Guo Guangchang, the chairman of Fosun International, mounted a strong defence of the group’s global expansion strategy as some of its biggest overseas acquisitions contributed heavily to a 76 per cent plunge in first-half profits.
The billionaire boss of Fosun, one of China’s biggest private-sector conglomerates, said he was determined in internationalising its operations, while putting behind it the collapse of some of its businesses like British tour operator Thomas Cook, Canadian live performance company Cirque du Soleil and the slump in tourism that hit its Club Med business after the Covid-19 pandemic.
“It was inevitable that a [Chinese] company would pay a huge price in its internationalisation process,” Guo told a post-results press conference on Friday. “When everyone is casting doubts on our unsuccessful investments abroad, I would like to highlight our successful deals that can justify our globalisation strategy.”
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He cited the partnership with the German next-generation immunotherapy company BioNTech to develop a Covid-19 vaccine as an example.
“It is only a marriage between a globalised company and a company with innovation capability that can lead to the successful launch and distribution of an effective vaccine around the world,” said Guo, 53, whose net worth is valued at 57 billion yuan (US$8.27 billion). “We will firmly maintain our initial goal of becoming a company that can bring some changes to the world.”
Fosun’s subsidiary Shanghai Fosun Pharmaceutical has partnered with BioNTech to develop a Covid-19 vaccine, known as BNT162. It is among the nearly two dozen vaccines that are in various stages of development to treat the deadly respiratory disease. Fosun Pharma aims to complete clinical trials in China and obtain marketing approval in the next few months.
While there are plenty of uncertainties before the vaccine can be commercialised, on Thursday BioNTech announced a potential deal with Fosun Pharma to supply 10 million doses of the vaccine candidate to Hong Kong and Macau.
Guo did not elaborate on whether escalating US-China tensions have had an impact on Fosun’s go-global drive.
Chinese companies such as telecom equipment maker Huawei Technologies are facing difficulties in doing businesses abroad as the US administration chokes their access to the Western markets. Washington has upped the ante, targeting the short-video app TikTok owned by ByteDance and Tencent’s WeChat super app.
On Thursday, Fosun reported a profit of 2 billion yuan, or earnings per share of 0.24 yuan, for the six months ending June 30, a 74.6 per cent year on year decline. The first-half performance fell short of a median forecast of 0.52 yuan earnings per share in a Bloomberg survey of analysts.
The company said that 43 per cent of its overall revenue of 63.3 billion yuan was generated by its overseas businesses.
Fosun’s tourism and cultural businesses hit a snag owing to restrictive measures to contain the Covid-19 pandemic around the world.
Fosun which owns luxury resort operator Club Med, dating service provider Baihe Jiayuan and fashion brand Lanvin, posted a 391.9 million yuan loss in its “Happiness” business segment, which includes tourism, fashion and lifestyle segments, compared to a profit of 1.82 billion yuan in the same period last year.
Cirque du Soleil Entertainment Group, in which Fosun holds a 25 per cent stake, filed for protection from creditors in Canada two months ago after the pandemic forced the company to close down shows around the world. It was saddled with total debts of more than US$1 billion and a proposal by the shareholders to leave creditors with a 45 per cent stake in exchange for wiping out most of the debt was rejected.
Fosun meanwhile wants to revive the 178-year-old Thomas Cook brand, which went bankrupt last year, on a travel platform targeting European customers.
“Fosun has been chasing projects with high ROE [return on equity] rates in the health and leisure industries, and it was obvious that those businesses fell victim to the coronavirus outbreak,” said Ivan Li, a money manager at Shanghai-based Loyal Wealth Management. “The good news is that the Covid-19 fears are easing in China and parts of the world outside, and Fosun has chances of better tapping the acquired assets to justify its investment strategies.”
Shares of Fosun International were unchanged at HK$8.71 in Friday afternoon trading, but have lost 25 per cent of their value so far this year.
More from South China Morning Post:
- Fosun looks to reap the gains of its early investment in logistics giant Cainiao with a US$1.3 billion stake sale to Alibaba
- Fosun leverages on pharmaceutical, biotech in race to tackle coronavirus as pandemic dents ClubMed, Cirque du Soleil units
- Fosun names new chiefs in one of biggest management reshuffles since 2017 after overseas buying spree