Strong consumer business offsets shortfall from property China Resources Enterprise said yesterday first-quarter net profit fell 13.6 per cent to HK$639 million, dragged down by lower gains from property investments and a lack of income from its discontinued petroleum business. In a statement, the company said that excluding the revaluation of property investments, profit attributable to shareholders increased 3.8 per cent on the strong performance of its consumer business. Sales grew 31.8 per cent to HK$15.87 billion. China Resources, a state-backed conglomerate, operates five core businesses - retailing, beverages, food processing and distribution, textiles and property investment. Profit at its brewery business fell 8.6 per cent year on year to HK$32 million on rising costs of barley and hops since the second half of last year. The unit is a joint venture with South Africa's SABMiller and makes the national beer brand 'Snow', which has a strong foothold in southern China. China Resources said business in Sichuan, Anhui and Zhejiang provinces were seriously affected by snowstorms early this year. Even so, sales volume for Snow grew 30 per cent in the first quarter to 1.07 million kilolitres. The company did not comment on the effect the recent earthquake would have on its business. UBS analyst Erica Poon said 'raw material costs should be offset by direct price increases and a product mix' that included more premium beers. With three new breweries in Beijing, Nanjing and Ningbo due to begin production this year, the company expects higher sales volumes, which will help the beverage division return to profit. Company figures show the brewery unit had an 18 per cent mainland market share last year and the firm targets 25 per cent in five years. China Resources is undergoing consolidation, selling off or privatising its non-consumer segments. Some analysts expected China Resources to also dispose of its textile operations and its 10 per cent stake in container port operator Hong Kong International Terminals this year, in order to concentrate on the retail and beverage businesses, which often have higher profit margins. Despite the quarterly loss in its beverage business, the firm is targeting 25 per cent sales growth for its retail business this year, according to a UBS report quoting the management. The company's priorities are to establish district dominance and enlarge economies of scale for a higher profit margin. It has three main business segments in retailing - supermarkets, branded fashion distribution and retail store operations. Net profit for the division increased 59.5 per cent in the first quarter to HK$268 million, with turnover growing 36.9 per cent to HK$9.58 billion for the three months to March. Shares of the company closed 2.62 per cent lower yesterday at HK$26. UBS rated the company a 'buy' with a 12-month target price of HK$31 based on the management's commitment to disposing of non-core assets.