2016 interim results mengniu
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24/8/2016 1 1
China Mengniu Dairy Company Limited
(2319.HK)
2016 Interim Results
August 2016
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Legal 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 does 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 contains projections and forward looking statements that may
reflect the Company’s current views with respect to future events and financial performance.
This presentation is provided without any warranty or representation of any kind, either
expressed or implied. The Company specifically disclaims all responsibilities in respect of
any use or reliance of any information, whether financial or otherwise, contained in this
presentation. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or
otherwise.
2
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Mengniu
Sun Yiping, Chief Executive Officer & Executive Director
Bai Ying, Chief Operation Officer & Executive Director
Zhang Ping, Chief Financial Officer
Gao Fei, Assistant Vice President of Sales
Pierre-Alain CERALLI, Vice President of R&D and Innovation
Chris Kwok, Financial Controller & Company Secretary
Yashili
Lu Minfang, Chief Executive Officer & Executive Director
Hua Li, Vice President of Marketing & Executive Director
Wen Jieping, Chief Financial Officer
Management Team
3
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2015 2016 +/-
Gross Profit
Gross Profit Margin
EBITDA
EBITDA Margin
Net Profit Margin
Profit Attributable to
Owners of the
Company
Basic EPS
(RMB)
27,257.2 +6.6%
9,181.4 +12.8%
33.68% +1.83ppt
2,155.1 -6.9%
7.91% -1.15ppt
1,077.3 -19.5%
3.95% -1.29ppt
0.277 -19.5%
Revenue
Six months ended 30 June
5
25,564.4
8,142.8
31.85%
2,315.6
9.06%
1,338.7
5.24%
0.344
Financial Highlights
RMB Million
Note: EPS was stated after taking into account the effect of bonus share. Comparative figures have been restated on the assumption that
the bonus share had been in place in prior periods.
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2015 +/- (%) % of
Revenue +/- (ppt)
Ice Cream
Milk Formula
Others
Liquid Milk
Total
2016
23,761.5 +8.3%
1,703.4 +3.6%
1,660.0 -6.9%
132.3 -32.4 %
87.2% +1.3ppt
6.2% -0.2ppt
6.1% -0.9ppt
0.5% -0.3ppt
27,257.2 +6.6% 100.0% /
6
21,940.9
1,644.3
1,783.5
195.7
25,564.4
Revenue Breakdown by Segment
RMB Million
Six months ended 30 June
Note: Others refers to cheese, plant-based nutritional food business, etc.
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Premium Pure Milk Premium Milk Beverage Room Temperature Yogurt
Basic Pure Milk Chilled Yogurt
Kids’ Milk Basic Milk Beverage
Pro-biotic Drink
Milk Beverage
Yogurt
UHT Milk
2015 +/- (%) % of Liquid
Milk
Revenue +/- (ppt) 2016
Total
11,513.8 +7.5%
4,915.9 -13.1 %
7,331.8 +31.6%
48.4% -0.4ppt
20.7% -5.1ppt
30.9% +5.5ppt
23,761.5 +8.3% 100.0% /
7
10,710.4
5,657.8
5,572.7
21,940.9
Revenue Breakdown of
Liquid Milk Segment Six months ended 30 June
RMB Million
UHT Milk Beverage Yogurt
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24/8/2016 8 8
Cashflow and CAPEX
Net Cash Inflows from
Operating Activities Capital Expenditure
(RMB Million) (RMB Million)
Plant & equipment Biological assets Equity investment
1H 2015 1H 2016
2,107.3
2,675.3
1,439.7
2,706.5
1H 2015 1H 2016
1,399.0 1,482.9
30.7
87.6 10.0
1,136.0
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4.3% 4.2%
21.8%
23.7%
1H 2015 1H 2016
1,093.7 1,135.9
(RMB Million) (RMB Million)
Expense % of revenue
S&D G&A
9 Expense % of revenue
SG&A Expenses
1H 2015 1H 2016
5,565.3 6,448.9
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1H 2015 1H 2016
10.7
15.2
(Days) (Days) (Days)
Inventory Turnover Receivables Turnover(1) Payables Turnover(2)
10
1H 2015 1H 2016
52.7 52.5
Operating Efficiency Index
(1) Receivables Turnover = (Average Balance of Trade and Bills Receivables / Revenue) x Number of Days
(2) Payable Turnover = (Average Balance of Trade and Bills Payables / Cost of Sales) x Numbers of Days
1H 2015 1H 2016
44.8
39.3
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24/8/2016 11
Stable Market Share Performance
Liquid Milk
11
