Haier boosts half-time profit as consumers seek smarter options

Net profit rises 3pc to 1.130b yuan, as revenues slips 8.1pc to 28.79b yuan

PUBLISHED : Wednesday, 31 August, 2016, 2:08pm
UPDATED : Wednesday, 31 August, 2016, 10:49pm

Haier Electronics Group, China’s second largest home appliances maker, posted slightly disappointing first half net profit on Wednesday, as it continues to struggle with bloated inventories amid weak domestic demand.

Net income climbed three per cent to 1.130 billion yuan from 1.096 billion yuan a year earlier, marginally below analyst consensus estimates of 1.135 billion yuan polled by Reuters, while its revenue declined 8.1 per cent to 28.79 billion yuan from a year earlier.

The underwhelming earnings painted a gloomy picture for the world’s largest white goods market dampened by an oversupply amid an economic slowdown, although a recently recovering housing sector appears to have spurred some demand for household devices.

It also came after the Chinese appliances giant had bought General Electric Co’s appliance division for US$5.4 billion in January, in its search for technology know-how to cater to the increasingly tech-savvy and discerning Chinese consumers.

The company declared no interim dividend, the same as last year.

“Consumers are more selective and discretionary when it comes to choices of consumer brands, and the traditional tenets of competitive advantage, such as the first-mover advantage, are no longer relevant,”said Haier Electronics chairman Zhou Yunjie in a statement.

The Chinese millennium generation has entered their prime consumption years, with starkly different consumption habits from their parents
Zhou Yunjie, Haier Electronics chairman

“The Chinese millennium generation has entered their prime consumption years, with starkly different consumption habits from their parents.”

Haier’s e-commerce unit, which it operates in cooperation with Alibaba’s Tmall online marketplace and JD.com, has become its prominent profit driver, after recording a 28 per cent surge in first half revenue to 3.79 billion yuan. Alibaba owns the South China Morning Post.

China Merchant Securities analyst Gloria Wang told the Post ahead of the result announcement that after struggling to cut inventory levels in previous quarters, the white goods maker was likely to see slight sequential improvements in the coming months.

“While the stagnant economy lingers, a revival in China’s housing market may underpin furniture and home appliance sales with demand rising,” Wang said.

Sales of washing machines, which represented 17.9 per cent of the company’s revenue, netted 6.30 billion yuan in the first six months of the year, up 1.2 per cent from a year ago,

“The consumption trend continues towards high-end and smart-home appliances, as consumers seek to save energy and their brands awareness rises,” Zhou said.

Stiffer competition has also pushed Haier to roll out more high-end household devices such as smart washing machines as domestic consumers show they are increasingly willing to pay a premium for gadgets featuring cutting-edge technologies.

The pressure to meet Chinese consumers’ sophisticated desires have triggered an overseas M&A push by the country’s two biggest white goods producers.

In January, Haier announced the takeover of GE’s white goods unit in the country’s biggest overseas acquisition deal of an electronics business.

Its biggest rival Midea, in July offered 4.6 billion euros for German robot manufacturer Kuka whose clients include Boeing and Audi.

Haier shares edged down 0.2 per cent to HK$12.94 in Wednesday’s morning session. The stock has lost 5.92 per cent over the last 12 months.