China Mengniu Dairy Company Limited Yashili International ...
China Mengniu Dairy Company Limited 2013 Interim Results · Chilled products business in China Cash...
Transcript of China Mengniu Dairy Company Limited 2013 Interim Results · Chilled products business in China Cash...
China Mengniu Dairy Company Limited
2013 Interim Results
Stock Code: 2319
August 2013
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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Disclaimer
Sun Yiping, Executive Director & Chief Executive Officer
Bai Ying, Executive Director & Vice President
Wu Jingshui, Executive Director & Chief Financial Officer
Liu Shengli, Vice President in Sales
Jesper Fournaise Colding, Vice President in Marketing
Wu Wennan, Senior Financial Controller & IR Officer
Chris Kwok, Financial Controller & Company Secretary
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Management Team
Contents
4
Results Overview P5
Business Overview P12
Strategic M&A P20
2013 Challenges & Actions P25
Part 1 Results Overview
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Results Overview
RMB Million Six Months Ended 30 June
Change 2013 2012*
Revenue 20,668.0 18,243.8 +13.3%
Gross Profit 5,519.2 4,643.6 +18.9%
EBITDA 1,517.4 1,287.7 +17.8%
Profit Attributable to
Owners of the Company 749.5 644.7 +16.3%
Basic Earnings per Share (RMB) 0.419 0.365 +14.8%
Gross Profit Margin 26.70% 25.45% +1.25 ppt
EBITDA Margin 7.34% 7.06% +0.28 ppt
Net Profit Margin 3.63% 3.53% + 0.10ppt
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*Certain amounts stated above do not correspond to the interim condensed consolidated financial statements as at 30 June 2012.
According to the IFRS 11–“Joint Venture Arrangement”, Mengniu’s investment in Mengniu Arla, its joint venture, has been adjusted
from consolidation and precedent based on the proportion of investment to recognition using the equity method. As a result, Mengniu’s
data in relation to assets, liabilities, income and expenses showed slight changes in June 2012, but net profit and net assets were not
affected
Revenue Breakdown by Segment
Liquid Milk
• Revenue amounted to RMB18,262.5M, increased by
14.4% YoY
• Percentage to revenue up 0.8 ppt YoY
Ice Cream
• Revenue amounted to RMB1,954.4M, decreased by
9.4% YoY
• Percentage to revenue down 2.3 ppt YoY
Other Dairy Products
• Revenue amounted to RMB451.0M, increased by
268.8% YoY
• Percentage to revenue up 1.5 ppt YoY
1H2013
1H2012
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Revenue Breakdown of Liquid Milk Segment
UHT Milk
• Revenue amounted to RMB10,940.8M, increased by
13.5% YoY
• Proportion to liquid milk revenue down 0.5 ppt YoY
Milk Beverages
• Revenue amounted to RMB4,732.1M, increased by 18.5%
YoY
• Proportion to liquid milk revenue up 0.9 ppt YoY
Yogurt
• Revenue amounted to RMB2,589.6M, increased by 11.0%
YoY
• Proportion to liquid milk revenue down 0.4 ppt YoY
1H2013
1H2012
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9 Source: Nielsen
25.9% 25.4% 25.5%
22.0% 22.7% 22.8%
14.4% 13.3% 12.3%
7.3% 7.4% 7.5%
30.4% 31.2% 31.9%
Liquid Milk
A B C
27.9% 27.6% 28.0%
24.5% 26.0% 26.2%
18.2% 17.2% 16.0%
22.5% 22.5% 22.3%
UHT
A B
19.8% 19.6% 19.6%
20.7% 20.2% 18.5%
13.4% 12.5% 13.5%
7.1% 8.5% 8.5%
7.2% 7.1% 7.3%
31.8% 32.1% 32.6%
Chilled Products
A B C
Market Share in 1H2013
1H2012 2H2012 1H2013
1H2012 2H2012 1H2013
Mengniu Others
Mengniu Others
1H2012 2H2012 1H2013
Mengniu Others Junlebao
Cash Flow Index & CAPEX
Net Cash from
Operating Activities
(RMB Million)
Capital Expenditure
(RMB Million)
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1H2012 1H2013
Operating Efficiency Index
Inventory Turnover Receivables Turnover Payables Turnover
(1)Receivables Turnover = [(Average balance of Trade and Bills receivables) / Revenue] x No. of days
(2)Payables Turnover = [(Average balance of Trade and Bills payables) / Cost of Sales] x No. of days
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(Day) (Day) (Day)
0
15
30
1H2012 1H2013
21.8
16.4
Part 2 Business Overview
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1H2013 Operating Highlights
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3
1 5
4 2
1H2013
Bolster Quality of Milk Sources
Increased the proportion of raw milk from
ranches and scaled farms to 94%
Enhance Quality Control and Inspection
Launched comprehensive quality
and safety management system, bolstered
milk sources chain
inspection
Focus on Key Brands & Innovative Marketing Strategies
Orchestrated marketing activities to
convey the “Little Happiness Matters”
vision
Product Innovation
Led market trends with 5 new key
innovative products
Optimise Sales Channels
Optimised sales channel management to
enhance overall efficiency
1. Bolster Quality of Milk Sources
Milk Stations
Cooperating
with farms
Ranches and scaled
farms
94%
Breakdown of milk sources
Self-built and
self operated,
equity
investment 6% 20%
74%
Current milk sources: 94% from ranches and scaled farms
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2. Enhance Quality Control and Inspection
Improve quality control and safety management through third party certification authority
Wholly owned by the New Zealand government
Largest food quality and safety certification authority in the southern hemisphere and is internationally recognised
Through high-tech analysis and rigorous examination to certify supply chain in food quality and safety for over 40
well-known global companies
Fulfills customers’ increasing demand for healthy and safe food around the world
Sign cooperative framework agreement
Establish third party certification
authority
Evaluate the quality and safety of the
ranch
Evaluate the safety of the dairy products
