CAS - China Automotive Systems Inc.
CAS - China Automotive Systems Inc.
08/13/2025 | Press release | Distributed by Public on 08/13/2025 04:09
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the Company's condensed unaudited consolidated financial statements and the related notes thereto and the other financial information contained elsewhere in this Report.
General Overview
China Automotive Systems, Inc. is a leading power steering systems supplier for the China automobile industry. The Company has business relationships with more than sixty vehicle manufacturers, including BYD Auto Co., Ltd., Zhejiang Geely Automobile Co., Ltd., and Chery Automobile Co., Ltd., three of the largest privately owned car manufacturers in China, Chongqing Changan Automobile Co., Ltd., the largest state-owned car manufacturers in China, SAIC Motor Co., Ltd., FAW Group and others. All of them are the Company's key customers. For overseas customers, the Company has supplied power steering gears to Stellantis N.V. since 2009 and to Ford Motor Company since 2016.
Most of the Company's production and research and development institutes are located in China. As of June 30, 2025, the Company has approximately 4,414 employees dedicated to design, development, manufacture and sales of its products. By leveraging its extensive experience, innovative technology and geographic strengths, the Company aims to grow leading positions in automotive power steering systems and to further improve overall margins, long-term operating profitability and cash flows. To achieve these goals and to respond to industry factors and trends, the Company is continuing its work to improve its operations and business structure and achieve profitable growth.
Corporate Structure
The Company, through its subsidiaries, engages in the manufacture and sales of automotive systems and components. Great Genesis Holdings Limited, a company incorporated in Hong Kong on January 3, 2003 under the Companies Ordinance of Hong Kong as a limited liability company, "Genesis," is a wholly-owned subsidiary of the Company and the holding company of the Company's joint ventures in the PRC. Henglong USA Corporation, "HLUSA," incorporated on January 8, 2007 in Troy, Michigan, is a wholly-owned subsidiary of the Company, and mainly engages in marketing of automotive parts in North America, and provides after-sales service and research and development support. CAAS Brazil's Imports And Trade In Automotive Parts Ltd., "Brazil Henglong," was established by Hubei Henglong Automotive System Group Co., Ltd., formerly known as Jingzhou Hengsheng Automotive System Co., Ltd., "Hubei Henglong," as a Sino-foreign joint venture company with two Brazilian citizens in Brazil in August 2012. In May 2017, the Company obtained an additional 15.84% equity interest in Brazil Henglong for nil consideration. In October 2024, Brazil Henglong changed its Articles. Under the new Articles, the Company's equity interest in Brazil Henglong was changed to 94.19% from 95.84%. The Company retained its controlling interest in Brazil Henglong and the acquisition of the non-controlling interest was accounted for as an equity transaction. In April 2020, Hubei Henglong acquired 100.00% of the shares of Changchun Hualong Automotive Technology Co., Ltd., "Changchun Hualong", for total consideration of RMB 1.2 million, equivalent to approximately $0.2 million. Changchun Hualong mainly engages in design and R&D of automotive parts. Wuhu Hongrun New Material Co., Ltd., "Wuhu Hongrun" was formed in December 2019, which mainly engages in the development, manufacturing and sale of high polymer materials. In April 2021, the Company obtained an additional 22.67% equity interest in Wuhu, for total consideration of RMB 6.9 million, equivalent to approximately $1.1 million, from the other shareholder. Following the acquisition, the Company owned 100% of the equity interests of Wuhu Henglong. In June 2023, Hubei Henglong contributed certain equipment and intangible assets to Hubei Zhirong Automobile Technology Co., Ltd., "Zhirong", representing 100% of Zhirong's paid-up capital. Zhirong mainly engages in inspection and testing of automotive products. In March 2024, KYB obtained an additional 6.6% equity interest in Henglong KYB for total consideration of RMB 110.0 million, equivalent to approximately $15.5 million, after that, Henglong owns 60.0% and KYB owns 40.0% of the shares of Henglong KYB. The Company retained its controlling interest in Henglong KYB. In December 2024, Hubei Henglong formed CAAS EUROPE S.r.l., "CAAS EUROPE", which mainly engages in design, prototyping, development and testing of parts and/or systems aimed at the automotive and commercial vehicle market. Hubei Henglong owns 100% of the shares of CAAS EUROPE. In September 2024, the Company formed China Automotive Systems Holdings, Inc., "CAAS Cayman".
Critical Accounting Estimates
The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions. The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company's condensed consolidated financial statements.
The Company considers an accounting estimate to be critical if:
| ● | It requires the Company to make assumptions about matters that were uncertain at the time it was making the estimate, and |
| ● | Changes in the estimate or different estimates that the Company could have selected would have had a material impact on the Company's financial condition or results of operations. |
The table below presents information about the nature and rationale for the Company's critical accounting estimates:
|
Balance Sheet |
Critical |
Nature of Estimates Required |
Assumptions/Approaches |
Key Factors |
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Long-term investments |
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Share of the income or losses from the limited partnerships |
The Company adjusted the carrying value of these equity method investments based on its share of the income or losses from the limited partnerships. The income or losses of the limited partnerships were primarily attributable to changes in the estimated fair value of the underlying investments held by these limited partnerships. |
The fair value of the underlying investments was determined using valuation techniques based on market approach with inputs, which required significant judgment. |
●Relevant market information
●Historical performance and future development prospects of underlying investments to assist the Company in determining an appropriate valuation methodology
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Accrued liabilities and other long-term liabilities |
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Warranty obligations |
Estimating warranty requires the Company to forecast the resolution of existing claims and expected future claims on products sold. OEMs are increasingly seeking to hold suppliers responsible for product warranties, which may impact the Company's exposure to these costs. |
The Company bases its estimate on historical trends of units sold and payment amounts, combined with its current understanding of the status of existing claims and discussions with its customers. |
●OEM sourcing
●OEM policy decisions regarding warranty claims
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Property, plant and equipment, intangible assets and other long-term assets |
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Valuation of long- lived assets |
The Company is required, from time-to-time, to review the recoverability of certain of its assets based on projections of anticipated future cash flows, including future profitability assessments of various product lines. |
The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
●Future production estimates
●Customer preferences and decisions
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Accounts receivable |
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Allowance for doubtful accounts |
The Company is required, from time to time, to review the credit of customers and make timely provision of allowance for doubtful accounts. |
The Company estimates the collectability of the receivables based on the future cash flows using historical experiences. |
●Customer credit
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Inventory |
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Provision for inventory impairment |
The Company is required, from time to time, to review the turnover of inventory based on projections of anticipated future cash flows, including provision of inventory impairment for over market price and undesirable inventories. |
The Company estimates cash flows using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. |
●Future production estimates
●Customer preferences and decisions.
