China: Mid-Year Financial Struggles Deepen for Regional Dairy Enterprises While Cheese Market Begins Recovery
Source: The DairyNews
As of July 9, 2024, the dairy industry faces significant financial challenges, particularly among medium-sized regional enterprises.
Three such companies have reported anticipated losses for the first half of the year, a stark contrast to their previous performances. These developments highlight the increasing difficulties faced by regional players in a competitive and homogenized market.
Intensified Financial Challenges
Tianrun Dairy, Manor Ranch, and Maiqu'er, all regional entities, disclosed their expected financial downturns. Tianrun Dairy, for instance, anticipates a net loss between 26 million to 31 million yuan for the first half of 2024, a dramatic shift from a net profit of 130 million yuan during the same period last year. The company's financial strain became particularly evident in the second quarter following a modest profit in the first quarter of the year.
Manor Ranch expects a loss of 70 million to 95 million yuan, deepening from a 20.163 million yuan loss last year, while Maiqu'er predicts losses ranging from 58 million to 68 million yuan, up from 37.37 million yuan the previous year. These forecasts reflect a broader trend of declining profitability within the sector.
Factors Contributing to Losses
The three companies attribute their deteriorating financial performance to several factors:
Weak Market Demand: A general decline in consumer demand has put additional pressure on sales.
Increased Competition: Intensified competition has forced these companies to elevate their market investments, resulting in higher sales expenses and reduced gross profits.
Declining Prices: Continuous drops in milk and cattle prices have adversely affected profitability. Tianrun Dairy noted that an oversupply of milk sources led to reduced prices for raw milk and cattle, necessitating increased disposals of low-yield dairy cows and bulls.
Regional vs. National Enterprises
Regional dairy enterprises are increasingly lagging behind their national counterparts, such as Yili and Mengniu. The homogeneity of products and direct competition exacerbate the challenges faced by these regional entities. Analyst Song Liang notes that these companies must leverage regional characteristics and adopt more flexible business strategies to withstand the competitive pressures.
Cheese Sector Shows Promise
In contrast to the struggles faced by regional dairy enterprises, the cheese market is showing signs of recovery. Miaokelando, a leader in the cheese stock market, forecasted a significant increase in net profit for the first half of 2024, expecting earnings between 65 million to 90 million yuan. This represents an increase of approximately 128% to 215% compared to the same period last year. The company attributed this growth to decreased raw material costs, improved gross profit margins, and effective cost management.
Industry Outlook
The dairy sector, particularly cheese, is undergoing a period of adjustment and consolidation. As stated by Chai Xiu, founder and president of Miaokelando, at the 2024 China Cheese Industry Development Seminar, the industry needs to seek new directions driven by market forces. The positive performance of Miaokelando indicates potential for recovery and growth in the cheese segment.
Intensified Financial Challenges
Tianrun Dairy, Manor Ranch, and Maiqu'er, all regional entities, disclosed their expected financial downturns. Tianrun Dairy, for instance, anticipates a net loss between 26 million to 31 million yuan for the first half of 2024, a dramatic shift from a net profit of 130 million yuan during the same period last year. The company's financial strain became particularly evident in the second quarter following a modest profit in the first quarter of the year.
Manor Ranch expects a loss of 70 million to 95 million yuan, deepening from a 20.163 million yuan loss last year, while Maiqu'er predicts losses ranging from 58 million to 68 million yuan, up from 37.37 million yuan the previous year. These forecasts reflect a broader trend of declining profitability within the sector.
Factors Contributing to Losses
The three companies attribute their deteriorating financial performance to several factors:
Weak Market Demand: A general decline in consumer demand has put additional pressure on sales.
Increased Competition: Intensified competition has forced these companies to elevate their market investments, resulting in higher sales expenses and reduced gross profits.
Declining Prices: Continuous drops in milk and cattle prices have adversely affected profitability. Tianrun Dairy noted that an oversupply of milk sources led to reduced prices for raw milk and cattle, necessitating increased disposals of low-yield dairy cows and bulls.
Regional vs. National Enterprises
Regional dairy enterprises are increasingly lagging behind their national counterparts, such as Yili and Mengniu. The homogeneity of products and direct competition exacerbate the challenges faced by these regional entities. Analyst Song Liang notes that these companies must leverage regional characteristics and adopt more flexible business strategies to withstand the competitive pressures.
Cheese Sector Shows Promise
In contrast to the struggles faced by regional dairy enterprises, the cheese market is showing signs of recovery. Miaokelando, a leader in the cheese stock market, forecasted a significant increase in net profit for the first half of 2024, expecting earnings between 65 million to 90 million yuan. This represents an increase of approximately 128% to 215% compared to the same period last year. The company attributed this growth to decreased raw material costs, improved gross profit margins, and effective cost management.
Industry Outlook
The dairy sector, particularly cheese, is undergoing a period of adjustment and consolidation. As stated by Chai Xiu, founder and president of Miaokelando, at the 2024 China Cheese Industry Development Seminar, the industry needs to seek new directions driven by market forces. The positive performance of Miaokelando indicates potential for recovery and growth in the cheese segment.
