China: Carlsberg brought 500% jump in 1Q to Lanzhou Huanghe Enterprise

Lanzhou Huanghe Enterprise Co., Ltd posted a higher than 500 percent jump in first-quarter net profits, partly on the alliance with the global beer prominent brand Carlsberg, SinoCast China Financial Watch reported April 10.The net profits is estimated to reach CNY 5 million to 6 million while the figure in the same period of last year was only CNY 959,300 with earnings per share being CNY 0.0058.

The soar is led by the sizzling performances of the joint ventures Huanghe Enterprise formed with Denmark-based Carlsberg, the Chinese company explained. The two joined hands in 2004 and so far have debuted four joint ventures, all based in Gansu, a northwestern province. The four, running Huanghe Enterprise's beer business under the Huanghe brand, have jointly grabbed a 60 percent share in Gansu's beer market. The product has been rather welcome in other northwestern regions, as well.

The sizzling performance in the off-season signals a continuous gallop in the entire 2007 provided no severe market fluctuation, said Wei Fuxin, board secretary at Huanghe Enterprise. He also attributed the strong growth to the beer maker's sound marketing strategy. Shenzhen-listed Huanghe Enterprise in 2006 earned sale revenues of CNY 596 million, up 23.25 percent from a year ago. With an increasing gross profit margin, the operating revenues from the main business gained 21.16 percent year on year.

The net profits rose 26.69 percent to CNY 20.26 million. Incepted a decade ago, it now has a 400,000-ton beer production capacity and 70,000-ton wheat germ processing capacity annually. It has agreed with Carlsberg to launch an environment-friendly project. With the beer production capacity of 500,000 tons, the project is in the preparation for the moment. It is expected to boost Huanghe Enterprise's annual production capacity of beer to more than 700,000 tons and wheat germ capacity to 200,000 tons.

The brewery, based in Lanzhou of Gansu, might then emerge into a second-tier beer maker in China, according to Wei Fuxin. Being just a regional player presently, Huanghe Enterprise faces stiff competition from rivals at both home and abroad. A beer producer's growth depends on several factors, including its production capacity, the earning manner as well as local rivals' conditions, pointed out an analyst at CITIC Securities. Though Huanghe Enterprise has gotten great support from the Carlsberg to improve the governance efficiency, it has to give more focus on boosting the capacity and sale for the further growth, he suggested.

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