Summary: Three regionally-focused dairy firms, Tianrun Dairy, Zhuangyuan Pasture and Maiquer, all forecasted losses for H1 2024, citing weak demand and an oversupply of milk.

In this month for the release of semi-annual report, three regionally-focused dairy companies, Xinjiang Tianrun Dairy Co., Ltd. (Tianrun Dairy, Stock Code: 600419.SH), Lanzhou Zhuangyuan Pasture Co., Ltd. (Zhuangyuan Pasture, Stock Code: 002910.SZ) and Maiquer Group Co., Ltd. (Maiquer, Stock Code: 002719.SZ) all predicted declines in their net profits in H1, mainly due to the weak demand for dairy products and oversupply of raw milk.

Tianrun Dairy

• Net loss attributable to parent company: -USD3.6 million to -USD4.3 million (-RMB26.0 million to -RMB31.0 million) vs. the net profit of USD17.7 million (RMB125.8 million) in H1 2023
• Net profit after excl. extraordinary gains/losses: USD3.1 million–USD3.6 million (RMB22 million–RMB26 million), down 77.80%–81.21%

Factors explaining this forecast:

• Weak consumer demand for dairy products, limiting the company's growth
• Milk surplus, which has led to a continuous decline in the selling prices of both raw milk and dairy cows — Tianrun Dairy has culled a larger number of low-yielding dairy cows during the reporting period, meaning lower levels of its cattle inventory and bio-assets.
• Continued loss in H1 in its subsidiary Alar Xinnong Dairy Co., Ltd., which had cut Tianrun Dairy's profit by -USD13.4 million (-RMB95.4 million) in 2023.

 

Zhuangyuan Pasture

• Net loss attributable to equity shareholders of the listed company: -USD9.8 million to –USD13.3 million (-RMB70 million to –RMB95 million), following the loss of the –USD2.9 million (-RMB20.2 million) in H1 2023
• Net loss attributable to equity shareholders excl. extraordinary gains/losses: -USD10.1 million to –USD13.6 million (-RMB72 million to –RMB97 million), following the loss of the –USD3.4 million (-RMB24.1 million) in H1 2023

Zhuangyuan Pasture said that in H1 2024 the slowdown in demand growth resulted in higher marketing costs and substantial decrease in gross profit margin.

Zhuangyuan Pasture was established in 2000 and currently owns 8 dairy farms and 3 dairy brands, offering a range of dairy products including UHT/fresh milk, modified milk, flavoured yoghurt and milk beverages to the northwest region, such as Gansu, Qinghai and Shaanxi. In 2018, Zhuangyuan Pasture acquired Xi'an Oriental Dairy Co., Ltd., to facilitate national expansion. However, the acquisition failed to live up to expectations, instead sinking Zhuangyuan Pasture into a quagmire of continued profit declines in 2019 and 2020, and loss in 2023.

 

Maiquer

• Net loss attributable to equity shareholders of the listed company: -USD8.1 million to –USD9.5 million (-RMB58 million to –RMB68 million), following the loss of the –USD5.2 million (-RMB37.4 million) in H1 2023
• Net loss attributable to equity shareholders excl. extraordinary gains/losses: -USD6.7 million to –USD8.1 million (-RMB48 million to –RMB58 million), following the loss of the –USD5.5 million (-RMB39.1 million) in H1 2023

Factors responsible for the losses:

• Increased loss in its own dairy farms, on the rising costs of raw milk production
• Increased sales and marketing expense to combat the downturn in the consumer market

Established in 2002, Maiquer is a manufacturer of dairy and bakery products, primarily selling its products in Xinjiang. In 2023, the company's revenues from dairy products and bakery foods were USD38.2 million (RMB271.9 million) and USD41.5 million (RMB295.5 million), respectively.