(China Daily)
Updated: 2007-09-13 14:07

Products of China Mengniu Dairy are displayed at a food & drink exhibition in Shanghai on May 10. Mengniu said first-half profit surged 41 percent on soaring demand for dairy products. [newsphoto]

China Mengniu Dairy Co, the nation's biggest producer of liquid milk, said first-half profit surged 41 percent on soaring demand for dairy products in the world's most populous country.

Net income in the six months ended June 30 climbed to 485 million yuan (US$64.3 million), or 0.35 yuan a share, from 343 million yuan, or 0.25 yuan, a year earlier, the company said in a Hong Kong stock exchange filing yesterday. Sales rose 33 percent to 10 billion yuan.

Mengniu Dairy raised US$174 million selling new shares this year to fund expansion as it competes for share with Inner Mongolia Yili Industrial Group and Bright Dairy &Food Co in a market growing 13 percent a year. Its share of the liquid milk market widened to 35 percent in June from 33 percent in December.

"The outlook is very positive as its market share keeps rising at the expense of other competitors," Carrie Chan, an analyst at ICEA Securities Ltd, said before the results were announced.

Hong Kong-based Mengniu's 20 processing plants had annual capacity of 4.71 million metric tons on June 30, up from 3.93 million tons last year. An additional 1 million tons will be added next year, Chief Financial Officer Yao Tongshan said at a briefing in Hong Kong yesterday.

"The growth in market share may be slower going forward and we may not see such a significant increase as in the first half," Yao said. "We are confident to maintain the existing share by introducing new products."

Milk sales, including milk beverages and yogurt, rose to 8.8 billion yuan from 6.4 billion yuan. Revenue from ice cream rose 12 percent while other dairy products reported an 18 percent drop.

In April, the dairy producer paid 134 million yuan for the 48 percent it didn't already own in a venture in Central China.

The country's demand for dairy products is expected to grow 13 percent annually to 40 million tons by 2010, according to a report by Rabobank Group last year.

The group boosted spending on promotion and marketing to 8.9 percent of sales from 7 percent a year earlier in preparation for the 2008 Olympic Games, and will continue to earmark about 9 percent of annual revenue for that purpose, Yao said.