MENGNIU DAIRY(02319)2024-09-23 08:31Financial Performance - Revenue for the first half of 2024 decreased by 12.6% year-on-year to RMB44,670.5 million due to an imbalance between supply and demand in the dairy industry and lower-than-expected consumer demand[7] - Gross profit margin increased by 1.9 percentage points year-on-year to 40.3% in the first half of 2024[7] - Operating profit decreased by 4.8% year-on-year to RMB3,119.3 million in the first half of 2024[7] - Profit attributable to owners of the company declined by 19.0% year-on-year to RMB2,445.8 million in the first half of 2024[7] - Net cash flow from operating activities dropped by 44.4% year-on-year to RMB1,919.9 million in the first half of 2024[7] - Basic earnings per share decreased by 18.6% year-on-year to RMB0.623 in the first half of 2024[7] - Diluted earnings per share decreased by 18.4% year-on-year to RMB0.622 in the first half of 2024[7] - Operating profit reached RMB3,119.3 million, with the operating profit margin increasing by 0.6 percentage points year-on-year to 7.0%[8] - Profit attributable to equity shareholders amounted to RMB2,445.8 million[8] - Revenue for the first half of 2024 was RMB44,670.5 million, a year-on-year decrease of 12.6%, with gross profit margin increasing by 1.9 percentage points to 40.3%[8] - Revenue decreased by 12.6% year-on-year to RMB44,670.5 million for the six months ended 30 June 2024 (2023: RMB51,118.5 million)[70] - Gross profit decreased to RMB17,984.7 million, with gross profit margin increasing by 1.9 percentage points to 40.3% due to lower raw milk prices[72] - Selling and distribution expenses decreased by 8.8% to RMB12,680.5 million, accounting for 28.4% of revenue[73] - Administrative expenses decreased by 11.1% to RMB1,941.0 million, maintaining a 4.3% share of revenue[73] - Operating profit decreased by 4.8% to RMB3,119.3 million, with operating profit margin increasing by 0.6 percentage points to 7.0%[74] - EBITDA decreased by 7.5% to RMB4,790.8 million, with EBITDA margin increasing by 0.6 percentage points to 10.7%[75] - Profit attributable to owners of the company decreased by 19.0% to RMB2,445.8 million, with basic earnings per share down 18.6% to RMB0.623[77] - Capital expenditure decreased by 10.3% to RMB1,692.9 million, with RMB1,583.4 million spent on production facilities and related investments[81] - Net cash inflow from operating activities decreased by 44.4% to RMB1,919.9 million, primarily due to lower net profit and increased raw milk powder inventories[82] - Outstanding interest-bearing bank and other borrowings increased to RMB41,562.3 million, with RMB17,755.1 million repayable within one year[83] - Net borrowings of the Group as of 30 June 2024 were RMB23,125.5 million, a decrease from RMB24,967.0 million at the end of 2023[84] - The Group's debt-to-equity ratio increased to 81.3% as of 30 June 2024, up from 73.9% at the end of 2023[84] - Finance costs of the Group were RMB884.3 million, representing 2.0% of revenue, an increase of 0.6 percentage points year-on-year[85] - Liquid milk revenue amounted to RMB36,261.5 million, accounting for 81.2% of Mengniu's total revenue[86] - Revenue from the ice cream business amounted to RMB3,371.4 million, accounting for 7.5% of Mengniu's total revenue[99] - Revenue from the milk formula business amounted to RMB1,635.3 million, accounting for 3.7% of Mengniu's total revenue[103] - Revenue from the cheese business amounted to RMB2,114.3 million, accounting for 4.7% of Mengniu's total revenue[109] - Mengniu had a total annual production capacity of 13.90 million tons as of 30 June 2024[114] Product Innovation and Market Expansion - The company launched new products like lactose-free milk and various flavored milk tea drinks to meet diverse consumer needs[19][20] - Mengniu's chilled yogurt upgraded to 100% raw milk formula, expanding into zero-sucrose and tasty fruit bits segments, with YO!FINE DIARY Yogurt achieving significant sales growth in 2024[26] - Shiny Meadow, Mengniu's high-end fresh milk brand, saw double-digit growth in 2024 despite market challenges[29] - Xiaoxianyu, a sub-brand targeting young consumers, achieved double-digit sales growth through partnerships with the Ta Foundation[31] - Mengniu's fresh milk business secured the largest market share in e-commerce and fresh food e-commerce through collaborations with Tmall, JD.com, and Douyin[32] - Mengniu's milk powder business returned to profitability in H1 2024 by restructuring its model and focusing on precise nutritional benefits[33] - Reeborne, Mengniu's infant formula brand, collaborated with Jiangnan University and Sun Yat-Sen University to release the world's first validated MLCT results[34] - Bellamy's achieved strong year-on-year sales growth in the Southeast Asian market in H1 2024, introducing two new products in the region[35] - Ruiburun brand achieved global first MLCT empirical results in collaboration with Jiangnan University and Sun Yat-sen University, enhancing infant formula product strength with patented MLCT+ new OPO formula[36] - Bellamy's Southeast Asia sales showed strong year-on-year growth in the first half of 2024, maintaining its position as the top organic milk powder brand in cross-border e-commerce[36] - Yourui brand released a white paper on health status and nutrition solutions for middle-aged and elderly adults, focusing on bone, joint, and muscle health products[37][38] - Suibian brand expanded its product lineup with cup and cone offerings and launched the Suibian Gold Label series to meet young consumers' demand for high-quality, multi-flavor products[41] - Ice+ brand collaborated with NBA to launch an electrolyte drink sorbet and with Brave the World Super X to introduce beer ice cream, targeting younger consumers[41] - AICE achieved top market share in Indonesia and second in the Philippines for snacking ice cream, with strong