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China. Barley cost crimps Tsingtao Brewery profit growth

* H1 net profit rises 22 pct, vs 30 pct in H1 2010
* Price of barley has risen more than a third this year

Tsingtao Brewery , China's second-largest brewer by volume, posted slower profit growth in the first half of 2011 as soaring barley prices hit margins.

Tsingtao, of which Japan's Asahi Breweries Ltd holds some 19 percent, said net profit rose 22 percent to 989.9 million yuan ($155 million) in the six months ended June, from 813 million a year ago. Net profit rose 30 percent in the first half of 2010.

The market had expected Tsingtao to post net profit of 994.2 million yuan for the first half, according to an average forecast of six analysts.

The price of barley, a basic ingredient for brewing beer, has risen by more than a third this year.

In the first quarter, Tsingtao raised the price of some products by about 5 percent, driving up sales and earnings as distributors stocked up ahead of the increase.

Rising per-capita income has driven up beer consumption in the world's most populous country.

Tsingtao Brewery's Hong Kong-listed shares have gained 20 percent this year, against a 15 percent drop in the Hang Seng Index .

Tsingtao competes in China with CR Snow, a joint venture between China Resources Enterprise Ltd and SAB Miller Plc . China Resources Enterprises' shares have gained 2 percent this year.

It also competes with Heineken NV , Carlsberg AS (CARLb.CO) and Kingway Brewery Holdings Ltd in the world's biggest beer market.

Prior to the first-half earnings, of 22 analysts tracked by Thomson Reuters, eight rated Tsingtao as a "buy" or "strong buy", seven had a "hold" recommendation, four rated it as an "underperform" and three called the company a "sell".

One of China's oldest beer makers, Tsingtao was founded in 1903 by German and British merchants under the name Nordic Brewery Co Ltd Tsingtao Branch.

($1 = 6.389 Chinese Yuan)

13 Aug. 2011

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