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Brewing company China Resources Beer (CR Beer) reported on Monday higher interim earnings results driven by an increase in profit and sales from China Resources Snow Breweries Limited’s (CRSB), proving that the country’s breweries are recuperating after declining in the recent years.

CR Beer’s chairman Lang Chen stated that in the first half of the year, the group has maintained steady progress towards developing and strengthening the beer business, as well as continuing on improving its product mix to keep up with the changing beer industry in the country.

Nevertheless, the beverage group still needs to keep a close eye with regard to its progress since its rival Tsingtao Brewery has stated earlier this year that uncertainties in the economic prospect would linger in some of the major regions amid changes on both political and economic policies.

Figures

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The leading Chinese brewer’s net profit with its beer brand Snow, rose as much as 93.4 percent year-on year to CN¥1.17 billion ($175.4 million) or CN¥0.36 earnings per share (EPS) in the first half ended June 30 as prices and sales picked up due to hot weather.

Snow Beer makes up about 25.6 percent of the beer market in China in 2016, beating home-grown rivals including Tsingtao Brewery and Harbin Brewery, and has been the largest brand by volume on a global basis since 2008.  

Last year, CR Beer has presented restated financial earnings report of CN¥605 million ($90.7 million).

Its profit pre-tax and interest for the first half of 2017 was also up by 1.8 percent to CN¥1.7 million.

Revenue added 3.7 percent on a year to year basis to CN¥15.77 billion ($2.4 billion) against CN¥15.21 billion a year earlier.

The hot weather benefitted the company’s beer sales volume as well, gaining 2.9 percent to 6,306,000 kiloliters, better than the industry's average during the period, and with Snow representing approximately 90 percent of the overall sales volume of the business.

The brewery’s constant build up over its brand promotion and market expansion, as well as its continued growth in overall sales volume of mid to high quality beer products, have led its overall average selling price to increase by 0.8 percent.

CR Beer’s Board of Directors also suggested an interim dividend of CN¥0.07 per share which is expected to be paid by October 16 this year to its registered shareholders.    

The Chinese brewery’s earnings results also reflected the benefit it acquired from accomplishing the 49 percent acquisition stake in CRSB in October of last year.

Ever since CR Beer completed the acquisition, its share of the brewing firm’s profit grew from 51 percent in the first half of 2016 to 100 percent in 2017 of the same period.

Forecast

Following CR Beer’s earnings report, the company’s stock price closed 2.2 percent lower to HK$19.53 on Monday, with analysts suggesting that the brewing group will be able to outperform the market given that sentiment has been improved in September 2016.

Profit margin of the company is also expected to rise through continuous product premiumization and the same goes with its sales channels, capacity and efficiency rationalization.

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