Mengniu is still waiting for a market turnaround: Profitability slightly decreased, asset divestment continues

The long cycle chill in the dairy industry has left a profound mark on Mengniu’s 2025 financials.

On March 6, Mengniu disclosed its 2025 earnings forecast, with total revenue declining by 7% to 8% year-on-year, basically in line with the revised guidance given at the company's 2025 interim results meeting.

However, in terms of key indicator operating profit margin, there is a certain gap between the actual performance in 2025 and the management’s target.

When the 2025 half-year report was released, management held a relatively optimistic view on the second half’s profitability outlook.

At that time, Mengniu expected that although revenue would be under pressure, the gross margin could benefit from falling raw milk prices and the continuous implementation of cost reduction and efficiency improvement measures, with the operating profit margin for the full year likely to be on par with 2024’s 8.2%.

But the latest forecast shows that the 2025 operating profit margin is expected to be between 7.9% and 8.1%, slightly down year-on-year.

To cope with cyclical industry adjustments, Mengniu continues to strengthen its asset clearance efforts.

According to the latest announcement, the company plans to make impairment provisions of about 2.2 to 2.4 billion yuan on idle production facilities and some financial assets of questionable recovery.

Compared with the approximately 4 billion yuan provisioned for Bellamy’s goodwill and other items in 2024, the current impairment is narrower, so Mengniu has locked its full-year net profit expectation at 1.4 to 1.6 billion yuan.

At the actual business level, benefiting from stabilized raw milk prices and a recovery in demand, Mengniu’s liquid milk income rebounded quarter-on-quarter in the second half of 2025; fresh milk, milk powder, and cheese categories all recorded double-digit growth for the full year, highlighting the trend toward diversification.

In addition, Mengniu is also deeply cultivating the B-end tea drink and coffee supply chain through its “Milk Cube” business division, actively building a new growth logic.

The industry has not yet reached a turning point. According to channel feedback, overall dairy product performance was flat during this year’s Spring Festival.

Wang Xuewei, Sysource Hengyue partner, noted that both Yili and Mengniu saw single-digit declines, with Mengniu’s drop being slightly larger. Aside from the supply-demand imbalance not being fundamentally resolved, the diversification of festival gift categories continues to enhance substitution effects for traditional dairy products.

However, upstream supply-side clearance signals are gradually strengthening.

Wang Xuewei told Xin Feng that the price of bulk milk in January has bounced back to about 3 yuan per kilogram, basically on par with the contract milk price of 3.04 yuan, compressing the cost advantage of small and medium dairy companies; currently there is basically no milk powder spraying phenomenon in the industry, indicating the supply-demand balance point is gradually approaching.

In his opinion, based on the current inventory and destocking pace, capacity clearance is expected to be completed in the first half of 2026. Combined with rational expansion in the industry, milk prices may enter a relatively long upcycle.

"But the market still has fluctuations before then," Wang Xuewei reminded, "Spring Festival data was not ideal, and in February the price of bulk milk fell from around 3 yuan back to below 2.7 yuan, reflecting the industry is still weak."

Market opinion believes Mengniu's current defensive stance—cutting investment, strictly controlling capital expenditures, and accelerating asset depreciation—is essentially accumulating strength for a possible industry turning point in the first half of 2026.

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