China High Speed Transmission Equipment Group, the nation's largest producer of gearboxes for wind power turbines, plans to spend about 400 million yuan (HK$493 million) this year to develop new businesses as growth of its core business slows and price competition intensifies.
The new businesses include light-emitting diode (LED) lighting and coal mining equipment production.
The Nanjing-based company, which also makes gearboxes for railway locomotives, vessels, construction and manufacturing equipment, is struggling with falling profits in the wind gearbox business that made up 67 per cent of last year's sales. The firm on Friday posted a 59.7 per cent decline in net profit to 556.97 million yuan for last year, 27 per cent lower than the 767.85 million yuan average estimate of 21 analysts polled by Thomson Reuters.
Excluding changes in fair values of convertible bonds and equity swaps, underlying net profit slid 49.3 per cent to 645.21 million yuan, of which profit fell 64.2 per cent in last year's second half to 270.2 million yuan.
Gross profit margin for wind gearboxes tumbled to 27.2 per cent from 31.2 per cent, with average selling price declining 12 per cent.
Chairman Hu Yueming said he could not see much improvement this year on both margin and prices, saying that the firm's target was to maintain last year's margin. He said it must look to new markets and products for growth.