Hong Kong: Harbin Brewery Group Ltd's net profit grew 3.8 % in 2003 as it beefed up marketing to recover from a first half setback due to SARS, China's fourth-largest beer maker said on April 22. Harbin Brewery is expected to see a nearly 52 % jump in net profit in 2004 on strong sales and higher prices, according to the median forecast of seven analysts polled by Reuters Research.

The firm, which is about 29.4 %-owned by the world's second-largest beer maker SABMiller Plc and dominates China's northeast region, is expected to pass higher raw materials costs and other expenses on to customers. It posted net profit of HK$114.38 million (US$14.66 million) in 2003 versus a restated HK$110.18 million in 2002.

The result was slightly above the analysts' expectation for profit of HK$112 million, but the growth came in below that of top Chinese beermaker Tsingtao Brewery, which has said its 2003 net profit jumped 10 %. Harbin's turnover rose 25 percent to HK$1.4 billion. "With an expanded distribution network and a stronger marketing effort, the group successfully mitigated the unfavourable impact caused by the SARS epidemic," Chief Executive Officer Peter Lo said in a statement.

The Severe Acute Respiratory Syndrome outbreak caused a 14 % drop in first half profit as drinkers avoided restaurants and pubs.

China's fragmented beer market, the world's largest by volume, is consolidating as it attracts investment from global giants such as Anheuser Busch, Heineken and Carlsberg Breweries. "Industry competition as well as a series of mergers and acquisitions are bringing a lot of new challenges to brewers," Lo said.

Harbin Brewery, which has a market share of 4.5 % plans to use acquisitions to help growth. It is considering buying a Jilin province-based brewery called Ginsber, which was previously part-owned by Britain's Bass Plc, Lo said.

China's number two beermaker CRE Beverage -- 49 percent owned by SABMiller -- is also interested in Ginsber. The two Chinese brewers may join in the possible acquisition, Lo said. Harbin, maker of the Hapi beer brand, has raised its average selling price in its core market of Heilongjiang province by 10 % since January this year.

Shares in Harbin Brewery ended the Thursday session 1.54 % higher at HK$3.30. The stock was down 0.77 % before the results release.

Harbin shares are nearly unchanged in the year so far through Wednesday, outperforming a 24 % drop in Tsingtao's share price. Tsingtao is considered less able to pass higher costs to consumers as it does not dominate a specific region.

China's beer industry is plagued by narrow margins, given that a bottle of beer can cost as little as 18 cents.

23 April, 2004