Kweichow Moutai seeks to prop up flagging shares with first-ever repurchase programme
Kweichow Moutai will launch its first-ever stock repurchase plan, as it seeks to prop up its shares amid tepid spending on the mainland
The company, based in China’s southern Guizhou province, plans to spend 3 billion yuan (US$425.4 million) to 6 billion yuan buying back its shares in the 12 months following approval from shareholders, according to a statement to the Shanghai Stock Exchange over the weekend. The repurchased shares will be cancelled, which will reduce registered capital, it said.
China’s slowing economy has hit Kweichow Moutai and other consumer product companies. The price of Flying Fairy, the company’s flagship liquor, has fallen over the past year, and the downturn has extended into September, which is typically a high season for Chinese baijiu ahead of the National Day holiday.
According to industry data, wholesale prices of Flying Fairy recently dropped 30 per cent from a year earlier to 2,300 yuan a bottle.
“The confidence [towards] the liquor market as well as demand is weak this year due to a fragile recovery in business catering and weak consumer spending,” said Wei Hongmei, an analyst at Dongguan Securities. “Liquor stocks are now trading at their cheapest levels in five years. Kweichow Moutai’s buy-back plan is conducive to protecting the interests of both the company and shareholders.”
Kweichow Moutai shares, which started trading in 2001, failed to get a boost from the buyback plan, falling 0.2 per cent to 1,261.54 yuan on Monday. On Thursday, the company’s shares reached their lowest point since April 24, 2020.
