(Yicai Global) April 28 -- Shares in Kweichow Moutai, China’s most valuable brand for the last three years, dropped as much as 4.3 percent today after the liquor maker reported its smallest first-quarter profit increase in six years, largely due to a big hike in taxes.

Kweichow Moutai’s stock price [SHA:600519] closed down 2.5 percent at CNY2,042 (USD315). Earlier in the day it had fallen to CNY2,003.

The distiller logged a 6.57 percent gain in profit in the three months ended March 31 from the same period last year to CNY14 billion (USD2.2 billion), the company said in its first-quarter earnings report released yesterday. Last year, despite the Covid-19 pandemic, profit for the period surged 16.69 percent.

Revenue, though, climbed 11.74 percent to CNY27.2 billion (USD4.2 billion).

Taxes have risen, hence the dwindling profit margin, Xiao Zhuqing, an analyst for the liquor sector, told Yicai Global. Rice wine producers used to pay consumption tax based on their net income, with expenses deducted, but duties are now being levied on their gross income.

The Zunyi, southwestern Guizhou province-based firm paid CNY3.8 billion (USD590.2 million) in taxes in the first quarter, a huge hike of 56.38 percent from the same period last year, it said in the report. Some of this was also due to more sales being handled by its unit Kweichow Moutai Sales.

Last year Kweichow Moutai also experienced a significant slowdown in profit growth to 13.3 percent year on year, down from 17.1 percent in 2019 and 30 percent in 2018.

Major stakeholders are beginning to distance themselves as profits slide. The Guizhou Provincial State-Owned Assets Operating Company shed 3 percent of its equity in the first quarter to 57 million shares, reducing its holdings to 4.54 percent from 4.68 percent at the end of last year.

Editors: Liao Shumin, Kim Taylor