Source: Nielsen Retail Research
27.5% 27.1% 27.4%
25.4% 25.9% 26.7%
8.6% 8.3% 7.6%
8.1% 7.1% 6.5%
30.3% 31.6% 31.8%
27.8% 27.5% 28.4%
29.1% 30.8% 31.4%
10.4% 9.3% 8.2%6.9% 6.1% 6.1%
25.8% 26.3% 25.9%
UHT Products
28.8% 28.7% 28.6%
17.3% 17.0% 15.4%
15.7% 15.5% 16.7%
8.7% 9.1% 8.8%
29.2% 29.8% 30.6%
Chilled Products
1H 2015 2H 2015 1H 2016
1H 2015 2H 2015 1H 2016
1H 2015 2H 2015 1H 2016
Mengniu A B Others C
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24/8/2016 12
Brand Clusters 1H 2015 1H 2016 + / - (ppt)
Star Brands 39.6% 41.3% + 1.7ppt
Opportunity Brands 3.1% 2.9% - 0.2ppt
Profit Contributor Brands 7.1% 6.9% - 0.2ppt
Backbone Brands 36.6% 34.9% - 1.7ppt
Continuous Improvement of
Product Mix
Note: Only states major brand clusters as a percentage of Mengniu standalone revenue (excluding Yashili)
12
1.5ppt
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Raw milk oversupply continued while end market competition remained fierce
The dairy industry exhibited overall growth slowdown as China’s economy enters the “New
Normal” stage
The growth model has gradually shifted to quality-oriented development from scale expansion in
domestic dairy market as the structural premiumization has become the key driver for consumption
Intensify efforts in brand building and establish long-term brand influence through diversified and
innovative marketing
Continuously launch new products and drive overall development through innovative and high
value-added products
Adapt to changes of new consumption era and develop new channels including e-commerce
platform
Expand existing channels and improve market penetration
From a long-term perspective, Mengniu strengthens competitiveness to cope with challenges under new market conditions
Industry Overview –
Still Faced Challenges in 2016
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2020
Strategy
2020 Strategic Roadmap
Explosive
Growth
2012 2015 2016 2017 2018 2019 2020
New Normal Economy
Stable
Growth
Organic Structural
Adjustment
Innovation-driven
Growth
15
Sophisticated
Omni-Channel
Management
System
Industry
Leading
Operational
Efficiency
Professional
Brand
Management
Capabilities
Internationa-
lization
Partnership Ecosystem
Digitalization
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Advance transformation of
regional offices to P&L
entities and improve market
response speed
Reinforce the strategy of
“enhance distributors, solidify
sales companies and develop
CBUs” to realize a more
efficient sales network
Strengthen control of channel
terminals and promote
sophisticated channel
management
Promote “Route To Market” Initiatives
Gained market share for basic products
Expanded market share in key regions
and enhanced market penetration in the
third- and fourth-tier cities
Established strategic alliance with
retailors and built win-win platform
through close cooperation with Key
Accounts
Realized breakthrough in special
channels including CVS, campus and
hotel
Completed pilot program of WSP 2.0
system for more sophisticated POS management
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Collaboration
between
production &
sales
Achieve collaboration between production and sales through application of SAR ERP and SAP CRM systems
Promote collaboration of production and sales at various levels through coordination of sales, procurement and capacity utilization
Improve layout of existing production facilities and enhance regional matching of production and sales
Build up new capacities for products with strong growth potential in a fast manner
Integrate and optimize existing manufacturing plants and improve asset utilization
Introduce intelligent tools to improve distribution efficiency and customer service with the three models under “Route to Market” initiatives
Optimize distribution models and effectively improve product freshness
Improve Supply Chain Management
Production capacity layout
Logistics &
transportation
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24/8/2016 18 18
Enhance Execution of
Business Strategies
Upgrade product quality to enhance product competitiveness
− Milk Deluxe upgraded to contain 3.6g of quality milk protein and 120mg of calcium
