China Mengniu Dairy Co., Ltd. Stock

Investors, analysts, journalists, good morning to you. This is the China Mengniu Dairy Company Limited 2026 Interim Results Announcement. Thank you for your participation, and thank you for your continued support.

First of all, let's look at the disclaimer page on the screen. Next, let me introduce the company representatives, Mr. Gao Fei, CEO and Executive Director; CFO and Executive Director, Mr. Shen Xinwen; Vice President, Chen Yiyi; Vice President, Mr. Li Pengcheng; and the Company Secretary, Mr. Chris Kwok.

Today, we will have Mr. Gao Fei to talk about the financial summary for 2026 interim. And then we will have the presentation. After that, we will have a Q&A session. The meeting will end at around 10:50. Mr. Gao Fei, please.

I do not know how well you rested last night. Yesterday's storm was really thunderous and really noisy. I hope you have rested well. So friends, investors, analysts, good morning to you. First of all, I would like to welcome you to the 2026 interim results announcement of China Mengniu Dairy. For the interim results, I'm sure you have gone through this. And today, I'm going to use this as an opportunity to run you through briefly the results for Mengniu Dairy 2026.

Now for the industry, overall speaking, for -- it has been stable and also the consumption has been stable. And in this mist, Mengniu was quick to seize this megatrend. So through sharp consumer insights and also proactive product innovation and full channel expansion, we were able to stay focused on our high-quality growth, and we were able to deliver on our One Core, Two Wings strategy with full spectrum growth. And the metrics as performance exceeds our expectation, and we outpaced the sector.

For revenue, it rose 7.8% year-on-year to RMB 45 billion, which is ahead of what we have communicated to you in the beginning of the year for mid-single-digit growth guidance for the full year. As for gross profit, it grew 5.2% to RMB 18.3 billion with gross margin at 40.8%, which is down 0.9 percentage points year-on-year. Now for the competition and also -- which had intensified and so also with falling raw milk prices in the past couple of years, we have been able to offset it by margin improvements. And since the last time that we communicated, since May of last year, we have adjusted prices for some of our milk products to support our channel partners and also for the consumers.

So rising costs for the year had brought on impact for margins. And also, we expect costs to rise as well. So for the second half, there has been a returning to favorable environment and picked up year-on-year in the second half. So amidst this mega market shifts, we pushed ahead with our strategy of high-quality development growth, that is, One Core, Two Wings. And operating profit, as a result, rose 3.9% to a record RMB 3.68 billion. Operating margin was 8.2%, down 30 basis points year-on-year, largely due to lower gross margin and a high base of 8.5% in the first half of 2025. But still, overall, it is better than last year's full year figure of 8%.

Next, if we look at the different product segments, for liquid milk, it was RMB 33.9 billion, which is a growth of 5.3% (sic) [ 5.2% ], outperforming the industry and key competitors. For ice cream, it was RMB 4.2 billion, and this is very good growth and 8.5% growth year-on-year and double digits for domestic and mid-single digits for overseas growth. Cheese was up 32.6%. Powdered milk was CNY 2 billion and a growth of 22.8%. Now 2 years ago, at the same occasion, I had mentioned that we will be extracting the value from further growth, and that is, we will be going for high-end milk and drink better, and we will diversify our portfolio. And last year, if you consider the second half for the plants, the milk powder plants, it was incomparable, I would say. So for powdered milk and also for cheese categories and fresh milk, they have each grown 30%. So this shows our strategy of Drink Milk, Drink Better, Drink Right is in full swing, and our category diversification goals are also reaping results.

Next, let's talk about selling and admin expenses. We continued with our efforts on lean operation and efficiency improvements. And this had raised our revenue growth and operating leverage. And the admin expense ratio fell 0.4% to 4.3%, and selling and distribution expense ratio declined 0.3% to 27.6%.

For operation efficiency, it remains healthy with notable improvements in inventory turnover and receivables days. Inventory days dropped 5.5 days to 30.5, which is driven mainly by raw milk powder inventory and stronger sell-through. For payables, it has decreased 5.2 days to 57.6 days. In this challenging industry cycle, we were able to shorten the payment cycles to our upstream suppliers and to support our overall ecosystem resilience. We have always been talking about this, supporting the win-win situation in the entire ecosystem of the industry.

As for cash flow and CapEx, operating cash flow is RMB 2.5 billion, and this is down mainly because of the one-off income tax payment last year, and that was one-off for last year. And for fixed CapEx, it has declined to RMB 490 million (sic) [ RMB 493 million. ] And given strong growth in Bellamy's and some of the fast-growing businesses, now facing supply shortage. So we have clear potentials in fresh milk, high protein, and we continue to dynamically assess the CapEx increases in these areas to position ourselves for the next phase of structural transformation. So that includes also deep processing segments as well. So in the next phase of industry adjustments, we will be able to grasp the opportunity with early positioning.

Concerning shareholders' returns, our solid operating and cash flow performance has underpinned the long-term value creation for investors and also for society at large. And this keeps raising the shareholder return, and we are very confident about this. And basically, for our channels and also for our stakeholders and also definitely for our shareholders, we are very cognizant of the increased return. And in March, we announced a 2025 to '27, 3-year shareholder return plan. So we keep stable the dividend payout ratio. and at the same time, maintaining our buyback or share buyback pace that we have established in '24/'25, continuing to deliver returns through a dividend plus share buyback approach for our shareholders.

