China Shengmu Returns to Profitability in 1H2026 with Revenue Up 7.1% and Profit Attributable to Owners Reaches RMB64.0 Million

Highlights

HONG KONG, August 27, 2026 - (ACN Newswire) - China Shengmu Organic Milk Limited (“China Shengmu” or the “Group”) (Stock Code: 1432.HK), the organic raw milk producer in China, today announced its financial results for the six months ended June 30, 2026 (the “Period” or “1H 2026”).

In the first half of 2026, as the raw milk industry continued to undergo supply-demand rebalancing and end-market demand remained under pressure, the Group adhered to its operating strategy of “production based on demand, controlling volume while improving quality, and prioritizing efficiency”. The Group continued to focus on improving milk yield, optimizing its herd structure, and enhancing cost efficiency. During the Period, the Group recorded sales revenue of RMB1,546.1 million, representing a year-on-year increase of 7.1%. Gross profit increased by 22.7% year-on-year to RMB447.8 million, with gross profit margin improving from 25.3% to 29.0%. Profit attributable to owners of the parent amounted to RMB64.0 million, compared with a loss of RMB48.3 million in the same period last year, marking a return to profitability.

The Group’s annualized yield per milking cow further increased to 13.14 tons, representing a year-on-year increase of 7.1% and a new historical high. This drove raw milk sales volume to 424,902 tons in the first half of the year, representing a year-on-year increase of 13.9%. Premium raw milk accounted for 79.5% of total raw milk sales, while the Group continued to enrich its product portfolio with differentiated products, including organic raw milk, organic A2 raw milk, and DHA raw milk. Although the average selling price of raw milk decreased by 6.0% year-on-year during the Period, the Group benefited from higher milk yield, lower feed costs, and refined feeding management. The cost of milk production per kilogram decreased to RMB2.58, representing a year-on-year decrease of 10.7%. As the decline in unit cost exceeded the decline in average selling price, the Group effectively enhanced its earnings resilience amid the industry downturn.

During the Period, the Group continued to optimize its herd structure. Total cattle inventory stood at 140,521 head, with milking cows accounting for 48.5%, representing an increase of 0.7 percentage points from the end of 2025. Adhering to its “production based on demand” approach, the Group focused on optimizing low-efficiency and high-parity cows, increasing the proportion of high-efficiency milking cows, and reasonably controlling the scale of replacement heifers.

Benefiting from the recovery in beef cattle market prices, the Group further optimized the grading, pricing, and sales management of culled cattle. During the first half of the year, the Group’s feedlot cattle business recorded sales volume of 8,099 head and sales revenue of RMB42.9 million, while net gain surged by 275% to RMB11.0 million, further enhancing the value of the Group’s cattle business across the full life cycle.

In terms of smart farming and sustainable development, the Group continued to integrate herd data, environmental monitoring, and equipment operations into its digital management systems. Through the use of tools including wearable collars, thermal imaging, and data analytics, the Group improved the efficiency of heat stress management, precision feeding, and herd health management, while steadily advancing the application of smart feeding systems, robotic milking systems, and electric equipment.

Leveraging the resource advantages of the Ulan Buh Desert, the Group continued to enhance its organic circular agriculture system covering “planting–breeding–returning to farmland,” promote the use of high-quality domestically produced forage, and advance manure resource utilization, as well as water- and energy-saving initiatives, further strengthening the distinctive advantages of its desert organic milk source.

Mr. ZHANG Jiawang, Chief Executive Officer and Executive Director of China Shengmu, said: “In the first half of 2026, amid continued supply-demand adjustment and the raw milk industry remaining at the bottom of its cycle, China Shengmu further improved the quality of its operations by continuously increasing milk yield, optimizing its herd structure, and reducing unit costs. Raw milk sales volume increased by 13.9% year-on-year, annualized yield per milking cow reached a new historical high, and the cost of milk production per kilogram decreased by 10.7% year-on-year, enabling the Company to return to profitability. Looking ahead, we will continue to prioritize efficiency and maintain prudent operations, consolidate our advantages in organic and differentiated milk sources, deepen collaboration with key customers and industry partners, and continuously enhance asset productivity and profitability.”

Looking ahead to the second half of 2026, the Group expects the domestic raw milk industry to remain in a phase of supply-demand rebalancing and recovery from the bottom of the cycle. The Group will continue to adhere to its strategy of “production based on demand, controlling volume while improving quality, and prioritizing efficiency,” further improve herd quality and milk yield, strengthen its cost curve advantage, deepen customer and product collaboration for organic and differentiated raw milk products, and advance digitalization and green production. Following the mandatory cash offer proposed by China Modern Dairy becoming unconditional in all respects on July 20, 2026, the Group will proceed with subsequent industry collaboration in accordance with applicable laws and regulations. While maintaining the distinctive characteristics of its organic milk sources and operational continuity, the Group will prudently assess and unlock potential synergies in areas including centralized procurement, cost management, breeding, and digital management.

China Shengmu Organic Milk Limited

China Shengmu Organic Milk Limited (“China Shengmu” or the “Group”; stock code: 1432.HK) is an organic raw milk producer in China. The principal business of the Group is dairy farming, production and sales of high-end desert-based organic raw milk and quality non-organic raw milk. The Group focuses on the production and sales of desert-based organic milk, while satisfying the diversified needs of customers for quality raw milk and continues to develop a variety of functional raw milk to enrich the Company’s product combination and enhance its profitability. As of June 30, 2026, China Shengmu owns 34 daily farms, including 1 fattening cow farm. The Company had 140,521 cows in stock.

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