Appliance maker targets parent's logistics arm

Haier Electronics Group Co, a unit of China's largest home appliance maker Qingdao Haier Co, said Thursday it intends to buy the logistics business from its parent in order to expand its business in the mainland's third and fourth-tier markets.

Haier Electronics announced last week that it will pay 763 million yuan for the entire equity interest of Qingdao Haier Logistics Company. Upon completion of the transaction, Qingdao Haier Logistics will become a wholly-owned subsidiary of Haier Electronics.

"Our logistics business will not only benefit from Haier's own sales, but logistics services for other suppliers," Haier Electronics' General Manager Zhou Yunjie told a press briefing in Hong Kong Thursday. "We aim to build up as many as 91 distribution centers."

Haier Electronics is primarily engaged in the manufacture and selling of washing machines and water heaters. It currently holds the largest market share for these items on the mainland.

The acquisition target, Qingdao Haier Logistics Company, earned 80 million yuan in net profit last year with a turnover of 1.7 billion yuan, according to Zhou, who added the acquisition will boost its logistics business.

"The purchase will help us expand our business operations from manufacturing to distribution and logistics," he said..

Zhou said that Haier Electronics and other international brands are targeting third- and fourth-tier regions on the mainland on hopes of a buoyant consumption growth story. This is being aided by fast economic growth rates as well as the government's subsidy program for home appliance purchases by rural residents.

Figures released by the Ministry of Commerce show that sales of home appliances in the mainland's countryside continue to grow rapidly. August sales stood at 17.12 billion yuan, compared with 16 billion yuan in July. The August figures jumped a remarkable 126 percent compared with a year ago, official data released Tuesday confirmed.

Peng Jiajun, chief financial officer at Haier Electronics, said more than 40 percent of the company's current sales are a result of the subsidy program.

Haier Electronics currently holds a 35 percent share of washing machine sales and 22 percent of water heater sales in rural areas in China under the subsidy program, Peng said. He added that overall sales of washing machines and water heaters have risen 27 percent and 44 percent respectively this year.

China Daily

(HK Edition 09/10/2010 page2)