CANADA: Noble China Reports Second Quarter Results

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Noble China Inc. (TSE:NMO.) reported net earnings for the three months ended June 30, 2000 of $732,000 ($0.07 per share) compared with $1.6 million ($0.15 per share) in the same period last year.

Noble China's results for the second quarter of 2000 reflected continuing difficult conditions for sales of premium beer in China. Net sales of Pabst Blue Ribbon by the Zhaoqing Noble Brewery for the three months ended June 30, 2000 were $14.0 million compared with $15.7 million for the same period in 1999, a decrease of 10.8%. The volume of beer produced by the Brewery and sold to the Marketing Company was 305,000 hectolitres compared with 340,000 hectolitres in 1999, a decrease of 10.3%.

For the six months ended June 30, 2000, net earnings were $2.1 million, or $0.21 per share (1999: $3.0 million, or $0.28 per share) on sales of $28.2 million (1999: $32.3 million). Total volume produced was 605,000 hectolitres compared with 670,000 hectolitres in the first half of 1999, a decrease of 9.7%.

The decline in sales continues to be of concern to the Company and, as indicated at the Annual Meeting in late June, management is actively involved in discussions with our Chinese partners to restructure the Pabst Blue Ribbon business in China to address this and other consolidation opportunities.

Strategic Direction

Following a detailed review of our business and the long-term development needs for the Pabst Blue Ribbon brand in China, we concluded that the current structure for the Blue Ribbon business, which separates production from sales and marketing, makes it very difficult to effectively manage and promote the brand.

Noble has proposed to its partners that Noble's interest in the Zhaoqing Noble Brewery and the Pabst license be combined with their interests in the Brewery and the Marketing Company in one entity. This would enable the new company to launch a cohesive effort to arrest the volume declines and create positive momentum to re-establish growth for the Pabst Blue Ribbon brand.

As a positive first step, the parties have reached agreement to proceed on a test market basis with a new local brand called 'Double V' to be manufactured at the Noble Zhaoqing Brewery and sold through the Marketing Company. This new product will be positioned in the market to compete with the many lower priced domestic brands which have gained in popularity with Chinese consumers.

Joint Venture Profit Distributions

Noble has received $2.7 million of its $10.8 million share of the profit distribution out of 1999 profits declared by the Zhaoqing Noble Brewery in February 2000. $5.1 million of the balance owing will be retained by the Brewery under a notice, received in July 2000, issued by the Guangdong Shenzhen Intermediate People's Court.

The notice instructs the Brewery to retain RMB 28.9 million (approximately Can. $5.1 million) from any dividend payments to the owner of the 60% interest in the Brewery until that amount is paid in settlement of a judgment obtained from the same court by Li Chiu Cheun, a brother of Lei Kat Cheong, Noble's former Chairman, against Goldjinsheng Holding Limited ("Goldjinsheng"), an inactive indirect subsidiary of Noble China.

While Noble China and its PRC counsel are of the view that the Shenzhen Court has no power to restrict the payment of dividends and are taking steps to have the notice rescinded, the Company is not able to determine at this time how long, or whether, the matter can be resolved in the Company's favour. In the meantime, the Brewery is holding the funds.

Noble's cash resources and the cash resources at the Brewery are strong and the retention of the funds will have no immediate impact on the Company's day-to-day operations.

Three Months ended Six Months ended
June 30 June 30
2000 1999 2000 1999

NET SALES $14,027 $15,714 $28,207 $32,339

Zhaoqing Noble Brewery 3,181 4,559 6,849 8,763
Corporate, amortization of
goodwill, and other expenses (866) (1,085) (1,495) (2,016)


INCOME TAXES $2,315 $3,474 $5,354 $6,747

NET INCOME $732 $1,579 $2,161 $3,003

NET INCOME PER SHARE $0.07 $0.15 $0.21 $0.28

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