Bloomberg News

BYD Slumps as Profit of Buffett-Backed Automaker Declines

June 29, 2011

(Updates with closing share price in fifth paragraph.)

June 29 (Bloomberg) -- BYD Co., the Chinese carmaker part- owned by Warren Buffett’s Berkshire Hathaway Inc., tumbled the most in more than three months in Hong Kong trading after reporting an 84 percent decline in first-quarter profit.

The Shenzhen-based company fell as much as 7 percent, after declining sales and a jump in financing expenses dragged first- quarter net income to 266.7 million yuan ($41 million) from 1.7 billion yuan a year earlier.

BYD’s vehicle sales declined for 10 straight months through May as demand slowed and rival carmakers including General Motors Co. and Nissan Motor Co. introduced new models. The company’s F3 sedan, introduced in 2005, fell to fourth from first in the rankings of China’s best-selling cars this year, prompting BYD to cut prices for its line-up in February.

“What BYD needs is a new product or a revamp of the F3,” said Johnny Wong, a Hong Kong-based auto analyst at Yuanta Securities HK Co. “They didn’t have many new models coming out in the first half of the year, and people are more attracted to newer models.”

The stock fell 5 percent to HK$23.80 at the 4 p.m. close, the biggest decline since March 17. The benchmark Hang Seng Index was little changed.

BYD sold 97,300 F3 sedans in the first five months, 30 percent fewer than a year earlier. That makes it the fourth-best selling model after Volkswagen AG’s Lavida and Jetta and GM’s Excelle, according to the China Association of Automobile Manufacturers.

Interest-Rate Increases

Finance expenses more than doubled in the first quarter to 118 million yuan because of increased borrowing and rising interest costs, BYD said. The company’s earnings are based on Chinese accounting standards.

China’s central bank raised interest rates four times starting in October and boosted banks’ reserve requirements nine times since November to stem rising consumer prices.

The automaker raised 1.35 billion yuan from a share sale in Shenzhen this month to fund expansion and invest in research and development. The stock will start trading in Shenzhen on June 30, the company said in a separate statement yesterday.

BYD’s Hong Kong-traded stock has plunged 42 percent this year, compared with the 4.2 percent drop in the Hang Seng Index.

--Liza Lin. Editors: Chua Kong Ho, Terje Langeland

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net undefined


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