Financial Data and Key Metrics Changes - The company reported a revenue growth of 4.9% for the first half of 2025, with an adjusted EBITDA margin maintained at 15.7% [48][49][64] - Adjusted net profit increased by 4.6%, reaching a net profit margin of 5.2% [49][64] - The gross profit margin improved by 1.4 percentage points for core product categories [55] Business Line Data and Key Metrics Changes - The ANC business grew by 5.9%, BNC by 2.9%, and P&C by 8.6% [22] - Nutritional supplements accounted for 65.6% of total revenue, showing a 4.1% increase [18] - The P&C business globally saw a 14% growth, with SOLIGO returning to 17.5% growth [10][36] Market Data and Key Metrics Changes - China contributed 70% of total revenue, with a 13% growth in the ANC business [20][5] - The ANZ market experienced a 5.6% growth, while the North American market saw a 4.6% growth [7][38] - Expansion markets contributed 66% of revenue, growing by 18.6% [21] Company Strategy and Development Direction - The company aims to diversify its market and brands while consolidating its core market [24] - Focus on premiumization and innovation in product offerings to drive growth [44][45] - Continued investment in new markets and channels to enhance profitability [46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged fierce competition in the Chinese market and emphasized the importance of strategic adjustments [3] - The company remains confident in achieving high single-digit sales growth for the full year [66] - Future strategies include focusing on super premium segments and expanding into new markets [45][46] Other Important Information - The interim dividend payout is set at HKD0.19 per share [12] - The company completed a refinancing of USD 300 million, which is expected to lower financial expenses [11][51] Q&A Session Summary Question: Do you have any guidance update for the whole year's performance? - The company expects high single-digit growth for the whole group, with adjusted EBITDA margin around 15% and adjusted net profit margin close to 5% [66] Question: What are the key drivers for the B&C business growth? - The main drivers include innovative products and penetration into new channels [70][71] Question: Will the product mix and brand be restructured strategically? - Yes, adjustments are being made to improve profitability, particularly in the non-core IMF and probiotic segments [71][73] Question: What is the expectation for the ANC business in ANZ? - The company will continue to promote growth in domestic channels to offset declines in the Daigou channel [85][87]

Industry Overview - The Chinese infant formula market is entering a new cycle focused on "quality first," driven by consumption upgrades and evolving parenting philosophies. Parents are shifting their focus from basic nutritional needs to comprehensive quality across the entire supply chain, including sourcing, formulation, production standards, and brand reputation [1][8] - The share of ultra-premium infant formula is expected to rise from 18% in 2025 to 35% by 2030, reflecting the increasing importance Chinese families place on infant nutrition and opening opportunities for global premium brands [1] Company Introduction - Bimbosan, a Swiss national infant formula brand with over 90 years of history, has officially entered the Chinese market, bringing a "pure and scientific" nutritional solution derived from the Alps. The brand emphasizes Swiss quality, professional heritage, and a commitment to parents and babies [1][8] Quality Control - Bimbosan's reputation as a trusted "national infant formula brand" is built on its comprehensive quality control across four dimensions: sourcing, production standards, and parenting philosophy, establishing a unique "Swiss standard" [2] - The milk source for Bimbosan comes from the pristine pastures of the Swiss Alps, providing a natural and pollution-free environment for dairy farming [3] Dairy Management - Bimbosan employs meticulous management practices for its dairy cows, ensuring each cow has a dedicated profile. The cows are fed a balanced diet of natural grasses and are not subjected to growth hormones or antibiotics, resulting in high-quality milk that is rich in nutrients and has a pleasant taste [4] Certification Standards - Bimbosan's standards exceed those of the EU, with its milk sources meeting Swiss dairy green standards and receiving Swissmilk Green certification. The organic series has dual organic certification from Switzerland and the EU, ensuring the formula is free from pollutants and additives [5] Nutritional Philosophy - Bimbosan's "building block nutrition" philosophy respects the individual growth rhythms of infants, providing tailored support based on their developmental stages. This approach allows for precise nutritional responses to each child's unique needs [6][7] - The product range includes a Super Premium series that meets specific developmental needs, an organic series for families seeking pure nutrition, and a goat milk series for infants with sensitive stomachs [7] Market Position - With over 90 years of experience, Bimbosan has established itself as a leader in the high-end organic infant formula sector, consistently ranking first in Swiss evaluations and maintaining a significant market share in Europe [8]

