Tsingtao brewery Group Co Ltd yesterday reported a 5.22-percent drop in first half profits, as the surging price of barley and the effects of SARS epidemic eroded its performance.

China's largest brewer raked in 116 million yuan (US$13.99 million) net profit in the period, or 0.12 yuan per share, which was 5.21 percent lower than a year ago.

"The worldwide price of beer's raw material barley has increased to US$250 from US$150 per ton, as a drought in Australia largely affected production," said Jiang Jian, a beer industry analyst with Haitong Securities. "Tsingtao added 80 million yuan to cover the rising costs, which partly led to the drop in profits," he added.

"Another obvious reason is the influence of SARS. The epidemic caused great damage to beer consumption as it hit the catering industry hard."

Jiang estimated this summer's hot weather along with the company's expansion and attempts to enter the high-end beer market might fuel its business in the second half.

The brewer acquired a 45-percent stake of Hunan Debier Brewery Co last Tuesday. It also plans to take over Fujian Sedrin Brewery.

(Shanghai Daily August 15, 2003)