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Wednesday, 27 March 2019, 23:55 HKT/SGT
Mengniu 2018 Revenue Reaches Record High RMB68,977 Million
Net Profit Climbs Near 50% to RMB3.043 Billion

HONG KONG, Mar 27, 2019 - (ACN Newswire) - China Mengniu Dairy Company Limited and its subsidiaries (together as "Mengniu" or the "Group", Stock Code: 2319), a leading dairy product manufacturer in China, announced today its audited annual results for the year ended 31 December 2018.

- In 2018, Mengniu was named the second consecutive year among the "Global Dairy Top 10" by Rabobank, and was on BrandZ(TM)'s list of top 20 most valuable Chinese brands for the fourth consecutive year, plus coming first in brand contribution. And, in 2019, for the first time, it made Brand Finance's list of top 500 most valuable brands of the world.
- Mengniu married its "Power of Nature, Born for Greatness" brand proposition with 2018 FIFA World Cup ("World Cup") themed marketing and achieved tremendous success, boosting significantly its brand power during the World Cup period, claiming the top spot in the industry the first time in five years.
- Sales volume of Mengniu's room temperature products rose markedly, with overall sales recorded impressive growth and the business assumed a bigger market share; chilled products business boasted the biggest share in the market for the 13th consecutive year, with the core products delivering steady performance and new and innovative products priding impressive performance; ice cream business achieved high single-digit sales growth, and milk formula business not only turned around to profit, but also saw sales on continuous climb and by significant magnitude.
- During the year, Mengniu consolidated and established new business divisions to focus on development of potential rich businesses, including overseas markets, fresh milk, plant-based protein beverage and yogurt, and initial success was achieved for the overall deployment.
- Mengniu strengthened digital marketing, channel and POS construction, promoted the new B2B retail mode to empower distributors in raising sales capability.
- Mengniu optimized deployment of quality milk sources and production lines to enhance supply chain efficiency and a factory was established in Indonesia, its second overseas factory and the first dedicated to liquid milk overseas, to help it speed up tapping Southeast Asian markets.

Thanks to its product innovation and optimized business structure, and the success of its FIFA World Cup themed marketing and promotion boosting sales volume, the Group made total revenue of RMB68,977.1 million in 2018, up by 14.7% year-on-year. Liquid milk recorded 12.0% more revenue and ice-cream 8.4% more year-on-year, while that of milk formula business boasted a breakthrough growth of 48.9% against the previous year. With a notably improved product mix and raw milk price staying relatively stable, gross profit margin of the Group was 37.4%, up by 2.2 percentage points relative to the previous year. Profit attributable to owners of the Company increased by 48.6% to RMB3,043 million. Basic earnings per share rose by 48.1% to RMB0.779. The Board has recommended payment of a final dividend of RMB0.181 (2017: RMB0.12) per share.

Mr Lu Minfang, Chief Executive Officer of Mengniu, said, "In 2018, all our different business segments grew and new businesses deployed had initial success. The room temperature and chilled products businesses maintained stable growth, whereas milk formula and ice cream businesses saw strong rebound and new businesses took flight. The management is much encouraged by the markedly boosted overall profit and the record high revenue and profit made by the Group. By deploying upstream resources and quality milk source with the future in mind, we have not only secured stable quality milk supply for our high-end products and fresh milk products, but also unleashed the synergies between operations in both upstream and downstream of our supply chain, which supported the quality growth in revenue and profit. To match the consumption upgrade trend, we have also pushed to upgrade of product categories and structure with innovation, launching high-end products that meet consumers' needs. With products of ever-improving and excellent quality and the help of focused marketing and promotion, Mengniu saw its brand image much enhanced. In addition, we also made good progress with channel building, digitalization and with cost-cutting and efficiency-boosting, sending the Group into a new and high quality development phase."