|
Recent Accounting Pronouncements
Please see Note 2 to the consolidated financial statements under Item 1 of Part I of this report.
Results of Operations - Three Months Ended June 30, 2025 and 2024
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|||||||||||
|
|
|
2025 |
2024 |
Change |
Change% |
|
||||||
|
Net product sales |
|
$ |
176,245 |
|
$ |
158,608 |
|
$ |
17,637 |
|
11.1 |
% |
|
Cost of products sold |
|
145,698 |
|
|
129,306 |
|
|
16,392 |
|
12.7 |
|
|
|
Gain on other sales |
|
455 |
|
|
1,720 |
|
|
(1,265) |
|
(73.5) |
|
|
|
Selling expenses |
|
4,514 |
|
|
4,614 |
|
|
(100) |
|
(2.2) |
|
|
|
General and administrative expenses |
|
5,412 |
|
|
7,418 |
|
|
(2,006) |
|
(27.0) |
|
|
|
Research and development expenses |
|
8,092 |
|
|
8,184 |
|
|
(92) |
|
(1.1) |
|
|
|
Other income, net |
|
1,060 |
|
|
1,735 |
|
|
(675) |
|
(38.9) |
|
|
|
Interest expense |
|
(292) |
|
|
(183) |
|
|
(109) |
|
59.6 |
|
|
|
Financial income/(expense), net |
|
|
1,327 |
|
|
(690) |
|
|
2,017 |
|
(292.3) |
|
|
Income taxes |
|
4,049 |
|
|
2,108 |
|
|
1,941 |
|
92.1 |
|
|
|
Net income |
|
10,372 |
|
|
8,755 |
|
|
1,617 |
|
18.5 |
|
|
|
Net income attributable to non-controlling interests |
|
2,747 |
|
|
1,608 |
|
|
1,139 |
|
70.8 |
|
|
|
Net income attributable to parent company's common shareholders |
|
|
7,625 |
|
|
7,140 |
|
|
485 |
6.8 |
% |
|
Net Product Sales and Cost of Products Sold
|
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|
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|
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|
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Net Product Sales |
Cost of Products Sold |
|||||||||||||||||||||
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|
(in thousands of USD, |
|
(in thousands of USD, |
|||||||||||||||||||
|
|
|
except percentages) |
|
except percentages) |
|
||||||||||||||||||
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|
|
Three Months Ended June 30, |
|
Three Months Ended June 30, |
|
||||||||||||||||||
|
|
|
2025 |
2024 |
Change |
|
2025 |
2024 |
Change |
|
||||||||||||||
|
Henglong |
$ |
83,432 |
|
$ |
80,000 |
|
|
3,432 |
|
4.3 |
% |
$ |
75,803 |
|
$ |
71,348 |
|
|
4,455 |
|
6.2 |
% |
|
|
Jiulong |
|
23,500 |
|
|
18,715 |
|
|
4,785 |
|
25.6 |
|
|
20,685 |
|
|
15,813 |
|
|
4,872 |
|
30.8 |
|
|
|
Wuhu |
|
6,092 |
|
|
8,998 |
|
|
(2,906) |
|
(32.3) |
|
|
6,263 |
|
|
10,060 |
|
|
(3,797) |
|
(37.7) |
|
|
|
Hubei Henglong |
|
29,978 |
|
|
26,804 |
|
|
3,174 |
|
11.8 |
|
|
27,537 |
|
|
21,095 |
|
|
6,442 |
|
30.5 |
|
|
|
Henglong KYB |
|
53,878 |
|
|
42,770 |
|
|
11,108 |
|
26.0 |
|
|
45,163 |
|
|
36,292 |
|
|
8,871 |
|
24.4 |
|
|
|
Brazil Henglong |
|
|
17,884 |
|
|
11,974 |
|
|
5,910 |
|
49.4 |
|
|
14,003 |
|
|
10,056 |
|
|
3,947 |
|
39.3 |
|
|
Other Entities |
|
35,509 |
|
|
35,101 |
|
|
408 |
|
1.2 |
|
|
29,194 |
|
|
29,569 |
|
|
(375) |
|
(1.3) |
|
|
|
Total Segments |
|
250,273 |
|
|
224,362 |
|
|
25,911 |
|
11.5 |
|
|
218,648 |
|
|
194,233 |
|
|
24,415 |
|
12.6 |
|
|
|
Elimination |
|
(74,028) |
|
|
(65,754) |
|
|
(8,274) |
|
12.6 |
|
|
(72,950) |
|
|
(64,927) |
|
|
(8,023) |
|
12.4 |
|
|
|
Total |
|
$ |
176,245 |
|
$ |
158,608 |
|
|
17,637 |
|
11.1 |
% |
$ |
145,698 |
|
$ |
129,306 |
|
|
16,392 |
|
12.7 |
% |
Net Product Sales
Net product sales were $176.2 million for the three months ended June 30, 2025, compared to $158.6 million for the same period in 2024, representing an increase of $17.6 million, or 11.1%, mainly due to the Company's increased sales of electric power steering, "EPS", and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $103.3 million for the three months ended June 30, 2025, compared to $103.0 million for the same period in 2024, representing an increase of $0.3 million, or 0.3%. Net sales of EPS systems and parts were $72.9 million for the three months ended June 30, 2025 and $55.6 million for the same period in 2024, representing an increase of $17.3 million, or 31.1%. As a percentage of net sales, sales of EPS were 41.4% for the three months ended June 30, 2025, compared with 35.1% for the same period in 2024.
