* Yashili s financial reporting was consolidated into Mengniu s financial statements starting from August 2013

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1 [FOR IMMEDIATE RELEASE] MENGNIU S 2014 INTERIM REVENUE UP 25.0% TO APPROXIMATELY RMB25.84 BILLION NET PROFIT SURGES 39.9% TO AROUND RMB1.05 BILLION * * * * * BUILDS UP A STRONGER BUSINESS PRESENCE 2014 INTERIM RESULTS HIGHLIGHTS: For the Six Months Ended 30 June (Unaudited) STREAMLINES ITS MANAGEMENT Mengniu s Own Business After Consolidation of Yashili Financial Results into Mengniu s Financial Statement* Change 2014 Interim Change Interim Interim RMB 000 RMB 000 % RMB 000 % Revenue 24,290,136 20,667, % 25,835, % Gross Profit 7,548,593 5,518, % 8,381, % Profit Attributable to 930, , % 1,048, % Owners of the Company Earnings per Share (RMB) - Basic % % - Diluted % % * Yashili s financial reporting was consolidated into Mengniu s financial statements starting from August 2013 Mengniu has achieved stable growth through consistently innovative efforts in marketing, implementing its business model and developing products as well as through extending its sales network and optimising its product portfolio Mengniu has strived to advance business collaboration with strategic partners particularly in the development of UHT, chilled and milk formula products, and optimise its business portfolio, aiming to become an innovation-led company offering health and nutrition With the aim to build up a win-win ecosystem, Mengniu has strengthened efforts to build milk sources. During the period under review, the ratio of milk sources provided by ranches and scaled farms has reached 94%, outperforming in the industry With clear brand value and product positioning, Mengniu has built its brand image through a Drop of Goodness and increased spending in digital media. Its star brands and opportunity brands have recorded outstanding performances According to Nielsen, Mengniu remained first in domestic market share of liquid milk, UHT dairy products and chilled dairy products The dairy industry has continued to steadily grow. In particular, liquid milk (including UHT milk, milk beverages and yogurt) recorded an outstanding performance with a clear trend of moving towards the high-end segment Page 1

2 Mengniu Announces 2014 Interim Results / P.2 (Hong Kong, ) - China Mengniu Dairy Company Limited and its subsidiaries ("Mengniu" or the "Group", Stock Code: 2319), a leading dairy product manufacturer in China, announced its unaudited interim results for the six months ended 30 June Ms. Sun Yiping, Chief Executive Officer of the Group, said, Following a number of strategic partnerships forged in 2013, Mengniu has been committed to closer business collaboration with strategic partners during the period under review while continuing revolutionary innovation in marketing, developing its business model and introducing new products. We have improved our management efficiency through streamlining workflow and optimising product portfolio. Our corporate culture of open and transparency has guided our internal and external communications. The series of reforms implemented by the Group have helped us achieve significantly improved results. Consequently, we have maintained growth in both revenue and profit. 1. Liquid milk business (Revenue: RMB21,764.8 million; accounting for 84.2% of the Group s revenue) According to Nielsen, Mengniu remained first in domestic market share of liquid milk, UHT dairy products and chilled dairy products during the first half of Among its liquid milk products, star brands such as Milk Deluxe, Yoyi C, Fruit Milk Drink, Champion and Future Star continued to lead the market. Opportunity brands, including Just Yoghurt, and the new product Minion Banana Milk maintained strong sales growth. UHT milk, milk beverages and yogurt businesses recorded revenue of RMB12,737.4 million, RMB5,826.2 million and RMB3,201.2 million respectively, accounting for 58.5%, 26.8% and 14.7% respectively of the revenue from the liquid milk business. As for UHT milk, Mengniu has launched Prime Ranch Pure Milk, Future Star Kid Organic Milk, Future Star Kid Walnut Milk and Future Star Kid Strawberry Milk. A full packaging upgrade of Strengthener and Energiser under the brand of Awakening Youth as well as Xin Yang Dao series products was also introduced to highlight the product features and brand image. On the milk beverages front, the packaging of the Minion Banana Milk features Minion, a popular cartoon figure, was well received by the market, while Yoyi C also recorded a high double-digit growth in sales. As for yogurt, Mengniu and Danone Group jointly launched Bio Fruity MIXI in June, entering the convenience store channel. Champion in upgraded packaging has emphasized its dual functions of regulating the intestinal bacterium and strengthening the immune system. 