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Lentuo International Inc. Announces First Quarter 2011 Financial Results

Stocks in this article: LAS

The Company believes acquisitions will be a significant driver to grow its business in the future. We plan to purchase franchises to expand our business portfolio and generate attractive returns for the Company and its shareholders. We will continue to seek strong acquisition targets and are pursuing additional acquisition opportunities in geographies other than Tianjin as well. We remain confident that we are on track to fulfill our mid-term expansion plan of adding 10 dealerships to our growing national operations.

Lentuo opened a new FAW-Volkswagen dealership in the central area of eastern Beijing last week and expects to generate sales from this dealership beginning this week. We expect the dealership to generate revenue within the range of RMB 180 million to RMB 200 million ($27.5 million to $30.5 million) for the year 2011. As we observe increasing demand for premium passenger vehicles to be a long-term trend among China’s growing number of affluent households, we expect a limited impact on the premium car segment of our business from Beijing’s new quota system. In addition, the prime location of the new dealership in Beijing will be a key competitive advantage for us in this market--both in terms of repair and maintenance services and new car sales.

Financial Outlook

The Company estimates that its revenues for the second quarter of 2011 will be approximately RMB 650 million to RMB 680 million ($99.3 million to $103.8 million), representing a year-over-year decrease of approximately 11.2% to 7.1%.

This guidance is based on current market conditions and reflects the Company’s current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

The Chairman concluded: “Although we expect second-quarter sales to be impacted by the recent policy changes in Beijing, we are working to overcome this challenge by enhancing and promoting our repair, maintenance and other service offerings, which generate significantly higher margins compared to new vehicle sales. Additionally, we plan to leverage our leadership position in Beijing to capitalize on local market consolidation opportunities and support our geographic expansion. We firmly believe that we have the right platform to take full advantage of China’s huge, rapidly growing auto market.”

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