Business performance in 2018

1. Liquid Milk Business (Revenue: Up 12.0% to RMB59,388.6 million, accounting for 86.1% of Mengniu's total revenue)

UHT Milk brought in revenue of RMB29,688.7 million, 15.6% more than in the previous year and accounting for 50.0% of the liquid milk business revenue. Milk beverages made revenue of RMB9,998.3 million, an increase of 1.2% and accounting for 16.8% of the liquid milk business revenue. Yogurt recorded revenue of RMB19,701.6 million, 12.9% higher year-on-year and accounting for 33.2% of the liquid milk business revenue. Mengniu's liquid milk business performed satisfactorily during the year. With consumers' needs in mind, the room temperature product business pursued product innovation, marketing innovation and stepped up RTM development, tying these efforts in with World Cup themed marketing, and as such saw a significant boost in brand influence and product sales volume. With overall sales up considerably, the business claimed a bigger market share. As for chilled products, Mengniu continued to hold the top market share for the 13th consecutive year with revenue achieving double-digit growth.

Regarding UHT milk, Mengniu Pure Milk and Milk Deluxe high-end pure milk both achieved double-digit growth in sales. Mengniu also launched the Prime Ranch high calcium milk during the year to fill the high calcium milk gift pack offer gap in the market. In addition, it unveiled to the market its first weight management fiber-rich milkshake milk product Burnlooking to meet consumer demand. Employing a new sales mode and using social marketing platforms for the product, the Group succeeded in capturing the eyes of the health and beauty conscious mass.

Regarding milk beverages and yogurt, Mengniu's star product Yoyi C LC-37 series took on a new World Cup themed packaging during the year and, at the complement of the "Scan the Code for Red Packet" activity, reported enhanced sales. Moreover, new products launched during the year, such as the easy-to-carry bottle series Xiaomanyao, also boosted Just Yoghurt sales. The grapefruit flavor Xiaomanyao launched at year-end, plus the new Fruit Yogurt product that hit the market during the year also achieved satisfactory results, sending sales performance of room temperature yogurts to a new height. Functional yogurt Champion, boosted by the new product BB-12 yogurt, grew alongside the star probiotics beverage Yoyi C in sales. The new meal replacement yogurt Bio Kaquzi also achieved impressive performance and European Charcoal Yogurt saw explosive sales growth.

II. Ice Cream Business (Revenue: Up by 8.4% to RMB 2,723.4 million, accounting for 4.0% of Mengniu's total revenue)

The business focused on key products of its flagship brand Suibian, and implemented World Cup marketing and promotion, starting with major cities for rippling effect to push up sales nationwide. In 2018, the business achieved high single digit sales growth, and its gross profit margin also increased notably.

During the year, Mengniu launched in all 28 new ice cream products. For example, the product offerings under Suibian were expanded and optimized with the addition of such high-end products as the double-layer crunchy Belgian chocolate and cherry jam ice cream and strawberry and chocolate flavor ice cream. The high-end brand Deluxe unveiled the new product wonder color crunchy ice cream to drive sales. Ice+ introduced various new products, including the special edition football shape product launched in cooperation with Lionel Messi ("Messi"), former FIFA World Player of the Year. New products were also added to the Mengniu Russian series and Mood for Green series, etc.

III. Milk Formula (Revenue: Surged 48.9% to RMB 6,017.4 million, accounting for 8.7% of Mengniu's total revenue)

By the end of 2018, Yashili International Holdings Ltd. ("Yashili"; stock code:1230) under Mengniu had completed registration of 48 formulas in 16 product series of its own brands and also the cooperative brand Arla. The Group's another milk formula brand Junlebao also completed registration of 27 formulas in nine product series, reflective of the recognition it enjoys for product quality.

In 2018, Yashili continued to enrich its brand mix and improve product structure, and completed its comprehensive branding upgrades. It launched its new logo and a new brand image with the brand slogan of "Do Our Best for Your Loved Ones" in April 2018. On the back of honors such as CCTV's "Craftsmanship Brand" and "Official Powdered Milk of the 2018 FIFA World CupTM (for Greater China)", it mounted all-round brand promotion on various platforms. Yashili also strengthened its penetration into counties, townships and third and fourth-tier cities via the mother-and-baby store channels, supplemented by modern trade channels and e-Commerce channels to grow its business. The business, which had turned around to profit, had sales climbing during the year, achieving significant growth.

IV. Other Products (Revenue: Surged by 44.8% to RMB847.7 million, accounting for 1.2% of Mengniu's total revenue)

During the period, Mengniu made active deployment for its cheese business, developing three major operations, namely retail, deep processing of dairy products and cheese for catering service. It strengthened cooperation with Arla Foods, which enabled it to introduce in the first half of 2018 Arla shredded mozzarella, the first cheese product tailored for the China market and made in its factories, kicking off formally its high-end cheese for catering service business. Together with Arla Foods, Mengniu was also the official sponsor of the 2018 World Fencing Championships. And, in last November, Mengniu launched Arla Little Explorer, a new children milk product series imported from Denmark.

