Yashili shows disappointing financial performance in 2017 05-09-2018

In 2017, Yashili still ran at a loss, whilst Ausnutria and H&H achieved significant profit growth, leaving Yashili targeting a turnaround in 2018.



 


At the end of March, Yashili published its 2017 financial report, showing a weak financial performance. The revenue of the company went up by up 2.3% YoY, but it still produced a net loss, even it went down by 43.8% compared with the 2016 loss of RMB320 million.


Looking at the sales by product, the segment of Infant formula witnessed an uptrend by 4.7%, which includes 25% growth by its premium infant formula market. The area of nutritional foods, which is including adult milk powder, oatmeal and rice flour for weaning infants, went down significantly by almost 28%, due to the company’s exit from some traditional channels recently. Other products of the company have been able to rise by 233.6%, reflecting milk powder sales from its subsidiary Yashili New Zealand and the sale to Danone.


According to market intelligence firm CCM, Yashili has published two major reasons for its increased revenue in 2017. On the one hand, the company showed a rapid increase in the number of its mother & baby stores to reduce its reliance on traditional distribution channels. On the other hand, continuous adjustments in its product strategies and the gradual phase-out of its products with low value or gross profit margin took an important share of the development.


Its reduced loss was achieved by lower sales and administrative expenses. To be more precise, the sales expenses of Yashili went down by 23.7% and equated to 39.6% of its full-year revenue, a drop by more than 13% compared to the previous year. It attributed this to its exit from traditional channels and more efficient expenditure.


Despite a decreased net loss, Yashili suffered a lower gross profit margin. The earned gross profit went down by 11.1%, with the gross profit margin down to 40.9% from 47.1% in 2016. This was due to higher costs in purchasing raw materials and milk powder production at Yashili New Zealand. Its sales of products at low prices as it exited from traditional channels also contributed to its lower gross profit margin.


Yashili promised a turnaround in net profit in 2018 when the Provisions for Infant Formula Milk Powder Formulation Registration take effect. This is possible given its establishment of new distribution channels like E-commerce platforms and mother and baby stores, its reduced reliance on traditional distribution channels and its new products targeting low, medium and premium market segments.


Other companies

In contrast to the unprofitable Yashili, Ausnutria and Health and Happiness International (H&H) both achieved significant profit growth in 2017.


Ausnutria’s revenue went up by 43.3% and the net profit was able to grow by USD15 million. Sales of its branded infant formula went up 55.30%, mainly Kabrita goat milk formula, sales of which witnessed a growth of 61% in China and 57% in international markets.


H&H has published a revenue increase by almost 25%, while the net profit: went down slightly by 2.26%. The sales from its Infant Nutrition and Care division reached showed a growth of 22.50%, while sales of infant formula: went up 16% (including premium and super-premium up by 18.5%).


About the article

The information for this article comes from CCM, China’s leading market intelligence provider for the fields of agriculture, chemicals, food and feed.


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