CHINA MENGNIU DAIRY COMPANY LIMITED

(2319.HK)

2020 Interim Results

August 2020

Legal Disclaimer

2

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.

Mengniu

Lu Minfang Chief Executive Officer & Executive Director

Meng Fanjie Vice President & Executive Director

Zhang Ping Chief Financial Officer

Gao Fei Senior Vice President

Wen Yongping Vice President

Li Pengcheng Vice President

Chris Kwok Financial Controller & Company Secretary

Yashili

Yan Zhiyuan Chief Executive Officer & Executive Director

Wen Jieping Chief Financial Officer

3

Management Team

1H2020 Review:

Combat COVID-19 Embrace Changes

Spearhead Industry Recovery

5

Proactively Responds to COVID-19 Challenges, Expediting

Business Recovery

Emergency Work

Leading Group set

up in response to

COVID-19

Swift decision-

making, highly

efficient and effective

execution

Charity Donation

Brand reputation

improved

significantly

Reducing inventory

to expedite multi-

channel sales

recovery

Accelerated sales

recovery, expediting

supply chain

normalization

Fulfilling social

responsibilities,

accurately judged

post-pandemic

market demand

and recovery

• COVID-19 outbreak resulted in excessive inventory; deployed online and offline omni-

channel in 1Q; invested promotional expenses to swiftly address inventory challenges

• Channel inventory resumed to normal level by end of April and achieved double-digit

growth for comparable business in April

• Multi-channel recovery, efficient execution and strong post-epidemic dairy demand drove

strong growth in May and June across all categories

Sourcing each drop

of qualified raw milk,

ensured sustainable

development of

supply chain

01 • Market share increased by 1.5ppt to 28.2% in 1H

• Significant effects in upgrading premium products,

Deluxe grew by 19% in 1H despite the COVID-19

outbreak

• Mengniu branded pure milk grew by 25% in 1H with

significantly higher OPM in 2Q

• Benefited from new product launch and improved brand

power, Fruit Milk Drink grew by 11% in 1H

02

Room temperature premium brands

continued to lead industry growth

02

Low temperature business achieved strong

performance in new retail channels

03Fresh milk business continued to

achieve high growth

6

• Despite the pandemic in Wuhan city, Fresh milk

business grew by 97.6% and Shiny Meadow branded

milk grew by 177% in 1H

• Market share grew by 4ppt to nearly 10%, and Mengniu

fresh milk jumped to industry No.2 in June

• Shiny Meadow maintained No.1 position in high-end

fresh milk

• Due to traffic decline in modern channel and special

channel, low temperature business recorded weak

performance

• Q2 gradually recovered to same level YoY and

achieved slight growth

• Focused on Blue Cap series of Champion Yogurt and

LC37 YoyiC to expand functional chilled dairy sub-

segment

Swift Decision-making and Firm Execution Boosting

Strong Growth Across All Segments

06Yashili product portfolio adjustment

achieved good results and 2Q grew by 25%

• Further adjusted IMF portfolio in 1Q, and achieved

better-than-expected strong growth recovery and margin

improvement in 2Q

• Focused on Reeborne Brand to produce better milk

powder which is ideal for babies

• Channel execution improvement drove strong growth in

mid- and high-end milk powder for adults

04• 品牌定位调整和产品创新升级，驱动产品结构提升

• 强化现代和新零售渠道，驱动费效比改善、经营利润

率大幅提升

冰淇淋业务利润率明显提升

05

7

04• Brand positioning adjustment and product upgrading

drove product mix improvement

• Enhancement in modern and new retail channels led

to improvement in opex efficiency and significant

growth in OP margin

Ice Cream business achieved strong

profitability improvement

• Proactive brand and product portfolio building

resulted in over 120% growth of cheese category in

retail channel

• Net margin increased significantly due to strong

growth of branded cheese in retail channel

Cheese business achieved explosive

growth

Swift Decision-making and Firm Execution Boosting

Strong Growth Across All Segments

Financial Overview

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RMB Million1H2019 1H2020 +/-

Revenue 39,857.2 37,533.5 -5.8%

Gross Profit 15,578.7 14,652.4 -5.9%

Gross Margin 39.1% 39.0% -0.1ppt

Operating Profit 2,420.3 1,500.0 -38.0%

Operating Margin 6.1% 4.0% -2.1ppt

EBITDA 3,511.6 2,194.9 -37.5%

EBITDA Margin 8.8% 5.8% -3.0ppt

Profit Attributable

to Owners of the

Company2,076.9 1,211.5 -41.7%

Net Profit Margin 5.2% 3.2% -2.0ppt

Basic EPS (RMB) 0.531 0.309 -41.8%

Financial Highlights

Financial Highlights – Comparable Business

RMB Million1H2019(1) 1H2020(2) +/-

Revenue 33,715.4 36,887.7 9.4%

Gross Profit 13,224.3 14,356.8 8.6%

Gross Margin 39.2% 38.9% -0.3ppt

Operating Profit 2,112.7 1,410.2 -33.3%

Operating Margin 6.3% 3.8% -2.5ppt

EBITDA 3,026.1 2,108.9 -30.3%

EBITDA Margin 9.0% 5.7% -3.3ppt

Profit Attributable

to Owners of the

Company2,001.6 1,158.4 -42.1%

Net Profit Margin 5.9% 3.1% -2.8ppt

Basic EPS (RMB) 0.512 0.295 -42.4%

Note: (1) The disposed business of Junlebao Dairy is not included in 1H2019; (2) The acquired business of Bellamy is not included in 1H2020.