− Basic pure milk products upgraded to contain 3.2g milk protein per 100g
Promote long-term and sustainable growth through optimization of product portfolio
Strengthen brand marketing
− Milk Deluxe – “Rebirth of National Music;” Pure Milk – “Excel in Rio, Run China;” Just Yogurt –
“Run for Time”
Contribute to brand internationalization
− Cooperation with NBA and Shanghai Disney Resort; Embed product into Hollywood movie
Room temperature products business –
concentrate on both product mix upgrade and brand building
Chilled products business – accelerate innovation supported by precise marketing
Focus on key products while committing resources on basic products
Conduct market research and actively promote innovation
− Launched new products for Champion, Yoyi C and basic yogurt
Eliminate underperformed brands and concentrate resources on brands with advantages
Enhance brand building through high-profile marketing events to strengthen consumer
connections
− Cooperation with “Chef Nic”
− Strategic cooperation with national swimming team
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Enhance Execution of Business
Strategies (Cont’d)
19
Ice cream business – transform into independent business
unit and realize more focused operation
Milk powder business – continuously promote upgrading
and transformation
Redefined product offerings to provide diversified products for different consumers
− Deluxe branded ice cream & Mengniu sub-branded popsicles
Introduced new products to strengthen product competitiveness
Reinforce execution of channel and sales strategies
Customized eight types of ice creams for Shanghai Disney Resort
Acquisition of Dumex China completed which will bring benefits in the aspects such as
production, sales network and R&D
Further diversified product offering to serve demands from different consumers
Continuously improve penetration of mother & baby store and e-commerce channels
Launched new product imported from New Zealand with original packaging through
multiple channels in China which was simultaneously introduced in New Zealand market
Started supply chain integration and accelerated optimization of production capacities
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Seek Growth through Innovative
Initiatives
Internation
-alization Digitali
-zation
Partner-
ship
Eco-
system Launch partnership
program and layout
burgeoning businesses
Benchmark international strategic
shareholders to innovate process
establishment
Construct “Win-Win &
Innovation” ecosystem with
global leaders focusing on
milk sourcing, quality control,
R&D and production
Rank No. 1 for liquid milk through e-commerce
channel with online channel gradually perfected
Establish strategic cooperation
with Alibaba and JD with potential
benefits in logistics, marketing and
channel penetration
Conduct consumer research,
realize precise marketing and
drive innovation of products
and channels via Big Data
Introduce global best practices and leading
technologies to strengthen competitiveness
Build nutrition research institute
with UC Davis and integrate
international resources to
enhance innovative R&D
capabilities
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Strengthen talent base for strategic development
Promote management system upgrade and effectively
improve operational efficiency
Inherit and develop Mengniu culture
Strengthen Organizational Capability
People
System
Culture
Launch “Key Personnel Training Program” and promote capability
upgrading of talents
Implement “Employee Happiness Project” and enhance employees’
engagement
Build consumer-centric organization and process
Establish human resources information platform
Optimize employee incentive system
Establish and implement Mengniu’s new corporate culture
values
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Vision Mission
To become a century-old, consumer-centric, innovation-led health and nutrition food company
Focus on nutrition and health, deliver a drop of happiness for every moment and every day to more people
Values
Integrity Innovation
Passion Openness
22
New Corporate Culture
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