Fosun, owner of Club Med, warns investors of 76 per cent slide in earnings as coronavirus ravages tourism business

Fosun Tourism Group expects to slip into the red in the first half as coronavirus pandemic decimated travel demand
Group has accelerated efforts to prepare for a rebound in consumption demand, chairman Guo Guangchang says

China economy

SCMP Reporter

Published: 11:30am, 25 Jul 2020

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Fosun International, the owner of Club Med resort chain, has told investors to expect up to a 76 percent slide in earnings for the first six months this year as the coronavirus pandemic crushed its tourism-related business.

The group is expected to generate 1.8 billion to 2 billion yuan (US$285 million) of earnings in the first half, compared with 7.61 billion yuan in the same period in 2019, it said in an exchange filing later Friday. The profit warning was based on a preliminary assessment of its management accounts.

The slide follows an impairment to its assets amid the global economic slowdown caused by the viral outbreak and restrictions on travels and social gatherings that clipped its tourism-related businesses. China’s economy posted a historic slump in the first quarter amid lockdowns that froze factories across the nation to contain the outbreak.

The Covid-19 pandemic has accelerated the company’s industry operations transformation, chairman Guo Guangchang said in the filing. Fosun has been pressing ahead to capture the opportunities arising from post-pandemic rebound in global consumption demand, he added.

Guo Guangchang, chairman of Fosun International, is pictured during an interview in Shanghai in November 2018. Photo: Simon Song

The viral outbreak and earnings setback came as a huge test for the Foshan, Guangdong based conglomerate, which revamped its top management in February amid the pandemic to consolidate and steer the group after a global acquisition spree.

Fosun Tourism Group, an 81 per cent-owned unit that holds its investment in Club Med and Atlantis Sanya, is expected to incur up to 1 billion yuan of losses, Fosun added, versus a 490 million yuan profit a year earlier, it added.

The group, which was spun off in a Hong Kong listing in late 2018, operated 66 Club Med resorts in more than 40 countries in 2019. It acquired the Thomas Cook brand in November last year.

“Fosun Tourism Group continues to control cost and strives to promote business recovery,” the company said in the announcement released Friday night. “Currently, the Company’s financial position remains solid with ample liquidity and diversified financing channels to cope with future business needs.”

Fosun International has declined 17 per cent in Hong Kong this year, while Fosun Tourism slumped 37 per cent.

Fosun International organises its business into three distinctive categories, namely health, happiness and wealth, each represented by the pharmaceutical, tourism and lifestyle, and insurance units.

Guo did not elaborate on the performance of the health and wealth units in Friday’s exchange filing.

Despite the setback in the tourism unit. the Covid-19 pandemic has given the group some boost in the global race for its vaccines. It has a 38.2 per cent stake in Shanghai Fosun Pharmaceutical, whose application for clinical trials of its vaccine candidate was recently accepted by the Chinese government.

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