Tue, Jan 18, 2005 - Page 10 News List

Yulon's Q4 profit plunges 36 percent

SLOWDOWN Profits dived in the quarter, mainly on slower sales of the Sunny compact car in China, as well as increased competition and higher prices for steel

BLOOMBERG

Yulon Motor Co (裕隆), the Taiwanese partner of Japan's Nissan Motor Co, posted a 36 percent decline in fourth-quarter profit because its sales of Sunny compact cars fell in China.

Fourth-quarter net income fell to NT$870 million (US$27.4 million), from 2003's NT$1.36 billion. The fourth-quarter number was derived by subtracting nine-month profit of NT$4.63 billion from the unaudited full-year profit figure by Yulon Motor.

"China's attempts to cool its economy caused a sudden slowdown in demand," Yulon's Vice President Charles Shiau (蕭明輝) said in an interview yesterday in Taipei. "The problem worsened in the fourth quarter and forced makers to slash prices to clear inventories."

Like other carmakers, the profit margin of Yulon's China business was squeezed last year from declining sales and the increasing cost of steel plates. The growth pace of China's car sales, which rose 50 percent in 2002 and 76 percent in 2003, dropped to 15 percent last year.

Increasing competition had forced carmakers to slash prices, encouraging customers to postpone their purchases on anticipation of further discounts.

The price of steel sheets used in car assemblies rose, with increasing demand for the metal from China.

Yulon's shares rose 2.7 percent to a 10-day high of NT$37.8 on the Taiwan Stock Exchange, before the carmaker's financial results were announced.

Yulon Motor's profit last year fell 29 percent to NT$5.5 billion, from NT$7.78 billion in 2003, Shiau said.

The company's profit from its venture with Dongfeng Motor Corp (東風) in China slumped almost 71 percent to NT$700 million last year from NT$2.4 billion in 2003.

Yulon makes Nissan's Sunny compact cars and Teana luxury sedans with Dongfeng.

For this year, Yulon is forecasting a 10.7 percent sales growth to NT$45.5 billion from NT$41.1 billion last year, according to its Jan. 13 forecast.

The company is aiming to sell 72,700 cars this year, 22 percent more than the 71,100 units sold last year, Shiau said.

Pretax profit for the year may fall to NT$5 billion, based on a "conservative" estimate, Shiau said. Yulon is expecting to pay 10 percent of the pretax income as taxes, he said.

Yulon sold NT$600 million worth of shares in Yulon Nissan Motor Co (裕隆日產) in December to spin off the marketing unit. The sale let Yulon become a contract manufacturer for Nissan's rivals, including General Motors Corp, without marketing for competing brands.

GM, the world's largest automaker, on Jan. 10 said it would invest NT$2 billion with Yulon to assemble Buick sedans in Taiwan. The venture will begin making cars next year.

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