Geely cheers state subsidies as H1 net profit rises 9%

Dow Jones Newswires (Hong Kong) - Chinese car maker Geely Automobile Holdings Ltd. (0175.HK) Wednesday said a boost from government subsidies offset a decline in domestic car sales as first-half net profit rose 9%.

A continued recovery in exports also gave the company's first-half effort some zip. It shipped more than 40,000 units in the period, nearly three times what it did in the same period last year.

In the first six months the Zhejiang-based motor-vehicle manufacturer received 620 million yuan ($US96.9 million) in government subsidies, up 17% from around CNY530 million, Chief Financial Officer Daniel Li told a news conference without elaborating on the nature of the state assistance.

And, Executive Director Lawrence Ang said the company is confident of meeting its full-year sales target of 460,000 units in spite of a difficult market. Rolling out new models in the next six to 12 months will help it achieve the 9% increase, he said. It sold 222,390 units in the first half, up 4%, accounting for 48% of its prediction.

The Hong Kong-listed company said in a statement first-half net profit was CNY1.02 billion (US$159 million), up from CNY937.65 million.

First-half revenue rose 6% to CNY11.18 billion from CNY10.54 billion. Like this time last year, it recommended no first-half dividend.

Geely Automobile's parent, Zhejiang Geely Holding Group Co., one of China's largest private car makers by production capacity, bought Ford Motor Co.'s (F) Volvo Car unit and assets in August 2010 for US$1.80 billion,

China overtook the U.S. to become the world's biggest buyer of motor vehicles in 2009. However, sales growth has weakened since mid-2010 when the government began removing cash support for car purchases.

Also, intensifying competition from foreign makers with local joint ventures producing homegrown brands is having an effect. In the first half, sales of indigenous sedans weakened considerably; down 7% compared with 6% growth for the overall market in the period.