Summary of Modern Dairy's Conference Call Company Overview - Company: Modern Dairy - Industry: Dairy Industry Key Points and Arguments Financial Performance - Modern Dairy expects EBITDA for the first half of 2025 to remain roughly flat compared to the same period last year, despite a projected net loss of 800 to 1,000 million yuan due to falling milk prices and increased costs associated with cow sales [2][3][4] - The company anticipates a total biological asset valuation loss of approximately 1.6 billion yuan for the year, attributed to depreciation of breeding cows, elimination losses, and herd impairment losses [4][15] Market Conditions - The dairy market is facing challenges in the first half of 2025, but Modern Dairy is optimistic about a turnaround in the second half due to industry consolidation and recovering consumer demand [4][10] - The number of dairy cows in the industry has decreased, with a significant drop in smaller farms, leading to a more stable supply-demand balance expected in the third quarter [11][12] Strategic Initiatives - Modern Dairy is implementing a cost leadership strategy by optimizing commodity procurement, precise feeding, and energy-saving measures to reduce feed costs [2][5] - The company plans to increase the proportion of specialty milk products, targeting 10% of total production by 2027, focusing on organic and A2 milk [2][7] Digital Transformation - The company is promoting a cloud-based cattle management model to enhance digital and precise management of farms, aiming to improve overall operational efficiency [8] Breeding and Production - Modern Dairy has made significant progress in breeding, with plans to achieve complete self-sufficiency in frozen semen by 2027 [9] - The company has seen a 10% increase in production in the first half of 2025, with expectations for mid-to-high single-digit growth for the full year [30] Cost Management - The average feed cost achieved in the first half of 2025 was 1.8 yuan per kilogram, with a target to reduce it below 1.78 yuan for the full year [4][19] - The company is facing pressure from rising corn feed prices, which have increased from 2,000 yuan to approximately 250-300 yuan [19] Customer and Market Dynamics - Demand remains relatively weak, but the company has successfully expanded its customer base, including partnerships with food processing companies [21] - The company is exploring further collaboration with partners like Miaokelan Duo for fresh cheese production [22] Cash Flow and Financial Health - Operating cash flow for the first half of 2025 is expected to be similar to last year, around 1.5 billion yuan, with efforts to maintain free cash flow [23][27] - The company plans to maintain a dividend payout of around 20% of profits, despite facing non-cash losses [24] Industry Challenges - The ongoing decline in milk prices is causing significant cash flow issues for many farms, with expectations of increased financial strain in the third quarter [25][26] - The company is closely monitoring market dynamics to adjust its operational strategies accordingly [19][26] Future Outlook - The second half of 2025 is expected to show positive signals, including easing trade tensions and supportive domestic policies, which may lead to a recovery in raw milk prices [6][10] - Modern Dairy aims to enhance its product structure and maintain a focus on high-quality differentiated raw milk production [6][10] Additional Important Insights - The company is actively working on deep processing initiatives, including partnerships for producing various dairy products [18][29] - The overall industry is expected to see a decline in supply due to the exit of smaller farms, which may lead to a more balanced market in the future [11][12][30]
现代牧业20250622