CHINA: SABMiller JV partner, China Resources Enterprise, warns on economy
- CRE nine-month net profits from core business drop by 3.3% to HKD2.4bn (US$308m)
- Net sales rise by 26% to HKD84bn
- Beer profits rise by 10% to HKD863m
- CR Snow Breweries venture partner warns on consumer confidence
SABMiller remains confident about the growth of its beer business in China, despite a warning from its joint-venture partner, China Resources Enterprise, that the country's economy has weakened.
China Resources Enterprise (CRE) said last week that net profits in its beer division rose by 10% for the nine months to the end of September, to HKD863m (US$110.8m). In the third quarter, however, beer profits rose by just 1.5% to HKD534m.
The slowdown in momentum refects growing economic pressures on Chinese consumers and higher input costs for businesses, according to CRE, which owns 51% of CR Snow Breweries. The other 49% is held by SABMiller.
All of CRE's other business divisions reported falls in net profits for both the nine-month period and the third quarter. Profits in retail, food and beverages fell by 40%, 32% and 26%, respectively, in Q3, compared to the same period of 2010. CRE's group net profits from its core business fell by 3.3% for the nine months and by 18.4% in the third quarter, to HKD2.4bn and HKD1.06bn, respectively.
"The uncertainties surrounding the global economy have affected consumer sentiment in China, which in turn has put pressure on the Group's consumer goods business in the near term," said CRE. Nevertheless, CRE's group net sales still increased by 26% for both the first nine months of 2011 and also for the third quarter, to HKD84bn and HKD30.8bn respectively. Consumer price inflation was a key sales driver, the firm said. Beer sales rose by 24% for the nine months, to HKD22.1bn, and by 19% for the third quarter, to almost HKD9.3bn.
Speaking to just-drinks during a results briefing last week, SABMiller's CEO, Graham Mackay, said that the economic environment is currently "quite constrained" in China. "The mood music is more sombre than usual," he said, but he added that the CR Snow business has continued to perform well.
In its outlook, CRE said that it will cut costs: "Over the next 12 months, we will strive to minimise the impact of higher costs with the implementation of stringent cost control measures while enhancing our economies of scale."
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