LOS ANGELES, Aug. 25 /PRNewswire/ -- CBR Brewing Company, Inc.
(OTC Bulletin Board: CBRB), the largest foreign label beer producer
and marketer in China, today reported financial results for the
Company's second quarter ended June 30, 1998.
Net sales for the three months ended June 30, 1998 increased approximately
2.2% to $40,774,424, compared with net sales of $39,897,019 for
the year-ago quarter. The Company reported net income of $1,037,387,
or $0.13 per share, for the second quarter compared with net income
of $1,169,474 or $0.15 per share for the same period of 1997.
Net sales for the six months ended June 30, 1998 decreased approximately
2.8% to $75,187,979, compared with net sales of $77,354,310 for
the year-ago period. The Company reported net income of $1,889,798,
or $0.23 per share, for the six month period compared with net income
of $2,277,639, or $0.28 per share for the same period of 1997.
"CBR's financial and operational results for the second quarter
matched our expectations. In response to changing market conditions
and competitive pressures, the Company introduced two new Pabst
Blue Ribbon beer products during March 1998 to appeal to the mid-priced
market segment and allow the Company to expand its market share.
Revenue contributions from these and other expected new products
in the mid-priced sector should help us increase our profitability
going forward," said Chen Zi Shou, President of CBR Brewing
Company.
"We believe that the best near term growth prospects in the
China beer market are in the mid-priced sector. While moving some
of our production from premium to mid-priced products has reduced
margins, we are positioning the Company for future growth since
the premium sector has slowed and mid-priced products is offering
new opportunities. With our new products and the additional production
capacity we have in process currently, we expect to resume overall
profit growth in 1999. We are highly encouraged by the early success
of our mid-priced products," continued Chen Zi Shou.
The Company sold 71,732 metric tons, or 609,722 barrels, of beer
to its distributors during the second quarter, compared with 64,324
metric tons, or 546,754 during the second quarter in 1997, representing
an approximate 11.5% increase in volume.
For the six months ended June 30, 1998, the Company sold 127,711
metric tons, or 1,085,545 barrels, of beer to its distributors,
compared with 122,861 metric tons, or 1,044,319 during the first
half of 1997, representing an approximate 3.9% increase in volume.
Strong Gross Profit Margins
For the three months ended June 30, 1998, total gross profit was
$7,367,034, or approximately 18.1% of total net sales, compared
with $7,658,197, or approximately 19.2% of total net sales in 1997.
Due to effective cost control measures, the second quarter gross
profit margin has increased compared with the 17% margin reported
in the first quarter of the current fiscal year. This increase was
achieved despite the margin pressure caused by the change of product
mix to include lower priced products.
For the six months ended June 30, 1998, total gross profit was
$13,431,306, or approximately 17.9% of total net sales, compared
with $14,251,160, or approximately 18.4% of total net sales for
the first six months of 1997.
Operating Income
Operating income for the second quarter of 1998 was $85,837, or
0.2% of net sales, compared with operating income of $1,719,284
or 4.3% of net sales for the same period of 1997. The decrease in
operating income is primarily attributable to the expanded advertising
and promotional program implemented by the Company to stimulate
consumer demand and to maintain the market position of Pabst Blue
Ribbon in China, as well as the shift in sales mix to lower margin
products.
For the six months ended June 30, 1998, operating income was $538,035,
or 0.7% of net sales, compared with operating income of $2,463,612
or 3.2% of net sales for the same period of 1997. The decrease in
operating income is primarily attributable to the expanded advertising
and promotional program implemented by the Company.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended June 30, 1998 increased approximately 23% to $7,300,313 from
$5,938,913 for the same period of 1997. The major part of this increase
is related to selling costs, which include costs of advertising,
promotion, marketing and distribution of Pabst Blue Ribbon Beer
in China. The Company's marketing strategy in response to the increased
market competition resulted an increased selling expenses both on
an absolute basis and as a percentage of sales, and an allocation
of larger expense portion to the period of April through September,
the cyclically high selling season of the year. For the six months
ended June 30, 1998, selling, general and administrative expenses
increased approximately 7.2% to $12,638,994 from $11,787,549 for
the same period of 1997.
Initial Penetration of Mid-Priced Beer Market
As part of the Company's strategy to penetrate the mid-priced beer
market, during the quarter, CBR Brewing introduced two new mid-priced
beers labeled under the Pabst Blue Ribbon Brand.
"The high consumer reception of our recent new product launches
attest to the initial success of our product diversification strategy
as CBR continues its steady growth in 1998. We expect this strategy
of diversifying our products, coupled with our acquisition program
and increased marketing efforts, to bolster our growth and solidify
our position as one of the leading breweries in China, particularly
once the country's current stagnant economy begins its revitalization,"
concluded Mr. Chen.
CBR Brewing is US company whose subsidiary companies are engaged
in the production, distribution, and sales of Pabst Blue Ribbon
Beer in China, via license from Pabst Brewing Company USA. CBR is
the largest locally produced foreign brand brewery and the only
brewery with nationwide distribution network in all of China, which
has recently become the world's second largest beer producing country.
Pabst Blue Ribbon was first produced in China in 1990 and is now
the second leading premium beer in China behind 80-year-old Tsing
Tao Beer. Pabst Blue Ribbon is the leading foreign label beer sold
in China today.
(Note: Statements in this press release which are not historical
may be deemed forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although CBR Brewing
Company, Inc. believes the expectations reflected in any forward-looking
statements are based on reasonable assumptions, it can give no assurance
that its expectations will be attained. Factors that could cause
actual results to differ materially from CBR Brewing Company, Inc.'s
expectations include completion of pending acquisitions, continued
availability of acquisitions, the availability and cost of capital
for acquisitions and for renovations, the ability to maintain existing
licenses, competition within the brewing industry, foreign exchange
fluctuations, China's economic conditions, and other risks detailed
from time to time in CBR Brewing Company, Inc.'s SEC reports, including
Quarterly Reports on Form 10-Q, current Reports on Form 8-K and
Annual Reports on Form 10-K.)
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