of tubed steel wheels comprised 38.8% of the first quarter revenue compared to 42.7% in the same quarter in 2019. Tubeless steel wheel sales represented 46.0% of the first quarter revenue compared to 43.6% in the same quarter of 2019. Sales of aluminum wheels accounted for 10.1% of the first quarter revenue, compared to 9.0% in the same quarter a year ago.

First quarter gross loss was RMB2.1 million (US$0.3 million), compared to a gross profit of RMB81.2 million in the same quarter in 2019. The negative gross margin in the first quarter was mainly due to the significant drop in sales volume, lower production utilization rate and wider than normal price cut following the unprecedented impact from COVID-19 outbreak.

Selling and distribution expenses decreased by 35.2% to RMB25.6 million (US$3.6 million) from RMB39.5 million in the first quarter of 2019. The decrease in selling and distribution costs was primarily due to lower sales in the first quarter of 2020 compared with the same quarter last year. As a percentage of revenue, selling and distribution costs were 8.0% in the first quarter, compared to 5.9% in the same quarter a year ago. The increase in selling and distribution costs as a percentage of revenue was primarily due to significantly lower sales in the first quarter of 2020 compared with the same quarter last year.

Research and development ("R&D") expenses decreased by 11.1% to RMB11.9 million (US$1.7 million), compared to RMB13.3 million in the first quarter of 2019. R&D as a percentage of revenue was 3.7% in the first quarter of 2020, compared to 2.0% in the same quarter a year ago. The increase in R&D as a percentage of revenue was primarily due to significantly lower sales in the first quarter of 2020 compared with the same quarter last year. In addition, the Company entered into a large R&D contract with a leading research institute in Beijing during the first quarter. The Company continues to maintain new product development programs associated with new material development, new product design, and new production equipment development.

Administrative expenses were RMB31.2 million (US$4.4 million), increased by 9.1% from RMB28.6 million in the first quarter of 2019. The increase of administrative expenses in the first quarter of 2020 compared with the same quarter last year was primarily due to higher healthcare expenses and personal protective equipment expenditures in response to the aftermath of COVID-19 outbreak. As a percentage of revenue, administrative expenses were 9.7%, compared to 4.3% of revenue in the first quarter of 2019. The increase in administrative expenses as a percentage of revenue was primarily due to significantly lower sales in the first quarter of 2020 compared with the same quarter last year.

Net loss and total comprehensive loss were RMB60.6 million (US$8.6 million) in the first quarter compared to net loss and total comprehensive loss of RMB4.5 million for the first quarter of 2019. 

Basic and diluted loss per ADS were RMB1.17 (US$0.17) compared to basic and diluted loss per ADS of RMB0.09 in the first quarter of 2019.

In the first quarter of 2020, the Company recorded net cash outflow from operating activities of RMB24.6 million (US$3.5 million) compared with a net cash outflow of RMB37.6 million in the first quarter of 2019.

During the first 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.

As of March 31, 2020, Zenix Auto had bank balances and cash of RMB863.7 million (US$122.0 million) and fixed bank deposits with a maturity period over three months of RMB290.0 million (US$41.0 million). Account receivables were RMB225.3 million (US$31.8). Total bank borrowings were RMB558.0 million (US$78.8 million). Total equity attributable to owners of the Company was RMB2,373.2 million (US$335.2 million).

Conference Call Information

The Company will host a conference call on Thursday, August 20, 2020 at 8:00 a.m. EDT/ 8:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-0782 (U.S. Toll Free), +1-201-689-8567 (International), or +86-400-120-2840 (mainland China). 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 19, 2020. 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 36642 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 RMB7.0808 to US$1.00, the effective noon buying rate as of March 31, 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 the largest commercial vehicle wheel manufacturer 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 62 distributors in more than 25 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 March 31, 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 quarter 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: kevin@awakenlab.com

- tables follow -

China Zenix Auto International Limited

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

For the three months ended March 31, 2020 and 2019

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




Three Months Ended March 31,



2019

2020

2020



RMB' 000

RMB' 000

US$' 000






Revenue


669,350

320,783

45,303

Cost of sales


(588,197)

(322,874)

(45,599)

Gross profit(loss)


