Holden posts successive profits despite sales decline

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Holden posted its second successive annual profit over the 2016 financial year, belying a fall in sales and its imminent factory closure in South Australia.

The General Motors subsidiary today announced a combined after-tax profit of $152.8 million for 2016, from consolidated revenue of $3.56 billion.

This follows a $128m combined profit in 2015, and contrasts losses of $255m, $554m and $153m in the three previous year, which led up to GM’s decision to kill the company’s local manufacturing arm.

Holden’s $130m windfall from selling its Port Melbourne engine factory had no bearing on the 2016 figure as the settlement date hasn’t yet occurred. That’ll pump up the coffers, at least officially, later.

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Of greater relevance was the $27.3m profit the company made from its national sales company operations – as opposed to its manufacturing arm.

From 2018 onwards, Holden Australia will be nothing but a national sales company, comprising vehicle sales and marketing, distribution and support.

The combined financial result of $152.8m score in the black includes a recorded profit of $125.5m for Holden’s manufacturing arm. But it’s not really profitable, for those wondering.

This result reflects a $128.1m payment from GM to fund the “orderly wind-down of manufacturing”. An additional $51.4m of support was also received from the government’s Automotive Transformation Scheme.

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“If GM Holden were continuing local manufacturing beyond 2017 a further $125.6m in asset depreciation would have been incurred,” Holden claims.

“With the above figures incorporated, Holden’s manufacturing arm continued to operate at a significant loss.” Clearly Holden wants to make it clear that its factories weren’t cost-viable.

Holden sold 94,308 vehicles in 2016, giving Holden a market share of 8.0 per cent. These sales were down about 8 per cent, and the Lion finished fourth in-market behind Toyota, Mazda and Hyundai. it also exported 4191 Commodores and Caprices to NZ, the Middle East and North America.

Holden chairman and managing director Mark Bernhard said Holden’s 2016 financial results underlined Holden’s viability as a full-line vehicle importer and sales operation.

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“For the second consecutive year Holden has recorded a solid profit from our National Sales Company operations. This result highlights the strong profitability of our long-term business plans,” he claimed.

“We’re facing challenges as a business and undergoing fundamental changes, there is no sugar coating that. But our consistent financial results highlight the underlying health of the business.

“Now we need to keep our unwavering focus on growing sales, re-building our brand and putting our customers first. If we look after the fundamentals of our business, the rest will take care of itself.”

In 2016, the company invested a claimed $69.1 million into R&D and paid combined taxes of $188.1 million.

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Beyond 2017, Holden will retain a “significant presence” in Australia.

Corporate headquarters in Port Melbourne will continue to employ hundreds of staff, combined with its international design studio, ongoing engineering and technical team, a national parts and distribution centre and the Lang Lang vehicle proving ground.

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Further quotes from Holden: 

“Holden has consistently been profitable on our imported vehicle range while we continue to lose money on local manufacturing.

“Over the past two years, we have booked approximately $600 million in one-off charges driven by wind-down costs associated with manufacturing, for asset impairments and inemployee entitlements. Our absolute priority remains supporting our people.

“While our losses in previous years have been overstated by the manufacturing elements, the bulk of those costs are now booked and you can clearly see we are profitable as an ongoing sales and marketing operation.”