Wonder Auto Technology's annual revenue tops $100 million

Jan. 1, 2020
Record revenues and net earnings for the year have boosted Wonder Auto Technology's annual revenue over the US$100 million mark for the first time. The company, which manufacturers automotive electrical and suspension parts in China, also reported an

Record revenues and net earnings for the year have boosted Wonder Auto Technology's annual revenue over the $100 million (U.S.) mark for the first time. The company, which manufactures automotive electrical and suspension parts in China, also reported an increase in net income for both the fourth quarter and the 2007 year, representing an 81.6 percent year-over-year growth.

"Our robust results in 2007 validate our growth strategies to increase market share in the rapidly growing Chinese domestic medium-sized automobile market while using our R & D skills to develop products targeting specific international markets," says Mr. Qingjie Zhao, the company's chairman and CEO. "As the Chinese consumer preference has moved towards medium-sized sedans due to the overall higher quality and driving ability, we also substantially increased our penetration in 1.6-2.0 liter engine market and 2.0-2.5 liter engine market, respectively, to meet the rising market demand. As a result, we not only captured rapid growth in the medium-sized sedan market, but also avoided the slowdown in the low-end economy car market. Besides our expansion in the sedan market, we also increased our sales in SUV, MPV and pick-up truck markets. We have accomplished these goals while maintaining our industry-leading gross margins.''

Other financial highlights include:

  • 2007 fourth quarter sales revenue increased to a fourth quarter record $29.7 million (U.S.), reflecting 55.4 percent year-over-year growth;
  • 2007 fourth quarter net income increased to a fourth quarter record $4.3 million (U.S.), reflecting 81.6 percent year-over-year growth, and fully diluted earnings per share increased to US$ 0.17, reflecting 70 percent year- over-year growth;
  • 2007 annual sales revenue increased to a record $102.1 million (U.S.), reflecting 41.5 percent year-over-year growth; and
  • 2007 annual net income increased to a record $14.5 million (U.S.), reflecting 76.5 percent year-over-year growth, and fully diluted earnings per share increased to $0.60 (U.S.), reflecting 50 percent year-over-year growth.

For the 2007 fourth quarter, sales revenue was $29.7 million (U.S.), a 55.4 percent increase as compared to US$19.1 million for the same period in 2006. Export sales were $3.3 million (U.S.) as compared to $1.6 million (U.S.) for the same period of 2006, reflecting a 106 percent year-over-year growth. Export sales in the fourth quarter represented 11.4 percent of total sales compared with $1.6 million (U.S.), or 8.2 percent of total sales for the same period in 2006.

Gross profit for the fourth quarter of 2007 was $7.5 million U.S.), an increase of 93.0 percent as compared to $3.9 million (U.S.) in the same period in 2006. Gross margin was 25.4 percent of sales for the 2007 fourth quarter as compared to 20.5 percent for the same period in 2006. Gross margin improvement was mainly due to efficient cost reduction through research and development efforts, focus on larger orders, successful price negotiation over volume discounts on raw material and subcomponents, and the ability to leverage economies-of-scale in production.

Operating income for the 2007 fourth quarter was $4.8 million (U.S.), an increase of 64.5 percent as compared to $2.9 million (U.S.) for the same quarter a year ago. The operating margin reached 16.3 percent in the fourth quarter of 2007 as compared to 15.3 percent for the same period in 2006.

Net income was $4.3 million (U.S.), an increase of 81.6 percent as compared to net income of $2.4 million (U.S.) in the fourth quarter last year. The net margin was 14.5 percent in the fourth quarter of 2007 compared with 12.4 percent for the same quarter in 2006. The fully diluted earnings per share were $0.17 (U.S.), a 70 percent increase as compared to $0.10 (U.S.) for the same quarter a year ago.

For the year ended Dec. 31, 2007, sales revenue increased 41.5 percent to $102.1 (U.S.) million compared with $72.2 million (U.S.) in 2006. For the 2007 year, alternators sales were US$59.8 million, starter sales were US$35.1 million, and rods and shafts contributed $7.3 million (U.S.) in sales revenues. Sales to the domestic Chinese market were $92.3 million (U.S.) in 2007, representing a 34.4 percent gain compared with $68.7 million (U.S.) in 2006, and 90.4 percent of total 2007 sales. Export sales in 2007 of $9.8 million (U.S.) rose 180 percent compared with $3.5 million (U.S.) in 2006, and represented approximately 10 percent of total 2007 sales.