2. Ice cream business (Revenue: RMB1,988.4 million, accounting for 7.7% of the Group s revenue) During the period under review, the opportunity brand product Deluxe recorded strong sales growth. Milk Stick launched in attractive packaging at the end of 2013 appeals to young consumers. 3. Milk formula business (Revenue: RMB1,933.8 million, accounting for 7.5% of the Group s revenue) As one of the important categories in the dairy industry, infant milk formula is likely to benefit from accelerated industry consolidation and the Chinese government s loosening its one-child policy by allowing couples where either parent has no siblings to have two children. The government continued to strengthen quality control over the food safety of infant milk formula. Mengniu was selected as one of the six pilot enterprises under the introduction of the food safety traceability system. Page 2

3 Mengniu Announces 2014 Interim Results / P.3 Starting from August 2013, the financial reporting of Yashili, a leading infant milk formula brand, was consolidated into Mengniu s financial statement. During the period, the sales revenue from Yashili amounted to RMB1,545.7 million. As for Mengniu s own milk formula business, in addition to Oushi, Mengniu introduced another self-developed infant milk formula brand, Milex, in June to enter the mid-range to high-end mother and infant milk formula market. 100% made from prime milk sources of five major ranches in Northern Europe, Milex is tailor-made for Chinese infants for easy digestion and absorption, adjusting intestinal functions and boosting the immune system. 4. Other dairy products business (Revenue: RMB148.8 million, accounting for 0.6% of the Group s revenue) Starting from 2013, Mengniu has increased its efforts in expanding the cheese product lines. The original and strawberry-flavored Kids Cheese Sticks, which targets kids of three years of age and above, were launched. Fresh cheese European Fermented Milk is made from quality fresh milk with fermentation in the same single cup in which it is sold. It contains no preservatives or artificial colors, yielding a pure texture and taste and enjoyed a good sales performance in the market. Strengthens strategic alliances and optimises business coverage In 2013, Mengniu has engaged in a number of mergers and acquisitions and strategic partnerships. In the first half of 2014, Mengniu was committed to closer collaboration with its strategic partners and subsequently stepped up efforts to develop chilled, imported, milk formula and nutrition businesses, so as to optimise its business coverage and better seize market opportunities. 1. Chilled business: Danone S.A. and its subsidiaries (collectively known as the Danone Group ) Mengniu Danone Dairy Co. Ltd., Inner Mongolia ( Mengniu Danone ), the joint venture established by Mengniu and Danone Group, the world s largest fresh dairy enterprise, in relation to the integration of their chilled dairy business in China, secured operation permit and commenced operation in June. Through this entity, both parties expanded the chilled business by optimising their brands and product portfolios, enhancing operating efficiency as well as adopting prudent investments and capital expenditures. Danone Group s operations experts in Asia Pacific have been dispatched to the chilled plant in Ma anshan, Anhui Province since February this year and commenced an efficiency improvement project. Danone Group's global-leading yogurt R&D technology, brand management and marketing experience should help Mengniu enhance its production and quality control standards, better enabling it to offer consumers world-class quality chilled dairy products. 2. Arla Foods As the sole distributor of Arla Foods in China, Mengniu and Arla Foods collaborate mainly in the area of imported business. During the period under review, Mengniu has streamlined Arla Foods product portfolio and optimised its brand structure while introducing Arla Foods cheese and butter products to the domestic market. On 26 April, the China-Denmark Milk Technical and Cooperation Center the first national dairy project led by the ministries of agriculture of both China and Denmark formally debuted at the COFCO Nutrition and Health Research Institute in Beijing. The Arla China Innovation Center, which is focused on developing cheese products for Chinese consumers, was also inaugurated at the same time and place. The China-Denmark Milk Technical and Cooperation Center and the Arla China Innovation Center marked another milestone in the close collaboration among the COFCO Group, Mengniu and Arla Foods. The location of the two centers at the COFCO Nutrition and Health Page 3

