Inner Mongolia Yili Industrial Group Co., Ltd. (Yili) announced on March 26 that the shareholder’s net profit for 2024 was only 105 million yuan, a 97.8% decrease compared to the previous year’s 4.809 billion yuan. This news quickly became a hot search topic on Baidu on March 30.
In the annual performance announcement for the year ended December 31, 2024, released by Yili on March 26, the company reported a full-year revenue of 88.67 billion yuan, a 10.1% decrease year-on-year. The net profit attributable to equity shareholders was 1.045 billion yuan, down 97.8% from 48.091 billion yuan in the same period last year.
An analysis by Guangzhou Daily on March 28 pointed out that as China’s second largest dairy enterprise, Yili had maintained a net profit of around 5 billion yuan in the past few years. The significant drop in net profit in 2024 was mainly due to the drag from merger and acquisition projects.
In 2024, the Chinese dairy industry faced dual pressures of oversupply of raw milk and insufficient terminal demand. Liquid milk, which accounts for 82.4% of Yili’s core business revenue, decreased by 10.97% year-on-year to 73.066 billion yuan, becoming the main reason for the overall revenue decline. However, thanks to the downward trend in raw milk prices and refined cost control, Yili’s gross profit margin increased to 39.6%, with an operating profit margin of 8.2%, reaching a historic high.
Moreover, Yili made provisions for goodwill and impairment of intangible assets totaling 4.645 billion yuan for its Australian milk powder brand “Bellamy” during the year, and its joint venture company Modern Dairy incurred a loss of 827 million yuan due to changes in the fair value of dairy cows, which cumulatively affected the net profit by 4.33 billion yuan.
On March 28, the International Financial News stated that the 2024 financial report was the first report submitted by Yili’s new president, Gao Fei, after one year in office. However, the media believed that the sharp decline in profits this time was a “legacy” left by the former president, Lu Minfang.
During Lu Minfang’s tenure, he led a series of capital operations, such as the acquisition of Bellamy, the merger with Maling, and cooperation with Modern Dairy, to expand the company’s business footprint in areas such as powdered milk, cheese, and upstream supply chain. These expansion moves increased the company’s scale from 53.8 billion yuan in 2016 to 98.6 billion yuan in 2023, but they also repeatedly dragged down Yili’s profits. These acquisitions did not meet expectations and resulted in losses for the company. For example, in 2019, Yili acquired Bellamy for about 7.1 billion yuan at a premium of nearly 5.2 times, but in the following years, Bellamy’s performance fell short of expectations, leading to an accumulated impairment of goodwill of 1.362 billion yuan.
Guangzhou Daily believes that Yili still faces multiple challenges, including the impact of impairment of goodwill, continuous devaluation of acquisition targets such as Bellamy and Asile, which expose the risks of aggressive expansion strategies. Additionally, the gap between Yili and China’s largest dairy enterprise, Inner Mongolia Yili Industrial Group, further widened in the first half of 2024, with Yili’s net profit being only one-third of Yili’s. In the future, balancing mergers and acquisitions with financial health and cultivating a truly “second curve” will be key to whether Yili can return to the fast lane of growth.