Rain dampens earnings for China Resources Enterprise
Sales at its beer unit slump in third quarter as mainland labour costs and minimum wage law in Hong Kong weigh on retail unit
Slower economic growth and rainy weather have taken a toll on China Resources Enterprise, with earnings at its beer unit falling in the third quarter and retailing profits slipping in the first nine months of the year.
Net profit rose 33 per cent year on year to HK$3.37 billion in the nine months ended September, buoyed by disposal gains and property revaluation.
Stripping the exceptional gains from revaluation and disposal of non-core asset, the underlying profit dropped 4.8 per cent to HK$1.80 billion in the first nine months.
"The greater frequency of rainy weather across the regions where we have a dominant market share has hammered the sales volume and price of beer as a whole," the company said in a press release.
With bad weather deterring visits to bars and clubs in the third quarter, beer sales dropped 1.3 per cent year-on-year to HK$9.15 billion in the three months ended September, while net profit slipped 5.8 per cent to HK$503 million.
Over 90 per cent of the nine million kilolitres of beer sold in the first nine months was sold under its main brand Snow. After expansion and acquisitions of breweries in Henan, Shanxi and Zhejiang provinces, the company runs more than 80 breweries with annual production capacity of more than 17 million kilolitres, strengthening its leading position in the mainland market. In the first nine months, profit from the beer unit was up 1.7 per cent year-on-year to HK$878 million.
The company's retail unit posted a 35.1 per cent increase in net profit to HK$77 million in the third quarter, excluding the exceptional gains. Earnings dropped 0.5 per cent year on year in the first nine months to HK$727 million, due to the new minimum wage policy in Hong Kong and rising labour costs on the mainland.
The company has tried to offset the rising costs by opening supermarkets in high-end residential projects on the mainland in co-operation with major property developers. It will also open a number of convenience stores at metro stations in Hangzhou, Zhejiang province.
The beverage unit has yet to benefit from the joint venture with Japan's Kirin Holdings formed in August last year. Although total sales increased 36 per cent year on year to 2.86 million kilolitres in the first nine months, earnings at its beverage unit tumbled 26.7 per cent year on year to HK$88 million.