Tsingtao Brewery Profit Increases 14.3% as Beer Demand Grows

Tsingtao Brewery Co. (600600), China’s second-largest brewer, posted a 14 percent increase in 2011 profit, beating analyst estimates, as rising incomes fueled demand for alcoholic drinks in the world’s most populous nation.

Net income rose to 1.74 billion yuan ($276 million) from 1.52 billion yuan a year earlier, Tsingtao said in a Shanghai stock exchange filing yesterday. Profit exceeded the 1.68 billion yuan median estimate of 13 analysts surveyed by Bloomberg News. Sales increased 16 percent to 23.2 billion yuan.

The company, based in the coastal city of Qingdao in Shandong province, said it faces challenges this year including “weak global economy, slowing domestic consumption growth, and rising human-resources costs.”

Profit margin at its core businesses narrowed to 33.4 percent from 35.2 percent a year earlier as raw material costs increased, the company said. Kingway Brewery Holdings Ltd. (124) earlier this month said its 2011 profit dropped 4.1 percent amid increased competition and production costs.

The company pledged to expand capacity, develop new products, and “actively seek suitable merger and acquisition targets” to achieve growth. The management is “full of confidence” about its ability to achieve annual sales of 10 million hectoliters of beer in 2014, it said.

Tsingtao rose 0.6 percent to 33.07 yuan in Shanghai yesterday, before the earnings announcement. The brewer’s Hong Kong-listed stock retreated 2.9 percent to HK$42.40.

To contact Bloomberg News staff for this story: Michael Wei in Shanghai at mwei13@bloomberg.net; Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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