CHINA MENGNIU DAIRY COMPANY LIMITED

(2319.HK)

2016 ANNUAL RESULTS

MARCH 2017

Legal Disclaimer

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 does 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 contains projections

and forward looking statements that may reflect the Company’s current views with respect to future

events and financial performance.

This presentation is provided without any warranty or representation of any kind, either expressed

or implied. The Company specifically disclaims all responsibilities in respect of any use or reliance

of any information, whether financial or otherwise, contained in this presentation. The Company

undertakes no obligation to publicly update or revise any forward-looking statements, whether as a

result of new information, future events or otherwise.

2

Mengniu

Lu Minfang, Chief Executive Officer & Executive Director

Bai Ying, Chief Operation Officer & Executive Director

Wu Wenting, Vice President & Executive Director

Zhang Ping, Chief Financial Officer

Liu Shengli, Vice President

Gao Fei, Vice President

Shi Dongwei, Vice President

Chris Kwok, Financial Controller & Company Secretary

Yashili

Chopin Zhang, Chief Executive Officer & Executive Director

Hua Li, Chief Operation Officer & Executive Director

Wen Jieping, Chief Financial Officer

Management Team

3

Financial Overview

2015 2016 +/-RMB Million

Gross Profit

Gross Profit Margin

EBITDA

EBITDA Margin

Net Profit Margin

Profit Attributable to

Owners of the

Company

Basic EPS

(RMB)

53,779.3 +9.7%

17,635.4 +14.7%

32.8% +1.4ppt

956.0 -77.4%

1.8% -6.8ppt

-751.2 -131.7%

-1.4% -6.2ppt

-0.193 -131.7%

Revenue 49,026.5

15,375.5

31.4%

4,229.9

8.6%

2,367.3

4.8%

0.609

Financial Highlights

5

6

Financial Highlights –

Excluding One-off Items in 2016

2015 2016 +/-

Net Profit Margin (2)

Profit Attributable to

Owners of the Company(2)

2,039.6 -13.8%

3.8% -1.0ppt

Revenue (1)

2,367.3

4.8%

Gross Profit (1)

Gross Profit Margin (1)

18,188.4 +18.3%

34.0% +2.6ppt

15,375.5

31.4%

53,558.3 +9.2%49,026.5

Goodwill Impairment

on Yashili2,253.8 -100%-

EBITDA (2)

EBITDA Margin (2)

3,841.6 -9.2%

7.2% -1.4ppt

4,229.9

8.6%

(1) Excluding the impact of sales of milk powder to third parties in 2016

(2) Excluding the impact of sales of milk powder to third parties and goodwill impairment on Yashili in 2016

RMB Million

Revenue Breakdown by Segment

2015 +/- (%)% of

Revenue+/- (ppt)

(1) Others refers to cheese, plant-based nutritional food business, .etc.

Ice Cream

Milk Formula

Others (1)

