Geely cuts annual sales target after 20.4pc fall in first-half earnings

First-half income drops 20.4pc at mainland carmaker as demand falls for domestic brands

PUBLISHED : Wednesday, 20 August, 2014, 2:44pm
UPDATED : Thursday, 21 August, 2014, 12:26am

Geely Automobile Holdings lowered its full-year sales target after reporting its first-half earnings fell by more than a fifth amid weakening demand for home-grown brands and rising competition from foreign carmakers.

Net profit fell 20.4 per cent from a year ago to 1.1 billion yuan (HK$1.38 billion). Analysts had predicted a more precipitous drop of 30 to 36 per cent.

Revenue dived 32 per cent to 10.2 billion yuan, with car sales falling 29 per cent year on year to 187,296 units, meeting just 32 per cent of its full-year target.

In a statement to the Hong Kong stock exchange yesterday, the mainland carmaker said it had decided to revise its full-year sales target to 430,000 units from 580,000 units.

The new target is about 22 per cent less than what the company had sold last year.

No interim dividend was declared, as in the year-ago period.

Company chairman Li Shufu blamed the poor performance on "weakening demand for indigenous-brand vehicles in China and a sharp decline in vehicle sales in some of the group's major export markets".

Domestic sales in the first half were down 28 per cent at 152,856 units, while export sales dropped 32 per cent to 34,440 units.

Chief executive Gui Shengyue said in Hong Kong yesterday he expected sales to pick up in the second half as the upgraded version of EC7 launched last month was generating strong interest in the market.

The company also planned to launch two models in the second half, Gui said.

"Geely's new target is still quite challenging and may not be easy to meet," said Barclays analyst Song Yang.

The second-half performance would depend on the sales of its upgraded EC7 model, Song said.

Sales volume of the EC7, the carmaker's best-selling model, fell 26 per cent to 64,046 units in the first half.

The lack of new model launches before it completed restructuring its dealers' network would continue to cloud its sales in the second half, Song said.

Li said the sales performance of Geely, which also owns Swedish luxury car brand Volvo, was also hindered by the upgrading of the company's product cycle and a major reshuffle of its sales and marketing systems.

He said challenges remained in the second half as international rivals had been strengthening their presence on the mainland, putting pressure on local carmakers.

Song said joint-venture brands had launched several lower-priced models, putting pressure on local brands such as Geely, Great Wall Motor and BYD.

Geely shares closed 0.65 per cent higher at HK$3.09 yesterday.