China brewer Tsingtao posts steepest profit drop in 20 years

SHANGHAI, March 30 (Reuters) - China’s Tsingtao Brewery Co posted its steepest annual net profit decline in two decades on Thursday after a second successive year of declining returns amid rising costs, weak consumption and tough competition.

The brewer, China’s second-largest by volume, said in a stock exchange filing that 2016 net profit fell by 39.1 percent to 1.04 billion yuan ($151 million). That compared with an average forecast of an 8.3 percent fall in a Reuters poll of 19 analysts.

China’s beer market is the world’s largest, but profits are slim because of the thin margins on the light beer preferred by Chinese consumers. However, a push into premium beers, including the nascent but fast-growing craft beer market, offers the promise of frothier returns.

“The overall consumption market was still weak,” Tsingtao said in a filing to the Shanghai stock exchange, pointing to stagnant growth in mid to high-end catering and unusually poor weather hitting demand for beer.

The brewer said that profit was also weighed down by expiration of a preferential tax rate.

Having flagged the likely drop in full-year net profit earlier in the month, the company reported revenue down 5.5 percent at 26.1 billion yuan, slightly below forecasts.

China Resources Beer Holdings Co, Tsingtao’s main domestic rival and owner of the popular Snow beer brand, this month reported its first annual profit in three years. ($1 = 6.8880 Chinese yuan renminbi) (Reporting by Adam Jourdan; Editing by David Goodman)