China Mengniu Dairy : Announcements and Notices - Announcement of the Annual Results for the Year Ended 31 December 2016

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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 ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016 HIGHLIGHTS

• Mengniu focuses on product quality and innovation, and is in the vanguard of the premium product consumption trend. During the year, Mengniu's liquid milk and chilled dairy products continued to lead the market with the largest market share.

• Continued with integration of the milk formula business, drawing on the resources support of Danone Group and the research and development expertise of Dumex Baby Food Co., Ltd. ("Dumex China") to improve its product development capabilities and augment the positioning of its product portfolio.

• Implemented new reforms for its business divisions in order to develop the independent room temperature, chilled, milk formula and ice cream product business segments. This has facilitated resource coordination and risk control, and thereby enabled the Group to achieve a balanced development.

• Entered into cooperative relations with international brands such as Shanghai Disney and NBA China to enhance the value of the Mengniu brand.

• Visionary deployment of upstream and downstream resources by increasing Mengniu's shareholding in China Modern Dairy Holdings Ltd. ("Modern Dairy"; stock code: 1117) in 2017, which is expected to help the Group to build smoother cooperative ties between upstream and downstream and ensure the supply of quality raw milk.

The board (the "Board") of directors ( the "Directors") of China Mengniu Dairy Company Limited (the "Company") is pleased to present the results of the Company and its subsidiaries (the "Group" or "Mengniu") for the year ended 31 December 2016, together with the comparative amounts.

* For identification purposes only

CONSOLIDATED STATEMENT OF PROFIT OR Year ended 31 December 2016	LOSS
Notes	2016 RMB'000	2015 RMB'000
CONTINUING OPERATIONS REVENUE	4	53,779,339	49,026,516
Cost of sales	(36,143,937)	(33,651,042)
GROSS PROFIT	17,635,402	15,375,474
Other income and gains	4	701,784	521,268
Selling and distribution expenses	(13,435,206)	(10,985,039)
Administrative expenses	(2,471,365)	(1,871,250)
Other expenses	5	(2,850,668)	(392,591)
Interest income	477,844	563,273
Finance costs	7	(293,700)	(318,634)
Share of profits/(losses) of associates	(225,477)	137,669
PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS	6	(461,386)	3,030,170
Income tax expense	8	(351,379)	(510,038)
PROFIT/(LOSS) FOR THE YEAR FROM
CONTINUING OPERATIONS	(812,765) 2,520,132
DISCONTINUED OPERATION Profit for the year from a discontinued operation	- 122
PROFIT/(LOSS) FOR THE YEAR	(812,765) 2,520,254
Attributable to: Owners of the Company	(751,155) 2,367,291
Non-controlling interests	(61,610) 152,963
(812,765) 2,520,254
EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY (EXPRESSED IN RMB PER SHARE)	10
Basic - For profit/(loss) for the year	(0.193) 0.609
- For profit/(loss) from continuing operations	(0.193) 0.609
Diluted - For profit/(loss) for the year	(0.193) 0.607
- For profit/(loss) from continuing operations	(0.193) 0.607

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2016

2016 2015

RMB'000 RMB'000

PROFIT/(LOSS) FOR THE YEAR (812,765) 2,520,254 OTHER COMPREHENSIVE INCOME/(LOSS)

Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods:

Exchange differences:

Exchange differences on translation of foreign operations (128,597) (66,650) Cash flow hedges:

Effective portion of changes in fair value of hedging

instruments arising during the year - 9,645 Income tax effect - (1,257)

Net other comprehensive loss to be reclassified to profit or loss in subsequent periods (128,597) (58,262)

Other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods:

Equity investments designated as fair value through other comprehensive income:

Changes in fair value 94,371 (117,050)

Net other comprehensive income/(loss) not to be

reclassified to profit or loss in subsequent periods	94,371	(117,050)
OTHER COMPREHENSIVE LOSS, NET OF TAX	(34,226)	(175,312)
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR	(846,991)	2,344,942
Attributable to: Owners of the Company	(823,053)	2,157,043
Non-controlling interests	(23,938)	187,899

(846,991) 2,344,942 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

Note	2016 RMB'000	2015 RMB'000
NON-CURRENT ASSETS Property, plant and equipment	12,698,374	11,637,977
Construction in progress	1,271,844	900,939
Investment properties	67,486	20,078
Land use rights	983,794	888,680
Goodwill	4,527,518	5,850,599
Other intangible assets	2,086,247	1,731,018
Investments in associates	4,132,099	4,185,883
Deferred tax assets	529,123	307,534
Biological assets	479,386	289,823
Non-current financial assets	2,495,681	2,327,916
Long term prepayments	15,566	91,738
Total non-current assets	29,287,118	28,232,185
CURRENT ASSETS
Other current financial assets	4,195,737	5,255,273
Derivative financial instruments	36,501	10,944
Inventories	3,314,282	4,339,506
Trade and bills receivables	11	2,340,099	1,617,757
Prepayments, deposits and other receivables	2,704,611	2,158,884
Pledged deposits	960,863	722,402
Cash and bank balances	6,070,078	7,931,237
19,622,171	22,036,003
Assets of disposal groups classified as held for sale	215,138	384,353
Total current assets	19,837,309	22,420,356