Guangdong Investment offshoot Guangdong Brewery Holdings says it might not meet its sales target of between 250,000 tonnes and 270,000 tonnes of Kingway beer this year, partly due to difficulties in penetrating the Guangzhou market. Chairman Gordon Au Wai-ming said after the annual meeting yesterday that he expected Kingway sales to exceed 200,000 tonnes this year, up from the lower than expected 137,000 tonnes last year. Sales started to gain pace last month, and the trend was expected to continue throughout the summer, he said. The company saw year-on-year growth of 28 per cent to 60,000 tonnes in the first five months, compared with only a 10 per cent increase in the first quarter. It would focus on marketing this year and would consider buying its parent's breweries next year as they became more profitable, Mr Au said. The company had not changed its plan to increase its production capacity to one million tonnes by 2000, up from about 700,000 tonnes this year. Its 50 per cent indirectly owned Shandong Huazhong Amber Brewery was expected to have sales growth of about 10 per cent this year from about 150,000 tonnes last year. Financial controller Donald Chau Kam-wing said gross profit margin had increased by one to two percentage points this year, from 33.8 per cent last year, as raw material costs had dropped 3 to 4 per cent in the first five months. The company, keen to maintain its status as a medium to high-end brand, does not plan to cut prices to boost sales. Mr Chau said the company planned to double the size of its yuan loans, raising them to 30 per cent of total debt from 20 per cent, to reduce foreign exchange risk. He said it was now easier to raise borrowings in the mainland than in Hong Kong as the SAR was suffering from a credit crunch. The company has about $200 million in cash, $550 million in loans and a net gearing ratio of about 35 per cent.