中国飞鹤(06186) - 2025 - 中期财报

Company Information Board of Directors and Committees The company's board comprises executive, non-executive, and independent non-executive directors, with audit, remuneration, nomination, and ESG committees ensuring sound corporate governance - Board members include Executive Directors Leng Youbin (Chairman & CEO), Liu Hua, Cai Fangliang, Tu Fang'er; Non-executive Directors Gao Yu, Chen Guojin, Zhang Guohua, Maher EL-OMARI; and Independent Non-executive Directors Liu Jinping, Song Jianwu, Fan Yonghong, Jacques Maurice LAFORGE[3] - Fan Yonghong chairs the Audit Committee, Liu Jinping chairs the Remuneration Committee, Leng Youbin chairs the Nomination Committee, and Liu Hua chairs the Environmental, Social and Governance Committee[3] Key Contact Information Tu Fang'er serves as Company Secretary, Ernst & Young is the auditor, with headquarters in Beijing, Hong Kong office in Causeway Bay, and investor relations contact details provided - Ms. Tu Fang'er is the Company Secretary, and Ernst & Young is the auditor[3] - The company's headquarters and principal place of business in China are located at 16th Floor, Block C, Xingcheng International Building, No. 10 Jiuxianqiao Road, Chaoyang District, Beijing, China[4] - Investor relations contact email is ir@feihe.com, company website is www.feihe.com, and stock code is 6186[4] Financial Highlights Key Financial Data For the six months ended June 30, 2025, revenue decreased by 9.4% to RMB 9,150.5 million, gross profit fell by 17.8%, profit for the period dropped significantly by 46.0% to RMB 1,032.5 million, and basic earnings per share were RMB 0.11 For the Six Months Ended June 30 Key Financial Data (RMB Thousand) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | Change Percentage | | :--- | :--- | :--- | :--- | | Revenue | 9,150,525 | 10,094,947 | (9.4)% | | Gross Profit | 5,634,862 | 6,852,455 | (17.8)% | | Profit for the Period | 1,032,538 | 1,911,451 | (46.0)% | | Earnings Per Share Attributable to Owners of the Parent – Basic | 0.11 | 0.21 | (47.6)% | | Earnings Per Share Attributable to Owners of the Parent – Diluted | 0.11 | 0.21 | (47.6)% | Management Discussion and Analysis Industry Overview China's infant formula market faces declining birth rates but is supported by rising consumer confidence, premium segment growth, urbanization, and government pro-natalist policies - China's birth rate declined from 10.48‰ in 2019 to 6.77‰ in 2024, with newborns decreasing to approximately 9.5 million people and children aged zero to three falling from 47.1 million to 28.1 million[8] - Market growth drivers include increased consumer confidence in domestic infant formula quality, growth in the premium infant formula segment (6.1% CAGR in per capita disposable income), and rising urbanization levels and disposable income[8] - The Chinese government has introduced several favorable policies, including the "Action Plan for Enhancing Domestic Infant Formula" (targeting 60% self-sufficiency), stricter national food safety standards, the three-child policy with supporting measures (e.g., birth subsidies, childcare services, free preschool education), and tightened formula registration regulations[8][9][12] Business Overview The Group's core business is internally developed infant formula, complemented by a diverse dairy product portfolio, sold through extensive offline and e-commerce channels, with continuous capacity enhancement and strategic marketing - The Group's infant formula products aim to mimic breast milk composition, offering a diverse portfolio including ultra-premium, premium, and regular infant formula series, as well as adult and student dairy products[11] - As of June 30, 2025, the Group sold products through over 2,700 offline customers (covering approximately 70,000 retail sales points) nationwide, with offline sales accounting for 71.9% of total dairy product revenue; also sold on major e-commerce platforms and proprietary websites[13][14] - The Group operates 11 production facilities with a combined designed annual capacity exceeding 440,000 tons, and has established a cream production line. Marketing strategies include face-to-face seminars (approximately 384,030 sessions held, acquiring over 274,000 new customers), online interactions, and media coverage[15][16][17] - Vitamin World USA operates 42 specialty stores in the United States and sells vitamins, minerals, and other nutritional supplements through its website and e-commerce platforms, contributing RMB 91.0 million in revenue for the six months ended June 30, 2025, accounting for 1.0% of the Group's total revenue[16] Operating Results and Analysis For the six months ended June 30, 2025, the Group experienced significant declines in revenue, gross profit, and profit for the period, driven by reduced infant formula channel inventory, birth subsidies, increased cost of sales, and changes in other income and expenses For the Six Months Ended June 30 Operating Results (RMB Thousand) | Indicator | 2025 | 2024 | Change Percentage | | :--- | :--- | :--- | :--- | | Revenue | 9,150,525 | 10,094,947 | (9.4)% | | Cost of Sales | (3,515,663) | (3,242,492) | 8.4% | | Gross Profit | 5,634,862 | 6,852,455 | (17.8)% | | Gross Margin | 61.6% | 67.9% | (6.3)pp | | Other Income and Net Gains | 540,082 | 862,259 | (37.4)% | | Selling and Distribution Expenses | (3,174,706) | (3,535,374) | (10.2)% | | Administrative Expenses | (773,735) | (738,708) | 4.7% | | Other Expenses | (20,606) | (41,311) | (50.1)% | | Finance Costs | (16,360) | (26,236) | (37.6)% | | Profit Before Tax | 1,758,631 | 3,029,435 | (41.9)% | | Income Tax Expense | (726,093) | (1,117,984) | (35.1)% | | Profit for the Period | 1,032,538 | 1,911,451 | (46.0)% | - Revenue decrease was primarily due to the implementation of the "Fresh Active Nutrition" strategy, reducing infant formula channel inventory, and the company's active fulfillment of social responsibility by providing