In 2023, many companies have high hopes for "growth recovery". Focusing on the "dairy" sector, by examining the financial reports of 10 listed/listed dairy companies, we can see that there are few double-line growers, and most of them have performed unsatisfactory.
So between growth and decline, what are the financial information details worth paying attention to, let's take a look!
Knight Dairy, Yantang Dairy and Nanfang Dairy, total revenue and net profit achieved "double-line growth"
During the reporting period, the biggest bright spot was the performance of regional dairy enterprises, with Knight Dairy, Yantang Dairy and Southern Dairy achieving "double-line growth" in total revenue and net profit. This outstanding performance is due to the fact that they have promoted the in-depth extension of the strategic layout, which has achieved remarkable business results.
From the performance side, specifically, the total revenue of Knight Dairy increased by 32.55% year-on-year to 1.256 billion yuan, and the net profit attributable to the parent company increased by 31.03% year-on-year to 93.85 million yuan, the total revenue of Yantang Dairy increased by 4.01% year-on-year to 1.950 billion yuan, and the net profit attributable to the parent company increased by 81.60% year-on-year to 180 million yuan, and the operating income of Southern Dairy increased by 14.60% year-on-year to 1.805 billion yuan, and the net profit attributable to the parent company increased by 18.34% year-on-year to 203 million yuan.
In-depth look, the key points of these three dairy companies to improve their performance:
Knight Dairy
Among them, Knight Dairy is not only based on the dairy industry, but also takes into account the sugar industry. According to the financial report, fresh milk and white sugar are the two core pillars of Knight Dairy's revenue sources, contributing 458 million yuan and 399 million yuan respectively during the reporting period. In addition, looking at the reasons for the change in the income of Knight Dairy, in addition to the increase in the income of the processing of room temperature milk, other income increased by 1113.95% year-on-year, and the revenue of white sugar also increased by 67.83% over the same period last year.
Yantang Dairy
Although Yantang Dairy is deeply engaged in the dairy industry in a decent manner, in 2023, it will actively explore new paths for the development of the industry with the guiding ideology of "laying out new regions, expanding new channels, promoting new products, operating new communication, and implementing new management". From the product side, the product revenue of liquid milk and lactic acid bacteria milk beverage accounted for 79.14% of its total revenue. In terms of market layout, both outside Guangdong Province and online sales have achieved double-digit growth.
Southern Dairy
Similarly, Southern Dairy's business revolves around the dairy industry. In 2023, the product category of ambient dairy products (sterilized milk, prepared milk) will contribute more than half of the total operating income with 1.157 billion yuan. However, in the face of the competitive pressure of duopoly in Yili, Mengniu and other industries, how Southern Dairy maintained its growth was not disclosed in the financial report.
It is worth noting that although Nanfang Dairy has been established for 71 years, its business scope is highly concentrated in Guizhou Province. For this shackle of development, Southern Dairy is also trying to find a way to break it. To this end, on the one hand, it strives to expand the external market, and on the other hand, it is committed to the development of e-commerce. In 2023, one of the reasons for the change in revenue includes a year-on-year increase of 101.51% in e-commerce channel revenue to 49.099 million yuan.
It should be pointed out that Knight Dairy and Southern Dairy have both completed a new turn not long ago, the former was successfully listed on the Beijing Stock Exchange, and the latter was listed on the New Third Board. So as the "first" annual financial report submitted by the two, the results are naturally outstanding, but whether it can be maintained in 2024 needs to be a big question mark.
Australasia Group, Youran Dairy and Original Ecological Animal Husbandry have fallen into the dilemma of "turning from profit to loss".
To say that the situation of the 10 dairy enterprises is the most unoptimistic, it is Australasia Group, Youran Dairy and Original Ecological Dairy Farming. Because according to the financial report, these three upstream ranches have all "turned from profit to loss". In 2022, their profit attributable to shareholders was $158.1 million, $415 million and $22.84 million respectively.
The performance in 2023 is as follows: the total revenue of Australasia Group increased by 3.19% year-on-year to 3.924 billion yuan, the profit attributable to shareholders decreased by 409.21% to -489 million yuan, the total revenue of Youran Dairy increased by 3.56% year-on-year to 18.694 billion yuan, the profit attributable to shareholders decreased by 353.15% year-on-year to -1.050 billion yuan, the original ecological animal husbandry increased by 5.66% year-on-year to 2.209 billion yuan, and the profit attributable to shareholders decreased by 1587.23% year-on-year to -340 million yuan.
In 2023, the revenue of this business will be 3.342 billion yuan, 12.903 billion yuan and 2.209 billion yuan respectively, accounting for 85.17%, 69.02% and 100% of the total revenue.
Australasia Group
It is worth noting that the revenue from the sale of raw milk by these three upstream farms has shown an increasing trend, but the overall performance is a loss, so what is the problem? In this regard, Australasia Group said: "The loss mainly attributable to the fair value of other biological assets minus the change in sales cost is 668 million yuan. The significant loss was mainly attributable to the assumption of a decrease in the price of raw milk in the calculation of the fair value of biological assets. ”
It is understood that in 2023, although the sales volume of raw milk of Australasia Group will increase by 9.8%, the gross profit will decrease by 19.8% to 709 million yuan due to the impact of an 8.2% decrease in the selling price of raw milk. To add insult to injury, beef cattle sales increased by 4.1 percent but prices also fell by 7.6 percent.
