China Automotive Systems, Inc.
Q4 2020 Earnings Call Transcript

Published: 31 Mar 2021

[Operator:]

Greetings, and welcome to the China Automotive Systems Fourth Quarter 2020 Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Kevin Theiss, Investor Relations. Please go ahead, sir.

[Kevin Theiss:]

Thank you, everyone, for joining us today. Welcome to China Automotive Systems 2020 Fourth Quarter and Annual Conference Call. Joining us today are Mr. Qizhou Wu, Chief Executive Officer; and Mr. Jie Li, Chief Financial Officer of China Automotive Systems. They will be available to answer questions later in the conference call with the assistance of translation. Before we begin, I'll remind all listeners that throughout this call, we may make statements that may contain forward-looking statements. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading Risk Factors in the company's Form 10-K annual report for the year ended December 31, 2020, as filed with the Securities and Exchange Commission today and in other documents filed by the company from time to time with the Securities and Exchange Commission.

[Operator:]

Your first question comes from the line of William Gregozeski with Greenridge Global.

[William Gregozeski:]

Can you talk about what your working relationship with Brilliance has been since they announced the restructuring? And what likelihood do you think there will be to recover some of that write-off?

[Unidentified Company Representative:]

Okay. So we are closely following -- monitoring the process of the Brilliance Auto's restructuring at the moment. We also very closely follow with the senior management team on the outstanding receivables. So we are actively and aggressively collecting the receivables. And we have collected some of the account receivables from Brilliance Auto, and we also plan to continue to collect after they complete the restructuring proceeding. Yes, so that's our plan. And also, we still -- on the business side, we're still working with them, and they have some new product lines coming. And so we're very carefully managing the relationship.

[William Gregozeski:]

Okay. If you exclude the write-offs, the G&A was still pretty high in the fourth quarter on an absolute dollar basis. I mean what's like a good G&A amount you guys expect going forward, excluding any write-offs or recoveries?

[Unidentified Company Representative:]

So excluding -- if you look at our 2020's G&A expenses, excluding the onetime nonrecurring and noncash write-off related to the Brilliance Auto's restructuring proceeding, our G&A expenses is in line with 2019. Now that -- we wanted you to be also mindful that in 2020, there was a major COVID event, and -- which hit our operation pretty hard, especially in the first quarter. And during that time, we had to increase -- to facilitate the reopening of our production. We had to increase the PPE and also the sanitization costs for all our business operation. And in addition to that, we had to provide our workers housing accommodation and the dining, and because it's a special time, we want to make sure they do everything properly and to contain any kind of -- to avoid any kind of spreading of the COVID. So all that extra cost, we bear that in 2020. And even with all that, we're still at the very similar level of 2019. Also in December 2020, we started a program to further streamline our cost management, especially in the G&A category. We reduced some of the staffing -- staffs, and also, we cut back some of the expenses in the G&A category. So within 1 month or so -- maybe 1.5 months, in January, we already see very evident changes after the -- implementing the cost control measures. So we feel 2021, we should be able to manage the G&A expenses pretty well.

[William Gregozeski:]

Okay. And then my last question is last week, you guys discussed that you self-developed EPS product. What's going on with the JV that you're self-developing EPS products for the Chinese market again because I thought that was all going to be done through the JV?

[Unidentified Company Representative:]

Okay. To clear your -- to clear this point is the production has always been managed by the joint venture with KYB. We -- according to initial arrangement or contract, CAAS will still lead the R&D of the EPS product and especially the new-generation EPS product. Our joint venture partner, they will provide some of the know-how and the technology know-how as well as managing the production, and so -- with our local team. So that's the arrangement. And we -- for this particular new product we just recently announced, that's in the ADAS area for the assist driving, autonomous driving feature. We -- our team, R&D team met the entire process. And we believe and this is the way we're going forward. And most of the high-end product need to be centralized in terms of R&D, so we're doing that. And we're pretty pleased with the results.

[Operator:]

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Mr. Kevin Theiss for closing remarks.

[Kevin Theiss:]

We want to thank all of you for participating in today's conference call. We wish you to be safe, and we look forward to speaking with you again. Have a great day.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.