40 Limited Annual Report 2001 Cutting-edge quality Operations Review Retail andManufacturing in HongKong. and mineralwatereach dayforsaletooffices andhomes plant canprocessand bottle330,000gallonsofdistilled lift andpackabout3,000 bottlesperhour. Thissophisticated a routinecheckontheroboticarmthatisprogrammed to operator atASWatsons waterbottlingplant,isperforming At 12:45hrinHongKong,Wong KwaiHung,amachine 12:45 hr

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41 42 Hutchison Whampoa Limited Annual Report 2001 Operations Review its freshfoodconceptcreatesfurtherdifferentiation. PARK n SHOP maintainsitsleadershipinthemarketand Retail andManufacturing the Taiwan operations. ventures, andalsoreducedretailprofitmargins,particularlyin HWC’s MainlandjointventureswithProcter&Gambleandother year mainlyasaresultofonetimerestructuringchargesfor overseas. ReportedEBITofHK$537millionwas19%belowlast expansion ofthesebusinessesinHongKong,theMainlandand or 8%,comparedto2000,duecontinuedgrowthinand totalled HK$29,543million,anincreaseofHK$2,295 Turnover fortheretailandmanufacturingdivision2001 manufacturing andtradingtoysalsopropertyinvestments. its businesstoconcentrateontraditionalactivitiesof became a50.5%ownedsubsidiaryinJuly2001andisrefocusing a companylistedontheStockExchangeofHongKong(“SEHK”), various venturesintheMainland.HutchisonHarbourRing(“HHR”), The HutchisonWhampoa(China)(“HWC”)divisioninvestsin spring waterproductsinEuropetotheoffice andhomemarkets. products inHongKongandtheMainlandaswellmineral manufactures anddistributesvariouswaterotherbeverage beauty productsandconsumerelectricalgoods.Thedivision and householditems,highqualitypersonalcare,health UK, withmorethan1,100storesworldwidethatprovidefood operating threemajorretailchainsinAsiaandonechainthe The Group’s ASWatson divisionisoneofAsia’s largestretailers, Your Personal Store has maintained its position as the most recognised health and beauty retailer in Asia. A S WATSON

2001 was another difficult year in the retail sector due to The non-food retail businesses include Watson’s, a leading weak economies and increased competition. The retail chain of personal care products with strong brand supermarket operations in performed well in a name recognition in Hong Kong, Taiwan, the Mainland and deflationary economy with the continued expansion of its other countries in Southeast Asia, and Savers, a health and large format stores. The retail non-food businesses benefited beauty products retail chain in the UK. These operations from geographic diversity with strong growth from the reported combined sales 14% above and EBIT in line with Savers retail chain in the UK partially offsetting the reduced the previous year. Watson’s continued to expand its chain in results from the businesses in Taiwan and Hong Kong. The Asia with the addition of 28 outlets, and now has over 560 manufacturing businesses in Hong Kong and the Mainland stores in the region. In Hong Kong, sales increased marginally were adversely affected by price competition while in Europe and EBIT was lower than the previous year due to the weak the water operations continued to expand and integrate the economy. In the Mainland, Watson’s reported sales growth of acquisitions made over the last few years. 15% and a positive result. In Taiwan, the slow economy, weaker New Taiwan dollar, and difficult trading conditions PARKnSHOP’s supermarket operations in Hong Kong and adversely affected sales, which declined 15% and Southern China reported an 11% growth in sales and an significantly reduced EBIT. A new management team is improvement in EBIT, a result of successful store expansion in addressing the trading issues to rebuild the business and to both regions. In Hong Kong, PARKnSHOP continued to improve its performance. In Southeast Asia, Watson’s expand its larger format superstores with more fresh food operations in Singapore, Malaysia and Thailand reported a offers and a “one-stop-shop” concept. Total trading area 3% sales increase and EBIT above the previous year. In the increased to 2.2 million sq ft at the end of the year. Despite UK, Savers, which was acquired in September last year, deflation in food prices and strong competition, the aggressively expanded its outlets to over 230 at the end of operations performed well in 2001, maintaining its leading the year. The successful expansion programme and strong market share. In Southern China, PARKnSHOP opened two comparable store sales growth contributed to impressive additional large format stores in Guangdong province, results for the year. The performance of Savers has been modelled on its successful large format store in Guangzhou, better than expected and further aggressive expansion of the which was opened in November 2000. More new stores in business is underway. Southern China are planned for this year.

