China: Yanjing Brewery shares surge on expansion plans

Beijing Yanjing Brewery Co., China's third-biggest brewer, rose the most in three weeks after announcing plans to expand production to increase its share of the world's largest beer market, Bloomberg reported January 25.

Yanjing rose 4.7 percent to 23.97 yuan at the 3 p.m. trading close in Shenzhen, its biggest gain since Jan. 4.

The brewer aims to expand beer production to 5 million kiloliters by 2010, 25 percent more than in 2007, making it one of the world's eight biggest beermakers, the Beijing-based company said in a statement to Shenzhen's stock exchange today.

Yanjing, China's only major brewer without an overseas partner, is competing with Tsingtao Brewery Co. and China Resources Snow Breweries Co. to boost capacity as higher wages increase consumer demand.

``Their expansion will further increase competition and quicken the pace of consolidation of China's beer industry,'' said Guo Changsheng, an analyst at Shanghai Securities Co.

Yanjing plans to increase annual brewing capacity by 975,000 kiloliters and expand barley-processing capacity by 150,000 metric tons. Barley is a main ingredient in beer.

The expansion may boost annual profit by 120 million yuan, and sales by 2.53 billion yuan, Yanjing said.

The company posted 2006 net income of 306.9 million yuan and sales of 5.31 billion yuan.

To fund the expansion, Yanjing plans to raise as much as 1.8 billion yuan ($249 million) selling 86 million new shares to 10 investors.

Tsingtao Brewery, which is 27 percent owned by Anheuser- Busch Cos., said in November it plans to sell 1.5 billion yuan of bonds to expand production.

Yanjing and Tsingtao Brewery trail Snow Breweries, 49 percent owned by the U.K.'s SABMiller Plc, by sales in China.

25 January, 2008