birth subsidies to consumers[20] - Increase in cost of sales was mainly due to higher production costs for raw milk powder (whole milk powder, skim milk powder, and cream) sold during the reporting period[21] - Gross margin decline was primarily due to an increased proportion of raw milk powder sales revenue in total revenue[23] - Decrease in other income and net gains was mainly due to reduced government grants and interest income[24] - Decrease in selling and distribution expenses was mainly due to reduced advertising and promotion expenses, offline activity costs, and promotional item expenses[25] - Decrease in finance costs was mainly due to a reduction in interest-bearing borrowings[29] Liquidity and Capital Resources The Group primarily funds operations through operating cash flows, interest-bearing bank borrowings, and net proceeds from global offerings, with cash and cash equivalents of RMB 6,476.6 million and improved asset-liability ratio as of June 30, 2025 - The Group primarily funds its operations through operating cash flows, interest-bearing bank borrowings, and net proceeds from its global offering, and achieves lower risk, good liquidity, and higher returns by purchasing wealth management products[34] Liquidity and Capital Structure (RMB Thousand) | Indicator | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 6,476,600 | 9,321,222 | | Interest-bearing Bank Borrowings | 782,100 | 999,858 | | Net Assets | 27,153,300 | 27,407,385 | | Gearing Ratio | (0.22) | (0.32) | Interest Rate Risk and Exchange Rate Risk The Group is exposed to interest rate risk from interest-bearing financial assets and liabilities, and transactional currency risk from Canadian overseas plant operations, without using derivative instruments for hedging - The Group is exposed to interest rate risk arising from changes in interest rates on interest-bearing financial assets and liabilities, and did not use derivative instruments for hedging during the six months ended June 30, 2025[39] - The Group is exposed to transactional currency risk, primarily related to its overseas plant operations in Canada denominated in Canadian Dollars, currently without a foreign currency hedging policy, but will closely monitor and consider hedging significant foreign currency risks[39] Material Acquisitions and Disposals For the six months ended June 30, 2025, the Group did not undertake any material acquisitions or disposals of subsidiaries or associates - For the six months ended June 30, 2025, the Group did not undertake any material acquisitions or disposals of subsidiaries or associates[40] Pledged Assets As of June 30, 2025, the Group's total pledged assets amounted to approximately RMB 941.8 million, a decrease of RMB 245.9 million from the beginning of the year - As of June 30, 2025, the Group's total pledged assets amounted to approximately RMB 941.8 million, a decrease of RMB 245.9 million from the beginning of 2025[41] Future Plans for Material Investments or Capital Assets Beyond the expansion plans disclosed in the prospectus, the Group currently has no other specific plans for material investments or acquisitions of significant capital assets but will continue to seek new business development opportunities - Except for the expansion plans disclosed in the "Business" and "Future Plans and Use of Proceeds" sections of the prospectus, the Group has no specific plans for material investments or acquisitions of significant capital assets or other businesses[42] - The Group will continue to seek new opportunities for business development[42] Contingent Liabilities As of June 30, 2025, the Group had no significant contingent liabilities - As of June 30, 2025, the Group had no significant contingent liabilities[43] Events After the Reporting Period As of the date of this interim report, the Group had no significant events after June 30, 2025 - As of the date of this interim report, the Group had no significant events after June 30, 2025[44] Future Outlook The company will continue to focus on its core business, promote independent innovation, optimize product formulations and production processes, build high-quality dairy products, and uphold social responsibility to contribute to China's dairy industry development and public health - The company will, as always, focus on its core business, vigorously promote independent innovation, continuously optimize product formulations and production processes, and comprehensively build high-quality dairy products, contributing core strength to China's dairy industry moving towards a "dairy powerhouse"[45] - The company will consistently uphold its original mission, using nutrition as a bridge to safeguard public health and well-being, striving for a smarter, healthier, and longer life for humanity[45] - The company will continue to fulfill its responsibilities as a private enterprise, adhering to serving the nation and benefiting the people, leading China's dairy industry into a new stage of high-quality development, and contributing more Feihe strength to the Healthy China strategy[45] Other Information and Corporate Governance Compliance with Corporate Governance Code The company adopted and largely complied with the Corporate Governance Code during the reporting period, noting the combined roles of Chairman and CEO are deemed beneficial for effective business decision-making and strategy implementation - The company has adopted the Corporate Governance Code set out in Appendix C1 of the Listing Rules and complied with the applicable code provisions during the reporting period, except that the roles of Chairman and Chief Executive Officer are not separated, both held by Mr. Leng Youbin[46][47] - The Board believes that Mr. Leng Youbin's extensive experience and leadership are beneficial for the effective planning and implementation of business decisions and strategies[47] Compliance with Model Code for Securities Transactions by Directors and Employees