China's biggest retail-chain operator, Lianhua Supermarket, said yesterday it would invest more than 400 million yuan (US$48.3 million) to open about 570 new stores in the second half of the year.

"We aim to achieve a larger economic scale and accelerate business growth through rapid expansion nationwide," Lianhua's Chairman Wang Zongnan said at a press briefing yesterday.

The Shanghai-based retail firm has operated a total of 2,214 outlets in 20 provinces and cities as of June 30, an increase of 330 new stores from the end of last year.

Xu Lingling, financial officer of the company, told reporters after the meeting that Lianhua would directly invest and set up eight hypermarkets, 50 supermarkets and 120 convenience stores in the second half of the year. The rest of the new stores will be established through franchise management.

According to her, the company's operating cash flow stood at about 900 million yuan (US$108.7 million), which is well enough to cover the expansion this year.

Shares in Lianhua soared by 10.1 per cent to HK$5.45 yesterday after it posted a 56 per cent rise in its first-half net profit in its first financial report since initial public offering in June.

The company attributed the encouraging financial performance to its continued rapid expansion in China's fragmented supermarket sector.

Its turnover rose 87 per cent to 4.56 billion yuan (US$550.7 million) and net profit reached 85 million yuan (US$10.3 million) for the first six months.

Supermarket operation is the company's most mature business and reported revenue of 2.6 billion yuan (US$314 million), an increase of 40 per cent year-on-year, which accounted for 57.3 per cent of the company's total.

Hypermarket business, which is still at the early stage in China, reported the fastest growth among Lianhua's retail operations - soaring by 447.12 per cent to 1.5 billion yuan (US$181 million) in revenue, and its convenience stores reported 41.46 per cent growth to 406 million yuan (US$49 million).

In addition to the three general types of retail business, the company's chairman said Lianhua had introduced the discount store, a new business mode, into the market via collaboration with Spain-based Distribuidora Internacional De Alimentacion (Dia).

(HK Edition 08/22/2003 page7)