Financial Data and Key Metrics Changes - Organic net sales declined by 0.4%, but excluding lost distribution and prior year effects, organic net sales grew by 1.8% year over year [16][25] - Gross margin expanded by 440 basis points year over year to 41%, driven by business recovery in infant formula [16][25] - First quarter EPS increased by 107% year over year to $0.60 per share [16][28] Business Line Data and Key Metrics Changes - Infant formula net sales increased by 19% compared to the same quarter last year, contributing to overall recovery [7][19] - OTC brands achieved solid organic growth of 5.9% year over year, driven by strong sales of key products [10] - Operating income in the CSCI segment grew by 10% organically, while CSEA operating income grew by 90% due to infant formula recovery [27] Market Data and Key Metrics Changes - Dollar sales across self-care categories turned negative compared to the prior year, reflecting cautious consumer behavior due to inflation and reduced consumer confidence [11][12] - Total US OTC store brand volume gained 50 basis points over the last four weeks, indicating a shift in consumer buying patterns towards value-oriented products [15] Company Strategy and Development Direction - The company is focused on its 3S plan: stabilize, streamline, and strengthen, with positive results from stabilizing key parts of the business [6][21] - The synergistic relationship between store brand and OTC brands is being leveraged to drive growth, with substantial cash flow generated from store brands [10] - The company is enhancing its new product development process to create a more efficient pipeline [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment but expressed confidence in the company's positioning to navigate these challenges [12][22] - The company is widening its 2025 net sales projections due to macroeconomic uncertainties while reaffirming its adjusted EPS range [12][30] - Management expects a significant ramp-up in infant formula sales in the second half of the year due to new product introductions [39] Other Important Information - The company plans to offset tariff-related cost increases through strategic pricing actions and sourcing more manufacturing to US facilities [14][30] - The gross increase in global cost of goods sold from tariffs is expected to be approximately 5.5% for the full year [32] Q&A Session Summary Question: Impact of tariffs on EPS for 2026 - Management expects that actions taken to mitigate tariff impacts will offset any major changes in EPS projections for 2025 and beyond [36][37] Question: Sales ramp for infant formula - Management anticipates a similar sales trajectory in Q2, with significant growth expected in the second half due to new SKU introductions [38][39] Question: Contract manufacturing activity - There is an increase in activity for contract manufacturing as competitors seek domestic supply routes [44] Question: Organic sales performance - Organic sales were broadly in line with expectations, with upper respiratory products performing well despite some regional variances [48][49] Question: Gross margin expectations - Management maintains a full-year gross margin expectation of around 40%, despite better-than-expected Q1 performance [52][53] Question: Widening net sales range - The widening range reflects dynamic shifts in consumer behavior and ongoing opportunities in the market [60][62] Question: Pharma-specific tariffs impact - Management anticipates a potential $100 million impact from pharma-specific tariffs, with plans to mitigate through pricing and sourcing strategies [84][85]

Financial Data and Key Metrics Changes - Organic net sales declined by 0.4%, but excluding lost distribution and prior year effects, organic net sales grew by 1.8% year over year [16][17] - Gross margin expanded by 440 basis points year over year to 41%, driven by business recovery in infant formula [16][26] - Operating margin expanded by 550 basis points, supported by gross margin flow through and benefits from Project Energize [17][26] - First quarter EPS increased by 107% year over year to $0.60 per share [17][29] Business Line Data and Key Metrics Changes - In the Americas business, store brand OTC saw new business awards that largely offset previous losses, with infant formula net sales increasing by 19% year over year [5][20] - OTC brands achieved solid organic growth of 5.9% year over year, driven by strong sales of key products [8] - CSCI segment reported organic net sales growth of 4.5%, while CSCA segment net sales declined by 3.6% due to lost distribution [27] Market Data and Key Metrics Changes - Dollar sales across self-care categories turned negative compared to the prior year, reflecting cautious consumer behavior due to inflation and reduced consumer confidence [10][14] - Total US OTC store brand volume gained 50 basis points over the last four weeks, indicating a shift in consumer buying patterns towards value-oriented products [15] Company Strategy and Development Direction - The company is focused on its 3S plan to stabilize, streamline, and strengthen operations, with significant progress reported in