Denway pulls off HK$1.29b profit surprise

PUBLISHED : Wednesday, 06 September, 2006, 12:00am
UPDATED : Wednesday, 06 September, 2006, 12:00am


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Denway Motors, Honda Motor's mainland partner, said first-half net profit jumped 30 per cent to a better than expected HK$1.29 billion on the back of strong sales of higher-margin vehicles such as the Accord and Odyssey minivan.

The Guangzhou Automotive Group unit had net profit of HK$990.89 million in the same period last year. The results beat an average forecast of HK$1.14 billion in a Reuters survey of three analysts.

Denway, which owns 50 per cent of Guangzhou Honda Automotive in partnership with Japan's third-largest carmaker, sold 123,500 Accord, Fit and City Saloon units and Odyssey minivans, up about 16 per cent from levels a year ago.

The sales growth was capped by capacity constraints that Denway said should ease once a new production line capable of making 120,000 vehicles a year came on stream in the fourth quarter.

Its sales target of 260,000 units for this year should be attainable, according to a report by Macquarie, the Australian investment bank.

In addition to adding production capacity, the company plans to expand its dealer network and bolster after-sales service.

Denway said, without providing details, profit from its 49 per cent stake in Guangzhou Automobile Group Component, which it bought in October last year for HK$700 million from its parent company, met its expectations.

Denway boosted its six-month dividend 20 per cent to five HK cents a share from four HK cents.

Mainland carmakers have been logging double-digit sales growth so far this year, although analysts question whether this can be sustained without price cuts that will damage their profitability.

Denway shares climbed 2.31 per cent to close at HK$2.66 yesterday before the earnings release. They have gained only 3.3 per cent so far this year, underperforming the H-share index's 27 per cent rise.