……
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Planting Breeding Primary
Processing
Product
Development Procurement Production Ex-warehouse Logistics
Sale Customer
Feedback
• Distributor Inventory
• Delivery Management
• Channels Management
• Customer Feedback
• Product Development
• Procurement Management
• Planning Management
• Preparation (before production)
• Production
• Ex-warehouse, Logistics
• Planting
• Ranches Construction
• Breeding
• Raw Milk
Production
• Cold Storage
• Logistics
Inspection (Managed by Laboratory)
Sources Management
Process Management
Terminal
Management
2. Enhance Quality Control and Inspection (cont’d)
End to end total process quality management
3. Focus on Key Brands & Innovative Marketing Strategies
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4. Product Innovation
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2
3
4 5
1
Just Yogurt
(纯甄酸牛奶)
• Launched in late May
• Simple and pure formula
• No artificial essence, colour or preservatives added
Suan Suan Ru Fruit Fibre
Nutritional Milk Beverage
(酸酸乳果纤维营养牛奶饮品)
• Launched in early April
• Milk plus real fruit fibre
Latte Banana Milk
(奶特香蕉口味牛奶)
• Launched in mid-May
• Upgraded product package and
taste
• Perfect combination of banana
and milk, offering a rich flavour
Super Gold Infant Formula
(欧世超金佳智婴儿配方奶粉)
• Launched in late April
• Uses 100% milk sources imported
from Northern Europe
• Six ingredients to inspire
babies’ intelligence and protect their
health
Red Bean/Black Bean Cereal
Breakfast Milk Beverage
(红谷/黑谷谷粒早餐牛奶饮品)
(Upgraded the package)
• Launched in mid-April
• Pure milk and rich in cereal
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1 Optimised distribution channels and retail service model
Adopted branch company, central business unit (CBU) and regional business
unit (RBU) models targeting POS
2 Streamlined sales system
Streamlined multi-layered structure and the communication processes from the
sales headquarter to retail sales, so as to swiftly meet market demand
3 Strengthened control over sales channels
Continued to increase the number of branch company and CBU, assisted the
dealers to develop the market and gathered first-hand market information
4 Enhanced sales channel penetration
Increased the distribution rate of key products, established a standardised
management system, enlarged the coverage of POS and its sales force
5. Optimise Sales Channels
Part 3 Strategic M&A
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Strategic Alliances and M&A
On 20 May, Mengniu signed a JV framework agreement with Danone
Through a JV with COFCO, Danone holds a 4% interest in Mengniu becoming its
strategic shareholder
On 9 August, the JV Contract with Danone was signed
On 18 June, Mengniu (2319.HK) made a voluntary general offer to acquire all
outstanding shares of Yashili (1230.HK)
On 16 July, acquisition of Yashili approved at Mengniu’s EGM
On 24 July, Mengniu received valid acceptances from about 75.3% of Yashili
issued share capital
As at 13 August, valid acceptances reached about 89.82%
On 7 May, Mengniu acquired 129.6 million shares of Modern Dairy,
approximately 26.92% of its issued share capital
As HK$2.45 per share for consideration of HK$3.178 billion
Mengniu now becomes its largest single shareholder owning 27.99%
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Upstream Strategy: Increase Shareholding in Modern Dairy
(1117.HK)
Disorganised
Dairy
Farmers
Raw Milk
Collection
Stations
Intermediate
Stations Dealers Distributors
Dairy Product
manufacturers Consumers
Fodder
Suppliers
Modern
Dairy COFCO Consumers Mengniu
Facilitate All-round Improvement of Mengniu
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Fodder
Quality
Raw Milk
Supervision Cost Control Food Safety
Brand
Upgrade
Joint Venture
(80% : 20%)
Chilled products business in China
Cash investment
• Acquired ~4% interest in Mengniu
• Invested in Joint Venture
Chilled products
business
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Partner with Danone to Capture the Growth
Opportunities in Chilled Products Market
Included among Fortune 500, Danone
is one of the most successful healthy
food companies in the world with
excellent reputation in food and
beverage industry globally
Its fresh dairy products rank number
one, in terms of global sales
Overview of Danone
Acquire Yashili (1230.HK) to Jointly Build a Leading
Platform for Pediatric Milk Formula Products
Luxury
Nutrition
Specialised
Nutrition
Product
Positioning
Super α
Golden
Golden
Ambery
α -Golden
Golden
Newwitt
Ambery
New
Formula
Youyi Series
Rice Flour
Oat Cereal
Soy Milk
Merla
Golden
Baby & Me
Special
Arla
formula
Platinum
Jiazhi
Super
Golden
Jiazhi Golden
Jiazhi
Premium
Zhuang
Standard
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Part 4 2013 Challenges & Actions
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Challenges in 2013
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Post-Merger
Integration Raw Milk
Price Hike
Innovation
Well Poised to Meet Challenges
Refine management and practices
Increase production capacity utilisation rate
Strengthen inter-departmental cooperation
Focus on high-end brands to raise profitability
Restore Mengniu brands credibility and achieve growth in fundamental
business
Ensure the quality of milk source and achieve regional development
Integrate resources and optimise complementary advantages
Enhance teamwork and improve management efficiency
Achieve
Stable
Business
Growth
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Optimise
Milk
Source
Structure
Actions
Activate
Internal Potential
Maximise
Synergies
Upgrade
Product
Portfolio
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