Chinese Dairy Giant’s Profits Turn Sour in First Quarter

What’s new: Inner Mongolia Yili Industrial Group Co. Ltd., one of China’s largest dairy companies, reported a nearly 50% slump in net profits of around 1.1 billion yuan ($155.4 million) in the first three months of 2020. Yili shares fell by 6.72% during morning trading on Wednesday in the domestic stock market after the company released its financial results late Tuesday.

Yili’s total revenues in the first quarter dropped nearly 11% year-on-year to just over 2 billion yuan, with its major business of liquid milk contracting by 19%, though other dairy products including milk powder and ice cream reported growth of 20%.

The dairy sector in general has been adversely impacted by the Covid-19 outbreak since January, according to a Citic Securities report.

Background: Yili’s revenue growth had already slowed down by about 3 percentage points in 2019 compared to the previous year.

However, several securities firms remain optimistic about Yili’s long term prospects as the leading dairy group is well-positioned to resist operational risks in the face of market turbelence brought on by the pandemic.

Yili also said in its annual report that the impact of Covid-19 is not expected to last for long. Milk products were listed by China’s central government as a key product in the fight against the virus in February, as they are thought to strengthen the human immune system.

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Related: Yili Takes the Lead in Huishan’s Long-Stalled Restructuring

Contact reporter Isabelle Li (liyi@caixin.com)