Wuliangye cuts 70% of net profit, where did the money go?

After the market closed on April 30, Wuliangye issued 37 announcements in one go.

The most eye-catching one was titled "Correction of Prior Accounting Errors." It slashed revenue for the first three quarters of 2025 from 60.9 billion yuan to 30.6 billion yuan; net profit attributable to shareholders dropped from 21.5 billion yuan to 6.5 billion yuan, a 70% downward revision in net profit.

For an ordinary company, this would be enough for the market to digest for a while, but Wuliangye’s financial report 'has more tricks up its sleeve.' On the next page of this announcement, the company casually noted: 'No impact on the presentation of the cash flow statement.' Cross-checking that statement with the cash flow statement: cash received from sales of goods and services provided was 76.6 billion yuan, and net cash flow from operating activities was 28.2 billion yuan. All items across the three reporting periods showed no changes following the adjustments to net profit and revenue.

Turning to the balance sheet, comparing line by line the original version published last year with the updated version released on the 30th—cash, accounts receivable, contract liabilities, and inventory—all were identical down to the last detail.It appeared as though 27 billion yuan in revenue had simply vanished into thin air, with no changes reflected in the cash flow statement, cash balances, or contract liabilities.。

What truly made the situation somewhat surreal was the simultaneously disclosed Q1 2026 report that evening, showing an 82.57% year-on-year increase in net profit attributable to shareholders. After reading the previous correction announcement and then seeing this figure, it felt disorienting—you had just watched the company slash 70% of its profits for the first three quarters of 2025, and then in another document, it tells you,the new year started with an 80% growth.。

Moreover, among the 37 announcements, there were other highlights, such as the implementation of a share repurchase plan with an amount ranging between 8 billion and 10 billion yuan. This is the largest buyback since Wuliangye's listing, and even the lower limit alone could support the market significance worthy of a standalone announcement. Normally, analysts would calculate what percentage of shares it represents, its proportion relative to market capitalization, and its impact on future dividends.

But on this night, all eyes were focused on the seemingly vanished 27 billion yuan in net profit, and the completely unchanged cash flow statement.The company’s official explanation for this correction was only five words: 'Business model review,' but many have interpreted it as Wuliangye proactively raising its revenue recognition standards. To assess whether this interpretation holds water, one must revisit the inconspicuous statement in the announcement: 'No impact on the presentation of the cash flow statement' and trace back along that clue.

01 Where did the money go?

We compared line by line the key items of the three reporting periods in the original and updated cash flow statements: Cash received from sales of goods and rendering of services amounted to 76.608 billion yuan; net cash flow from operating activities was 28.247 billion yuan; net cash flow from financing activities was -18.951 billion yuan, and none of these figures changed.

The money came in and stayed on the books. So where did the 27 billion yuan removed from revenue go?

A previously inconspicuous item, other current liabilities, showed significant changes. In the original disclosure, it was 504 million yuan at the end of Q1 2025, 423 million yuan at the end of H1, and 386 million yuan at the end of Q3, with the total for the three quarter-ends not exceeding 1.3 billion yuan. After the updated disclosure, the figures jumped to 19.093 billion yuan, 27.749 billion yuan, and 27.827 billion yuan respectively.

Looking further at the consolidated balance sheet for the 2025 annual report, this item started at 1.057 billion yuan at the beginning of the period and ended at 27.029 billion yuan. The more than 27 billion yuan of revenue that was removed was mainly recorded under this single item, with the remaining small portion corresponding to output VAT, which went into 'Payable Taxes - Deferred Output VAT.' Adding both sides together, the amount adjusted out due to error corrections perfectly matches up on the balance sheet. Looking back one year earlier,Such 'collection nature' account hanging cannot be seen in the 2024 balance sheet.。

A common interpretation is to regard this 27 billion yuan as agency or entrusted business, meaning the company merely handled the transactions, recording income and costs on the books, but the money does not belong to its real earnings. Under accounting standards, determining whether a business is self-operated or agency-based hinges on whether control of the goods has been transferred to the enterprise, which is a judgment of commercial substance, not just based on gross margin. However, inferring from the financial structure, several characteristics of this part of the business can be observed.

