Chinese carmaker BYD Co, backed by US billionaire Warren Buffett, forecast its first-half net profit to plunge up to 95 per cent on falling sales amid fierce competition and after the government dropped a tax incentive.
The company, which also makes batteries and mobile phone parts, said sales of its handset parts and assembly business also declined during the six-month period after a major customer postponed orders, according to a statement filed at the Shenzhen stock exchange yesterday.
BYD forecast its net profit for the first six months of the year at between 121.06 million yuan (Dh68.6 millin) and 363.18 million yuan, down 85-95 per cent from 2.42 billion yuan a year earlier, based on the company's preliminary estimate.
Two analysts polled by Thomson Reuters forecast on average a first half net profit of 576.7 million yuan.
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"It's below my expectation and there is a chance that they'll make a loss in the second quarter," said Steven Man, an analyst at Samsung Securities.
The company reported a net profit of 266.74 million yuan for the first quarter of 2011, down 84 per cent year-on-year.
Man said he would lower his annual net profit forecast for the company, which is currently at 2.8 billion yuan.
BYD said sales were affected by the government's move to cancel a tax incentive for cars with engines of 1.6 litres or below this year. Gross profit margins also fell in the first half on falling revenue in all divisions.
The company raised 1.42 billion yuan in June by selling domestic Chinese shares listed in the Shenzhen stock exchange. These shares ended down four per cent yesterday at 31.51 yuan.