China's major wine maker, Yantai Changyu, posted a 46 percent rise in its third-quarter earnings thanks to cost cuts and is poised to outperform rival Dynasty Fine Wines Group this year.

Yantai Changyu Pioneer Wine Co. Ltd., partly owned by Italian liqueur maker Illva Saronno and the World Bank's International Finance Corp. (IFC, reported a net profit of 93.3 million Yuan ($12 million) for the January-September period, up from 63.83 million in the same period of last year.

"In the reporting period, our firm managed to cut operational and management costs, with management expenditure dropping 50 percent," Changyu said in the quarterly results.

While turnover rose 18 percent year on year to 472.42 million from July to September, Changyu managed to curb its operational costs to a rise of only 3.5 percent to 133 million Yuan. Management costs dropped to 17.7 million from 35.6 million Yuan.

The Shenzhen-listed company is now poised for healthy earnings growth for all of 2006 as its January-September net profit had already jumped the same 46 percent from a year earlier to 293.33 million Yuan.

In comparison, it is forecasted Hong Kong-listed Dynasty Fine Wines' 2006 net earnings to fall 3 percent. Both companies focus their sales on China's eastern Shandong province, though Dynasty is not obliged to post quarterly results due to different regulatory requirements on the mainland and Hong Kong.

Costs have become a key factor to affect wine makers' profits over the past year mainly because bad whether adds to spending. Chinese producers were also faced with growing competition from foreign rivals as Beijing prizes open the wine market.  Consumption is rising at a steady 11 to 12 percent on an annual basis in the recent years.

Domestic makers are unlikely to see particularly strong earnings growth over the next few years as prices of foreign brands are now at about the same level of local peers.

Source:佚名