January 23, 2009 / 5:20 AM / 9 years ago

UPDATE 1-SAIC, Changan warns of 2008 profit falls, FAW shines

(Adds analysts comments, details)

SHANGHAI, Jan 23 (Reuters) - China’s biggest automaker SAIC Motor (600104.SS) and its smaller peer Chongqing Changan Auto Co 000625.SZ warned on Friday about a sharp drop in 2008 net profit as a slowing economy curbs automobile demand.

SAIC Motor expects a more than 50 percent fall in unaudited net profit in 2008, hit in part by its investment in South Korea’s Ssangyong Motor Co (003620.KS), which has filed for bankruptcy protection due to severe liquidity problems.

Ssangyong, 51.33 percent owned by SAIC, posted four consecutive quarterly net losses as auto demand plunged amid a deepening global recession, forcing its Chinese shareholder to put aside “a significant amount of provision”.

SAIC did not specify the size of provisions, but said earlier this month that exposure for its stake in Ssangyong was estimated at 1.85 billion yuan ($270.5 million) under Chinese accounting standards as of the end of November.

In a separate statement, Changan Auto, Ford Motor’s (F.N) China partner, said unaudited 2008 net profit was at roughly 38.93 million yuan, down from 666.89 million yuan a year earlier.

“Obviously a sharp slowdown of China’s car market played a big role in the weak earnings. Troubles with Ssangyong make life even harder for SAIC,” said Zhang Xin, a senior industry analysts with Guotai Junan Securities.

SAIC, a Volkswagen AG (VOWG.DE) and General Motors (GM.N) partner, sold 1.72 million vehicles in 2008, data showed. It sold 1.69 million vehicles in 2007, up 25.8 percent from a year ago.

Changan Auto makes cars in a three way tie-up with Ford and Mazda Motor (7261.T). It was hit badly as car sales at the venture fell 5.9 percent this year, after a 60 percent jump in 2007.

However, not all auto manufacturers have been affected by the market downturn.

    FAW Car Co (000800.SZ), a unit of one of China’s three largest auto makers FAW Group, said on Friday its 2008 net profit rose 90 to 120 percent to 1.05 billion-1.20 billion yuan, boosted by expanded sales and production.

    Analysts attributed the earnings jump to brisk demand for its self-developed mid-sized Besturn sedans and Mazda 6 models, which are competitively priced against rival brands.

    “FAW Car’s performance is not surprising at all. It could still hold out much better than most of its peers this year due to the popularity of Besturn and Mazda 6,” said an analyst with Tianxiang Consulting.

    FAW Car said last year it planned to invest 2.36 billion yuan to boost its internally developed car brands, adding 200,000 units of annual capacity for its own-brand cars by 2012, up from 120,000.

    It shares, traded in Shenzhen rose 4.2 percent to 8.65 yuan by midday, outperforming a 0.2 percent decline in the benchmark index .SSEC.

    SAIC rose 2.03 percent to 6.03 yuan and Changan Auto has suspended trading since early October pending an announcement.

    $1=6.839 Yuan Reporting by Edmund Klamann and Fang Yan, Editing by Jacqueline Wong

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