PARKnSHOP has successfully introduced the megastore concept in Southern China.

43 44 Hutchison Whampoa Limited Annual Report 2001 Operations Review which are manufactured anddistributedinHongKong well knownbrandsofwater, softdrinksandfruitjuices, The manufacturingdivision’s operationsare comprisedof cosmetics concessioninTerminal 1. in Februarythisyear, wonanotherthree yearperfumeand in Terminal 2ofSingaporeChangiAirportand International three yearconcession forthesaleofperfumeandcosmetics passenger spending.InJuly2001,Nuance-Watson wona marginal declineinsalesandreduced EBITduetoreduced Airport.ThisoperationreportedKong International a perfume, cosmeticsandgeneralmerchandise attheHong Holdings,holdsconcessionsforthesaleof International Nuance-Watson, a50%jointventure withNuance declined 6%andEBITwasgreatly reduced. discretionary consumerelectricalgoodsmarket.Sales sentiment andreduced consumerspendinginthemore in HongKongwasseverely affected bypooreconomic The 67store Fortress consumer electricalgoodsstore chain the UK,providinggreatvalueand conveniencetoconsumers. Savers healthandbeautychain continues togrowswiftlyin Retail andManufacturing HUTCHISON WHAMPOA(CHINA) economy inHongKongandexpansioncostsEurope. 2000 duetopricecompetitioninallmarkets,theweak Europe. However, combinedEBITdeclined43%compared to This division’s salesincreased 7%mainlyduetoexpansionin France andnowhasoperationsinsevenEuropean countries. business furtherexpandedwithacquisitionsinItalyand markets inEurope. Duringtheyear, theEuropean water manufactured anddistributedtotheoffice andhome the Mainland,andmineralspringwater, whichis dental hygieneandpaperproducts throughout the distributes arangeofhair-care, skin-care, soap,detergent, Procter &Gamble-Hutchison whichmanufactures and The Group’s principalinvestmentisa20%interest in medicines (“TCM”). develop anddistributenewtraditionalChinese joint ventures were entered intotoresearch, manufacture, and aviationprojects. Duringtheyear, anumberofnew investments inanumberofsuccessfulconsumerproducts Hutchison Whampoa(China)Limitedcurrently has HK$ millions Turnover Retail andManufacturing 79 90 01 00 99 98 97 21,448

21,580

23,805

27,248

29,543 Hong Kong Overseas manufactures and distributes health products in the Mainland. Shanghai Hutchison Pharmaceuticals Limited, a 50% owned joint venture in Shanghai, manufactures and distributes TCM products in the Mainland. The Group is

The Group’s Powwow brand became the UK’s largest water currently planning to test market TCM products under the cooler company in just two and a half years in the business. “Sen” brand name in the UK.

HUTCHISON HARBOUR RING Mainland. The Group’s share of EBIT from this joint venture Hutchison Harbour Ring (formerly ICG Asia Limited) is listed declined compared to last year, due to one time restructuring on the SEHK and became a 50.5% subsidiary of the Group in charges and competition from international and domestic July 2001. In the second half of the year, HHR fundamentally companies to gain market share. restructured and refocused its business strategy. HHR The Group has entered into three start up joint ventures to reassessed the financial performance and business prospects develop health care businesses. Tong Ren Tang Hutchison, of its Internet B2B activities and began to gradually exit from a 50% owned joint venture in Hong Kong, provides these business interests through a programme of distribution service for TCM products. Hutchison Healthcare rationalising its various investment positions and making Limited, an 80% owned joint venture in Guangzhou, prudent provisions. HHR plans to retain only small strategic holdings in its Internet B2B investments and focus on its traditional activities of manufacturing and trading of toys and property investments. For the period from July to the end of 2001, the Group has consolidated HHR’s results. The Group’s 50.5% share of HHR’s profit attributable to shareholders, after consolidation adjustments, amounted to HK$23 million.

Number of Retail Outlets 1,139 1,028 823 788 704

Traditional Chinese medicine formulas are produced to the highest international manufacturing standards.

Overseas Hong Kong

97 98 99 00 01 45