Quantcast
Last updated on April 20, 2014 at 5:20 EDT

Lentuo International Announces Fourth Quarter and Fiscal 2011 Financial Results

April 26, 2012

BEIJING, April 27, 2012 /PRNewswire-Asia/ — Lentuo International Inc. (NYSE: LAS) (“Lentuo” or the “Company”), the largest non-state-owned automobile retailer in Beijing as measured by new vehicle sales revenue in 2010, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2011.

Fourth Quarter 2011 Financial Highlights

  • The Company reported revenues of RMB 1.0 billion ($164.7 million) for the fourth quarter of 2011, an increase of 38.6% from the third quarter of 2011.
  • The Company sold 5,140 vehicles during the fourth quarter of 2011, representing a 62.6% sequential increase over 3,162 vehicles sold in the third quarter of 2011.
  • The Company serviced 49,695 vehicles during the fourth quarter of 2011, representing a 31.1% increase over 37,894 vehicles in the third quarter of 2011.
  • The Company reported net income of RMB 15.4 million ($2.5 million) for the fourth quarter of 2011, an increase of 43.0% from the third quarter of 2011.

“2011 was a very challenging year for us. In December 2010, the Beijing government introduced traffic control measures that severely limit the availability of new license plates through a lottery system in order to reduce traffic jams and limit environmental problems. This particularly affected us because of our historical sales concentration in Beijing,” stated Mr. Hetong Guo, Founder and Chairman of Lentuo. “As the year went by, we progressively executed our planned strategic diversification with the acquisition of three dealerships outside Beijing while also opening one new dealership and acquiring another one in Beijing. Three of these new dealerships contributed to revenues for the first time in the fourth quarter. Similarly, our efforts to increase revenues from repair and maintenance paid off with revenue growth in the fourth quarter of 68 percent year over year.

“These diversification measures enabled us to grow revenues by 38.6 percent compared to the third quarter of 2011 and limit the decrease in annual revenues to just under ten percent. However, diversification also required increased spending, at least initially, in advertisement, additional staff, acquisition expenses and brand building. This inevitably had a substantial impact on net income for the year.

“We plan to continue to grow through dealership acquisitions, new dealership openings, expansion of repair and maintenance services and the addition of other high-end brands. We believe that these strategic moves will improve our performance and enhance shareholder value.”

Fourth Quarter 2011 Financial Performance

Revenues for the three months ended December 31, 2011 decreased 6.2% to RMB 1.0 billion ($164.7 million) from RMB 1.1 billion in the fourth quarter of 2010. The decrease was primarily due to lower vehicle sales resulting from the Beijing government’s new traffic congestion control measures introduced in December 2010. Quarter-on-quarter, revenues for the three months ended December 31, 2011 increased 38.6% from RMB 747.6 million in the third quarter of 2011.

During the fourth quarter of 2011, the Company sold 5,140 vehicles, representing a 18.3% decrease from 6,292 vehicles in the fourth quarter of 2010. On a year-over-year basis the Beijing automobile market has moved from an environment that was helped by a series of policies favorable to the industry to one that is negatively impacted by the new traffic control measures introduced in December 2010. Overall, the general Beijing automobile market saw substantial year-over-year sales volume declines, whereas the impact on Lentuo has been reduced mainly due to its strong brand awareness and reputation for excellent service. Quarter-on-quarter, the number of vehicles sold for the three months ended December 31, 2011 increased 62.6% from 3,162 vehicles in the third quarter of 2011.

The average new vehicle unit price for the fourth quarter of 2011 was RMB 176,486 ($28,041), a 7.0% increase over RMB 164,879 for the same period in 2010. The increase in the average new vehicle unit price was primarily driven by customers’ changing preferences toward higher-end vehicles after the Beijing government adopted policies aimed at curbing traffic congestion that increased the cost of automobile usage.

The Company serviced 49,695 vehicles during the three months ended December 31, 2011, representing a 31.2% increase over the 37,868 vehicles serviced in the fourth quarter of 2010. Revenue from repair and maintenance services in the fourth quarter of 2011 increased 68.4% to RMB 104.1 million ($16.5 million) compared to RMB 61.9 million in the same period in 2010.

In the fourth quarter of 2011, to diversify its revenue drivers in response to the new vehicle registration quota system in Beijing, the Company began to generate revenues from sales of leased vehicles held for sale.

Cost of goods sold decreased 5.4% to RMB 933.9 million ($148.4 million) in the fourth quarter of 2011 from RMB 986.8 million in the same period of 2010. The decrease was primarily attributable to lower vehicle sales.

