Mengniu Dairy milks low costs to deliver 2009 gains

16:43, April 29, 2010      

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Mengniu Dairy, a leading maker of dairy products, Wednesday reported a profit of 1.16 billion yuan ($169.93 million) in 2009, making it the third dairy company to reach the black compared with a year earlier, when China's melamine-tainted milk scandal unfolded.

However, experts warned that producers' profits this year are not expected to reach high due to rising milk materials costs.

According to Mengniu's fiscal report, its net profit jumped from a loss of 950 million yuan ($139.17 million) in 2008.

Yili saw a net profit growth of 138.38 percent from the previous year.

Bright Dairy turned a net profit of 122 million yuan ($17.87 million), up from a 286 million yuan ($41.90 million) loss in 2008.

"Their good performance is partly due to the low cost last year," Chen Lianfang, an analyst with Beijing Orient Agribusiness Consultant Ltd, told the Global Times Wednesday.

Last year, China imported 250,000 tons of raw milk, compared with imports of 100,000 tons a year earlier.
Big producers took 60 percent of the milk imports, Chen said.

The imported raw milk price last year was about $2,200 per ton, lower than the domestic price of 20,000 yuan ($2,929.80), he said.

A report from Cinda Securities predicted the imported raw milk price will exceed $3,000 per ton this year.

Moreover, many factories producing raw milk in Northwest China collapsed after the blow of the melamine contamination scandal, which worsened the supply gap, Chen added.

A report by CLSA Asia-Pacific Markets, an independent brokerage and investment group, said only 28 percent of cattle farms plan to increase herd numbers in the second half of 2009, although they have won government support to do so.

"In the second half of 2009, the demand and supply of raw milk showed the gap due to farmers' lack of enthusiasm to feed cows," said Chen Gang, an analyst with the Guojin Securities firm.

Moreover, prices of other materials such as sugar are also increasing, worsening cost pressures.

From June of last year, sugar prices jumped from 3,000 yuan ($439.47) per ton to the current 5,500 yuan ($805.70), the China Sugar Index shows.

"It is possible some producers will lift prices," Chen said.

Source: Global Times


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