Buffett-Backed BYD Falls After Forecasting Profit Drop

BYD Co. (1211) fell the most in a month in Hong Kong trading after the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) forecast first-half profit may slump as much as 95 percent.

BYD sank as much as 6.1 percent to HK$19.82, the biggest intraday dip since March 26, before trading at HK$19.90 as of 3:13 p.m. in Hong Kong. The company’s Shenzhen-traded shares retreated as much as 3.8 percent to 26.36 yuan, the lowest level since March 28.

Net income for the six months ended June 30 may drop to between 13.8 million yuan ($2.2 million) and 68.8 million yuan because of reduced earnings from solar energy and mobile handsets, the Shenzhen-based manufacturer said in a statement to the Hong Kong stock exchange yesterday. Demand for BYD’s cars also slowed after the government ended buying incentives and the popularity of its top-selling F3 sedan waned.

“The whole solar industry has a tremendous amount of excess capacity,” said Theodore O’Neill, an analyst at Wunderlich Securities in New York. “If you’re in an industry that’s borderline profitless and you’re a smaller player like BYD, it’s maybe going to be worse than profitless.”

First-quarter vehicle sales fell 8 percent from a year earlier to 108,755 vehicles, the company said. China’s total passenger-car sales slipped for the first time since 2005, dropping 1.3 percent from a year earlier, as the slowing economy and rising fuel costs curbed buying. BYD blamed the forecast decline in profit mainly on a “great loss” in its solar cell business.

Solar Cell Prices

Profit in the first three months of the year slumped 90 percent to 27 million yuan, down from 266.7 million yuan a year ago. The company had earlier given guidance indicating a decrease of 65 percent to 95 percent. Sales were little changed at 11.7 billion yuan.

“The persistent decline in the global solar energy market has led to a substantial decrease in the price of solar cell products,” BYD said in the filing. For handsets, the market share of the company’s major clients declined, it said.

BYD has risen 19 percent this year in Hong Kong trading, compared with a 12 percent gain for the benchmark Hang Seng Index. The stock fell 2.2 percent to close at $2.62 in U.S. over-the-counter trading, after the filing.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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