Mengniu sees sales growth but earnings pressured

Mengniu sees sales growth but earnings pressured

Chinese dairy giant Mengniu said its strategy is paying off today (25 August) as it booked higher sales for the first half of the year, although its profits were dented by losses from associates and other items.  

The company said sales increased by 6.6% in the six months to 30 June, rising to CNY27.26bn (US$4.1bn). Mengniu said its revenue growth was supported by "active brand promotion and marketing". 

The company also stressed efforts to strengthen its product mix are paying off. "Mengniu constantly strives to optimise its product mix with the aim of guiding the premium product consumption trend as well as promoting consumption of nutritious and healthy dairy products. During the period, Milk Deluxe continued to lead the high end market and Mengniu maintained leadership in liquid milk and chilled dairy product market with the largest market share," Mengniu noted. 

This contributed to higher gross profit, which rose to CNY9.18bn versus CNY8.14bn last year. However, profit before tax declined due to a significant increase in losses from associates as well as higher selling and distribution expenses, losses on the fair valuation less cost to sell of livestock. Pre-tax profit totalled CNY1.49bn compared to CNY1.75bn in the previous year. 

Lower taxation rates meant that the net profit decline was not as steep. For the six month period net profit stood at CNY1.18bn against CNY1.43bn in the first half of last year.