Dongfeng Motor profits increase 29.9pc

PUBLISHED : Friday, 20 April, 2007, 12:00am
UPDATED : Friday, 20 April, 2007, 12:00am

Total vehicle sales in the mainland last year jump 26.3 per cent to 751,000 units

Dongfeng Motor Group, the nation's third-largest vehicle maker, saw net profit rise 29.9 per cent last year on the back of higher sales volume and new product launches.

The company posted profit of 2.08 billion yuan, up from 1.6 billion yuan in 2005. But excluding 252 million yuan of one-time expenses incurred during the transformation of shares in two mainland-listed subsidiaries from tradable ones, its core profit was 2.33 billion yuan - slightly ahead of the 2.28 billion yuan mean estimate of 21 brokerage analysts polled by Thomson First Call.

Turnover grew 15.6 per cent to 48.26 billion yuan on the back of a 26.3 per cent increase in vehicles sold to 751,000 units.

The growth is in line with the 25 per cent sales growth to 7.22 million units for the mainland's car industry, whose output climbed 27 per cent to 7.28 million units last year.

Dongfeng's passenger car sales climbed 40.9 per cent to 494,846 units, increasing its share of the national market to 9.6 per cent from 8.8 per cent in 2005. Sales of commercial vehicles - mainly buses and trucks - climbed 5.2 per cent to 256,242 units, giving it an industry-leading market share of 12.6 per cent.

Gross profit margin of passenger cars rose to 18.9 per cent from 15.8 per cent as higher prices of raw materials such as fuel and aluminium were offset by appreciation of the yuan against the yen, which made imported parts cheaper.

Buying parts from domestic sources also helped lower costs, chairman Xu Ping said, adding that local components accounted for 80 per cent of the value of cars it made at the end of last year.

Gross margin of commercial vehicles grew to 12 per cent from 11.3 per cent.

Mr Xu said despite a brief price war in March this year, he believed further car price erosion would be moderate.

'I think price cuts will continue, but you won't see cut-throat reductions as domestic car prices are already reduced to international levels,' he said. 'As the room for profit is now very slim, I think industry players would cut prices in a rational fashion.'

Dongfeng expected a 3 per cent to 5 per cent drop in car prices in its annual financial budget, he added.

The company has budgeted 9.83 billion yuan of capital investment this year and 9.69 billion yuan for 2008, up from 5.51 billion yuan spent last year.

Some 73.7 per cent of this year's spending has been allocated for vehicle capacity expansion and product development, with the rest mostly for boosting engine and component output capacity.

It plans to ramp up output capacity to 1.28 million units by the end of next year and 1.63 million by the end of 2010, from 945,000 at the end of last year.

Despite the aggressive expansion plans, vice-president Liu Zhangmin said output would only be released according to market demand and the company would not flood the market with products.

Utilisation of the company's three joint-venture passenger car plants averaged about 80 per cent last year.

Basic earnings per share fell 6.6 per cent to 24.15 fen from 25.86 fen in 2005 due to shares issued in its initial public offering in late 2005.

A final dividend of four fen was proposed.

After the announcement, its share price fell 2.8 per cent to close at HK$4.17, compared with a 2.3 per cent fall in the Hang Seng Index.