The company's directors confirmed compliance with the Model Code for securities transactions during the reporting period, and a similar code of conduct was established for relevant employees - The company has adopted the Model Code set out in Appendix C3 of the Listing Rules as the code of conduct for directors' dealings in the company's securities, and all directors confirmed compliance during the reporting period[48][49] - The Board has also established a "Code of Conduct for Securities Transactions by Relevant Employees" with terms no less stringent than the Model Code, to regulate transactions by relevant employees who may possess inside information[50] Directors' and Chief Executive's Interests and Short Positions in Shares, Underlying Shares, and Debentures of the Company or its Associated Corporations As of June 30, 2025, the company's directors and chief executive held long positions in the company's shares, primarily through controlled corporations or as founders of discretionary trusts, with no short positions Directors'/Chief Executive's Interests in Company Shares/Underlying Shares (Long Positions) | Director/Chief Executive Name | Nature of Interest | Capacity | Number of Shares/Underlying Shares | Approximate Percentage of Company's Shareholding | | :--- | :--- | :--- | :--- | :--- | | Leng Youbin | Corporate Interest | Interest in Controlled Corporation | 587,516,458 | 6.48% | | Leng Youbin | Other Interest | Founder of Discretionary Trust | 3,889,911,881 | 42.90% | | Liu Hua | Other Interest | Founder of Discretionary Trust | 345,681,920 | 3.81% | | Zhang Guohua | Beneficial Interest | Beneficial Owner | 326,000 | 0.00% | | Cai Fangliang | Corporate Interest | Interest in Controlled Corporation | 101,647,734 | 1.12% | | Tu Fang'er | Other Interest | Founder of Discretionary Trust | 23,717,804 | 0.26% | | Tu Fang'er | Beneficial Interest | Beneficial Owner | 104,762 | 0.00% | | Gao Yu | Beneficial Interest | Beneficial Owner | 7,536,151 | 0.08% | | Chen Guojin | Beneficial Interest | Beneficial Owner | 3,368,918 | 0.04% | - Mr. Cai Fangliang holds a 7.66% beneficial interest in Jilin Green Energy Ecological Animal Husbandry Co., Ltd., an associated corporation[54] - As of June 30, 2025, none of the company's directors or chief executive held any short positions in the shares or debentures of the company or its associated corporations[55] Major Shareholders' Interests As of June 30, 2025, excluding directors and chief executive, Harneys Trustees Limited was the largest shareholder with 49.21% of shares, with other major shareholders including LYB International Holding Limited, Garland Glory Holdings Limited, Mr. Liu Shenghui, and Dasheng Co., Ltd Major Shareholders' Interests in Company Shares (Long Positions) | Shareholder Name/Designation | Nature of Interest | Number of Shares/Underlying Shares | Percentage of Company's Shareholding | | :--- | :--- | :--- | :--- | | Harneys Trustees Limited | Trustee of Trust | 4,461,740,357 | 49.21% | | LYB International Holding Limited | Interest in Controlled Corporation | 3,889,911,881 | 42.90% | | Garland Glory Holdings Limited | Beneficial Owner | 3,889,911,881 | 42.90% | | Mr. Liu Shenghui | Interest in Controlled Corporation and Founder of Discretionary Trust | 813,663,014 | 8.97% | | Dasheng Co., Ltd. | Beneficial Owner | 587,516,458 | 6.48% | - Harneys Trustees Limited is deemed to have interests in shares held by various family trusts, including the Leng Family Trust, Liu Hua Family Trust, and Liu Family Trust[57] - As of June 30, 2025, no other person held any disclosable interests or short positions in the company's shares or underlying shares[59] Employees and Remuneration As of June 30, 2025, the Group had 9,024 full-time employees, mostly in China, and is committed to providing a quality work environment, diverse training, attractive compensation, and performance-based incentives - As of June 30, 2025, the Group had 9,024 full-time employees, with the majority located in China[60] - The Remuneration Committee is responsible for reviewing remuneration policies; the company provides a quality work environment, diverse training programs (including induction training, quality control, production safety, etc.), and performance-based compensation (bonuses, honorary awards, promotions, share options)[61] - The Group takes measures to promote employment equality among employees, oppose discrimination, and foster employee diversity[61] Purchase, Sale or Redemption of the Company's Listed Securities During the reporting period, neither the company nor any member of the Group purchased, sold, or redeemed any of the company's listed securities, and no treasury shares were held at period-end - During the reporting period, neither the company nor any member of the Group purchased, sold, or redeemed any of the company's listed securities[63] - At the end of the reporting period, the company did not hold any treasury shares[63] Use of Net Proceeds from Global Offering The company raised approximately HKD 6,554.7 million net proceeds from its 2019 global offering. As of June 30, 2025, HKD 1,409.8 million remained unutilized, expected to be fully used by December 31, 2025, with some delays due to changes in China's macroeconomic and infant formula market environment - The company raised net proceeds of approximately HKD 6,554.7 million from its global offering in 2019[64] Use of Net Proceeds from Global Offering (HKD Million) | Intended Use of Proceeds | Initial Planned Allocation | Unutilized Amount as of December 31, 2024 | Amount Used for the Six Months Ended June 30, 2025 | Unutilized Amount as of June 30, 2025 | Expected Timeline for Using Remaining Proceeds | | :--- | :--- | :--- | :--- | :--- | :--- | | Repayment of Offshore Debts | 2,621.9 | 208.3 | – | 208.3 | Before December 31, 2025 | | Potential M&A Opportunities | 1,310.9 | – | – | – | – | | Operations of the Company's Kingston Plant | 655.5 | 471.7 | 78.3 | 