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August 28, 2009

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Sales decline but profits climb

TWO white goods companies yesterday reported that although their first-half sales fell due to weaker demand amid the economic recession, their profits jumped on plunging raw material prices and higher margins.

"The improved profits were mainly attributable to falling raw material prices and increased profit margins after they focused on energy-saving products, which boast higher profit margins," said Guo Haiyan, an analyst at China International Capital Corporation.

But Guo warned the prices of raw materials are starting to rise following an optimistic economic outlook which boosted demand for materials, and that may hurt corporate earnings in the second half.

Gree Electric Appliances Inc, based in Zhuhai in Guangdong Province, reported that between January and June, its sales declined 19.89 percent to 19.99 billion yuan (US$2.93 billion) while net profit rose 29.18 percent to 1.23 billion yuan, or 0.66 yuan per share, according to a filing to the Shenzhen Stock Exchange.

Its revenues from overseas markets tumbled 48.38 percent in the first half of the year while domestic sales showed a narrower drop of 9.26 percent as the Chinese government gave subsidies to replace older home appliances and to farmers to buy home appliances.

GD Midea Holdings Co said revenue in the first six months fell 11.33 percent to 24.9 billion yuan. Net profit rose 18.63 percent to 1.15 billion yuan, or 0.61 yuan per share, in the same period, said a statement filed to the Shenzhen exchange. Its sales in overseas markets tumbled 20.58 percent to 8.2 billion yuan and domestic sales fell 5.96 percent to 16.7 billion yuan.


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