Now for business review and outlook. For the One Core, Two Wings strategy in the past 2 years, we have continued to adhere to this to anchor the consumer nutrition needs and also strengthen our 6 businesses, the 6 businesses being the Core, while breaking new ground with the Two Wings, which is nutrition health and international expansion. So with 1.5 years ago, we added the Drink Milk, Drink Better, Drink Right initiative to navigate the overall cycle. And after 2 years of disciplined execution, this blueprint is already delivering tangible results.

Next, I will talk about the different areas. First of all, in the first half of the year for the different business segments of the company, they have all accelerated, and we outperformed the industry. So as the sector improved, Mengniu had done even better. So we call that this is the 8 steeds galloping together. That's the 6 core businesses plus the Two Wings businesses, all advancing in synergy and in tandem. So this underpins the key dimensions that we have. So with this synergistic development, there are a few key mentions that I'm going to introduce to you.

First of all, strategic position and execution. So that's from planning to getting results. So this is not just a slogan, but really an action plan, driving diversification and a shift from scale expansion to value creation. Second, lean management. So we continue to pursue excellence, and we continue to activate the operation. We deepened the headquarters capabilities and also the business unit's execution model. This streamlines processes, and also we use data to boost our operational efficiency, bringing us to a high level of operational excellence. Thirdly, it is about product excellence, that is, from volume to relevance to our end users and consumers. How do we calibrate our strategy so that it is accurate by translating our consumer insights into products that are refinedly tailored to the new demographics and also the drinking scenarios and also the consumer channels.

Now for the channel, which is the fourth area, there is further refinement through broad coverage to precise reach. We accelerate the RTM transformation and shore up traditional channels and capture growth through new channels and scenarios. The fifth one is brand precision. From awareness to conversion, and we move beyond mere exposure to drive engagement and also sales conversion. All this is rooted in our consumer-first value, strengthening the core, expanding the wings, refining products and deepening the channels, all serve the purpose of helping consumers Drink Milk, Drink Better, and Drink Right. So this is creating value in these areas in order to basically just serve the single purpose of really meaningfully having our consumers drink milk, drink better milk and drink the right milk. So this is our mission, and this is our vision, and we've done a lot of work in this regard.

So starting this year, 2026, in terms of our brand marketing, especially the 2 major [ IPs ], this is explosive for our company, including for the top-tier sports, the IPs. So we leveraged the 2 major mega events to build an integrated brand efficiency to sales capability, that is, turning the brand momentum into real business growth. So from the beginning of the year, that was exactly the time of the Milan Winter Olympics, and it coincided with the CNY. So we orchestrated a full category, full brand campaign across communications, products, channels, and overall. So it was integrated in terms of our synergistic growth. And this drove, in January to February, the sales growth by double digit. And also in e-commerce and O2O performance, we also registered a strong, solid start of the year.

Now after the Winter Olympics, shortly after, we had the World Cup, and we continue to refine our playbook to build the Champion IP narrative. So that was resonating with the mass audiences, and also through engagement, we were able to further cement our always-resilient, never-give-up brand spirit. And also, we were able to set a new benchmark in terms of sports marketing.

So in terms of sports marketing, that was a completely new level that we have achieved. Now with this brand momentum, what is most important ultimately is to translate it into business growth. So let me now talk about the performance of our One Core, Two Wings strategy. First of all, for UHT, in the past 2 years, there had been some challenges in terms of supply and demand and channel challenges in the past 2 years. But what we want to do is to grow the pie. So it is not about just competing, but we chose to innovate and to open new markets. So this is by creating value. And only by creating value, can we grow that pie and open new markets.

For the March results briefing, I previewed some functional nutrition products. And at the World Cup kickoff, we officially unveiled M-PLUS daily protein native high-protein milk. As you all know, today, high protein is exactly what the market is looking for. So from domestic China to international markets, this is a highly accelerating market segment. So in the past few years, from technology to development to delivery, we have been putting in a lot of efforts. So this is our own R&D, and we have been able to have the 15 gram of native protein per bottle delivered to our consumers without adding protein powder. And also, we had the enzymatic hydrolysis, which removes lactose. So as I have mentioned in past briefings, I -- today, I would want you to actually taste it with this great taste of this new product. I would urge you to try it out today.

And I believe it will exceed your expectations. And also for the -- this new product, it is highly targeted, and this is a very good brand with a new product, which is answering the need of the market. And all the more, it is about the consumers about the scenarios, and pursuing excellence for our product. It is an excellent product of ours, it's new product. And after our Milk Deluxe, Telunsu, this is going to be another major product. So this is about targeting the diverse scenarios, in particular, for the needs in milk calcium, electrolyte drink, whey protein, isolate water. This is for light outdoor activity and on-the-go protein supplement.

