Yashili International Holdings, the listed Chinese infant formula company in which Mengniu and Danone hold sizeable stakes, has warned that it now expects a 40% decline in profit for 2014.
In an announcement to the Hong Kong stock exchange, the company blamed a slowdown in the paediatric milk powder industry in China and rising competition. The infant formula maker added that internal development measures had also hit the bottom line. Yashili has invested in alterations to its distribution and marketing model and raised its advertising spending. Yashili also conceded that new products were “not launched at a pace expected”.
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The company was, however, upbeat on the progress it has made to “adjust its strategies” and “consolidate its cooperation” with Mengniu and Danone. Mengniu holds 51% of Yashili’s share capital, while Danone struck a deal last November to take a 25% stake in the group. State-owned giant COFCO, which has interests spanning chemicals, property and food, controls Mengniu.
Yashili recently appointed chairman of Danone’s early life nutrition business in Greater China, Jeffery Minifang Lu, to the post of CEO. It has also embarked on a number of strategic initiatives that it believes will leave it better positioned to compete in the Chinese baby food sector. Yashili said it has “optimised” its sales model and moved to diversify its product offering.
In a statement, a spokesperson observed: “Since the previous year, Yashili has been proactively adjusting its development mode to adapt to market changes. As time is required for such adjustments, it is inevitable to encounter fluctuations in results paving its path for international development.
“Nevertheless, Yashili will adhere to its proactive transformation; with the recent appointment of Mr Lu, CEO of Yashili, and the support from COFCO, Mengniu and Danone, Yashili is set to achieve significant development and realize new breakthroughs.”
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By GlobalDataYashili said its board is still in the process of finalising its results for the year to end-December 2014. The company expects to release its annual results before the end of March.
