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CRE retail hit by SARS but earnings rise 3%
( 2003-09-11 14:34) (China Daily HK Edition)

China Resources Enterprise (CRE) suffered a big loss in its retail business in the first half due to the SARS outbreak and high start-up costs for its expanded mainland supermarket network.

But strong growth in its petroleum and textile operations offset the loss to push up the company's earnings by 3 per cent year-on-year for the six months ended June 30.

China Resources, which is backed by China's foreign trade ministry, said its net profit reached HK$749.7 million (US$96 million) in the first half, compared with HK$725.5 million (US$93 million) a year earlier.

The textile operation saw its profit rising 74 per cent to HK$82 million (US$10.5 million), while petroleum and chemicals distribution - benefiting from a global oil price hike - contributed HK$286 million (US$36.7 million) in earnings to the company, 57 per cent up from a year ago.

Compared with a gain of HK$61.5 million in the first half of 2002, the company's retail operations inked a loss of HK$88.8 million (US$11.4 million) this year.

"We have slowed down the expansion plan for new supermarkets on the mainland, focusing on improving the internal management first," said Chairman Ning Gaoning.

"We don't expect the retail business to contribute profit to the company until the second half of next year," the chairman said.

China Resources spent some HK$240 million (US$30.7 million) for the opening of 17 new supermarkets by the end of June, and plans to spend another HK$70 million for nine more in the second half.

The company posted HK$16.2 billion (US$2 billion) turnover for the first six months, 25.2 per cent up from a year ago, of which 49 per cent came from mainland operations for the first time.

However, the proportion of pre-tax profit from mainland operations fell to 8 per cent from last year's 25 per cent, dragged by the retail and brewery businesses. Earnings contribution from beer operations dropped 34 per cent as SARS frightened consumers away.

The company declared an interim dividend of HK$0.1.

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