China Automotive expects improved margin in Q4

China Automotive Systems Inc. (CAAS. NASDAQ), a leading power steering components and systems supplier in China, has reported a net income increase of 7.2 percent year on year to $2.8 million or $0.09 per fully diluted share for the third quarter ended September 30, 2008.

Its net sales increased 18.4 percent on year to $36.9 million in the third quarter from the $31.2 million for the year earlier period.

Included were $24.6 million from sales of steering products for passenger and light-duty vehicles, presenting an increase of 22 percent on year, $8.8 million from sales of steering products for commercial vehicles, an increase of 8.8 percent on year, and $3.4 million from sales of oil pumps and sensors, an 18.1 percent year-on-year growth.

As of September 30, 2008, the company held $27.2 million of cash and cash equivalents, up from $19.5 million as of December 31, 2007. Also, there were $9.2 million of pledged cash deposits, part of which is expected to turn into free cash in the fourth quarter.

According to Qizhou Wu, chief executive officer of China Automotive Systems, the company has increased its product selling prices in response to higher raw material costs during the summer, especially the commercial vehicle OEMs.

Wu said, "With falling steel prices and our adjusted ASP, we are expecting a much improved gross margin in the fourth quarter. On the sales front, we expect the gradual recovery of domestic auto sales growth following the new emission standard introduction."

"We remain hopeful that the Chinese government's road and port infrastructure build-out plan along with $586 billion stimulus package can benefit the domestic auto industry," he added.