Tsingtao Brewery, China's largest beer producer, posted a 22.5 per cent rise in first-half earnings, thanks to increased sales in the booming mainland market drowning out rising competition. Net income rose to 212.7 million yuan or 16 fen a share for the six months to June from 173.6 million yuan or 15 fen a share a year earlier, according to the result statement released yesterday. Sales leapt 16 per cent to 5.77 billion yuan. The higher sales helped trump rising raw materials and power costs, which cut Tsingtao's gross profit margin to 6.4 per cent from 6.8 per cent a year ago amid keen competition in the mainland, driven by consolidation and an influx of international players. Tsingtao's beer production increased 10.5 per cent for the first half to 2.27 million kilolitres compared with the 16.4 million kilolitres, a 14.2 per cent rise year on year by China's entire mainland brewery industry, Tsingtao said. The company, about 25 per cent owned by top US beer producer Anheuser-Busch, has a 13.9 per cent mainland market share. Company chairman Li Guirong also credited gains on Tsingtao's cost-cutting focus. 'The earnings growth over the recent years has benefited from our internal restructuring,' he said. In contrast to its smaller rivals, which have been trying to catch up through buyouts, market leader Tsingtao had improved efficiency by gradually disposing of loss-making breweries, said Merrill Lynch analysts Denise Chai and Kenny So in a research report. To further boost sales, Tsingtao said it would build a factory with 400,000 kilolitres production capacity in Shandong. The first phase construction with 200,000 kilolitres capacity will be completed by the end of next year. Before the earnings announcement, Tsingtao shares fell 0.66 per cent to close at HK$9.