Further analysis by segment (before elimination) is as follows:
| ● | Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were $83.4 million for the three months ended June 30, 2025, compared with $80.0 million for the three months ended June 30, 2024, representing an increase of $3.4 million, or 4.3%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
| ● | Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were $23.5 million for the three months ended June 30, 2025, compared with $18.7 million for the three months ended June 30, 2024, representing an increase of $4.8 million, or 25.6%. The increase was mainly due to the increase in sales volume of products used in commercial vehicles. |
| ● | Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd., "Chery", one of the major automotive manufacturers in China. Net product sales for Wuhu were $6.1 million for the three months ended June 30, 2025, compared to $9.0 million for the same period in 2024, representing a decrease of $2.9 million, or 32.3%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chery. |
| ● | Hubei Henglong mainly engages in providing vehicle steering systems to Stellantis N.V. and Ford. Net product sales for Hubei Henglong were $30.0 million for the three months ended June 30, 2025, compared with $26.8 million for the three months ended June 30, 2024, representing an increase of $3.2 million, or 11.8%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles from Stellantis N.V. |
| ● | Henglong KYB mainly engages in providing passenger EPS products. Net product sales for Henglong KYB were $53.9 million for the three months ended June 30, 2025, compared with $42.8 million for the three months ended June 30, 2024, representing an increase of $11.1 million, or 26.0%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Net product sales for Brazil Henglong were $17.9 million for the three months ended June 30, 2025, compared to $12.0 million for the same period in 2024, representing an increase of $5.9 million, or 49.4%. The increase was mainly due to the increase in demand of Stellantis N.V. |
| ● | Net product sales for other entities were $35.5 million for the three months ended June 30, 2025, compared to $35.1 million for the same period in 2024, representing an increase of $0.4 million, or 1.2%. |
Cost of Products Sold
For the three months ended June 30, 2025, the cost of products sold was $145.7 million, compared to $129.3 million for the same period of 2024, representing an increase of $16.4 million, or 12.7%. The increase in cost of sales was mainly due to the increased sales volumes. Further analysis is as follows:
| ● | Cost of products sold for Henglong was $75.8 million for the three months ended June 30, 2025, compared to $71.3 million for the same period of 2024, representing an increase of $4.5 million, or 6.2%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Jiulong was $20.7 million for the three months ended June 30, 2025, compared to $15.8 million for the same period of 2024, representing an increase of $4.9 million, or 30.8%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Wuhu was $6.3 million for the three months ended June 30, 2025, compared to $10.1 million for the same period of 2024, representing a decrease of $3.8 million, or 37.7%. The decrease was mainly due to the decreased sales volumes. |
| ● | Cost of products sold for Hubei Henglong was $27.5 million for the three months ended June 30, 2025, compared to $21.1 million for the same period of 2024 representing an increase of $6.4 million, or 30.5%. The increase was mainly due to the increase in sales volumes. |
| ● | Cost of products sold for Henglong KYB was $45.2 million for the three months ended June 30, 2025, compared to $36.3 million for the same period in 2024, representing an increase of $8.9 million, or 24.4%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for Brazil Henglong was $14.0 million for the three months ended June 30, 2025, compared to $10.1 million for the same period of 2024, representing an increase of $3.9 million, or 39.3%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for other entities was $29.2 million for the three months ended June 30, 2025, compared to $29.6 million for the same period in 2024, representing a decrease of $0.4 million, or 1.3%. |
Gross margin was 17.3% for the three months ended June 30, 2025, compared with 18.5% for the same period of 2024, which was mainly due to increase of tariffs and product mix change from increased sales portion of relatively lower-margin products.
Selling Expenses
Selling expenses were $4.5 million for the three months ended June 30, 2025, which was stable compared to $4.6 million for the three months ended June 30, 2024, mainly due to the decreased marketing expenses.
General and Administrative Expenses
General and administrative expenses were $5.4 million for the three months ended June 30, 2025, as compared to $7.4 million for the same period of 2024, representing a decrease of $2.0 million, or 27.0%, which was mainly due to the decreased business taxes and surcharges.
Research and Development Expenses
Research and development ("R&D") expenses were $8.1 million for the three months ended June 30, 2025, which was stable compared to $8.2 million for the three months ended June 30, 2024.
Other Income, net
Other income, net was $1.1 million for the three months ended June 30, 2025, as compared to $1.7 million for the same period of 2024, representing a decrease of $0.6 million, or 38.9% which was mainly due to the loss from disposal of property, plant and equipment.
Interest Expense
Interest expense was $0.3 million for the three months ended June 30, 2025, which was stable compared to $0.2 million for the same period of 2024.
Financial income/(expense), net
Financial income, net was $1.3 million for the three months ended June 30, 2025, as compared to financial expense, net of $0.7 million for the three months ended June 30, 2024, representing an increase in financial income of $2.0 million, which was primarily due to an increase in the foreign exchange gain due to the foreign exchange volatility.
