2016 interim results mengniu

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China Mengniu Dairy Company Limited

(2319.HK)

2016 Interim Results

August 2016



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Legal Disclaimer

The presentation is prepared by China Mengniu Dairy Company Limited (the “Company”)

and is solely for the purpose of corporate communication and general reference only. The

presentation is not intended as an offer to sell, or to solicit an offer to buy or to form any

basis of investment decision for any class of securities of the Company in any jurisdiction.

All such information should not be used or relied on without professional advice. The

presentation is a brief summary in nature and does not purport to be a complete description

of the Company, its business, its current or historical operating results or its future business

prospects. This presentation contains projections and forward looking statements that may

reflect the Company’s current views with respect to future events and financial performance.

This presentation is provided without any warranty or representation of any kind, either

expressed or implied. The Company specifically disclaims all responsibilities in respect of

any use or reliance of any information, whether financial or otherwise, contained in this

presentation. The Company undertakes no obligation to publicly update or revise any

forward-looking statements, whether as a result of new information, future events or

otherwise.

2



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Mengniu

Sun Yiping, Chief Executive Officer & Executive Director

Bai Ying, Chief Operation Officer & Executive Director

Zhang Ping, Chief Financial Officer

Gao Fei, Assistant Vice President of Sales

Pierre-Alain CERALLI, Vice President of R&D and Innovation

Chris Kwok, Financial Controller & Company Secretary

Yashili

Lu Minfang, Chief Executive Officer & Executive Director

Hua Li, Vice President of Marketing & Executive Director

Wen Jieping, Chief Financial Officer

Management Team

3



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Financial Overview



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2015 2016 +/-

Gross Profit

Gross Profit Margin

EBITDA

EBITDA Margin

Net Profit Margin

Profit Attributable to

Owners of the

Company

Basic EPS

(RMB)

27,257.2 +6.6%

9,181.4 +12.8%

33.68% +1.83ppt

2,155.1 -6.9%

7.91% -1.15ppt

1,077.3 -19.5%

3.95% -1.29ppt

0.277 -19.5%

Revenue

Six months ended 30 June

5

25,564.4

8,142.8

31.85%

2,315.6

9.06%

1,338.7

5.24%

0.344

Financial Highlights

RMB Million

Note: EPS was stated after taking into account the effect of bonus share. Comparative figures have been restated on the assumption that

the bonus share had been in place in prior periods.



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2015 +/- (%) % of

Revenue +/- (ppt)

Ice Cream

Milk Formula

Others

Liquid Milk

Total

2016

23,761.5 +8.3%

1,703.4 +3.6%

1,660.0 -6.9%

132.3 -32.4 %

87.2% +1.3ppt

6.2% -0.2ppt

6.1% -0.9ppt

0.5% -0.3ppt

27,257.2 +6.6% 100.0% /

6

21,940.9

1,644.3

1,783.5

195.7

25,564.4

Revenue Breakdown by Segment

RMB Million

Six months ended 30 June

Note: Others refers to cheese, plant-based nutritional food business, etc.



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Premium Pure Milk Premium Milk Beverage Room Temperature Yogurt

Basic Pure Milk Chilled Yogurt

Kids’ Milk Basic Milk Beverage

Pro-biotic Drink

Milk Beverage

Yogurt

UHT Milk

2015 +/- (%) % of Liquid

Milk

Revenue +/- (ppt) 2016

Total

11,513.8 +7.5%

4,915.9 -13.1 %

7,331.8 +31.6%

48.4% -0.4ppt

20.7% -5.1ppt

30.9% +5.5ppt

23,761.5 +8.3% 100.0% /

7

10,710.4

5,657.8

5,572.7

21,940.9

Revenue Breakdown of

Liquid Milk Segment Six months ended 30 June

RMB Million

UHT Milk Beverage Yogurt



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Cashflow and CAPEX

Net Cash Inflows from

Operating Activities Capital Expenditure

(RMB Million) (RMB Million)

