Profit and Revenue Both Rise Against the Trend: What Other Anxieties Does New Dairy Have?

(Source: Beijing Business Today)

In an industry where liquid milk sales are generally under pressure, New Dairy has delivered a double increase in profits and revenue for the year. On the evening of March 22, New Dairy announced its annual results, reporting a revenue of 11.233 billion yuan, up 5.33% year-over-year; net profit attributable to shareholders was 730 million yuan, up 35.98%. Behind these strong results, high accounts receivable and goodwill impairment risks pose potential concerns for its future development. After the earnings release, as of the close on March 23, New Dairy’s stock price fell 4.6% to 17.85 yuan per share, with a total market value of 15.363 billion yuan.

Revenue Growth of 5.33%

New Dairy’s 2025 annual report shows both revenue and net profit attributable to shareholders increased, a unique achievement among dairy companies’ financial reports disclosed during the same period.

The 5.33% year-over-year revenue growth is mainly attributed to the focus on the “Fresh Cube Strategy” and a product strategy centered on “Fresh Value.” The financial report indicates that New Dairy continues to adhere to the “Fresh and Acid Dual Strength” category development strategy, increasing product innovation. During the reporting period, both low-temperature fresh milk and low-temperature yogurt achieved double-digit growth. High-end fresh milk and “Today’s Fresh Milk Shop” also saw double-digit increases. Specialty yogurt grew over 30% year-over-year, with functional yogurt brands like the “Huorun” series continuously innovating around value-for-money, meal replacements, and zero-sugar trends. Asahi Weipin launched several best-selling new products, driving rapid growth. The revenue share of new products has maintained double digits for five consecutive years, with ongoing improvements in product efficiency, supporting stable company performance.

According to Kantar data, dairy consumption is gradually shifting from general nutritional supplementation to more refined, personalized choices based on scenarios, functions, and emotional needs. Overall liquid milk sales faced pressure, but demand differentiation and structural growth trends are evident in segmented tracks. On one hand, basic white milk growth has slowed; on the other, niche categories aligned with new consumption trends performed well. Low-temperature fresh milk, perceived as “fresher and more nutritious,” maintained good growth; functional dairy products rich in lactoferrin and probiotics are favored due to consumer concerns about “health and immunity.” Additionally, categories like specialty yogurt, desserts, and light cheeses that meet leisure and self-indulgence needs are emerging as new growth points.

Beijing Business Today notes that during the reporting period, New Dairy increased marketing expenses, with 2025 sales expenses reaching about 1.81 billion yuan, up 9.05%. Advertising and promotion costs were 316 million yuan, up 30.08%, accounting for 17.47% of sales expenses, up from 14.65% in 2024. In response, New Dairy stated, “The company is strengthening brand building and increasing advertising investments to enhance market brand recognition.”

Accelerating DTC Business Expansion

Under the “Fresh” strategy, in recent years, New Dairy has made DTC (Direct to Consumer) business its core growth engine.

During the reporting period, New Dairy’s DTC expansion showed a “multi-point bloom.” For example, by quickly establishing “Lightning Warehouses” covering bases and urban clusters, the instant retail business achieved rapid growth; it enhanced operations across different channels such as membership stores and snack discounts, and deepened cooperation with tea and catering channels to lead emerging channels’ growth; new regional expansion focused on the “urban cluster” strategy, optimizing channel structures, increasing brand investment, and breaking through in core categories, resulting in sales growth in these markets.

While promoting DTC, New Dairy also optimized traditional distributor channels. During the period, the number of distributors decreased by 383, with a net reduction of 266 in East China, 91 in North China, 16 in Northwest China, 107 in Central China, and 13 in other regions. Regional revenue analysis shows that growth in Southwest and Northwest was nearly stagnant, North China even declined by 0.5%, while only East China achieved a 14.95% increase. New Dairy explained, “During the reporting period, the net reduction of distributors in North China was 31.6%, mainly due to optimizing low-yield, less-contributing distributors to improve overall channel health.”

“New Dairy has abandoned investments in traditional distributors and supermarket channels, increasing投入 in online, private domain, instant retail, and community platforms, promoting flatter sales channels, and vigorously developing DTC. Coupled with product innovation and digital marketing systems, this allows direct consumer engagement,” said Song Liang, senior dairy industry analyst. “For a mid-sized company like New Dairy, it’s suitable to focus on community retail and integrate online and offline channels, capturing traffic and then feeding back to offline. However, this model is less applicable to large dairy companies like Yili or Mengniu.”

Risks of Accounts Receivable and Goodwill Impairment

Alongside the earnings announcement, New Dairy announced plans to distribute a cash dividend of 3.8 yuan per 10 shares (tax included), with no bonus shares or capital reserve conversion. Despite the impressive performance and high dividends, the company also revealed structural risks such as increasing accounts receivable and goodwill impairment concerns.

Song Liang pointed out, “The push into DTC may cause a short-term surge in accounts receivable. Previously, transactions with distributors were cash-based with shorter payment terms; now, direct retail means longer payment cycles, which could tighten cash flow.”

The financial report shows that as of 2025, accounts receivable reached 671 million yuan, up 4.6%, accounting for 91.76% of net profit attributable to shareholders during the same period. The top five customers’ receivables totaled 38.52% of total accounts receivable.

Shen Meng, executive director of Sangsa Capital, noted, “High receivables are common in fast-moving consumer goods, indicating possible slow-moving inventory at the distributor level, which affects their cash turnover and repayment ability. While some of this may be due to liquidity issues among distributors, it’s unlikely to be a widespread problem.”

More concerning is that the company’s goodwill on the books is as high as 1.01 billion yuan, accounting for over 11% of total assets. The auditors have listed this as a “key audit matter,” indicating potential impairment risks. KPMG’s annual audit report states that the goodwill from the acquisition of Ningxia Huamei Dairy Development Co., Ltd. (hereafter “Huamei Dairy”) and its subsidiaries, acquired on July 1, 2020, totaled 831 million yuan, with trademarks valued at 279 million yuan. The management considers the low-cost, indefinitely extendable trademark rights as intangible assets with uncertain useful life. Huamei Dairy mainly operates in Ningxia, Gansu, Shaanxi, and Henan, with projected 2025 revenue of 1.718 billion yuan and a main business profit of 442 million yuan.

Previously, at the end of 2024, New Dairy was warned by the Sichuan Securities Regulatory Bureau for not conducting timely impairment tests on its Chongqing Hanhong subsidiary’s goodwill, leading to incomplete and inaccurate disclosures in the 2023 semi-annual report, raising concerns about internal control delays.

Shen Meng emphasized, “Goodwill often results from acquisition premiums. Its value depends on the acquired company’s profitability. If the profitability drops sharply and irreversibly in the short term, the goodwill may be overstated and require impairment.”

The Beijing Business Today reporter sent interview requests to New Dairy via email regarding accounts receivable and goodwill risks but had not received a reply as of publication.

Beijing Business Today Reporter: Kong Wenxie