Income Taxes
Income tax expense was $4.0 million for the three months ended June 30, 2025, as compared to $2.1 million for the three months ended June 30, 2024, which was primarily due to a higher income before income tax expenses and a higher expected annual effective tax rate in 2025 based on the latest annual forecast as compared to 2024.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $2.7 million for the three months ended June 30, 2025, compared to $1.6 million for the three months ended June 30, 2024, representing an increase of $1.1 million.
Net Income Attributable to Parent Company's Common Shareholders
Net income attributable to parent company's common shareholders was $7.6 million for the three months ended June 30, 2025, compared to $7.1 million for the three months ended June 30, 2024, representing an increase of $0.5 million.
Results of Operations - Six months Ended June 30, 2025 and 2024
Selected highlights from our results of operations are as follows (in thousands of U.S. dollars):
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|
|
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|
|
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Six Months Ended June 30, |
||||||||||
|
|
2025 |
2024 |
Change |
Change % |
||||||||
|
Net product sales |
|
$ |
343,339 |
|
$ |
298,002 |
|
$ |
45,337 |
15.2 |
% |
|
|
Cost of products sold |
|
284,207 |
|
244,631 |
|
39,576 |
16.2 |
|
||||
|
Gain on other sales |
|
1,606 |
|
2,234 |
|
(628) |
(28.1) |
|
||||
|
Selling expenses |
|
9,332 |
|
8,687 |
|
645 |
7.4 |
|
||||
|
General and administrative expenses |
|
12,977 |
|
12,965 |
|
12 |
0.1 |
|
||||
|
Research and development expenses |
|
16,805 |
|
13,496 |
|
3,309 |
24.5 |
|
||||
|
Other income, net |
|
3,001 |
|
4,138 |
|
(1,137) |
(27.5) |
|
||||
|
Interest expense |
|
(775) |
|
(441) |
|
(334) |
75.7 |
|
||||
|
Financial income/(expense), net |
|
3,305 |
|
(702) |
|
4,007 |
(570.8) |
|
||||
|
Income taxes |
|
6,986 |
|
3,851 |
|
3,135 |
81.4 |
|
||||
|
Net income |
|
18,827 |
|
18,019 |
|
808 |
4.5 |
|
||||
|
Net income attributable to non-controlling interests |
|
4,080 |
|
2,597 |
|
1,483 |
57.1 |
|
||||
|
Net income attributable to parent company's common shareholders |
|
14,747 |
|
15,407 |
|
(660) |
(4.3) |
% |
||||
Net Product Sales and Cost of Products Sold
|
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|
|
|
|
|
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|
|
|
|
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|
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|
|
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|
|
Net Product Sales |
|
Cost of Products Sold |
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|
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(in thousands of USD, |
|
(in thousands of USD, |
|||||||||||||||||
|
|
|
except percentages) |
|
except percentages) |
|||||||||||||||||
|
|
|
Six Months Ended June 30, |
|
Six Months Ended June 30, |
|||||||||||||||||
|
|
2025 |
2024 |
Change |
2025 |
2024 |
Change |
|||||||||||||||
|
Henglong |
|
$ |
164,161 |
|
$ |
138,716 |
25,445 |
18.3 |
% |
$ |
149,546 |
|
$ |
124,185 |
25,361 |
20.4 |
% |
||||
|
Jiulong |
|
43,171 |
|
35,467 |
7,704 |
21.7 |
|
38,416 |
|
30,150 |
8,266 |
27.4 |
|
||||||||
|
Wuhu |
|
16,147 |
|
17,858 |
(1,711) |
(9.6) |
|
15,203 |
|
19,019 |
(3,816) |
(20.1) |
|
||||||||
|
Hubei Henglong |
|
57,236 |
|
57,187 |
49 |
0.1 |
|
49,494 |
|
46,211 |
3,283 |
7.1 |
|
||||||||
|
Henglong KYB |
|
102,248 |
|
77,767 |
24,481 |
31.5 |
|
87,236 |
|
67,467 |
19,769 |
29.3 |
|
||||||||
|
Brazil Henglong |
|
34,415 |
|
24,675 |
9,740 |
39.5 |
|
28,338 |
|
19,419 |
8,919 |
45.9 |
|
||||||||
|
Other Entities |
|
70,061 |
|
64,101 |
5,960 |
9.3 |
|
57,548 |
|
53,983 |
3,565 |
6.6 |
|
||||||||
|
Total Segments |
|
487,439 |
|
415,771 |
71,668 |
17.2 |
|
425,781 |
|
360,434 |
65,347 |
18.1 |
|
||||||||
|
Elimination |
|
(144,100) |
|
(117,769) |
(26,331) |
22.4 |
|
(141,574) |
|
(115,803) |
(25,771) |
22.3 |
|
||||||||
|
Total |
|
$ |
343,339 |
|
$ |
298,002 |
45,337 |
15.2 |
% |
$ |
284,207 |
|
$ |
244,631 |
39,576 |
16.2 |
% |
||||
Net Product Sales
Net product sales were $343.3 million for the six months ended June 30, 2025, compared to $298.0 million for the same period in 2024, representing an increase of $45.3 million, or 15.2%, mainly due to the Company's increased sales of electric power steering, "EPS", and partially offset by the appreciation of the USD against the RMB.
Net sales of traditional steering products and parts were $197.4 million for the six months ended June 30, 2025, compared to $195.0 million for the same period in 2024, representing an increase of $2.4 million, or 1.2%. Net sales of EPS systems and parts were $145.9 million for the six months ended June 30, 2025 and $103.0 million for the same period in 2024, representing an increase of $42.9 million, or 41.7%. As a percentage of net sales, sales of EPS were 42.5% for the six months ended June 30, 2025, compared with 34.6% for the same period in 2024.
