Anheuser lifts Tsingtao stake to 27%
Top US beermaker Anheuser-Busch raised its stake in Tsingtao Brewery to 27 per cent yesterday by exercising convertible bonds worth US$145.56 million in China's largest brewer.
Also yesterday, Tsingtao reported a 3 per cent rise in second-half earnings, lagging market forecasts as fierce competition and rising costs offset sales growth in the world's largest beer market by volume.
Anheuser-Busch, the maker of Budweiser beer, which has been aggressively investing in China, already held 9.9 per cent of Tsingtao and had been expected eventually to lift its holding to 27 per cent.
Wendy Huang, a Shanghai-based analyst with Core Pacific-Yamaichi, said closer ties between the two firms should help bolster Tsingtao's management skills, operations and technology, although the China market remains difficult.
"The situation has not improved for breweries," said Huang, who has a "sell" rating on Tsingtao.
China's beer industry is growing by 7-10 per cent a year and has attracted a flood of overseas investment in the past few years, which has driven up the valuations of listed brewers .
Margins are expected to remain under pressure as costs rise and the influx of overseas players makes rivals even stronger.
"Foreign breweries might not make significant returns from China, but their entry is hurting domestic brewers," UBS wrote in a note issued last week.
Tsingtao, which controls about 13 per cent of the market, had a net profit of 140.4 million yuan (US$16.95 million) for the six months through December compared with 136.25 million yuan (US$16.46 million) a year earlier. It declared a final dividend of 0.15 yuan a share, compared with 0.20 yuan last year.
Analysts polled by Reuters Estimates had an average profit forecast of 169.78 million yuan (US$20.5 million). For the whole of 2004, net profit rose 16.4 per cent to 285.16 million yuan (US$34.4 million).
"The Chinese market is facing fierce competition from big international companies. It is also facing pressure from higher energy and raw material prices, but Tsingtao is confident it can overcome these difficulties and sustain business growth," Chairman Li Guirong said in a statement.
The St. Louis-based firm's request to convert its remaining Tsingtao bonds to newly issued "H" shares of Tsingtao was approved by Tsingtao's board yesterday, the Chinese company said.
"So far, we haven't been seeing too much synergy between these partners," said DBS Vickers analyst Alice Hui, who has a "hold" rating on Tsingtao.
As a result of its expanded stake, Anheuser-Busch will get a second seat on Tsingtao's board of directors. Its voting stake, however, will be only 20 per cent, with the Qingdao city government keeping voting rights to the remaining 7 per cent.
Tsingtao's turnover for the year rose 14.7 per cent to 7.7 billion yuan (US$930 million). Sales volume rose 13.8 per cent to 3.71 million kilolitres for the year.