Export growth pushes Geely Automobile past weak local demand
Overseas sales help boost carmaker's net profit by 9pc, making up for domestic slump
A sharp growth in exports not only rescued mainland carmaker Geely Automobile from weakening demand at home but also made it one of the best performers among its domestic rivals in the first half of this year.
Geely saw sales volume fall 9 per cent to 182,329 at home over the first six months. However, J.P. Morgan was optimistic that the group would nonetheless become "China's version of Hyundai" within the next decade.
The group sold 222,390 vehicles in the first six months - a year-on-year rise of 4 per cent. While exports accounted for less than one-fifth of the sales, volume nearly tripled to 40,061 units, which helped boost interim net profit by 9 per cent year on year to 1.02 billion yuan (HK$1.25 billion) - more than tripling the market's expectation of a 2.6 per cent growth.
Dongfeng Motor - another major domestic carmaker - saw net profit decline 67.5 per cent in the first six months, while BYD warned of a profit drop of up to 95 per cent for the same period.
Despite good sales, Geely was plagued with surging inventories, whose value rose 33 per cent year on year to 1.8 billion yuan in the first half, and an increase of 23 per cent in financial costs.
Geely executive director An Conghui said the group intended to raise stockpiles ahead of a relocation of its production plant in Shanghai and a plan to upgrade several of its models this month, which would reduce the production capacity level.
Meanwhile, group chief financial officer Daniel Li Donghui said financial costs should also be much lower in the second half following the central bank's two cuts in benchmark lending rates, in June and July.
Despite stagnant local demand, Geely chief executive Gui Shengyue predicted improved profit margins in the second half as the company sought to meet more than three-quarters of an expected sales target of 30,000 sport utility vehicles this year, which would give a profit margin of more than 20 per cent compared with 17.4 per cent for the group overall.
"We are confident of the group's performance in the second half, as we have launched a number of new models between May and July that could help boost demand," Gui said.
Geely's share price closed 0.74 per cent higher at HK$2.74 yesterday, compared with a 1.06 per cent loss in the Hang Seng Index.