393.4 | Before December 31, 2025 | | R&D Activities for Overseas Infant Formula and Nutritional Supplements | 655.5 | 655.5 | – | 655.5 | Before December 31, 2025 | | Business Expansion of Vitamin World USA | 327.7 | – | – | – | – | | Marketing Efforts | 327.7 | 152.1 | – | 152.1 | Before December 31, 2025 | | Working Capital and General Corporate Purposes | 655.5 | 0.5 | – | 0.5 | Before December 31, 2025 | | Total | 6,554.7 | 1,488.1 | 78.3 | 1,409.8 | | - A portion of the net proceeds was delayed by two years compared to the original schedule, mainly due to changes in China's macroeconomic environment and the market environment of the infant formula industry[67] Interim Dividend and Closure of Register of Members The Board recommended an interim dividend of HKD 0.1209 per share for the six months ended June 30, 2025, totaling approximately RMB 1 billion, with the register of members to be closed from September 12 to September 15, 2025, to determine dividend eligibility - The Board resolved to recommend an interim dividend of HKD 0.1209 per share for the six months ended June 30, 2025 (totaling approximately HKD 1,096,327,741, equivalent to approximately RMB 1,000,000,000)[68] - The interim dividend was determined based on the dividend policy of not less than 30% of the net profit for each financial year, plus approximately 70% of the profit for the six months ended June 30, 2025 (totaling approximately 100%)[68] - To determine shareholders' eligibility for the interim dividend, the company will close its register of members from September 12, 2025, to September 15, 2025 (both dates inclusive)[70] Audit Committee The Audit Committee, comprising three members and chaired by Mr. Fan Yonghong, is responsible for reviewing the company's accounting principles, audit, risk management, internal controls, and financial reporting matters, including the financial information in this interim report - The Audit Committee comprises Mr. Fan Yonghong (Chairman), Mr. Gao Yu, and Mr. Jacques Maurice LAFORGE[72] - The Audit Committee has reviewed the accounting principles and practices adopted by the company with management and external auditors, and discussed audit, risk management, internal controls, whistle-blowing policy and system, and financial reporting matters, including this interim report[72] Pre-IPO Share Option Scheme The company adopted the Pre-IPO Share Option Scheme on October 14, 2019, to attract and retain talent. The scheme's maximum share number was 190,190,704 shares, fully exercised by September 29, 2022, with no outstanding options at period-end - The Pre-IPO Share Option Scheme was adopted on October 14, 2019, to replace the DIF Share Option Scheme, to recruit and retain outstanding talent, provide additional incentives, and promote the Group's business development[73][74] - The maximum number of shares that may be granted as Pre-IPO Awards and issued under the scheme is 190,190,704 shares, representing approximately 2.10% of the company's total issued shares[76] - All Pre-IPO Share Options (190,190,704 shares) were granted to Dasheng Co., Ltd. on October 14, 2019, and fully exercised on September 29, 2022. At the beginning and end of the reporting period, there were no outstanding Pre-IPO Share Options[83][84] 2020 Share Option Scheme The company adopted the 2020 Share Option Scheme on June 22, 2020, to attract and retain skilled personnel and incentivize directors, key employees, and other stakeholders. The scheme allows for a maximum of 134,000,100 shares to be granted, with no outstanding options at period-end, but 80,696,300 options remain available for grant - The 2020 Share Option Scheme was adopted on June 22, 2020, to attract and retain skilled and experienced personnel, provide additional incentives to directors, key employees, and other stakeholders, and promote the successful development of the company's business[86][87] - The maximum number of shares that may be granted as awards and issued under the scheme is 134,000,100 shares, representing 1.48% of the company's total issued shares. The individual limit for each eligible participant in any 12-month period is 1% of the issued shares[89][91] - The subscription price shall not be less than the highest of the closing price on the Stock Exchange on the date of grant, the average closing price for the five business days immediately preceding the date of grant, and the nominal value of the shares[97][99] - At the beginning and end of the reporting period, no share options granted under the 2020 Share Option Scheme were outstanding. At the end of the reporting period, 80,696,300 share options remained available for grant, representing approximately 0.89% of the total issued shares[100] 2023 Share Award Scheme The company adopted the 2023 Share Award Scheme on May 25, 2023, to recognize and reward eligible participants' contributions and attract talent, with a maximum grant limit and vesting conditions. For the six months ended June 30, 2025, 956,021 share awards were granted to employees, of which 413,074 vested - The 2023 Share Award Scheme was adopted on May 25, 2023, to recognize and reward the contributions of eligible participants to the growth and development of the Group, provide incentives to retain them, and attract suitable talent for the Group's further development[102][103] - Eligible participants include employee participants, associated entity participants, and service providers. The scheme is valid for 10 years from May 25, 2023[104][107] - The maximum grant limit is 10% of the company's issued share capital (906,825,170 shares), with a sub-limit of 0.5% (45,341,258 shares) for service providers. Share awards to directors, chief executives, or major shareholders require approval from the Remuneration Committee and independent non-executive directors, and shareholder approval for exceeding specific limits[109][110] 2023 Share Award Scheme Changes (Number of Shares) | Selected Participant | Outstanding as of January 1, 2025 | Granted for the Six Months Ended June 30, 2025 | Forfeited or Cancelled for the Six Months Ended June 30, 2025 | Vested for the Six Months Ended June 30, 2025 | Outstanding as of June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | | Employees | 956,021 | – | 64,936 | 413,074 | 478,010 | Changes in Directors' Information There were no changes in directors' information requiring disclosure under Listing Rule 13.51B(1) during the reporting period and up to the latest practicable date - Except for those disclosed in the company's 2024 annual report, there were no changes in information requiring disclosure under Listing Rule 13.51B(1) during the reporting period and up to the latest practicable date[121] Independent Review Report Review Conclusion Ernst & Young reviewed China Feihe Limited's interim financial information for the six months ended June 30, 2025, finding no matters suggesting non-compliance with IAS 34 in all material respects - Ernst & Young has reviewed the interim financial information contained on pages 31 to 59, including the condensed consolidated statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, and statement of cash flows[124] - The scope of a review is substantially less than that of an audit, and therefore no audit opinion is expressed. Based on the review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34[126][127] Condensed Consolidated Statement of Profit or Loss Profit or Loss Statement Overview For the six months ended June 30, 2025, the Group's revenue was RMB 9,150,525 thousand, and profit for the period was RMB 1,032,538 thousand, both showing a decrease compared to the same period last year Condensed Consolidated Statement of Profit or Loss (RMB Thousand) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Revenue | 9,150,525 | 10,094,947 | | Cost of Sales | (3,515,663) | (3,242,492) | | Gross Profit | 5,634,862 | 6,852,455 | | Other Income and Net Gains | 540,082 | 862,259 | | Selling and Distribution Expenses | (3,174,706) | (3,535,374) | | Administrative Expenses | (773,735) | (738,708) | | Other Expenses | (20,606) | (41,311) | | Finance Costs | (16,360) | (26,236) | | Share of Loss of Associates | (7,473) | (6,739) | | Changes in Fair Value Less Costs to Sell of Biological Assets | (423,433) | (336,911) | | Profit Before Tax | 1,758,631 | 3,029,435 | | Income Tax Expense | (726,093) | (1,117,984) | | Profit for the Period | 1,032,538 | 1,911,451 | | Basic Earnings Per Share Attributable to Owners of the Parent (RMB) | 0.11 | 0.21 | | Diluted Earnings Per Share Attributable to Owners of the Parent (RMB) | 0.11 | 0.21 | Condensed Consolidated Statement of Comprehensive Income Comprehensive Income Overview For the six months ended June 30, 2025, the Group's profit for the period was RMB 1,032,538 thousand, which, combined with exchange differences on translating financial statements of group companies of RMB 25,518 thousand, resulted in total comprehensive income of RMB 1,058,056 thousand Condensed Consolidated Statement of Comprehensive Income (RMB Thousand) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Profit for the Period | 1,032,538 | 1,911,451 | | Other Comprehensive Income/(Loss) that May Be Reclassified to Profit or Loss in Subsequent Periods: | | | | Exchange Differences on Translating Financial Statements of Group Companies | 25,518 | (24,752) | | Total Comprehensive Income for the Period | 1,058,056 | 1,886,699 | | Attributable to: | | | | Owners of the Parent | 1,026,212 | 1,849,752 | | Non-controlling Interests | 31,844 | 36,947 | Condensed Consolidated Statement of Financial Position Assets, Liabilities and Equity Overview As of June 30, 2025, the Group's total assets were RMB 33,902,693 thousand, with net current assets of RMB 15,119,792 thousand. Net assets amounted to RMB 27,153,285 thousand, and equity attributable to owners of the parent was RMB 25,610,542 thousand Condensed Consolidated Statement of Financial Position (RMB Thousand) | Indicator | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Non-current Assets | | | | Property, Plant and Equipment | 9,430,196 | 9,496,701 | | Biological Assets | 2,236,840 | 2,339,650 | | Total Non-current Assets | 13,471,152 | 13,477,115 | | Current Assets | | | | Inventories | 2,050,919 | 2,153,945 | | Structured Deposits | 10,386,931 | 9,681,736 | | Cash and Cash Equivalents | 6,476,567 | 9,321,222 | | Total Current Assets | 20,431,541 | 22,248,591 | | Current Liabilities | | | | Trade and Bills Payables | 1,436,344 | 1,565,160 | | Interest-bearing Bank Borrowings | 316,384 | 514,804 | | Total Current Liabilities | 5,311,749 | 6,591,030 | | Net Current Assets | 15,119,792 | 15,657,561 | | Non-current Liabilities | | | | Total Non-current Liabilities | 1,437,659 | 1,727,291 | | Net Assets | 27,153,285 | 27,407,385 | | Total Equity | 27,153,285 | 27,407,385 | Condensed Consolidated Statement of Changes in Equity Equity Changes Overview For the six months ended June 30, 2025, the Group's total equity changed from RMB 27,407,385 thousand at the beginning of the period to RMB 27,153,285 thousand at period-end, primarily influenced by profit for the period, exchange differences, and declared dividends Condensed Consolidated Statement of Changes in Equity (RMB Thousand) | Indicator | As of January 1, 2025 | Profit for the Period | Exchange Differences | Dividends Declared | Share-based Payment Arrangements | Additions to Non-controlling Interests | As of June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Equity Attributable to Owners of the Parent | 25,933,186 | 1,000,105 | 26,107 | (1,350,316) | 1,460 | – | 25,610,542 | | Non-controlling Interests | 1,474,199 | 32,433 | (589) | – | – | 36,700 | 1,542,743 | | Total Equity | 27,407,385 | 1,032,538 | 25,518 | (1,350,316) | 1,460 | 36,700 | 27,153,285 | Condensed Consolidated Statement of Cash Flows Cash Flow Overview For the six months ended June 30, 2025, the Group's net