Tsingtao faces test of confidence

PUBLISHED : Saturday, 30 June, 2012, 12:00am
UPDATED : Saturday, 30 June, 2012, 12:00am

The resignation of Tsingtao Brewery chairman Jin Zhiguo, coming just days after a major shareholder sold HK$1.5 billion worth of shares in the company, will weigh on market sentiment towards the brewer, analysts say.

Jin (pictured), 55, resigned from the top post and left on Thursday after a 37-year association with the company. His departure surprised analysts, as he had extended his tenure for another term just last year, brokerage Yuanta Securities said in a report.

In a filing to the Hong Kong stock exchange, Tsingtao said Jin resigned for health reasons.

But the timing of the resignation and the earlier sale of 32 million H-shares in the brewer by its second-biggest shareholder, billionaire Chen Fashu, at reportedly HK$47.00 a share - or a 10 per cent discount to the prevailing market price - sparked allegations of insider dealing. The company denied the claims in a separate announcement on Thursday.

Chen was reported to have netted HK$1.5 billion from the sell-down of his shareholding.

Tsingtao president Sun Mingbo, 55, has succeeded Jin as chairman. Analysts said the transition should not have a great impact on the daily operations of the brewer since Sun had been with the company for 19 years and was familiar with the business.

Shares in the company dropped as much as 2 per cent before recovering most of the intra-day losses to close down just 0.6 per cent at HK$44.05 yesterday.

Tsingtao said the outgoing chairman confirmed that he had undertaken no communication with Chen prior to the share sale and neither had Chen communicated with the company before the sale.

Under the reign of Sun, Tsingtao would probably roll out a more volume-focused growth strategy, a UBS report said.

'Sun has been endeavouring to fulfill a 10 million kilolitre sales volume target in 2014 by nurturing a second brand and by acquisition,' it said.

Jin led Tsingtao's internal consolidation after its aggressive acquisitions in the 1990s. But volume growth has slowed since 2001, and from the second half of 2010, the brewer has devoted more energy to achieving higher sales volumes.

It acquired Shandong Yinmai Beer last year. Earlier this month, it announced a joint venture with Japanese beverage maker Suntory to produce and distribute beer in Shanghai and the neighbouring province of Jiangsu.

However, the ability of the new management team to execute the growth plan was doubtful, given that the company's organic volume growth last year was just in line with the sector average, a Citigroup report said. The brokerage firm said the incentive programme for the top management was not enough, compared to privately owned companies.

Sun receives an annual remuneration of 1.58 million yuan (HK$1.94 million) while the new president, Huang Kexing, will receive 946,900 yuan a year.


The amount of sales volume, in kilolitres, that Sun Mingbo has been trying to fulfil by 2014


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