Tsingtao Brewery, the mainland's second-largest beer producer, reported a worse than expected 20 per cent rise in net profit last year to 540 million yuan (HK$602.9 million) on increases in tax payments and costs. Revenue increased 15.9 per cent last year to 13.5 billion yuan on an 11 per cent gain in sales volume to 50.5 million hectolitres, the company said yesterday. The results were based on Hong Kong accounting standards and an income tax rate of 33 per cent instead of the 15 per cent it previously paid, the Qingdao-based company said. Analysts in a Thomson Reuters survey forecast profit growth of 38.8 per cent to HK$693 million. Sales of high-end draught beer and canned beer jumped 23 per cent. The company is battling to stop margins from being squeezed by prices for raw materials like barley as it aims to take back the top spot it lost to rival Snow Beer in 2006. 'China's fast-growing economic development has provided good opportunities, but we are also facing pressure from rising costs and stiffer competition,' Tsingtao said. With more effective measures to boost sales and control costs, the company was confident of achieving its sales target of 57 million hectolitres this year, it said. A spokeswoman said the income tax rate for this year had yet to be decided by the tax authorities. Earlier this month, the company said profit for the first nine months of last year fell by 135.23 million yuan, or 19.45 per cent, because of the revised tax rate. Tsingtao, among the first companies to list H shares in Hong Kong, faces a huge back-tax bill. The mainland tax authority issued a notice last year saying the special 15 per cent tax rate, a concession given in 1993 to encourage firms to list overseas, had expired in 1998. The authority said affected companies should pay the normal 33 per cent rate and also asked for the difference in back taxes.