Plant & equipment Biological assets Equity investment

1H 2015 1H 2016

2,107.3

2,675.3

1,439.7

2,706.5

1H 2015 1H 2016

1,399.0 1,482.9

30.7

87.6 10.0

1,136.0



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4.3% 4.2%

21.8%

23.7%

1H 2015 1H 2016

1,093.7 1,135.9

(RMB Million) (RMB Million)

Expense % of revenue

S&D G&A

9 Expense % of revenue

SG&A Expenses

1H 2015 1H 2016

5,565.3 6,448.9



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1H 2015 1H 2016

10.7

15.2

（Days）（Days）（Days）

Inventory Turnover Receivables Turnover（1） Payables Turnover（2）

10

1H 2015 1H 2016

52.7 52.5

Operating Efficiency Index

(1) Receivables Turnover = (Average Balance of Trade and Bills Receivables / Revenue) x Number of Days

(2) Payable Turnover = (Average Balance of Trade and Bills Payables / Cost of Sales) x Numbers of Days

1H 2015 1H 2016

44.8

39.3



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Stable Market Share Performance

Liquid Milk

11

Source: Nielsen Retail Research

27.5% 27.1% 27.4%

25.4% 25.9% 26.7%

8.6% 8.3% 7.6%

8.1% 7.1% 6.5%

30.3% 31.6% 31.8%

27.8% 27.5% 28.4%

29.1% 30.8% 31.4%

10.4% 9.3% 8.2%6.9% 6.1% 6.1%

25.8% 26.3% 25.9%

UHT Products

28.8% 28.7% 28.6%

17.3% 17.0% 15.4%

15.7% 15.5% 16.7%

8.7% 9.1% 8.8%

29.2% 29.8% 30.6%

Chilled Products

1H 2015 2H 2015 1H 2016

1H 2015 2H 2015 1H 2016

1H 2015 2H 2015 1H 2016

Mengniu A B Others C



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Brand Clusters 1H 2015 1H 2016 + / - (ppt)

Star Brands 39.6% 41.3% + 1.7ppt

Opportunity Brands 3.1% 2.9% - 0.2ppt

Profit Contributor Brands 7.1% 6.9% - 0.2ppt

Backbone Brands 36.6% 34.9% - 1.7ppt

Continuous Improvement of

Product Mix

Note: Only states major brand clusters as a percentage of Mengniu standalone revenue (excluding Yashili)

12

1.5ppt



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Business Review

and Prospects



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Raw milk oversupply continued while end market competition remained fierce

The dairy industry exhibited overall growth slowdown as China’s economy enters the “New

Normal” stage

The growth model has gradually shifted to quality-oriented development from scale expansion in

domestic dairy market as the structural premiumization has become the key driver for consumption

Intensify efforts in brand building and establish long-term brand influence through diversified and

innovative marketing

Continuously launch new products and drive overall development through innovative and high

value-added products

Adapt to changes of new consumption era and develop new channels including e-commerce

platform

Expand existing channels and improve market penetration

From a long-term perspective, Mengniu strengthens competitiveness to cope with challenges under new market conditions

Industry Overview –

Still Faced Challenges in 2016



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2020

Strategy

2020 Strategic Roadmap

Explosive

Growth

2012 2015 2016 2017 2018 2019 2020

New Normal Economy

Stable

Growth

Organic Structural

Adjustment

Innovation-driven

Growth

15

Sophisticated

Omni-Channel

Management

System

Industry

Leading

Operational

Efficiency

Professional

Brand

Management

Capabilities

Internationa-

lization

Partnership Ecosystem

Digitalization



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Advance transformation of

regional offices to P&L

entities and improve market

response speed

Reinforce the strategy of

“enhance distributors, solidify

sales companies and develop

CBUs” to realize a more

efficient sales network

Strengthen control of channel

terminals and promote

sophisticated channel

management

Promote “Route To Market” Initiatives

Gained market share for basic products

Expanded market share in key regions

and enhanced market penetration in the

third- and fourth-tier cities

Established strategic alliance with

retailors and built win-win platform

through close cooperation with Key

Accounts

Realized breakthrough in special

channels including CVS, campus and

hotel

Completed pilot program of WSP 2.0

system for more sophisticated POS management



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Collaboration

between

production &

sales

Achieve collaboration between production and sales through application of SAR ERP and SAP CRM systems