Gross profit decreased 13.1% to RMB 102.7 million ($16.3 million) for the quarter, down from RMB 118.2 million in the fourth quarter of 2010. The decrease in gross profit was primarily driven by lower vehicle sales and a drop in gross margin for automobile sales and maintenance services.

Gross margin for the fourth quarter of 2011 decreased to 9.9% from 10.7% in the fourth quarter of 2010. Specifically, the gross margin for automobile sales decreased to 5.1% in the fourth quarter of 2011 from 6.3% in the same period of 2010, while the gross margin of repair and maintenance services decreased to 48.5%, as compared to 75.8% for the same period in 2010 and 48.8% for the third quarter of 2011. Margins contracted toward the high end of industry averages for vehicle sales primarily as a result of various discount programs designed to drive sales volume. The Company intends to maintain its gross margin at or slightly above its peer group average.

Selling, marketing and distribution expenses increased 61.6% to RMB 33.6 million ($5.3 million) in the fourth quarter of 2011 from RMB 20.8 million in the same period a year ago, primarily as a result of the acquisition of additional dealerships and increased advertising expenses related to the Company’s efforts to further elevate its brand awareness in both Beijing and other markets. As a percentage of revenues, selling, marketing and distribution expenses increased to 3.2% in the fourth quarter of 2011 from 1.9% in the fourth quarter of 2010.

General and administrative expenses increased by 101.4% to RMB 25.6 million ($4.1 million) in the fourth quarter of 2011 from RMB 12.7 million in the same quarter of 2010, primarily due to expanding operations, hiring of additional staff to support growth, and increased expenses related to being a public company. As a percentage of revenues, general and administrative expenses increased to 2.5% in the fourth quarter of 2011 from 1.2% in the fourth quarter of 2010.

Operating income for the fourth quarter of 2011 decreased 48.6% to RMB 43.5 million ($6.9 million) from RMB 84.7 million for the same period in 2010. The change in operating income was primarily the result of expanding operations, increased advertising expenses, and costs related to being a public company.

Operating margin for the fourth quarter of 2011 was 4.2%, compared to 7.7% for the same quarter in 2010. The decrease in operating margin was primarily attributable to the increase in marketing expenses.

Net income and comprehensive income attributable to controlling interest was RMB 15.4 million ($2.5 million), a decrease of 68.5% from RMB 49.0 million for the same period in 2010. This decrease, driven by reduced gross margin coupled with increased operating expenses, reflects the challenges created by the new traffic control measures introduced in Beijing in December 2010 as well as the Company’s continuing efforts to strengthen its competitive position both in and outside of Beijing. While this has negatively impacted the Company’s performance, Lentuo believes its peers have experienced an even greater negative impact, which in turn positions the Company to gain more market share in the future.

Diluted earnings per ADS were RMB 0.52 ($0.08) for the fourth quarter of 2011 compared to RMB 2.02 for the fourth quarter of 2010, decreasing 74.3%.

As of December 31, 2011, the Company had cash and cash equivalents of RMB 161.4 million ($25.6 million), compared to RMB 801.9 million as of December 31, 2010.

Fiscal Year 2011 Financial Performance

Revenues for the fiscal year ended December 31, 2011 decreased 9.7% to RMB 3.0 billion ($482.4 million) from RMB 3.4 billion in the previous fiscal year. The decrease was primarily due to lower vehicle sales resulting from the Beijing government’s new traffic congestion control measures introduced in December 2010, which was partially offset by the increase in revenues from automobile repair and maintenance services, as well as sales from greenfield and acquired dealerships.

During fiscal year 2011, the Company sold 13,582 vehicles, representing a 25.3% decrease from 18,176 vehicles in the previous fiscal year. The average new vehicle unit price for fiscal year 2011 was RMB 196,197 ($31,173), a 15.9% increase over RMB 169,182 for the previous fiscal year. The Company serviced 153,365 vehicles during fiscal year 2011, representing a 21.5% increase over the 126,277 vehicles serviced in the previous fiscal year.

Cost of goods sold decreased 9.1% to RMB 2.7 billion ($432.6 million) in fiscal year 2011 from RMB 3.0 billion in the previous fiscal year, primarily as a result of decreased vehicle sales.

