Higher sales boost Tsingtao's stock

Tsingtao Brewery Co (青島啤酒) shares posted their biggest one-day gain in 17 months yesterday after China's biggest brewer said first-half profit would surge and Anheuser-Busch Companies, the world's No. 1 brewer, may increase its stake.

First-half profit jumped more than 50 percent, Tsingtao reported to the Shanghai Stock Exchange in advance of full results due on Aug. 14. Sales of its namesake beer climbed 40 percent, after the company bought up 45 rivals, some unprofitable, the past three years.

"The company has a track record of turning around loss- making breweries," said Joseph Lau, chief investment officer at Tai Fook Asset Management Ltd, who holds Tsingtao shares. "They have only turned around about 40 percent of the breweries they bought, so there's more growth potential, which will sustain earnings."

Tsingtao's expanding reach in the world's second-biggest beer market is among the reasons Anheuser-Busch, maker of Budweiser beer, wants to increase its 5 percent stake, the St. Louis-based company said.

Tsingtao formally confirmed talks with the US brewer in a statement to the Hong Kong exchange. It didn't say how many shares Anheuser-Busch might buy.

The Chinese brewer made its profit statement to the Shanghai exchange under rules that require companies to give investors advance notice when earnings are expected to rise or fall by more than 50 percent. It didn't give specific figures.

Beer sales were helped in June by promotions tied to the World Cup debut of China's national soccer team. Tsingtao erected giant outdoor television screens and provided live telecasts of matches from South Korea and Japan.

"Beer is the drink of choice when men get together to watch soccer," said Han Wei, a customer supervisor at Citic Industrial Bank in Shanghai, who's also a Tsingtao drinker.

The tournament proved more successful for Tsingtao than for the Chinese team, which failed to score a single goal and was one of the first teams to be bundled out of the tournament.

The brewer spent 610 million yuan (US$74 million) buying smaller rivals last year as it tries to gain dominance in China's beer market, which is split among regional brewers.

It reported less-than-expected profit growth of 31 percent for 2001 because many of its acquisitions were still unprofitable.

To turn them around, it has stepped up advertising and marketing and improved distribution.

"Tsingtao has been more aggressive in its marketing, and that has helped to raise brand awareness and sales," said Foo Choy Peng, an analyst at Worldsec International Ltd in Hong Kong. "This will help to raise its market share to 14 percent this year from 11 percent."