Air conditioners face cold sales

Tag : center air conditioner


Domestic air conditioner producers are taking a further hit thissummer by rising material costs, bloated inventory and decliningsales both at home and abroad, according to industry analysts.
Shi Hong, an analyst on home electrical appliances at IndustrialSecurities in Shanghai, told China Daily that profits of most airconditioner manufacturers are expected to drop again this summerlargely because of dwindling sales as potential buyers are balkingat the idea of buying them because of rising energy costs.
The sluggish property market has also contributed to the decline insales because fewer new homes need to be fitted, Shi and otheranalysts said.
Exports of air conditioners, accounting for more than half of theindustry's total sales, has also been dragged down by thepersistent appreciation of the renminbi against the US dollar andother major currencies. These problems have been aggravated bysurging material costs.
"The surging prices of basic materials in producing airconditioners, such as steel and petrochemical products, have hitmanufacturers," Shi said.
Analysts said the continuous renminbi appreciation has strippednational air conditioner makers of their competitiveness againstJapanese and South Korean brands in many overseas markets.
Latest industry figures show sales of Chinese air conditioningproducts in May totaled 7.92 million units, down 10.9 percent fromthe same month in the previous year. Of these, 3.13 million unitswere sold in the domestic market, down 32 percent from the previousyear.
Although exported air conditioning products from China increased 13percent in May to 4.79 million units, the growth rate dropped 7percentage points compared with last May's 20 percent.
Meanwhile, the inventory of air conditioners rose 4 percent to10.75 million units by the end of May.
Although June's sales figure is yet to be published, analystspredict it won't significantly increase from May.
"I don't expect any pleasant surprises in terms of higher sales inJune," said Shi.
Industry analysts said as long as manufacturing costs keep risingand sales fail to rebound, air conditioner makers will continue tosuffer shrinking profits in the next two months, after which theannual peak sales season ends.
Apart from material costs, according to industry experts andanalysts, air conditioner makers should also control the expensesrelated with sales and company operation, which usually account for70 percent of the gross profit margin.
For example, Gree and Midea, the nation's two largest airconditioner makers in terms of sales, posted a gross profit marginof 18 percent and 18.6 percent respectively in 2007. But afterweeding out their expenses on product sales and company operation,they posted a net profit margin of 3.39 percent and 3 percentrespectively.