China’s Geely Automobile flags costs, chip shortage after 12% drop in 2021 profit

The Geely Auto Holdings emblem is pictured at the Auto China 2016 car present in Beijing, China April 25, 2016. REUTERS/Kim Kyung-Hoon

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SHANGHAI, March 23 (Reuters) – Geely Auto Holdings Ltd (0175.HK) expects rising raw materials rates and international chip shortages to pressure its profitability and income this calendar year, the Chinese company stated on Wednesday, immediately after reporting a 12% slide in 2021 profit.

The world’s maximum-profile Chinese automaker, thanks to its investments in Volvo Cars and Daimler AG , claimed a 2021 earnings of 4.85 billion yuan ($761.64 million), when compared with 5.53 billion yuan in the prior 12 months. Revenue rose 10% to 101.6 billion yuan.

“The intensified level of competition in China, the increase in raw substance costs, other pandemic-related disruptions and world wide shortages of chip provide have confirmed no symptoms of subsiding and should really keep on to place tension on the sales functionality and profitability of the Group in 2022,” Geely Automobile said in a statement.

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Geely Car is focusing on to promote 24% far more vehicles this year, at 1.65 million autos, stating it would seem to further increase its export income to new marketplaces in Southeast Asia, the Center East and western Europe.

The business also encouraged payment of a remaining dividend of HK$.21 for every regular share.

China’s automobile sales grew very last calendar year, helped by surging product sales of new strength cars, but marketplace executives have warned about the impression of a world-wide shortage of semiconductors and increasing raw content costs, which have been exacerbated by provide chain disruptions following Russia’s invasion of Ukraine.

Russia phone calls its steps in Ukraine a “particular navy procedure”.

In an earnings phone on Wednesday, Geely Auto Group CEO Jerry Gan explained the company’s reliance on custom made chips and globalised offer chains meant the semiconductor scarcity experienced a “quite massive result” on output, an difficulty Geely would deal with through localisation and in-house chip advancement, amid other measures.

($1=6.3678 Chinese yuan)

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Reporting by Brenda Goh and Eduardo Baptista Editing by Subhranshu Sahu and Louise Heavens

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Katherine T. Burrows

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