Troubled Mengniu Dairy replaces chief exec after dismal half-time results

Three non-execs also leave the business, less than a month after it suffers a 20 per cent fall in interim profit

PUBLISHED : Friday, 16 September, 2016, 3:37pm
UPDATED : Friday, 16 September, 2016, 10:31pm

The chief executive of China’s second largest dairy firm China Mengniu Dairy is leaving the business, and has been joined on her way out by three of the company’s non-executive directors.

The sudden top management reshuffle comes less than a month after Mengniu posted a dismal 20 per cent decline in first half earnings.

Sun Yiping, 49, is being replaced with Lu Minfang, the 47-year-old chairman of Mengniu’s formula offshoot, Yashili International. Lu is also a high-ranking veteran of France’s Danone, the Inner Mongolia-based company’s second largest shareholder after state-owned food conglomerate Cofco.

Also leaving Mengniu are non-execs Liao Jianwen, Yu Xubo, and Liu Ding. The latter are both long-serving Cofco executives.

Wu Wenting, former chief financial officer with Cofco’s Hong Kong-listed flagship China Foods has been appointed as a Mengniu executive director.

Yashili, headed by Lu for more than a year, also suffered a brutal 86 per cent plunge in its net profit for the same period, and so his appointment to head the larger firm is likely to cause raised eyebrows.

The drastic fall in Yashili’s earnings increased analyst concerns over Mengnui’s ability to make up ground on its bigger rival Inner Mongolia Yili.

Its worse-than-expected double digit drop in profit at its stellar premium milk and yoghurt sales were blamed on the rising cost of a bitter marketing battle with its competitors.

But its revenue climbed 6.6 per cent, topping estimates, as the Chinese market for dairy produce continues to grow.

Sun’s two predecessors each served about six years in the chief executive’s role, and she had been expected be in place until 2018 after being appointed in 2012. She spent more than two decades previously with Cofco’s food and beverage, and property units before joining Mengniu.

“Ms Sun has tendered her resignation due to personal career development reasons,” the company said in a statement to the Hong Kong Stock Exchange.

“As recommended by Cofco and approved by the board of directors, Lu Minfang was appointed Mengniu’s chief executive,” according to a separate new release issued Thursday.

In late August, Sun told investors at Mengniu’s post-earnings question and answer session in Hong Kong “she was not aware of any matters” related to what impact Beijing’s SOE reform’s might have on her position.

Since being chosen by the authorities as a “role model” for the country’s sweeping reforms, Cofco has undergone a range of structural overhauls such as cutting staff numbers at its headoffice and reducing its layers of management.

Danone, the world’s biggest diary products company sold its China infant formula brand to Yashili last year and used the proceeds to increase its holding in Mengniu.

After more than a decade with Danone, Lu Minfang is also a vice president of Danone Early Life Nutrition’s greater China business. He previously worked for US medical device multinational Johnson & Johnson.

“During his tenure at the Danone Group, he demonstrated strong strategic business and marketing planning capabilities,” his appointment statement said.

“Mr Lu contributed significantly to the success of the Danone Group’s baby nutrition business in China.”