China Mengniu Dairy Company Limited

2013 Interim Results

Stock Code: 2319

August 2013

The presentation is prepared by China Mengniu Dairy

Company Limited (the “Company”) and is solely for the

purpose of corporate communication and general reference

only. The presentation is not intended as an offer to sell, or to

solicit an offer to buy or to form any basis of investment

decision for any class of securities of the Company in any

jurisdiction. All such information should not be used or relied

on without professional advice. The presentation is a brief

summary in nature and do not purport to be a complete

description of the Company, its business, its current or

historical operating results or its future business prospects.

This presentation is provided without any warranty or

representation of any kind, either expressed or implied. The

Company specifically disclaim all responsibilities in respect of

any use or reliance of any information, whether financial or

otherwise, contained in this presentation.

2

Disclaimer

Sun Yiping, Executive Director & Chief Executive Officer

Bai Ying, Executive Director & Vice President

Wu Jingshui, Executive Director & Chief Financial Officer

Liu Shengli, Vice President in Sales

Jesper Fournaise Colding, Vice President in Marketing

Wu Wennan, Senior Financial Controller & IR Officer

Chris Kwok, Financial Controller & Company Secretary

3

Management Team

Contents

4

Results Overview P5

Business Overview P12

Strategic M&A P20

2013 Challenges & Actions P25

Part 1 Results Overview

5

Results Overview

RMB Million Six Months Ended 30 June

Change 2013 2012*

Revenue 20,668.0 18,243.8 +13.3%

Gross Profit 5,519.2 4,643.6 +18.9%

EBITDA 1,517.4 1,287.7 +17.8%

Profit Attributable to

Owners of the Company 749.5 644.7 +16.3%

Basic Earnings per Share (RMB) 0.419 0.365 +14.8%

Gross Profit Margin 26.70% 25.45% +1.25 ppt

EBITDA Margin 7.34% 7.06% +0.28 ppt

Net Profit Margin 3.63% 3.53% + 0.10ppt

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*Certain amounts stated above do not correspond to the interim condensed consolidated financial statements as at 30 June 2012.

According to the IFRS 11–“Joint Venture Arrangement”, Mengniu’s investment in Mengniu Arla, its joint venture, has been adjusted

from consolidation and precedent based on the proportion of investment to recognition using the equity method. As a result, Mengniu’s

data in relation to assets, liabilities, income and expenses showed slight changes in June 2012, but net profit and net assets were not

affected

Revenue Breakdown by Segment

Liquid Milk

• Revenue amounted to RMB18,262.5M, increased by

14.4% YoY

• Percentage to revenue up 0.8 ppt YoY

Ice Cream

• Revenue amounted to RMB1,954.4M, decreased by

9.4% YoY

• Percentage to revenue down 2.3 ppt YoY

Other Dairy Products

• Revenue amounted to RMB451.0M, increased by

268.8% YoY

• Percentage to revenue up 1.5 ppt YoY

1H2013

1H2012

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Revenue Breakdown of Liquid Milk Segment

UHT Milk

• Revenue amounted to RMB10,940.8M, increased by

13.5% YoY

• Proportion to liquid milk revenue down 0.5 ppt YoY

Milk Beverages

• Revenue amounted to RMB4,732.1M, increased by 18.5%

YoY

• Proportion to liquid milk revenue up 0.9 ppt YoY

Yogurt

• Revenue amounted to RMB2,589.6M, increased by 11.0%

YoY

• Proportion to liquid milk revenue down 0.4 ppt YoY

1H2013

1H2012

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9 Source: Nielsen

25.9% 25.4% 25.5%

22.0% 22.7% 22.8%

14.4% 13.3% 12.3%

7.3% 7.4% 7.5%

30.4% 31.2% 31.9%

Liquid Milk

A B C

27.9% 27.6% 28.0%

24.5% 26.0% 26.2%

18.2% 17.2% 16.0%

22.5% 22.5% 22.3%

UHT

A B

19.8% 19.6% 19.6%

20.7% 20.2% 18.5%

13.4% 12.5% 13.5%

7.1% 8.5% 8.5%

7.2% 7.1% 7.3%

31.8% 32.1% 32.6%

Chilled Products

A B C

Market Share in 1H2013

1H2012 2H2012 1H2013

1H2012 2H2012 1H2013

Mengniu Others

Mengniu Others

1H2012 2H2012 1H2013

Mengniu Others Junlebao

Cash Flow Index & CAPEX

Net Cash from

Operating Activities

(RMB Million)

