HK Stock Market Move | MENGNIU DAIRY (02319) rises more than 8% after issuing a profit warning. The impairment of goodwill caused the annual net profit to decline by more than 90% year-on-year, but it did not affect dividend payouts due to stable cash flow.

After issuing a profit warning, MENGNIU DAIRY (02319) rose more than 8%, as of the time of writing, up 8.18% to 16.92 Hong Kong dollars, with a turnover of 3.5 billion Hong Kong dollars. On the news front, MENGNIU DAIRY announced a profit warning stating that its subsidiary Bellamy will have impairment provisions for goodwill and related intangible assets, and its joint venture company CH MODERN D incurred losses from changes in fair value of dairy cows and impairment of related goodwill. These two factors have led to a significant year-on-year decline in net profit for the 2024 financial statements of Mengniu, triggering the profit warning. The announcement stated that the estimated net profit for the year 2024 is expected to be between 50 million and 250 million Renminbi, compared to 4.809 billion Renminbi recorded in 2023, a decrease of approximately 94.8% to 99%. This is mainly due to the expected impairment impact of non-cash nature. If the impact of the two impairment factors is excluded, the year-on-year performance of net profit attributable to shareholders in 2024 is still robust. The company expects a stable performance in operating cash flow for the year, therefore, when considering the declaration of dividends according to the dividend policy, the impact of impairment will be excluded.