China Resources is hit by extravaganza clampdown

The campaign to curb extravagant spending by mainland officials and rising material costs took a toll on China Resources Enterprise, which saw a more than 60 per cent drop in net profit in the first three months of the year.

Shares in the beer-to-retailing conglomerate dropped 1.4 per cent to HK$25.15 yesterday after the quarterly report was published.

Profits tumbled 61 per cent to HK$512 million in the three months to March, from HK$1.33 billion a year earlier. Stripping out the effect of paper gains from property revaluation and disposals of investments last year, profits at its core business dropped 8.6 per cent year on year.

The company, which operates Pacific Coffee shops in Hong Kong and on the mainland, and Chinese Arts & Crafts stores, and has a 51 per cent stake in the mainland's largest brewer, Snow, blamed the decline in its retail sales on the government's recent promise to fight corruption.

"The calls to curb receptions, vehicles and overseas trips at public expense, along with flattening inflation, have adversely affected consumption expenditure in the short run," the company said in its result announcement.

Sales at its retail business rose 7.3 per cent year on year to HK$25.9 billion, while earnings dropped 6.25 per cent.