Changyu, China’s largest wine producer, has said it will spend CNY77m (10m euros) to create a new subsidiary in France.
Changyu said it will be the sole owner of the new company, which will be based on France’s Cognac region and will be named Fransco Champs Participation SAS. It said it would fund the move with cash reserves and that the new entity will allow it to better integrate its assets in French wine and Cognac, as well as consolidate its tax bill in the country.
The news comes one year after Changyu bought Cognac merchant house Roullet-Fransac. Changyu did not specify which other French wine assets it wanted to integrate into the new company, but it has partnerships with several wine groups in the country, including Castel.
Changyu’s announcement that it will use cash reserves to fund the new company comes after it reported a 67% increase in cash flow from operating activities in the third quarter of its financial year.
Its results suggested that a strict focus on cost cutting – during a challenging time for China’s emerging wine market – has started to improve the firm’s profits. For the three months to the end of September, operating profits rose by 10% on the same period of last year, to CNY890m. Net profits jumped by25.6% to CNY159m.
However, the performance was not enough to offset a tough first quarter. Changyu’s operating profits and net profits were down by 4.7% and 8% respectively for the first nine months of the year, at CNY3.2bn and CNY799m.
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