And also, we have other products as well, the [ Satine ] Hi! Milk functional product range, for instance, combining premium quality with actual functionality. So we also have these proprietary strains with probiotic strains in the yogurt, expanding our precision wellness. So with [Foreign Language] BUFF, which is another of such functional series and also with our premium brands and also our Milk Deluxe, we are making it the products a lot more precise and a lot more functional. So these are strong products with our integrated brand channel marketing upgrades.

So this is about developing the channel and also meeting the needs very precisely for the market. So with these upgrades and growth, in the first half, both Mengniu branded pure milk and also with our Deluxe Milk, we have delivered high single-digit growth continuing to anchor our very good performance. As for chilled dairy, we continue to expand the channel and to drive growth. So in the first half, we continue to lead the category value innovation for product mix optimization and channel development, maintaining #1 market share in chilled dairy, and we also leveraged various IPs, including our yogurt product.

We amplified our 5A standard yogurt quality message and also our high-protein products. And also for [indiscernible], we anchored it for our yogurt segment, promoting its certified immunity-enhancing qualities. And so this is within our portfolio, and there is still a lot of room for further development. For yogurt, for example, or Yoyi C, it is insufficient in terms of what we have done. Well, that is to say that we have a lot of space for future growth and development. So for these products, we want them to be high functioning and also to have even more growth. For channels, we continue to expand our partnership with membership stores, O2O, snack wholesalers, et cetera so as to vertically integrate the platforms and to cement growth.

For the fresh milk business, we grasp the channel shift opportunities and our revenue have increased by 30% and we also have increased the market share and further narrowing the gap with the leader. For the first half of the year, the 2 major sports IP campaigns drove strong brand exposure and sales for Shiny Meadow with the World Cup legendary jersey bottle proving a hit with fans. We built a full channel brand efficiency sales loop, driving notable growth in O2O and interest-based e-commerce platforms, extending our online leadership.

And our -- we have also very rapid growth, omnichannel. So overall, the chilled yogurt and fresh milk continue to grow. So our sales remain at the #1 position with the liquid milk. And with ice cream, we focused on product innovation, channel breakthrough and brand upgrades. As the World Cup's official ice cream, we appeared in stadiums and leading U.S. supermarkets, while bring the same products to the Chinese consumers. Beyond the traditional channels, we accelerated expansion into membership stores, snack retailers, fresh food e-commerce, as well as O2O achieving solid breakthroughs in new retail and new scenario growth.

For the ice cream segment, we have had huge breakthrough. So for H1, this sector, the growth grew by -- the revenue grew by 10% with new products contributing significantly and profitability improving in tandem. For milk formula, for H1 on a comparable basis, it grew over 30%. But I mentioned earlier, there was a one-off item with the sale of the milk powder factory in New Zealand. And Ruibaoan continue to strengthen the growth, and we also have invested a lot in R&D in breast milk nutrition and delivered nearly 20% growth on top of the 2025's increase. And we provided a significant support technologically to these functional products and that's why we have maintained a growth of 20% since last year. And for Yourui we focused on tailored formulas and precision nutritions for the seniors and to grow robustly online and offline channels. Bellamy's is the same, the brand equity jumped through the IP, and we've achieved a revenue growth of over 60%. And we hope that by the end of the year, we would like to achieve the sales we had when we acquired Bellamy's. And the team do have the confidence, but the major issue we need to solve is the out-of-stock issue.

Well, for the cheese business, drink milk, drink milk, drink good milk, and drink the right milk. And we also need to eat the milk, and this is another important upgrade we want to achieve. So for first half of the year for the cheese sector, we have had very good growth over 30%. For Milkground, it has delivered over 20% growth over 3 consecutive quarters. Both revenue and profits hit new highs since Mengniu took control. For both B2B and B2C, it has grow by over 20% with emerging channels becoming key growth drivers. Milkground has entered a phase of systematic and professional development. And more importantly, our cheese foundation is solidifying. In August this year, we launched our global cheese R&D innovation center and had the huge conference. And we also benchmark ourselves with the global market. And we have also moved from product-driven to R&D-driven growth. And we would like to build delicious cheese and from eating cheese to eating good cheese, we are leveraging our capabilities in proprietary R&D, flavor innovation, and category expansion.

For the 2 wings, strengthen the core is just one part, and our Two Wings are also taking off, injecting new growth drivers. For the nutrition and health innovation sector, we've had very good growth. And for the advanced processing, I have mentioned a few times, China's dairy industry has long relied on imported key ingredients, and we faced seasonal milk surpluses and had low value-added products. So currently, advanced processed products account for less than double digit.

Under such the context, we established the Nailifang business unit and launched the new brand, MnmpX, which is dedicated to precision separation, purification, and separate precisely the nutritions and have full utilization of the milk components. And we successfully launched independently produced lactoferrin. This year, it has grow dramatically. We have launched the independently produced lactoferrin membrane-separated casein and D90 desalinated whey powder. The lactoferrin, a core functional ingredient in infant formula requires 14 kilograms of milk to extract 1 gram only. Previously, over 90% of it was imported. But now we are accelerating the growth of locally produced substitution.

And in medical nutrition, we have good breakthroughs as well. We developed this product, which is called Ruibaoan, and it's already been brought into the market, and it's China's first domestically produced special medical food for PKU children aged 0 to 12 months, a category previously relied on imports. PKU is a rare disease, and we've already told the investors, for those who suffer PKU, they would have stricter control over the intake of proteins.

