White goods maker Haier is consolidating its home appliance business by integrating its two subsidiaries listed in Shanghai and Hong Kong, said company executives yesterday.

Shanghai-listed Qingdao Haier Co Ltd is planning to buy a 31.93 percent stake in Haier Electronic Group Co Ltd from its parent Haier Group, to increase its holdings in the Hong Kong-listed company to 51.31 percent.

Both the companies are yet to formalize the arrangement, but a preliminary agreement has been reached, Qingdao Haier said in a statement.

In July 2008, Qingdao Haier spent HK$775.5 million to acquire a 19.38 percent stake in Haier Electronic from Deutsche Bank at a price of HK$1.975 per share.

"This is a key step for us to integrate the home appliance businesses under the Haier umbrella," said Ming Guozhen, secretary to the board of directors of Qingdao Haier.

"Qingdao Haier will become the flagship for the white goods business and add Haier Electronic's washing machine and water heater to its line up of refrigerators, air conditioners and ice chests."

Haier Electronic has a 30 percent share of the domestic washing machine market and a 20 percent share in the water heater segment, according to a report in China Securities Journal.

Ming said the group expects to maintain its leading edge in the Chinese white goods market and also cash in on the growing opportunities in the domestic home appliances segment, especially from rural areas.

"The group's positioning has become clear by moving the profitable white goods sector into the A share market. We expect Qingdao Haier to report better profits as washing machines account for over 30 percent of the total sales of electric home appliances in China, while water heaters are also a profitable business," said Zhu Lijun, an analyst with China Galaxy Securities.

Qingdao Haier shares soared to the 10 percent limit on Monday and rose nearly 4.26 percent to 24.49 yuan yesterday. Haier Electronic shares surged 9.51 percent to HK$4.72 yesterday.

Haier currently has 29 manufacturing plants, eight comprehensive R&D centers and 19 overseas trading companies across the world. It employs over 50,000 at these facilities. In 2008, the group reported global revenue of 119 billion yuan.

Qinghai Haier reported a 28.72 percent year-on-year increase in net profit during the first nine months of this year to 966 million yuan. Haier Electronic posted profit of HK$163.15 million in the first six months, up 27.15 percent over the same period in 2008.