Financial Services Association, August 19 (Reporter Zhu Wanping) Affected by the high base, heavy precipitation in the domestic layout area, and weak consumption, China Resources Brewery (0291.HK)'s turnover in the first half of the year was 23.744 billion yuan, a slight decrease of 0.5%, and net profit of 4.71 billion yuan, a slight increase of 1.2%. Hou Xiaohai, chairman of the board of directors of China Resources Brewery, confessed at the company's performance exchange meeting held this afternoon that, unsurprisingly, the company's beer sales are expected to continue to grow by a low single digit throughout the year.

Financial reports show that in the first half of this year, the company's beer business achieved a turnover of 22.566 billion yuan, a year-on-year decrease of 1.43%, and achieved sales volume of 6.348 million kiloliters, a year-on-year decrease of 3.4%. China Resources Breweries executives said that the decline in the company's sales volume was mainly affected by the decline in sales of low-end beer, while sales of second-highest beer increased in single digits year-on-year in the first half of the year, and sales of high-end beer and above grew by more than 10%.

In the first half of this year, China Resources Brewery's product structure upgrade combined cost reduction also drove China Resources Brewery's beer business tonnage to 3,555 yuan/kilolitre, an increase of 2% over the previous year, and the gross margin of the beer business increased 0.6 percentage points to 45.8%. “Overall, the company's performance in the first half of this year was in line with our expectations.” A China Resources Brewery executive said.

In response to the beer business situation in the second half of the year, Hou Xiaohai said that the weather was not very good in July this year, the beer sales performance did not meet the company's expectations, and sales have been good since August. “However, it is unlikely that sales will increase throughout the year.” Hou Xiaohai said.

In addition to the beer business, outsiders are also concerned about China Resources Brewery's liquor business. The revenue from this business is mainly contributed by Guizhou Jinsha Cellar Liquor Co., Ltd., which was acquired by the company at a price of 12.3 billion yuan. Financial reports show that in the first half of this year, China Resources Beer's liquor business achieved a turnover of 1.178 billion yuan, a year-on-year increase of 20.6%, and profit before interest and tax (EBIT) of 0.048 billion yuan, a year-on-year decrease of about 32%.

Despite China Resources Brewery's earnings report, the sales scale of the company's liquor business is growing rapidly. Among them, the sales volume of “Summary” increased by more than 50% year on year, contributing about 70% of the liquor business turnover. However, from the perspective of profit before interest and tax (EBIT), the liquor business contributed very little to China Resources Beer's performance.

“Abstract” is the core single product of Jinsha Liquor. China Resources Brewery positions it as a “national high-end single product” in financial reports, but judging from actual prices, “Abstract” is currently mainly at the next high-end price, and this price has a big impact on the decline in commercial consumption. Since this year, the overall wholesale reference price of the “Summary” has shown a relatively stable trend. According to today's wine price data, the current wholesale reference price for “Summary” (53 degrees, 500 ml) is about 465 yuan/bottle, down 55 yuan/bottle from the beginning of the year.

Currently, on e-commerce platforms such as Pinduoduo, the “Summary” treasure edition sold at many stores costs around 460 yuan to 480 yuan/bottle. Earlier, Jinsha Liquor issued a notice requesting all sales regions to organize dealers in their jurisdictions to clean up the low-priced “Summary” treasure edition of the online platform. The clean-up and recycling targets are products with a price of less than 650 yuan/bottle. The target platforms involved include e-commerce platforms such as Pinduoduo, JD, Taobao, Tmall, and Suning. Looking at it now, the results of this clean-up operation seem to have fallen short of expectations against the backdrop of weak consumption.

“In the first half of the year, channel prices for our liquor were controlled, and the overall channel inventory remained at the level of 3 to 4 months. The company's liquor business will continue to strive for rapid growth in the future.” China Resources Breweries executives said it is possible for the company's liquor business to grow by more than 30% this year.

It is worth mentioning that at the end of July this year, there was a rumor about China Resources Beer's salary limit in the market. Some brokerage firms analyzed the matter and may have had a certain impact on the company's management and business development, and the company's stock price fluctuated greatly as a result. In response, at today's results conference, Hou Xiaohai said, “I will not comment on market rumors.” At the same time, he added that the company's remuneration level is already at the forefront of the industry and has a strong motivational effect. Even if unforeseen situations occur, there will be no shortage of incentives.

“Even if the above market rumor becomes reality, it will only affect a very small number of people, and the impact on the company's management team is probably only 0.01%, if not zero.” Hou Xiaohai said.

In recent years, China Resources Brewery's stock price has been weak. Since 2021, the company's stock price has dropped by about 65%. Since this year, the company's stock price has fallen by more than 28%. While China Resources Brewery handed over a slight increase in net profit this time, it also raised its interim dividend by 30%, reaching 0.373 yuan per share, and increasing the semi-annual dividend rate from 20.1% to 25.7%. Affected by this, the stock price of China Resources Brewery rose slightly by 0.42% today.

As to whether the company can increase dividends in the future proposed by some investors, Hou Xiaohai did not respond positively at today's results meeting; he only stated that future dividend policies will be formulated based on the company's development, capital expenditure, and profit situation.