China: China Resources Enterprise Announced Interim Results for 2005

China Resources Enterprise, Limited announced on September 8 its interim results for the six months ended 30 June, 2005 today. Consolidated turnover reached HK$25.3 billion, led by the retail and beverage businesses, representing an increase of 12% from last year. Profit attributable to Company’s shareholders grew by 70% to HK$1,262 million with all operations under management showing improvement in profitability. Excluding the after-tax effect of revaluation of investment properties, which led to a HK$326 million gain, underlying net profit was up 26%. Earnings per share rose by 66% to HK59¢. The Board of Directors declared an interim dividend of HK13¢ per share, an 18% increase from the same period in 2004.

During the period, earnings contribution from retail business surged 66% to HK$105 million. The three retail operations, including supermarket, retail stores in Hong Kong and brand fashion distribution, reported profit growth of 141%, 7% and 34% respectively. For the supermarket business, steady gross margin, reduced operational expenses, improved sales after store renovation and higher contributions from Suguo accounted for the profit escalation.

Earnings in beverage business rose by 14% with beer sales volume increasing 30% to 1.87 million kilolitres. Overall average selling price rose and overall gross margin was steady. Organic sales volume growth was 13%, beating the 3% market growth during the period. Sales volume of our national brand, SNOW, surged by 40% to about 706,000 kilolitres, comprising 38% of the total volume sold. Its annual production capacity amounted to about 5.8 million kilolitres at the end of June 2005.

Food distribution business reported a 26% profit growth, boosted by the HK$59 million gain through disposing our 25.09% stake in Xuzhou VV Food & Beverage. With prices for mainland livestock stabilized, operating margin of foodstuff distribution rebounded.

Textile business recovered with a 32% increase in earnings. There was strong growth in sales volume, including 36% for cotton yarns, 37% for fabrics and 25% for garment. We have re-aligned the 12 textile and dyeing plants to enhance production efficiency, that each of them can specialize in a particular product segment.

Petroleum business reported a 54% recurring profit growth driven by improved wholesaling and petrol station margins as well as piped gas projects. In addition, the residual 10.5% stake in Qingdao Qirun was sold, recording a HK$84m profit.

Mr. Song Lin, Chairman of the Company, said, “We have been making several necessary reforms for our businesses in the past years to enhance their long term competitiveness. By remodelling the store format of our supermarkets in China, focusing on individual fashion brand profitability and repositioning the department store business in Hong Kong, our retail division demonstrated significant turnaround. Similarly, the branding exercise for SNOW, the technology upgrade program for textile and the investment in piped gas projects for petroleum all created new drivers for them. Without these strategies in place years before, we would not have been able to enjoy the flourishing results today.”

China Resources Enterprise, Limited is listed on the Hong Kong Stock Exchange and is also traded on SEAQ International of the London Stock Exchange. It is also one of the constituent stocks of the Hang Seng Index in Hong Kong and Hang Seng London Reference Index. The Group focuses on the consumer businesses in both Hong Kong and the Chinese Mainland, with core activities being retail, beverage, food processing and distribution, textile and property.

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