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)