Dukang Distillers Holdings

[rogerwilco]

From page 3 of Dukang FY 2012 press release ,

In light of the continuous expansion of the Chinese baijiu market, the Group expects to increase its production capacity for 「Dukang」 brand products by about 40% or 3,000 tonnes through the addition of another 700 fermentation pools during the next financial year. The estimated capital expenditure of about RMB100 million is expected to be funded by internal resources

As a point for comparison, 2011 capex is RMB 44.4 million (taken from Dukang AR 2011 cash flow statement)

[rogerwilco]

Anyone attended Dukang's AGM? any new update from the management? can't wait to see Dukang's next financial update...

The net profits of Kweichow Moutai Co, China's leading high-end liquor producer, surged 106.05 percent year-on-year to reach 3.42 billion yuan ($543.41 million) in the third quarter of 2012.

Liquor producer Wuliangye Group recorded a net profit increase of nearly 90 percent in the third quarter, driven by price hikes and strong sales, the company said Monday.

Not everyone fared well, however. A media storm over pesticide residue hurt sales at Yantai Changyu Pioneer Wine, a leading maker of red and white wine in China. Its net profit fell 38 percent in the quarter, which the company blamed on negative media coverage and increased marketing costs.

Source
Kweichow Moutai's Q3 profits surge 106%
Liquor Maker Wuliangye Sees Robust Q3 Profit Growth
China booze makers defy economic gloom

[godjira1]

Du Kang has such big potential (after all, one of cao cao's famous phrases) so hopefully it turns in a good set of results. Thing i am looking most for is sales growth.

Vested.

[egghead]

Any idea how the growth can come about when capacity utilization is already 100%?

[ValueBeliever]

SGX and SIAS should continue to re-inforcement work on making sure the accounting of a handful respectable?? S-chips is sound.

There have been too many fraudulent practice uncovered and there should not be repeat of the same mistake.

Can any1 point out anything wrong with Dukang?

[yeokiwi]

Any idea how the growth can come about when capacity utilization is already 100%?

add water..haha.

[egghead]

Hi, ValueBeliever

I hope your post is not because you interpreted my question as suspicion on Dukang's account. I read from their presentation slides that their current capacity utilization is hitting 100% or more. In such situation, the way to increase sales is to increase price; but I'm just wondering how much price can be increased to significantly increase sales and profit.

---

add water..haha.

Ouch!

[rogerwilco]

Reading from Dukang's presentation, 100% capacity utilization are during 2Q and 3Q (winter and spring) which are normally the best period for selling baijiu. Other period has lower utilization so I would assume production volume can still be increased.

Dukang also has stated that it would increase its production capacity for Dukang」 brand products by about 40% during the next financial year (2013).

[portuser]

Dukang stores a portion of the grain alcohol for it to age for sale at a very much higher price later.
Distillation of grain alcohol in summer was curtailed because high ambient temperature results in high evaporation loss.
How long sales growth can be sustained depends on the grain alcohol inventory and its age composition.
New fermentation pools will not contribute much in the short terms as they are not capable of producing premium alcohol.
The premium "Dukang Juizu" brand variants are produced from fermentation pools that are older than 20 years.

[sgd]

I read an articles some time back, there's a strong demand but shortage in supply of premium vintage baijiu available in the chinese market agents are scouring the countryside going door to door looking baijiu aged from the 50's 60's era.

In fact not only baijiu because of rise in global population the trend is demand for liquor has made a very strong comeback. In the 80's there was an oversupply and plummeting demand resulting in closures of many distilleries in scotland and US, now with short supply and growing demand t's getting hard to find 30yr-40yr vintages whiskies or bourbons on the market when they do appear on the market in limited quantities they are quickly snapped up usually by the local people themselves.

To meet the demand you will notice many distilleries are introducing liquor that are aged only 8/9/10 yo because there really is not enough supply.