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Haier Reports Q1 Profit
Apr 29, 2004
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The listed arm of Chinese appliance giant Haier reported a 0.06-percent rise in first-quarter net profits thanks to healthy sales that helped offset intense competition and rising costs.

Analysts said the better-than-expected result and a rebound in the domestic appliance market could help the white goods player, which sells about half its products abroad via retailers such as Wal-Mart, sustain earnings growth.

Many had predicted a third straight year of profit decline for Qingdao Haier Co. Ltd., whose parent Haier Group is one of China's best-recognized global brands, as a battle for market share that began in the late 1990s raged on.

"Judging from its first-quarter results Haier is likely to keep earnings stable this year," said analyst Zou Gao of Tianxiang Investment Consulting. "The domestic home appliance market has hit bottom after years of weakness. Prices should stabilize or even rise in the near term. As an industry leader, Haier is likely to be among the first to benefit from the recovery."

Listed Haier, a unit of the world's number-five maker of white goods, posted earnings of 88.11 million yuan (approx. U.S. $10.65 million) versus 88.06 million yuan a year ago, it said in a statement. Turnover rose 16 percent to 3.23 billion yuan.

"We enjoyed healthy domestic and overseas sales despite intense competition and difficult market conditions," the company said in the statement.

Margins have been sliced by rising costs for raw materials such as steel, even though increasingly affluent customers are snapping up appliances in the Chinese economy, which grew 9.7 percent in the year through the first quarter.

Steel prices have jumped as much as 30 percent since the start of 2004 and are now hovering at 10-year highs.

Still, Haier said first-quarter margins for refrigerators and air-conditioners -- its staple products -- held roughly steady at 20.4 percent and 10.7 percent respectively, compared with 19.2 percent and 12.4 percent last year.

Overseas forays could provide some relief -- Haier now pulls in about 15 percent of its revenue from abroad.

It has cornered nearly half the U.S. compact refrigerator market and more than half the wine cooler segment, but analysts say any move into mainstream consumer markets faces tough competition from leaders Whirlpool and Maytag.

The parent aims to join the Global Fortune 500, export two-thirds of its products, and pass Siemens and General Electric to become the number-three home appliance maker behind Whirlpool and Sweden's Electrolux.

Now the market is looking out for movement on its parent's express intention to eventually group its businesses under one listed vehicle in Hong Kong.

Haier Group intends to sell its washing machine and cell phone units to Hong Kong-listed joint venture Haier-CCT Holdings Ltd. for HK$1.5 billion (approx. U.S. $192.3 million). The rest of its white goods operations could follow, it has said. (Reuters)

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