On April 30, the deadline for annual report disclosures by A-share listed companies, Wuliangye Yibin Co.,Ltd., often referred to as the "second-largest liquor producer," released its 2025 annual report and 2026 first-quarter report at the last moment.
The two financial reports shocked investors. For the full year of 2025, Wuliangye reported revenue of approximately 40.529 billion yuan, down 54.55% year-on-year, and net profit attributable to shareholders of about 8.954 billion yuan, a decline of nearly 72%. However, in the first quarter of 2026, the company's performance rebounded sharply, with revenue reaching around 22.838 billion yuan and net profit hitting approximately 8.063 billion yuan—nearly matching the full-year 2025 profit in a single quarter.
Even more startling to investors was Wuliangye's restatement of its financial reports for the first, second, and third quarters of 2025. Revenue for the first three quarters was revised downward from 60.945 billion yuan to 30.638 billion yuan, a reduction of roughly 30.3 billion yuan.
Why did Wuliangye's performance change so abruptly? Can investors seek compensation following this major financial adjustment?
**First Question: What Caused the Sudden Performance Shift?**
2025 marked the first time since 2015 that Wuliangye experienced a simultaneous decline in both revenue and net profit.
According to the restated data, first-quarter 2025 revenue was adjusted downward from 36.940 billion yuan to 17.086 billion yuan, a reduction of 19.855 billion yuan. Net profit attributable to shareholders was lowered from 14.860 billion yuan to 4.416 billion yuan, down 10.444 billion yuan. For the first half of 2025, revenue was reduced by 29.261 billion yuan and net profit by 14.868 billion yuan. By the first three quarters, revenue was cut by 30.307 billion yuan and net profit by 15.036 billion yuan. Overall, revenue was halved, and net profit fell by about 70%.
In its "Announcement on Correction of Prior Period Accounting Errors," Wuliangye stated that the revisions were based on a review of its 2025 business model and the principle of prudence, correcting errors in revenue recognition in the consolidated financial statements for the first, second, and third quarters of 2025.
Following the revision of 2025 financial data, Wuliangye's revenue and net profit surged in the first quarter of 2026, rising 33.67% and 82.57% year-on-year, respectively. However, based on previously disclosed figures, they would have shown declines of 38.18% and 45.74%.
**Second Question: Why Did 30.3 Billion Yuan in Revenue Vanish?**
It was noted that Wuliangye's other current liabilities—which include regulatory commodity payments and deferred output VAT—increased significantly in each period: up 18.589 billion yuan in the first quarter of 2025, 27.326 billion yuan in the first half, and 27.442 billion yuan in the first three quarters.
A partner at a well-known accounting firm explained that a major reduction in revenue necessarily corresponds to a significant increase in liabilities. Comparing the corrected first and third quarter 2025 reports reveals a sharp rise in other current liabilities: from 1.057 billion yuan at the start of 2025 to 19.093 billion yuan by the end of the first quarter, and 27.827 billion yuan by the end of the third quarter.
This directly indicates that a large number of paid but undelivered orders were reclassified as liabilities. Meanwhile, contract liabilities remained high, reflecting the extent of order backlogs where payment was received but goods were not shipped.
**Third Question: Was the Accounting Error Correction Compliant?**
Wuliangye cited Accounting Standards for Business Enterprises No. 28 and disclosure rules for correcting financial information as the basis for its revisions.
Accounting Standards No. 28 defines prior period errors as including calculation mistakes, misapplication of accounting policies, oversight or misinterpretation of facts, effects of fraud, and inventory or fixed asset gains.
The accounting firm partner analyzed that Wuliangye's adjustment to third-quarter 2025 figures essentially constitutes an accounting error correction. Revenue is a cumulative metric that should only increase as business progresses; a decrease indicates an accounting adjustment. The company itself acknowledged the correction was due to accounting errors, implying that the accounting methods used in the originally disclosed first three quarters of 2025 were inappropriate.
The errors primarily concerned revenue recognition methods. Current revenue standards require a five-step model for recognition. The reduction suggests that revenue was previously recognized too early or in excessive amounts. The adjustment delays the recognition point by applying a different model.
For example, the company might have recognized revenue when distributors placed orders or goods left the warehouse, without considering end sales. This approach may have worked during industry booms, but recent sluggishness in the liquor sector, including price inversions where wholesale prices exceed retail, made the original model unsustainable. Wuliangye likely reduced revenue due to high distributor inventory, effectively adopting stricter recognition criteria.
A more pressing question is whether 2024 revenue was also overstated, as those results have already been announced. Wuliangye has not addressed this, but the root issue may lie in overly lenient 2024 recognition standards.
Zhang Qi, equity partner at Duan & Duan Law Firm, argued that the adjustment is unreasonable for three reasons: the massive scale of the revision defies normal accounting logic; it represents a policy change disguised as an error correction; and the timing—amid a leadership investigation and board transition—suggests intentional profit manipulation.
However, Yang Zhaoquan, director of Beijing Weinuo Law Firm, stated that the adjustment aligns with accounting prudence. He noted that liquor industry practices have long involved specific revenue recognition methods, not deliberate financial arrangements. Given high channel inventory, recalibrating recognition helps reflect true operations. The process, including internal review and auditor verification, complies with regulations and is not considered financial misconduct.
**Fourth Question: Will Regulators Intervene?**
Following the disclosure, some investors questioned whether financial statements can be arbitrarily adjusted, while others mocked the company as "Unreliable Liquor."
Shanghai Jiucheng Law Firm lawyer Xu Feng suggested the announcement may involve false disclosure, warranting clearer explanations to exclude suspicion. If explanations are inadequate, regulators may need to intervene.
Zhang Qi argued the move violates several rules: previous quarterly reports were seriously inaccurate, breaching securities law requirements; accounting policy changes were mislabeled as errors to avoid strict disclosure; repeated major errors indicate internal control failures; and delayed corrections violate timeliness principles.
He predicted combined administrative, self-regulatory, and civil penalties, but not criminal liability. Steps may include inquiry letters, warnings, fines, and auditor sanctions.
Xu Feng noted that if false disclosure is confirmed, Wuliangye could face fines up to 10 million yuan and executive penalties, including criminal liability in severe cases. Du Yunfeng, senior partner at Beijing Lantai Law Firm, said high adjustment magnitude increases regulatory scrutiny risks, potentially leading to exchanges penalties, CSRC sanctions, investor lawsuits, or even criminal charges.
**Fifth Question: Can Investors Claim Compensation?**
Investors are particularly concerned about potential losses.
Zhang Qi stated that investors may file civil compensation suits for false disclosure, with the company liable for losses. Deliberate fraud could lead to market bans for responsible individuals or judicial proceedings.
Xu Feng indicated that investors who bought Wuliangye shares between April 28, 2025, and May 1, 2026, and sold or held them after May 1, 2026, may claim compensation.
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