China Mengniu Dairy's earnings go sour
Mainland firm vows to improve controls after profit falls 18pc amid food-safety scandals
China Mengniu Dairy plans to undertake more quality-control measures, after sales were severely hit by quality-related scandals in the first half of the year.
The largest dairy producer on the mainland saw its net profit plunge 18 per cent to 645 million yuan (HK$789.16 million) in the first six months while revenue fell 1.2 per cent to 18.4 billion yuan.
The company, based in Inner Mongolia, said sales volume plunged nearly 30 per cent after a government check in December found its milk products contained unsafe levels of flavacin M1, a cancer-causing substance.
Chief financial officer Wu Jingshui blamed the drop in net profit on aggressive spending on marketing to regain consumer confidence, and extra costs for product inspection.
"The incident has taken a bigger toll on Mengniu than expected," said Sunny Kwok, an analyst at Guotai Junan Hong Kong.
"It will affect sales expectations for the rest of the year as well."