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Sedan mix slows FAW H1 profit

By Li Fangfang (China Daily)
Updated: 2009-08-18 08:04

FAW Car Co reported a slower-than-industry-average profit and sales growth in the first half of this year, as it failed to benefit from the government incentives for small cars due to its line up of medium-to-high-end models.

In a statement to the Shenzhen Stock Exchange, the automaker said its net profit in the first half of the year rose 5.83 percent to 535.28 million yuan ($78.33 million), up from 505.77 million yuan a year earlier.

Revenue rose 11.51 percent year-on-year to 11.63 billion yuan, from 10.43 billion yuan, while operating profit and total profit fell 10.79 and 10.93 percent.

The Changchun-based company said fierce competition in the domestic automobile market and its product line-up affected profits.

"As the Western automobile markets have been shrinking amid the financial crisis, foreign automakers all shifted their focus and investment to China, which increased competition," said the company.

"As a medium-to-high-end sedan provider, FAW could not benefit from the government policies which are mainly for small cars with engine capacity of less than 1.6 liter. This also resulted in slower profit growth," the company said.

During the first six months, the company sold 75,315 vehicles, including Besturn, Hongqi, Mazda 6 and Wagon vehicles, up 27.6 percent over last year.

"As the price and profit margin of Besturn, the company's major product, are relatively lower, FAW Car's gross profit ratio reduced 2 percentage points from a year earlier," said Industrial Securities in a report yesterday.

The brokerage predicted that total sales of FAW Car this year would be around 150,000 units, while revenue and net profit are expected to reach 23 billion yuan and 1.24 billion yuan.

Shares of FAW Car and its sister company Tianjin FAW Xiali Automobile Co were suspended yesterday from trading in the Shenzhen Stock Exchange pending company statements regarding a report by the Economic Observer newspaper.

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The Chinese media had reported that China FAW Group Corp, the parent company of the Shenzhen-listed automakers, had drafted a listing plan under which it may use FAW Car unit for a backdoor listing.

However, FAW Group's spokesman Gao Yuan denied the listing news to China Daily.

"I never heard of such a listing plan," said Gao. "The trading suspension of FAW Car and Tianjin FAW Xiali has nothing to do with FAW Group."

He refused to disclose any further information about FAW's go-public scheme.

FAW Group had started exploring the listing options two years back, but dropped the plan later without giving any explanation.

It is the only group among China's top three automakers that did not go public. SAIC Group had been listed in Shanghai two years back through its subsidiary SAIC Motor. Dongfeng Motor Corp also went public in Hong Kong at the end of 2005.

FAW Group has total assets of 134 billion yuan. Analysts feel that the company should utilize the opportunity to go public, as China has emerged as the most prosperous and promising automobile market in the world.