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Disclaimer

The presentation is prepared by China Mengniu Dairy Company Limited


(the “Company”) and is solely for the purpose of corporate communication and general
reference only. The presentation is not intended as an offer to sell, or to solicit an offer
to buy or to form any basis of investment decision for any class of securities of the
Company in any jurisdiction. All such information should not be used or relied on
without professional advice. The presentation is a brief summary in nature and do not
purport to be a complete description of the Company, its business, its current or
historical operating results or its future business prospects.
This presentation is provided without any warranty or representation of any kind, either
expressed or implied. The Company specifically disclaim all responsibilities in respect
of any use or reliance of any information, whether financial or otherwise, contained in
this presentation.

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Presentation Team

Wu Jingshui Executive Director & Chief Financial Officer

Lu Jianjun Chief Administrative Officer

Chris Kwok Financial Controller & Company Secretary

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Agenda

Results Highlights

Financial Overview

Business Overview

Future Strategies

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Results Highlights

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Overview of 2010 Interim Results

For the six months ended 30 June


RMB’M
2009 2010

Revenue 12,097.6 14,434.2

Gross profit 3,233.0 3,787.2

EBITDA 1,190.4 1,077.5

Net profit attributable to owners of the


661.9 618.8
Company
Earnings per share (RMB)
0.424 0.356
- Basic

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Segment Breakdown
Revenue
Liquid milk segment:
Change: • Revenue up 21.1% to RMB12,462.2M
RMB12,097.6M RMB14,434.2M + 19.3%
• Focused on female and children
1.3% - 0.3 1.0% - 1.0% markets and introduced more products
100.00% with high-end functions
13.7% - 1.1 12.6% + 9.9%
Ice cream segment:
80.00% + 1.4 • Revenue up 9.9% to RMB1,821.1M
• Optimised gradually the production
lines to include low-end, mid-range and
60.00%
high-end ice-cream brands, set a long-
85.0% 86.4% + 21.1% term branding strategy to secure
sustainable development for all
40.00%
product lines

20.00%
Other dairy product segment:
• Revenue was RMB150.9M , accounting
0.00% for 1% of the Group’s revenue
1H 2009 1H 2010
Liquid Milk Ice Cream Other Dairy Products
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Liquid Milk Segment
Revenue of Liquid Milk UHT Milk:
Milk
Change: • Revenue up 20% to RMB7,604.6M
RMB10,287.5M RMB12,462.2M + 21.1% • Launched a new product Milk Deluxe Chunxian
• Xin Yang Dao Low-Lactose Milk was awarded a
9.7% 10.4% + 30.2% gold prize at the “China International Nutrition &
+ 0.7
100.00% Health Industry Expo Shanghai”
• Upgraded Future Star Milk garnered an
Innovative Product Award at SIAL and a Monde
80.00% Selection prize by Belgian International Institute
28.7% - 1.1 28.6% + 20.6%
Milk Beverage:
Beverage
• Revenue up 20.6% to RMB3,562.4M
60.00%
• Successfully launched a new generation of milk
- 0.6 beverages with fruit fiber Fruit-fiber Milk, and a
new series of high-end fruit flavoured milk
40.00% beverages Nai Te
61.6% 61.0% + 20.0%

Yogurt:
20.00% • Revenue up 30.2% to RMB1,295.2M
• High-end yogurt product Champion obtained
national certification as a healthy product; the
0.00% Red Jujube Yogurt and Grain Yogurt were deeply
1H 2009 1H 2010 welcomed by consumers

UHT Milk Milk Beverage Yogurt


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Financial Overview

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2010 Interim Financial Overview

RMB ’M
1H 2009 1H 2010 Change

Gross profit 3,233.0 3787.2 17.1%


26.7%
- Gross profit margin 26.2% 0.5 ppt
(FY2009: 26.7%)
Net profit 661.9 618.8 6.5%
5.5%
- Net profit margin 4.3% 1.2 ppt
(FY2009:4.3%)
Despite the substantial increase in the raw material price, the Group maintained a
stable overall gross profit margin:
 By increasing the proportion of high-end functional products
 By exercising stringent cost control measures
 Effectively offset the impact of the increase in price of raw materials like raw milk

The net profit margin was decreased to 4.3%, but comparable with FY2009:
 Improved resources allocation and utilization efficiency by optimizing its operation
and management system
 Rise in price of raw materials, transportation, lease and other distribution costs
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Effective Cost Control