Revenue was reduced by 19.855 billion yuan, and operating costs were reduced by 4.646 billion yuan. Calculating backwards, the corresponding gross profit structure of the removed portion is 76.6%. In the original disclosure, Wuliangye’s overall liquor gross margin was 82.20%, and the gross margin for the main brand Wuliangye products was 86.45%. The 76.6% is close to the gross profit level of the real liquor business, unlike typical agency businesses that only earn a markup or commission. Moreover, the removed portion was accompanied by full accrual of selling expenses and consumption tax calculated based on ex-factory prices.These are characteristics of self-operated business, not agency business.。

We have also seen another explanation: this portion of income was simply recognized a bit early; the liquor might still be in the warehouse and not yet truly shipped out, so it makes sense to reverse it from revenue. If this is the case, the corresponding consumption tax should decrease accordingly, as the liquor consumption tax is accrued at the ex-factory price when the production enterprise ships to distributors and issues invoices. Without shipping and invoicing, no consumption tax would be incurred.

However, when it comes to taxes and surcharges, the figures remain unchanged before and after the error correction. The Q1 cumulative was 5.405 billion, H1 cumulative was 7.852 billion, and Q3 cumulative was 9.116 billion. The numbers in both the original and updated versions are identical. This indicates that the portion of sales disclosed in the original report indeed corresponded to goods that had been fully shipped to distributors, invoiced, and subject to output consumption tax based on the factory price.

What the error correction removed were not 'non-existent' sales but a batch of real shipments that had completed the delivery and invoicing process and were reclassified by the accounting department.。

There is still one more account to settle. The error correction not only affected revenue and net profit but also reduced sales expenses: Q1 decreased by 913.5 million, H1 decreased by 1.897 billion, and Q3 remained the same as H1, meaning there was no additional adjustment in Q3 alone. During the same period, 'Other Payables' on the balance sheet correspondingly decreased: Q1 decreased by 910 million, H1 decreased by 1.897 billion, matching the figures perfectly.

Reviewing these five steps together: the distributors really paid, the liquor was genuinely shipped, the consumption tax based on the factory price was truly paid, and the corresponding sales rebates were written off in the accounts. In other words, a complete set of real business actions from payment to shipment, to taxation, to rebate reconciliation has already taken place and been completed.

However, in the updated financial report, this more than 27 billion yuan is no longer counted as the company's current realized sales revenue but is returned to the 'Other Current Liabilities' item on the balance sheet, becoming a liability that the company has not yet fully fulfilled. Physically, the liquor has been shipped from the Wuliangye warehouse to the distributors’ warehouses, which is a step that actually happened.This means that these liquors are likely currently piled up in the warehouses of distributors across the country, waiting to be sold.。

This scenario bears a striking resemblance to the portrayal of the liquor industry’s 'channel stocking model where distributor payments are recognized as sales revenue.'However, the official name given by the company for this entire adjustment is simply 'Business Model Streamlining.' Every action was conducted within the compliance framework of accounting standards, but such treatment within the compliant framework is being displayed publicly on this scale for the first time.

02 Pathways during the downturn

In the first quarter of 2026, Wuliangye’s net profit attributable to shareholders increased by 82.6% year-over-year. In the report, the company explained it this way:

During this reporting period, the company received more bills due to market changes and was also affected by a relatively high base figure from the same period.

The latter part of the statement, 'relatively high base figure,' refers to the previously restated amount of 4.416 billion. What truly deserves attention is the earlier phrase, 'more bills.' In the single quarter of Q1 2026, Wuliangye's accounts receivable financing increased by 11.304 billion yuan.This indicates that a significant portion of the payments received were not in cash but rather in bills issued by distributors.。

This itself is a shared signal within the current downward cycle of the liquor industry.

Over the past two years, the liquor industry has been experiencing its deepest downturn since 2018, with both demand and prices declining simultaneously. On December 12, 2025, the wholesale price of the benchmark product, Feitian Maotai 53% 500ml bottle, dropped to 1,485 yuan per bottle, falling below the official recommended price for the first time. Entering 2026, while the nominal ex-factory price of Wuliangye remained at 1,019 yuan, the manufacturer began offering a subsidy of 119 yuan per bottle, reducing the distributor’s actual invoicing price to around 900 yuan per bottle.

