In 2020, the revenue and operating cash flow of Daohuaxiang Liquor industry both declined, and the company's existing bonds will mature within the year, and there is some uncertainty in the availability of repayment funds.
01
On a watch list
On May 21, CCXCI announced that the main credit rating of Hubei Daohuaxiang Liquor Co., Ltd. (hereinafter referred to as "Daohuaxiang Liquor") AA and the credit rating of the debt of "16 Edao 01" AA were included in the watch list of possible downgrades.
Notice of inclusion on the Watch List
The announcement shows that in 2020, the revenue and operating cash flow of Daohuaxiang Wine industry both declined, and the company had a large capital occupation, limited available funds, existing bonds will mature within the year, and there is some uncertainty in the availability of repayment funds.
According to the statistics of "Small Debt Looking at the Market", the current existing bonds of Daohuaxiang Liquor Industry, "16 Edao 01" and "16 Daohuaxiang", with a survival scale of 885 million yuan, will mature in August and November this year, respectively, and the short-term centralized payment pressure is relatively large.
Existing bonds
According to the materials provided by Daohuaxiang Liquor, the sources of its repayment funds are mainly the return of cash from liquor sales and the new bank credit, and there is a certain uncertainty in the availability of the above funds.
02
Performance declines Funds are tight
According to the official website, Daohuaxiang Liquor Industry started in 1982, and founded the "Daohuaxiang" brand in 1992, which is a joint-stock enterprise mainly engaged in the production and sales of Daohuaxiang series liquor.
In 2020, Daohuaxiang was selected as "China's 500 Most Valuable Brands" for the 17th consecutive year, with a brand value of 80.586 billion yuan.
The official website of Daohuaxiang Liquor Industry
From the perspective of equity structure, the controlling shareholder of Daohuaxiang Liquor Is Cai Hongzhu, a natural person, with a shareholding ratio of 35.3%, which is the actual controller of the company.
Shareholding chart
In recent years, the domestic high-end liquor prices have risen rapidly, driven by consumption upgrades, traditional high-end liquor companies have deeply cultivated the market, second-line liquor products have been upgraded upwards, and the competition in the high-end liquor market is fierce.
Under the pressure of industry competition, Daohuaxiang Wine industry adjusted its product structure, increased the sales publicity of high-end products, and increased sales expenses by a large margin, which seriously eroded profits, and its performance in 2019 fell sharply nearly to the waist.
In 2020, superimposed on the impact of the new crown epidemic, Daohuaxiang Wine achieved revenue of 2.405 billion yuan, down 15.09% year-on-year; achieved net profit attributable to the mother of 343 million yuan, and net operating cash flow of 610 million yuan, down 33.87% year-on-year.
Profitability
As of the end of 2020, the total assets of Daohuaxiang Wine were 13.825 billion yuan, the total liabilities were 7.097 billion yuan, the net assets were 6.727 billion yuan, the asset-liability ratio was 51.34%, and the financial leverage was higher than the industry average.
The analysis of the debt structure of "Small Debts looking at the market" found that the owners of Daohuaxiang Wine should mainly have current liabilities, accounting for 84% of the total debt, and the debt structure is unreasonable.
As at the same reporting period, Daohuaxiang Liquor had current liabilities of RMB5.994 billion, mainly bills payable, and its short-term debt maturing within one year was RMB2.48 billion.
Compared with the scale of short-term debt, The liquidity of Daohuaxiang Wine Industry is insufficient, and its monetary funds on its account are 1.792 billion yuan, which is not enough to cover short-term debt, and there is a certain risk of debt repayment in the short term.
In terms of standby funds, as of the end of June 2020, the total credit of Daohuaxiang Liquor Bank was 3.53 billion yuan, and the unused credit line was 412 million yuan, which showed that its financial flexibility was not good.
Bank credit
However, as a key enterprise in the national agricultural industry, Daohuaxiang Liquor has received some support from local governments and financial institutions in terms of capital and financing.
From 2017 to 2019, Daohuaxiang Liquor industry received government subsidies of 0.19 billion yuan, 0.04 billion yuan and 0.42 billion yuan respectively.
In the first quarter of 2020, Three Gorges Logistics Park, a subsidiary of Daohuaxiang Wine, received a low-interest epidemic loan of 125 million yuan from the Three Gorges Branch of the Agricultural Bank of China and enjoyed epidemic loan subsidies.
