Net profit jumps 30% at Chinese dairy firm despite higher cost base
China’s number four dairy company, majority-owned by state-owned conglomerate Bright Food Group, made a net profit of 406m yuan (€47m) in the year to the end of December, up from 311.3m yuan profit in 2012.
Booming demand in China for milk and milk powder is a big driver for the global dairy industry. Strong dairy demand has helped local rivals such as China Mengniu Dairy increase annual net profit by 25%.
But a shortfall in domestic production and the high cost of imports led to an 18.9% rise in Bright Dairy’s operating costs last year to 10.6bn yuan.
“We faced negative factors such as quickly rising prices both in China and abroad, a shortage of high quality milk supply and intensifying market competition,” Bright Dairy said.
At the same time, China’s government is promoting consolidation in the sector to improve regulation and quality after a 2008 scandal where dairy products contaminated with chemicals led to the deaths of at least six infants. The government’s stance should benefit larger dairies like Bright Dairy and Mengniu.
Bright Dairy, which held a 6.9% share of the country’s dairy market in 2013 according to research firm Euromonitor, reported a fourth-quarter net profit of 98m yuan, according to Reuters calculations. That was up around 10% from an 89m yuan profit a year earlier.
The company’s parent Bright Food Group has been making acquisitions outside its home market as it looks to tap into demand from Chinese consumers for globally sourced products, often seen as being of higher quality than local equivalents.
The group’s acquisitions include UK breakfast cereal company Weetabix and Australian food firm Manassen Foods. Bright Food is also in talks to buy a stake in Israel’s biggest food maker Tnuva.
Shanghai-listed Bright’s 2013 revenue rose 18.3% to 16.3bn yuan, falling slightly short of estimates of 16.8bn yuan. Shares were down 0.12% at end of trading yesterday, before the 2013 earnings were disclosed.
