Kingway Brewery is the latest beer company to warn of commodity costs hitting its bottom line.

The Chinese brewer said today (5 December) that net profit for this year "may experience a significant decline" on 2006 and "may even record an operating loss for the full year", due to rising raw material and expansion costs.

The company has suffered not only as a result of the increase in malt prices, but also from having to cut the retail prices of its beers due to a shift of product mix this year.

In April, Kingway posted a marked drop in net profit for 2006, which slid to HKD110.2m (US$14.1m) from HKD198.28m a year earlier. The company said at the time that marketing costs and initial expenses related to the construction of breweries in Xian and Chengdu ate into earnings for the year.

Heineken holds an indirect 21.44% interest in Kingway through Heineken-APB (China), a joint venture between Asia Pacific Investment (API) and Asia Pacific Breweries. API is a holding company jointly-owned by the Dutch brewing giant and Singapore-based conglomerate Fraser and Neave.