We launched such product not just to build a technological benchmark. We also see it as a social responsibility. We need to build reliable supply chain and offer cost-effective products and bring peace of mind to children who suffer from this disease, providing them with the right nutrition.

For the international business, the Hong Kong and Macau market. First, the Shiny Meadow product has achieved triple digit growth, and we've also launched the ice cream products and continue to roll out the products across the region. And yesterday, we also have launched the full range of Milkground products into the Hong Kong market. So this year, overall, we're going to have great performance of our business here in this region.

And in Southeast Asia, Aice remains #1 in Indonesia, rose to #2 in the Philippines, and reached #2 in Vietnam. Bellamy's is also expanding rapidly across the region. We're going to bring also this Australian organic nutrition to the Southeast Asia. So we continue to strengthen our Southeast Asian presence and our Oceanian base, serving more consumers globally.

When it comes to management upgrade, business growth rests on a solid management foundation. One Core, Two Wings defines our growth trajectory. Well, management upgrades will determine our future development, whether it's going to be stable or sustainable. Since early this year, we have initiated a comprehensive management upgrade covering governance, rule systems, strategic alignment, organizational structure, leadership development as well as culture, systematically upgrading our corporate operating system. The transformation focuses on 3 shifts. The first one is from rule by people to rule by data, enhancing decision-making precision and embedding individual capabilities into processes.

Number two, from silos to enterprise-wide synergy, breaking down internal barriers and creating a unified coordinated operating model. Number three, from control to empowerment. Headquarter focuses on strategy, rule setting, resource allocation, and ecosystem enablement, empowering frontline teams to make decisions with full support. And this will help to invigorate the vitality of the whole business. So we would like to make governance more standardized, collaboration smoother, and operations more efficient. Management upgrades are a long-term deep-rooted transformation that will steadily strengthen Mengniu's ability to navigate cycles and grow sustainably. So that was on management upgrade.

Now I would like to talk about technology and innovation. Technology and innovation is Mengniu's growth engine and our core moat. It determines how far we can go and how high we can reach. We are building right now a length, breadth, and height 3-dimensional innovation system. We'd like to build a world-class R&D platform to support high-quality development. First, length. Long-term R&D investment across the full value chain from seed technology, and forage, and soil improvement to smart manufacturing, green packaging, building an integrated self-reliant innovation system and reinforcing supply chain resilience and also build our cost advantages over time.

Second, breadth. We have 9 R&D centers, and we also have more than 11 academicians working for us, and we want to cover basic nutrition, functional nutrition, medical nutrition across the full life cycle of our products, diversifying our growth revenues -- avenues and smoothing out the category volatility. We had this conference in Ulan Buh, and it was a very successful conference and very impactful as well. It helped to lay the foundation, directing us to our future R&D work.

And the third one is height, leveraging our [ prioritary ] core platforms, nondestructive separation, 10,000 strain local probiotic ecosystem and synthetic biology for precision nutrition and full chain clinical research augmented by AI-powered R&D and also tackle industry bottlenecks. I mentioned earlier, products like lactoferrin and [Foreign Language] and also Ruibaoan and other innovative products are all successful outcomes of such R&D platforms we've built. I've often said that the next decade of dairy competition will shift from scale and channel battles to technology-driven category innovation and value creation. That is the core logic.

This framework means that we can better differentiate ourselves and we can build our second growth curve and also sustain our margin improvement and overall achieve high-quality development. I believe with management upgrades as well as technological innovation work in tandem, I'm confident that Mengniu is well equipped to navigate industry cycles and achieve high-quality growth.

Lastly, I would like to talk about ESG development. For Mengniu, sustainability is not an optional extra. It's the operating ethos woven throughout our entire value chain. And it is also the underlying logic for long-term resilience. It's where commercial, ecological, and social value converge. The best example of that is the Ulan Buh Desert. 17 years ago, it was a barren wasteland and we chose the path of ecological industrialization and industrial ecology. Through 17 years of dedication, 230 square kilometers desert has been transformed into an Oasis, housing the world's largest organic pasture cluster, a unique irreplaceable asset. And that is also the moat for our Deluxe product.

And this ecological value is steadily converting into brand premium and long-term competitiveness. I was joking with the team the other day. We're going to have the interim results announcement in August. We might as well just have it in the Ulan Buh Desert, but the investors will be busy. Maybe we can delay by a couple of days, which might be a good idea as well. So Mengniu is working on ESG, and we want to build our moat. And with years of effort, we built this whole network and build our products and our competitive advantage. I just mentioned earlier the length and the breadth and the height industry and Academy and also these are all very important.

Mr. [ Goh ] has visited and everyone who's visited come back impressed. Globally, Mengniu has used years and years of effort to really build the products and build the brand. Well, at the same time, we are able to create ecological value. Not many companies can do this. We've communicated with many companies around the world. They have been able to treat the environment, but they may not always be able to create the value. The Shajin Tohoi and also Deluxe brand we have and Ulan Buh model. This is already a global model and global benchmark. And this year, our Ulan Buh model was recognized as the world's first complete dairy desertification control case in the UN Global Green Development Case Collection. And in early August, we released the Ulan Buh Organic white paper.

