JINZHOU CITY, Liaoning, China, Wonder Auto Technology, Inc. a leading manufacturer of automotive electrical and suspension parts in China, today reported its financial results for the third quarter ending September 30, 2007.
For the 2007 third quarter, sales revenue was US$ 27.3 million, a 40% increase as compared to US$ 19.5 million for the same period in 2006. Gross profit for the third quarter of 2007 was US$ 7.1 million, an increase of 78% as compared to US$ 4.0 million in the same period in 2006. Net income was US$ 3.7 million, an increase of 55% as compared to net income of US$ 2.4 million in the 2006 third quarter. The fully diluted earnings per share were US$ 0.15, a 50% increase as compared to US$ 0.10 for the same quarter a year ago.
Sales revenue from exports reached approximately 10% of sales revenue for the third quarter 2007, compared to 6% of sales for the same period in 2006. Jinzhou Wanyou Mechanical Parts Co, Ltd. ("Jinzhou Wanyou") became the Company's wholly owned subsidiary in April 2007, and contributed sales revenue of $2.2 million in the third quarter, mostly in the export market.
Qingjie Zhao, Wonder Auto' Chairman and CEO, said, "We are pleased to report a strong quarter as our quarterly revenue reached a record high with improved margins. In response to the Chinese government's policies on emission control, Wonder Auto continues to focus on Chinese domestic economy- car OEMs and small- to mid-size engine manufacturing opportunities in China. Also, we are strengthening our penetration into the global markets, in particular Europe and North America. We continue to increase investment in R&D with a focus on higher-margin, new products to meet market demand. We believe our emphasis on producing high-quality products will generate sales growth and enable us to expand our market share, increase earnings and build shareholder value."
Gross margin increased to 26% of sales for the 2007 third quarter as compared to 21% for the same period in 2006. Gross margin improvement was mainly due to economies-of-scale, efficient cost controls, product price increases and the addition of Jinzhou Wanyou which had an approximately 28% gross margin in the third quarter of 2007. The Company's financial performance has also benefited from the consolidation of Jinzhou Dongwoo Precision Co., Ltd.'s ("Jinzhou Dongwoo") results, which became a consolidated subsidiary in November 2006.
During the third quarter, total operating expenses were US$ 1.9 million as compared to US$ 1.3 million for the same period in 2006. The Company incurred higher administrative expenses mainly related to the addition of Jinzhou Wanyou and Jinzhou Dongwoo and the increased costs in connection with improving the Company's internal control system for Sarbanes-Oxley 404 compliance and the addition of three new independent directors. While experiencing strong revenue growth, the Company successfully managed to slightly reduce its selling expenses. As a result, operating income for the 2007 third quarter was US$ 5.2 million, an increase of 96% as compared to US$ 2.7 million for the same quarter a year ago. The operating margin reached 19% in the third quarter of 2007 as compared to 14% for the same period in 2006.
For the nine months ended September 30, 2007, sales revenue increased 37% to US$ 72.4 million. Net income grew 75% to US$ 10.2 million and fully diluted earnings per share were US$ 0.43.
Total cash and cash equivalents and restricted cash as of September 30, 2007 totaled US$ 17.8 million as compared to US$ 13.1 million as of December 31, 2006. Stockholders' equity increased to US$ 50.1 million as of September 30, 2007 from US$ 38.2 million as of December 31, 2006.
Ryan Yuan, Chief Financial Officer of Wonder Auto, commented, "We achieved favorable results during this quarter by increasing production capacity, tightening cost management, measuring material usage and controlling our operating expenses. The successful integration of the Jinzhou Wanyou and Jinzhou Dongwoo also benefited Wonder Auto's margin improvement and product diversification. We are confident that we are on track to exceed the goals of total revenues of $100 million with net income of $13.5 million for the year of 2007. We expect our fourth quarter sales revenue and net income to reach US$ 29.5 million and US$ 3.9 million, respectively."
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