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China: Kingway Brewery Holdings Ltd., based in Guangdong, announced on December 1 it intends to invest US$100 million (HK$780 million) to build a production plant in Tianjin city North-East China. The project is the largest brewery’s investment ever undertaken in Tianjin, China’s third largest city. Kingway said the new plant in Tianjin will have an annual capacity of 400,000 tonnes. The project will be developed in two phases, with an investment of US$50 million in the first phase that can produce 200,000 tonnes a year. Construction will begin after Lunar New Year.

“The Tianjin government will give us preferential treatment on tax and land, and the cost there is cheaper,'' said Kingway managing director Jiang Guoqiang, adding that Kingway has allocated funds to invest in the city over the next four years. Chairman Ye Xuquan said the brewer would fund a third to a half of the investment bank loans because current interest rates are low and the borrowings would not dilute shareholders' interests.

Annual beer demand in Tianjin is around 450,000 tonnes a year but local production is close to just 180,000 tonnes. Tianjin's beer market is dominated by Yanjing, produced by Beijing Enterprises Holdings, and China Resources Enterprise's Snow, with each selling about 130,000 tonnes a year.

Kingway Brewery Holdings Ltd. also predicted on December 1 its net profit will grow at least 42 % in 2004 on cost controls. That translates to net profit of more than HK$149 million, based on the company's HK$105 million profit last year. “We expect both our sales and profit may increase by at least 42 %, from a year ago,'' said chairman Ye Xuquan, adding it will be able to reach its 2004 sales target of 390,000 tonnes. “Increased sales have reduced costs, which we expect to go up by just 1 per cent this year, compared with our domestic peers' which rose an average 17 %,'' he said. Kingway maintains a net cash position, with more than HK$500 million net cash and more than HK$200 million in annual operating cashflow.

China's beermakers are benefiting from rising consumption amid the fast-growing economy. The booming market is prompting local brewers such as China Resources Brewery and Tsingtao Brewery to expand, and driving foreign giants like Anheuser-Busch and Carlsberg into acquisition sprees. Kingway has an alliance with Heineken.

Kingway was formerly known as Guangdong Brewery Holdings until it changed its name in May this year.


05 December, 2004