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HK Bourse: Results Announcement From Yuanshengtai Dairy Farm Ltd. -5-

28 Aug 2017 3:32 am
 
 
 
supply in the upstream market and the impact of global economic environment. During the Period, despite the 
unfavorable operating environment, the Group still managed to sell raw milk at a price higher than the market 
average price. The average selling price of our raw milk was RMB3,845 per ton for the Period, representing 
a decrease of 4% as compared to that in the same period of last year. 
 
Outlook 
 
Based on the current market conditions, it is estimated that the consumption for liquid milk in 2017 will 
reach 37.28 million tons. On consumptions, China market is now in the stage of consumption upgrading. 
The consumption from first- and second-tier cities is almost at full capacity, while the consumption from 
third- and fourth-tier cities will be the main driving force for needs. With the improving consumption power 
of the residents in the People's Republic of China (the "PRC"), as well as their consumption habits for 
dairy products gradually becoming mature, the consumption will continue to grow. In addition, with overall 
liberalization for China's two-child policy, the new population is expected to grow nearly 2-3 million each 
year, which will increase the demand for infant formula milk powder. As a result, the overall consumption 
for dairy products in China will maintain an uprising momentum in the next few years, and our business will 
strive to achieve profit growth in this good environment. 
 
Our Revenue 
 
During the Period, our total sales of milk produced decreased by 4.3% to RMB492.5 million as compared with 
RMB514.4 million in the first half of 2016. The decrease of total sales was mainly due to a decrease in the 
price of domestic raw milk. The average selling price of our raw milk dropped to RMB3,845 per ton compared 
with RMB4,005 per ton in the first half of 2016, representing a decrease of 4.0%. The sales volume reached 
128,067 tons, representing a decrease of 372 tons as compared with 128,439 tons in the first half of 2016. 
 
Cost of Sales 
 
Our cost of sales for the Period was RMB360.8 million. The table below summarizes the components of our 
cost of sales by nature for the six months ended 30 June 2017 and 2016: 
 
                                                                             Six-month            Six-month 
                                                                          period ended         period ended 
                                                                          30 June 2017         30 June 2016 
                                                                              RMB'000              RMB'000 
 
Cost of sales 
                                                                                262,161 
  Feed                                                                                              249,708 
                                                                                 25,368 
  Salary, welfare and social insurance                                                               23,273 
                                                                                 26,751 
  Depreciation                                                                                       22,055 
                                                                                 19,090 
  Veterinary cost                                                                                    12,705 
                                                                                 27,409 
  Other cost                                                                                         30,194 
 
 
                                                                                360,779 
Cost of sales, total                                                                                337,935 
 
 
 
 
                                                   - 11 - 
Feed costs represent the feed consumed by our milkable cows. The feed costs for milkable cows were 
RMB262.2 million and RMB249.7 million for the six-month periods ended 30 June 2017 and 2016, 
respectively, representing 72.7% and 73.9% of the cost of sales for the respective six-month periods ended 
30 June 2017 and 2016. The increase in our feed costs was attributable to the increase in feed prices and our 
efforts to optimise the feeding formulas. 
 
Gross Profit 
 
Resulted from the factors discussed above, the gross profit decreased to RMB131.7 million for the Period 
(the same period in 2016: RMB176.4 million), representing a decrease of 25.4%. Our gross profit margin 
decreased from 34.3% for the six-month period ended 30 June 2016 to 26.7% for the Period. 
 
Other Income 
 
                                                                             Six-month            Six-month 
                                                                          period ended         period ended 
 
                                                                          30 June 2017         30 June 2016 
                                                                              RMB'000              RMB'000 
 
Other income 
                                                                                  2,694 
  Government subsidies                                                                                   356 
                                                                                  9,564 
  Interest income from bank deposit                                                                    1,096 
                                                                                  6,445 
  Sales of male calves                                                                                 2,759 
                                                                                  6,033 
  Sales of milk powder                                                                                   820 
                                                                                  2,759 
  Others                                                                                                 616 
 
 
                                                                                 27,495 
Other income, total                                                                                    5,647 
 
 
Other income for the six-month periods ended 30 June 2017 and 2016 amounted to RMB27.5 million and 
RMB5.6 million, respectively, representing an increase of 386.9%. 
 
Selling and Distribution Expenses 
 
All of the Group's selling and distribution expenses were transportation expenses of the Group's raw milk. 
Our selling and distribution costs were RMB9.5 million for the Period (the same period in 2016: RMB9.0 
million). The increase was mainly due to more sales in the Period made to customers located farther to our 
farms. 
 
 
 
 
                                                   - 12 - 
Administrative Expenses 
 
The table below summarizes the components of our administrative expenses: 
 
                                                                              Six-month            Six-month 
                                                                           period ended         period ended 
                                                                           30 June 2017         30 June 2016 
                                                                               RMB'000              RMB'000 
 
Administrative expenses 
                                                                                  12,106 
  Salaries and welfare                                                                                 15,987 
                                                                                   3,227 
  Amortization                                                                                          2,623 
                                                                                   3,057 
  Travel, meal and entertainment                                                                        3,133 
                                                                                   4,441 
  Professional fee                                                                                      2,524 
                                                                                     500 
  Depreciation                                                                                            410 
                                                                                   3,423 
  Insurance                                                                                             3,483 
                                                                                     641 
  Write-down of inventories to net realisable value                                                    18,954 
                                                                                   3,097 
  Other expenses                                                                                        5,743 
 
 
                                                                                  30,492 
Administrative expenses, total                                                                         52,857 
 
 
We incurred administrative expenses of RMB30.5 million for the Period (for the first half of 2016: RMB52.9 
million), representing a decrease of approximately 42.3% as compared to the same period of 2016. The 
decrease was mainly attributable to the decrease of the write-down of inventories to net realisable value 
occurred in the Period. 
 
Other Expenses 
 
                                                                              Six-month            Six-month 
 
 
 
 

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