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China Resources Beer Boosts Profit on Higher-Margin Beer Sales

Published on Aug 19 2016 10:36 AM in Drinks tagged: Trending Posts / China / China Resources / Drinks / Snow Beer

China Resources Beer Boosts Profit on Higher-Margin Beer Sales

China Resources Beer Holdings Co., maker of the world’s top-selling brew, reported 605 million yuan (US$91 million) in profit for the first half of the year after focusing on more premium products that garnered higher prices even as sales dipped slightly.

Profit from its continuing operations increased 45 percent to 605 million yuan from 417 million yuan in the same period last year, said the company, which makes Snow beer. China Resources Beer said that the profit growth was due to higher average selling prices, enhanced production capacity and reduced materials costs.

Shares rose as much as 1.7 percent to HK$15.38 on Friday in Hong Kong trading.

China Resources Beer and other breweries are engaged in a pitched battle for market share as a slowing economy weighs on beer consumption. The company is open to acquisition opportunities and isn’t interested in smaller companies, Chief Financial Officer Tomakin Lai said at a briefing in Hong Kong Friday. It agreed in March to take full control of the Snow brand, buying out its venture partner SABMiller Plc’s 49 percent stake for $1.6 billion.

The company saw a sales drop of 1.8 percent in the first-half to 15.2 billion yuan compared to the same period last year, and a similar drop in beer sales volume to 6.1 million kilolitres, it said in a statement to the Hong Kong exchange.

Lackluster Economy

It attributed the decline to the "lackluster macroeconomy, the decline in consumer spending appetite and the unfavorable weather conditions in mainland China." The country had its worst floods since 1998 last month and cooler-than-usual weather at the start of the summer, which analysts said would dent sales for brewers during traditionally peak beer-drinking months.

On the whole, the company said its sales were better than the industry average.

“It remains to be seen if they can sustain a strong performance in the second half, as results in the year so far have been volatile," said Guotai Junan Securities Co analyst Andrew Song.

The company had sold its non-beer assets, including its money-losing retail venture with Tesco Plc, to its parent for HK$30 billion last year to focus on its top-selling Snow beer. It posted a loss of 3.42 billion yuan for the first half of last year if discontinued operations were included, it said.

China’s beer market is one of the most competitive, with major brewers including Tsingtao Brewery Co., Beijing Yanjing Brewery Co., Anheuser-Busch InBev NV, and a myriad of smaller, regional producers, accounting for almost 30 percent of the market. Snow beer is the top-selling brew in China with over a fifth of the market.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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