The world's top 5 dairy company and China's number 1, Yili, has presented its 2023 financial report, which showcases strategic growth and resilience amidst market challenges.
By product | Operating income CNY | Operating costs CNY | Gross profit margin % | Operating income YOY% | Gross Profit Margin YOY% |
liquid milk | 85.5 billion | 59.5 billion | 30.36 | 0.72 | 1.25% |
Milk powder and dairy products | 27.5 billion | 17.1 billion | 38.14 | 5.09 | -2.92% |
Cold drink products | 10.6 billion | 6.5 billion | 38.45 | N/A | N/A |
other products | 0.6 billion | 0.5 billion | 18.3 | 60.7 | -3.22% |
Total Revenue: Yili achieved 125 billion CNY (17.9 billion USD), there is a significant increase in revenue, reporting 85.540 billion yuan from its liquid milk business alone, with a minor growth rate of 0.72% over the previous year. Overall, the innovative products sector contributed impressively, accounting for 16.8% of total revenue, which equates to over 20 billion yuan.
Gross Margin: The gross profit margin for liquid milk sustained a growth trajectory, while other sectors such as milk powder and dairy products saw a decrease in gross margin by 2.92%. This diversification in margin performance highlights different levels of profitability across product lines.
Operating Cash: Detailed figures for operating cash were not specified in the provided document excerpts. However, the report discussed significant cash flow from financing activities, suggesting robust cash management and strategic financial operations throughout 2023.
Net Profit Margin: Yili's financial strategies resulted in a net profit increase, with the company managing a net profit of 1.513 billion yuan despite facing substantial impairment losses which totalled 1.03 billion yuan in the fourth quarter alone.
Strategic Insights
Financial Health and Strategic Investment
Yili's financial strategy in 2023 has been robust, with cash assets significantly surpassing liabilities. The report indicates that cash assets outstripped interest-bearing liabilities by three to four billion, marking a stark improvement from 2022. This financial upswing is supported by a substantial increment in borrowing, with funds reaching 245.6 billion, nearly 15 times the amount in 2019.
Product Innovation and Market Adaptation
2023 was a pivotal year for Yili, characterized by sluggish growth in traditional segments like liquid milk, which only saw a marginal revenue increase of 0.72%. Despite this, Yili excelled in innovating within its product lines. The introduction of new products such as "Jindian" A2β-casein organic pure milk and "Anmuxi" active probiotic yogurt contributed significantly to their revenue stream, accounting for 16.8% of the total revenue, translating to over 20 billion in sales.
Operational Efficiency
Yili's operational strategies have led to a reduced expense ratio and increased gross profit margin. The reduction in administrative expenses by 8.22% year-on-year, due to a decrease in personnel, played a critical role. Additionally, Yili achieved a net profit of 621 million, despite a 730 million increase in asset impairment losses compared to the previous year.
Market Trends and Consumer Demand
The report highlights a strategic shift towards high-end, organic, and functional dairy products in response to evolving consumer preferences. This shift is a response to stagnant growth in basic liquid milk and a market trend favouring premium products. Notably, Yili's cold drink segment outperformed, with a revenue jump of 11.72%, reaching 10.688 billion yuan.
Future Outlook and Strategic Direction
Yili plans to continue leveraging its innovative capabilities and operational efficiency to enhance market competitiveness. The strategic reduction in capital expenditures, with a planned investment of only 4.457 billion in 2024, indicates a focus on optimizing current assets and boosting shareholder value through increased dividends.
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