Toyota Motor Co's main Chinese partner posted a 50 percent jump in second-quarter earnings as car sales leapt two-thirds in the first half and margins firmed despite high steel costs and price cuts.
FAW Xiali Automobile Ltd, which makes Toyota's Vios and Corolla sedans, reversed a first-quarter loss to record a net profit of 92.68 million yuan ($11.44 million) from April to June, versus 61.7 million yuan a year ago, according to Reuters' calculations using previously announced figures.
Xiali, China's fourth-largest listed car maker by capitalisation, had posted a 32.1 million yuan loss in the first quarter as the world's third-largest vehicle market fell under margin pressures, with steel prices soaring to a decade-high while domestic competition intensified.
"Prices of raw materials such as steel fluctuated sharply in the first half of this year," it said in a statement in the official Shanghai Securities News on Saturday, adding it had cut prices on some of its sedans since the start of 2005.
"But our strong marketing efforts helped raise overall margins," it said without elaborating.
Domestic steel prices began to fall in April, though they remained at multi-year highs after peaking in the first quarter.
Xiali sold 97,750 sedans in the first half, up 65 percent from the same period of last year. But turnover rose a much slighter 11 percent to 3.44 billion yuan.
Margins on all products - mainly cars - inched up 2.92 percentage points to 12.55 percent in the first half, the company said without giving a quarterly breakdown.
For the first half, Xiali's net profit fell 19 percent year-on-year to 60.58 million yuan, as it booked hefty depreciation charges of 102.56 million yuan.
China's car sales have decelerated since the second quarter of last year when Beijing began slapping curbs on auto loans as part of efforts to slow the economy. Analysts say the market is expected to grow just 10 to 15 percent this year.
A margin-slicing price war is also hammering profits - General Motors Corp, Ford Motor Co and Honda Motor Co have all cut prices so far this year.
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