The Group's fresh milk business covers to date about 30 major cities in Eastern, Southern, Northern and Central China, with main products including Shiny Meadow fresh milk that targets the high-end market and Greenhouse fresh milk that targets the mid-range to high-end markets. As for the plant-based protein beverage business, with the help of precision marketing, Silk Americano Soymilk achieved significant sales volume growth as compared with the previous year. In addition to launching new flavors, Silk Americano Soymilk also strengthened B2B cooperation with Starbucks, offering plant-based solutions to the partner's soymilk-based coffees. The business also took advantage of the existing market resources of Mengniu's liquid milk business to gradually expand its sales network.

Leveraged FIFA World Cup to speed up business expansion

In 2018, Mengniu pushed to expand its overseas business guided by the strategy of "taking full advantage of the World Cup and deploying business across Southeast Asia". It organized marketing roadshows in Hong Kong, Singapore and Myanmar for Just Yoghurt, Yoyi C and ice cream products, which resulted in high double-digit growth in export volume of the products for the fifth consecutive year. The Group's factory in Indonesia commenced operation in November 2018 and will contribute eventually to the integration of production, supply and sales all in one place and help increase Mengniu's competitiveness in the Southeast Asian market.

During the year, all the different business divisions of Mengniu stepped up RTM development, investing particularly in channels in third- and fourth-tier cities, county and township markets, and also school campuses. It also exerted on developing e-commerce channels and new retail channels, raising sales efficiency with the help of its channel resources, brand advantage and digital platform, enhancing channel and POS control, and driving establishment of highly effective systems to aid product distribution, precision marketing and all-channel Marketing. During the year, Mengniu's e-commerce sales had a more than 50% leap year-on-year, higher than the average growth rate of the industry. In addition, the Group actively explored new retail channels, including deploying un-manned convenience stores, and also social network retailing, with such products as the fiber-enriched milkshake Burnlooking milk.

Mr Lu concluded, "In 2019, Mengniu is celebrating its 20th anniversary. It is also a year when it is going to make a sprint towards accomplishing its '2020 Strategic Targets'. We will pool our superior resources and focus on our key product categories and keep strengthening key products and our core capabilities. 2019 will also be a year when Mengniu see its new businesses take flight. The country launching policies to invigorate the dairy industry has presented Mengniu with valuable development opportunities. We will actively drive the building of a 'Global Dairy Community', cooperate with international industry peers and expand resources deployment worldwide, with the aim of opening a golden era for Mengniu and the dairy industry in China."

About China Mengniu Dairy Company Limited

China Mengniu Dairy Company Limited and its subsidiaries manufacture and distribute quality dairy products in China. It is one of the leading dairy product manufacturers in China, with MENGNIU as its core brand. Mengniu's diversified products range includes liquid milk products (such as UHT milk, milk beverages and yogurt), ice cream, milk formula and other dairy products (such as plant-based protein beverage and cheese). Mengniu made it on the "Global Dairy Top 10" list published by Rabobank for two consecutive years, continued to be named among BrandZ(TM)'s list of top 20 most valuable Chinese brands for the fourth consecutive year as well, and topping the list of brand contribution. In 2019, for the first time, Mengniu made it among Brand Finance's list of the top 500 most valuable brands of the world. By the end of 2018, the Group's annual production capacity reached 9.75 million tons. In March 2014, Mengniu became a Hang Seng Index constituent, making it the first blue-chip Chinese dairy product manufacturer. For more information, please visit www.mengniuir.com.

For Enquiries:
Strategic Financial Relations (China) Limited
Anita Cheung, Tel: +852 2864 4827
Jover Wong, Tel: +852 2864 4811
Karen Li, Tel: +852 2864 4837
Lonn Lo, Tel: +852 2114 4962
Jourdan Zhai, Tel: +852 2864 4839
Email: sprg-mengniu@sprg.com.hk

Topic: Press release summary Sectors: Daily Finance, Daily News
From the Asia Corporate News Network

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