And globally, this model is also being explored and rolled out. And also the dairy desertification control and green governance practice report is being presented at the UNCCD COP17. And these recognitions validate our long-standing commitment. At the R&D and Tech Innovation Conference, we released the white paper, and we can publicly disclose what we have done, how we studied the soil, how we studied the grass, from the soil to the grass to advanced manufacturing to dairy processing and synthetic biology. We study all of these together with all the academicians.

We need to use technologies to really build a solid product. And with years of commitment, that's what we have done. So I sincerely invite you all to visit Ulan Buh, and it will be a good idea to have an announcement there. And you could all visit and see for yourselves, not just the ESG work Mengniu has done and also how we've really built the business and protect the environment, and you will be able to understand our mission of building the business and also honor our green commitment.

For the second half of the year and the future, Mengniu will continue to have very solid strategies, and we'll continue to improve our operation efficiency and use more technologies and doing more research to continue to reinforce the core competitiveness that we have. We will deliver sustainable value to shareholders through operating value, technological value, and ecological value. And also inject more growth momentum into the dairy industry in China. So we look forward to your continued support and valuable feedback. Together, let's embark on a journey of long-term value creation. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Welcome to all of you. And also thank you to all your support to Mengniu [indiscernible]. Please note that we have a disclaimer for today's event. Now I will introduce to you the management team today. They are Chief Executive Officer and Executive Director, Mr. Gao Fei; our CFO and Executive Director, Mr. Shen Xinwen; Vice President, Mr. Mr. Chen Yiyi; Vice President, Mr. Li Pengcheng; Company Secretary, Chris Kwok. We will have Mr. Gao present to us the 2025 financials and business performance and also the outlook section.

And then followed, we will have the Q&A session and the event is estimated to commend at 10:50. Now let's welcome Mr. Gao.

Dear investors, analysts and media friends, good morning. Thank you so much for taking the time out of your busy schedule to attend Mengniu's 2025 full year results announcement. First, I will walk you through the key financials for Mengniu for 2025. Over the past year, Mengniu has faced due challenges of the macroeconomic environment and industry cycles, but we adhere to long-term perspective and maintain strategically grounded.

The company has navigated these cycles and through value creation, delivering a set of results and demonstrated its resilience. For the full year, the company's total revenue stood at RMB 82.24 billion, a year-on-year decrease of 7.3%, which was broadly in line with the company's expectations. But if we break down by volume and price, the overall sales volume fell by around 4%, while the average selling price declined by around 3%.

The impact of the decline in sales volume on revenue was slightly more pronounced, benefiting from lower raw milk prices and continued lean operations, the company's gross profit margin reached a record high of 39.9%, an increase of 0.3 percentage points from 39.6% in 2024.

The operating profit for the full year was RMB 6.56 billion, with the operating profit margin remaining at 8.0%, a slight decrease of 0.2 percentage over last year. But compared with the years prior to 2024, there has been a very big improvement. Excluding the impact of nonrecurring impairments in 2025 and the impairment of Shengmu's idle lands, the company's profit attributable to owners on an adjusted basis was RMB 3.96 billion.

At the end of August last year, also during the result announcement, I said that in the face of the changes, people, products and venues, all our business categories were innovating and adapting, actively embracing new trends. Today, we can say that many of these innovative and adaptive measures have yielded tangible results.

And also, we adhere to the fundamental principle of creating value through value and we have decisively steered clear of the trap of low price evolution and driving high-quality development through innovation to navigate economic cycles and enhance resilience. Although the liquid milk business remained under pressure overall in 2025, but the second half of the year showed signs of stabilization and improvement compared to the first half.

The diversification of product categories and the optimization and upgrading of the product mix have maintained a positive trends among these segments such as fresh milk, infant milk formula and adult milk formula all achieved double-digit growth and with cheese growth exceeding 20%, further expanding our market leadership. And we believe that the China's consumer industry has shifted to a long-term growth.

So we need to shift from competition more to creating long-term value for the consumers. In terms of expenses, we have continued to refine our expense management and enhance the efficiency of our expenditure. Selling expenses fell by 6.5% to RMB 21.59 billion. However, due to the negative operating leverage effect resulting from the decline in revenue, both the selling expense ratio and the administrative expenses ratio rose slightly year-on-year. In terms of operational efficiency, all key indicators remain at healthy levels.

Under our ongoing lean operational management, Inventory turnover days and receivables turnover days have improved further year-on-year. Thanks to robust operating profit performance during the year as well as continued improvements in inventory turnover and receivables, full year operating cash flow reached RMB 8.75 billion, setting a record high. In recent years, we have tightened our control over CapEx, which has fallen further to RMB 2.45 billion. Consequently, free cash flow for '25 reached RMB 6.3 billion, also reaching a record high. Our robust operational and cash flow performance provides a solid foundation for Mengniu to create long-term value for our investors, the supply chain and the societies.

The company will continue to focus on and continuously enhance its cash generation capabilities. Our robust operating profit and operating cash flow performance give us the confidence to increase shareholder returns. We have formulated a 3-year shareholder return plan for 2025 to 2027, which sets out a steady increase in dividends per share over the next three years and maintain the share buyback pace for 2024 and 2025.

