By Joanne Chiu
Chinese car maker Geely Automobile Holdings /zigman2/quotes/200716015/delayed HK:175 -3.00% Ltd. said Wednesday its net profit rose 16% last year despite rising domestic competition, and it plans to boost its capital expenditure this year to meet increasing demand for automobiles in China.
The unit of Zhejiang Geely Holding Group Co., which in August completed a US$1.8 billion acquisition of Volvo Cars from Ford Motor /zigman2/quotes/208911460/composite F +0.36% Co., also said it expects its auto sales to grow 15% this year to 480,000 units, from 415,843 in 2010, buoyed by strengthening domestic demand as well as a recovery in exports.
It sold 77,440 units in the January-February period, up 6.7% from a year earlier and accounting for 16% of its full-year sales target.
Zhejiang-based Geely Automobile, which competes with state-owned Dongfeng Motor Group /zigman2/quotes/202033304/delayed HK:489 -1.21% Co. and Shenzhen-based BYD /zigman2/quotes/206867707/delayed HK:1211 -2.82% Co., said its net profit for the 12 months ended Dec. 31 totaled 1.37 billion yuan (US$209 million), up from 1.18 billion yuan a year earlier.
Revenue rose 43% to 20.10 billion yuan from 14.07 billion yuan.
Executive Director Lawrence Ang said the company is planning to boost its capital spending to around 2 billion yuan this year from 1.6 billion yuan n 2010, to support an expansion in production capacity in the face of rising demand for cars in China.
Government stimulus measures designed to encourage auto purchases during the global economic downturn helped China overtake the U.S. as the world's biggest auto market in 2009. Although auto-sales growth in China remained fast at the start of 2010, the pace has moderated since the second half as incentives have been withdrawn.
China's overall auto sales rose 32.4% to 18.06 million units in 2010, but the increase in sales will likely slow to 10%-15% this year, the semi-official China Association of Automobile Manufacturers said in January.
Mr. Ang said the company plans to launch six-eight new models this year, with a focus on more profitable high-end cars.
At a news conference, Chairman Li Shufu said: "Geely has no plan to boost its sales by cutting prices. Our priorities are to improve our product quality, raise brand awareness, as well as to improve after-sale services."
Mr. Li, who is also chairman of Geely's parent, said Geely and Volvo Cars have been discussing possible areas of cooperation. He declined to elaborate.
In August, Mr. Li said Zhejiang Geely intends to inject Volvo Cars into its Hong Kong-listed unit "in the long run." When asked about that plan Wednesday, Mr. Li said the listed company has no current plan to buy Volvo Cars from its parent.
"It's not the right time for a marriage of Geely and Volvo, as they're not grown-ups yet," Mr. Li said.
He also said Geely would consider a listing on Shanghai's planned international exchange once the rules governing listings by foreign and overseas-incorporated Chinese companies are complete. Geely is incorporated in the Cayman Islands.
The company recommended a final dividend of 2.6 Hong Kong cents (0.3 cents) per share, up from a final dividend of 2.3 Hong Kong cents the year before.