Hong Kong-based Kingway Brewery Holdings has informed shareholders it may report a first-half net loss due to a decline in sales and higher production costs.

In a statement late yesterday (16 June), the Chinese brewery said that the deterioration in the group's profits was as a result of a rise in production costs due to the increase in raw material prices and unit fixed costs.

The company, in which Heineken has a 21% stake, also blamed an increase in administrative expenses as a result of the group's expansion including the Xian, Chengdu and Foshan brewery plants, which commenced in February 2007, April 2007 and January 2008 respectively.

In April, Kingway Brewery recorded a net loss for 2007 of HKD23.6m (US$3m), compared to a net profit in 2006 of HKD110m. Sales in the period rose, however, to HKD1.58bn from HKD1.41bn.