Promote collaboration of production and sales at various levels through coordination of sales, procurement and capacity utilization

Improve layout of existing production facilities and enhance regional matching of production and sales

Build up new capacities for products with strong growth potential in a fast manner

Integrate and optimize existing manufacturing plants and improve asset utilization

Introduce intelligent tools to improve distribution efficiency and customer service with the three models under “Route to Market” initiatives

Optimize distribution models and effectively improve product freshness

Improve Supply Chain Management

Production capacity layout

Logistics &

transportation



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Enhance Execution of

Business Strategies

Upgrade product quality to enhance product competitiveness

− Milk Deluxe upgraded to contain 3.6g of quality milk protein and 120mg of calcium

− Basic pure milk products upgraded to contain 3.2g milk protein per 100g

Promote long-term and sustainable growth through optimization of product portfolio

Strengthen brand marketing

− Milk Deluxe – “Rebirth of National Music;” Pure Milk – “Excel in Rio, Run China;” Just Yogurt –

“Run for Time”

Contribute to brand internationalization

− Cooperation with NBA and Shanghai Disney Resort; Embed product into Hollywood movie

Room temperature products business –

concentrate on both product mix upgrade and brand building

Chilled products business – accelerate innovation supported by precise marketing

Focus on key products while committing resources on basic products

Conduct market research and actively promote innovation

− Launched new products for Champion, Yoyi C and basic yogurt

Eliminate underperformed brands and concentrate resources on brands with advantages

Enhance brand building through high-profile marketing events to strengthen consumer

connections

− Cooperation with “Chef Nic”

− Strategic cooperation with national swimming team



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Enhance Execution of Business

Strategies (Cont’d)

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Ice cream business – transform into independent business

unit and realize more focused operation

Milk powder business – continuously promote upgrading

and transformation

Redefined product offerings to provide diversified products for different consumers

− Deluxe branded ice cream & Mengniu sub-branded popsicles

Introduced new products to strengthen product competitiveness

Reinforce execution of channel and sales strategies

Customized eight types of ice creams for Shanghai Disney Resort

Acquisition of Dumex China completed which will bring benefits in the aspects such as

production, sales network and R&D

Further diversified product offering to serve demands from different consumers

Continuously improve penetration of mother & baby store and e-commerce channels

Launched new product imported from New Zealand with original packaging through

multiple channels in China which was simultaneously introduced in New Zealand market

Started supply chain integration and accelerated optimization of production capacities



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Seek Growth through Innovative

Initiatives

Internation

-alization Digitali

-zation

Partner-

ship

Eco-

system Launch partnership

program and layout

burgeoning businesses

Benchmark international strategic

shareholders to innovate process

establishment

Construct “Win-Win &

Innovation” ecosystem with

global leaders focusing on

milk sourcing, quality control,

R&D and production

Rank No. 1 for liquid milk through e-commerce

channel with online channel gradually perfected

Establish strategic cooperation

with Alibaba and JD with potential

benefits in logistics, marketing and

channel penetration

Conduct consumer research,

realize precise marketing and

drive innovation of products

and channels via Big Data

Introduce global best practices and leading

technologies to strengthen competitiveness

Build nutrition research institute

with UC Davis and integrate

international resources to

enhance innovative R&D

capabilities



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Strengthen talent base for strategic development

Promote management system upgrade and effectively

improve operational efficiency

Inherit and develop Mengniu culture

Strengthen Organizational Capability

People

System

Culture

Launch “Key Personnel Training Program” and promote capability

upgrading of talents

Implement “Employee Happiness Project” and enhance employees’

engagement

Build consumer-centric organization and process

Establish human resources information platform

Optimize employee incentive system

Establish and implement Mengniu’s new corporate culture

values



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Vision Mission

To become a century-old, consumer-centric, innovation-led health and nutrition food company

Focus on nutrition and health, deliver a drop of happiness for every moment and every day to more people

Values

Integrity Innovation

Passion Openness

22

New Corporate Culture



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Investor Relations

2016 interim results mengniu