cash flow from operating activities was RMB 77,421 thousand, net cash used in investing activities was RMB 85,188 thousand, and net cash used in financing activities was RMB 1,599,211 thousand, resulting in a net decrease in cash and cash equivalents of RMB 1,606,978 thousand Condensed Consolidated Statement of Cash Flows (RMB Thousand) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 77,421 | 1,567,971 | | Net Cash Flow Used in Investing Activities | (85,188) | (363,866) | | Net Cash Flow Used in Financing Activities | (1,599,211) | (1,407,849) | | Net Decrease in Cash and Cash Equivalents | (1,606,978) | (203,744) | | Cash and Cash Equivalents at Beginning of Period | 7,214,612 | 7,447,381 | | Net Effect of Exchange Rate Changes | 11,601 | (33,397) | | Cash and Cash Equivalents at End of Period | 5,619,235 | 7,210,240 | Notes to the Condensed Consolidated Financial Information Basis of Preparation This condensed consolidated interim financial information is prepared in accordance with IAS 34 and applicable disclosure requirements of the HKEX Listing Rules, and should be read in conjunction with the annual consolidated financial statements - The condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[138] - This information does not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group's annual consolidated financial statements for the year ended December 31, 2024[139] Changes in Accounting Policies and Disclosures The accounting policies adopted for this interim financial information are consistent with the prior year, except for the initial adoption of amended IAS 21 "Lack of Exchangeability," which had no impact as all currencies traded by the Group are convertible - The accounting policies adopted in the preparation of the condensed consolidated interim financial information are consistent with those applied in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2024, except for the initial adoption of IAS 21 (Amendments) "Lack of Exchangeability"[140] - As the currencies in which the Group trades and the functional currencies of the Group entities used for conversion into the Group's reporting currency are all convertible, these amendments had no impact on the condensed consolidated interim financial information[140] Operating Segment Information The Group has two reportable operating segments: raw milk and dairy & nutritional supplement products, with management independently monitoring their performance. For the six months ended June 30, 2025, the dairy & nutritional supplement products segment generated RMB 9,142,719 thousand in revenue, accounting for the vast majority of total revenue, with mainland China contributing most external customer revenue and non-current assets - The Group has two reportable operating segments: the raw milk segment (production and sale of raw milk) and the dairy and nutritional supplement products segment (production and sale of dairy products and sale of nutritional supplements)[141][145] Segment Revenue (RMB Thousand) | Segment | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Raw Milk (Sales to External Customers) | 7,806 | 38,685 | | Dairy and Nutritional Supplement Products (Sales to External Customers) | 9,142,719 | 10,056,262 | | Total Revenue | 9,150,525 | 10,094,947 | Geographical Information: Revenue from External Customers (RMB Thousand) | Region | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Mainland China | 9,041,300 | 9,987,364 | | United States of America | 91,012 | 81,305 | | Canada | 18,213 | 26,278 | | Total | 9,150,525 | 10,094,947 | Geographical Information: Non-current Assets (RMB Thousand) | Region | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Mainland China | 10,803,989 | 10,940,287 | | United States of America | 33,533 | 38,365 | | Canada | 1,539,681 | 1,548,706 | | Total | 12,377,203 | 12,527,358 | Revenue, Other Income and Net Gains For the six months ended June 30, 2025, the Group's revenue from contracts with customers was RMB 9,150,525 thousand, primarily from goods sold in mainland China. Other income and net gains were RMB 540,082 thousand, a decrease from the prior year, mainly due to reduced bank interest income and government grants Revenue from Contracts with Customers (RMB Thousand) | Type of Goods/Geographical Market/Timing of Revenue Recognition | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Sale of Goods | 9,150,525 | 10,094,947 | | Mainland China | 9,041,300 | 9,987,364 | | Goods Transferred at a Point in Time | 9,150,525 | 10,094,947 | Other Income and Net Gains (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Bank Interest Income | 74,307 | 138,364 | | Other Interest Income | 88,287 | 40,708 | | Government Grants (Asset-related) | 24,960 | 35,126 | | Government Grants (Income-related) | 299,248 | 401,255 | | Fair Value Gain on Structured Deposits | 50,195 | 139,955 | | Total Other Income and Net Gains | 540,082 | 862,259 | - Decrease in other income and net gains was mainly due to reduced government grants and bank interest income[152] Profit Before Tax For the six months ended June 30, 2025, the Group's profit before tax was RMB 1,758,631 thousand, primarily affected by cost of sales, depreciation, and fair value loss on biological assets Profit Before Tax Adjustment Items (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Cost of Sales | 3,515,663 | 3,242,492 | | Depreciation of Property, Plant and Equipment | 332,932 | 298,677 | | Depreciation of Right-of-Use Assets | 11,031 | 12,775 | | Depreciation of Investment Properties | 6,407 | 8,195 | | Write-down of Inventories to Net Realizable Value | 20,878 | 15,740 | | Changes in Fair Value Less Costs to Sell of Biological Assets | 423,433 | 336,911 | | Loss on Disposal of Property, Plant and Equipment Items | 2,047 | 2,082 | Finance Costs For the six months ended June 30, 2025, the Group's finance costs were RMB 16,360 thousand, mainly from bank loan interest, a decrease from the prior year Finance