Mengniu Dairy taps into rising demand

First-half net profit at China Mengniu Dairy jumped 16.3 per cent to 749.5 million yuan (HK$950 million) as demand for its products grew steadily.

The mainland's biggest maker of dairy products has been busy partnering with other firms and streamlining its products in response to Beijing's plan to reform and consolidate the industry in light of a plethora of scandals in recent years.

In the first half, the firm initiated the acquisition of milk formula maker Yashili, completed the acquisition of a further 26.92 per cent of raw milk producer Modern Dairy for a total stake of 28 per cent, and agreed to form a joint venture with Danone to produce yogurt and related products on the mainland.

Production capacity stayed flat at 7.59 million tonnes over the six-month period. The series of acquisitions helped to quadruple the firm's capital expenditure to 3.72 billion yuan year on year. The company's interest-bearing bank loans soared to 3.96 billion yuan from 573.8 million yuan in late December.

Meanwhile, raw milk producer China Modern Dairy, which supplies most of its milk to Mengniu, says it has stopped importing cows from Australia, New Zealand and Uruguay this year and will focus on nurturing its own dairy herds and improving average annual milk yield per cow.

Modern Dairy said that it aimed to increase average annual milk yield to more than nine tonnes this year, up from 8.23 tonnes in the fiscal year that ended in June.