Bloomberg News

Changan Auto Third-Quarter Profit Falls 12% on Tax

October 30, 2007

Chongqing Changan Automobile Co. (000625), the Chinese partner of Ford Motor Co. (F:US) and Mazda Motor Corp., said third-quarter profit fell 12 percent after higher taxes masked gains from increasing sales of Focus compact cars.

Net income dropped to 66.9 million yuan ($9 million), or 0.034 yuan a share, from last year's 75.8 million yuan, or 0.047 yuan a share, the company said in a Shenzhen stock exchange statement today, citing Chinese accounting standards. Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 67 percent to 101.9 million yuan.

Changan Auto's venture with Ford and Mazda boosted nine- month sales by 59 percent, more than double the rate of China's overall car market, on demand for Focus cars. Last month, Changan Ford Mazda (7261) Automobile Co. opened its second plant and added a new version of the Ford Mondeo sedan.

``I am optimistic about Changan's potential given the strong sales growth at its venture,'' Guodu Securities Co.'s Beijing analyst Xu Caihua said before the announcement, keeping his ``strong buy'' recommendation on the carmaker. ``The new Mondeo is very competitive.''

Sales Rise

Changan Auto's third-quarter sales rose 14 percent to 2.83 billion yuan. Its business tax and surcharges rose 86 percent to 82.2 million yuan. Board secretary Li Jun wasn't available for comment when called at the company's headquarters in Chongqing, southern China, outside of regular office hours.

The automaker rose 4.3 percent to 17.30 yuan in Shenzhen trading before the earnings announcement. The stock has more than doubled this year, trailing the benchmark CSI 300 Index, which has almost tripled.

Changan Ford's new plant, located in eastern China's Nanjing city, has an initial production capacity of 160,000 vehicles a year, about two-thirds the size of the venture's existing plant in Chongqing. Capacity can be expanded to 300,000 units. The plant will make models including Mazda2 compacts.

Changan Ford aims to boost full-year Focus sales by 25 percent to 100,000 units. It cut the prices on the car by as much as 7 percent from July 3 to help boost sales. The compact model, which went on sale in September 2005, now starts at 123,800 yuan.

Changan Auto owns half of Changan Ford. Ford has a 35 percent stake, with Mazda holding the rest.

Ford today announced technology research alliances with the Nanjing University of Aeronautics & Astronautics and Shanghai Jiaotong University. The tie-ups will develop diesel engines and conduct research on aluminum sheet forming, Dearborn, Michigan- based Ford said in a statement.

To contact the reporter on this story: Tian Ying in Beijing at ytian@bloomberg.net; Irene Shen in Shanghai at ishen4@bloomberg.net

To contact the editor responsible for this story: Bret Okeson at bokeson@bloomberg.net


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