Capital Expenditure

(RMB Million)

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1H2012 1H2013

Operating Efficiency Index

Inventory Turnover Receivables Turnover Payables Turnover

（1）Receivables Turnover = [(Average balance of Trade and Bills receivables) / Revenue] x No. of days

（2）Payables Turnover = [(Average balance of Trade and Bills payables) / Cost of Sales] x No. of days

11

(Day) (Day) (Day)

0

15

30

1H2012 1H2013

21.8

16.4

Part 2 Business Overview

12

1H2013 Operating Highlights

13

3

1 5

4 2

1H2013

Bolster Quality of Milk Sources

Increased the proportion of raw milk from

ranches and scaled farms to 94%

Enhance Quality Control and Inspection

Launched comprehensive quality

and safety management system, bolstered

milk sources chain

inspection

Focus on Key Brands & Innovative Marketing Strategies

Orchestrated marketing activities to

convey the “Little Happiness Matters”

vision

Product Innovation

Led market trends with 5 new key

innovative products

Optimise Sales Channels

Optimised sales channel management to

enhance overall efficiency

1. Bolster Quality of Milk Sources

Milk Stations

Cooperating

with farms

Ranches and scaled

farms

94%

Breakdown of milk sources

Self-built and

self operated,

equity

investment 6% 20%

74%

Current milk sources: 94% from ranches and scaled farms

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2. Enhance Quality Control and Inspection

Improve quality control and safety management through third party certification authority

Wholly owned by the New Zealand government

Largest food quality and safety certification authority in the southern hemisphere and is internationally recognised

Through high-tech analysis and rigorous examination to certify supply chain in food quality and safety for over 40

well-known global companies

Fulfills customers’ increasing demand for healthy and safe food around the world

Sign cooperative framework agreement

Establish third party certification

authority

Evaluate the quality and safety of the

ranch

Evaluate the safety of the dairy products

……

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16

Planting Breeding Primary

Processing

Product

Development Procurement Production Ex-warehouse Logistics

Sale Customer

Feedback

• Distributor Inventory

• Delivery Management

• Channels Management

• Customer Feedback

• Product Development

• Procurement Management

• Planning Management

• Preparation (before production)

• Production

• Ex-warehouse, Logistics

• Planting

• Ranches Construction

• Breeding

• Raw Milk

Production

• Cold Storage

• Logistics

Inspection (Managed by Laboratory)

Sources Management

Process Management

Terminal

Management

2. Enhance Quality Control and Inspection (cont’d)

End to end total process quality management

3. Focus on Key Brands & Innovative Marketing Strategies

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4. Product Innovation

18

2

3

4 5

1

Just Yogurt

(纯甄酸牛奶)

• Launched in late May

• Simple and pure formula

• No artificial essence, colour or preservatives added

Suan Suan Ru Fruit Fibre

Nutritional Milk Beverage

(酸酸乳果纤维营养牛奶饮品)

• Launched in early April

• Milk plus real fruit fibre

Latte Banana Milk

(奶特香蕉口味牛奶)

• Launched in mid-May

• Upgraded product package and

taste

• Perfect combination of banana

and milk, offering a rich flavour

Super Gold Infant Formula

(欧世超金佳智婴儿配方奶粉)