Through a combination of dividends and share buybacks, we will continue to enhance shareholder returns. Consequently, for this year's dividend, we have set a very lucky number, a dividend of RMB 0.520 per share, representing a steady increase from the 2024 dividend of RMB 0.509 per share. So that was about the operation.

And now I will explain more on each business segment. In terms of strengthening the One Core, we have stabilized our core businesses, accelerated the development of niche categories and further optimized our product portfolio. Specifically, over the past two years, the room temperature business has faced the most acute challenges in terms of supply-demand, dynamics and channel fragmentation.

However, to address these challenges, breakthrough bottlenecks and grow the pie, we cannot rely on low price evolution and downgrading our products. Instead, we must break the deadlock through innovation and tapping into incremental market. Mengniu has redefined value around the concept of drinking milk, drinking good milk and drinking the right milk, accelerating the adjustment of product structure, vigorously promoting new products, strengthening the alignment between products and channels and expanding consumption scenarios.

Let me give a few examples. You can see in the -- for year outside, we have launched the lactose-free soft milk series. Statistics show that the number of lactose-intolerant people in China reached 660 million. Therefore, through soft milk, lactose-free milk, more people will be able to drink milk, further expanding the base of consumers.

At the same time, with a full industry chain mindset and higher quality positioning, Mengniu strives to ensure consumers drink good milk. Last year marked the 20th anniversary for Deluxe. We leveraged the scarcity of the desert organic industry chain to further deepen our value moat, launching top of the range product, which is called Shajin Tohoi. So these are the products for us to drink milk and drink good milk. And in the dairy beverage sector, Mengniu is focused on expanding consumption scenarios and accelerating product innovation. At the beginning of the year, fruit milk drink positioned itself at the premium end of the market, launching the Dream Cap fresh coconut milk beverage. In March, we launched the industry's first Mengniu calcium electrolyte beverage targeted at people who do sports, meeting the due demands of hydration and calcium supplementation.

In the face of channel diversification, we must not only consolidate our strength in the RTM channel, but also actively embracing high potential channels to expand our omnichannel operational capabilities. We will accelerate the expansion of our coverage in lower-tier markets and increase the penetration of our product categories, ensuring high-quality nutrition is made accessible to a wider range of consumers.

In the chilled sector, in 2025, Mengniu outperformed the industry against the trend, maintaining its position as top one market leader for 21 consecutive years. The Champion has deepened its focus on the functional segments, continuously amplifying its exclusive advantages in Jianzihao, achieving exponential growth in the second half of the year and retained its position as the sales champion at Sam's Club.

The new Super Vitality Jar product launched in early 2026 meets the triple demand for product emotion and function, breaking the record for first day sales of a new product. In terms of channels, we have strengthened our presence in emerging sectors, including membership stores, instant retail, snack specialty stores and vertical fresh produce outlets.

In particular, the range of customized products we have developed for Sam's Club and Hema have quickly become best sellers following their launch. And for the fresh milk business, it achieved double-digit growth in 2025 with market share increasing further. Shiny Meadow achieved high double-digit growth while it's continuing to strengthen the 4.0 protein product range, adapting to niche demands through new products such as lactose-free double protein lines, effectively expanding the consumer base for fresh milk.

In terms of channels, we lead in market share within membership stores, instant retail and e-commerce platforms. We're absolute leaders. And also, we partner with those 2B businesses, including Starbucks and [indiscernible] driving breakthrough in sales. It is particularly worth noting that Shiny Meadow achieved rapid growth in the Hong Kong and the Macau markets last year with coverage now exceeding 1,000 outlets, receiving widespread recognition from the public.

For the ice cream business, we also achieved double-digit growth in 2025 with profitability increasing as well. We focused on Suibian plus Mood for Green dual brand strategy, stepping up innovation centered on quality and health to create several best-selling products. For the milk formula business, it achieved high single-digit growth for the full year. And for the second half, we reached to high double-digit growth.

For the infant formula, the growth trend was very obvious through continuous strengthening of its research and development capabilities, Reeborne significantly enhanced its product competitiveness with full year revenue growth exceeding 20%. Yourui continued to focus on nutrition pivots for the middle-aged and elderly concentrating on functional niche products and capitalizing on opportunities in channels such as interest-based e-commerce and securing the top online market share in the fourth quarter.

Bellamy's achieved growth of over 20% for the year with its premium platinum organic A2 range accelerating expansion. And in the Southeast Asia market, especially in Vietnam, the performing was particularly well. Cheese. Cheese represents a key strategic move in our drive to promote both drinking and eating milk. In 2025, the Mengniu Cheese segment demonstrated robust growth with annual growth exceeding 20%.

The group further strengthened synergies with Milkground, deepening comprehensive empowerment across supply chain, marketing and channel resources, capitalizing on growth momentum in both 2C and 2B sectors to consolidate its absolute leadership position in the industry. Building on a strong core Mengniu's Two Wings are taking flight, injecting new momentum into the company's development.