sales revenue growth and improved profit margins[43] - Milkground launched a new line of ready-to-eat nutritional products for adults in May 2024, transitioning from a focus on children's cheese to products for all age groups[45] - Milkground's market share remains the top in the cheese segment, with its leading advantage continuously expanding[46] - Milkground launched new adult ready-to-eat nutritious cheese products in May 2024, marking a brand upgrade from children's cheese to all-age cheese[46] - Milkground introduced new products such as Cheese Granules, upgraded Mousse Cup Cheese, bite-sized Cheese, and Fresh Hand-torn Cheese, enriching its product lineup[47] - Milkground completed a cash acquisition of 100% equity in Inner Mongolia Mengniu Cheese Co., Ltd. in June 2024, aiming to strengthen its leadership in the cheese market[49] - Mengniu launched a new lactose-free milk product in 2024 to meet the needs of lactose-intolerant consumers[89] - Just Yoghurt's zero additive original taste yogurt has passed EU standard certification, emphasizing Mengniu's commitment to quality[90] - Fruit Milk Drink introduced a new series of milk tea beverages in 2024, targeting young Generation-Z consumers with zero added milk powder and zero trans fats[92] - Mengniu's chilled yogurt products have been upgraded to a 100% raw milk formula, with expansion into zero-sucrose and fruit grain segments[94] - Yoyi C 100ml Smooth Drinks, featuring a formula of 5 strains of complex probiotics, has been highly acclaimed since its launch[94] - Shiny Meadow launched Dual Protein Milk, enriched with six almonds per 350ml serving[97] - Xiaoxianyu, a sub-brand of Shiny Meadow, focused on light-calorie fresh milk, rapidly expanding its reach among young consumers[97] - Mengniu Modern Meadow fresh milk launched seasonal products like Mood for Green Raw Milk Green Shasha and Functional Flavor 5 Black Milk[97] - Suibian introduced the Gold Label 72% series, targeting high-quality chocolate ice cream demand among young consumers[100] - Reeborne upgraded its core products to A2 β-casein milk sources in 2024[104] - Milkground launched new products such as flower-flavour cheese sticks and light-fat mozzarella cheese crumbles[110] Sustainability and ESG Initiatives - The company is implementing its "GREEN" strategy and "dual-carbon goals", including deforestation-free strategies and green packaging transformation[9] - Established a "1+N" sustainability report disclosure system and released key reports including the "2023 Annual Sustainability Report" and the first TNFD-aligned "Nature-Related Information Disclosure Report" in China's dairy industry[117][118] - Developed a 4R1D green packaging strategy (Reduce/Recycle/Reuse/Renew/Degradable) and set quantitative goals for reducing environmentally unfriendly plastics and increasing recycled materials usage[118] - Partnered with Aihuishou to launch the "New Life Dairy Packaging Recycling Program" and signed a sustainability agreement with the Bel Group for low-carbon agriculture and food waste reduction[119] - Joined the Roundtable on Sustainable Palm Oil (RSPO) and completed the delivery of China's first batch of "zero-deforestation" soybeans[120] - Established the Inner Mongolia Mengniu Public Charity Foundation focusing on disaster relief, nutrition enhancement, rural revitalization, and ecological protection[121] - The company is integrating ESG concepts into its corporate management under the GREEN strategy, focusing on governance, risk management, and business ethics to enhance sustainability[183] - The Company has adopted ESG governance, risk governance, and business ethics as part of its GREEN strategy to enhance sustainable corporate governance[185] Digital Transformation and AI Integration - Online membership exceeded 82 million, with a focus on high-growth channels such as interest-based and content-based e-commerce[23] - The company is accelerating digital transformation to develop new production capabilities and optimize the entire value chain[16] - Mengniu launched over 1,700 AI applications across various business scenarios, improving decision-making and execution efficiency[67][68] - Mengniu's digital intelligence team accelerated platform development and integrated AI to boost productivity, addressing supply-demand imbalances[65][66] - Mengniu upgraded its store and warehouse systems, introduced a smart sales system, and launched a comprehensive digital marketing platform, significantly reducing sales costs[67][68] - Mengniu streamlined supply chain processes, improving inventory turnover and addressing technical bottlenecks behind supply-demand imbalances[67][68] - Mengniu promoted the "AI Smart Data Analysis Assistant," leveraging AIGC technology to drive sustainable growth in front-end operations[67][68] Corporate Governance and Shareholder Information - The company plans to repurchase shares up to HK3,646,950,000 remain outstanding, with 111,595,758 ordinary shares potentially issuable upon full conversion[167] - The Share Award Scheme is funded by existing shares of the Company, and no new shares are issued, thus avoiding dilution of existing shareholders' equity[160] - The company issued convertible bonds with a nominal value of HK34.73 per share, later adjusted to HK3,646,950,000 remain outstanding, which could be converted into 111,595,758 ordinary shares at the adjusted conversion price[174][179] - The company redeemed convertible bonds with nominal values of HK729,390,000 on 21 November 2022 and 1 December 2023, respectively[174][179] - The Group's cash and cash equivalents denominated in RMB, USD, Philippine peso, and Euro were approximately RMB30,640,000, RMB55,937,000, RMB56,526,000, and RMB91,000, respectively, as of 30 June 2024[170][172] - The Group's interest-bearing bank and other borrowings denominated in USD were approximately RMB778,959,000 as of