Midea, Haier boost earn­ings as Chi­nese adopt smart ap­pli­ances

Ris­ing mid­dle class in na­tion leads to an up­mar­ket strat­egy

China Daily (Canada) - - BUSINESS - By BLOOMBERG

China’s top two mak­ers of house­hold goods are en­joy­ing an earn­ings boost as mil­lions of Chi­nese fam­i­lies in­creas­ingly adopt higher-priced smart ap­pli­ances, such as re­frig­er­a­tors that con­nect to the in­ter­net.

Mar­ket leader Midea Group Co, which is buy­ing Ger­man ro­bot-maker Kuka AG, saw net in­come for the first half rise 14 per­cent to 9.5 bil­lion yuan ($1.4 bil­lion), while Qing­dao Haier Co profit surged 21 per­cent to 3.32 bil­lion yuan, ac­cord­ing to state­ments to Chi­nese stock ex­changes on Tues­day.

The two com­pa­nies are among Chi­nese man­u­fac­tur­ers that are spend­ing bil­lions of dol­lars to buy tech­nol­ogy from over­seas com­peti­tors as they com­pete to out­fit homes with smart ap­pli­ances. Midea ear­lier this year agreed to buy ma­jor­ity stakes in Ital­ian air con­di­tioner maker Clivet SpA and the home ap­pli­ance unit of Ja­pan’s Toshiba Corp. Mean­while, Qing­daoHaier in June com­pleted its $5.6 bil­lion ac­qui­si­tion of GE Ap­pli­ances, Gen­eral Elec­tric Co’s ap­pli­ance busi­ness.

“There is growth po­ten­tial as ur­ban­iza­tion rates rise and the mid­dle class, which is now opt­ing for bet­ter-qual­ity prod­ucts, ex­pands in China,” Liu Chi­dao, a SWS Re­search Co an­a­lyst, wrote in a re­port this month. “An in­creas­ing num­ber of firms are step­ping up ef­forts to di­ver­sify into new mar­kets or achieve dif­fer­en­ti­a­tion through ad­vanced tech­nol­ogy.”

Rev­enue at the Qing­daobased unit ofHaier Group was 48.8 bil­lion yuan, com­pared with a re­stated 47.3 bil­lion yuana year ago, whileFoshan­basedMidea’s profit rose even as sales fell 6 per­cent.

Haier Elec­tron­ics Group Co, the Hong Kong-listed sis­ter com­pany of Qing­dao Haier, also re­ported that first-half profit rose 3 per­cent to 1.13 bil­lion yuan, even as rev­enue slipped 8.1 per­cent to 28.8 bil­lion yuan, ac­cord­ing to a state­ment onWed­nes­day.

Qing­dao Haier shares rose as much as 1 per­cent to 10.41 yuan in Shang­hai trad­ing — the high­est level since Aug 19. Midea shares rose as­muchas2 per­cent to 27.41 yuan in Shen­zhen. In Hong Kong, Haier Elec­tron­ics fell as much as 1.5 per­cent to HK$12.94 ($1.67). The Shang­hai Shen­zhen CSI 300 In­dex was lit­tle changed.

Midea in May also made a cash of­fer for a ma­jor­ity stake in Kuka that val­ued it at 4.6 bil­lion eu­ros ($5.1 bil­lion), a pur­chase aimed at help­ing Midea trans­form its man­u­fac­tur­ing line with Kuka’s ro­bot tech­nol­ogy. That had ini­tially drawn op­po­si­tion from Ger­man politi­cians, al­though the coun­try’s Econ­omy Min­istry said on Aug 17 it won’t open a for­mal probe into the deal.

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