At the same time, the "Measures" issued by the Yichang Municipal Government in early 2020 also proposed the establishment of a 500 million yuan liquor industry development fund, and designated Daohuaxiang Liquor Industry as the lead enterprise to leverage social capital to support the development of the liquor industry.
In terms of liabilities, Daohuaxiang Liquor also has non-current liabilities of 1.103 billion yuan, mainly long-term borrowings, and its long-term interest-bearing liabilities total 820 million yuan.
Overall, the rigid debt of Daohuaxiang Wine industry is 5.062 billion yuan, mainly based on short-term interest-bearing debt, and the interest-bearing debt ratio is 71%.
With high interest-bearing liabilities, the financial expenses of Daohuaxiang Liquor Industry continue to grow, and the indicator in 2019 is as high as 332 million yuan, coupled with high expenses during the period such as sales expenses, which seriously erodes the company's profits.
The cost is high during this period
From the perspective of the source of debt repayment funds, in addition to the return of sales cash, Daohuaxiang Liquor mainly relies on external financing, which is financed through leasing, accounts receivable, equity, bonds, equity pledges and bank credit.
It is worth noting that in recent years, the inflow of financing into The Daohuaxiang Wine Industry has decreased sharply, and the net financing cash flow after debt repayment has continued to be net outflow, which has been -573 million, -508 million and -382 million yuan in the past three years, which can be seen that the external financing environment continues to deteriorate.
Net financing cash flow
In addition, the restricted assets of Daohuaxiang Liquor industry are large, which adversely affects the flow of assets.
As of the middle of 2020, the total restricted assets of Daohuaxiang Liquor Industry were 7.696 billion yuan, accounting for more than half of the total assets of the current period, of which 1.402 billion yuan of restricted monetary funds, mainly bank credit deposits, and 5.634 billion yuan of restricted investment real estate, mainly used for bank credit offset pledges.
In terms of asset quality, other receivables of Daohuaxiang Liquor are large, mainly for the loan of distributors and related party funds, and some of the funds are more than 1 year, and the recovery progress is relatively slow.
Overall, in recent years, the profitability of The Daohuaxiang Wine Industry has declined year by year, and the performance in 2019 has even been cut off; the liquidity is insufficient, the short-term debt repayment pressure is greater; the scale of asset restriction is larger, which is not conducive to asset flow.
03
"Three people, three cylinders, 1500 yuan loan"
Cai Hongzhu, the founder of Daohuaxiang Wine, is a farmer entrepreneur who started from "three people, three tanks, and a loan of 1500 yuan".
In 1982, Cai Hongzhu persuaded the secretary of the brigade to borrow 1,500 yuan from the credit union, set up three large tanks in two earthen houses at the east end of the village, and founded the first factory in the village, the Qinglong Village Soy Sauce Factory.
At the beginning, Cai Hongzhu used a board cart to pull soy sauce along the street to sell, but within a few years he became a well-known "ten thousand yuan household".
Early pictures of the soy sauce factory
In 1986, Cai Hongzhu took up the management burden of two beverage factories and one Tumen distillery in the town, and renamed the enterprise "Yichang County Longquan Bailin Distillery".
Six years later, Cai Hongzhu put forward the development policy of "two finds, one innovation and three highs", under the guidance of the famous winemaker, the distillery conducted thousands of experiments, and finally in October of that year, the "Daohuaxiang" wine was successfully developed, and once it was put into the market, it was sought after.
In 1996, the sales volume of Daohuaxiang wine exceeded 200 million, and Cai Hongzhu expanded his commercial territory to the Yangtze River Delta and pearl river delta regions. When the situation was very good, Cai Hongzhu established the Daohuaxiang Group.
The development of Daohuaxiang wine industry was in the early stage
In 2005, Cai Hongzhu successively acquired four major brands such as Guan Gongfang, Chudu Liquor, Zigui Quyuan Distillery and Zhaojun, and Daohuaxiang developed into a leading liquor industry in Hubei, with an annual revenue of more than 1 billion yuan.
Five years later, the fragrance of rice flowers has successively entered the southwest, the Yangtze River Delta, and the Pearl River Delta. Three years later, Cai Hongzhu marched into Beijing and Shanghai and "conquered the last fortress." ”
Nowadays, Cai Hongzhu's commercial territory has formed a pattern dominated by rice and flowers and liquor, and five major industries such as food and beverage, packaging facilities, ecological agriculture, trade logistics, and sightseeing and tourism are held together.