Diageo said the brand has suffered particularly in Chinas on-trade

Diageo said the brand has suffered particularly in China's on-trade

Diageo has written down the value of baijiu maker Shuijingfang, of which it has a 39.7% stake, by GBP264m (US$446.2m) as sales of the white spirit have fallen sharply in the face of China's anti-extravagance measures. 

The company revealed the impairment charge today in full-year results, which showed a slide in group profits and sales. Diageo blamed “emerging market weakness” for the results, particularly in China. 

With Diageo's stake in the group, and a GBP65m deferred tax liability, the impact on the UK firm's profits will be GBP79m. 

Sales of Shuijingfang fell by 78% in the 12 months to the end of June, the group said. "The effects of the government’s anti extravagance campaign severely impacted the on trade channel, and continued to affect performance of both our Chinese white spirits and Scotch (whisky) businesses,” Diageo said. 

The group also pointed to "pricing pressures from other leading brands" for Shuijingfang's performance. 

Diageo said the impairment will reduce the group's basic earnings per share by GBP0.03. 

Speculation that Diageo was preparing to writedown its stake in the Chinese brand emerged earlier this week