Yanjing Brewery aims to raise 1.8b yuan

PUBLISHED : Tuesday, 22 January, 2008, 12:00am
UPDATED : Tuesday, 22 January, 2008, 12:00am

Proceeds from share placement to fund building of new plants and capacity expansion

Beijing Yanjing Brewery, the third-biggest brewer on the mainland and a subsidiary of Beijing Enterprises Holdings, plans to raise up to 1.8 billion yuan from a share placement to fund expansion, a Yanjing senior manager told mainland media.

The placement would be used mainly to help the brewer meet its 2015 target of eight million tonnes in annual sales volume, the China Business News reported, citing an unnamed source.

The brewer would spend part of the proceeds on the construction of 11 projects including new raw material production plants in Xinjiang and Inner Mongolia and the expansion of several existing production bases, it said.

Yanjing's sales volume reached four million tonnes last year and it aims to sell 4.5 million tonnes this year and five million tonnes next year by adding 13 production lines in a move to fend off increasing competition in the world's largest beer market by volume.

Trading in Shenzhen-listed Yanjing shares was suspended last Friday because the company was holding talks on 'key' issues with 'relevant parties', it said in a statement filed to the stock exchange.

Shares in Yanjing Brewery have surged 67.2 per cent over the past year and closed down 7 per cent at 22.9 yuan before trading was suspended.

'Yanjing wants to expand production capacity first and then grab market share as the beer industry is in the process of consolidation,' said Chen Xun, an analyst with Ping An Securities. 'It's the right time to make a share placement because its stock price has been rising.'

However, Reuters reported that the brewer aimed to raise between 1.2 billion yuan and 1.5 billion yuan, citing sources. Guangfa Securities had been appointed the underwriter for the new share offer and trading of the shares would resume next week, it said.

The spokesman for Yanjing Brewery declined to comment yesterday.

The company has a strong presence in Beijing, Fujian province as well as Guangxi and Inner Mongolia autonomous regions under various brands. It held more than 85 per cent market share in Beijing, the firm said in a filing to Shenzhen Stock Exchange earlier.

Mr Chen said Yanjing lagged behind bigger rivals Tsingtao Brewery and China Resources Snow Breweries.

Chen Gang, analyst at Sinolink Securities, said Yanjing had 10 per cent of the mainland's fragmented beer market, compared to about 16 per cent each for Tsingtao and China Resources.

Last November, Tsingtao unveiled a plan to sell domestic corporate bonds to raise up to 1.5 billion yuan to increase capacity following the announcement of its first overseas manufacturing foray by setting up a plant in Thailand. The annual production capacity of the plant will be 800 hectolitres.

However, the pressure of rising raw material costs has plagued the industry. Since last month, both Yanjing and Tsingtao have raised selling prices of some products.