In its statement, the company wrote, 'The ex-factory price has not been adjusted; the so-called price reduction circulating in the market is actually a result of the price change following the implementation of relevant subsidy support policies.' The subsidy is essentially an indirect price cut.

Channel pressure at the mid-range price point repeatedly appears in industry research. According to KPMG China's '2025 Mid-Term Research Report on China’s Liquor Market' released on June 18, 2025,58.1% of dealers reported continued inventory increases, with the industry's average inventory turnover days reaching 900 days. The most severe price inversion occurred in the 800 to 1,500 yuan price range, which is where Wuliangye P5 and Guojiao 1573 are most concentrated.。

Looking at listed companies, as of the third quarter of 2025, the total inventory of 21 A-share listed liquor companies amounted to 170.996 billion yuan, representing a year-on-year increase of 11.32%. The average inventory turnover days rose from 862 days in the same period last year to 1,424 days, extending by 65.21% in a single year. It should be noted that a considerable portion of the liquor industry’s inventory consists of base liquor, which appreciates in value the longer it is stored, making it a core asset. This cannot be fully equated with stagnant inventory in general fast-moving consumer goods.

However, the year-on-year extension of 65% in a single year cannot be fully explained by proactive storage of base liquor. The remaining portion falls under channel overstocking. The combined contract liabilities of 20 companies totaled 39.15 billion yuan, representing payments already made by distributors but not yet recognized as revenue.

In this environment, the split between 'book sales' and 'actual cash receipts' is a common phenomenon across the industry.The only difference lies in how each company chooses to handle this split.。

Yanghe has chosen to clear its books thoroughly. In the first three quarters of 2025, Yanghe's revenue fell 34.26% year-over-year, its receivables financing plummeted 96.66%, and the balance of accounts receivable was reduced to just 8 million yuan. This effectively means that the channel pressures accumulated over the past few years were painstakingly converted back into cash. The company did not focus on maintaining a good-looking book, at the cost of unattractive surface figures.

Luzhou Laojiao, on the other hand, adopted a more restrained approach by proactively tightening. In the first three quarters of 2025, Luzhou Laojiao cut its absolute sales expenses by 81 million yuan, reduced its receivables financing by nearly 80% over two years, and slashed long-term borrowings by 64.67% in a single year. It chose not to let its books bear the brunt of this round of downward channel pressure, preferring slower revenue growth rather than inflating its books with superficial gains, instead shifting its entire balance sheet towards a more conservative direction.

And what about Wuliangye? Before this earnings revision, in the first three quarters of 2025, Wuliangye’s sales expenses increased by 37.15% year-over-year, contract liabilities rose by 70.30%, and receivables financing grew by 38.90%. These impressive figures on the books were achieved without publicly acknowledging any downturn or actively tightening channel pressures.This time, the previously attractive figures on the books were recalculated through a compliant error correction, but the scale of the adjustment has shocked everyone.。

03Conclusion

Error corrections are permitted under accounting standards; legally and from a compliance perspective, the company has no issues, and the market has processed it as per procedure. However, viewed against the backdrop of the deepest downturn in the baijiu sector since 2018, Wuliangye's deliberate choice to take this path tells investors one thing:

What can be explained away with a phrase like 'business model review' under accounting standards will be voluntarily disclosed in announcements; the parts of the story that cannot be justified remain outside the disclosures.。

The ripple effect of this event is that when Wuliangye releases its next earnings report, upon seeing the 'revenue' line, investors’ first thought will likely no longer be 'how many bottles were sold this year,' but rather 'are these numbers reliable this time?' This is a cost that won’t appear in any accounting entries, but every investor who has witnessed this error correction will probably pause an extra second when reviewing any of the company’s future reports.

In the capital markets, trust in a company is hard to build but easy to destroy. Accounting errors can be corrected, and figures can be rehung on the books, but...Some things, once they happen, can never return to the way they were before。 $Wuliangye Yibin (000858.SZ)$$Luzhou Laojiao (000568.SZ)$$Kweichow Moutai (600519.SH)$

Disclaimer: This article is intended solely for learning and communication purposes and does not constitute investment advice.

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