Dynasty Fine Wines cuts distribution to curb losses

Chinese winemaker Dynasty Fine Wines significantly cut distribution costs in the first half of 2014 in order to reduce the group's losses as it continued to suffer from weaker consumer demand in the country.

Dynasty remained in the red during the first half of 2014. It reported preliminary net losses of HK$63.6m for the six months to the end of June.

Losses were around double that figure in the same six months of 2013, and Dynasty's accounts show that it was forced to cut distribution of its wines in an effort to balance its fragile finances. Distribution costs were HK$99.5m in the first half of 2014, versus HK$177.9m a year earlier.

Dynasty's financial results for 2013 and 2014 remain preliminary pending an ongoing investigation into the company's accounts by external auditors. The company's shares have been suspended from trading since 22 March 2013.

The group said in its half-year statement that government austerity measures in China, including stricter rules on entertainment spending by officials, have continued to damage its wine business.

Net sales dropped by 17% versus the first half of 2013, to HK$325m, due to lower volume sales of wine and consumers trading down to cheaper wines.

Alongside austerity measures, Dynasty also blamed weaker demand for domestic Chinese wines for the fall, underpinned by a general economic slowdown across the country.

The company said that it would report on the outcome of the external audit of its financial health. But, it did not provide a timescale.

In June this year, French drinks group Remy Cointreau said it had halved the estimated value of its 27% stake Dynasty over the past two years, amid ongoing uncertainty around the Chinese group’s financial situation.