China Resources Enterprise (CRE), the mainland’s second largest operator of hypermarkets, reported an 11.1 per cent year-on-year decrease in net profit to HK$1.005 billion, compared to analysts forecast of HK$1.075 billion polled by Bloomberg.
First-half turnover rose 12.3 per cent year-on-year to HK$71.857 billion.
CRE’s main business centres on retailing, beer production, and the food and beverage sectors. It operates 4,400 retail stores including the Vanguard supermarket chain. It also produces C’estbon bottled water and Snow beer.
It blamed China’s economic and leadership transition for dampened revenues over the Chinese New Year period, although beer sales had held up better than last year, helped by an especially hot summer. It said its Snow brand remained the best-selling single beer brand in China by volume for the eighth consecutive year.
China Resources Enterprise said it was confident that its acquisition of the beer Kingway Brewery Holdings would strengthen its position in the mainland market.
The company predicted that the second-half operating environment and consumer sentiment were both likely to be affected by the volatile global economy.
“However, we remain optimistic about the long-term development of China’s retail market as the central government’s new urbanisation strategies... will continue to drive steady growth in domestic consumption,” it said.
Earlier this month, CRE signed a memorandum of understanding with the UK’s largest grocery and general merchandise retailer Tesco to form a joint venture.
The British brand, which entered China nine years ago, has been struggling to establish itself in the crowded general merchandising market.
Under the deal, China Resources Enterprise will take 80 per cent of the venture, while Tesco, the world’s third-biggest retailer, has 131 outlets.
Both companies say the venture will allow the two companies to grow their hypermarkets, supermarkets, convenience stores, cash and carry business and liquor stores in China.
CRE is also reportedly in the running to bid for local grocery market chain ParknShop, along with Sun Art Retail, the mainland’s largest hypermarket operator, and six others.
The company issued an interim dividend of HK$0.13 per share. At Wednesday midday, shares of CRE were trading at HK$23.