Further analysis by segment (before elimination) is as follows:
| ● | Henglong mainly engages in providing passenger vehicle steering systems. Net product sales for Henglong were $164.2 million for the six months ended June 30, 2025, compared with $138.7 million for the six months ended June 30, 2024, representing an increase of $25.4 million, or 18.3%. The increase was mainly due to the increase in sales volume of products used in passenger vehicles. |
| ● | Jiulong mainly engages in providing commercial vehicle steering systems. Net product sales for Jiulong were $43.2 million for the six months ended June 30, 2025, compared with $35.5 million for the six months ended June 30, 2024, representing an increase of $7.7 million, or 21.7%. The increase was mainly due to the increase in sales volume of products used in commercial vehicles. |
| ● | Wuhu mainly engages in providing vehicle steering systems to Chery Automobile Co., Ltd., "Chery", one of the major automotive manufacturers in China. Net product sales for Wuhu were $16.1 million for the six months ended June 30, 2025, compared to $17.9 million for the same period in 2024, representing a decrease of $1.7 million, or 9.6%. The decrease was mainly due to the decrease in sales volume of products used in passenger vehicles from Chery. |
| ● | Hubei Henglong mainly engages in providing vehicle steering systems to Stellantis N.V. and Ford. Net product sales for Hubei Henglong were $57.2 million for the six months ended June 30, 2025, which is stable compared to $57.2 million for the same period in 2024. |
| ● | Henglong KYB mainly engages in providing passenger EPS products. Net product sales for Henglong KYB were $102.2 million for the six months ended June 30, 2025, compared with $77.8 million for the six months ended June 30, 2024, representing an increase of $24.5 million, or 31.5%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Net product sales for Brazil Henglong were $34.4 million for the six months ended June 30, 2025, compared to $24.7 million for the same period in 2024, representing an increase of $9.7 million, or 39.5%. The increase was mainly due to the increase in demand of Stellantis N.V. |
| ● | Net product sales for other entities were $70.1 million for the six months ended June 30, 2025, compared to $64.1million for the same period in 2024, representing an increase of $6.0 million, or 9.3%. |
Cost of Products Sold
For the six months ended June 30, 2025, the cost of products sold was $284.2 million, compared to $244.6 million for the same period of 2024, representing an increase of $39.6 million, or 16.2%. The increase in cost of sales was mainly due to the increased sales volumes. Further analysis is as follows:
| ● | Cost of products sold for Henglong was $149.5 million for the six months ended June 30, 2025, compared to $124.2 million for the same period of 2024, representing an increase of $25.4 million, or 20.4%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Jiulong was $38.4 million for the six months ended June 30, 2025, compared to $30.2 million for the same period of 2024, representing an increase of $8.2 million, or 27.4%. The increase was mainly due to the increased sales volumes. |
| ● | Cost of products sold for Wuhu was $15.2 million for the six months ended June 30, 2025, compared to $19.0 million for the same period of 2024, representing a decrease of $3.8 million, or 20.1%. The decrease was mainly due to the decreased sales volumes from Chery. |
| ● | Cost of products sold for Hubei Henglong was $49.5 million for the six months ended June 30, 2025, compared to $46.2 million for the same period of 2024 representing an increase of $3.3 million, or 7.1%. The increase was mainly due to the increase in sales volumes. |
| ● | Cost of products sold for Henglong KYB was $87.2 million for the six months ended June 30, 2025, compared to $67.5 million for the same period in 2024, representing an increase of $19.8 million, or 29.3%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for Brazil Henglong was $28.3 million for the six months ended June 30, 2025, compared to $19.4 million for the same period of 2024, representing an increase of $8.9 million, or 45.9%. The increase was mainly due to the increase in sales volume of EPS products used in passenger vehicles. |
| ● | Cost of products sold for other entities was $57.5 million for the six months ended June 30, 2025, compared to $54.0 million for the same period in 2024, representing an increase of $3.6 million, or 6.6%. |
Gross margin was 17.2% for the six months ended June 30, 2025, compared with 17.9% for the same period of 2024, representing the increase of tariffs and product mix change from increased sales portion of relatively lower-margin products.
Selling Expenses
Selling expenses were $9.3 million for the six months ended June 30, 2025, as compared to $8.7 million for the same period of 2024, representing an increase of $0.6 million, or 7.4%, which was mainly due to the increased marketing expenses related to the increased revenue.
General and Administrative Expenses
General and administrative expenses were $13.0 million for the six months ended June 30, 2025, which was stable compared to $13.0 million for the same period of 2024.
Research and Development Expenses
Research and development ("R&D") expenses were $16.8 million for the six months ended June 30, 2025, as compared to $13.5 million for the same period of 2024, representing an increase of $3.3 million, or 25.4%, which was mainly due to the increased salary expenses and miscellaneous expenses related to R&D, caused by the increase in R&D activities and increased headcount of R&D departments.
Other Income, net
Other income, net was $3.0 million for the six months ended June 30, 2025, as compared to $4.1 million for the six months ended June 30, 2024, representing a decrease of $1.1 million, which was mainly due to the loss from disposal of property, plant and equipment.
Interest Expense
Interest expense was $0.8 million for the six months ended June 30, 2025, as compared to $0.4 million for the same period of 2024, representing an increase of $0.4 million, which was mainly due to the increase of new loans.
Financial income/(expense), net
Financial income, net was $3.3 million for the six months ended June 30, 2025, as compared to financial expense, net of $0.7 million for the six months ended June 30, 2024, representing an increase in financial income of $4.0 million, which was primarily due to an increase in the foreign exchange gain due to the foreign exchange volatility.
