China Dairy Giant Sees Biggest Quarterly Profit Drop Since 2008

(Bloomberg) -- China’s dairy maker Inner Mongolia Yili Industrial Group Co Ltd. posted its largest quarterly profit drop since 2008 as the virus-triggered shutdown hurt sales but didn’t reduce underlying business costs.

Net income for the first quarter plunged 50% to 1.14 billion yuan ($161 million) while sales fell 11% to 20.5 billion yuan, the company said in a statement Tuesday. The firm also reported a 2.7 billion yuan decline in operating cash flow as raw material purchases and staff salaries were paid out despite weakening sales.

The earnings are the first proper look at the damage to China’s biggest consumer companies in the first quarter as much of the economy shut down to halt the virus’s spread. Mid- and low-tier consumer goods seem to have fared worse than high-end staples: premium baijiu distillers Kweichow Moutai Co. and Wuliangye Yibin Co. reported strong earnings growth for the quarter.

Recovery for companies like Yili could be uneven with scientists warning that the pathogen is likely to return in waves like the flu.

There are signs that the food and essentials category is rebounding faster than others such as restaurants and jewelry stores, spurring hope that Yili will do better in the coming quarters. Its shares have rallied more than 13% since March 17 as China began to ease restrictions.

Yili’s net income for 2019 rose 7.6% to 6.93 billion yuan while revenue increased 14% to 90 billion yuan, according to a company filing.

©2020 Bloomberg L.P.