Yashili warns of 40pc milk profit drop

PUBLISHED : Monday, 25 July, 2011, 12:00am
UPDATED : Monday, 25 July, 2011, 12:00am

Yashili International Holdings, the mainland's third largest baby milk formula firm by sales, said yesterday it expected profits to drop by 30 to 40 per cent year on year for the first half.

The company said in a statement that it expected a profit decrease mainly because of rising raw material costs, advertising expenses and the rising tax rates.

Tax rates increased because certain tax benefits previously enjoyed by the group had ended.

Yashili said it still expected revenue for the first half to record an increase compared with the same period last year.

The forecast was based on 'a preliminary assessment by the board based on information currently available to it', the company said.

Results for the six months ending on June 30 will be announced next month.

The dairy company raised US$349 million in its Hong Kong initial public offering in October last year. US investment firm Carlyle Group owns a 24.26 per cent stake in the company.

Zhang International, founded and owned by Zhang Lidian, president of Yashili International, and his brothers, has a controlling stake of 51.91 per cent.

The company's share price has plummeted 58 per cent compared to when it listed last year.

Yashili was one of 22 mainland baby milk formula companies to be involved in a melamine scandal in 2008. Six babies died and thousands fell ill because of milk tainted with melamine, an industrial chemical that can cause kidney stones, but can inflate the protein level of milk.

In 2009, Carlyle bought a 17.3 per cent stake in the company. The American firm helped tighten practices and improved the company's safety standards.

Yashili's revenue was 2.95 billion yuan (HK$3.6 billion) last year, 14.2 per cent higher than in 2009.

The group's profit attributable to shareholders for the year amounted to 502.4 million yuan, a 24.1 per cent increase year-on-year. Earnings per share were 17 fen.

Yashili's share price increased 1.74 per cent, or 30 cents, to HK$1.75 on Friday.


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