China Resources (Holdings)

CR Beer eyes more acquisitions after profit surges 13.8 per cent

Following SABMiller deal, China’s top beer seller counts on organic expansion and more acquisitions

PUBLISHED : Friday, 18 March, 2016, 3:15pm
UPDATED : Friday, 18 March, 2016, 6:45pm

China Resources Beer, which owns the top selling beer brand in China, has its sights set on more acquisition opportunities after posting a 13.8 per cent surge in net profit last year to HK$831 million.

“We are confident the market’s long-term prospects will be driven by multiple favourable factors,” Chairman Chen Lang said in the results announcement statement. “The beer business will continue to strengthen through both organic expansion and acquisitions.”

Earlier this month, CR Beer announced plans to acquire British SABMiller’s 49 per cent stake in China Resources Snow Breweries, China’s biggest brewing company.

The US$1.6 billion deal, expected to go through by the end of this year, was completed at a much lower price than expected.

“It’s a friendly price,” said Vincent Tse Tan-hon, CR Beer’s director of investor relations, referring to its long standing joint venture agreement with SABMiller since 1994.

CR Snow accounted for 23.2 per cent of the beer market in China in 2014, while Tsingtao Brewery was second at 18.4 per cent, according to data from Euromonitor, an international market research company.

The market’s long-term prospects will be driven by multiple favourable factors
Chen Lang, China Resources Beer

The company revealed that despite China’s stagnant economy, beer sales in the first two months of this year have been “so far so good”, with low single digit growth.

“The market declined by six per cent last year, so a positive number in comparison is already really good,” said Tse, who added that the company hoped to maintain the same growth pace in the coming year.

The firm attributed the slow market growth to unfavourable weather conditions and the government’s anti-corruption drive that has affected consumer appetite.

Jason Hou Xiaohai, CR Snow’s general manager, expressed confidence in the long-term demand for high quality beer, which has seen exponential growth even with the shrinking beer market.

“Even though it will be difficult for the beer industry to grow within these two years, what’s important is that sales of high-value products is still increasing,” he said.

The former conglomerate that also had interests in retail, food and other beverages, sold its non-beer operations to parent China Resources Holdings for HK$30 billion in September. The non-beer operations had posted a net loss of HK$4.8 billion in the first eight months of last year.

The company called the decision a strategic move to help it focus on beer, its most profitable business.

Additional reporting by Brendan Clift