Mengniu may considers price rises

Updated: 2011-04-02 10:58


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HONG KONG - China Mengniu Dairy Co Ltd, China's top dairy products maker by sales volume and value, aims to maintain its current profit margin but will consider increasing prices if its margin falls short of an internal target, its CFO said on Friday.

Chief Financial Officer Wu Jingshui, who gave no details on the internal target, added that the company had no fundraising plans.

"We will watch closely the market and we will also take into consideration the central government's policy for any price adjustment," Wu told a news conference.

"Our performance has been good in the first quarter, and is better than the industry average," Wu said, adding it was not necessary to raise price for the time being.

Mengniu, which produces milk, ice-cream, and yogurt, has increased average selling prices by about one percent so far this year, compared with about a 1-2 percent rise in 2010, said financial controller Chris Kwok.

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Like its rivals, Mengniu faces the challenge of rising raw material prices which dragged down its gross profit margin to 25.7 percent in 2010 from 26.7 percent in 2009.

"We can offset price hike pressures through optimising our products mix," Wu said.

Mengniu on Thursday said 2010 full-year net profit rose 10.9 percent to 1.24 billion yuan, below a 1.31 billion yuan forecast for the year.

Looking ahead, the Chinese dairy group said its capital expenditure would be increased to 1.7-1.9 billion yuan in 2011, from 1.5 billion yuan in 2010, mostly to strengthen its upstream farm infrastructure.

Chief Administrative Officer Lu Jianjun said the company would actively expand the business to increase its market share and would develop overseas markets.

Lu said it aims to become the world's top 10 dairy company in its five-year plan beginning 2011 from the current ranking of the world's 16th dairy company. He gave no further details.

Shares of Mengniu have fallen 2.4 percent so far this year as of late Friday, compared with a 2.5 percent rise in the broader market. The shares fell as low as HK$19.94, its lowest in 10 weeks, before steadying at HK$20.10 in late trade on Friday, still down 2.4 percent.


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