Introduction: With the relaxation of pandemic prevention policies and the gradual recovery of future consumption, dairy companies are truly facing market tests.

From a revenue perspective, 14 dairy companies achieved revenue growth, while 4 saw revenue declines, showing overall stability. The fastest growth was seen by Beingmate, with a year-on-year increase of 45.8%, performing well. Other companies achieving double-digit revenue growth alongside Beingmate include Milkground, Joyoung Health, Western Pastoral, Tianrun Dairy, New Hope Dairy, and Yili. Despite good revenue performance, only 7 companies saw growth in net profit attributable to shareholders, while the rest declined. Among the 7 companies with net profit growth, Royal Group performed impressively with a year-on-year increase of up to 220%. The other companies achieving net profit growth were Tianrun Dairy, New Hope Dairy, Beingmate, Yili, Western Pastoral, and Milkground, which are also the 7 companies that achieved growth in both revenue and net profit. Four companies saw declines in both revenue and net profit: Bright Dairy, Yantang Dairy, Sanyuan Foods, and Sunshine Dairy. Let's take a closer look at the performance of each dairy company in the first three quarters of 2022.

Top Five Performances Have Mixed Results

Yili: In terms of revenue, Yili is the only dairy company among the 18 with revenue exceeding RMB 50 billion. According to the financial report, Yili achieved revenue of RMB 93.5 billion in the first three quarters of 2022, a year-on-year increase of 10.42%. Net profit attributable to shareholders was RMB 8.061 billion, up 1.5% year-on-year.

Image: Screenshot from Yili's Q3 financial report

Although Yili achieved profit growth, the increase was modest, possibly related to a decline in single-quarter profit in Q3. The financial report shows that Q3 net profit attributable to shareholders was RMB 1.929 billion, down 26.46% from the same period last year. Yili explained in the report that intense competition and increased sales expenses in Q3 2022 compared to the same period led to reduced net profit. In other words, Yili's investment in advertising expenses did not yield the expected growth.

Bright Dairy: According to the financial report, Bright Dairy achieved revenue of RMB 21.385 billion in the first three quarters, down 3.5% year-on-year, with net profit attributable to shareholders of RMB 370 million, down 16.98%. In Q3 alone, revenue was RMB 6.975 billion, down 10.5% year-on-year, and net profit attributable to shareholders was RMB 88.03 million, down 52.18%. Bright Dairy saw declines in both revenue and profit in the first three quarters and in Q3 alone. The company explained in the report that the decline was due to reduced revenue during the reporting period, which sounds honest.

New Hope Dairy: According to the financial report, New Hope Dairy achieved revenue of RMB 7.48 billion in the first three quarters, up 12.48% year-on-year, with net profit attributable to shareholders of RMB 310 million, up 21.16%. New Hope Dairy performed well in the first three quarters of 2022, achieving double-digit growth in both revenue and profit. Notably, Q3 alone also saw double-digit growth in revenue and profit, with revenue of RMB 2.7 billion, up 15.68% year-on-year, and net profit attributable to shareholders of RMB 121 million, up 10.19%.

Sanyuan Foods: According to the financial report, Sanyuan Foods achieved revenue of RMB 6.302 billion in the first three quarters, down 6.81% year-on-year, with net profit attributable to shareholders of approximately RMB 108 million, down 60.60%. In Q3 alone, revenue was RMB 2.04 billion, down 7.2% year-on-year, and net profit attributable to shareholders was RMB 14.85 million, down 82.2%.

Image: Screenshot from Sanyuan Foods' Q3 financial report

Like Bright Dairy, Sanyuan Foods saw declines in both revenue and profit in the first three quarters and Q3 alone, with slightly larger declines. The financial report attributes the changes to increased feeding costs, decreased investment income, and rising raw material costs leading to lower returns and reduced profits. Additionally, Sanyuan explained other reasons for the decline: (1) Since May this year, the company no longer consolidated SPV (Luxembourg) and its French subsidiaries, leading to a year-on-year revenue decline; (2) Since January, the company consolidated Shounong Animal Husbandry, and due to significant increases in feed prices such as soybean meal, corn, and alfalfa, farming costs rose cyclically; (3) The catering business in the investment segment was significantly affected by the pandemic, leading to a year-on-year decline in performance.

