Dukang Distiller

Dukang Distiller: 2QFY14 net profit slumped 93% to Rmb10m led by a 45% decline in revenue to Rmb402.8m, taking 1HFY14 net profit to Rmb40.5m (-80.5%). The terrible performance was due mainly to decrease in revenue from both Luoyang Dukang (-38%) and Siwu operations (-66%), as a result of China’s current austerity measures on luxury gifting and spending. Gross margins decreased by 4.4 ppt to 35.2% due primarily to an overall decline in gross margins for Dukang products. Bottom-line was further weighed by a 47.3% rise in selling and distribution expenses to RMb95.0m, due to a 24.5% rise in TV commercial telecast expenses and a Rmb8m rise in bus and rooftop adverting costs in major Henan province cities.