Fosun International 2023 interim results show steady growth amid global headwinds

published on The Asset.com 13 Sep 2023

Fosun International Limited has maintained steady overall business growth despite the slow economic recovery.

Focusing on its core businesses, the Chinese multinational group reported revenue of 97.06 billion yuan (US$13.28 billion) for the six months to June 2023, a 10.9% increase from a year ago. Industrial operation profit, a critical indicator of the company’s operational capabilities, rose by 5.5% to 3.37 billion yuan, if excluding the profit of disposed (including transactions yet to be completed) enterprises, representing a significant year-on-year increase of 66%.

"The first half of the year was tough, with the pandemic significantly impacting the Chinese economy for the past three years, resulting in lingering effects in the first half of 2023,” says Fosun executive director and co-chief executive officer Xu Xiaoliang. “The recovery phase in both domestic and global markets is slow and uneven across sectors. Regardless, we are satisfied with our progress so far."

 

Fosun executive director and co-chief executive officer Xu Xiaoliang

Streamlining businesses and expanding financing channels

In response to challenges in the macro environment, Shanghai-based Fosun streamlined its businesses and focused on the needs of global families in health, happiness, and wealth.

"Fosun has pivoted from diversified development to concentrate on family-centric sectors. This transition necessitates specialization, membership-based models, and systematic frameworks. High gross profit margin is needed on the maker end, and digitization is crucial to achieve this," says Xu.

As a major player in the tourism industry, which is a pillar of family enjoyment-oriented consumption, Fosun benefits from the economic rebound and actively promotes the resurgence of offline consumption.

Among its portfolio companies, France-based Club Med, which offers premium all-inclusive leisure and vacation packages for families, saw its global business volume grow 20% in H1 2023 from a year earlier, while Atlantis Sanya, a luxury resort in Hainan, China, welcomed a total of 3.18 million visitors during the period.

Despite business perking up, Xu notes that the pace of recovery of overseas travel among Chinese tourists is not as robust as previously expected.  Factors such as flight schedules, visa processing times, and customer willingness are affecting business rebound, but Xu remains upbeat: "This sector is expected to improve in the future." A report by Future Market Insights predicts a remarkable growth trajectory for the global tourism market, which is projected to develop at a compound annual growth rate (CAGR) of 5% over the next decade, reaching an estimated value of US$17.1 trillion by 2032.

Meanwhile, Fosun worked on enhancing its capital and asset structure as it stepped up efforts towards disposing of non-strategic and non-core assets. From its latest interim results data released in August 2023, the group's cash inflow from divestment amounted to more than 20 billion at the consolidated level. In addition, Fosun redeemed onshore bonds of 6.73 billion yuan as well as USD offshore debt and syndicated loans amounting to more than US$2.7 billion, and it had no material offshore bonds due in the next 12 months. As of 30 June 2023, cash and bank balances and term deposits were abundant, reaching 114.68 billion yuan. Fosun’s proactive liquidity management has been affirmed by the international market, its’ rating outlook has been lifted by international rating agency S&P Global Ratings to "stable" in May 2023.

In view of global interest rate hikes, Fosun, being a private enterprise, is actively exploring financing channels to maintain sufficient liquidity. In addition, it is reducing investments in asset-heavy businesses and bolstering its capabilities in asset-light segments while continuing to invest in research and development in key sectors, explains Xu.

Fosun will continue its strategic focus centering around the needs of global families. It is preparing a comprehensive industry layout, covering sectors such as hospitals, maternal and infant systems, medical insurance, high-end medical checkups, and elderly care. The group will increase R&D investment in areas such as malignant tumors' treatment. It is also expanding into sectors such as fine jewellery, liquor and spirits, beauty, and pet-related businesses.

Well-established global business presence

Fosun began its globalization journey in 2007 when it listed in Hong Kong. Since then, Fosun has established a business presence in over 35 countries and regions, and has more than 100,000 employees worldwide. Indeed, it boasts global coverage that is rare for Chinese privately-owned companies.

In H1 2023, overseas business became the driving force for the group's development, with overseas revenue amounting to 44.09 billion yuan and accounting for 45.4% of total revenue.

"Global operations are more about bridging gaps in space rather than time. The key is to combine global growth momentum with global resources," says Xu.

The group’s "global organization + local operations" model has matured over time. During the reported period, Fosun Insurance Portugal's international business continued to grow, while its Latin American business improved further; Eason Technology recorded a significant increase in its overseas high-margin orders, especially in North America.

"After enduring a three-year-long pandemic, I am confident about the future. This experience has taught us invaluable lessons in resilience and helped us sharpen our focus on essential sectors; we should be more courageous at this time," says Xu. "As we continue to adhere to our original aspiration and mission, to navigate through this challenging period and win out more cycles, we remain committed to our global family-oriented strategy, and we are optimistic about our future."