Kingway to raise HK$757m for new plants

PUBLISHED : Friday, 18 May, 2007, 12:00am
UPDATED : Friday, 18 May, 2007, 12:00am

Kingway Brewery, a mainland beer maker in which Heineken owns 20 per cent, has proposed to raise about HK$757 million by selling rights shares to fund construction of new plants.

Kingway will sell at least 310 million rights shares at HK$2.42 each on the basis that holders of every nine existing shares are entitled to buy two. HSBC is arranging the sale.

Funds raised from the sale would be used to finance a HK$338 million project in Foshan and the HK$194 million brewing plants in Chengdu, Xian and Tianjin.

The company would use the remainder of the proceeds to repay bank loans and for working capital.

Shares in Kingway fell 2.15 per cent, closing at HK$3.18 yesterday when trading resumed from a one-day suspension.

Kingway, a smaller rival to Tsingtao Brewery and Beijing Yanjing Brewery, has been adding capacity, hoping to tap the mainland's rising beer consumption.

The company is also expanding to new markets such as Xian from its base in southern China.

Kingway reported a 45 per cent profit slump to a less than expected HK$110 million last year, as sales slowed and margins narrowed amid intensified competition in Guangdong province.

Kingway has expected sales to increase 24 per cent to eight million tonnes this year, which analysts said was achievable if the brewery managed to start production in Xian in the first quarter and Chengdu in the second.

Analysts have cut their forecasts on Kingway's earnings for this year by 50 per cent to 55 per cent because of higher operating losses from its new plants, but they expect earnings to rebound next year.