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Buffett-Backed BYD’s Profit Plunges 94% on Handset, Solar Units

Bloomberg's David Ingles and Zeb Eckert report on how earnings in the U.S. are outpacing China; and the drought in Hong Kong's IPO market.

BYD Co. (1211), the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B), said first- half profit plunged 94 percent, dragged down by its solar-cell and handset units.

Net income fell to 16.3 million yuan ($2.6 million) in the six months ended June 30, compared with 275.4 million yuan a year ago, BYD said in a statement to the Shenzhen stock exchange yesterday. Sales rose 0.2 percent to 22.6 billion yuan.

BYD, which supplies to mobile-phone makers including Nokia OYJ (NOK1V) and HTC Corp. (2498), said in April that first-half profit would plunge as much as 95 percent as major customers suffered a decline in market share and Europe’s debt crisis hurt demand for solar-energy cells. Vehicle deliveries declined this year at the Shenzhen-based maker as popularity of its F3 model waned amid increased competition from foreign carmakers including Volkswagen AG. (VOW)

Net income for the nine months to the end of September is forecast to fall by as much as 95 percent to 17.6 million yuan, the company said in the statement.

“During the third quarter of 2012, due to the impact of macro-economic uncertainties at home and abroad, China’s auto demand is expected to remain weak while market competition will intensify,” BYD said in yesterday’s statement. Profit at its handset and solar-cell units will continue to decline over the nine-month period, BYD said.

Shares Fell

BYD shares fell 2.8 percent to HK$13.36 in Hong Kong trading yesterday before the announcement, widening its loss this year to 21 percent. The company’s Shenzhen-listed stock rose 1.1 percent to 15.08 yuan yesterday.

Revenue from handset components and assembly fell 11.6 percent from a year earlier to 8.6 billion yuan, while rechargeable battery sales dropped 5.5 percent to 2.4 billion yuan, according to the statement. Automobile sales increased 12.7 percent to 11.6 billion yuan.

BYD’s vehicle sales fell 11 percent in the first seven months of the year to 231,902 units, compared with a 19 percent gain for Volkswagen’s eponymous brand to 1.18 million, according to data from industry researcher LMC Automotive.

Total industry passenger-car sales rose 7.5 percent to 8.74 million units in the first seven months, according to the China Association of Automobile Manufacturers.

BYD’s shares fell by the most in more than two months in Hong Kong in May after a newspaper reported three passengers were killed when one of its E6 electric taxis caught fire after a crash in Shenzhen. Official investigations found no flaws in the vehicle’s safety design, the company said on Aug. 3.

Midsized Sedan

The automaker introduced the Su Rui, a new midsized sedan, in Beijing this month, and is trying to expand overseas sales in markets such as Israel and Uruguay with fleet trials of its electric buses, according to the company.

MidAmerican Energy Holdings Co., a unit of Buffett’s Berkshire Hathaway, bought 9.9 percent of BYD in September 2008 to tap rising demand for clean technology. BYD shares surged more than ninefold after Buffett’s investment, reaching a record close of HK$85.50 on Oct. 23, 2009.

None of the 21 analysts who cover BYD recommend investors buy its Hong Kong stock. Twelve analysts have a sell rating, with the remaining nine recommending a hold, according to data compiled by Bloomberg.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Daryl Loo in Beijing at dloo7@bloomberg.net

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

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