Hong Kong company reporting season

Geely first-half profit jumps 128pc spurred by Volvo technology and design

Net profit for the six months hits 4.3 billion yuan (US$643 million) on revenue of 39.4 billion yuan, which represented an 118 per cent jump

PUBLISHED : Wednesday, 16 August, 2017, 3:22pm
UPDATED : Wednesday, 16 August, 2017, 11:21pm

Geely Automobile Holdings, the Chinese carmaker whose parent owns the Swedish car marque Volvo, has reported a thumping 128 per cent jump in after-tax half-year profit, driven by soaring sales, as it improved the design and engineering of its product range.

Net profit for the six months, ended June 30, was 4.3 billion yuan (US$643 million) on revenue of 39.4 billion yuan, which represented an 118 per cent jump. The earnings beat analysts’ estimates of 4.0 billion yuan.

And its president An Conghui said the automaker was equally upbeat for the remainder of the year.

“Our sales performance is continuously strong and our upcoming new models received very good market feedback. We’re confident in achieving a 10 per cent rise in full year sales volume target of 1.1 million units,” An added.

The company has not distributed any dividend, but starting from next year, it “should have a better chance of distributing an interim dividend and better full year end dividend,” added Gui Shengyue, its chief executive. “We have such good performance.”

Peter Chen, a Shanghai-based engineer with US components maker TRW, said: “Geely has emerged as one of the biggest winners among the domestic auto market, as it gradually assimilated Volvo’s technologies and designs.

“All eyes will now be on its ambitions to move up the value chain.”

Vehicle shipments jumped 89 per cent to 530,627 cars in the first half, smashing the national growth of 1.6 per cent.

In July alone, the Zhejiang-based car manufacturer, controlled by billionaire Li Shufu, reported an 88 per cent jump in sales. The company’s indigenous brands, including Boyue and Emgrand, recorded sizzling sales too.

Geely has set an annual sales target of 1 million cars for this year with plans to launch a first sports-utility vehicle (SUV), under its own mid-priced Lynk & Co high-end brand, which has been 50/50 jointly developed with Volvo.

Geely will launch the Lynk brand in the last quarter of this year.

“The joint development has the shared technology from Volvo,” An said. “The new brand will launch all necessary models such as ‘SUV’ models.”

Volvo’s owner Geely aims to sell 500,000 units of its new Lynk brand vehicles by 2019

Geely Auto’s shares have soared 157 per cent so far this year, and rose another 1.2 per cent in early afternoon trading to HK$19.22.

Morgan Stanley has forecast more modest 22 per cent annual sales rise through to 2019.

Geely’s multi-brand strategy had previously sparked uncertainty, but working closely in tandem with Volvo has proved a winning formula, backed up by a widespread dealership network, Morgan Stanley said, adding it believes the timing of Geely’s initiatives to tap into the mid- to high-end SUV segment perfectly matches the fast growth of segment, which expected to last for the next few years.

Lynk also plans to sell vehicles in the United States and Europe, after launching in China.

Earlier this month, Geely and Volvo set up a 50-50 joint venture, GV Automobile Technology (Ningbo), to strengthen their tie-up in technology development.

Geely founder Li Shufu said the joint venture would further promote even closer ties between the brands on shared vehicle architecture and electrification.

In June, Geely also acquired 49.9 per cent in Malaysian carmaker Proton, and 51 per cent of iconic British sports car marque, Lotus.