China Re­sources says busi­ness un­der pres­sure on weak econ­omy

The Pak Banker - - Front Page -

BEI­JING

China Re­sources En­ter­prise Ltd. (291), the gov­ern­ment-backed part­ner of SABMiller Plc. (SAB), said its con­sumer goods busi­ness will be un­der pres­sure on weak global econ­omy af­ter re­port­ing a de­cline in profit be­fore one­time gains.

Profit ex­clud­ing one-time gains dropped 2.1 per­cent to HK$668 mil­lion ($86 mil­lion) in the third quar­ter ended Sept. 30, the com­pany said in a state­ment to Hong Kong's stock ex­change to­day. Sales climbed 11 per­cent to HK$34.2 bil­lion.

Poor global eco­nomic en­vi­ron­ment, slower eco­nomic growth in the world's most pop­u­lous coun­try and ris­ing la­bor costs be­cause of an in­crease in min­i­mum wages across China have im­pacted the com­pany, China Re­sources said in the state­ment. Con­sumer goods busi­ness in the near term will re­main un­der pres­sure, it said. China's gross do­mes­tic prod­uct slowed to 7.4 per­cent in the third quar­ter, the seventh straight de­cel­er­a­tion.

China Re­sources faces "tough" chal­lenges ahead as it is un­der cost pres­sure and there is un­cer­tainty in the global econ­omy, which will continue to im­pact the com­pany's profit for the rest of the year, said Jac­que­line Ko, an an­a­lyst at Kim Eng Se­cu­ri­ties (HK) Ltd. She has a hold rat­ing on the stock. China Re­sources, whose other busi­nesses in­clude bev­er­ages and food pro­cess­ing and dis­tri­bu­tion, fell 2 per­cent to HK$25.7 in Hong Kong trad­ing, the big­gest de­cline since Nov. 8. The stock has lost 3.6 per­cent this year, com­pared with the 16.8 per­cent gain in the city's bench­mark Hang Seng In­dex.

China Re­sources's re­tail op­er­a­tions had $1.5 bil­lion net gains on dis­posal of non-core in­vest­ments and on val­u­a­tion sur­plus on in­vest­ment prop­er­ties in the nine months ended Sept. 30, com­pared with gains of HK$633 mil­lion a year ear­lier. Same-store sales at the re­tail op­er­a­tions rose 4.6 per­cent in the first nine months of the year, com­pared with a 5.7 per­cent in­crease in the first six months of this year.

Rev­enue at the beer busi­ness fell 1.3 per­cent to HK$9.15 bil­lion dur­ing the quar­ter as rainy weather across the re­gions where the com­pany has dom­i­nated mar­ket share lim­ited sales vol­ume growth in the first nine months of the year, China Re­sources said. Its ven­ture with SABMiller sells the No. 1 Snow beer brand in China with a 22 per­cent mar­ket share last year, ac­cord­ing to Euromon­i­tor In­ter­na­tional, a Lon­don-based re­searcher.

Re­tail ac­counted for 64 per­cent of to­tal sales dur­ing the nine-month pe­riod, while beer con­trib­uted 24 per­cent.

Net in­come rose 27 per­cent to HK$1.14 bil­lion boosted by new store open­ings and con­tri­bu­tion from the newly ac­quired Jiangxi Hongke­long Depart­ment Store In­vest­ment Co., the com­pany said. "China Re­sources will fo­cus on grow­ing scale in its re­tail busi­ness in the next few years," said Vi­vian Liu, a Shang­hai- based an­a­lyst at Sinopac Se­cu­ri­ties Asia Ltd. Even so, the money it spends on adding new stores and mar­ket­ing may eat up prof­its, she said.

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