Silver Base switches tack after plunge into the red

PUBLISHED : Wednesday, 03 July, 2013, 12:00am
UPDATED : Wednesday, 03 July, 2013, 4:48am

Mainland liquor and cigarette distributor Silver Base will launch cheaper products after reporting a net loss of HK$1.13 billion for the past financial year.

The firm reported an 86.9 per cent drop in revenue to HK$390.2 million for the year to March, blaming it on the economic slowdown on the mainland and Beijing's crackdown on corruption.

Gross profit plunged 97.7 per cent to HK$32.3 million. The company took an impairment of HK$507 million by way of trade receivables.

One of the largest distributors of high-end liquor brands such as Wuliangye and Moutai, Silver Base now seeks to pay more attention to the mid to low-end market and expand its reach.

Last year, 90 per cent of its products were oriented towards the high-end market. The firm wants to scale that back to 70 per cent.

"Although local policies might have a short term and greater impact on the gross profit margin for our high-end products, we anticipate a higher margin for our mid to low-end products," chairman Liang Guoxing said.

The mainland market accounts for 57.2 per cent of the company's revenue. The rest was from exports.

Liang said the chances of a rebound in the margins for high-end products were low and the company's stock price would continue to fall for the next six months.

Priced between 1,500 yuan (HK$1,900) and 2,000 yuan for 500ml bottles, premium liquor products such as mao-tai and Wuliangye are among the most sought-after gifts among top mainland officials and a permanent fixture in high-level banquets. But an alcohol ban in military events and an increase of retail prices for baijiu or white alcohol products have severely hit demand.

In February, top liquor makers on the mainland, including Kweichow Moutai and Wuliangye Yibin, were fined HK$558 million by the National Development and Reform Commission for violating antitrust laws.

The companies admitted violating anti-monopoly laws by penalising distributors which sold their products at lower prices than they had set.

Silver Base's shares closed unchanged at HK$1.46 yesterday. The stock is down 41.6 per cent so far this year.