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Beverages

Tsingtao Brewery Company

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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.

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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..

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