Tsingtao lifts profit, talks to Bud

By Alex Frew McMillan

HONG KONG, China (CNN) -- Tsingtao Brewery Co. on Wednesday said its net profit for the first half of the year will be up more than 50 percent over the same time in 2001.

China's largest brewery made the filing as it said it is in talks with Anheuser-Busch on a partnership in China that could see it increase its stake.

Anheuser-Busch, the world's biggest brewery and the maker of Budweiser beer, now owns 4.5 percent of Tsingtao.

The company did not release its profit estimates, which are unaudited and compiled using Chinese accounting standards.

Tsingtao claims around 11 percent of China's beer market, the second-largest in the world after the United States.

Rapid expansion in China

The market is dominated by numerous small brands with local allegiances. Large overseas breweries such as Carlsberg have failed in their attempts to break in.

South African Breweries has successfully charted a course of buying small breweries and improving their performance, through a Hong Kong partner (full story).

Tsingtao has also been expanding rapidly, buying up more than 40 small breweries in the last five years.

A buyin from Anheuser-Busch might speed that process and develop the Tsingtao brand.

Bud's parent is now in "exclusive negotiations" to create a strategic alliance with Tsingtao in China. The two parties expect to sign a definitive agreement "as soon as possible."

Tsingtao is already a well-known beer in the United States and is one of China's best-known brands.

Numbers not released

Tsingtao did not release its earnings estimate. But it made a net profit of 55.6 million yuan ($6.7 million) in the first quarter, up 80.5 percent over the year-ago period.

"Tsingtao recorded significant increase of more than 50% in net profits," it said in a legal notice. "Actual unaudited results for the half year ended 30 June 2002 have yet to be finalised and will be included in the interim report."

For the first half of 2001, it made a net profit of 68.9 million yuan ($8.3 million).

Tsingtao was the first H share to list in Hong Kong back in 1993. H shares are companies that are incorporated and based in China but that list on Hong Kong's stock market.

It has subsequently listed in Shanghai, with an A share listing open only to Chinese investors.

Stock in Tsingtao is soaring on Wednesday in Hong Kong, up 10.94 percent to HK$3.55, after rising as much as 12.5 percent.