Tsingtao Brewery Company
Introduction
Tsingtao Brewery Company is among the most celebrated organizations located in China. As such, it is the oldest brewery company in the nation. Managers registered the company in 1993. Later on, the company was enlisted in the international stock exchange market. Tsingtao Brewery Company was the first local entity to join international stock market. After numerous years of operation, the company successfully joined 2008 Beijing Olympic Games team as a patron. The workers mission is to offer quality services and products to the clients. It aids in luring potential customers readily available in the business environment. Also, the organization’s goals are achieved within the required timeframe.
Tsingtao Brewery Company risk factor
Economic risk factors
The overall economic growth rate has recently dropped within the past few years. Regardless of the fact that people’s living standards has gradually improved, the barley export volume has also decrease as well. On the other hand, the Chinese barley demand has increased lately. Tsingtao Brewery Company should ensure that they produce increased quantity of beer targeting the large importers in the market. There is high demand for barley in China. However, the country is not the initial planter of barley. Monetary value required has led to the increased production costs. According to experts, Chinese industry development has increased by 15% since 2011.
Exchange rate risks challenges
A business market is divided into two parts such as micro environment and macro environment. Consequently, the macro environment uses political, economic, social, and technological analysis (Fombrun 168). Practitioners involve are required to come up with the necessary actions to ensure that there are no challenges faced in the near future. Organizations consider the flow of imports in the market to ensure that the leaders come up with the necessary selling protocol required in the market.
A company is required to handle important issue in regards to maintenance of conducive local conditions. For instance, practitioners should enhance development of technological skills at the workplace for improvement. Innovation is important because it aids in competition against rival companies in the market. Improved technological skills in the company lead to advancement in production, as well as, reducing the production cost. Don't use plagiarised sources.Get your custom essay just from $11/page
CONFERENCE CALL ANALYSIS
Beer consumption has recently increased in China. Numerous citizens have adapted to beer civilization due to the high rate of consumption. Chinese citizens enjoy taking beer and sharing their emotions. Imbibing beer is considered as a relaxation protocol in the nation. All occasions in the society are allowed to take beer since it plays an important role in socialization. The largest consumer groups of Tsingtao beer are individuals between the ages of 18-29 years in the community. As such, the consumers have recently increased by 14% since 2009. According to the practitioners, such results are likely to lead to the fight against Tsingtao in the near future (Junhong 95). Young individuals should ensure that consumption of beer does not lead to negative effects such as lack of productivity in the end.
Accounting Framework
Financial information
ASSETS 31st December 2018 31st December 2017
Current assets
Cash at bank and on hand 6,388,650 8,531,720,086
Notes receivable 41,600,000 84,760,000
Accounts receivable 125,421,629 152,292,736
Advances to suppliers 191,672,927 132,345,527
Interests’ receivable 171,660,445 188,461,377
Other receivables 163,583,950 183,395,467
Inventories 2,486,827,106 2,534,551,935
Other current assets 782,631,150 466,863,422
Total current assets 10,352,047,986 12,274,390,550
Non-current assets
Available-for-sale financial assets 308,642 1,308,642
Long-term equity investments 1,536,262,375 1,270,638,738
Investment properties 10,960,292 7,924,988
Fixed assets 9,118,776,190 8,740,310,277
Construction in progress 1,051,916,065 506,624,256
Fixed assets pending for disposal 17,965,978 5,368,759
Intangible assets 2,780,584,276 2,533,027,393
Goodwill 1,307,103,982 1,079,925,496
Long-term prepaid expenses 32,574,517 21,525,082
Deferred tax assets 718,786,072 700,162,187
Other non-current assets 76,626,751 223,660,169
Total non-current assets 16,651,865,140 15,090,475,987
TOTAL ASSETS 27,003,913,126 27,364,866,537
The rate of the domestic beer market declined gradually (Gang 1315). Therefore, the company applied innovative measures to ensure that there was an adjustment according to the challenges faced in the market due to stiff competition. Leaders devoted themselves to expand the available markets which assisted in acquiring better results. Eventually, it led to growth and development since the volume of sales increased gradually, as well as, the economic status. Beer sales increased by 5.1% in comparison to the previous year. Also, the organization changed the development strategies to ensure that the market share increased according to the leaders’ projections. However, leaders are required to hire competent stuff at the workplace. As such, regular training sessions should be offered regularly to ascertain that they are conversant with the required skills according to technological changes.
Foreigner Exchange Rate
Tsingtao Brewery Company uses RMB Yuan as the operational currency unless stated otherwise by the current leaders. As uh, it mainly applies in regards to sale of beer since most of its foreign revenue is acquired in terms of foreign currencies in the prevalent market. Therefore, most of production, as well as, operational costs are valued in RMB Yuan. In most cases, the workers face challenges linked to currency risk exposures in the business environment. Exchange rate risks and opportunities are often experienced due to translation of the currency used into revenues, net assets, and expenses.
My analysis: According to my perspective, in case the foreign currencies used at the workplace are weakened, negative impacts may be faced such as increase in prices of beverages among the clients which reduces demand for products and services offered to the available clients. Contrary to this, in case foreign exchange is strengthened, manufacturing costs increase thus minimizing profits acquired by the organization.