Income Taxes
Income tax expense was $7.0 million for the six months ended June 30, 2025, as compared to $3.9 million for the six months ended June 30, 2024, which was primarily due to a higher income before income tax expenses as compared to the same period of 2024 and a higher expected annual effective tax rate in 2025 based on the latest annual forecast as compared to 2024.
Net Income Attributable to Non-controlling Interests
Net income attributable to non-controlling interests amounted to $4.1 million for the six months ended June 30, 2025, compared to $2.6 million for the six months ended June 30, 2024, representing an increase of $1.5 million.
Net Income Attributable to Parent Company's Common Shareholders
Net income attributable to parent company's common shareholders was $14.7 million for the six months ended June 30, 2025, compared to $15.4 million for the six months ended June 30, 2024, representing a decrease of $0.7 million.
Liquidity and Capital Resources
Capital Resources and Use of Cash
The Company has historically financed its liquidity requirements from a variety of sources, including short-term and long-term borrowings under bank credit agreements, bankers' acceptances, issuances of capital stock and notes and internally generated cash. As of June 30, 2025, the Company had cash and cash equivalents and short-term investments of $135.3 million, compared to $84.5 million as of December 31, 2024, representing an increase of $50.8 million, or 60.1%.
The Company had working capital (total current assets less total current liabilities) of $170.9 million as of June 30, 2025, compared to $146.2 million as of December 31, 2024, representing an increase of $24.7 million, or 16.9%.
Except for the expected distribution of dividends from the Company's PRC subsidiaries to the Company in order to settle the existing intercompany loan, which was used to pay the one-time transition tax due to the U.S. Tax Reform, the Company intends to indefinitely reinvest the funds in subsidiaries established in the PRC.
Based on our liquidity assessment, we believe that our cash flow from operations and proceeds from our financing activities will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for the foreseeable future and for at least twelve months subsequent to the filing of this report.
Common share dividends
On July 19, 2024, the Company's Board of Directors declared a special cash dividend of $0.8 per common share. The aggregate amount of the special dividend payment was $24.1 million. The special dividend payment has been fully paid as of June 30, 2025.
Capital Source
The Company's capital source is multifaceted, such as bank loans and banks' acceptance facilities. In financing activities and operating activities, the Company's banks require the Company to sign line of credit agreements and repay such facilities within one to two years. On the condition that the Company can provide adequate mortgage security and has not violated the terms of the line of credit agreement, such facilities can be extended for another one to two years.
The Company had short-term loans of $71.9 million, long-term loans of $0.02 million and bankers' acceptances of $90.0 million (See Note 8) as of June 30, 2025.
The Company currently expects to be able to obtain similar bank loans, i.e., RMB loans, and bankers' acceptance facilities in the future if it can provide adequate mortgage security following the termination of the above-mentioned agreements, see the table under "Bank Arrangements" below for more information. If the Company is not able to do so, it will have to refinance such debt as it becomes due or repay that debt to the extent it has cash available from operations or from the proceeds of additional issuances of capital stock. Due to a depreciation of assets, the value of the mortgages securing the above-mentioned bank loans and banker's acceptances is expected to be reduced by approximately $13.8 million over the next 12 months. If the Company wishes to maintain the same amount of bank loans and banker's acceptances in the future, it may be required by the banks to provide additional mortgages of $13.8 million as of the maturity date of such line of credit agreements, see the table under "Bank Arrangements" below for more information. The Company can still obtain a reduced line of credit with a reduction of $7.8 million, which is 56.5%, the mortgage ratio, of $13.8 million, if it cannot provide additional mortgages. The Company expects that the reduction in bank loans will not have a material adverse effect on its liquidity.
Bank Arrangements
As of June 30, 2025, the principal outstanding under the Company's credit facilities and lines of credit was as follows (figures are in thousands of USD):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assessed |
||||||
|
|
|
|
|
Due |
|
Amount |
|
Amount |
|
Mortgage |
|||
|
|
|
Bank |
Date |
|
Available(2) |
|
Used(3) |
|
Value(4) |
||||
|
1. Comprehensive credit facilities |
|
China Constitution Bank (1) |
|
Nov-2025 |
|
|
13,969 |
|
|
8,651 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Comprehensive credit facilities |
|
China Merchants Bank (1) |
|
Jun-2027 |
|
|
13,969 |
|
|
2,925 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3. Comprehensive credit facilities |
|
Bank of China (1) |
|
Nov-2025 |
|
|
13,969 |
|
|
11,173 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Comprehensive credit facilities |
|
Bank of China |
|
Dec-2025 |
|
|
6,985 |
|
|
2,766 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Comprehensive credit facilities |
|
China Everbright Bank (1) |
|
Dec-2025 |
|
|
3,353 |
|
|
1,118 |
|
|
4,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Comprehensive credit facilities |
|
Shanghai Pudong Development Bank (1) |
|
Nov-2025 |
|
|
27,938 |
|
|
4,394 |
|
|
19,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Comprehensive credit facilities |
|
Hubei Bank (1) |
|
Aug-2026 |
|
|
23,748 |
|
|
11,801 |
|
|
26,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Comprehensive credit facilities |
|
Industrial and Commercial Bank of China |
|
Jul-2025 |
|
|
17,881 |
|
|
8,102 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Comprehensive credit facilities |
|
Agricultural Bank of China |
|
Mar-2026 |
|
|
13,969 |
|
|
91 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
135,781 |
|
|
51,021 |
|
|
50,183 |
| (1) | The comprehensive credit facility with China Constitution Bank is guaranteed by Hubei Henglong. The comprehensive credit facilities with China Merchants Bank are guaranteed by Hubei Henglong. The comprehensive credit facilities with Bank of China are guaranteed by Hubei Henglong. The comprehensive credit facilities with China Everbright Bank are guaranteed by Hubei Henglong in addition to the above pledged assets. The comprehensive credit facilities with Shanghai Pudong Development Bank are guaranteed by Henglong and Hubei Henglong in addition to the above pledged assets. The comprehensive credit facilities with Hubei Bank are guaranteed by Chen Hanlin in addition to the above pledged assets. |
| (2) | "Amount available" is used for the drawdown of bank loans and issuance of bank notes at the Company's discretion. If the Company elects to utilize the facility by issuance of bank notes, additional collateral is requested to be pledged to the bank. |
| (3) | "Amount used" represents the credit facilities used by the Company for the purpose of bank loans or notes payable during the facility contract period. The loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire. The amount used includes bank loans of $19.3 million and notes payable of $31.7 million as of June 30, 2025. |
| (4) | In order to obtain lines of credit, the Company needs to pledge certain assets to banks. As of June 30, 2025, the pledged assets included property, plant and equipment and land use rights with an aggregate assessed value of $88.7 million. |
The Company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line.
