Tsingtao income rises on less tax, asset losses

PUBLISHED : Wednesday, 20 August, 2008, 12:00am
UPDATED : Wednesday, 20 August, 2008, 12:00am

Tsingtao Brewery, the mainland's second-largest beer producer, said first-half net profit jumped 41.36 per cent year on year on a decline in taxes and lower asset-impairment losses.

However, operating profit rose only 7.88 per cent as an increase in Beijing Olympics-related marketing expenses outpaced sales growth.

Net income for the six months to June rose to 381.13 million yuan (HK$434 million) from 268.7 million yuan a year earlier, based on Hong Kong accounting standards, the company said in a filing with the Shanghai stock exchange yesterday.

Turnover rose 15.56 per cent to 7.9 billion yuan from 6.83 billion yuan.

Tsingtao paid 190.53 million yuan in taxes, down from 222.48 million yuan. The company benefited from the tax unification regimen that took effect from January, reducing its tax rate to 25 per cent from 33 per cent.

Asset-impairment losses dropped to 1.8 million yuan from 53.36 million yuan in the same period last year.

'The reduced asset impairment loss is the key factor in the company's interim results,' said Yang Lei, an analyst at ABN Amro. 'It helped the company deliver a better than expected operating profit.'

Despite pressure from rising prices of raw materials such as barley and hops, Tsingtao lifted its gross margin 0.7 percentage point as it sold more products with higher margins and selling prices. It sold 2.69 million kilolitres of beer, up 5 per cent.

'In the second half, we will continue to take effective measures to mitigate the mounting pressure from rising raw materials,' the Qingdao-based company said.

Chairman Jin Zhiguo said earlier that 'we are in the winter of our industry', but Tsingtao's goal is to have 2 per cent higher sales growth than the industry average.

Selling expenses rose 20.5 per cent to 1.61 billion yuan, mainly due to its sponsorship of the Olympics and related marketing promotions.

Beijing Yanjing Beer, also a Games sponsor, said on Monday its first-half sales rose more than 10 per cent as the Olympics boosted its brand, reducing the effect of rising costs.

No dividend was declared.