Gross profit decreased 14.8% to RMB 313.7 million ($49.8 million) for the fiscal year, down from RMB 368.1 million in fiscal year 2010. The decrease in gross profit was primarily the result of lower vehicle sales caused by the new policy changes in Beijing, as well as increased personnel costs driven by inflation and headcount increases for the Company’s repair and maintenance services segment.

Gross margin for fiscal year 2011 decreased to 10.3% from 10.9% in the previous fiscal year. Specifically, the gross margin for automobile sales decreased to 4.7% in the period from 6.2% in fiscal year 2010, while the gross margin of repair and maintenance services decreased to 51.5%, as compared to 59.7% in 2010. Margins contracted toward the high end of industry averages for vehicle sales primarily as a result of various discount programs implemented to drive sales volume, as well as increased personnel costs driven by inflation and headcount growth. The Company intends to maintain its gross margin at or slightly above its peer group average.

Selling, marketing and distribution expenses increased 75.3% to RMB 91.4 million ($14.5 million) in fiscal year 2011 from RMB 52.2 million in 2010, primarily as a result of increased advertising and marketing expenses related to the Company’s efforts to further elevate its brand awareness in Beijing and other markets upon its successful IPO, inflation-related salary adjustments, and increased expenses related to the Company’s dealership network expansion. As a percentage of revenues, selling, marketing and distribution expenses increased to 3.0% in the period from 1.6% in 2010.

General and administrative expenses increased by 47.4% to RMB 55.8 million ($8.9 million) in fiscal year 2011 from RMB 37.8 million in the previous fiscal year, primarily due to hiring of additional staff to support growth, inflation-related salary adjustments, the acquisition of additional dealerships, and increased expenses related to being a public company. As a percentage of revenues, general and administrative expenses increased marginally to 1.8% in the period from 1.1% in fiscal year 2010.

Operating income for fiscal year 2011 decreased 40.1% to RMB 166.5 million ($26.5 million) from RMB 278.1 million for the previous fiscal year.

Operating margin for fiscal year 2011 was 5.5%, compared to 8.3% for the previous fiscal year. The decrease in operating margin was primarily attributable to reduced gross margin coupled with increased operating expenses.

Net income and comprehensive income attributable to controlling interest for fiscal year 2011 was RMB 67.9 million ($10.8 million), a decrease of 57.9% from RMB 161.4 million for the previous fiscal year. This decrease, driven by reduced gross margin coupled with increased operating expenses, reflects the challenges created by the new traffic control measures introduced in Beijing in December 2010 as well as the Company’s continuing efforts to strengthen its competitive position both in and outside of Beijing. While this has negatively impacted the Company’s performance, Lentuo believes its peers have experienced an even greater negative impact, which in turn positions the Company to gain more market share in the future.

Diluted earnings per ADS were RMB 2.30 ($0.37) for fiscal year 2011 compared to RMB 7.54 for the previous fiscal year, decreasing 69.5%.

Conference Call

The Company will hold a conference call on Friday, April 27, 2012 at 10:00 a.m. Eastern time (7:00 a.m. Pacific) to discuss its fourth quarter and fiscal 2011 financial results. To participate in the call, please dial (877) 941-8416, or (480) 629-9808 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company’s website at http://ir.lentuo.net, or alternately at http://ViaVid.net.

A replay of the call will be available for one week from 1:00 p.m. EDT on April 27, 2012, until 11:59 p.m. EDT on May 4, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the pass code for the replay is 4533901. In addition, a recording of the call will be available via the Company’s website at http://ir.lentuo.net for one year.

Exchange Rate

This announcement contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the exchange rate of RMB 6.2939 to US $1.00, as set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2011.

About Lentuo International Inc.

Lentuo is the largest non-state-owned automobile retailer in Beijing, China as measured by its 2010 new vehicle sales revenue. Lentuo operates eleven franchise dealerships, ten automobile showrooms, one automobile repair shop and one car leasing company.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “target,” “going forward,” “outlook” and similar statements. Such statements are based upon management’s current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control, which may cause the Company’s actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Contact:
Jiangyu Luo
Lentuo International Inc.
Investor Relations Department
Email: luojiangyu@lentuo.net

Dave Gentry, U.S.
RedChip Companies, Inc.
Tel: +1-800-733-2447, Ext. 104
Email: info@redchip.com

                                                 LENTUO INTERNATIONAL INC.
                                                CONSOLIDATED BALANCE SHEETS
                      (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for
                                                     number of shares)