As the first wing, the innovation segment achieved breakthrough progress in 2025. We're focusing on the nutrition and health, continuously increasing R&D investment, striving to create differentiated value and driving a leap forward in the value chain. In the area of deep processing, we now have the products such as lactoferrin, Micellar, casein and demineralized whey powder D90. And all these products have met national -- international standards, while products such as mascarpone and natural mozzarella have successfully rolled off the production line, gradually overcoming technical bottlenecks and reducing reliance on imports.

In the professional dairy sector, we have launched over 10 new products, including new national standard whipped cream and accelerated B2B collaborations with tea, bakery and food service brands. In the professional nutrition sector, M-ACTION's sports nutrition product portfolio is growing increasingly diverse, shining in fields such as marathons and [ trail ] running.

Last year, M-ACTION also secured nearly RMB 100 million in Series A funding with our forward-looking strategies gaining broader market validation. In the international or globalized segment, it represents another vast frontier for Mengniu. Over the past year, we have achieved growth and enhanced returns simultaneously.

Building on our existing footprint, we are continuously expanding and deepening our presence in the Southeast Asian market, starting with the leading brand ice cream to expand into more categories such as infant formula and cheese. We're strengthening our broadening and broadening our Australia and New Zealand base, enhancing the development of Bellamy's 2C and [indiscernible] 2B platforms.

Bellamy is currently experiencing strong growth momentum in the Southeast Asian market, as I said just now. In the Vietnam market, through a dual-pronged approach of driving sales via retail outlets and focusing on social media influencer marketing, sales have doubled within the year. Moving forward, Bellamy will accelerate its expansion into Indonesia and the Philippines, secure infant formula registrations in more markets and build momentum for the next phase of growth, [indiscernible] will strengthen the development of its flagship products, building on our existing operations will fully integrate and collaborate with Mengniu's domestic cheese and deep processed businesses.

So we have quite strong foundation in Middle East, Southeast Asia and so on. So we will strengthen and intensify expansion in key global markets, including China. So that is the overall One Core -- Two Wings business development initiatives.

Next, I will talk about ESG. In 2025, Mengniu continued to implement our Green Sustainability Strategy, making solid progress on key ESG issues. Notably, in relation to the dual carbon initiative, we established our first Scope 3 carbon emissions calculation model, thereby strengthening the foundation for carbon management across the supply chain.

Our efforts have garnered high recognition from authoritative bodies. We have been a constituent of the Hang Seng Sustainable Development Enterprise Index for 5 consecutive years. And our MSCI ESG rating has remained at AA level. As the only comprehensive dairy enterprise in China, we have been included in S&P Global's Sustainability Yearbook.

Looking ahead, Mengniu will remain committed to advancing our sustainability strategy, creating social value through industrial value and safeguarding the shared health of humanity and the planet. So that's about ESG. Now let me talk about future outlook. As we enter -- the spring of 2026, the dairy industry is benefiting from a double boost from both policy and market factors.

Firstly, intensive policy dividends have been released, providing a comprehensive boost to industry confidence. I guess you have already noticed that this year's central document # 1 explicitly calls for multiple measures to promote dairy consumption, sending a strong policy signal to support the industry stabilization and recovery.

So during the two sessions, the Minister of Agriculture and Rural Affairs even called on the public to drink more milk. The minister pointed out that China's per capita milk consumption is nearly 1/3 of the global average. The U.S. stands at 220 kilograms, EU, 240 kilograms, whilst China's figure is only 42 kilogram. So there's a significant gap. Clearly, the role of dairy products in the Chinese diet has not yet been fully realized and the potential for growth remains immense.

We firmly believe that China's dairy industry remains a sector full of imagination and worth investing in. So overall speaking, the industry has bottomed out and stabilized with a clear trend towards recovery. Since the second half of last year, both raw milk prices and retail prices have stabilized.

For functional dairy products and solid dairy products, they are growing rapidly and the structure of dairy consumption continues to diversify and upgrade. Seizing the opportunities presented by favorable policy environment and industry recovery, Mengniu will continuously enhance its value creation capabilities through the evolution of four core competencies: digital intelligence transformation, R&D innovation, channel upgrading and brand lab, thereby leading the industry into a new cycle of high-quality development.

Digital intelligence transformation is key to achieving high-quality development. Mengniu remains committed to the deep integration of digitalization and intelligent technologies with the industry, implementing systematic initiatives across supply chain channels, logistics, marketing and management to drive quality improvements and efficiency gains throughout the entire value chain, thereby creating business value through digital intelligence.

Everyone is saying that we must cater to the most diversified and most discerning consumers in history, who demand quality, value for money and emotional value. However, the mission of a consumer goods company is to meet the diverse and personalized needs of consumers in a better way. In response, we must return to the fundamentals of business.

The essence of milk is good quality protein. People consume dairy products precisely for high-quality nutrients such as protein. Therefore, the dairy industry must create health benefits for consumers through high-quality nutrition. So products should drive experience and then experience will lead to functionality and then with more penetration and finally, better and high-quality growth. That is our core.

So every drop of nutrition nurturing every life, this is Mengniu's corporate mission. We have always anchored ourselves in the core value of nutrition, focusing on three key areas: basic nutrition, functional nutrition and medical nutrition, whilst continuously enhancing our capacity for value creation. In basic nutrition, we must tap into potential and expand the market.

