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Buffett-Backed BYD Says First-Half Profit May Fall 95%

Wednesday, 25 April 2012 05:40 PM

BYD Co., the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., said first-half profit may fall as much as 95 percent because of reduced earnings from solar energy and mobile handsets.

Net income for the six months ended June 30 may drop to between 13.8 million yuan ($2.2 million) and 68.8 million yuan, the Shenzhen-based manufacturer said in a statement to the Hong Kong stock exchange Wednesday.

Demand for BYD’s cars slowed after the government ended buying incentives and the popularity of its top-selling F3 sedan waned. First-quarter sales fell 8 percent on year to 108,755 vehicles, the company said. China’s total passenger-car sales fell for the first time since 2005, dropping 1.3 percent from a year earlier, as the slowing economy and rising fuel costs curbed buying. BYD blamed the forecast decline in profit mainly on a “great loss” in its solar cell business.

“The whole solar industry has a tremendous amount of excess capacity,” said Theodore O’Neill, an analyst at Wunderlich Securities in New York. “If you’re in an industry that’s borderline profitless and you’re a smaller player like BYD, it’s maybe going to be worse than profitless.”

First-quarter profit fell 90 percent to 27 million yuan, down from 266.7 million yuan a year ago. The company had earlier given guidance indicating a decline of 65 percent to 95 percent. Sales were little changed at 11.7 billion yuan.

“The persistent decline in the global solar energy market has led to a substantial decrease in the price of solar cell products,” the company said in the filing. For handsets, the market share of the company’s major clients declined, it said.

BYD has risen 25 percent this year in Hong Kong trading, compared with a 12 percent gain for the benchmark Hang Seng Index. The stock rose 0.7 percent to close at HK$21.10 yesterday, before the announcement.

The stock fell 2.2 percent to close at $2.62 in U.S. over- the-counter trading, after the filing.

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Wednesday, 25 April 2012 05:40 PM
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