March 28, 2018 / 1:04 AM / 2 years ago

UPDATE 1-China Mengniu returns to black in 2017, lags forecasts

* Revenue rises 11.9 pct in 2017

* Gross profit margin up 2.4 percentage points to 35.2 pct

* Sees new development opportunities from upgrade of consumption (Add management comment, details)

HONG KONG, March 28 Reuters) - China Mengniu Dairy Co Ltd said it returned to profit in 2017, helped by low raw milk prices and solid sales growth for its milk and yogurt products.

China’s biggest manufacturer said late on Tuesday annual net profit came in at 2.05 billion yuan ($326.5 million), compared with a loss of 751 million yuan in the prior year when its unit Yashili International Holdings booked a heavy impairment loss on its goodwill.

The result missed a Thomson Reuters StarMine Smart Estimate of 2.3 billion yuan drawn from 26 analysts. Smart Estimates give greater weighting to more accurate analysts.

Revenue rose 11.9 percent to 60.16 billion yuan. Gross profit margin increased 2.4 percentage points from a year ago to 35.2 percent amid relatively low raw milk prices and an improving product mix.

Chief Executive Officer Jeffrey Lu said the company would look for opportunities from rising consumption of mid- to high-end products such as yoghurt, as well as the growing popularity of milk products among younger consumers.

“Mengniu will follow closely the trend of consumption upgrade and move toward the middle and higher end of the value chain,” he said in a statement.

Mengniu also said the dairy industry was looking at a revival of sales of liquid milk and milk powder amid a recovery in consumer confidence and the roll-out of China’s two-child policy. Looking forward, Lu said the dairy product industry was “expected to maintain relatively fast growth in the next 5 to 10 years”.

Mengniu is stepping up development and sales of premium products that are gaining favour with Chinese consumers and is working with partners like Danone Group and Arla Foods to bring more dairy goods to China.

$1 = 6.2781 Chinese yuan renminbi Reporting by Donny Kwok; Editing by Edwina Gibbs and Stephen Coates

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