merate China Resources Enterprise Ltd (CRE) expects government approval for its joint venture with British supermarket operator Tesco to come through in May of this year.CRE's chief financial officer Frank Lai told journalists assembled at a news conference that "we can book in the sales from JV in third or fourth quarter this year."
"We can expect the Tesco joint venture will eventually get approval from Chinese authorities in May," he said.
The partnership was formed last October, with Tesco injecting all of its mainland stores into the joint venture and taking a 20 per cent stake. Tesco's most recent annual pre-tax losses in China amounted to HK$3 billion.
Tesco has not made any profits in China, but CRE wants to turn the situation around in three years. Net income in the retail division, CRE's biggest business, slumped 65.2% to HK$1 billion owing to the mainland's economic restructuring, the company said in a report to the Hong Kong stock exchange yesterday.
But CRE are extremely confident that the JV will be a success. "When we bought Home World, they were also losing 600 million [yuan]. It took us two-and-a-half years to turn it into break even. Then in the fourth year, we made a profit. So you can see the synergy definitely will come," said Frank Lai.
CRE's business interests focus on retailing, beverage, food processing and distribution, textiles and real estate in Hong Kong and Mainland China. Its assets include a 51% share in CR Snow, the largest brewing company in China and a joint venture with SAB Miller.
