Car manufacturer Denway Investment posted a 60.24 per cent gain in net profit to HK$37.86 million for the year to December 31. Turnover rose to HK$624.52 million from HK$559.06 million a year earlier. Vice-chairman Lu Zhifeng attributed the profit growth to a reduction in expenses, good performance of the red chip's 50-50 joint venture Guangzhou Honda Automobile and an increase in sales at its subsidiaries. Earnings per share were 1.6 HK cents, down from 1.7 HK cents previously. No dividend was recommended. Financing expenses were reduced because the company repaid HK$542 million in loans with funds from a rights issue. The loan was made to Denway by its 95 per cent-owned subsidiary Guangzhou Automobile Group to form Guangzhou Honda Automobile in March last year. The joint venture met a production and sales target of 10,000 Honda Accord sedans last year. Mr Lu said Guangzhou Honda lost HK$40 million, far less than the HK$100 million expected during development. Guangzhou Honda started making a profit in August and achieved a local content rate of 45.38 per cent last November. The joint venture turned out 7,000 units in the January-April period and now aims to produce 20,000 units this year. Chairman Zhang Fangyou said domestic demand for Japanese sedans still exceeded supply. He did not anticipate the company would feel pressure to cut prices after tariffs are reduced to 25 per cent by 2006, should the mainland gain entry to the World Trade Organisation. The current tariff rate is 80 to 100 per cent. ' Our cars will still be selling at a price 15-20 per cent less than the imports of the same type,' Mr Zhang said. Individual orders accounted for 84 per cent of Guangzhou Honda's total orders last year. Denway plans to raise Guangzhou Honda's annual production capacity to 80,000 in three to five years and launch two new models this year. Denway is also seeking to acquire Guangzhou Automobile's 51 per cent stake in a coach-manufacturing joint venture formed with Isuzu in Japan.