Through product innovation, we will address consumer pain points and broaden consumer base and unlock incremental markets. Secondly, through channel innovation, we will expand coverage in lower-tier and untapped markets to increase the market penetration of basic dairy products. Thirdly, we'll intensify product development and channel expansion for the [ two oils ] and one cheese, enabling consumers to both drink and eat milk.

Fourthly, we'll strengthen nutrition outreach and category education to drive both volume and quality growth in dairy consumption. So in conclusion, in our industry in the past, there was too much focus on the existing market competition and also price competition. But how can we expand demand or increase demand so that we can see a better situation. So today, we have to consider product innovation.

At the same time, we need to see how we can expand the pie. In the fields of functional nutrition and medical nutrition, we must plan proactively and seize the initiative. Judging by global industry trends, once per capita GDP crosses the USD 13,000 threshold, functional nutrition market enters a period of explosive growth. Our country has exceeded this threshold for three consecutive years, and the functional nutrition market is now poised for takeoff.

In response, Mengniu has already established a foundation for research and development across six key functional nutrition areas, bone, joints, muscle health, cardiovascular health, immune system, neurocognitive function, gut health, beauty, anti-aging and weight management. We have also launched the [indiscernible] specializing in medical food project.

So [indiscernible] is a specialized medical food project dedicated to the research, development and production of specialized medical foods for infants. The registered formula is in place. So Mengniu is strengthening the deep integration of industry academia, research and application to accelerate commercialization of research outcomes. Last year, our self-developed Sugar-Control Probiotic LC19 was featured in a top-tier international academic journal.

Just a few months later, [indiscernible], the first product utilizing this strain was launched, demonstrating how scientific value is rapidly being transformed into product value that consumers can experience. So we have received much recognition from consumers. As I mentioned earlier, the core value of milk lies in providing high-quality protein.

Currently, Chinese consumers have become increasingly aware of the need for high-quality protein, yet the market still lacks truly excellent products to lead this trend. So I would like to give you a sneak preview today. For high-quality protein product, we have made a lot of plans and leveraging our exclusive leading domestic technology, we have independently developed a high-protein milk that will be launched very soon.

This technology and product will meet consumer-specific functional needs and will extend to more product categories and usage scenarios. continuously raising the bar for how Chinese people drink and eat milk, thereby injecting new momentum into health. At the same time, consumers are changing and so are the channels. Scenarios are becoming increasingly diverse and borderless.

Therefore, we must break free from conventional thinking and upgrade from deep distribution to value-driven cultivation, ensuring that every high-quality product reaches the most suitable consumers and creating value -- market value through channel value. We must strengthen digital and intelligent empowerment to achieve precise allocation of channel expenditure and enhanced execution, ensuring that every penny invested is converted into growth momentum.

We must deepen cooperation with incremental channels such as membership stores, snack specialty stores, content, e-commerce and instant retail to build an omnichannel competitive advantage. That is also a focus of us from bespoke offerings for high-precision membership channels to exclusive new product development for the snack system, we must accelerate our response to customized channel requirements, strengthen product channel alignments and expand into scenario-based diversified consumer markets.

We must fully tap into the potential of lower-tier markets, achieving deep penetration from county-level areas to rural villages, ensuring nutrition inclusion, reaching all demographics and regions. Today, consumption scenarios are undergoing profound changes and channels are evolving more rapidly.

Our brand communications must resonate with these shifts and evolve in tandem. In 2026, with both the Olympics and the World Cup on the horizon, Mengniu is set to take center stage. This presents a unique marketing opportunity and serves as a testing ground for our marketing capabilities.

In Q1, we capitalized on the window of opportunity presented by the convergence of the Winter Olympics and CNY, deeply integrating the bond to be strong spirit with a passion for winter sports and the festive spirit of family reunion. During the Spring Festival, we achieved a harmonious integration of brand exposure and sales conversion.

Authoritative third-party data shows that Mengniu topped the digital brand asset rankings for the Milan Winter Olympics. Strong brand visibility directly drove sales conversion, helping us achieve a strong start to the year and laying the foundation for our development throughout the year.

Moving forward, we'll continue to deeply connect with all scenario consumer demand, drive implementation of integrated brand efficiency and sales strategies and through the dual engine drive of brand visibility and business growth, sustain the strong start and secure a successful year.

Finally, investors, friends, 2026 marks the start of the 15th 5-year plan and will be a pivotal year for Mengniu as we drive the implementation of our strategy and upgrade our management. Standing at this new starting point, we'll adhere to long-termism, focus on our nutritional mission and accelerate our comprehensive transformation from a traditional dairy manufacturer to a comprehensive nutrition and health solutions provider.

Looking ahead, we'll use the value of our products to create health value for consumers throughout their entire life cycle, use innovation value to create ecological value for high-quality development for the industry chain, use operational value to generate long-term stable returns value for investors, use industry value to create social value that safeguards the shared health of humanity and the planet. Finally, we would like to thank you all for your continued trust and support over the year. Mengniu looks forward to continuing to work hand-in-hand with you as we build a journey towards a brighter future. Thank you.

[Statements in English on this transcript were spoken by a interpreter present on the live call.]