China’s Tsingtao Brewery posted a 40 percent increase in first quarter net profit on higher sales, as its distributors stocked up ahead of increases in the prices of it beer products.
Tsingtao, in which Asahi Breweries holds a stake of more than 19 percent, said its net profit rose to 393.4 million yuan ($60.4 million) for the three months through March, from 280.9 million yuan a year earlier.
‘During the reporting period, the company maintained the satisfying sales momentum, especially as driven by the rapid growth of the mid-high-end products,’ the company said in a filing with the Hong Kong stock exchange on Thursday.
Sales volume rose 22 percent year-on-year to 15 million hectolitres, with sales volume of Tsingtao rising 36 percent.
Analysts are positive on Tsingtao’s business outlook as China’s beer consumption continues to rise, and the firm continues to grow its sales through acquisition.
Analysts had expected Tsingtao to post more than 20 percent rise in sales volume for the first quarter of 2011, as distributors stocked up prior to increase in its beer prices.
They gave no forecast for its quarterly earnings.
Tsingtao hiked prices of its main brands by about five percent in the first four months of 2011 to help offset rising packaging and labour costs, and barley prices, analysts said.
This was prompted by a 3-4 percent year on year increase in packaging costs, 30-40 percent rise in barley prices and a 10 percent increase in labour costs, Barclays Capital said.
Barclays expects stable gross margins of 35.1 percent for Tsingtao in 2011 as compared to 35.2 percent in 2010.
‘Facing the rising barley prices and packaging costs, it is necessary for it (Tsingtao) to hike price further in order to maintain gross margin at the current level of about 35 percent,’ said William Lo, analyst at Ample Capital.
Tsingtao aims to boost annual production capacity to 100 million hectolitres in the next five years. It is China’s second-largest brewer by volume after CR Snow, a joint venture between China Resources Enterprises and SAB Miller .
It also competes with Heineken, Carlsberg and Kingway Brewery in China, the world’s biggest beer market.
Tsingtao’s Hong Kong-listed shares are up 1.97 percent so far this year, compared with a 3.34 percent rise in the broader Hang Seng Index. ($1 = 6.512 Chinese Renminbis)