UPDATE 1-Chinese brewer Tsingtao Q1 net profit up 20 pct on higher sales

Tue Apr 29, 2014 8:54am EDT

(Adds detail)

April 29 (Reuters) - Tsingtao Brewery Co Ltd , China's second-biggest brewer by volume, said first-quarter net profit rose 20 percent on higher sales.

One-fifth owned by Japan's Asahi Breweries Ltd, Tsingtao said net profit rose to 585.7 million yuan ($93.67 million) in the three-month period which ended March 31 from 488 million a year earlier.

Asia has become the main battleground for the big four global brewers - Anheuser-Busch InBev SA, SABMiller , Heineken and Carlsberg, as they face flagging sales in Europe and the United States. China is also the world's biggest beer market by volume.

A growing middle class means China's beer market has huge potential yet the sector suffers from fierce competition, over-supply and low retail prices. Tsingtao reported its worst quarterly losses ever in the fourth quarter of last year.

A positive for the firm is that the market, estimated at 451 billion yuan in 2013 according to Euromonitor, is consolidating, a trend which should support earnings for market leaders such as Tsingtao. The firm said it held around 17.2 percent share of the market last year.

First quarter revenue grew 17.4 percent helped by active marketing, the company said in the statement.

The firm, which competes with SABMiller-backed Snow beer, AB InBev and Beijing Yanjing Brewery Co Ltd, saw first quarter revenues rise to 7.4 billion yuan.

Denmark's Carlsberg is also mounting a challenge, upping its stake in local brewer Chongqing Brewery last year, while AB InBev bought Chinese brewer Siping Ginsber this year as it looks to expand in more regions of the country.

Tsingtao's Shanghai-listed shares ended up 2.95 percent on Tuesday, compared to a 1.10 percent rise in the benchmark CSI 300 Index.

Its Hong Kong stock ended up 1.52 percent, outperforming the main Hang Seng Index's 1.45 percent rise.

(1 = 6.2530 Chinese Yuan) (Reporting by Adam Jourdan and Samuel Shen in Shanghai; editing by Jason Neely)