China Mengniu Dairy's Higher Margins Support Ratings Despite Weaker Sales, S&P Says

MT Newswires Live09-04

China Mengniu Dairy's rising margins will cushion the company's ratings amid weak revenue generation, S&P Global Ratings said in a Monday release.

Cheaper input costs, a steady operating cash flow and better product mix will prop up the dairy producer's margins, S&P said.

S&P forecasts an increase in the company's standalone EBITDA margin of between 30 basis points and 50 basis points from 2024 to 2025.

The company's sales have faced pressure from weak demand, oversupply of raw milk and heightened competition from white-label milk processors, the rating agency said.

S&P expects the glut of raw milk to continue until 2025, which will also mark when the company's revenue will rebound.

The rating agency also sees the company targeting a debt leverage below 2x despite increased shareholder returns, with an estimated debt-to-EBITDa ratio of 1.5x as of end-June.

Price (HKD): $12.82, Change: $-0.14, Percent Change: -1.08%

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