Wednesday, 28 May 2014

China Ouhua: red wine and red flags (2)

China Ouhua Winery was listed end of 2010, exactly from that moment onwards its financials started to deteriorate severely. Something that is (unfortunately) not uncommon for companies that seek a listing on Bursa Malaysia, and even more common in the case of China listed companies.

The results so far:

       Revenue  PATMI
2010    209M     52M
2011    198M     28M
2012     76M      0M
2013     18M    -47M
For those who think that it can't get any worse, I have bad news. China Ouhua managed to book a revenue for the first three months of 2014 of barely RM 1 million. Even most ACE listed companies would be ashamed of such low numbers.

Sometimes business can be brutal, the price of raw materials rise, margins decrease, a bad one-off event, etc. But when a company has hardly any revenue, how can it ever come back again?

The company was described as "one of the top 10 wine companies in China (based on Frost & Sullivan's market research of China's wine market in 2009). It has a vertically integrated business model and is the first player in the PRC wine industry to establish speciality wine stores as a mode of distribution. It also owns one of the largest matured vineyards in Shandong."

If that is still true, then I feel sorry for China's wine industry.

I hope the authorities will look into this case.


  1. Hi could you make a guess as to why this happened? Its unlikely that the China wine market has kaputed? Thanks lots

  2. I see much too many red flags, can't draw any conclusion without a much more thorough investigation, hope the authorities will do that.