Bright Dairy Profit Tops Estimates on Growing China Market

Bright Dairy & Food Co., China’s third-largest dairy products maker, reported 2015 profit that beat analysts’ estimates as the Chinese consumer’s appetite for milk products grew even as the economy slowed.

While net income fell 27 percent to 418 million yuan ($64.6 million) in the 12 months ended December, that beat an average estimate of 384.6 million yuan from nine analysts compiled by Bloomberg. 

Sales at the maker of “White Rabbit” milk candy dropped 4.4 percent to 19.4 billion yuan, missing the average projection of 25.7 billion yuan from nine analysts. The Shanghai-based company said it has proposed to pay a dividend of 0.12 yuan per share.

Bright Dairy fell as much as 1.1 percent in Shanghai trading. The shares have plunged 25 percent so far this year through Monday, compared with the city’s benchmark composite index which fell 14 percent.

UHT products, milk-based drinks and yogurt are rapidly growing in popularity as the expanding Chinese middle class trades up to high-priced products and “Chinese diets converge with those of mature markets,” Bloomberg Intelligence analyst Thomas Jastrzab wrote in a December note.

The crowded dairy products industry in China has seen local players such as China Mengniu Dairy Co. and Inner Mongolia Yili Industrial Group Co. engage in price cuts and splash out on aggressive marketing, while international brands including Nestle SA and Yakult Honsha Co. also push in for a slice of China’s growing dairy market.

“The consumer dairy market now is in bad shape,” said Sealand Securities analyst Yu Chunsheng. “There are too many players undercutting one another and they are all suffering.”

Mengniu led the dairy product industry in China last year with an 18.9 percent market share, followed by Yili with 18.6 percent and Bright Dairy with 7.1 percent, according to market researcher Euromonitor International.

Earlier this month, Chinese authorities closed off a tax loophole that allowed for lower prices on foreign-made infant formula purchased through websites operating outside of China, a move that could slow sales for Bright Dairy’s overseas competitors such as Danone and a2 Milk Co.

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