The Company's bank loan terms range from 4 months to 36 months. Pursuant to the comprehensive credit line arrangement, the Company pledged and guaranteed:
1. Land use rights and buildings with an assessed value of approximately $14.8 million as security for its revolving comprehensive credit facility with Shanghai Pudong Development Bank.
2. Land use rights and buildings with an assessed value of approximately $8.8 million as security for its revolving comprehensive credit facility with China Everbright Bank.
3. Equipment with an assessed value of approximately $65.1 million as security for its revolving comprehensive credit facility with Hubei Bank.
Short-term and Long-term Loans
The following table summarizes the contract information of short-term borrowings between the banks and the Company as of June 30, 2025 (figures are in thousands of USD).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing |
|
Annual |
Date of |
||||||||||
|
Bank |
|
|
|
Borrowing |
|
Term |
|
|
|
|
Interest |
|
Interest |
|
|
|
Government |
|
Purpose |
|
Date |
|
(Months) |
|
Principal |
|
Rate |
|
Payment |
|
Due Date |
|
|
Bank of China |
|
Working Capital |
|
Mar 27, 2025 |
|
|
|
4,191 |
|
2.30 |
% |
Pay monthly |
|
Mar 27, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and Commercial Bank of China |
|
Working Capital |
|
Jan 27, 2025 |
|
|
|
3,911 |
|
2.30 |
% |
Pay monthly |
|
Jan 27, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Oct 25, 2024 |
|
|
|
4,191 |
|
3.00 |
% |
Pay monthly |
|
Oct 25, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of China |
|
Working Capital |
|
Jan 22, 2025 |
|
|
|
4,191 |
|
2.35 |
% |
Pay monthly |
|
Jan 21, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Jun 16, 2025 |
|
|
|
5,030 |
|
2.45 |
% |
Pay monthly |
|
Jun 16, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank of China |
|
Working Capital |
|
Apr 30, 2025 |
|
|
|
2,791 |
|
2.30 |
% |
Pay monthly |
|
Apr 29, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Apr 27, 2022 |
|
|
|
111 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
May 12, 2022 |
|
|
|
73 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
May 24, 2022 |
|
|
|
53 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Jun 16, 2022 |
|
|
|
42 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Jun 29, 2022 |
|
|
|
113 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Jul 28, 2022 |
|
|
|
78 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Jan 16, 2023 |
|
|
|
158 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Feb 20, 2023 |
|
|
|
19 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Mar 21, 2023 |
|
|
|
22 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chongqing Bank(1) |
|
Working Capital |
|
Jun 18, 2023 |
|
|
|
15 |
|
3.25 |
% |
Pay semiannually |
|
Apr 13, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Mar 18, 2025 |
|
|
|
6,706 |
|
1.40 |
% |
Pay in arrear |
|
Mar 18, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Mar 25, 2025 |
|
|
|
4,694 |
|
1.40 |
% |
Pay in arrear |
|
Mar 24, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank(1) |
|
Working Capital |
|
Aug 7, 2024 |
|
|
|
5,170 |
|
1.55 |
% |
Pay in arrear |
|
Aug 7, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Aug 22, 2024 |
|
|
|
2,514 |
|
1.55 |
% |
Pay in arrear |
|
Aug 21, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Nov 26, 2024 |
|
|
|
2,095 |
|
1.65 |
% |
Pay in arrear |
|
Nov 25, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial and Commercial Bank of China |
|
Working Capital |
|
Apr 1, 2025 |
|
|
|
4,191 |
|
1.65 |
% |
Pay in arrear |
|
Mar 19, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Jan 20, 2025 |
|
|
|
4,471 |
|
1.45 |
% |
Pay in arrear |
|
Jan 20, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Mar 18, 2025 |
|
|
|
3,716 |
|
1.40 |
% |
Pay in arrear |
|
Mar 18, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank(1) |
|
Working Capital |
|
Jul 31, 2024 |
|
|
|
4,136 |
|
1.55 |
% |
Pay in arrear |
|
Jul 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Aug 19, 2024 |
|
|
|
2,235 |
|
1.55 |
% |
Pay in arrear |
|
Aug 15, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 2, 2025 |
|
|
|
361 |
|
1.25 |
% |
Pay in arrear |
|
Sep 24, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 2, 2025 |
|
|
|
624 |
|
1.25 |
% |
Pay in arrear |
|
Sep 27, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 2, 2025 |
|
|
|
365 |
|
1.25 |
% |
Pay in arrear |
|
Sep 26, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 2, 2025 |
|
|
|
244 |
|
1.25 |
% |
Pay in arrear |
|
Sep 25, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 16, 2025 |
|
|
|
188 |
|
1.15 |
% |
Pay in arrear |
|
Sep 27, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 25, 2025 |
|
|
|
321 |
|
1.28 |
% |
Pay in arrear |
|
Oct 2, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
Apr 25, 2025 |
|
|
|
211 |
|
1.28 |
% |
Pay in arrear |
|
Sep 27, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
May 14, 2025 |
|
|
|
556 |
|
1.25 |
% |
Pay in arrear |
|
Oct 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
May 14, 2025 |
|
|
|
284 |
|
1.25 |
% |
Pay in arrear |
|
Oct 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank |
|
Working Capital |
|
May 22, 2025 |
|
|
|
236 |
|
1.25 |
% |
Pay in arrear |
|
Oct 28, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China CITIC Bank(1) |
|
Working Capital |
|
Feb 27, 2025 |
|
|
|
500 |
|
1.20 |
% |
Pay in arrear |
|
Jul 24, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Mar 11, 2025 |
|
|
|
377 |
|
1.38 |
% |
Pay in arrear |
|
Sep 6, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Mar 11, 2025 |
|
|
|
508 |
|
1.38 |
% |
Pay in arrear |
|
Jul 22, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Mar 11, 2025 |
|
|
|
3 |
|
1.38 |
% |
Pay in arrear |
|
Jul 23, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Feb 5, 2025 |
|
|
|
209 |
|
1.15 |
% |
Pay in arrear |
|
Aug 5, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Feb 5, 2025 |
|
|
|
209 |
|
1.15 |
% |
Pay in arrear |
|
Aug 5, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
