China Mengniu Dairy : Announcements and Notices - ANNOUNCEMENT OF THE INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

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CHINA MENGNIU DAIRY COMPANY LIMITED

中 國 蒙 牛 乳 業 有 限 公 司*

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2319)

ANNOUNCEMENT OF THE INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

HIGHLIGHTS

• The Group generated revenue of RMB37,533.5 million for the six months ended 30 June 2020 (2019: RMB39,857.2 million), representing a decrease of 5.8% year-on- year. Excluding the business of Shijiazhuang Junlebao Dairy Co., Ltd. ("Junlebao"), which was disposed in 2019, and Bellamy's Australia Limited ("Bellamy's"), which was acquired in 2019, the Group's revenue from comparable businesses amounted to RMB36,887.7 million (2019: RMB33,715.4 million), representing a year-on-year increase of 9.4%. During the period, the Group continued to maintain a trend of high-quality development while each of its main product categories continued to focus on upgrade and innovation in order to satisfy consumers' demand for quality life.
• Profit attributable to owners of the Company amounted to RMB1,211.5 million (2019: RMB2,076.9 million), representing a decrease of 41.7% as compared with the corresponding period last year. The profit attributable to owners of the Company from comparable businesses (excluding Junlebao and Bellamy's) was RMB1,158.4 million (2019: RMB2,001.6 million), representing a decrease of 42.1% as compared with the corresponding period last year. The decrease in profits mainly attributed to an increase in the costs of the Group due to the following measures taken in the first quarter of 2020: (i) the Group had incurred additional expenses on epidemic prevention and control to safeguard the health and safety of its employees, and to ensure the resumption of work and production; (ii) the Group had incurred additional marketing expenses to accelerate the reduction of inventories in its distribution channels; and (iii) the Group had actively fulfilled its corporate social responsibilities and had made cash and dairy product donations to those in need.

• For identification purposes only

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• After the outbreak of the COVID-19 Epidemic (the "Epidemic") in early 2020, Mengniu immediately activated the emergency response mechanism, centralising the deployment of various business divisions around the world to carry out prevention and control work, resuming work and production on the premise that both the employee safety was protected and product safety was ensured. During the Epidemic, Mengniu adhered staunchly to its stance to maintain procurement of every drop of qualified fresh milk, helping partners on the upstream of the industrial chain like ranches achieve sustainable development while providing a strong support to ensure a rapid growth in the second quarter. Mengniu adopted timely measures to inject promotional expenses to reduce channel inventory, actively carrying out e-commerce, home delivery business and community group marketing, thereby facilitating a full recovery of the multi-channel sales. Overall business realized a strong recovery in the second quarter.
• Mengniu undertook social responsibilities actively, donating cash and products to provide nutritional support to the medical institutions and frontline institutions of epidemic control across the country while donating and constructing an emergency supply centre in Wuhan. In addition, Mengniu fully exploited its powerful logistics capacity, joined with the China Charity Federation and the Blue Sky Rescue Team to carry out a large scale delivery of relief materials across the nation, completing the delivery of more than 40 million pieces of supplies in Wuhan alone. Moreover, all the dairy products donated by Mengniu were delivered to the frontline anti- epidemic personnel within two weeks. Through outstanding performance in assuming social responsibility, Mengniu has greatly enhanced its corporate and brand reputation.
• During the period, for room temperature business, the revenue growth of Mengniu branded pure milk further increased. After the launch of the new products of Milk Deluxe , Just Yoghurt and Fruit Milk Drink , room temperature liquid milk business achieved a breakthrough in sales growth. By launching the new chilled products with high added value, the sales of the chilled products led the industry. Focusing on the Shiny Meadow and Modern Meadow brands, the fresh milk business launched new products and packagings which boosted an almost doubling growth in sales as compared to the corresponding period last year.
• The ice cream business focused on its star brands, such as Suibian, Deluxe and Mood for Green , actively communicated with consumers. The cheese business created the Arla ASCX brand which achieved a high revenue and profit growth against adverse market trend. In terms of the milk formula business, Yashili continued to make every effort to adjust its channels and product strategies. Bellamy's brand milk formula and baby food products have also achieved a favourable growth with a significant increase in profitability.

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The board (the "Board") of directors (the "Directors") of China Mengniu Dairy Company Limited (the "Company") is pleased to present the unaudited consolidated interim results of the Company and its subsidiaries (the "Group" or "Mengniu") for the six months ended 30 June 2020, together with the comparative amounts. The interim results and condensed interim financial statements have been reviewed by the audit committee (the "Audit Committee") and the auditors of the Company.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 June 2020

		2020		2019
		(Unaudited)	(Unaudited)
	Notes	RMB'000		RMB'000
Revenue	4	37,533,459		39,857,239
Cost of sales		(22,881,073)	(24,278,510)
Gross profit		14,652,386		15,578,729
Other income and gains		296,410		292,973
Selling and distribution expenses		(11,499,647)	(11,317,690)
Administrative expenses		(1,438,981)	(1,585,750)
Impairment losses on financial and		(101,731)
contract assets, net		(88,817)
Loss on disposal of financial assets measured at		(8,253)		-
amortised cost
Other expenses	5	(943,795)	(575,646)
Interest income		564,490		510,908
Finance costs		(324,449)	(321,917)
Share of profits and losses of:		(14,853)		-
A joint venture
Associates		220,759			103,140
Profit before tax	6	1,402,336		2,595,930
Income tax expense	7	(267,538)	(435,298)
Profit for the period		1,134,798			2,160,632
Attributable to:
	1,211,526
Owners of the Company			2,076,926
Non-controlling interests		(76,728)	83,706
		1,134,798			2,160,632
Earnings per share attributable to ordinary
equity holders of the Company
(expressed in RMB per share)	9	0.309
Basic				0.531
Diluted		0.308		0.531

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INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2020

	2020		2019
	(Unaudited)	(Unaudited)
	RMB'000	RMB'000
Profit for the period	1,134,798		2,160,632
Other comprehensive income/(loss)
Other comprehensive income/(loss) that may be reclassified
to profit or loss in subsequent periods:
Exchange differences:	(197,358)
Exchange differences on translation of foreign operations	(34,791)
Cash flow hedges:
Effective portion of changes in fair value of hedging	8,721
instruments arising during the period		(12,988)
Reclassification adjustments for gains included in the	(10,814)	-
consolidated statement of profit or loss
	(2,093)	(12,988)
Share of other comprehensive loss of associates	(3,632)	(3,742)
Net other comprehensive loss that may be reclassified to
profit or loss in subsequent periods	(203,083)	(51,521)
Other comprehensive income/(loss) that will not be
reclassified to profit or loss in subsequent periods:
Equity investments designated at fair value through other
comprehensive income:	27,854
Changes in fair value		(15,176)
Share of other comprehensive income of an associate	-	78
Net other comprehensive income/(loss) that will not be
reclassified to profit or loss in subsequent periods	27,854		(15,098)
Other comprehensive loss, net of tax	(175,229)	(66,619)
Total comprehensive income for the period	959,569		2,094,013
Attributable to:	1,054,554
Owners of the Company		2,008,499
Non-controlling interests	(94,985)	85,514
	959,569		2,094,013

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