4 Mengniu Announces 2014 Interim Results / P.4 Research Institute facilitates the consolidation of the three parties resources and more effectively leverages their collective experiences, thereby further strengthening their collaboration. Mengniu will conduct further research and innovation in food nutrition and health based on the research advances that COFCO Group has accumulated over the years. By introducing proven Danish technologies in dairy breeding, product processing and packaging, Mengniu resolves to produce and provide safe, tasty and high-quality products for consumers. 3. Milk formula business: Yashili International Holdings Ltd ( Yashili, stock code: 1230) With a 76.58% equity interest in Yashili, Mengniu aims at turning Yashili into its infant nutrition product platform. Yashili is committed to expansion of its channels (particularly the mother and baby and e-commerce channels), product upgrade (dedicated products for different channels, introduction of high-end products) and precision marketing (membership stores, membership point system). Meanwhile, Mengniu and Arla Foods have extended an agreement, pursuant to which Arla Foods will endorse the high-end Merla series under the Scient brand of Yashili by cooperating with Yashili in the development and production of a new infant milk formula series, Arla Merla, which is expected to be introduced to the Chinese market through direct imports by the end of the year. 4. Plant-based nutrition product business: The WhiteWave Foods Company ( WhiteWave ) Mengniu and WhiteWave have jointly announced to acquire 100% equity interests in Yashili (Zhengzhou) Nourishment Co., Ltd. ( Yashili Zhengzhou ) on 6 January. Mengniu and WhiteWave have completed the acquisition of Yashili Zhengzhou through a joint venture established at the end of April, with Mengniu and WhiteWave holding 51% and 49% of the joint venture respectively. The joint venture is mainly engaged in the manufacturing, packaging and distribution of nutrition products in the PRC. Since early April, the joint venture has been engaged in preparation works for factory production, conducting technical upgrades for Yashili Zhengzhou. The joint venture has also embarked on product R&D as well as devising brand positioning and marketing strategies. Plant-based protein beverages are planned to be launched by the end of the year to explore the high-end plant-based protein beverage market in the PRC and enrich Mengniu s product lines. Enhances reliability of milk sources and ensures quality from the source During the period, the ratio of milk sources provided by ranches and scaled farms has reached 94%, outperforming industry peers. Mengniu aims to build up an upstream industry chain that promotes partnership and mutual benefit and to lead the trend of establishing milk source bases in China through scaling of ranches and modernized development. New reforms were implemented to best match milk sources with production capacity and with product structure. The proportion of smalland medium-sized ranches was increased to facilitate the upgrade of milk source bases. Riding on Arla Garden s ranch management model, Mengniu has also assisted suppliers in enhancing their operational competency and breeding efficiency through its alignment with international standards. A resource platform was set up to help raw milk suppliers select high-quality vendors and lower their procurement costs. Through the platform, Mengniu has also strengthened its upstream quality control and ensured the quality of raw milk. Ensure the quality of raw milk and stringently safeguards quality management The four carriages of Mengniu s quality management system, namely the quality and safety management system and three quality management centers on milk sources, operations and sales respectively, continued to ensure end-to-end food quality and safety. With a unified direction and a dedicated focus, the four carriages have been coordinated to form an inspection team across milk source suppliers and the retail market for the purpose of proactively identifying and solving Page 4

5 Mengniu Announces 2014 Interim Results / P.5 problems on a timely basis. Mengniu has also fostered the establishment and operation of the milk sources technical standard system, and adopted a uniform pricing model for all suppliers as it conducted periodic assessments to further ensure the quality of raw milk, thus providing consumers with a Drop of Goodness. Actively expands sales channels and enhances branding Mengniu has focused on boosting comprehensive operational capabilities of its distributors, streamlined segregation of sales channels and enhancing the efficiency and quality of traditional channel expansion. The three-level key account ( KA ) service team composed of the headquarters client team, the regional KA team and the distributor KA team has changed the role from serving as a pure supplier to acting as a strategic partner of retailers by collaborating closely in product category management to enhance the service level and efficiency of KA teams. On the other hand, in close alignment with market demand, Mengniu