Buffett-Backed BYD's Profit Plunges More Than 99% as Sales Drop

[NINETY EIGHT REGENCY]

Buffett-Backed BYD's Profit Plunges More Than 99% as Sales Drop

By Bloomberg News - Oct 26, 2010 3:58 AM CT

Oct. 4 (Bloomberg) -- Erwin Sanft, a Hong Kong-based strategist at BNP Paribas SA, talks about the outlook for Chinese stocks and the country's economy. China will address "structural problems" and stabilize its economy by increasing domestic demand, Premier Wen Jiabao said. Sanft speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)

Attachment: BYD Earnings Statement

BYD Co., the Chinese carmaker backed by Warren Buffett, fell the most in almost two years in Hong Kong trading after third-quarter profit dropped 99 percent amid faltering sales.

The shares declined 10 percent to close at HK$51.05, the biggest drop since November 2008, after BYD posted net income of 11.34 million yuan ($1.7 million) for the three months ended Sept. 30. It was the second-biggest decline among 982 stocks in the MSCI Asia Pacific Index.

“Profit was pretty disappointing and well below our estimations,” said Galant Ng, an analyst at Taifook Securities Group Co. in Hong Kong. BYD suffered from declining car sales and higher costs, Ng said in an interview today.

The plunge in profit adds to setbacks for Shenzhen-based BYD, which has delayed plans to export electric vehicles to the U.S. and was ordered to surrender seven facilities earlier this month after China’s government said it built them illegally. The company, the fastest-growing automaker in China last year, cut its 2010 vehicle sales target 25 percent in August as it struggled to maintain momentum amid higher taxes on small cars.

The third-quarter profit figure was calculated by Bloomberg News by subtracting six-month earnings from nine-month results announced by the company today in a statement to the Hong Kong stock exchange. Third-quarter sales rose 0.3 percent from a year earlier to 10.3 billion yuan, based on the statement.

Vehicle Sales

Vehicle sales at BYD, 10 percent owned by Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., slumped 25 percent in September to 33,085 vehicles even as rivals SAIC Motor Corp. and Dongfeng Motor Group Co. increased deliveries and China’s industrywide passenger-car sales to dealerships rose 19 percent. BYD’s deliveries dropped 19 percent in August.

“Most local brands suffered from the government policy tax revision,” Ricon Xia, a Hong Kong-based senior analyst at Mitsubishi UFJ Asset Management, said. BYD’s fourth quarter also “won’t be very strong,” he said.

The carmaker, founded by Chairman Wang Chuanfu, has said it may fail to meet a schedule for shipping electric cars to California. BYD may introduce its E6 electric cars in the U.S. next year, Henry Li, general manager of the company’s export division, said last month, delaying an earlier plan to begin deliveries this year.

Buffett’s Support

Berkshire Hathaway’s chairman Buffett affirmed his support for BYD last month when he visited the automaker in Shenzhen, saying it will be a leader in electric cars. Berkshire owns its stake through Des Moines, Iowa-based MidAmerican Energy Holdings Co.

China’s vehicle sales may rise 25 percent to 17 million this year, Xinhua News Agency reported on Oct. 11, citing the China Association of Automobile Manufacturers.

The carmaker, which also makes batteries and assembles mobile phones, plans to list on the Shenzhen stock exchange. BYD, whose F3 car is still the best-selling passenger car in China this year, is also expanding its alternative-energy business to jumpstart earnings.

For the nine months through Sept. 30, BYD said profit rose 4 percent to 2.43 billion yuan from 2.34 billion yuan a year earlier. Sales increased 31 percent to 34.5 billion yuan, the company said.

--Liza Lin. Editors: Ian Rowley, Hwee Ann Tan.

link:

http://www.bloomberg.com/news/2010-10-26/buffett-backed-byd-s-third-quarter-profit-drops-as-sales-in-china-falter.html