10

11

17,122.7

19,765.0

36,887.7

1Q20 2Q20 1H20

YoY +0.0% +19.2% +9.4%

0.5%

6.7%

3.8%

1Q20 2Q20 1H20

YoY -8.0ppt +2.7ppt -2.5ppt

RMB Million

Note: This slide shows the quarterly performance of comparable business in 1H2020.

Revenue Operating

Profit Margin

Proactively Responds to COVID-19, Driving Strong

Recovery in 2Q

12

Revenue Breakdown by Segments

Note:

(1) The disposed business of Junlebao Dairy is not included in 1H2019;

(2) (2) 1H2020 results include RMB646 million of Bellamy’s revenue.

(RMB Million)

1H2019(1) 1H2020(2) +/-% of 1H2020

Revenue+/-

Liquid Milk 29,446.4 32,565.3 10.6% 86.8% -0.6ppt

Ice Cream 2,186.0 2,229.2 2.0% 5.9% -0.5ppt

Milk Formula 1,758.6 2,281.9 29.8% 6.1% +0.9ppt

Others (Cheese) 324.4 457.1 40.9% 1.2% +0.2ppt

Total 33,715.4 37,533.5 11.3% 100.0% /

13

Net Cash Inflows from

Operating Activities

Capital Expenditure -

Property, Plant & Equipment

(RMB Million) (RMB Million)

209.8

-1,119.2

1,826.9

3,816.0

2,036.7

2,696.8

1Q19 1Q20 2Q19 2Q20 1H19 1H20

1,058.9

1,682.4

1H19 1H20

Note: The disposed business of Junlebao Dairy is not included in 1H2019, and Bellamy’s financials are included in 1H2020.

Cash Flow and CAPEX

14

4.1% 3.8%

Expenses As a % of revenue

S&D G&A

(RMB Million)(RMB Million)

1,367.0

1,439.0

1H19 1H20

Note: The disposed business of Junlebao Dairy is not included in 1H2019, and Bellamy’s financials are included in 1H2020.

SG&A Expenses

4,574.9

5,873.24,957.7

5,626.4

9,532.6

11,499.6

1Q19 1Q20 2Q19 2Q20 1H19 1H20

26.7%

33.7%

29.9%28.0% 28.3%

30.6%

Expenses As a % of revenue

Note:

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

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

(3) The disposed business of Junlebao Dairy is not included in 1H2019, and Bellamy’s financials are included in 1H2020.

Inventory Turnover(3) Receivables

Turnover(1)(3) Payables Turnover (2)(3)

Day Day Day

1H19 1H20

18.3 18.6

1H19 1H20 1H19 1H20

54.8

15

Operational Efficiency Index

36.2

28.8

58.8

2020

Strategic Priorities

Upgrades brand proposition

and continues to improve

brand reputation and loyalty

• Providing strategic sourcing

assurance for invested farms

• Tactically increasing sourcing

volume

Strengthens raw milk

sourcing for long-term

strategic development

• Consumer fidelity to Mengniu brand

improved after the COVID-19 outbreak

Continues to build

RTM strength

• Executed by category/cross category

Design-to-Value initiatives

• Product design and innovation driven

by consumer insights

• Simplifying packaging, formula and

streamlining SKUs

Cost savings from

whole value chain

• Digital infrastructure upgrade for

enhanced business insights and

decision-making

• Empowered To B’s digitalized

management efficiency

• Promoted To C’s digitalized precise

marketing

Improves overall digital

capability to empower

business decision-making

• Bellamy’s

• Lion Dairy & Drinks

Rapidly implements

post-acquisition integration

6

32

54

1

17

Firmly Executes Existing Strategies - 2020 Strategic Priorities

Increase POS

Coverage

Strengthen RTM for

Future Growth

Improve

Supply Chain

Model

Reinforce

Channel

Management

Empower

Distributors

Optimize

Sales Force

Structure

Donation Enhances Brand Reputation;

