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Jiugui Liquor’s net profit plummets


09:31, April 23, 2013

Jiugui Liquor Co Ltd, a major Chinese maker of high-end white liquor, said its net profit in the first quarter of the year plummeted 91.51 percent year-on-year.

The Shenzhen-listed company reported a 10.1 million yuan ($1.63 million) net profit in the first quarter, down from 119.1 million yuan in 2012. The company said the sharp decline was mainly caused by the significant slide in sales income.

Its sales revenue dropped to 198.2 million yuan from 526.2 million yuan in 2012, while the operating cash flow dropped to minus 180.9 million yuan from 145.3 million yuan in the same period of last year. Jiugui said that a decline in sales commissions is the main reason behind the drop in operating cash flow.

A report from UBS Securities pointed out that the central government’s policies to curb corruption and extravagance has also affected the company’s sales performance in the first quarter.

Meanwhile, some distributors stopped buying Jiugui’s products, while the return of some products also pressured the company’s sales growth in the first quarter.

In November 2012, the Hunan Provincial Administration of Quality and Technological Supervision said Jiugui’s products contained 1.04 milligrams of plasticizers per kilogram, much higher than the national standard. The news caused many distributors to return products at the end of 2012.

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