Chinese infant formula maker Yashili International Holdings revealed that full-year net profit fell by 43% in 2014 amid declining sales and lower margins.

Net profit attributable to owners of the company fell to CNY248.8m (US$40m), down from CNY437.6m in 2013. Operating profit dropped 47.1% to CNY255m versus CNY481.7m.

In January, Yashili, in which Chinese dairy Mengniu Dairy and France's Danone hold significant stakes, warned it expected its profits to have tumbled 40% in 2014.

Sales at the infant formula group plummeted 27.6% to CNY2.8bn. The company has blamed a slowdown in the paediatric milk powder industry in China and rising competition for its poor trading performance. Internal development measures have also weighed on the bottom line, the group revealed when it issued a profit warning in January.

Earlier this month, Danone defended its investment in Yashili. Speaking to analysts at the Consumer Analyst Group of Europe investment conference in London, Danone CEO Emmanuel Faber said Yashili's results in 2014 were "no surprise" for Danone. He indicated Yashili's performance last year had been a reason why the infant formula's majority shareholder, Mengniu Dairy, as well as Mengniu's backer, the state-controlled Cofco, had approached Danone.

Faber said Danone had invested in Yashili because the business had been earmarked by the Chinese government as one of a selected number of companies to help consolidate the local infant formula industry.

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By GlobalData