China: China Resources Enterprise’s beer division reports 13.3% increase in turnover in the first quarter of this year

China Resources Enterprise, Limited said on May, 16 its beer division reported turnover of HK$6,548 million and an attributable loss of HK$23 million, respectively for the first quarter of 2013, representing an increase of 13.3% and a decrease in loss by 30.3% over the corresponding period last year.

The division recorded beer sales volume of 2,297,000 kilolitres for the first quarter of 2013, representing an increase of 16% as compared to the corresponding period last year. Of this, the
sales volume of the Group’s national “雪花 Snow” brand increased by 17% to approximately 2,103,000 kilolitres, accounting for over 90% of the Group’s total beer sales volume. Higher-than-usual temperatures nationwide fuelled the growth in the overall capacity of the beer market during the period under review, which in turn boosted the division’s sales volume.

During the quarter under review, the division’s overall operating costs, including primary and secondary raw material costs, generally increased. In response to the intensifying market competition, the division ramped up investment in promotions and marketing in a moderate manner, which in turn hindered growth in the division’s operating profit.

The division’s newly-built breweries in Guangxi and Anhui commenced operation during the quarter under review. As at the end of March 2013, the Group operated more than 80 breweries in China with an aggregate annual production capacity approximately 18,000,000 kilolitres. The recent Sichuan earthquake in April this year has insignificant impact to the local operation.

In addition, the Group’s beer division has entered into an agreement in February 2013 to acquire the business of Kingway Brewery Holdings Limited (“Kingway Brewery”) in relation to its beer production, distribution and sales businesses for a total consideration of RMB5.38 billion. The assets involved include seven breweries in Chengdu, Dongguan, Foshan, Shantou, Tianjin, Xian and Shenzhen Plant 2 with a combined production capacity of 1.45 million tonnes. With the good brand reputation of Kingway Brewery in China, especially in Guangdong Province, as well as its strong market share, extensive sales network and established manufacturing facilities, the acquisition will not only strengthen the division’s production capacity and economies of scale, but also further optimize the sales network of the Group in China and continue to enhance the Group’s leading position in China’s beer industry.

Looking ahead, the Group’s beer division will continue to carry out marketing campaigns for the “雪花 Snow” brand so as to strengthen the brand’s reputation and customer loyalty. The division will reinforce the promotion of its premium beer to optimize its product mix. At the same time, the division will continue to seek and evaluate investment opportunities in a prudent manner while pursuing organic growth in order to expand its market share and to consolidate its leading market position, China Resources said.