Costs Analysis (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Interest on Bank Loans | 15,003 | 26,907 | | Interest on Lease Liabilities | 1,357 | 1,968 | | Total | 16,360 | 26,236 | Income Tax For the six months ended June 30, 2025, the Group's income tax expense was RMB 726,093 thousand, with an effective tax rate of 41.3%. Taxable profits in mainland China are subject to a 25% rate, while some agricultural subsidiaries are exempt from corporate income tax - Income tax on taxable profits in mainland China is calculated at the applicable corporate income tax rate of 25%. Certain subsidiaries of the Group engaged in agricultural businesses are exempt from corporate income tax[156][157] Income Tax Expense Analysis (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Current – China | 727,607 | 969,775 | | Withholding Tax | 300,000 | 553,700 | | Deferred | (301,514) | (411,359) | | Total Tax Expense for the Period | 726,093 | 1,117,984 | - The Group's effective tax rate for the six months ended June 30, 2025, was 41.3% (2024: 36.9%)[32] Dividends The company declared a final dividend of HKD 0.1632 per ordinary share for 2024 (totaling approximately RMB 1.35 billion) and an interim dividend of HKD 0.1209 per share for the first half of 2025 (totaling approximately RMB 1 billion) after the reporting period - For the six months ended June 30, 2025, the company declared a final dividend of HKD 0.1632 per ordinary share for the year ended December 31, 2024, totaling approximately RMB 1.35 billion to its shareholders[159] - Subsequent to the end of the reporting period, the Board declared an interim dividend of HKD 0.1209 per share for the six months ended June 30, 2025, totaling approximately RMB 1.0 billion[159] Earnings Per Share Attributable to Owners of the Parent For the six months ended June 30, 2025, both basic and diluted earnings per share attributable to owners of the parent were RMB 0.11, a decrease from RMB 0.21 in the prior year Earnings Per Share Calculation (RMB Thousand and Number of Shares) | Indicator | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Profit for the Period Attributable to Owners of the Parent | 1,000,105 | 1,875,011 | | Weighted Average Number of Ordinary Shares Outstanding for Basic EPS Calculation | 9,054,820,598 | 9,048,107,529 | | Dilutive Effect – Weighted Average Number of Ordinary Shares: Share Awards | 1,264,937 | – | | Weighted Average Number of Shares for Diluted EPS Calculation | 9,056,085,535 | 9,048,107,529 | - Both basic and diluted earnings per share are calculated based on the profit for the period attributable to owners of the parent and the weighted average number of ordinary shares outstanding, adjusted to reflect treasury shares[160] Property, Plant and Equipment For the six months ended June 30, 2025, the Group acquired property, plant and equipment items totaling RMB 316,433 thousand, and disposed of assets resulting in a loss of RMB 2,047 thousand. At period-end, approximately RMB 25,037 thousand of plant and machinery and construction in progress were pledged - For the six months ended June 30, 2025, the Group acquired property, plant and equipment items totaling RMB 316,433 thousand[163] - The Group disposed of assets with a net book value of RMB 44,188 thousand, resulting in a loss on disposal of RMB 2,047 thousand[163] - As of June 30, 2025, certain plant and machinery and construction in progress with a total net book value of approximately RMB 25,037 thousand were pledged as collateral for third-party and bank borrowings[164] Biological Assets The Group primarily holds dairy cows for milk production, with a total of 108,439 cows as of June 30, 2025. Biological assets had a fair value of RMB 2,236,840 thousand, with a fair value change less costs to sell loss of RMB 423,433 thousand during the period. Some biological assets are pledged for bank borrowings - The dairy cows owned by the Group are primarily held for production of milk, including heifers and calves, and mature cows[165] Number of Dairy Cows (Head) | Dairy Cow Category | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Mature Cows | 51,452 | 49,330 | | Heifers and Calves | 56,987 | 57,966 | | Total Dairy Cows | 108,439 | 107,296 | Changes in Value of Dairy Cows (RMB Thousand) | Item | Heifers and Calves | Lactating Cows | Total | | :--- | :--- | :--- | :--- | | Balance as of January 1, 2025 | 993,920 | 1,345,730 | 2,339,650 | | Increase due to Breeding (Feeding Costs and Others) | 397,463 | – | 397,463 | | Transfers (Out)/In | (374,705) | 374,705 | – | | Decrease due to Sales | (13,790) | (63,050) | (76,840) | | Loss from Changes in Fair Value Less Costs to Sell | (72,768) | (350,665) | (423,433) | | Balance as of June 30, 2025 | 930,120 | 1,306,720 | 2,236,840 | - As of June 30, 2025, biological assets amounting to RMB 916,799 thousand were pledged as collateral for interest-bearing bank borrowings[170] Inventories As of June 30, 2025, the Group's total inventories amounted to RMB 2,050,919 thousand, primarily comprising work-in-progress, finished goods, feed, and raw materials Inventory Composition (RMB Thousand) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Feed | 425,015 | 649,498 | | Raw Materials | 81,765 | 67,265 | | Work-in-Progress | 960,891 | 1,009,150 | | Finished Goods | 548,980 | 404,585 | | Other | 34,268 | 23,447 | | Total | 2,050,919 | 2,153,945 | Trade and Bills Receivables As of June 30, 2025, the Group's total trade and bills receivables were RMB 334,915 thousand. The Group provides credit terms to customers and maintains strict control over receivables, with no significant concentration of credit risk Trade and Bills Receivables (RMB Thousand) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Trade Receivables | 329,085 | 382,041 | | Bills Receivables | 17,886 | 25,234 | | Impairment | (12,056) | (12,056) | | Total | 334,915 | 395,219 | - The Group grants specific credit terms to customers, typically ranging