Mengniu Dairy warns of profit dip despite revenue decline

China Mengniu Dairy (HKEX: 2319) issued a profit warning, projecting a year-on-year decrease in total revenue for the year ended December 31, 2024, due to an imbalance in raw milk supply and demand. Despite the revenue dip, the company anticipates a substantial increase in gross profit and operating profit margins thanks to lower raw milk prices and improved cost management. However, these gains will be offset by impairment provisions. Specifically, the company expects to recognize impairment provisions against goodwill and intangible assets of its subsidiary, Bellamy's Australia Limited, impacting the Group's financial performance by approximately RMB3.8 billion to RMB4.0 billion. Additionally, associated company China Modern Dairy Holdings Ltd. is expected to report losses, leading to Mengniu recording a share of losses between RMB790 million and RMB900 million. As a result, Mengniu expects profit attributable to owners of the Company to be between RMB50 million and RMB250 million for 2024, compared to RMB4.809 billion in 2023. Excluding the impact of impairments, profit attributable to owners remains stable year-on-year.