July 27 (Bloomberg) -- Dynasty Fine Wines Group Ltd. fell as much as 14 percent, heading for a record decline, in Hong Kong trading after saying first-half profit may be “considerably lower” than a year earlier.
The Tianjin, China-based winemaker, partly owned by France’s Remy Cointreau SA, dropped 14 percent to HK$2.16 as of 11:54 a.m. on the city’s stock exchange. The stock looked set to end trading with the biggest loss since it listed in January 2005.
Net income will decline because of lower sales in Zhejiang, Huadong, which is Dynasty’s “strongest” market in the country, as the company reorganizes distribution, it said in a statement to the Hong Kong stock exchange yesterday. The winemaker is talking to distributors about strengthening control on retail prices, it said.
“It won’t be easy for Dynasty to change its distribution model because wine distributors in China have enormous negotiating power,” Jason Yuan, an analyst at UOB Kay Hian Investment Co., said by phone today. “I don’t think they can succeed.”
Gross profit margin in the first half of the year was also reduced by higher costs of raw materials and manufacturing, a new city construction tax and an education surcharge on its units in China, Dynasty Fine Wines said in the statement.
Remy Cointreau manufactures Remy Martin.
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