Asset impairment at Zhonghua sedan unit blamed for 94pc slump in earnings Brilliance China Automotive Holdings hopes to turn around its unexpectedly large losses of last year by increasing exports, mainly to the Middle East and North Africa. The H share, which makes Jinbei minibuses, Zhonghua and BMW passenger cars, saw net profit plunge 94.8 per cent last year to 48.56 million yuan. The result was a far cry from the consensus forecast for a 605.74 million yuan net profit by 15 brokerages polled by Thomson First Call. The operating loss was largely attributable to a 300 million yuan intangible asset impairment of the Shenyang, Liaoning-based company's Zhonghua sedan operations, which posted an operating loss of 596.66 million yuan. Amid cut-throat price competition, the company sold only 10,982 Zhonghua cars last year, down 57.1 per cent from 2003 and far short of its target of 25,000 units. Brilliance needed to sell 20,000 units a year to break even, a spokeswoman said. 'The overall car market witnessed a drastic slowdown in the face of macro-economic and credit tightening instigated by the government and the industry's over-capacity problem,' chairman Wu Xiaoan said when commenting on the results. Minibus sales fared better, but last year's volume of 61,618 was 17.4 per cent below that in 2003. The operating profit of its minibus and car parts operations amounted to 517.99 million yuan. Brilliance made 19.61 million of profit from its 50 per cent-held joint venture with Germany's BMW, which sold 8,708 cars last year. No comparable figure for 2003 was available as mainland production only started in October that year. Chief executive Lin Xiaogang said Brilliance aimed to raise exports from 777 units last year to 5,000 - equally split between Zhonghua cars and minibuses - this year. Orders had been received from buyers in Egypt, Saudi Arabia and Iran to fulfil the target, he added. The company recently signed an eight-year agreement with Egypt's Bavarian Auto Group under which Bavarian will buy components from Brilliance and assemble them into cars. Mr Lin said assembly would start in the fourth quarter, during which 300 units were expected to be produced, rising to 2,000 units next year. Brilliance aims to sell 20,000 Zhonghua cars and 75,000 minibuses this year. Mr Lin refused to disclose its BMW car sales target for this year. In the first quarter, Brilliance sold 2,680 Zhonghua cars, while minibus sales fell 11.2 per cent year on year to 15,230 units. Last week, BMW Brilliance Automotive chief executive Eberhard Schrempf said the joint venture sold about 3,000 cars to dealers while only 1,900 were retailed. Sales picked up last month - during which 1,300 units were sold to dealers - after BMW slashed prices of its mainland-made cars by 13 per cent in mid-January, a Bear Stearns research report said. Brilliance's turnover slid 35.28 per cent to 6.54 billion yuan last year. Operating loss was 437.42 million yuan, compared with an operating profit of 1.27 billion yuan in 2003. Gross profit margin fell to 16.1 per cent from 23.6 per cent previously.