Haier IR09_cover layout.indd - Haier Electronics Group Co., Ltd.

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29 Haier Electronics Group Co., Ltd Management Discussion and Analysis (Cont’d) Business Review (Cont’d) Washing Machine Business (Cont’d) Thanks to our effective strategies to optimize product mix, minimize cost and maintain low inventory level so as to benefit from the reduction of raw material price in the market, the Group’s operating profit of washing machine business rose significantly from HK$125 million for the first half of 2008 to HK$174 million for the first half of 2009, whilst the operating margin increased from 2.93% in the first half of 2008 to 4.17% in the first half of 2009. 125,000,000 174,000,000 2.93%4.17% Water Heater Business The water heater business accounted for approximately 21.4% of the Group revenue in the first half of 2009 (1H2008: 19.7%). Revenue grew by approximately 8.7%, reaching HK$1,136 million in the first half of 2009. According to China Market Monitor, the Group maintained the largest market share in the water heater market in the PRC with approximately 19.0% in the first half of 2009. 21.4%19.7% 8.7%1,136,000,000 19.0% During the period, the Group successfully maintained effective cost control system and low inventory level, as well as increased proportion of high value-added products in the product mix. As a result, the operating profit of the water heater business increased by 47.4% from HK$38 million in the first half of 2008 to HK$56 million in the first half of 2009, whilst the operating margin increased from 3.64% in the first half of 2008 to 4.92% in the first half of 2009. The Group strongly believes that it would be able to capture the growth opportunities in this market in the long run by leveraging on its rich experience, expertise and strong emphasis on research and development. 38,000,00047.4% 56,000,000 3.64%4.92% Overall, with Haier’s transformation of its commercial model of “maketo-order”, the development of the Group has been surely given impetus by its product innovation, network innovation and self-motivated management system innovation which create value for customers. The Group will continue to strengthen its competitiveness by focusing on its research and development capabilities with an aim to launch more diversified products to the market. At the same time, the Group will extend the sales, logistics and services networks in the rural and urban markets to enhance sales performance. Moreover, the potential growth in the domestic rural market and the international emerging markets are expected to be the Group’s new income drivers. Interim Report 2009
30 Haier Electronics Group Co., Ltd Prospects To capture the opportunities offered by the favorable government policies, the Group will strive to optimize its distribution networks and develop innovative products to create value for customers. The Group is also implementing effective measures to enhance operational efficiency and maintain strong financial position to cope with unforeseen events in the market. With its successful marketing strategies and optimized product mix, the Group would be able to expand its market share in the domestic markets, and to increase recognition worldwide particularly in the international emerging markets. Meanwhile, the Group will put more effort in the research and development of environmentally-friendly and energy-efficient products, high value-added products as well as new products leading the trend, with a view to further optimizing its product mix and enhancing its profitability. Liquidity and Financial Resources The Group has maintained a healthy financial and liquidity position with a current ratio of 136% as at 30 June 2009 (at 31 December 2008: 123%). As at 30 June 2009, the Group had a cash and cash equivalent balance of HK$1,164 million (at 31 December 2008: HK$696 million); bank and other borrowings of approximately HK$162 million (at 31 December 2008: HK$162 million) of which approximately HK$78 million (at 31 December 2008: HK$28 million) was due within one year and approximately HK$84 million (at 31 December 2008: HK$134 million) was due over one year. 136% 123% 1,164,000,000 696,000,000 162,000,000 162,000,000 78,000,000 28,000,00084,000,000 134,000,000 Due to our focus on cash flow management, the Group was able to maintain a strong cash position with a net cash balance (cash balance less borrowings) of HK$1,002 million as at 30 June 2009. Our sufficient balance of liquidity ensures the financial flexibility when the market recovers and investment opportunities arise. 1,002,000,000 There is no material effect of seasonality on the Group’s borrowing requirements. The Group’s contracted capital commitments amounted to HK$30 million as at 30 June 2009 (at 31 December 2008: HK$34 million), which were mainly related to purchase of machinery for the expansion in production capacity of the Group’s businesses. 30,000,000 34,000,000 Interim Report 2009
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Haier IR09_cover layout.indd - Haier Electronics Group Co., Ltd.

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