the Americas business [5][22] - The synergistic relationship between store brand and OTC brands is being leveraged to drive growth, with investments in high-growth brands expected to yield benefits in the second half of the year [8][9] - The company is navigating macroeconomic uncertainties while reaffirming its adjusted EPS range and net leverage targets [11][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macroeconomic environment but expressed confidence in the company's unique business model to capitalize on growth opportunities [14][23] - The company expects to mitigate tariff-related cost increases through strategic pricing actions and sourcing adjustments [13][31] - Future sales growth projections have been widened to account for macroeconomic risks, with expectations of 3% to 4.5% organic growth [31][32] Other Important Information - The company reported a cash balance of $410 million at the end of the first quarter, with typical cash outflow patterns observed [29] - The international business showed strong performance, with mid-single-digit sales growth and double-digit profit growth [88][90] Q&A Session Summary Question: Impact of tariffs on EPS for 2026 - Management expects actions taken to mitigate tariff impacts will offset any significant changes in EPS projections for 2025 and 2026 [36][37] Question: Sales ramp for infant formula - Management anticipates a similar sales trajectory in Q2, with significant growth expected in the second half due to new SKU introductions [38][39] Question: Contract manufacturing activity - There is an increase in activity for contract manufacturing, with competitors seeking domestic supply routes [42][43] Question: Organic sales performance - Organic sales were broadly in line with expectations, with upper respiratory products performing well despite some regional variances [46][48] Question: Gross margin expectations - Management maintains a full-year gross margin expectation of around 40%, despite better-than-expected Q1 performance [51][52] Question: Widening net sales range - The widening range reflects dynamic consumer patterns and ongoing work to capture market opportunities [56][62] Question: Pricing actions and brand divestitures - Pricing adjustments are being discussed with retailers, and progress on brand divestitures is ongoing, with a focus on international opportunities [70][73] Question: Impact of pharma-specific tariffs - Management anticipates potential impacts from pharma tariffs but has a mitigation plan in place [84][85]

Summary of the China Infant Milk Formula Conference Call Industry Overview - The report focuses on the **China Infant Milk Formula (IMF)** industry and its outlook in light of changing birth rates and government policies regarding fertility subsidies [1][4][11]. Key Insights 1. **Birth Rate Projections**: - A moderate decline in birth rates is expected in **2025** after the Year of the Dragon in **2024**. The anticipated year-on-year changes in birth rates for **2026-2028** are projected as follows: - Bull case: **1%** increase - Base case: **-3%** decrease - Bear case: **-5%** decrease [1][2]. 2. **Infant Population Trends**: - The decline in the infant population (ages 0-3) is expected to narrow in **2025** and **2026** compared to a **-4%** decline in **2024**. Projections for **2027** and **2028** indicate stabilization in the bull case, a **-3%** decline in the base case, and a **-5%** decline in the bear case [3]. 3. **IMF Market Dynamics**: - The IMF market is experiencing a trend of **premiumization**, with ultra-premium product sales growing despite a weak macroeconomic environment. The sales value decline narrowed from **-10%** in **2023** to **-7%** in **2024**. The average selling price (ASP) has remained stable, indicating a better product mix that offsets price competition [4][5]. 4. **Sales Forecasts**: - Sales decline in the IMF market is expected to further narrow in the following scenarios: - Base case: **-1% to -4%** - Bear case: **-2% to -6%** - Bull case: stabilization [4]. 5. **Stock Implications**: - Companies like **Feihe** and **A2 Milk** are expected to gain market share due to their strong positioning in lower-tier markets and effective execution strategies. Feihe is particularly well-positioned to benefit from the birth subsidy in lower-tier cities [5][14][18]. Additional Considerations - **Demographic Challenges**: - The female population of childbearing age (20-39 years) is projected to decline by **2-3%** annually from **2025-2028**, which poses a long-term challenge for birth rates and, consequently, the IMF market [2][8]. - **Risks**: - Key risks affecting the IMF industry include potential food safety issues, lower-than-expected gross profit margins, and a decline in the infant population size. These factors could impede stock performance and market recovery [15][21]. - **Valuation Metrics**: - Target prices for Feihe and Health and Happiness (H&H) are set based on P/E ratios and sum-of-the-parts (SOTP) approaches, reflecting the expected recovery in the market [14][16]. This summary encapsulates the critical insights and projections regarding the China Infant Milk Formula industry, highlighting both opportunities and risks for investors.