China Mengniu Dairy, one of the country’s largest dairy companies with 2023 revenues of €12.6bn, issued a profit warning, saying that it expects full-year 2024 profit of approximately €6.5m, down from €630m a year earlier.
The company said that the plunge in profits was driven by falling sales of dairy products and impairment costs on business units.
Mengniu said the impairments were driven by provisions at its Australian business, Bellamy’s, and asset devaluation at China Modern Dairy.
On sales, the company said there is an “imbalance between supply and demand in raw milk and lower-than-expected consumer demand”. In 2023, liquid milk sales accounted for €10.7bn of the company’s revenues.
The Australian subsidiary is expected to report a full-year loss for 2024 with Mengniu saying it has considered the “future market outlook” and now expects to recognise an impairment provision on goodwill and intangible assets at the operation.
In its home market, there will also be impairments at China Modern Dairy, with fair value adjustments on dairy cows and a goodwill impairment.
Mengniu said that the impairments are non-cash adjustments and that its cashflow is projected to remain “stable” in 2024. Last year, company CEO Jeffrey Minfang Lu stepped down and was replaced as head of the group by Gao Fei.
The Chinese dairy market has struggled with an over-supply of liquid milk since 2023 with many dairy farms running at a loss as feed and overhead costs are not covered by the milk price which has fallen from 57c/kg in 2021 to 40c/kg in 2024, with production costs at approximately 44c/kg.
China Mengniu Dairy, one of the country’s largest dairy companies with 2023 revenues of €12.6bn, issued a profit warning, saying that it expects full-year 2024 profit of approximately €6.5m, down from €630m a year earlier.
The company said that the plunge in profits was driven by falling sales of dairy products and impairment costs on business units.
Mengniu said the impairments were driven by provisions at its Australian business, Bellamy’s, and asset devaluation at China Modern Dairy.
On sales, the company said there is an “imbalance between supply and demand in raw milk and lower-than-expected consumer demand”. In 2023, liquid milk sales accounted for €10.7bn of the company’s revenues.
The Australian subsidiary is expected to report a full-year loss for 2024 with Mengniu saying it has considered the “future market outlook” and now expects to recognise an impairment provision on goodwill and intangible assets at the operation.
In its home market, there will also be impairments at China Modern Dairy, with fair value adjustments on dairy cows and a goodwill impairment.
Mengniu said that the impairments are non-cash adjustments and that its cashflow is projected to remain “stable” in 2024. Last year, company CEO Jeffrey Minfang Lu stepped down and was replaced as head of the group by Gao Fei.
The Chinese dairy market has struggled with an over-supply of liquid milk since 2023 with many dairy farms running at a loss as feed and overhead costs are not covered by the milk price which has fallen from 57c/kg in 2021 to 40c/kg in 2024, with production costs at approximately 44c/kg.
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