China Resources says Q3 profit falls, beer sales up

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* Beer division sales up 19.3 pct in Q3
* Retail sales rise 27 pct, same-store sales up 11.6 pct
* Says consumer sentiment hit by global economic woes

By Donny Kwok

China Resources Enterprise Ltd, the country’s biggest supermarket operator and top beer maker, on Thursday posted an 18.4 percent drop in third-quarter profit amid rising costs.

“Uncertainties surrounding the global economy have affected consumer sentiment in China, which in turn has put pressure on the group’s consumer goods business in the near term,” said Chairman Qiao Shibo in a statement.

“We are optimistic about the long-term development of China’s retail market,” Qiao added.

The company, which produces China’s top beer brand Snow with one of the world’s largest brewers SABMiller Plc, said profit for the third quarter fell to HK$863 million ($110.9 million), from HK$1.06 billion profit a year earlier.

Along with the urban maintenance and construction tax and education surcharges imposed on foreign enterprises since the end of 2010, an increase in labour costs and an acceleration of retail network expansion had affected earnings, it said.

Profit from the retail division plunged 39.7 percent during the quarter, while food dropped 32.2 percent, and beverages fell 26.2 percent. The beer division posted a 1.5 percent gain.

In August, China Resources Enterprise had said cost pressures would continue to rise for the remainder of the year, but its profit margin should remain at the same level as the first half.

“We will also continue to seek investment opportunities in a prudent manner to further expand our business and move closer to our goal of becoming the largest consumer goods company in China,” Qiao said, adding that the company would enhance profitability through organic growth.

The conglomerate said revenue for the quarter rose to HK$30.8 billion from HK$24.45 billion a year earlier. Sales from its retail division rose 27 percent to HK$17.67 billion.

Sales from the beer division were up 19.3 percent at HK$9.27 billion. The food business jumped 35.9 percent to HK$2.88 billion, and beverages climbed 45.4 percent to HK$1.1 billion.


The company said beer sales for the first nine months of 2011 rose 24.1 percent to HK$22.1 billion, while profit rose 10.1 percent to HK$863 million.

The company, which operates about 80 breweries in China, said it would strengthen cooperation with suppliers and reinforce its centralised purchasing system to stabilise raw material costs.

On the retail front, China Resources, which operates more than 3,800 stores in China and more than 77 percent self-operated, said same-stores sales rose 11.6 percent during the quarter but the business was facing pressure from rising wages and taxes.

Shares of the company were down 1.15 percent at the midday trading break on Thursday before the results, against a 0.88 percent fall in the Hang Seng Index.