JINZHOU CITY, China - Wonder Auto Technology, Inc, a leading manufacturer of automotive electrical and suspension parts in China, today announced record financial results for the first quarter ended March 31, 2008.
- Sales revenue increased 44.3% year-over-year to a record US$31.1 million
- Gross profit rose 53.8% year-over-year to a record US$8.2 million
- Net income increased 46.9% year-over-year to US$4.0 million
- Export sales increased to 16.3% of total revenue
- EPS rose 36.4% over same period last year to US$0.15.
First quarter sales revenue increased to a record US$31.1 million, a 44.3% increase from the 2007 first quarter revenue of US$21.6 million. Sales revenue increase was primarily due to the increased demand of our alternators and starters products in China and increased export sales that reached US$5.1 million in the first quarter of 2008, constituting 16.3% of our total sales revenue, a significant increase from 4.8% of total sales revenue in the same quarter last year.
A major portion of the export increase was derived from the inclusion of approximately US$4.5 million of suspension part sales from Jinzhou Wanyou, which we acquired in April 2007. The Chinese automotive market, especially the market for small engine automobiles, continued to demonstrate solid growth in the first quarter of 2008 due in part to favorable new government regulations and tax laws which encourage use of low-emission vehicles. Such growing market benefited the sales of the Company's diverse line of alternators and starters. In addition, the Company's sales growth also benefited from the increased penetration of the growing mid-sized vehicle market, where rising middle class population in China increased their car ownership.
2008 first quarter gross profit increased 53.8% to a record US$8.2 million from a gross profit of US$5.3 million in the first quarter last year. Gross margin was 26.3% in the 2008 first quarter compared with 24.6% for the same period last year. This gross margin increase was mainly due to economies-of-scale and change of product mix. In the first quarter of 2008, we sold a greater number of more profitable, larger displacement alternators and starters, and higher-margin rods and shafts manufactured by Jinzhou Wanyou which contributed approximately 14% of the total sales revenue. Additionally, improved technology allowed us to reduce raw material and component consumption per unit of production.
Operating expenses for the first quarter of 2008 were US$2.4 million as compared to US$1.6 million in the same period of 2007, reflecting a 53.2% increase, primarily because of the consolidation of Jinzhou Wanyou, Jinzhou Hanhua and Jinzhou Karham during the first quarter, and the increased professional expenses of being a public company after the Company moved to the Nasdaq Global Market.
Due to the acquisition of Jinzhou Hanhua and Jinzhou Karham, the Company absorbed more administrative costs without a rise in sales revenue as both acquired companies are suppliers to Wonder Auto. Higher selling expenses during the first quarter were also primarily related to the acquisitions, but remained at approximately the same percentage of revenue in both the 2008 and 2007 first quarters.
Research and development costs increased US$114,111, or 43.3%, to US$377,557 for the three months ended March 31, 2008 from US$263,446 for the same period in 2007. As a percentage of sales revenue, research and development costs remained at 1.2% for the three months ended March 31, 2008. The Company expects to increase the amount of investments in research and development as revenues increase and will maintain the ratio of research and development costs to total sales revenue at approximately 1%.
First quarter 2008 net income increased 46.9% to US$4.0 million from US$2.7 million in the same quarter of 2007. Fully diluted earnings per share for the first quarter were US$0.15 versus US$0.11 in the same period of 2007. As of March 31, 2008, the total shares outstanding on a diluted basis were 26,959,994 shares, as compared to 23,959,994 diluted shares outstanding in the same quarter of 2007.
''We are excited with another strong quarter, as we outperformed the market once again. Our top customer Shenyang Dongan Engines experienced strong growth in the first quarter, as their main customers, Chinese national automakers, continued to expand market share in Chinese domestic market. Apart from our operating achievements and profit returns to our shareholders, our export sales increased remarkably during the quarter, with significant growth in Asia, North America and South America which validates our ability to enter key global markets,'' said Chairman and CEO, Mr. Qingjie Zhao.
As of March 31, 2008, Wonder Auto had US$24.7 million in cash and cash equivalents (including US$6.7 million restricted cash), a current ratio of 2.4 to 1, working capital of US$56.8 million and US$19.4 million long-term debt. Shareholders' equity increased to US$84.6 million. On December 11, 2007, Wonder Auto announced the completion of a private placement of 3 million shares raising gross proceeds of almost US$26 million.
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