Brilliance China sees a "very satisfying" profit in 2010

Fri May 28, 2010 1:15am EDT

HONG KONG May 28 (Reuters) - Brilliance China Automotive Holdings (1114.HK) said it expects to post a "very satisfying" profit this year on strong demand for cars produced by its joint venture with Germany's Bayerische Motoren Werke AG (BMW) (BMWG.DE).

The Brilliance-BMW joint venture sold 22,000 cars in the first four months of the year, up 77.3 percent from a year earlier, Chairman Wu Xiaoan told reporters in a news conference on Friday. He added that the company was confident it could achieve a sales growth of more than 30 percent this year from 44,880 cars in 2009.

Wu said sales of its minivan were on track to reach their target.

"We are focussing on two profitable businesses -- the BMW venture and minivan manufacturing," he said.

Last year the company sold its self-developed but money-losing brand Zhoughua to parent Huachen Group.

Wu said he saw the BMW joint venture benefitting from the Euro's recent fall against the yuan, which should lower production costs. Nearly 60 percent of the components used in the China-made BMWs are imported, with most coming from Europe.

Brilliance continued to see strong demand for the joint venture's cars, despite a recent slowing of car sales growth in China, which last year overtook the United States to become the world's largest auto market, he said.

There was a supply shortage for some BMW models due to capacity constraints at the joint venture, which could produce about 75,000 units per year, he added.

BRIGHT OUTLOOK FOR MINIVANS

Brilliance China, the country's top minivan maker, reported sales of 78,968 units for 2009 and aims to sell 100,000 units this year.

"We will definitely be profitable this year," Wu said, adding that the profit level would be "very satisfying".

Brilliance China posted a net loss of 1.64 billion yuan ($240 million) for 2009. Analysts polled by by Thomson Reuters I/B/E/S forecast that the company would earn a net profit of 656.9 million yuan in 2010.

BMW and Brilliance China have started construction on the second phase of production facilities for their joint venture with a total investment of 10 billion yuan ($1.46 billion) over three to five years. The work would add annual capacity of 200,000 units in 2012 and could be expanded to 300,000 per year, Wu said, adding that Brilliance China would use internal resources and bank borrowing to fund the expansion.

Munich-based BMW, which began producing 3- and 5-Series models in China in 2003, may add production of the X1 compact SUV in China when the second phase opens in 2012 and was working with Brilliance China on battery-powered models, media reports said.

"We will introduce new models in China and are actively studying alternative energy cars and how to transform current models to run on alternative energy," Wu said, without providing details.

BMW Group's sold more than 90,000 vehicles last year in China, which is the company's fourth largest market.

($1=6.829 Yuan)

((Reporting by Alison Leung; Editing by Don Durfee and Chris Lewis))

((alison.leung@thomsonreuters.com; +852 2843 6369; Reuters Messaging: alison.leung.reuters.com@reuters.net))

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