China's Buffett-backed BYD says profit down 84 pct

AP News
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Posted: Jun 29, 2011 6:26 AM
China's Buffett-backed BYD says profit down 84 pct

Chinese auto and battery maker BYD Co. said Wednesday its profit fell 84 percent in the first quarter, mainly due to a slowdown in car sales and rising costs.

The company, whose shares will begin trading in the southern city of Shenzhen on Thursday, said unaudited results showed net profit in the quarter ended March 31 was 266.7 million yuan ($41.2 million), compared with 1.7 billion yuan a year earlier.

"The performance in the 1st quarter of 2011 dropped significantly, which was mainly due to a decline in the performance of the automobile business," BYD said in a notice to the Hong Kong Stock Exchange, where its shares already trade. But it also noted weakening sales of rechargeable batteries and cell phone parts.

MidAmerican Energy, a subsidiary of billionaire investor's Warren Buffett's Berkshire Hathaway, holds a 9.9 percent stake in BYD, whose shares already are traded in Hong Kong.

BYD, whose name stands for "Build Your Dreams," raised 1.42 billion yuan ($220 million) in its share offering, aimed at raising cash for an expansion mainly focused on an auto research, development and production base in the company's hometown of Shenzhen, which borders Hong Kong.

The company sold 79 million shares, or a 3.4 percent stake, at 18 yuan each on the Shenzhen Stock Exchange.

In recent comments to shareholders, Berkshire Hathaway's vice chairman, Charlie Munger, said he was still enthusiastic about BYD, despite its recent troubles, which have delayed its plans to launch car sales in North America.

Munger said BYD's mistake was in trying to double its automotive sales every year for six years in a row. It worked for the first five years, he said.

China's auto sales slowed significantly this spring, after generous incentive programs ended and buyers wary of traffic quotas and rising fuel prices began shunning showrooms.

The company started out making batteries and later shifted to automaking. Recently, it has branched into energy storage systems and bus production.