China: Breweries produced 164.2 million hl of beer in 1H 2006

In the first half year, pushed by consumption increase, the whole food and beverage industry stepped into a period of fast development, China Economic released October 24. In the whole industry, the beer field showed its capacity to develop and to earn profit, and had attracted more and more attention of investors.

Statistics showed that in the first half year, the nationwide beer industry had been developing steadily; it had produced 164.2 million hl beer with an increase of 14.2% year-on-year; the beer industry was becoming more prosperous. Based on the half-year report, in the first half year, many listed companies performed well. In the first half year, Tsingtao Beer made a retained profit of RMB201.9965 million yuan with an increase of 23.81 percent year-on-year; as for Yanjing Beer the figures are 154.4265 million yuan and 5.25 percent.

With the development of national economy and the coming of a period of consumption upgrade, the consumption volume of beer and dairy food, which were not the main food before, has got greatly increased. The beer production in our country has increased from 3.10 million tons in 1985 to 30.61 million tons in 2005; the annul increase rate is over 40 percent. At the same time, lots of consumption groups haven't been explored and the large market of countryside hasn't been developed as well in China. With huge potential consumptive power as guarantee, the development situation in beer industry will go on.

Statistics shows that, in the second quarter, 241 funds have invested 35 billion yuan to three industries together: the food and beverage industry, the wholesale and retail industry and the machine, equipment and instrument industry. The increased market value of the above three industries occupies 70 percent of the newly added market value of the funds; and the beer field was hot for the funds to increase the share.

Because of the regionality characteristics of beer industry, mergers and acquisitions is the best way to explore new market. From 2001 till now, following the coming of enterprises like SABMiller, Anheuser - Busch, Interbrew and Carlsberg, almost all the famous beer producers in the world have settled down in China.

This year there has been a new round of combination in the beer industry, which took the mergers and acquisitions among international and domestic large enterprises and the adjustment of nationwide distribution of large enterprises as the major forms; the mergence process in beer industry has been fastened. In January this year, the largest beer producer in the world, Belgium InBev Beer Group purchased Fujian Xuejin Beer Co., Ltd. with RMB 5.886 billion yuan; the premium was nearly ten times which made it the biggest foreign-fund purchase case in beer industry up to now. In April, a holding subsidiary company of Tsingtao Brewery Beer Co., Ltd Tsingtao Beer Hans (Baoji) Co., Ltd, purchased Baoji Beer shares and assets related to beer production with RMB 123.32 million yuan, by which the market status of the company in northwest area was strengthened.

Wang Henan from Southwest Securities said that at present the beer industry in China was in a period of conformity and had huge market space and development potential. He expressed that some dominant enterprises like Tsingtao Beer, Yanjing Beer and Huarun Snow Beer got the best opportunities; one reason was that they already had certain scales, and another reason was that large enterprises held an active place when adjusting product structure and raising the proportion of high grade beer; under the present situation that the gross interest rate in beer industry was shrinking, raising the proportion of high grade beer to clear cost pressure was an effective measure to increase profits.

The prospective benefits brought by consumption upgrade, the attention and accession of foreign funds and the acceleration of industrial conformity, all these testify that the value in beer field needs to be found out and revalued. According to the analysis of people inside the circle, with the increased attention in the market, some individual shares have mergers and acquisitions potential will become the business target of the market; the business future in beer section is promising; for example, Yanjing Beer has the trend to develop more smoothly. Wang Yan from TX Investment Consulting Co., Ltd. said that at present Yanjing Beer had a market occupation rate of over 85 percent in Beijing; as five new production bases continually began the production, the company would build up the market advantage in Beijing, Guangxi, Fujian, Hubei and Mongolia. In the last few years, when the whole industry was developing slowly, the gross interest rate of Yanjing Beer kept a steady increase which showed its strong competitive advantage; the good performance of the company in exploring non-local markets in the last few years gradually appeared. Besides, Tsingtao Beer and Huiquan Beer etc. also have the potential to continue their development, worthy of more attention and more investment.

Ref. (mid-term of 2006):

Yanjing Beer
Income per share: 0.14 yuan
Net assets value per share: 4.61 yuan
Main income: 3,024.4871 million yuan
Retained profits: 154.4265 million yuan

Chongqing Beer
Income per share: 0.052 yuan
Net assets value per share: 2.77 yuan
Main income: 311.2992 million yuan
Retained profits: 13.4306 million yuan

Huiquan Beer
Income per share: 0.05 yuan
Net assets value per share: 3.78 yuan
Main income: 444.6631 million yuan
Retained profits: 12.4942 million yuan

Tsingtao Beer
Income per share: 0.15 yuan
Net assets value per share: 3.77 yuan
Main income: 5,767.6510 million yuan
Retained profits: 201.9965 million yuan

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