(Corrects story from March 20 to fix company name to Tesco Plc,
not Tesco Corp)
* Full-year net profit lowest in nine years, Q4 a loss
* Strong beer sales fail to offset weak food business
* Sees Tesco JV to turn to profit in 2-3 years - CFO
* Expects to get China approval in Tesco JV in May - CFO
* Says will develop e-commerce in China through Tesco JV -
By Donny Kwok
HONG KONG, March 20 China Resources Enterprise
Ltd (CRE), the country's No.2 supermarket chain, said
it will expand in smaller cities and lean on its joint venture
with Tesco Plc to turn around a business that posted
its lowest profit in nine years.
Hypermarket operators in China including Hong Kong-listed
CRE and market leader Sun Art Retail Group Ltd have
been pressured by competition from a growing online foods market
and a slower Chinese economy.
In October, CRE said it was joining forces with Tesco's
China unit in the hopes of cutting costs and tapping the British
supermarket operator's international expertise. But some CRE
investors dumped its shares after the tie-up, concerned that the
Tesco unit had been making losses.
CRE said it expects the joint venture to turn profitable in
two to three years.
"We are not a miracle worker. I cannot turn it from loss to
profit overnight. That is why we have that HK$4.3 billion
($553.77 million) cash to help us to cushion this," CRE Chief
Financial Officer Frank Lai told reporters on Thursday.
"This HK$4.3 billion cushion plus two years' time, we are
very comfortable it will become a very valuable asset," Lai
said. "We can book in the sales from the JV in the third or
fourth quarter this year."
Lai expects the Tesco joint venture will eventually get
approval from Chinese authorities.
"I expected them to be approved by May or June," he said.
CRE on Thursday said full-year net profit fell to HK$1.91
billion ($246 million), the lowest since 2004, from HK$3.95
billion a year earlier. That was below a forecast of HK$2.11
billion from Thomson Reuters' Starmine SmartEstimate.
The company, which has a market value of $6 billion, said it
would step up expansion into smaller mainland cities after its
2013 profit from retail operations fell 65.2 percent from a year
earlier, with its food business down 84 percent.
Sun Art had earlier in March reported a 15.2 percent rise in
net profit for 2013, with an expanding store network helping it
to shrug off an economic slowdown.
CRE posted a loss of HK$30 million for the fourth quarter,
compared with a HK$572 million profit in 2012, according to
The company, which has interests from beverage making to
operating supermarket chains, said its turnover for 2013 rose 16
percent to HK$146.4 billion.
CRE, which owns China's top beer brand Snow, said beer
remained its major earnings contributor, with profit rising 14.6
percent to HK$943 million and beverages profit up 23.3 percent
to HK$106 million. The Snow brand has a market share of 23
percent in volume terms.
Rival Tsingtao Brewery Co Ltd is due to
announce its 2013 earnings next week.
CRE shares ended up 1.2 percent after the earnings
announcement, outpacing a 1.8 percent fall in the Hang Seng
For additional detail on the company's results, please see:
($1 = 7.7649 Hong Kong Dollars)
($1 = 7.7649 Hong Kong Dollars)
(Reporting by Donny Kwok; Editing by Anne Marie Roantree,
Stephen Coates and Ryan Woo)