139 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Jan 22, 2025 |
|
|
|
418 |
|
1.00 |
% |
Pay in arrear |
|
Jul 21, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank(1) |
|
Working Capital |
|
Feb 7, 2025 |
|
|
|
223 |
|
1.15 |
% |
Pay in arrear |
|
Aug 7, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
209 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
139 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
139 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
139 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Merchants Bank |
|
Working Capital |
|
Apr 8, 2025 |
|
|
|
139 |
|
1.14 |
% |
Pay in arrear |
|
Oct 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A(1) |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Jul 7, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A(1) |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Aug 6, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Sep 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Oct 6, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Nov 6, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Dec 8, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Jan 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Feb 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Mar 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Apr 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
May 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Jun 8, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Jul 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A(1) |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Aug 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A(1) |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Sep 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Oct 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Dec 1, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Dec 29, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Jan 29, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Mar 2, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Mar 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Apr 29, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
May 29, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jun 29, 2023 |
|
|
|
9 |
|
7.44 |
% |
Pay monthly |
|
Jun 29, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco Safra S/A |
|
Working Capital |
|
Jul 6, 2023 |
|
|
|
15 |
|
7.31 |
% |
Pay monthly |
|
Jul 6, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
71,961 |
|
|
|
|
|
|
| (1) | These bank loans were repaid in July and August 2025 when they became due. |
The Company must use the loans for the purpose described and repay the principal outstanding on the specified date in the table. If it fails to do so, it will be charged a penalty interest payment of 30% to 100%. The Company had complied with such financial covenants as of June 30, 2025.
Notes Payable
The following table summarizes the contract information of issuing notes payable between the banks and the Company as of June 30, 2025 (figures are in thousands of USD):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
|
|
|
|
|
|
Payable on |
|
|
Purpose |
Term (Months) |
Due Date |
Due Date |
||||
|
Working Capital(1) |
Jul. 2025 |
|
15,939 |
||||
|
Working Capital(1) |
Aug. 2025 |
|
14,946 |
||||
|
Working Capital |
Sep. 2025 |
|
19,846 |
||||
|
Working Capital |
Oct. 2025 |
|
12,689 |
||||
|
Working Capital |
Nov. 2025 |
|
16,319 |
||||
|
Working Capital |
Dec. 2025 |
|
10,231 |
||||
|
Total (See Note 8) |
|
|
|
$ |
89,970 |
||
(1)The notes payable were repaid in full on their respective due dates.
The Company must use notes payable for the purpose described in the table. If it fails to do so, the banks will no longer issue the notes payable, and it may have an adverse effect on the Company's liquidity and capital resources. The Company has to deposit a sufficient amount of cash on the due date of notes payable for payment to the suppliers. If the bank has advanced payment for the Company, it will be charged an additional 50% penalty interest. The Company complied with such financial covenants as of June 30, 2025.
Cash Flows
| (a) | Operating Activities |
Net cash provided by operating activities for the six months ended June 30, 2025 was $49.1 million, compared to net cash provided by operating activities of $9.1 million for the same period of 2024, representing an increase in net cash inflows by $40.0 million, which was mainly due to the collection of receivables arising from sales during the second half of 2024. As a result, operating cash flow for the six months ended June 30, 2025 materially exceeded the prior-year period despite comparable underlying net income.
| (b) | Investing Activities |
Net cash used in investing activities for the six months ended June 30, 2025 was $10.3 million, as compared to net cash used in investing activities of $28.2 million for the same period of 2024, representing a decrease in net cash outflows by $17.9 million, which was mainly due to the lower capital expenditures of $8.5 million and higher realized gains on our translated earnings contracts of $8.9 million.
| (c) | Financing Activities |
Net cash used in financing activities for the six months ended June 30, 2025 was $2.8 million, compared to net cash provided by financing activities of $14.2 million for the same period of 2024, representing a decrease in net cash inflows by $17.0 million, which was mainly due to the decrease in cash received from capital contributions by a non-controlling interest holder by $15.5 million.
Off-Balance Sheet Arrangements
As of June 30, 2025 and December 31, 2024, the Company did not have any significant transactions, obligations or relationships that could be considered off-balance sheet arrangements.
Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes annual assessments of the SOC reports of our providers and implementing complementary controls. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third-parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
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