DFG Denies Merger with FAW, Sees a 3.3% Revenue Decline Last Year

Luo Qi, Wang Jiaxin / Yicai

2017-03-30

(Yicai Global) March 30 -- With the change in consumer preferences, Dongfeng Motor Group Co. (DFG) [HKG:0489] saw a slight fall in its annual revenue last year. Meanwhile, the company’s management also denied a rumored merger with FAW Group Corp.

As of Dec. 31 last year, DFG registered revenue of around USD17.7 billion (CNY124,422 million), falling about 3.3 percent from a year earlier, the company’s annual report released March 28 shows. The decrease in earnings was mainly due to the decline in sales revenue of affiliate Dongfeng Peugeot Citroen Auto Sales Co. Profit attributable to shareholders was approximately CNY13,355 million (USD1.9 billion), representing an increase of 15.6 percent. The board of directors declared a dividend of CNY0.23 per share.

DFG inked a strategic cooperation agreement with FAW Group at year’s start, sparking market speculation as to whether this portended a merger between China’s second- and third-largest automobile groups. Speaking at the DFG 2016 performance conference in Hong Kong, company chairman Zhu Yanfeng said cooperation between DFG and FAW aims to build a forward-looking common technology innovation center, and the two sides will focus on new energy, intelligent networking and lightweight, and other forward-looking technology research and “have no discussion and no plan” on other issues that have fueled market conjecture, thus denying the rumored merger with FAW in a roundabout way. 

Dongfeng Peugeot and Citroen car sales plummeted last year, dragging down total DFG revenue. In the first two months of this year, Dongfeng Peugeot Citroen Automobile Co. recorded less than 50,000 Dongfeng Peugeot and Citroen cars sold, down nearly 50 percent from the year before. While the Chinese auto market still maintains rapid growth, such a poor performance aroused widespread market concern.

DFG non-executive director Liu Weidong admitted that the sales decline of Dongfeng Peugeot and Citroen cars last year was within expectations, because China's consumer market is undergoing dramatic changes. He said the company will adjust its strategy and introduce new models as soon as possible, e.g. the already-launched Dongfeng Peugeot SUV4008, and other models like SUV5008 to be launched this year. He also said the company will also consider the relations between single-car pricing and overall sales revenue, and market share and revenue, adding that he is confident in the future development of Dongfeng Peugeot and Citroen cars. 

DFG management also said the company will accelerate its development of a new energy vehicle business, carry out joint development by partnering with overseas brands to reduce development costs to offer users wallet-friendly prices, and will strive to meet market demand through the construction of common modular platform (CMP) and electric edition common modular platform (eCMP). However, the company said its cooperation with overseas brands will mainly focus on technology, and will not seek to launch new brands.

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