Tsingtao net expected to be hurt by losses at acquired breweries

PUBLISHED : Monday, 17 April, 2000, 12:00am
UPDATED : Monday, 17 April, 2000, 12:00am

Tsingtao Brewery's net earnings growth last year will be hit by 'heavy operating losses' of tens of million of yuan incurred by newly bought breweries, according to sources.

These operating losses are understood to have brought about a net loss for the second half, wiping out some of the H share's first-half net profit of 50.17 million yuan (about HK$46.93 million) and culminating in a full-year net profit slightly below the 38.29 million yuan in 1998.

It is expected to announce full-year results today.

Its 51 per cent-held Shenzhen Tsingtao Beer Asahi, which began production last July, had about 20 million yuan in operating losses. A dozen other breweries have been losing during their start-up stages.

The operating losses underscore the growing pains the H share is facing as it moves to beef up capacity and boost market share.

Last year's production was a record 1.07 million tonnes, up substantially from 1998's 557,000 tonnes, making it the mainland's largest brewery in terms of production and market share.

As of December the Shandong-based firm had bought 22 cash-strapped breweries over two years to stay competitive and to prepare for the onslaught of foreign competition.

The issue has taken on renewed urgency with Beijing's expected entry into the World Trade Organisation later this year.

About 50 foreign brewers with facilities in the mainland account for 30 per cent of the market.

Tsingtao's mainland market share increased from 2.8 per cent to 4.4 per cent in the first half of last year.

As part of the move, the H share is stepping up the push to improve its domestic sales network and adding focus on the freshness of its products.