China Resources Beer (0291) saw its first-half net profit fall 10.7 percent year-on-year to 5.17 billion yuan (HK$5.98 billion) and cut its interim dividend by 3.9 percent to 44.6 fen.
Overall turnover edged up 1.2 percent to 24.24 billion yuan, while basic earnings per share dropped to 1.59 yuan.
Zhao Chunwu, chairman of the borad at the company, cited higher raw material costs and increased investments to cultivate mid-tier and new products as the main reason for the profit decline.
However, despite the interim dividend cut, Yang Hongxia, chief financial officer of the company expects the full-year payout ratio to rise from last year's 53 percent to at least 55 percent, eyeing a long-term target of up to 70 percent.
On a segment basis, the core beer business stayed resilient with turnover rising 2.2 percent to 23.67 billion yuan as sales volume increased 1.7 percent to 6.6 million kilolitres.
A continuous premiumisation strategy drove its sales volumes for sub-premium and affordable premium beers up by over 10 percent and 15 percent, respectively. Among them, Heineken surged over 20 percent, while Lao Xue and Amstel jumped more than 40 percent and 80 percent.
Meanwhile, Li Xiaodong, vice president of the company, noted the gross profit margin shed 1 percentage point to 48.3 percent due to heavier regional promotions and a 2 percent rise in production costs driven by pricier packaging.
Profitability to improve in the long run by expanding the sales proportion of sub-premium and above beers from 26 percent to between 30 and 35 percent, Li expects.
In contrast, the baijiu segment weighed on results as turnover plunged 27.2 percent to 570 million yuan and earnings before interest, taxes, depreciation, and amortization (EBITDA) shrank to 84 million yuan. The company attributed this short-term operational pressure to a cycle of profound adjustments and consumption polarisation in China's baijiu industry, characterized by "subdued overall volume, structural divergence, and high inventory levels".
To navigate the prolonged adjustment period, CR Beer plans to build a consumer digital operation system and expand its group-buying businesses and direct sales channels. They will continue to optimize the segment's structure, dedicating itself to turning baijiu into its second growth driver, the group added.