Connection with Young Consumers Boosts Brand Power

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1

Donation of RMB740 million cash and dairy

products was well received, winning significant

brand reputation and acclamation1

Initiated Chinese cartoonized marketing and

introduced brand IP image “Niu Mengmeng”

to rejuvenate brand proposition

2

Launch of creative packages themed “college

entrance examination tips”, attracting wide

attention and heated discussions on the Internet3

+0.5Brand Power Index

2020Q2 vs. 2019Q3

Continues to Build RTM Strength,

Improving Channel Control

19

Increase POS

Coverage

Strengthen RTM for

Future Growth

Improve

Supply Chain

Model

Reinforce

Channel

Management

Empower

Distributors

Optimize

Sales Force

Structure

Significant Progress of RTM building in 1H2020

Market Coverage

POS coverage of liquid milk further

improves

Empowering Distributors

Continues to promote Smart Network

system to achieve refined channel

management

Channel Penetration

All-effort promotion of “Penetration into

Towns and Villages” program, growing

150,000 POS within 1H2020

2

Seizes Post-pandemic Opportunities,

Focusing On New Retail Channel Development

20

E-commerce O2O Home

Delivery

Fresh-to-Buy

Platforms

Community

Group Buying

2

Accounting for over 6%

of liquid milk business;

No. 1 sales on 618

shopping festival

Continues to push

forward in-depth

strategic cooperation

with Alibaba and

JD.com

GMV of O2O model

reached over RMB1

billion in 1H, up by

200% YoY

Sales and growth rate

reached new high in

June

Covering all Fresh-to-

Buy platforms and

introducing seasonal

sales campaigns

Creating over 100,000

WeChat groups during

the pandemic to drive

community group

buying sales

Achieved over RMB1

billion of sales in 1H

Strengthens Raw Milk Sourcing for Long-term

Strategic Development

21

Deploys for Domestic and

Overseas Raw Milk Sourcing• Developing rearing and breeding, milking and processing

integrated industry clusters in domestic market; already

commenced building three farms with sizes of 100,000

heads of cows

• Preparing strategic complementary sourcing from oceanic

markets

Supports Three Large Farming

Companies to Expand Capacity

• Focusing on raw milk production and enhancing

operational synergies

• Helping to improve capital liquidity, operational

efficiency and capacity expansion capability

Enhances Organic Raw Milk

Source Development

• Exercising warrants share arrangement regarding Shengmu

(1432.HK) at the end of July and increased ownership to

17.8%, so as to strengthen control over organic raw milk

sourcing

• Converting more non-organic farms to organic ones and

expanding organic raw milk production in desert areas to drive

organic milk business expansion

3

项目执行

Simplify product design 2

Product innovation driven by

consumer insights1

Cross-BU Collaboration

Establish cross-BU project team to achieve

cost cuts and efficiency improvement from

product packaging and formula upgrading

Performance-based Assessment

Set up KPI and incentive mechanism,

motivating implementation across each BU

Empowerment

Set up methodology, implementing in each

Business Unit

Design-To-Value Initiatives

Driven by Consumer InsightsProject Execution

Consumer-centric, Steering towards

Full Chain Cost Savings

22

SKU portfolioPackaging Formula

4

Improves Overall Digital Capability, Empowering Business Decision-making

23

Facilitate More Precise Consumer Communication

Improve Marketing Expense Efficiency

Leverages big data to optimize

digital media procurement,

improving media investment

efficiency

Digitalized and Precise

Advertisement

Establishes a one-stop consumer

data management platform,

improving sales conversion rate

through precise marketing

Omni-channel

Consumer-centric Operation

Builds a platform to directly

engage with consumers and

facilitate end-to-end data

connection to establish solid

infrastructure for digitalized

operation

One Pack, One Code

5

Bellamy’s

• 1H business performance in line with our

expectation

• Medium to long-term growth strategies formulated

• Establish performance incentive plan, and

strengthen Chinese business team

• Launch super premium organic A2 formula and

organic goat milk formula in June

• Launch Chinese-labelled organic baby food in

March, and Chinese labelled organic formula

products in late August

Acquisition of Lion Dairy & Drinks was terminated as

preconditions of the deal had not been fulfilled on the

Conditions Precedent End Date.

24

Rapidly Implements Post-acquisition Integration6

25

Executes ESG Strategic Plan,

Pursuing High Quality Long-term Growth

• Promotes the integrated execution of ESG

sustainable strategy and business operations

• Continues to implement 12 Subjects and 27

Actions according to ESG Three-Year Roadmap

• “Mengniu ESG Report 2019” released in July

• In August 2020, Mengniu was selected into Hang Seng Corporate Sustainability

Index and Hang Seng ESG 50 Index

• Nine factories honored with “National Green Factories” and built two smart

factories to embrace digital transformation

• Honored with the “Climate Leadership Plant Award”, jointly presented by Energy

Foundation and China Council for an Energy Efficient Economy

• The “Inclusive Nutrition Plan” won “Asia Responsible Enterprise Awards - Social

Empowerment Award” from Enterprise Asia for three consecutive years

Quality Assurance

……

…… ……

Environment

Society Economy

CarbonEmission

Green Packaging

Energy Saving

Risk Control

Anti-corruption

Responsible Supply Chain

Social Commitments

Employees’ Rights

Q&A