from one to three months from the invoice date. Trade and bills receivables are non-interest bearing[173] Ageing Analysis of Trade and Bills Receivables (RMB Thousand) | Ageing | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Within One Month | 255,317 | 308,529 | | One to Two Months | 24,507 | 41,518 | | Two to Three Months | 17,275 | 20,016 | | Over Three Months | 37,816 | 25,156 | | Total | 334,915 | 395,219 | Trade and Bills Payables As of June 30, 2025, the Group's total trade and bills payables were RMB 1,436,344 thousand, mostly settled within three months, and are unsecured and non-interest bearing Ageing Analysis of Trade and Bills Payables (RMB Thousand) | Ageing | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Within Three Months | 1,315,235 | 1,428,376 | | Three to Six Months | 101,783 | 65,890 | | Over Six Months | 19,326 | 70,894 | | Total | 1,436,344 | 1,565,160 | - Trade and bills payables are unsecured, non-interest bearing, and typically settled within one to six months[175] Other Payables and Accrued Expenses As of June 30, 2025, the Group's total other payables and accrued expenses were RMB 4,033,501 thousand, with a current portion of RMB 3,314,879 thousand, mainly including deferred revenue, other payables, accrued expenses, and contract liabilities Other Payables and Accrued Expenses Composition (RMB Thousand) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Deferred Revenue | 729,859 | 716,743 | | Other Payables | 925,228 | 1,404,668 | | Accrued Expenses | 1,629,429 | 2,125,442 | | Contract Liabilities | 748,985 | 559,799 | | Total | 4,033,501 | 4,806,652 | | Non-current Portion | (718,622) | (705,608) | | Current Portion | 3,314,879 | 4,101,044 | Share Capital As of June 30, 2025, the company's authorized share capital was 2,000,000,000,000 ordinary shares of USD 0.000000025 each, with 9,067,251,704 shares issued and fully paid - The company's authorized share capital is 2,000,000,000,000 ordinary shares of USD 0.000000025 each[177] - The issued and fully paid share capital consists of 9,067,251,704 ordinary shares of USD 0.000000025 each[177] - Each fully paid ordinary share carries one vote and the right to receive dividends when declared by the company[177] Commitments As of June 30, 2025, the Group's capital commitments primarily related to the construction and purchase of property, plant and equipment items, amounting to RMB 447,455 thousand Capital Commitments (RMB Thousand) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Construction and Purchase of Property, Plant and Equipment Items | 447,455 | 337,225 | Related Party Transactions The Group during the period engaged in transactions with related parties, including purchasing goods from companies controlled by the controlling shareholder, and had bank loan guarantees provided by a subsidiary's vice president and director. Total key management personnel compensation was RMB 19,242 thousand Transactions with Companies Controlled by Controlling Shareholder (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Sale of Raw Milk | – | 7,607 | | Purchase of Goods | 8,975 | 9,709 | - Bank loan facilities up to RMB 831,000 thousand were guaranteed by a subsidiary's vice president and his spouse, of which RMB 256,655 thousand remained unutilized[180] - Bank loan facilities up to RMB 340,000 thousand were guaranteed by a subsidiary's director and his spouse, of which RMB 105,052 thousand remained unutilized[180] Key Management Personnel Compensation (RMB Thousand) | Item | 2025 (Unaudited) | 2024 (Unaudited) | | :--- | :--- | :--- | | Short-term Employee Benefits | 19,103 | 21,781 | | Post-employment Benefits | 139 | 132 | | Total Key Management Personnel Compensation Paid/Payable | 19,242 | 21,913 | Fair Value and Fair Value Hierarchy of Financial Instruments The fair values of the Group's financial instruments are similar to their carrying amounts. Structured deposits and interest-bearing bank borrowings are primarily fair valued using discounted cash flow analysis and classified as Level 2. Financial assets at fair value through other comprehensive income are classified as Level 3 - The fair values of financial instruments such as cash and cash equivalents, restricted cash, trade and bills receivables, and trade and bills payables are similar to their carrying amounts, mainly due to their short-term maturity[183] - The fair value of structured deposits is determined based on discounted cash flow analysis and classified as Level 2 fair value measurement[185][186] - The fair value of the non-current portion of interest-bearing bank borrowings is calculated by discounting expected future cash flows using current interest rates for instruments with similar terms, credit risk, and remaining maturity, and classified as Level 2 fair value measurement[184][188] - Financial assets at fair value through other comprehensive income (RMB 1,800 thousand) are classified as Level 3 fair value measurement, estimated using the market approach, with unobservable inputs being the price-to-book ratios of comparable companies[186][187] Approval of the Condensed Consolidated Interim Financial Statements These unaudited condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on August 28, 2025 - These unaudited condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on August 28, 2025[189] Definitions Definitions of Key Terms This section provides definitions for key terms used in the report, covering corporate governance, financial, legal, and business-related jargon, ensuring consistent understanding for readers - Provides definitions for key terms such as "Audit Committee", "Awarded Shares", "Board", "Corporate Governance Code", "China", "Company", "Directors", "Group", "HKD", "Hong Kong", "IFRS", "Listing Rules", "RMB", "Reporting Period", "Share Award", "Shareholder", "Stock Exchange", "Subsidiary", "Trustee", "US", "USD", "Vitamin World USA", and "Original Ecological"[190][191][193][194][196]