China Modern Dairy (1117) H2 2024 earnings summary

Executive summary

• Achieved record-high unit yields and total raw milk production, with raw milk sales revenue up 1.9% year-over-year to RMB10.45 billion.

• Implemented cost-reduction and efficiency measures, resulting in a 19.6% increase in cash EBITDA to RMB2,986 million.

• Gross profit margin and cash EBITDA both increased despite a slight decline in total revenue.

• Faced challenging market conditions with declining raw milk prices and weak consumer demand, but maintained industry leadership and expanded herd size by 9%.

• Continued investment in breeding, digital platforms, and sustainability, with notable ESG achievements and product quality awards.

Financial highlights

• Revenue was RMB13,254 million, down 1.5% year-over-year; raw milk sales rose 1.9% while integrated dairy farming solutions fell 12.4%.

• Gross profit increased 10.3% to RMB3,451 million; gross profit margin rose 2.8 ppt to 26.0%.

• Cash EBITDA grew 19.6% to RMB2,986 million; margin improved by 4.0 ppt to 22.5%.

• Net profit turned to a loss of RMB1,469 million from a profit of RMB185 million year-over-year, mainly due to significant fair value losses on dairy cows and goodwill impairment.

• Earnings per share (basic) dropped to -18.09 RMB cents from 2.23 RMB cents; net asset value per share fell to RMB1.20.

Outlook and guidance

• Rabobank forecasts a 2.6% YoY drop in China's milk output in 2025, but expects dairy consumption to rise by 1.2%.

• Focus on strengthening core business, improving product quality, and enhancing production efficiency through technological innovation and cost control.

• Plans to expand breeding, feed, and supply chain finance services, and explore a full-service cattle farming chain.

• Commitment to digitalization, sustainability, and fulfilling social responsibilities while aiming for international competitiveness.

• Domestic policy support and consumption upgrades are anticipated to drive industry development.