81,153

(2,091)

(296)

Other operating income 


2,906

3,059

432

Net exchange (loss) gain


(1,260)

72

10

Selling and distribution costs


(39,469)

(25,565)

(3,610)

Research and development expenses


(13,335)

(11,855)

(1,674)

Administrative expenses


(28,624)

(31,217)

(4,409)

Finance costs


(5,892)

(5,985)

(845)

Loss before taxation 


(4,521)

(73,582)

(10,392)

Income tax credit


22

13,018

1,839






Loss and total comprehensive loss
for the period


(4,499)

(60,564)

(8,553)

Earnings per share





Basic


(0.02)

(0.29)

(0.04)

Diluted


(0.02)

(0.29)

(0.04)






Earnings per ADS





Basic


(0.09)

(1.17)

(0.17)

Diluted


(0.09)

(1.17)

(0.17)






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,
 2019


March 31,
 2020


March 31,
 2020



RMB'000


RMB'000


US$' 000

ASSETS







Current Assets







Inventories


129,641


187,480


26,477

Trade and other receivables and
prepayments


596,359


467,953


66,088

Pledged bank deposits


14,900


16,500


2,330

Fixed bank deposits with maturity
period over three months


290,000


290,000


40,956

Bank balances and cash


906,840


863,701


121,978

Total current assets


1,937,740


1,825,634


257,829








Non-Current Assets







Property, plant and equipment


1,076,731


1,041,641


147,108

Right-of-use assets


357,599


355,243


50,170

Deposit paid for acquisition of
PPE


61,618


61,618


8,702

Long–term prepayments


-


15,000


2,118

Deferred tax assets


54,641


66,962


9,457

Intangible assets


17,000


17,000


2,401

Total non-current assets


1,567,589


1,557,464


219,956

Total assets


3,505,329


3,383,098


477,785








EQUITY AND LIABILITIES







Current Liabilities







Trade and other payables and
accruals


410,764


361,532


51,058

Amount due to a shareholder


10,557


-


-

Taxation payable


982


-


-

Bank borrowings


558,000


558,000


78,805

Total current liabilities


980,303


919,532


129,863








Deferred tax liabilities


85,150


84,453


11,927

Deferred income


6,106


5,907


834

Total non-current liabilities


91,256


90,360


12,761

Total liabilities


1,071,559


1,009,892


142,624








EQUITY







Share capital


136


136


19

Paid in capital


392,076


392,076


55,372

Reserves


2,041,558


1,980,994


279,770

Total equity attributable to owners
of the company


2,433,770


2,373,206


335,161

Total equity and liabilities


3,505,329


3,383,098


477,785

 

 

China Zenix Auto International Limited

Unaudited Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2020

(RMB and US$ amounts expressed in thousands)




Three Months Ended 

OPERATING ACTIVITIES

March 31, 2020



RMB
'000


US$
'000

Loss before taxation

(73,582)


(10,392)

Adjustments for:





Depreciation of right-of-use assets

2,356


333


Depreciation of property plant and equipment

35,090


4,956


Release of deferred income

(199)


(28)


Finance costs

5,985


845


Interest income

(2,857)


(403)

Operating cash flows before movements in working capital

(33,207)


(4,689)






Increase in inventories

(57,839)


(8,168)

Decrease in trade and other receivables and prepayments

113,676


16,054

Decrease in trade and other payables and accruals

(49,232)


(6,953)

Cash used in operations

(26,602)


(3,756)

Interest received

2,981


421

PRC income tax paid

(982)


(139)

NET CASH USED IN OPERATING ACTIVITIES

(24,603)


(3,474)

INVESTING ACTIVITIES




Placement of pledged bank deposits


(80,600)


(11,383)

Withdrawal of pledged bank deposits


79,000


11,157

Placement of fixed bank deposits with maturity periods over three months

(160,000)


(22,596)

Withdrawal of fixed bank deposits with maturity periods over three months

160,000


22,596

NET CASH USED IN INVESTING ACTIVITIES

(1,600)


(226)

FINANCING ACTIVITIES




New bank borrowings raised

340,000


48,017

Repayment of bank borrowings

(340,000)


(48,017)

Interest paid

(5,985)


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