Yili Group

Mengniu profit surges 41pc

PUBLISHED : Thursday, 13 September, 2007, 12:00am
UPDATED : Thursday, 13 September, 2007, 12:00am

Net hits 485.1m yuan as firm focuses on high-end products

China Mengniu Dairy, the mainland's largest milk producer, boosted first-half profit 41.3 per cent and increased its share of the mainland liquid milk market as it sought higher growth from high-end products.

Net profit rose to 485.1 million yuan from 343.3 million yuan a year earlier as revenues increased 32.8 per cent to 10.02 billion yuan from 7.55 billion yuan last year.

Liquid milk continued to be the company's main driver, contributing 8.8 billion yuan in revenue, or a 36.9 per cent increase from a year earlier and accounting for 87.8 per cent of total revenue.

According to a survey by ACNielsen in June, Mengniu raised its share of the mainland liquid milk market to 35.1 per cent in terms of sales volume from 31.7 per cent a year earlier.

'Mengniu's market share will grow higher, but at a slower pace,' said Yao Tongshan, the company's chief financial officer. 'The major driver for market share in the future will be the introduction of new products.'

The top three liquid milk manufacturers, Mengniu, Inner Mongolia Yili Industrial Group and Bright Dairy and Food, together accounted for 65.3 per cent of the market at the end of June, up from 62.4 per cent a year earlier, data from ACNielsen showed.

Mengniu is facing fierce competition from Yili and Bright Dairy, which are cutting prices.

To diversify revenue sources, Mengniu is developing yogurt and ice-cream products.

Last year, the company formed three ventures with Paris-based Groupe Danone to sell yogurt products in the mainland. The cost of the investment was about 1.6 billion yuan.

Revenue from yogurt grew 34 per cent this year to 608 million yuan.

Mengniu would spend more on technological improvements and research and development of the yogurt segment, the company said.

It would also introduce new ice-cream products for growth in the high end of the market.

The ice-cream segment, which accounts for 11.4 per cent of total revenue, increased its sales 12 per cent from a year earlier to 1.14 billion yuan.

Mengniu has launched a variety of promotion and marketing campaigns for its products since June last year, increasing expenses on advertising and promotion to 8.9 per cent of total revenue from 7 per cent.

Selling and distribution costs surged 53 per cent to 1.66 billion yuan and accounted for 16.5 per cent of revenue, up from 14.4 per cent last year.