Gross profit for the 2007 year increased 73 percent to $25.6 million (U.S.), representing a margin of 25.1 percent of sales as compared to $14.8 million (U.S.), or a margin of 20.5 percent for 2006. Gross margin improvement was mainly due to economies-of-scale, research and development reducing costs, emphasizing larger orders from customers, efficient cost controls, and the addition of Jinzhou Wanyou.

During the 2007 year, total operating expenses were $8.0 million (U.S.) as compared to $5.0 million (U.S.) for 2006. The company incurred higher administrative expenses due to increased financing and audit expenses, higher costs in connection with improving the company's internal control system for Sarbanes-Oxley 404 compliance and the addition of new independent directors. Research and development expenses increased as the company developed products with higher output power, smaller size and weight, longer duration and higher endurance to harsh environment.

Income before income taxes for 2007 was $17.0 million (U.S.), an increase of 77.6 percent as compared to $9.6 million (U.S.) a year ago. The operating margin reached 17.3 percent in 2007 as compared to 13.3 percent for the same period in 2006.

Net income grew 76.5 percent to $14.5 million (U.S.) and fully diluted earnings per share were $0.60 (U.S.), compared with $8.2 million, or fully diluted earnings per share of $0.40 (U.S.) in 2006. The weighted average number of shares on fully diluted basis increased to 24,140,816 shares in 2007 versus 20,787,279 shares in 2006. The net income margin was 14.2 percent in 2007 compared to 11.4 percentfor the 2006 year.

''We are pleased to report a strong quarterly result. Thanks to our strong fourth quarter performance, we exceeded our guidance of total revenues above US$100 million with net income over $14.5 million (U.S.) for the 2007 year," says Ryan Yuan, the company's chief financial officer. "We look forward to another year of strong growth during 2008 while managing our operating expenses.''

Total cash and cash equivalents and restricted cash as of Dec. 31, 2007 totaled $34.7 million (U.S.) as compared to $13.0 million (U.S.) as of Dec. 31, 2006. Long-term debt was $17.6 million (U.S.). Stockholders' equity increased to $78.4 million (U.S.) as of Dec. 31, 2007 from $38.2 million (U.S.) as of Dec. 31, 2006.

The company is expected to complete its 10-K filing on or before Feb. 14, 2008.

Recent corporate activity that has helped the company's financial position include: the acquisition of the remaining 79.6 percent of Jinzhou Wanyou in April 2007, which expanded the company's product mix by adding shock absorber rods, vibration dampers and rotary axles for automotive alternators and starters. On Jan. 1, 2008, the company acquired 50 percent of Jinzhou Hanhua Electric Fitting Ltd., a manufacturer of armatures for automotive starters.

The company also announced its largest supply contract to date for a foreign auto company in Nov. 2007. Wonder Auto is expected to supply approximately 800,000 automotive alternators to a Shanghai-registered international auto parts procurement center over the next three years. All alternators supplied through this contract are expected to be exported overseas to a major global automotive manufacturer. The contract value is projected to be approximately $11 million (U.S.) per year and approximately $32 million (U.S.) over the three-year contract period.

On Dec. 11, 2007, Wonder Auto announced that it entered into a Securities Purchase Agreement with certain institutional investors to sell 3,000,000 newly issued shares of its common stock at a price of $8.65 per share. Gross proceeds to Wonder Auto from the sale of the privately placed common stock were $25,950,000 (U.S.) and the company expects to use the proceeds from such sale for working capital and general corporate purposes that include the purchase of additional R & D equipment and production assets.

The management of Wonder Auto confirms that 2008 anticipated total sales could exceed $140 million (U.S.) with over $20 million (U.S.) in net income.

''Coming into 2008, we are excited about the opportunities that lie ahead of us,"; Zhao adds. "After a successful expansion year in 2007, we aim to increase our market share in China in 2008. On the export front, we continue to focus on US and European markets in both OEM and aftermarket sectors. We also plan to use over $15 million from our recent financing to expand our production capacity to meet the growing demand for our products.''

For more information about Wonder Auto Technology, Inc., visit the company's Web site.

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