China’s Buffett-backed BYD shares surge on debut (AP)

June 30, 2011

SHANGHAI – Shares in Chinese auto and battery maker BYD Co. jumped 44 percent in their debut on the Shenzhen Stock Exchange on Thursday, despite news that the company’s profit fell by 84 percent in the first quarter.

Shenzhen-based BYD raised 1.42 billion yuan ($220 million) in a share offering aimed at raising cash for an expansion mainly focused on an auto research, development and production base.

Its shares gained 7.87 points, or 43.72 percent, to 25.87 yuan in morning trading.

BYD, whose name stands for Build Your Dreams, said the plunge in its first quarter profit was mainly due to weak auto sales. Unaudited results showed net profit in the quarter ended March 31 was 266.7 million yuan ($41.2 million), compared with 1.7 billion yuan a year earlier, it said.

“The performance in the first quarter of 2011 dropped significantly, which was mainly due to a decline in the performance of the automobile business,” BYD said in a notice to the Hong Kong Stock Exchange, where its shares already trade. But it also noted weakening sales of rechargeable batteries and cell phone parts.

MidAmerican Energy, a subsidiary of billionaire investor’s Warren Buffett’s Berkshire Hathaway, holds a 9.9 percent stake in BYD.

The company sold 79 million shares, or a 3.4 percent stake, at 18 yuan each in its offering on the Shenzhen Stock Exchange, the smaller of China’s two stock markets.

Local media reports said the company chose to be listed on the small- and medium-size company index to help improve the likely performance of its shares.

In recent comments to shareholders, Berkshire Hathaway’s vice chairman, Charlie Munger, said he was still enthusiastic about BYD, despite its recent troubles, which have delayed its plans to launch car sales in North America.

Munger said BYD’s mistake was in trying to double its automotive sales every year for six years in a row. It worked for the first five years, he said.

China’s auto sales slowed significantly this spring, after generous incentive programs ended and buyers wary of traffic quotas and rising fuel prices began shunning showrooms.

The company started out making batteries and later shifted to automaking. Recently, it has branched into energy storage systems and bus production.

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