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CASTLE MALTING NEWS in partnership with www.e-malt.com Italian
20 April, 2007



Brewing news Hong Kong: Tsingtao says H2 earnings jump 76.9%

Tsingtao Brewery Co. Ltd., China's second-largest beer maker, posted a 76.9 percent rise in second-half earnings as it struggled to protect margins and fought foreign entrants in China's beer market, Reuters reported April 20.

Tsingtao – 27 percent-owned by top U.S. beer maker Anheuser-Busch Cos. Inc. and maker of China's most famous beer brand – is battling for market share from global players SABMiller, Heineken and Carlsberg while fighting to protect margins in a country where a 640-ml bottle can cost just 12 U.S. cents.

China's beer market is the largest in the world by volume and grew nearly 15 percent in 2006, the third consecutive year of double-digit volume growth, according to Anheuser-Busch, and Tsingtao hopes next year's Olympics will further spur sales.

The market reached 307 million hectolitres in 2005.

Tsingtao said on Thursday it earned 235.1 million yuan (US$30.47 million) for the six months ended Dec. 31, 2006, versus 132.9 million yuan a year earlier.

The result beat an average forecast of 175.71 million yuan, according to Reuters calculations based on 14 analysts polled by Reuters Estimates.

The Chinese brewer said its net profit for 2006 was at 447.9 million yuan versus 306.6 million yuan a year earlier.

Beverage-to-retail giant China Resources Enterprise Ltd. <0291.HK>, which runs China Resources Snow Breweries, a beer venture with SABMiller Plc, is China's largest brewer. It commands around 15 percent of China's beer market.

Tsingtao has a market share of around 14 percent, while domestic competitor Yanjing Brewery Co. has 10.2 percent.

Analysts say 2007 will be a year in which the firm struggles with new competition, and rising costs that eat into margins.

"There are key areas to be worried about: the first is the jump in barley costs, the second is rising energy prices and the third concern is the jump in sales and promotion costs because competition is intensifying," Vineet Sharma, analyst for JP Morgan, said on Thursday.

Global barley prices rose 78 percent year-on-year to US$217 per tonne in February 2007, according to Dutch bank ABN Amro.

Tsingtao imports more than 50 percent of its barley and usually maintains a five to six-month inventory, the bank said in a research note.

In early March, Tsingtao president Jin Zhiguo told Reuters the Olympics would be a good opportunity to promote the brand, but declined to predict how much growth the event would bring for the company.

The firm expected double-digit sales growth in 2007, he said.

Tsingtao was established a century ago in the port city of Qingdao, which will host the games' sailing events.

The brewer's Hong Kong-listed shares climbed 51 percent in the second half of last year, in line with a 52 percent jump in the index of Chinese companies listed in Hong Kong

($1=7.716 Yuan)





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