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China Resources Quarterly Profit Rises on Expansion, Acquisition

China Resources Enterprise Ltd. (291), the government-backed partner of SABMiller Plc. (SAB), said third-quarter profit grew 27 percent as its retail business opened more stores and an acquisition boosted sales.

Net income rose to HK$1.14 billion ($147 million) in the three months ended September, from a restated HK$898 million a year earlier, the company said in a statement to Hong Kong’s stock exchange today. That beat the HK$749 million average of four analysts estimates compiled by Bloomberg. Sales climbed 11 percent to HK$34.2 billion.

China Resources has expanded its retail and beer business by buying rivals to tap the country’s burgeoning domestic consumption. Its venture with SABMiller sells the No. 1 beer brand in China with a 22 percent market share last year, according to Euromonitor International, a London-based researcher. Retail sales in China grew 14.2 percent in September, the most since March.

“China Resources will focus on growing scale in its retail business in the next few years,” said Vivian Liu, a Shanghai- based analyst at Sinopac Securities Asia Ltd. Even so, the money it spends on adding new stores and marketing may eat up profits, she said.

Sales at the retail business rose 19 percent to HK$21 billion during the quarter because of new store openings and contribution from the newly acquired Jiangxi Hongkelong Department Store Investment Co., the company said today.

Rising Costs
Slower economic growth in the world’s most populous country and rising labor costs because of increases in minimum wages across China impacted its retail operations, the company said.

Revenue at the beer business fell 1.3 percent to HK$9.15 billion during the quarter as rainy weather across the regions where the company has dominated market share limited sales volume in the first nine months of the year, it said.

China Resources, whose other businesses include beverages and food processing and distribution, has lost 4.3 percent in Hong Kong trading this year, compared with the 15 percent gain in the city’s benchmark Hang Seng Index. The stock fell 2.9 percent to HK$25.50 as of 1:16 p.m.

21 Nov. 2012

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