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China Resources Rises on Underlying Profit Jump: Hong Kong Mover

Nov. 14 (Bloomberg) -- China Resources Enterprise Ltd., the state-backed hypermarket operator and beermaker, rose the most in a month as its underlying profit rose 36 percent in the third quarter on improved consumer spending.

The stock climbed 4.3 percent to HK$27.00, the biggest gain since Oct. 15. Earnings excluding asset revaluations and disposals rose 36 percent to HK$911 million ($117.5 million) in the three months ended September, the company said in a stock-exchange statement today.

Government-backed China Resources has expanded its beer and retail businesses by buying rivals and opening new stores to tap rising domestic consumption as incomes climb. The world’s second-largest economy expanded 7.8 percent in July-to-September from a year earlier, up from a 7.5 percent gain in the previous period.

“China’s domestic economy showed positive momentum as total retail sales of consumer goods continued to see a better growth rate, while consumers in tier-one cities were more willing to spend,” the company said in today’s statement.

Sales rose 19 percent to HK$40.6 billion. China Resources, listed in Hong Kong, derives more than 90 percent of its revenue from the mainland.

Hot Summer

Underlying profit at the retail operations fell 2.6 percent, while net income fell 83 percent to HK$84 million in the three-month period. The difference arose from revaluation of an investment property located in Hong Kong last year.

Earnings at the beer division, which makes China’s best-selling Snow brand with SABMiller, climbed 49 percent to HK$749 million. A hotter-than-usual summer helped boost sales in beer, the company said in today’s statement.

Tesco Plc, the largest U.K. retailer, is combining its 134 outlets and shopping-mall business in China with the almost 3,000 stores owned by the state-backed conglomerate in China and Hong Kong. Tesco will pay HK$4.33 billion to gain 20 percent of a venture with the Chinese company owning the rest, according to their agreement announced this year.

Sun Art Retail Group Ltd. is China’s largest hypermarket operator, with a 14 percent share of the 574 billion yuan ($94 billion) industry last year, according to Euromonitor International. Wal-Mart and China Resources were tied for second place with an 11 percent share each in 2012.

Sun Art reported today profit rose 26 percent to 2.18 billion yuan in the first nine months of the year on sales up 12 percent to 65.7 billion yuan.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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