Beer Market Still Bubbling for Tsingdao

Tsingdao Beer Co Ltd (share code: 0168 Shenzhen) is considering the further acquisition of beer plants around the country to expand its sales and strengthen its lead in the market.

Peng Zuoyi, president of Tsingdao Group, said his company would begin to expand its beer sales through a new round of acquisitions over the next six months.

He said this new round of acquisitions would target the capital cities of every province.

It is also reported Tsingdao is in talks over the purchase of Baoji Beer Plant, the largest beer producer in Northwest China's Shaanxi Province, which has been valued at 350 million yuan (US$42.3 million).

If the takeover plan is successful, the production capacity of the plant would be increased to 1 million tons from the current 350,000 tons.

Tsingdao Group has acquired more than 40 beer producers since it launched its acquisition strategy to expand its market share six years ago.

The company produced 1.86 million tons of beer with sales revenue totalling 3.76 billion yuan (US$454.27 million) last year.

However, because of its expansion programme, its net profit was only 95.2 million yuan(US$11.51 million) and its return is just 0.1 yuan (US$0.012) per share.

The huge capital input demanded by newly acquired plants has added to the financial burden of the company.

In February, Tsingtao Beer successfully issued 100 million additional A shares on the Shenzhen exchange and raised funds worth 759 million yuan (US$91.7 million). This has helped reduce its asset liability ratio from 50 per cent to 30 per cent.

The funds have been mainly used to pay for the acquisitions of the Shanghai Carlsberg, Beijing Wuxing, Beijing Sanhuan plants, and technology upgrades.

Its new acquisitions have already begun to perform well. The Shanghai Carlsberg Beer Plant, now known as Shanghai Songjiang, produces draft beer which is selling strongly in the local market.

As a result of its rapid expansion, Tsingdao Beer is expected to soon become one of top three beer producers in the world with an estimated annual output of 8 million tons by 2010.






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