Raw material prices drive up Giti Tire Corp profits in H1 2012
For the first half of the 2012 financial year, Giti Tire Corporation has reported revenue of RMB 2.06 billion (£205.0 million), a year-on-year decrease of 7.0 per cent. The Giti Tire Pte. Ltd. subsidiary says this decline was a combined effect mainly attributable to decrease in sales volume and increase of average selling price. Lower sales mainly reflected a slowdown in China related to the construction and property sectors, coupled with measures undertaken by the Chinese government to restrict credit availability. The export market decrease was largely brought about by the financial crisis in European markets, Giti Tire Corporation added.
Despite lower sales, during the six months to 30 June 2012 the company’s gross profit rose 98.9 per cent year-on-year to RMB358 million (£35.6 million), while gross profit margin for the reporting period was 17.3 per cent, compared with 8.1 per cent in the first half of 2011. The increase in gross profit was mainly attributable to lower raw material costs. Giti Tire Corporation generated a net profit of RMB143 million (£14.2 million) in the first half 2012, up from RMB32 million a year earlier, while net profit margin for was 6.9 per cent, compared 1.4 per cent in the first half of 2011.
The company also incurred higher finance expenses during the period due to higher cost of borrowings compared to the first half of 2011 and decrease in foreign exchange gain recognised during the period, mainly attributable to a strengthening US dollar and weakening euro against China’s currency during the period.
Giti Tire Corporation holds 51 per cent of Giti Tire Pte. Ltd’s interest in Giti Tire Fujian, one of seven tyre manufacturing plants owned by the group. Giti Tire Fujian was established in 1995 and manufactures PCR and TBR tyres. The other locations where Giti operates plants are Giti Tire Anhui (founded 1993, produces TBR and PCR tyres), Giti Tire Chongqing (acquired 2002, produced TBR tyres), Giti Tire Yinchuan (acquired 2002, produces TBR and cross-ply tyres) and Giti Tire Hualin (acquired 2003, produces PCR, TBR and cross-ply tyres).