Mengniu Dairy, the Chinese dairy group, has reported an increase in half-year profits despite lower sales amid efforts to reduce costs.
The company, China's largest producer of liquid milk and chilled dairy products, posted net proft of CNY1.34bn for the six months to the end of June, a 27.7% increase on a year earlier. EBITDA increased 13.4% to CNY2.32bn.
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Lower operating, selling and distribution expenses, as well as efforts to improve its product mix, helped Mengniu's profitability amid a decrease in sales. Net sales dipped 1.1% to CNY25.56bn.
Mengniu's sales were hit by competition in China's infant formula sector. The company, which controls Chinese infant formula group Yashili International Holdings, reported lower revenue from milk powder. Revenue from the company's liquid milk and ice cream businesses rose year-on-year.
"Excluding Yashili, the revenue of the group rose by 0.5% to CNY24.4bn. Brands such as Milk Deluxe, Yoyi C, Champion and Just Yoghurt achieved strong growth, which has optimized the product mix," Mengniu said.
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Reflecting on the prospects for China's dairy sector, Mengniu added: "Given the increase in the urbanization ratio in the PRC, the penetration of dairy enterprises' sales channels into third and fourth tier cities and rural market, and the fact that the per capita consumption of dairy products in the PRC is far behind than that of Japan and South Korea and large European and North American countries, there is a remarkable growth potential for the consumption of dairy products in the PRC. At the same time, the innovation of dairy products segmentation, the upgrading of product mix, the survival of the strongest which will result in the optimization of the competitive landscape, as well as the layout of international resource, will offer a huge development opportunity for the dairy enterprises, in particular the leading dairy enterprises.
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By GlobalData"The development of dairy products towards the high-end segment is increasingly apparent. High-end UHT milk, UHT yogurt, lactobacillus drinks and chilled yogurt will maintain a strong growth momentum."
