0175 Geely Automobile Holdings Limited Annual Report 2011

Annual Report 2011Geely Automobile Holdings LimitedLETTER TOSHAREHOLDERSLi Shu FuChairmanThe profit attributable toequity holders for 2011 wasRMB1.54 billion, representingan increase of 13% over2010, mainly helped byimproved product mix, lowershare-based paymentsto employees and fastergrowth in subsidy incomes.Excluding non-cash expensesrelated to share-basedpayments to employees,underlying profit attributableto shareholders increased by2% to RMB1.68 billion.Business OverviewGrowth in China’s sedan market slowed down considerablyin 2011 after two exceptionally strong years in 2009 and2010, principally driven by the Chinese Government’sshort-term stimulation programme to promote economysedans in a bid to sustain economic growth in China. Theexpiration of the automobile stimulation programme at theend of 2010 and tighter monetary policy in China combinedto suppress demand for economy sedans in China.Despite these, the Group successfully overcame thesechallenges and continued to achieve solid growth in 2011.With a new focus on quality and sustainable growth, theGroup continued to implement major structural changesduring the year, changing management structure fromproduct line management to product brand management,thus further optimizing operating efficiency, enhancingbrand and product image, and improving customers’services. While the growth of the Chinese sedan marketslowed down significantly in 2011, recovery in our majorexport markets continued throughout the year, resultingin an encouraging 93% growth in our export volume to39,600 units in 2011.The Group sold a total of 421,611 units of sedans in 2011,up 1% from 2010, of which 9% or 39,600 units were soldabroad, up 93% from last year. In the Chinese market,the Group’s sales volume was down 3% from 2010 to382,011 units in 2011, mainly due to slower sales of older,smaller sized and cheaper models. As a result, sales volumeat both GLEagle division and Englon division decreased11% and 5% respectively from 2010. Sales volume atEmgrand division, which featured the Group’s newer andhigher-priced models, however, grew 47% to 106,676 units,accounting for 25% of the Group’s total sales volume.Financial ReviewOverall, the Group’s performance in 2011 remainedsatisfactory with total revenue increased by 4% to RMB21.0billion for the year ended 31 December 2011. Profitattributable to the equity holders of the Company grew fasterby 13% to RMB1.54 billion. The 2011 results were despitethe start-up costs of the new automatic transmissionsplants in Xiangtan, the still small scale production at twonew manufacturing plants in Jinan and Chengdu, and theadditional expenses related to the development of three newproduct brands and their associated distribution networksduring the year. The Group’s product mix continued toimprove in 2011. Our flagship mid-size sedan model“EC7”, which is retailing at RMB75,800 to RMB109,800,has become the Group’s most popular model in terms ofsales volume. Total net profit of the Group was up 11%