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Kweichow Moutai Q1 net profit lags forecasts
April 24, 2014 / 1:46 PM / 3 years ago

Kweichow Moutai Q1 net profit lags forecasts

* Profit 3.7 bln yuan vs 4.1 bln yuan forecast

* Weakest Q1 profit growth in four years

* Crackdown on graft, flashy lifestyles takes toll

SHANGHAI, April 24 (Reuters) - Kweichow Moutai Co Ltd , China’s top seller of fiery liquor baijiu, on Thursday posted its weakest quarterly profit growth in three quarters due to the Chinese government’s crackdown on luxury spending.

The result suggests China’s premium alcohol makers may be suffering a sustained hangover from the government’s two-year-old drive against corruption and luxury gift-giving that has also hit sales at global spirits firms Diageo Plc and Remy Cointreau SA.

Boozy official banquets and flashy gifts account for about half of high-end baijiu sales, according to analysts, but such ostentatious displays of wealth have fallen out of favour as President Xi Jinping tries to calm public anger over corruption and restore faith in the ruling Communist Party.

Moutai, China’s largest baijiu seller by revenues, posted profit of 3.7 billion yuan ($593.2 million) for the three months ended March, up 3 percent from 3.6 billion yuan in the same period last year. This lagged estimates of 4.1 billion yuan.

The 3 percent rise is Moutai’s weakest profit growth since the second quarter of last year, when its net profit fell, according to Thomson Reuters data.

Quarterly revenues hit 7.4 billion yuan, up 4 percent from 7.2 billion yuan in 2013. This also missed estimates of 7.9 billion yuan.

Moutai narrowly avoided its weakest ever annual growth in 2013 and expects 2014 to be an “even more difficult year” for the baijiu market, according to its latest annual earnings statement.

The firm has predicted its weakest ever rise in annual sales this year, with revenues to climb just three percent on 2013.

Kweichow Moutai’s shares fell 0.17 on Thursday, and are up 36.9 percent this year, far outstripping the benchmark CSI 300 Index, which is down 6 percent.

$1 = 6.2376 Chinese Yuan Reporting by Adam Jourdan in SHANGHAI and Twinnie Siu in HONG KONG; Editing by Mark Potter

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