Youran Dairy
Similarly, the reason why Youran Dairy's raw milk business was able to maintain positive growth was also the "increase in sales volume", which increased from 2,328,500 tons to 2,945,800 tons in the reporting period. But in fact, Youran Dairy has also been affected by the decline in raw milk prices, with the average unit price of raw milk being 4.38 yuan/kg, a year-on-year decrease of 6%.
Moreover, Youran Dairy also mentioned that the loss of 1.617 billion yuan from the change in the fair value of biological assets minus the change in the cost of sales became a loss of 3.613 billion yuan in the reporting period, which was mainly due to the decline in the sales price of raw milk in 2023 and the decline in the market price of beef cattle and finisher cattle.
Original animal husbandry
In addition, the same is true for primitive animal husbandry. "Due to the weak growth of China's dairy demand in the past two years, the decline in downstream dairy enterprises and terminal demand, and the surplus of upstream raw milk, the overall market raw milk prices have continued to fall," it said. During the year, due to the weak demand for raw milk, the average selling price of fresh milk of the Group decreased slightly, with the average selling price of raw milk at RMB4,787 per tonne, representing a decrease of 5.7% from RMB5,074 in the same period last year. ”
As a result, the change in the fair value of its biological assets minus the cost of sales in 2023 was a loss of $750 million, compared with a loss of $390 million in 2022, and the further widening of the loss was mainly due to the decline in the price of raw milk.
So in the new year, whether these three upstream ranches can reverse the downward trend, we wait and see.
Modern Dairy, China Shengmu, Mengniu Dairy, and H&H International Holdings have fallen into a strange circle of "increasing income but not increasing profits".
Although they escaped losses, Modern Dairy, China Shengmu, Mengniu Dairy, and H&H International Holdings have fallen into a vicious circle of "increasing profits but not increasing income". As one of the leaders in the domestic dairy industry, Mengniu's total revenue in 2023 will be 98.624 billion yuan, a year-on-year increase of 6.51%, and the profit attributable to shareholders will be 4.809 billion yuan, a year-on-year decrease of 9.31%.
The other three companies were: Modern Dairy's total revenue increased by 9.46% year-on-year to 13.458 billion yuan, and the profit attributable to shareholders decreased by 68.86% year-on-year to 175 million yuan, the total revenue of China Shengmu increased by 6.53% year-on-year to 3.384 billion yuan, and the profit attributable to shareholders decreased by 79.33% year-on-year to 86.08 million yuan, and the total revenue of H&H International Holdings increased by 9.01% year-on-year to 13.924 billion yuan, and the profit attributable to shareholders decreased by 4.89% year-on-year to 582 million yuan.
Modern animal husbandry
Judging from the financial report, Modern Dairy has two major sectors: raw milk and new business, of which the former is the main source of income. However, in 2023, the gross profit of the raw milk business decreased by 5.9% year-on-year to RMB2.913 billion, mainly due to the gross profit contributed by the increase in raw milk sales, which could not fully offset the decrease in gross profit caused by the decrease in the average selling price of raw milk. In addition, the gross profit margin of the raw milk business decreased by 2.7 percentage points year-on-year to 28.4%. The decrease in profit attributable to shareholders was also attributable to a decrease of 3.8 percentage points in cash EBITDA margin to 18.5%.
In the case of China Shengmu, which focuses on the sales of raw milk, the loss caused by the change in fair value of biological assets minus sales expenses was 706 million yuan, an increase from the loss of 291 million yuan in the same period, mainly due to the significant increase in the number of retired inefficient cattle compared with the same period, the decline in the market price of raw milk, the high cost of feed and the decline in the market price of beef.
Mengniu
Mengniu Dairy's EBITDA margin was 9.6%, down 0.3 percentage points year-on-year. This was mainly attributable to the decrease in the results of the associated companies attributable to the year and the recording of a one-off gain of approximately $241.5 million on the disposal of a subsidiary in 2022. The decrease in profit attributable to shareholders was also due to the decrease in net financial income (interest income net of financing costs) and the increase in income tax expense.
H&H International Holdings (also known as "H&H Group") can see from the business segment that the revenue of China's infant nutrition and care products segment in 2023 will be 5.511 billion yuan, a decrease of 12.4% from last year. Among them, revenue from infant formula decreased by 15.5% year-on-year to MOP4,244 million. The decline was mainly due to systemic challenges across the industry and increased competition such as reducing the inventory of old national standard products during the transition to the new "national standard".
H&H International Holdings
In addition, the revenue of the Other Infant Products segment, mainly the sales of Dodie brand diapers, decreased by 60.5% from last year to RMB65.9 million. The main reason is the decline in overall sales in the market due to the decline in the birth rate, although the Dodie brand diaper business in Chinese mainland will completely cease operations from 2024.
Also due to the decline in the performance of the infant nutrition and care products segment, H&H Group's gross profit margin decreased from 60.3% in 2022 to 59.6% in 2023. From the current point of view, H&H Group's main revenue mainly relies on adult nutrition and care products, contributing 6.145 billion yuan to it in 2023, accounting for 44.1% of the total revenue.
The barrel effect tells us that the long-term development of an enterprise does not only depend on the strength of its strengths, but also on its ability to effectively respond to and improve its weaknesses. Standing in the new year 2024, what kind of performance these dairy companies will have is worth our expectation and attention.