TAXATION
Financial statements are prepared according to the recommended accounting standards. On the other hand, workers follow relevant regulations offered by the ministry of finance referred to as the accounting standards for business enterprises. General rules that guide financial reporting are offered by China Securities Regulatory Commission. There are several amendments in the accounting policies due to various reasons. For instance, several financial statements have recently been presented in accordance to the standards linked to the comparative session. Additionally, disclosure of fair value is prepared in regards to fair value measurement. The required standards are followed to avoid facing any challenges in the near future. Consequently, any important information concerning the comparative period is not required.
Consolidated statement of income
Year ended 31st December
Note 2017 2018
Revenue 9 29,049,321,166 28,290,978,428
Less: Cost of sales 9 (17,899,291,275) (17,007,893,969)
Taxes and surcharges 10 (2,182,264,248) (2,227,776,340)
Selling and distribution expenses 10 (5,682,981,368) (5,610,693,817)
General and administrative expenses (1,362,297,511) (1,572,544,494)
Finance expenses-net 334,652,990 251,391,313
Losses 3,513,780 (1,744,922)
Add: Investment income 11 23,959,509 229,225,467
Share of profit of associates and
a joint venture 23,840,743 9,465,953
Operating profit 2,284,253,043 2,350,941,666
Add: Non-operating income 469,416,868 563,993,284
Gains on disposal of non-current 3,216,362 3,277,089
Assets
Less: Non-operating expenses (70,671,089) (248,401,282)
Losses on disposal of non-current
Assets (62,932,536) (104,922,138)
Total profit 2,682,998,822 2,666,533,668
Less: Income tax expense (663,466,755) (691,609,875)
Net profit 2,019,532067 1,974,923,793
Attributable to shareholders of the company 1,990,098,822 2,666,533,668
Attributable to non-controlling interests 29,434,023 1,551,696
Other comprehensive income, net of tax (15,152,645) 6,167,439
Changes arising from remeasurement of
defined benefit plan liabilities (14,767,000)
Currency translation differences (226,482)
Shares for comprehensive income investees (159,163)
Total comprehensive income 2,004,379,422 1,981,091,232
Attributable to shareholders of the company 1,974,945,399 1,979,539,536
Attributable to non-controlling interests 29,434,023 1,351,539,536
Earnings per share
Basic earnings per share 1,473 1,461
Diluted earnings per share 1,473 1,461
ANALYST
Financials
Valuation
P/E ratio (TTM) Price to sales ratio Price to book ratio Price to cash flow ratio
30.96 1.49 2.08 8.05
Profitability
Gross margin Operating margin Net margin Return on assets Return on equity
+30.41 +5.84 +5.87 4.43 8.20
Capital structure
Total debt to total equity Total debt to total capital Total debt to total assets Interest coverage
3.47 3.35 1.83 80.91
Financial health
Current ratio Quick ratio Cash ratio
1.47 1.25 1.15
Asset turnover ratio: 75/100= 0.75
Equity multiplier=Total assets/Total shareholder’s equity=5.32
Profit margin=( $32M-$24M )/$32M=25%
Tsingtao Brewery Company Roe=537.12/749.95=0.716
Risk and operation
There are alternative drinks that are used instead of Tsingtao beer according to the prevalent event. They are referred to as merchandise rivals. For example, intoxicants and soft drinks such as fruit juices, carbonated drinks, and mineral water. Alternative drinks are used in occasions such as hotel get-together parties, and party feasts. In most party occasions, people prefer beer. Brand rivals include Yanjing beer and Snow beer acquired from regional distribution. Tsingtao beer initially originated from South and East China whereas Snow beer originated from northeast China. Contrary to this, Yanjing based most of its stronghold in Beijing. Beer sales contribute to growth and development of the country’s economic status in regards to a gradual increase in the gross
Economic growth in the society has gradually improved after China reformed policies thus leading to stability. Therefore, individuals’ lives improved leading to positive impact. Improvement of the quality of life is considered important due to the policies issued by leaders in the government. In 2012, the drinks import duties were increased. Vinos duty rate increased by 50%. It assisted in improving the total gross revenue earned in the nation. Nutrient processing industries require improvement to ensure that clients acquire necessary products without facing any delay. There are various sectors that require improvement such as improving the delisting system, and increasing the penalty incurred as a result of producing illegal products in nutrient industries.
Quality of alcoholic drinks should be improved to assist in increasing demand among the clients. For instance, practitioners should enhance development of technological skills at the workplace for improvement. Innovation is important because it aids in competition against rival companies in the market. Improved technological skills in the company lead to advancement in production, as well as, reducing the production cost.
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Works cited
Fombrun, Charles J., and Matthew Pan. “Corporate reputations in China: How do consumers feel about companies?.” Corporate Reputation Review 9.3 (2006): 165-170.
Lu, Gang, et al. “UV inactivation of microorganisms in beer by a novel thin-film apparatus.” Food Control 21.10 (2010): 1312-1317.
Yu, Junhong, et al. “The influence of LOX‐less barley malt on the flavour stability of wort and beer.” Journal of the Institute of Brewing 120.2 (2014): 93-98..