                                                                                        As of December 31,
                                                                                  2010                 2011
                                                                                  ----                 ----
                                                                                RMB                  RMB    US$
    ASSETS
    Current assets:
    Cash and cash equivalents                                                  801,850              161,393      25,643
    Restricted cash                                                            411,994              435,770      69,237
    Accounts receivable (net of allowance for doubtful                          42,659               48,961       7,779
      accounts of nil as of December 31, 2010 and
      December 31, 2011)
    Inventories, net                                                           276,179              516,256      82,025
    Leased automobiles held for sale, net                                            -              147,749      23,475
    Advances to suppliers                                                      395,266              219,936      34,944
    Prepaid expenses and other current assets                                   53,743              265,199      42,136
    Amounts due from related parties                                                 -               74,857      11,894
    Deferred tax assets                                                          4,061                6,062         963
                                                                                 -----                -----         ---

    Total current assets                                                     1,985,752            1,876,183     298,096
                                                                             ---------            ---------     -------

    Non-current assets:
    Property and equipment, net                                                223,285              325,308      51,686
    Land use rights, net                                                         5,806               18,821       2,990
    Intangible assets, net                                                           -              135,067      21,460
    Goodwill                                                                         -               73,634      11,699
    Long term prepayments                                                            -              137,750      21,886
    Deferred tax assets                                                            860                4,112         653
                                                                                   ---                -----         ---

    Total non-current assets                                                   229,951              694,692     110,374
                                                                               -------              -------     -------

    TOTAL ASSETS                                                             2,215,703            2,570,875     408,470
                                                                             =========            =========     =======

                                                    As of December 31,
                                                         2010      2011
                                                         ----      ----
                                                       RMB       RMB    US$
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                    1,948    12,568       1,997
    Bills payable                                     690,100   889,158     141,273
    Advances from customers                            90,652    47,990       7,625
    Deposits from third parties                        85,856         -           -
    Accrued expenses and other current liabilities    208,273   329,468      52,347
    Amounts due to related parties                     13,553    10,000       1,589
    Unrecognized tax benefits                           4,963     4,963         789
    Taxes payable                                     142,852    33,562       5,332
    Short-term loans                                  241,053   370,883      58,927

    Total current liabilities                       1,479,250 1,698,592     269,879
                                                    --------- ---------     -------

    Non-current liabilities:
    Deferred tax liabilities                                -    39,193       6,227
                                                          ---    ------       -----

    Total non-current liabilities                           -    39,193       6,227
                                                          ---    ------       -----

    Total liabilities                               1,479,250 1,737,785     276,105
                                                    --------- ---------     -------

    Shareholders' equity:
    Ordinary shares, par value US$0.00001 per share
    Authorized - 500,000,000 shares as of                   4         4           1
           December 31, 2010 and 2011
    Issued and outstanding -58,937,912 shares as
           of  December 31, 2010 and 2011
    Additional paid-in capital                        469,761   469,761      74,638
    Retained earnings                                 266,688   334,605      53,163

    Total equity for controlling interest             736,453   804,370     127,802

    Non-controllinginterest                                 -    28,720       4,563

    Total shareholder's equity                        736,453   833,090     132,365

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      2,215,703 2,570,875     408,471
                                                    ========= =========     =======

                               LENTUO INTERNATIONAL INC.
              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for
                         number of shares and per share data)

                                               Three months ended December 31,
                                                   2010                     2011
                                                   ----                     ----
                                                RMB                      RMB       US$
    Revenues:
    Sales
     of
     automobiles                              1,037,417                  907,137          144,130
     Automobile
     repair
     and
     maintenance
     services                                    61,856                  104,136           16,546
    Sales
     of
     leased
     automobiles                                      -                   18,310            2,909
    Other
     services                                     5,725                    6,999            1,111
                                                  -----                    -----            -----
                                              1,104,998                1,036,582          164,696
                                              ---------                ---------          -------
    Cost of goods sold:
    Sales
     of
     automobiles                               (971,582)                (861,112)        (136,817)
     Automobile
     repair
     and
     maintenance
     services                                   (14,986)                 (53,670)          (8,527)
    Sales
     of
     leased
     automobiles                                      -                  (17,330)          (2,753)
    Other
     services                                      (212)                  (1,765)            (281)
                                                   ----                   ------             ----
                                               (986,780)                (933,877)        (148,378)
                                               --------                 --------         --------

    Gross
     profit                                     118,218                  102,705           16,318
                                                -------                  -------           ------

