Geely Shares Drop after Profit Announcement

Shares in Geely Automobile Holdings, the listed arm of China's largest private carmaker Geely, fell over 5 percent after the company posted an 8 percent fall in earnings in the second half of 2009. Geely's parent company signed last month a definitive agreement to buy Volvo Cars from Ford. Geely blamed increased costs but said it was targeting a 22% growth in sales this year with help from government incentives for new vehicle buyers.

"After three years of large-scale restructuring, the group's overall competitiveness has strengthened significantly," a company statement said. Geely's shares are down 2.3% this year, after advancing nearly seven-fold last year on optimism about its parent's plans to purchase Volvo and an investment in the company by Goldman Sachs, Reuters noted.

Despite the second-half profit drop, revenue for the full year more than tripled to CNY14 billion (USD 2.05 billion), as vehicle sales in China expanded thanks to the government economic stimulus measures. Analysts told Reuters Geely would continue to report solid sales in 2010, although the growth rate might be slow because of a much higher comparative base in 2009. "Like other Chinese automakers, Geely's sales will remain healthy this year, but it's just unrealistic to repeat last year's breakneck growth," Zhang Xin, a Beijing-based analyst with Guotai Junan Securities, said.

Geely sold 326,710 sedans last year, up 60% from 2008, lifting its market share to over 4%. Geely's parent and Ford have both said they hoped to complete the Volvo deal in the first quarter of 2010. The Chinese company has plans to build a plant in China to make Volvo models, but has made no decision on the site of the facility.