April 11, 2006

China's biggest dairy reports 43 percent increase in profits

China Mengniu Dairy Co, the country's largest milk producer by sales volume, said Monday (Apr 11)  its 2005 net profit soared 43 percent from a year earlier.

Mengniu announced 2005 net profits of RMB456.8 (US$56.9 million), up from RMB319.4 (US$39.8 million) the year before.

The Inner Mongolia-based company said its 2005 revenue surged 50 percent to RMB10.82 billion (US$1.35 billion) from RMB7.21 billion (US$0.9 billion).

Excluding milk beverages and yogurt, Mengniu captured a 28.6 percent share of China's liquid milk market by sales volume at the end of December 2005, according to a survey by market research firm ACNielsen.

Mengniu, together with two other companies, captures three-fifths of China's liquid milk market as at the end of last year, the same survey said.

Yao Tongshan, chief financial officer, said the company's gross profit margin in 2005 was 22.3 percent, unchanged from the year before.

However, it warned that maintaining the same profit margin this year would be difficult due to increased cost of raw milk and higher salaries of workers.

Mengniu operated 14 production bases last year with a total annual production capacity of 278 million tonnes.

The company hopes to increase production capacity by 30 percent this year while expanding capital expenditure to RMB1.3 billion (US$160 million) from 2005's RMB1 billion (US$125 million), Yao said.