    Operating expenses:
     Selling,
     marketing
     and
     distribution
     expenses                                   (20,770)                 (33,567)          (5,333)
     General
     and
     administrative
     expenses                                   (12,710)                 (25,594)          (4,067)
                                                -------                  -------           ------

    Total
     operating
     expenses                                   (33,480)                 (59,161)          (9,400)
                                                -------                  -------           ------

     Operating
     income                                      84,738                   43,544            6,918
                                                 ------                   ------            -----

     Interest
     income                                         717                    1,557              247
     Interest
     expenses                                   (17,814)                 (23,593)          (3,749)
     Exchange
     loss                                        (2,554)                      32                5
    Other
     income,
     net                                          2,158                      479               76
                                                  -----                      ---              ---

     Income
     before
     income
     tax
     expenses                                    67,245                   22,019            3,497
     Income
     tax
     expenses                                   (18,274)                  (7,397)          (1,175)
                                                -------                   ------           ------

    Net
     income
     and
     comprehensive
     income                                      48,971                   14,622            2,322

    Net
     income
     and
     comprehensive
     income                                           -                     (815)            (129)
    attributable to non-controlling
     interest

    Net
     income
     and
     comprehensive
     income                                      48,971                   15,437            2,451
    attributable to
     controlling
     interest
                                                                                              ===

    Earnings per share:
    Basic
     and
     diluted
     earnings
     per
     share                                         1.01                     0.26             0.04
                                                   ====                     ====             ====

    Weighted average ordinary shares
     outstanding:
    Basic
     and
     diluted                                 48,622,695               58,937,912       58,937,912
                                             ==========               ==========       ==========

                               LENTUO INTERNATIONAL INC.
              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
    (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for
                         number of shares and per share data)

                                                   Years ended December 31,
                                                   2010                     2011
                                                   ----                     ----
                                                RMB                      RMB       US$
    Revenues:
    Sales
     of
     automobiles                              3,075,045                2,664,750          423,386
     Automobile
     repair
     and
     maintenance
     services                                   274,076                  333,755           53,028
    Sales
     of
     leased
     automobiles                                      -                   18,310            2,909
    Other
     services                                    14,548                   19,403            3,083
                                                 ------                   ------            -----
                                              3,363,669                3,036,218          482,406
                                              ---------                ---------          -------
    Cost of goods sold:
    Sales
     of
     automobiles                             (2,883,938)              (2,540,688)        (403,671)
     Automobile
     repair
     and
     maintenance
     services                                  (110,487)                (161,756)         (25,700)
    Sales
     of
     leased
     automobiles                                      -                  (17,330)          (2,753)
    Other
     services                                    (1,177)                  (2,802)            (445)
                                                 ------                   ------             ----
                                             (2,995,602)              (2,722,556)        (432,569)
                                             ----------               ----------         --------

    Gross
     profit                                     368,067                  313,662           49,837

    Operating expenses:
     Selling,
     marketing
     and
     distribution
     expenses                                   (52,173)                 (91,438)         (14,528)
     General
     and
     administrative
     expenses                                   (37,824)                 (55,760)          (8,859)
                                                -------                  -------           ------

    Total
     operating
     expenses                                   (89,997)                (147,198)         (23,387)
                                                -------                 --------          -------

     Operating
     income                                     278,070                  166,464           26,450
                                                -------                  -------           ------

     Interest
     income                                       1,102                    3,182              506
     Interest
     expenses                                   (53,832)                 (61,560)          (9,781)
     Exchange
     loss                                        (3,018)                  (9,100)          (1,446)
    Other
     income,
     net                                          2,144                    1,407              224
                                                  -----                    -----              ---

     Income
     before
     income
     tax
     expenses                                   224,466                  100,393           15,953
     Income
     tax
     expenses                                   (63,093)                 (33,291)          (5,289)
                                                -------                  -------           ------

    Net
     income
     and
     comprehensive
     income                                     161,373                   67,102           10,664

    Net
     income
     and
     comprehensive
     income                                           -                     (815)            (129)
    attributable to non-controlling
     interest

    Net
     income
     and
     comprehensive
     income                                     161,373                   67,917           10,793
    attributable to
     controlling
     interest
                                                                                              ===

    Earnings per share:

    Basic
     and
     diluted
     earnings
     per
     share                                         3.77                     1.15             0.18
                                                   ====                     ====             ====

    Weighted average ordinary shares
     outstanding:
    Basic
     and
     diluted                                 42,727,446               58,937,912       58,937,912
                                             ==========               ==========       ==========

SOURCE Lentuo International Inc.


Source: PR Newswire