As of April 29, the 2023 annual reports of regional leading dairy companies such as Sanyuan Co., Ltd., Bright Dairy, Tianrun Dairy, and JuneYao Health have been released. Among them, the net profit of Guangming and Sanyuan increased significantly, but the revenue decreased slightly, while the revenue of Tianrun and JuneYao increased, but the net profit declined. Industry analysts pointed out that in the past two years, milk prices have declined, and under the onslaught of national dairy enterprises such as Yili, Mengniu and New Dairy, regional dairy enterprises have adopted a contraction strategy and sought stable development in order to stabilize the basic market.
Bright and Sanyuan's revenues did not meet expectations
From the perspective of revenue, in the financial reports of regional leading dairy enterprises last year, Bright Dairy ranked first with 26.485 billion yuan, followed by Sanyuan with 7.842 billion yuan, but both declined year-on-year.
Specifically, in 2023, Bright Dairy's revenue will be about 26.485 billion yuan, a year-on-year decrease of 6.13%, and the business plan has not been completed, Sanyuan's revenue will be about 7.841 billion yuan, a year-on-year decrease of 1.38%, Tianrun Dairy's revenue will be about 2.714 billion yuan, a year-on-year increase of 12.62%, and JuneYao Health's revenue will be about 1.634 billion yuan, a year-on-year increase of 65.71%.
Bright Dairy's revenue has declined for two consecutive fiscal years, with about 29.21 billion yuan, 28.21 billion yuan and 26.485 billion yuan from 2021 to 2023, respectively. Bright Dairy said that the main reason for the failure to complete the business plan in the total operating income of the current period is that the growth rate of the domestic dairy industry has slowed down, the market competition is fierce, and the operating income of dairy products has not met expectations. For 2024, Bright Dairy's annual business plan is to strive to achieve a total operating income of 29.031 billion yuan, a net profit attributable to shareholders of listed companies of 567 million yuan, and a return on net assets attributable to shareholders of listed companies greater than 6.26%.
Sanyuan shares also experienced a decline in revenue for two consecutive fiscal years, with about 8.85 billion yuan, 7.951 billion yuan and 7.841 billion yuan respectively from 2021 to 2023. Regarding the year-on-year decline in revenue, Sanyuan mentioned in the report that from May 2022, SPV Luxembourg will no longer be included in the scope of the company's consolidation, and from May 2023, Beijing Shounong Animal Husbandry Development Co., Ltd. will no longer be included in the scope of the company's consolidation, which will lead to a slight year-on-year decline in the company's revenue in 2023. If the above factors are excluded, the company's revenue in 2023 will increase by 9.34% year-on-year.
Tianrun and JuneYao increased their income but did not increase profits
From the perspective of net profit, Bright Dairy ranked first with 967 million yuan, followed by Sanyuan shares with 243 million yuan, but Sanyuan shares grew the fastest, reaching 502.39%, mainly because animal husbandry is no longer consolidated. Tianrun Dairy and JuneYao Health increased their income but did not increase profits.
Specifically, Bright Dairy's net profit in 2023 will be about 967 million yuan, a year-on-year increase of 168.19%, Sanyuan's net profit will be about 243 million yuan, a year-on-year increase of 502.39%, Tianrun Dairy's net profit will be about 142 million yuan, a year-on-year decrease of 27.71%, and JuneYao Health's net profit will be about 57 million yuan, a year-on-year decrease of 24.97%.
Tianrun Dairy's net profit declined year-on-year, mainly affected by the acquisition of Xinnong Dairy. In May 2023, Tianrun Dairy acquired 100% of the equity of Xinnong Dairy and included it in the consolidated financial statements on June 1, 2023. As of the appraisal base date, its net book assets were 183 million yuan, the transaction price was its equity appraisal value of 326 million yuan, and the appraised value was 143 million yuan, with an appraised appreciation rate of 77.99%. After the equity delivery, the original shareholders of Xinnong Dairy paid the company a profit and loss of 12 million yuan during the transition period, and the actual cost of the company's acquisition of Xinnong Dairy was 314 million yuan. In 2023, the impact of Xinnong Dairy on Tianrun Dairy's profit will be -95.35 million yuan.
JuneYao Health's net profit declined year-on-year, mainly due to the concentration of sales during the Spring Festival in 2024 from January to February 2024, resulting in a decline in sales of lactic acid bacteria drinks in the fourth quarter of 2023 compared with 2022, which correspondingly led to a decrease in non-net profit attributable to shareholders of listed companies.
It is worth noting that the sharp increase in net profit of Bright Dairy and Sanyuan shares is not caused by the main business. The main reason for Bright Dairy's over-fulfillment of the profit plan was the implementation of the acquisition and storage of the land plot at No. 777 Chengshan Road, Pudong New Area, Shanghai during the year, and the recognition of land compensation income in the current period, the year-on-year decrease in the cost of main raw materials and the year-on-year decrease in sales expenses. The high net profit of Sanyuan shares generated an investment income of 190 million yuan through the transfer of its equity in Shounong Animal Husbandry, while the net profit after deducting non-recurring gains and losses was only 1.8321 million yuan, a year-on-year decrease of 93.84%.
Begin strategic contraction
Since 2020, the upstream animal husbandry industry has accelerated its expansion, and national dairy enterprises such as Yili, Mengniu, and New Dairy have "staked their ground", causing a certain market squeeze on regional leading dairy enterprises.
Song Liang, a senior dairy analyst, said, "At present, regional dairy companies have adopted a contraction strategy, such as the revenue of Sanyuan shares has not fallen sharply, and the net profit will not change much from the first agricultural and animal husbandry, indicating that it is difficult to stabilize the fundamentals last year."
In 2023, the revenue of liquid milk, other dairy products and animal husbandry products will decline by 2.75%, 8.02% and 33.47% respectively. From a regional point of view, at the end of the reporting period, Bright Dairy's Shanghai and foreign distributors increased by 344, but the revenue in Shanghai and other places fell by 4.13% and 13.3% respectively, while overseas increased by 5.95%.
The situation of Sanyuan shares is slightly better, and the revenue of dairy products in the reporting period of 2023 will increase by 5.21% year-on-year. Among them, liquid milk, solid milk, ice cream and other products all saw good growth.
Song Liang said, "In the case of general losses in the upstream, it is normal to divest the animal husbandry, and the divestment can achieve profitability." However, in essence, dairy enterprises are an industry with a highly specialized division of labor, and the upstream and downstream should not be pinched together under the concept of integration and weak upstream."
Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said that the report card of regional leading dairy enterprises last year showed the operating differences and strategic adjustments between different enterprises, "Bright Dairy's revenue is leading, reflecting its stable position and good brand influence in the market, and the net profit growth rate of Sanyuan Dairy is as high as 502.39% Tianrun Dairy and JuneYao Health also have good revenue growth, but their net profit has not increased simultaneously, which may be related to factors such as fierce market competition and terminal price wars."
Zhan Junhao further said, "The competitive landscape among regional leading dairy companies may be changing, and as market competition intensifies, companies need to continuously innovate and improve product quality to maintain a competitive edge. At the same time, companies also need to pay attention to the changes in profit margins and look for new profit growth points."
Regarding the reasons for the change in performance and what new strategies will be adopted this year, a reporter from Beijing Business Daily sent an interview letter to the above-mentioned companies by email, but did not receive a reply as of press time.
Source: Beijing Business Daily