Mengniu Dairy Forecasts Net Profit to Decline 60% YoY in 1H2020

Consumer Staples Author: Yue Liu Editor: Luke Sheehan Jul 19, 2020 12:00 PM (GMT+8)

Meat production companies performed better overall than dairy companies in the first half of 2020.

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According to the CICC report on the consumer marketplace, the operation of meat and fresh frozen products was less affected by the epidemic, and the concentration of the slaughter industry is expected to increase further. Meanwhile, dairy products' demand experienced an off-season in 1H2020, dragging down the revenue and net profits of dairy companies.

Yili group (600887:SH): revenue up 4% and net profit down 22%. The firm expects that income of the three main products, including flat temperature liquid milk, low-temperature liquid milk and milk powder will rise 18%-20% in 2Q2020, a significant improvement over 1Q2020.

Mengniu Dairy (02319:HKEX): revenue up 10% and net profit down 60%. Profits were mainly dragged down by the epidemic in the first quarter. The revenue growth rate of major products, such as liquid milk, improved in the second quarter.

Bright Dairy (600597:SH): revenue up 7% and net profit down 11%. Mosley's inventory returned to normal, driving up the net profit, as this product's profitability is the highest.

Shuanghui (000895:SZ): revenue up 41% and net profit up 27%. The fall in domestic pig and chicken prices has reduced costs and brought a more significantly positive contribution to profitability.

WH Group (00288:HKEX): revenue up 10% and net profit up 30%. Similar to Shuanghui, the decline in raw material prices has pulled up profits. However, the severe US epidemic negatively affects net profit – the company has closed five factories in the US since April.