Jardine Motors stalls with 86% profit crash

Blame it on the difficult trading conditions in its Mainland China business.

According to Moody's, despite achieving sales growth of 5% for the H1 2012 period, Jardine Motors reported an 86% decline in underlying profit due to difficult trading conditions and margin erosion in its Mainland China business. This business reported a loss which was countered by an improvement, albeit modest, in profits from Hong Kong and Macau and an increase in sales from the UK.

Here's more from Moody's:

"Despite a year on year increase of 11% in top line sales, underlying profit before tax at H1 2012 was almost unchanged from previous year at about USD 2.3 billion due to declining margins in the past 2 quarters" says Laura Acres, a Moody's Senior Vice President. Weak performances by Jardine Motors and Hongkong Land were mainly responsible for the decline in the group's profit margins, with underlying profit before tax margin falling to 11.6% from 13% in H1 2011.

H1 2012 results for Jardine Matheson Holdings ("JMH") and Jardine Strategic Holdings ("JSH") were modest, though overall financial metrics remain strong for JSH's A3 issuer rating. "Jardine's overall business performance in H1 2012 continued to improve however growth rates are slowing and segmental results are mixed," added Acres.

In H1 2012, Jardine Group's total revenue--excluding associates—reached USD 20.2 billion, up 11% y-o-y, with key contributors such as Astra and Dairy Farm recording strong sales growth of 18% and 8% respectively, although growth rates have tailed off substantially since FY 2011. Astra, which continued to be the largest contributor to Jardine Group based on revenue, generated over USD 10.4 billion in sales -- a record-high -- boosted by sales ahead of the June 2012 implementation of increased minimum downpayment regulations in respect of automotive loans.