Liquid Milk

Total

2016

48,102.9 +11.0%

2,179.9 +1.8%

3,150.9 -2.4%

345.6 +4.8 %

89.4% +1.1ppt

4.1% -0.3ppt

5.9% -0.7ppt

0.6% -0.1ppt

53,779.3 +9.7% 100.0% /

43,326.6

2,141.2

3,228.8

329.9

49,026.5

RMB Million

7

Stable Market Share Performance

Source: AC Nielsen Retail Research

Liquid Milk

UHT Products

Chilled Products

Mengniu A B OthersC

Chilled Yogurt

8

32.0% 31.4%

19.5% 20.4%

15.7% 13.6%

7.8% 8.5%

25.0% 26.1%

2015 2016

27.3% 27.4%

25.7% 26.8%

8.5% 7.6%

30.9% 32.0%

2015 2016

27.3% 27.9%

29.6% 31.3%

10.2% 8.4%6.4% 5.6%

26.5% 26.8%

2015 2016

28.4% 27.6%

16.9% 15.1%

15.3% 15.6%

8.7%

30.7% 32.7%

2015 2016

9.0%7.6% 6.2%

Key Categories Maintained

Strong Growth

0.7%

170.4%

5.3%

35.5%

-10.7%

10.2%

74.1%

17.7%16.1%

3.3%

-50%

0%

50%

100%

150%

200%

Source: Company data, AC Nielsen Retail Research

3.8%

43.9%

12.6% 11.2%

-2.3%

-20%

0%

20%

40%

60%

80%

100%

Mengniu Sales Growth2016 Industry Growth at

Retail End

Liquid

Milk

UHT

Yogurt

Premium

UHT

Chilled

Yogurt

Basic

UHT

2015 2016

Liquid

Milk

UHT

Yogurt

Premium

UHT

Chilled

Yogurt

Basic

UHT

9

Brand Clusters (1) 2015 2016 + / - (ppt)

Star Brands +

Opportunity Brands43.2% 44.8% +1.6ppt

Profit Contributor

Brands5.1% 4.8% -0.3ppt

Backbone Brands 38.2% 36.1% -2.1ppt

(1) Only states major brand clusters as a percentage of Mengniu standalone revenue (excluding Yashili)

Continuous Improvement of

Product Mix

1.6ppt

10

Cashflow and CAPEX

Net Cash Inflows from

Operating ActivitiesCapital Expenditure

2015 2016

2,874.4 3,037.5

152.5 230.8

1,084.2

2015 2016

1,909.2

4,512.9

(RMB Million)(RMB Million)

Plant &

equipment

Biological

assets

Equity

investment

3,026.9

4,352.5

11

3.8%

4.6%

22.4%

25.0%

2015 2016

1,871.3

2,471.4

2015 2016

10,985.0

13,435.2

(RMB Million) (RMB Million)

Expense % of revenue

S&D G&A

Expense % of revenue

SG&A Expenses

12

2015 2016

47.1

38.6

2015 2016

10.3

13.4

2015 2016

52.3 50.8

（Days） （Days） （Days）

Inventory Turnover Receivables Turnover (1) Payables Turnover (2)

Operating Efficiency Index

(1) Receivables Turnover = (Average Balance of Trade and Bills Receivables / Revenue) x Number of Days

(2) Payable Turnover = (Average Balance of Trade and Bills Payables / Cost of Sales) x Numbers of Days

13

Business Review

and Prospect

2016 Overview

Remarkable

growth versus

industry, laid

solid foundation

for reaching 2020

strategic target

Realized substantial progress for “Route to Market”

Advanced transformation of regional offices to P&L entities

Further implemented the strategy of “enhance distributors,

solidify sales companies & develop CBUs”

Reinforced channel execution, implemented sales strategy,

improved penetration and strengthened control over POS

Optimized product mix and improved branding strategies

Improved quality, launched new products and strengthened product

competitiveness

Optimized product structure and continuously focused on star brands

Promoted brand internationalization with strong marketing efforts

Reached consensus with strategic shareholders on

future development strategies

Strengthened ties with upstream partners – increased shareholding

of China Modern Dairy

15

Deepened cooperation with Danone and made clear development direction

of milk formula business with the target of improving Yashili’s

operation

China Dairy Industry 2017 –

Challenges and Opportunities

Challenges

Opportunities

Pressure of cost inflation across industry

Demand for dairy products not yet significantly accelerated

Near-term market disturbance before the full roll-out of infant milk

formula registration policy as well as continuous competition

from overseas brands

Much work to be done for market penetration in lower-tier areas given

great potential for dairy product consumption in China

Product mix upgrade being the focus of industry growth

Market competition expected to be gradually eased as raw milk supply &

demand tends to be balanced

Milk source deployment is of increasing strategic importance to maintain

industry leading position

16

To grow into the most dynamic and

internationalized Chinese company

targeting at one hundred billion revenue

scale

Mengniu 2020 Strategies

Mission

Vision

Goal

To become a century-old, consumer-

centric and innovation-led health and

nutrition food company

Focus on nutrition and health, deliver a drop of happiness for every moment and every day to more people