Milkground: According to the financial report, Milkground achieved revenue of RMB 3.829 billion in the first three quarters, up 21.78% year-on-year, with net profit attributable to shareholders of RMB 144 million, up 0.21%. In Q3 alone, revenue was RMB 1.235 billion, up 14.68% year-on-year, and net profit attributable to shareholders was RMB 11.65 million, down 63.03%. Milkground's revenue scale and brand awareness are not as high as the previous four, possibly because its core business is cheese. Despite achieving growth in both revenue and profit in the first three quarters, the profit increase was modest, and Q3 profit fell 63.03% year-on-year. Milkground explained in the report that the decline in net profit attributable to shareholders was mainly due to the pandemic slowing the growth of high-margin products, while raw material prices rose, increasing operating costs compared to the same period last year.

Only 7 Companies Achieved Profit Growth in the First Three Quarters

In addition to Yili, New Hope Dairy, and Milkground mentioned earlier, four other companies achieved profit growth in the first three quarters.

Beingmate: From the data, Beingmate's revenue performance was good, with over 40% growth in both the first three quarters and Q3 alone. According to Beingmate's Q3 report, revenue in the first three quarters was RMB 2.417 billion, up 45.78% year-on-year, and net profit attributable to shareholders was RMB 44.25 million, up 14.19%. In Q3 alone, revenue was RMB 803 million, up 49.6% year-on-year, and net profit attributable to shareholders was RMB 1.33 million, down 74.5%.

Royal Group: Royal Group's net profit attributable to shareholders in the first three quarters of 2022 was impressive, but Q3 alone saw a significant decline. According to Royal Group's Q3 2022 financial report, revenue in the first three quarters was RMB 2.056 billion, up 6.37% year-on-year, and net profit attributable to shareholders was RMB 57.65 million, up 220.24%. In Q3 alone, revenue was RMB 738 million, up 17.77% year-on-year, and net profit attributable to shareholders was RMB -38.32 million, down 611.2%.

Tianrun Dairy: Among niche dairy brands, Tianrun performed exceptionally well, with growth in both revenue and profit in the first three quarters and Q3 alone, with relatively large increases. Tianrun explained in the report that the increase was mainly due to increased product sales, adjusted product structure, and improved operating efficiency.

Image: Screenshot from Tianrun's Q3 financial report

According to Tianrun's Q3 financial report, revenue in the first three quarters was RMB 1.851 billion, up 17.78% year-on-year, and net profit attributable to shareholders was RMB 154 million, up 36.41%. In Q3 alone, revenue was RMB 618 million, up 19.67% year-on-year, and net profit attributable to shareholders was RMB 46.01 million, up 45.33%.

Western Pastoral: According to the Q3 financial report, Western Pastoral achieved revenue of RMB 973 million in the first three quarters, up 18.37% year-on-year, and net profit attributable to shareholders of RMB 14.56 million, up 0.93%. In Q3 alone, revenue was RMB 352 million, up 17.54% year-on-year, and net profit attributable to shareholders was RMB 2.48 million, up 53.07%.

Joyoung Health: In addition to the 7 companies with profit growth in the first three quarters, Joyoung Health saw a decline in profit but good revenue growth, with Q3 profit growth as high as 71.55%. According to Joyoung Health's Q3 financial report, revenue in the first three quarters was RMB 845 million, up 20.62% year-on-year, and net profit attributable to shareholders was RMB 78.91 million, down 45.21%. In Q3 alone, revenue was RMB 304 million, up 35.99% year-on-year, and net profit attributable to shareholders was RMB 33.49 million, up 71.55%. Joyoung Health explained that the decline in profit in the first three quarters was mainly due to increased investment in new products, new business divisions, and R&D, as well as increased channel investment, leading to higher expenses; some raw material prices rose, increasing product costs; and the pandemic affected some orders and factory shipments, increasing transportation costs, resulting in a decline in net profit attributable to shareholders.

Additionally, it is worth noting that four companies saw declines in both revenue and profit. Besides Sanyuan and Bright mentioned earlier, the other two are Yantang Dairy and Sunshine Dairy. Among them, Sunshine Dairy explained in the report that the main reason was the impact of the pandemic in Q3.

