CR Beer’s interim profit up 93.4pc on strong Snow brand sales, but growth still below expectations

Chinese breweries are recovering from stagnated beer consumption in recent years, as the results showed

PUBLISHED : Monday, 21 August, 2017, 3:05pm
UPDATED : Monday, 21 August, 2017, 10:44pm

China Resources Beer, the country’s biggest brewer, reported a 93.4 per cent increase in interim profits on Monday on the back of rising revenues from its wholly owned Snow Beer brand.

The company’s net profit for the 6 months to June rose 93.4 per cent to 1.2 billion yuan (US$180 million), or 0.36 yuan per share, from 605 million yuan in 2016, putting it slightly behind a Reuters analyst consensus estimate of 1.3 billion yuan for the period.

Revenue was up 3.7 per cent to 15.8 billion yuan for the first half, up from 15.2 billion yuan in 2016.

The company proposed an interim dividend of 0.07 yuan, while no interim dividend was declared last year.

Asked if the company had any target firms in mind for future acquisitions, CR Beer chief executive Hou Xiaohai said the company will focus on the craft and imported beer segments, eyeing firms that could help expand its product distribution channels as well as diversify product types.

“Now the craft beer segment accounts for only a tiny fraction of the whole beer market in China, so it still has huge potential to grow,” he said.

Looking ahead, the company said it would continue to develop its premium brands.

The company saw its beer sales volume increase by 2.9 per cent year on year to 6,306,000 kiloliters,

a growth rate better than the industry average during the period, driven by hot weather, recovering consumer sentiment and demand from younger customers in China. The trend also shows that Chinese breweries are recovering from a three year decline, with big players benefiting most.

China Resources Beer to raise HK$9.5b in rights issue to part-fund SABMiller stake purchase

Last year CR Beer acquired the remaining 49 per cent stake in China Resources Snow Breweries Limited it didn’t already own, with Snow Beer’s contribution being fully reflected in group results since the first half of 2017, according to its statement.

After the acquisition, the company’s share of China Resources Snow Breweries Limited’s profit increased from 51 per cent in the first half of 2016 to 100 per cent in the same period in 2017, CR Beer said.

A subsidiary under state owned conglomerate China Resources, the company has been engaged in the beer business since 1994 and has maintained a leading position in the sector with around 26 per cent volume share of the market, according to research firm Euromonitor.

The entire beer market benefited from the hot weather and the year-on-year sales volume was slightly higher
China Resources Beer statement

Boasting a market share of 25.6 per cent of the beer market in China in 2016, with Snow Beer, the largest selling brand in the world, CR Beer has outpaced its smaller rival Tsingtao Brewery and AB Inbev’s Harbin Brewery, with the two accounting for 17.2 per cent and 16.2 per cent of the market respectively.

Although the largest beer market in the world, China is still relatively immature in the sector, as highlighted by its undersized premium beer segment, which offers a huge opportunity for Chinese and international brewers.

The profit margin for China Resources Beer is expected to be lifted by ongoing product “premiumisation”, as well as the company’s sales channels, capacity and efficiency rationalisation, according to a recent research report from JP Morgan.

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