17

Five Key Themes of Strategy

Implementation in 2017

1

4 5

Improve operational

efficiency and

strengthen profitability2 3

Adjust strategic initiatives based on industry and market

dynamics to realize 2020 strategic goals

Take organization

restructuring and

enhance head-quarter

competitiveness

Deploy upstream

resources at home and

abroad with a forward-

looking vision and build an

efficient and integrated

enterprise

Focus on star brands

and promote full

upgrade across all

categories

Continue “Route to Market”

initiative and strengthen

competitiveness in sales

channels

18

UHT products

OthersChilled

products

Ice cream

Milk formula

Focus on UHT/chilled

segments

Accelerate milk formula

business

Take Organization Restructuring and Enhance

Head-quarter Competitiveness

(plant-based,cheese, .etc.)

1

Develop high-potential

businesses

Stabilize ice cream

business

Group level

R&DConsumer

insightBrand building

Quality &

regulatory

monitoring

Public affairs

administrationTalent training

Serve, support and monitor

business divisions

19

Function-based system to

new division-based system

Build a professional and high-efficiency

functional team at head-quarter

Improve Operational Efficiency

and Strengthen Profitability2

Improve

merchandising

efficiency

Public

bidding

& centralized

procurement

Enhance quality

& efficiency along

supply chain

Establish centralized

procurement system

and operation flow

Continuously improve

public bidding practice

Proactively work out

cost-saving plans

Set up specific plans

to improve quality &

efficiency of supply

chain based on

different business

formats

Leverage experience

of Danone and Arla to

rigorously promote

supply chain cost

reduction plans

Benchmark

merchandising

efficiency with industry

peers, while develop

and implement

corrective actions

20

7

Deploy Upstream Resources at Home &

Abroad with A Forward-looking Vision &

Build An Efficient and Integrated Enterprise

3

Establish milk sourcing division to ensure effective implementation of

milk sourcing strategies

Centralized procurement &

management of raw milk and milk powder

− Exert overall control and procurement

planning of raw milk and milk powder to

effectively control cost

Control premium raw milk sourcing

in domestic market

− Ensure stable & high quality raw milk supply to

develop premium UHT products and low temperature

category

− Develop China Modern Dairy’s downstream business

and drive performance improvement of Mengniu’s

mid-to-high end products

Deploy upstream milk source and

other milk-related materials globally

Europe

Australia / New Zealand

− Balance prices, effectively manage cost and

secure high quality & stable supply of raw

materials

21

Focus on Star Brands and Promote

Full Upgrade across All Categories4

Brand Building

Product Screening

Sort out product

lines and carry

out

premiumization

strategies

Optimize

product mix and

focus on star

brands

R&D on nutrition and

products in complement

Make full use of three R&D

platforms, actively develop

new products and upgrade

existing products

Promote overall long-term

& sustainable growth

through high value-added

products

Strengthen cooperation with world-class brands and promote brand

internationalization

− Exclusive partner of dairy products for Universal Beijing Resort

Increase investment in brand building and enhance long-term

brand influence

− Implantation into popular TV shows and other high quality

entertainment resources

− Implantation into and joint promotion with Hollywood movies

R&D/Innovation

22

Continue “Route to Market” Initiative

and Strengthen Competitiveness in

Sales Channels

Continuously promote and enhance transformation of regional offices to P&L

entities, implement responsibility system and management mechanism

Stabilize distributor system while develop direct sales capability to

strengthen control over POS

Specify development paths of distributors, sales companies and CBUs, and

balance the roles of the three

Expand market share and enhance penetration in lower tier cities

Improve Key Account management framework and strengthen cooperation

through various means

− Data analysis, differentiated marketing strategies, strategic alliance with

retailers

Continue to build advantages over special channels

− Convenience store sales improvement project

Full application of Wei Sales Platform for more sophisticated POS management

Improve layout of E-commerce platforms and maintain leading position

5

Strategies

Actions

23

24