Geely auto plunges after saying profit may fall 50% on ruble
By Bloomberg
Chinese billionaire Li Shufu’s Geely Automobile Holdings Ltd. plunged in Hong Kong trading after saying it expects full-year net income to fall about 50 percent because of the slumping Russian currency and declining sales.
Geely tumbled 17 percent to HK$2.59 for the biggest decline since July 2002 in Hong Kong trading, where the benchmark Hang Seng Index slid 0.4 percent.
Depreciation of the ruble resulted in an unrealized foreign-exchange loss from operations in Russia, Geely said in a statement to the Hong Kong stock exchange yesterday. Sales volume dropped 26 percent in the first 11 months of the year, led by a 49 percent decline in export markets, it said.
“The company has fundamental weaknesses in brand, product, and distribution,” said Max Warburton, a Singapore-based analyst at Sanford C. Bernstein & Co., which has an underperform rating on the stock. “We do not believe Geely is set for a period of particularly strong growth or transformed earnings, and it is our view that cooperation with Volvo remains minimal.”
The ruble sank beyond 80 per dollar yesterday, a record low, before rebounding after Economy Minister Alexei Ulyukayev denied speculation that the government would turn to foreign- exchange restrictions to stop Russians from converting money into dollars. Li is revamping Zhejiang Geely Holding Group Co., the company’s parent, after setting Swedish automaker Volvo Cars on a five-year renewal.
Russia Sales
The Hangzhou, China-based carmaker has started to increase the retail prices of vehicles in Russia and will accelerate localization of production in major export markets to reduce foreign-exchange risks, it said.
Geely said its performance in China has rebounded since August after it reorganized its domestic sales and marketing system and accelerated the introduction of new and upgraded models. The parent said this week it will replace the Emgrand, Gleagle and Englon marques introduced in 2009 and market all future models under a single “Geely” brand.
Geely’s full-year net income was 2.66 billion yuan ($430 million) in 2013, the company said.