Qingdao Haier 1st-Half Profit Rises to 548.9 Mln Yuan

By Stephanie Wong and Chia-Peck Wong

Aug. 24 (Bloomberg) -- Qingdao Haier Co., a unit of the Chinese company that may buy General Electric Co.'s appliance arm, said first-half profit rose 46 percent as rising incomes fueled consumer spending in the world's most-populous country.

Net income rose to 548.9 million yuan ($80 million), or 0.41 yuan a share, from 376 million yuan, or 0.28 yuan, a year earlier, the Qingdao, eastern China-based maker of air conditioners and refrigerators said in a statement to Shanghai's stock exchange today, citing Chinese accounting standards. Sales rose 11 percent to 18.5 billion yuan.

Qingdao Haier is using publicity gained from sponsoring the Beijing Olympics to tap rising affluence in the world's fastest- growing major economy, which has expanded by at least 10 percent annually since 2003. Retail sales in China rose by at least 19 percent in each of the first six months of this year, accelerating to 23 percent in June, the fastest pace since Bloomberg data began in 1999.

``Sales volume will continue to grow,'' Zhang Hongdao, a Nanjing-based industrial analyst with Huatai Securities Co Ltd., said by phone before the earnings announcement. ``Because of the seasonality, more products are sold in the first than the second half.'' He doesn't have a rating for the stock.

The company will pay an interim dividend of 0.20 yuan, compared with the 0.15 yuan per share paid a year earlier.

The company is a unit of unlisted Haier Group Corp., China's largest maker of refrigerators and air conditioners. Both are based in the city of Qingdao in eastern China.

Air-Conditioner

First-half sales of air conditioners fell 3 percent from a year earlier to 7 billion yuan. Gross margin in the business, or the percentage of sales left after subtracting production costs, widened to 24.4 percent from 22.8 percent.

Refrigerator sales rose 18 percent to 7.41 billion yuan, with gross margin widening to 29.5 percent from 22.6 percent a year earlier, the company said.

Revenue from outside China fell 7.6 percent to 3.4 billion yuan, while domestic sales rose 16 percent to 15.1 billion yuan.

Haier Group is considering GE's appliance unit, the biggest provider of refrigerators, ovens and dishwashers for new U.S. homes, as well as other ``opportunities'' as it seeks acquisitions overseas, Zhang Tieyan, chief executive officer for Asia outside of China, said Aug 1.

GE Chief Executive Officer Jeffrey Immelt in May identified Haier and Korea's LG Electronics Inc. as potential suitors. A purchase of the century-old division would give Haier, which sells products through Wal-Mart Stores Inc., Best Buy Co. and Home Depot Inc., a household name to help its U.S. expansion.

The GE unit may fetch $3 billion to $8 billion, according to estimates from Citigroup Inc. and Goldman Sachs Group Inc.

The Sunday Telegraph reported Aug. 10 that Haier and Blackstone will jointly bid for GE's appliances unit, which was later denied by the Chinese company.

Qingdao Haier's shares declined 2.9 percent to 9.58 yuan in Shanghai on Aug. 22. The company has lost more than half its market value in the past 12 months.

To contact the reporters on this story: Stephanie Wong in Hong Kong at swong139@bloomberg.net; Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net