China Mengniu Dairy posts 751 million yuan loss as milk powder unit Yashili dents profits
Chief executive Lu Minfang sees China’s dairy market growing 3 to 4 per cent this year
China Mengniu Dairy, the country’s second largest dairy producer, posted a net loss of 751 million yuan (US$109 million) last year, hurt by intense competition with rivals and heavy losses from its baby milk powder subsidiary.
It represents a dramatic fall from the 2.4 billion yuan net profit the company reported in 2015.
Excluding Yashili, the company’s baby milk powder subsidiary, Mengniu’s net profit still dropped 27.6 per cent to 1.7 billion yuan from 2.3 billion yuan in 2015, the company said in a statement late on Wednesday. It equates to a loss of 19 fen per share for 2016, compared to earnings per share of 61 fen in 2015.
Mengniu said its performance was undermined by a “deterioration of operating performance” of Yashili, a one-time sale of inventory raw milk powder and “a significant loss” incurred by an associate company.
With the cost structure changing, it is likely that competitive landscape will ease in the future for the industry
Speaking at the firm’s annual results press conference in Hong Kong on Thursday, newly appointed chief executive Lu Minfang said he did not think Yashili would continue to hurt Mengniu that badly this year.
“I believe in 2017 we will see a significant improvement in Mengniu’s profits.” he said.
