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SCMP Reporter

Leading home-appliance maker Qingdao Haier's net profit surged 45.69 per cent to 617.84 million yuan (about HK$583.8 million) last year despite the price war in the domestic market.

The company attributed the growth to its increased stake in an air-conditioner-making operation last year.

Qingdao Haier, a Shanghai A share-listed arm of white-goods giant Haier Group, increased its stake in Qingdao Haier Air Conditioning to 99.95 per cent from 25.5 per cent last year for two billion yuan.

The company increased the stake to shift to the growing air-conditioner market from the saturated refrigerator market.

The air-conditioner maker accounted for 68.57 per cent of Qingdao Haier's profit of 897.88 million yuan last year.

Turnover rose 137 per cent to 11.44 billion yuan.

The company sold 2.83 million refrigerator units in the mainland last year, compared with 2.79 million units in 2000.

Last year, air-conditioner sales in the domestic sector reached 2.06 million units.

The company exported 1.27 million refrigerators and 750,000 air-conditioners last year.

Analysts said the price war in the domestic market intensified last year as leading foreign brands geared up sales efforts to grab market share. Some leading domestic players such as Guangdong Kelon Electrical Holdings slashed prices to defend their market positions.

The competition was also excacerbated by the market entrance of leading television makers - TCL International Holdings diversified into the manufacturing of refrigerators and air-conditioners.

Analysts said the leading domestic players failed to reach their growth potential due to the numerous money-losing small competitors, which were being sustained in part by regional government's budgets.

However, Qingdao Haier said it insisted on waging a 'value war' instead of 'price war'.

The company quoted a survey saying that its products had the largest market share in the mainland last year, with refrigerators having 27 per cent of the market and air- conditioners 19.3 per cent.

But an analyst said she doubted the company's strategy because its market shares fell last year, Reuters reported.

The company and other rivals, such as Guangdong Kelon and Gzitic Hualing Holdings, have been trying to lessen the impact of the fierce competition at home by exploring overseas markets.

Qingdao Haier Air Conditioning and the ultimate parent, Haier Group, and other related companies plan to establish a finance company with a registered capital of 500 million yuan.

The new entity, Haier Group Finance, will take charge of settlements of the connected transactions among the companies under the group, providing financial services to them.

Qingdao Haier Air Conditioning will contribute 150 million yuan to the finance company for a 30 per cent stake.



Haier's earnings defy domestic price war