Haier Electronics Profit Rises 77% on Washing Machines, Heaters

By Mark Lee

Sept. 20 (Bloomberg) -- Haier Electronics Group Co., a unit of the Chinese company that may buy General Electric Co.'s appliance arm, said first-half profit jumped 77 percent as economic growth in China spurred sales.

Net income rose to HK$128.3 million ($16.5 million), or 6.6 Hong Kong cents a share, in the six months ended June 30, from HK$72.5 million, or 3.9 cents a share, a year earlier, Haier said last night in a statement to the Hong Kong stock exchange. Sales rose 48 percent in the first half to HK$5.31 billion from HK$3.58 billion.

The Hong Kong-listed appliance maker, in which Qingdao, eastern China-based Haier Group Corp. controls a 78.5 percent stake, expanded sales by adding stores in smaller cities. Rising household income in China, the world's fastest-growing major economy, fuelled demand for washing machines and water heaters.

``The directors are confident that the group will continue to perform well in the second half,'' the company said in the statement. Selling and distribution costs increased 43 percent ``as a result of our strategy of promoting sales in third and fourth tier markets, and extending our distribution network in the rural areas.''

Haier Electronics had 32 percent of the market for washing machines in China in the first half, and 22 percent of the nation's water heater sales, the company said, citing data from research company China Market Monitor.

China's retail sales rose 23.2 percent in August, after growing at the fastest pace for nine years in the previous month, according to government data. Urban disposable incomes increased 14.4 percent in the first half, helping to drive domestic consumption as exports and fixed-asset investment slow.

Haier Electronics shares rose 11 percent to 70 Hong Kong cents in Hong Kong trading yesterday, narrowing the stock's decline this year to 58 percent, compared with a 31 percent drop in the city's benchmark Hang Seng Index. The company will pay an interim dividend of 2 cents and a special dividend of 2 cents.

Potential Acquisitions

Parent 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, the parent's chief executive officer for Asia outside of China, said in August.

GE Chief Executive Officer Jeffrey Immelt in May identified Haier Group 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.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net