Consumer-focused conglomerate China Resources Enterprise (CRE) said its net profits for the first nine months of 2008 dropped 52 percent year-on-year to HK$2.159 billion.

Meanwhile, the company's net profits for the third quarter dropped to HK$671 million from HK$765 million in 2007 despite its revenue rise by 29 percent to HK$18.3 billion.

CRE, which processes meat, owns slices of container ports and investment properties and produces Snow beer with SABMiller, said the mainland's economic growth slowed down during the period and the widening financial turmoil and declining exports hurt the country's economy.

The company lamented that domestic consumption during the Mid-autumn Festival and the National Day holidays was weak, adding that the worst has yet to come. "The economy is expected to slow down further in the last quarter of the year and 2009."

Excluding the disposal gains on non-core investments, profits of the food processing and distribution division decreased by 82.5 percent for the third quarter and 50.7 percent for the first nine months of 2008, mainly because of the performance of the livestock distribution business and the decline of pig import prices.

Intense competition in Hong Kong's live pig market reduced both sales quantity and gross margin, thus lowering the profitability of the livestock distribution business, the company said.

Profits from supermarket and logistic businesses for the third quarter were HK$64 million, down 12.3 percent, while the profits through September dropped 18.2 percent to HK$324 million.

But the company's beer sales volume rose 5.7 percent in the third quarter to 2.62 million kiloliters. Its premium Snow brand competes with the likes of Tsingtao and Yanjing in the domestic market.

CRE's profit contributions also rose 19 percent to HK$256 million in the third quarter, thanks to cost control and satisfactory results from some new breweries recently bought by the company.

The company's gearing ratio stood at 10.4 percent as of September, a slight improvement compared with the 13.3 percent in 2007.

Investment bank UBS downgraded the CRE's rating, saying the slowdown of domestic consumption will hurt mainland retail stocks.

CITIC Group, however, predicted that mainland supermarket industry will bottom out next year.

Due to poor third-quarter result, shares of CRE yesterday fell 1.71 percent to close at HK$12.6.

(HK Edition 11/20/2008 page2)