Jinwu Financial News | China Shengmu (01432) issued a profit warning. As of December 31, 2023 (“reporting period”), the Group is expected to record profit attributable to owners of the parent company between RMB 75 million and RMB 90 million (2022: RMB 416 million), a year-on-year decrease of about 78% to 82%; cash EBITDA ranges from RMB 960 million to RMB 1 billion (2022: RMB 937 million), a year-on-year increase of about 2.5% to 6.7%.
The profit expected to be accounted for by parent company owners during the reporting period decreased compared to 2022. The main reasons are as follows: 1. In the context of an industry where prices in the raw milk market continued to decline due to weak domestic consumption of dairy products, the Group strengthened operating efficiency to achieve a year-on-year decrease in the sales cost of kilogram milk, but due to the fact that prices of raw materials were still relatively high, the extent of the decline was difficult to make up for the decline in raw milk prices, which led to a decrease of about 1% to 2% year-on-year in the Group's gross margin during the reporting period compared to 2022; and 2. Losses due to changes in the fair value of biological assets to reduce sales expenses increased by more than RMB 400 million compared to 2022 This is mainly due to (i) the Group actively retiring inefficient cows to improve the structure of high-quality dairy herds, and the number of retired cows has increased significantly compared to 2022; and (ii) factors such as declining sales prices in the raw milk market, high feed costs, and falling beef market prices, which led to a year-on-year decline in the valuation value of biological assets.