CR Enterprise net halves as retail, food units falter

Earnings at China Resources Enterprise (0291), whose core businesses include retailing, beer, food, and beverages, halved to HK$2.83 billion last year.

But the result was above the HK$2.43 billion forecast.

Earnings per share was HK$1.18 and the conglomerate set a final dividend of 32 HK cents. Underlying net profit of the core business fell 0.3 percent to HK$1.89 billion after excluding the effects of asset revaluation and disposals.

Last year net income at the retail division - made up of Chinese Arts & Crafts stores, CR Care shops and Pacific Coffee outlets - fell 10.1 percent to HK$1.7 billion.

"The slide in earnings in our retail business is due to tax and surcharges levied [in China] and higher labor costs," deputy managing director and chief financial Frank Lai Ni-hium said yesterday.

The wage bill in the mainland last year rose 40 percent from 2010 and will continue to grow marginally, Lai said.

But he is confident of maintaining stable underlying profits this year.

The food business, under the Ng Fung brand, fared poorly with net income slumping 33.5 percent to HK$278.

Income in the beverages operation, led by the C'estbon purified water brand, dropped 18.7 percent.

Of the four core operations, only the beer division reported growth in income, up 14.6 percent last year.

Growth was driven by the best- selling Snow Beer in the mainland.

"There is still room for price hikes of Snow Beer, and our average selling price is likely to increase after we shift to the premium beer market," Lai said.

He added there is no timeframe for the Kingway Brewery Holdings (0124) acquisition. The deal was not concluded last year as rivals emerged.

CRE plans capital expenditure of HK$8.3 billion this year, 40 percent of which will be used for asset acquisitions.

It aims to open 500 outlets under the CRE brand in the mainland this year, adding to the 4,000-plus stores it already operates.

Same store sales growth in the mainland is likely to ease to single digits this year compared with the 10.9 percent gain last year, Lai said. CRE shares fell 1 percent to HK$29.45 yesterday.