For the six months ended 30 June


2009 2010
% of % of Change in %
RMB ’M RMB’M
Revenue Revenue Point

Cost of Sales 8,864.6 73.3 10,647.1 73.8 0.5

Total operating expenses 2,405.5 19.9 3,117.5 21.6 1.7

Selling & distribution costs 1,942.5 16.1 2,601.7 18.0 1.9


Administrative & other
463.0 3.8 515.8 3.6 0.2
operating expenses
Finance cost 47.9 0.2 21.9 0.4 0.2

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Leverage and Financial Resources

Debt to Equity Ratio(1) Net Cash Flow from Operating Activities

(RMB ’M)
10% 1800 1,748.3

1600
7.6%
8% 1400
6.3% 1,168.7
1200
6%
1000

800
4%
600

2% 400

200

0% 0
2009/12/31 2010/6/30 1H 2009 1H 2010

(1) Debt to Equity Ratio = Total Bank Loans/ Total Equity 12


Working Capital

(Days)
Receivables(1) Inventory Turnover
(Days)

7.8 7.4 20 16.4


8
14.0
6
4 10
2
0 0
1H 2009 1H 2010 1H 2009 1H 2010
(1)
Receivable Turnover = [ (Average balance of Trade and Bills receivables) / Revenue] x No. of days

Payables Turnover(2)
(Day)

60 54.8
47.4
40

20

0
1H 2009 1H 2010
(2)
Payable Turnover = [(Average balance of Trade and Bills payables) / Cost of Sales] x No. of days 13
Business Overview

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Branding and Marketing

Put forward “High Quality for a Green Life” brand proposition. Being the 1st
China’s dairy company to go-green, complemented by a series of branding and
marketing activities
Initiated a “Special Consumer Reception Month” campaign where the CEO met
with consumers in person, and allowed them to witness the production of
MENGNIU products with natural ecological quality

Ranked 16th
Most Reliable Most
among dairy
companies in Food Brand Popular Food
the world

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Go-Green Strategy
Green-themed promotion campaigns effectively highlight the green ecological image
of MENGNIU and commitment to social responsibility
Launched “China Ecoranch” programme and created “China Ecoranch Fund" to
arouse social awareness on protection of pasture lands and ecosystem, as well as
to promote development of ecologically friendly milk services
Lower energy consumption, minimize waste emissions, use wastewater treatment
and methane-to-energy facilities as well as recycle used packages as part of efforts
to achieve green operations
Embarked on large-scale eco-activity campaign “Eco-Action for Green China”
Promotes concept of green living through activities like “Ecological Signature” and
“Carbon Test”

Most-Watched The only dairy


China’s Low company among
Carbon Low Carbon
Contribution “2010 Best
Pioneering Chinese Brands”
Enterprise Enterprise

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Quality Control

Further strengthened the monitoring and enhancement procedures


on raw milk quality
Be a pioneer to take a preemptive measure to extend the monitoring
scope from the milk itself to tracing the safety of feed and veterinary
drugs, in the quest to provide consumers with the highest quality
products

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Production and Technological R&D

Annual production capacity reached 6.14 million tons at June 2010

Mengniu’s Dairy Research Institute & High-Tech Production Base


commences operation

Set up the Overseas R&D Center (Paris) with Danisco Group

Continued to strengthen partnerships with leading enterprises within a


variety of industries

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Future Strategies

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Future Strategies

Strives to develop nutritional & healthy products

Promote the development of functional products under the “Jian Zi”


label
Meet the increasing expectations from consumers
Develop patented products

Promote Standardisation of Ranches

Continuously promote the standardisation of ranches


Increase the proportion of milk sources from ranches
Vigorously carry out pre-emptive control measures for raw milk
Calling attention to natural and pure brand of eco-friendly pastures

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Future Strategies

Continuously Enrich the Product Matrix

Strive for excellence in flavour, nutrition and packaging of products


Steadfastly grasp the evolving trend of high-end dairy products
Increase brand affinity and gain preference among customers

Promote the “Green Strategy”

Promote the production and consumption of dairy products and related


activities in an environmental-friendly and low-carbon emitting way
Advocate cooperation from suppliers and partners upstream & downstream,
with an aim to create a green industry
Launch ecological public activities
Create “Good Quality” and “Green Living” for customers
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THANK YOU

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