Yantang Dairy: According to the Q3 financial report, Yantang Dairy achieved revenue of RMB 1.409 billion in the first three quarters, down 5.92% year-on-year, with net profit attributable to shareholders of RMB 83.98 million, down 46.82%. In Q3 alone, revenue was RMB 511 million, down 7.23% year-on-year, and net profit attributable to shareholders was RMB 26.23 million, down 43.51%.

Sunshine Dairy: According to the Q3 financial report, Sunshine Dairy achieved revenue of RMB 425 million in the first three quarters, down 9.54% year-on-year, and net profit attributable to shareholders of RMB 92.59 million, down 13.61%. In Q3 alone, revenue was RMB 153 million, down 14.28% year-on-year, and net profit attributable to shareholders was RMB 36.93 million, down 21.19%.

Maiquer Affected by Food Safety Incident, Poor Q3 Performance

Maiquer was affected by a food safety incident this year, and its poor performance was reflected in the Q3 financial report. Maiquer explained, "Due to the impact of the pure milk incident, after offsetting sales revenue and accruing asset impairment losses, the impact on net profit for the first half of 2022 was RMB 190 million. As of September 30, 2022, the incident had impacted net profit by RMB 316 million."

Image: Screenshot from Maiquer's Q3 financial report

Maiquer: According to the Q3 financial report, Maiquer achieved revenue of RMB 849 million in the first three quarters, up 3.1% year-on-year, and net profit attributable to shareholders of RMB -316 million, down 1889.57% year-on-year, compared to RMB 17.552 million in the same period last year, failing to maintain profitability. In Q3 alone, revenue was RMB 141 million, down 58.66% year-on-year, and net profit attributable to shareholders was RMB -141 million, down 2227.99%.

Yiming Food: According to the Q3 financial report, Yiming Food achieved revenue of RMB 1.806 billion in the first three quarters, up 7.14% year-on-year, and net profit attributable to shareholders of RMB -63.99 million, down 203.98%. In Q3 alone, revenue was RMB 642 million, up 9.85% year-on-year, and net profit attributable to shareholders was RMB 2.24 million, up 47.79%. Yiming Food explained the decline in net profit attributable to shareholders as mainly due to: (1) increased direct-operated stores in the second half of 2021, leading to higher labor costs and fixed expenses such as rent; (2) increased marketing expenses from promoting online business during the reporting period; (3) increased fixed costs after full production at Jiangsu Yiming and Jiaxing Yiming.

Pinlive Foods: According to the Q3 financial report, Pinlive Foods achieved revenue of RMB 1.175 billion in the first three quarters, up 2.7% year-on-year, and net profit attributable to shareholders of RMB 16.26 million, down 76.8%. In Q3 alone, revenue was RMB 434 million, down 4.61% year-on-year, and net profit attributable to shareholders was only RMB 720,000, down 97.20%.

Liziyuan: According to the Q3 financial report, Liziyuan achieved revenue of RMB 1.061 billion in the first three quarters, up 0.59% year-on-year, and net profit attributable to shareholders of RMB 155 million, down 20.4%. In Q3 alone, revenue was RMB 361 million, down 3.77% year-on-year, and net profit attributable to shareholders was RMB 52.08 million, down 21.10%.

Zhuangyuan Pasture: According to the Q3 financial report, Zhuangyuan Pasture achieved revenue of RMB 777 million in the first three quarters, up 5.6% year-on-year, and net profit attributable to shareholders of RMB 30.33 million, down 6.05%. In Q3 alone, revenue was RMB 280 million, up 10.12% year-on-year, and net profit attributable to shareholders was RMB 21.26 million, up 125.46%.

Panda Dairy: According to the Q3 financial report, Panda Dairy achieved revenue of RMB 645 million in the first three quarters, up 4.28% year-on-year, and net profit attributable to shareholders of RMB 39.9 million, down 33.86%. In Q3 alone, revenue was RMB 267 million, up 16.94% year-on-year, and net profit attributable to shareholders was RMB 17.11 million, down 28.67%.

Final Thoughts: Affected by the pandemic and rising raw material prices, the overall revenue performance of the 18 dairy companies was stable, but most saw declines in profit. A small number of companies managed to achieve growth in adversity, which is commendable. As pandemic prevention policies ease and consumption gradually recovers, dairy companies will truly face market tests.