Midea Group
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Midea, Haier Boost Profit as Chinese Adopt Smart Appliances

Aug. 31, 2016
Over in China, the Internet of Things is contributing to big earnings bumps for the country’s two biggest appliance manufacturers.

China’s top two makers of household goods are enjoying a boost to earnings as millions of Chinese families increasingly adopt higher-priced smart appliances such as refrigerators that connect to the Internet.

Market leader Midea Group Co., which is buying German robot-maker Kuka AG, saw net income for the six months ended June rise 14% to 9.5 billion yuan ($1.42 billion), while Qingdao Haier Co. profit surged 21% to 3.32 billion yuan ($497.06 million), according to statements to Chinese stock exchanges Tuesday.’

The two companies are among Chinese manufacturers that are spending billions of dollars to buy technology from overseas competitors as they compete to outfit homes with smart appliances. Earlier this year, Midea agreed to buy majority stakes in Italian air-conditioner maker Clivet SpA and the home appliance unit of Japan’s Toshiba Corp., while Qingdao Haier in June completed its $5.6 billion acquisition of GE Appliances, General Electric Co.’s white-goods business.

“There is growth potential as urbanization rates rise and the middle class, which is now opting for better-quality products, expands in China,” Liu Chidao, a SWS Research Co. analyst, wrote in a report this month. “An increasing number of firms are stepping up efforts to diversify into new markets or achieve differentiation through advanced technology.”

Revenue at the Qingdao-based unit of Haier Group was 48.8 billion yuan ($7.31 billion) compared with a restated 47.3 billion yuan ($7.08 billion) a year ago, while Foshan-based Midea’s profit rose even as sales fell 6%.

Haier Electronics Group Co., the Hong Kong-listed sister company of Qingdao Haier, also reported first-half profit rose 3% to 1.13 billion yuan ($169.18 million) even as revenue slipped 8.1% to 28.8 billion yuan ($4.31 billion), according to a statement Wednesday.

Qingdao Haier shares rose as much as 1% to 10.41 yuan ($1.56) in Shanghai trading to reach the highest level since Aug. 19, while Midea shares rose as much as 2% to 27.41 yuan ($4.10) in Shenzhen. In Hong Kong, Haier Electronics fell as much as 1.5% to HK$12.94 ($1.67). The Shanghai Shenzhen CSI 300 Index was little changed.

In May, Midea also made a cash offer for a majority stake in Kuka that valued it at 4.6 billion euros ($5.13 billion), a purchase aimed at helping Midea transform its manufacturing line with Kuka’s robot technology. That had initially drawn opposition from German politicians, although the country’s Economy Ministry said Aug. 17 it won’t open a formal probe into the deal.

By Bloomberg News

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