The Shanghai-listed arm of top Chinese appliance maker Haier disappointed with a 17 percent slide in second-quarter earnings on Thursday, as it fended off fierce competition while keeping a lid on rising costs.
And Qingdao Haier Refrigerator Co. Ltd.'s 2005 profit is expected to drop by about a fifth from 2004, as the world's fourth-largest appliance maker -- behind Whirlpool, Electrolux and Siemens A.G. struggles to make headway abroad.
Parent Haier Group -- the appliance titan headed by entrepreneur Zhang Ruimin which pondered a $1 billion-plus bid for Maytag Corp. in June that ultimately failed -- is striving to carve out a larger slice of the global appliance pie.
The Shanghai-listed company did not mention Maytag in Thursday's earnings report.
Haier has made a name for itself in the West as a maker of quirky products like space-saving freezers that double as PC tables, and cornering the market for dorm-room fridges and cheap wine coolers.
Haier's push abroad comes as Chinese rivals from Gree Electric to Midea Electric slug it out for a rising share of the consumers' yuan.
Listed Haier earned a net profit of 85.09 million yuan ($10.51 million) versus 102.51 million yuan a year earlier, it said in a filing on the Shanghai exchange's Web site (www.sse.com.cn).
That marked its second consecutive quarter of year-on-year profit decline. Three analysts polled by Reuters had expected earnings to rise 17 percent to 120 million yuan.
"I expect Haier's full-year profit to fall about 20 percent as sales of home appliances, such as fridges and aircons, slow in the second half," said Shenyin & Wanguo Securities analyst Sun Shengquan.
Based in the balmy eastern coastal city of Qingdao, listed Haier said revenues in the second quarter stood almost flat at 5.45 billion yuan versus 5.42 billion yuan a year ago.
"Competition kept intensifying, raw material costs kept rising, energy supply kept decreasing and consolidation accelerated," Haier said, reciting a litany of the problems facing the sector.
"To counteract that, we're going to meet customer demands by coming up with innovative products."
In the first half of the year, Haier said it derived almost 18 percent of its overall sales from abroad -- foreign sales jumped 15.6 percent to 1.7 billion yuan.
Domestic sales in the first half rose a much-slower 9.3 percent to 7.8 billion yuan.
Unlisted parent Haier is one of a group of homegrown firms that includes TCL Corp. is keen to make it abroad.
But Haier's long-cherished aim of becoming a global player suffered a setback when its proposed bid for Maytag -- in conjunction with private equity giants Bain Capital and Blackstone -- was topped by Whirlpool.
Haier's fortunes have closely tracked that of China, the world's seventh largest economy that is increasingly relying on consumer spending for growth.
Years of hyper 8-percent economic growth had already given Chinese the wherewithal to snap up everything from cars and flat screen TVs to more humdrum appliances such as air conditioners.
Its yuan-denominated A shares, open to select foreigners, rose 2.9 percent in the second quarter, handily outperforming an 8.5-percent slide in the broader index.