(Yicai Global) Aug. 28 -- Wuliangye Yibin Co. [SHE:000858], a leading producer of the distilled Chinese liquor baijiu, had operating income of USD2.3 billion in the first half, up 18 percent on the year, according to its interim report.

Net profit rose 28 percent to USD740 million on the back of strong sales growth.

The impressive rise in earnings is largely attributable to improved sales and higher prices resulting from a recovery in the baijiu industry, a distributor told Jiemian News. Kweichow Moutai Co. [SHA:600519], the most popular high-end brand, was in severe short supply in the first half, which saw sales of Wuliangye, the number two brand, grow significantly.

Wuliangye Yibin's core product, the self-named Wuliangye, is widely seen as one of the best baijiu products in the country. Currently valued at USD13 billion, the brand has been one of China's best-selling food and beverage firms for 22 years.

However, there is still a large gap between Wuliangye and its top competitor, Kweichow Moutai. The latter's interim report, released late last month, showed operating income of USD3.2 billion and net profit more than doubling Wuliangye's at USD1.68 billion.

Overcapacity is the biggest problem facing the baijiu industry, said Li Shuguang, chairman of Wuliang ye's parent company Sichuan Yibin Wuliangye Group Co. Greater market integration and concentration are the general trend among baijiu makers, and Wuliangye is looking to scale up business operations through mergers and acquisitions, he added.