has streamlined the range of its products and optimised its brand structure by categorizing them into star brands, backbone brands, profit contributor brands and opportunity brands. Mengniu has devoted more resources to promote its key products and earmarked more investment to digital new media for online media advertising with the aim to facilitate more timely and accurate communications and more in-depth interactions with consumers. It will also enable consumers to experience a Drop of Goodness through enjoying Mengniu s products and visiting its factory. Adhering to its brand value and product positioning, Mengniu has actively built the brand image of its parent brand and interpreted the brand proposition Little Happiness Matters through a Drop of Goodness. Moreover, having created a concept for milk in an internet setting, Mengniu has embarked on innovation in its product portfolio, tastes and distribution channels. Meanwhile, to cope with the changing dynamics of the dairy market in the digital era, Mengniu has commenced e-commerce business by integrating digital marketing initiatives with offline resources of its distributors and leveraging its mobile internet platform. Ms. Sun concluded, As we mark the 15th anniversary of the founding and the decennial of Mengniu s public listing, we wish to express our heartfelt gratitude to Mengniu s employees, consumers, shareholders and partners for their ongoing support over the past years. Mengniu will continue to be consumer-oriented and grow together with our customers, employees, shareholders and all stakeholders, cultivating a sustainable ecological cycle. Mengniu will continue to strengthen quality safety management throughout the supply chain from ranches to consumers. While pursuing strategic development of the upstream business chain, we will also endeavor to develop our downstream brands and distribution network. We will continue to optimise our product portfolio, raise the proportion of our high margin products, strive to pursue innovation in marketing, systems and products, build up professional teams and enhance the Group s overall competitiveness. At the same time, with the commencement of our branding activity a Drop of Goodness, we hope to demonstrate our simple and sincere efforts to customers how Mengniu is actually improving quality, and through our milk, we convey our love and care to them. In this way, Mengniu can work as a bridge of love, so that our customers can appreciate a Drop of Goodness in their everyday life. ~End~ Page 5

6 Mengniu Announces 2014 Interim Results / P.6 China Mengniu Dairy Company Limited Consolidated Income Statement For the six months ended 30 June (Unaudited) RMB 000 RMB 000 Restated* Continuing Operations Revenue 25,835,834 20,667,898 Cost of sales (17,454,016) (15,149,123) Gross profit 8,381,818 5,518,775 Other income and gains 250, ,387 Gain arising from changes in fair value less cost to sell of dairy cows 3,345 - Selling and distribution costs (5,897,135) (3,806,892) Administrative expenses (962,047) (801,400) Other operating expenses (556,196) (135,865) Profit from operating activities 1,220, ,005 Interest income 253, ,353 Finance costs (176,248) (33,714) Share of profits of associates 183,180 29,605 Profit before tax from continuing operations 1,481,457 1,022,249 Income tax expense (252,501) (185,684) Profit for the period from continuing operations 1,228, ,565 Discontinued operations Profit for the period from discontinued operations (22) 13,815 Profit for the period 1,228, ,380 Attributable to: Owners of the Company 1,048, ,494 Non-controlling interests 180, ,886 1,228, ,380 Earnings per share attributable to ordinary equity holders of the Company (expressed in RMB per share) Basic Diluted *Certain amounts stated above do not correspond to the interim condensed consolidated financial statements as of 30 June ABOUT CHINA MENGNIU DAIRY COMPANY LIMITED: China Mengniu Dairy Company Limited and its subsidiaries manufacture and distribute quality dairy products in China. It is one of the leading dairy product manufacturers in China, with MENGNIU as its core brand. Mengniu s diversified products range includes liquid milk products (such as UHT milk, milk beverages and yogurt), ice cream, milk formula and other dairy products (such as cheese). Mengniu s liquid milk products ranked first, in terms of sales volume and sales value, among similar products in China in 2013, according to China Industrial Information Issuing Centre. By the end of June 2014, the Group s annual production capacity reached 8.04 million tons. In March 2014, Mengniu became a Hang Seng Index constituent, making it the first blue chip Chinese dairy product manufacturer. For more information, please visit For Enquiries: Strategic Financial Relations (China) Limited Esther Lau Tel: (852) esther.lau@sprg.com.hk Janice Au Tel: (852) janice.au@sprg.com.hk Page 6