August 29, 2012

Mengniu reports an income drop of 1.2% on-year to CNY18.36 billion (US$2.9 billion) for the first half of 2012, with net profit down 18.4%.

No interim dividend was declared.

During the period, the Group eliminated a large number of fragmented milk sources and increased the proportion of purchase from integrated milk sources so as to enhance the quality of its products. In the meantime, costs also surged upon further efforts devoted by the Group in engaging more quality assurance staff to inspect each stage of production on a more regular basis. The Group recorded a gross profit decrease of 2.37%. Overall, gross profit margin reached 25.7%, a decrease of 0.3 percentage points from the same period last year.

At the end of June, Mengniu's net cash sharply dropped to CNY830 million (US$131 million). The decrease was primarily attributable to the improvement of efficiency in the application of funding resulting from an increase in the amount of investment deposits. The unsettled bank loan amounted to CNY730 million (US$115 million), and the debt to equity ratio equalled 5.9%.