Red chip expects first-half hit

PUBLISHED : Wednesday, 12 April, 2006, 12:00am
UPDATED : Wednesday, 12 April, 2006, 12:00am

Beijing Enterprises says interim earnings will be affected by a share reform for unit Yanjing Brewery

Beijing Enterprises Holdings says earnings for the first half of this year will be affected by the share reform of subsidiary Yanjing Brewery.

Under a revised plan, the firm is planning to give shareholders 2.7 non-tradable shares for every 10 tradable shares in China's third-biggest beer maker, at a total cost of $290 million.

Beijing Enterprises Holdings, the Hong Kong-listed investment arm of the municipal government, yesterday reported a 13.3 per cent rise in profit attributable to shareholders to $570.42 million. Turnover rose 13.8 per cent to $11 billion.

Originally, shareholders were to be given 2.1 non-tradable shares for every 10 tradable shares in order to increase the incentive for shareholders to participate in the reform programme.

The official announcement of the new plan, details of which were given at a press conference yesterday, is due to be released today.

'Beijing Enterprises Holdings hopes to book the cost of the Yanjing Brewery share reform in the first half of this year. This would be a one-off impact. Undoubtedly this would pose some pressure on profit attributable to shareholders but we have already communicated with the fund investors,' Tam Zhenfai, chief financial officer of the group, said.

The red-chip group also announced early this month it would sell equity interests in its Wangfujing Department Store to parent Beijing Enterprises Group, hoping to offset about half the cost of Yanjing's share reform. The sale of equity in Wangfujing would give the group $970 million cash.

Yanjing's beer sales volume increased 8.7 per cent to 3.13 million tonnes last year. Turnover rose 30.4 per cent to $4.55 billion and profit was up 4.7 per cent at $134 million. The group has changed its tone in welcoming strategic partners but said it had no plans to sell Yanjing Brewery.

'We never reject any potential strategic partners. But all the co-operation should be considered under the growth condition of Yanjing beer. Meanwhile, a strategic partner would be helpful, while Yanjing beer needs the support of capital or technology etc,' said group vice-chairman Bai Jinrong, without offering details of any potential partnerships.

After selling equity interests in Wangfujing, Beijing Enterprises Holdings will focus on infrastructure and utility work.

The group now has net cash of $131 million with expected total capital expenditure of $400 million to $500 million this year. No new acquisitions and asset transfer are planned at the moment. Mr Tam said the group would consider issuing new shares or bonds to raise funds if there were possible large-scale acquisitions in the future.

The group's earnings per share were 92 cents. Overall gross profit margin was at 27 per cent. The final dividend was 20 cents per share.

During last year, the group completed the sale of equity interests in Sanyuan Food and Badaling Tourism Development with gross exceptional gain of about $217 million; while the diminution in value of certain non-performing assets and other investment projects brought exceptional gain of $130 million.