• Launched in late April

• Uses 100% milk sources imported

from Northern Europe

• Six ingredients to inspire

babies’ intelligence and protect their

health

Red Bean/Black Bean Cereal

Breakfast Milk Beverage

(红谷/黑谷谷粒早餐牛奶饮品)

(Upgraded the package)

• Launched in mid-April

• Pure milk and rich in cereal

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1 Optimised distribution channels and retail service model

Adopted branch company, central business unit (CBU) and regional business

unit (RBU) models targeting POS

2 Streamlined sales system

Streamlined multi-layered structure and the communication processes from the

sales headquarter to retail sales, so as to swiftly meet market demand

3 Strengthened control over sales channels

Continued to increase the number of branch company and CBU, assisted the

dealers to develop the market and gathered first-hand market information

4 Enhanced sales channel penetration

Increased the distribution rate of key products, established a standardised

management system, enlarged the coverage of POS and its sales force

5. Optimise Sales Channels

Part 3 Strategic M&A

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Strategic Alliances and M&A

On 20 May, Mengniu signed a JV framework agreement with Danone

Through a JV with COFCO, Danone holds a 4% interest in Mengniu becoming its

strategic shareholder

On 9 August, the JV Contract with Danone was signed

On 18 June, Mengniu (2319.HK) made a voluntary general offer to acquire all

outstanding shares of Yashili (1230.HK)

On 16 July, acquisition of Yashili approved at Mengniu’s EGM

On 24 July, Mengniu received valid acceptances from about 75.3% of Yashili

issued share capital

As at 13 August, valid acceptances reached about 89.82%

On 7 May, Mengniu acquired 129.6 million shares of Modern Dairy,

approximately 26.92% of its issued share capital

As HK$2.45 per share for consideration of HK$3.178 billion

Mengniu now becomes its largest single shareholder owning 27.99%

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Upstream Strategy: Increase Shareholding in Modern Dairy

(1117.HK)

Disorganised

Dairy

Farmers

Raw Milk

Collection

Stations

Intermediate

Stations Dealers Distributors

Dairy Product

manufacturers Consumers

Fodder

Suppliers

Modern

Dairy COFCO Consumers Mengniu

Facilitate All-round Improvement of Mengniu

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Fodder

Quality

Raw Milk

Supervision Cost Control Food Safety

Brand

Upgrade

Joint Venture

(80% : 20%)

Chilled products business in China

Cash investment

• Acquired ~4% interest in Mengniu

• Invested in Joint Venture

Chilled products

business

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Partner with Danone to Capture the Growth

Opportunities in Chilled Products Market

Included among Fortune 500, Danone

is one of the most successful healthy

food companies in the world with

excellent reputation in food and

beverage industry globally

Its fresh dairy products rank number

one, in terms of global sales

Overview of Danone

Acquire Yashili (1230.HK) to Jointly Build a Leading

Platform for Pediatric Milk Formula Products

Luxury

Nutrition

Specialised

Nutrition

Product

Positioning

Super α

Golden

Golden

Ambery

α -Golden

Golden

Newwitt

Ambery

New

Formula

Youyi Series

Rice Flour

Oat Cereal

Soy Milk

Merla

Golden

Baby & Me

Special

Arla

formula

Platinum

Jiazhi

Super

Golden

Jiazhi Golden

Jiazhi

Premium

Zhuang

Standard

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Part 4 2013 Challenges & Actions

25

Challenges in 2013

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Post-Merger

Integration Raw Milk

Price Hike

Innovation

Well Poised to Meet Challenges

Refine management and practices

Increase production capacity utilisation rate

Strengthen inter-departmental cooperation

Focus on high-end brands to raise profitability

Restore Mengniu brands credibility and achieve growth in fundamental

business

Ensure the quality of milk source and achieve regional development

Integrate resources and optimise complementary advantages

Enhance teamwork and improve management efficiency

Achieve

Stable

Business

Growth

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Optimise

Milk

Source

Structure

Actions

Activate

Internal Potential

Maximise

Synergies

Upgrade

Product

Portfolio

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