Business Intelligence on Retailing, Franchising, and Consumerism in China

Chinese Goat Milk Producer Sees Profit Drop

Chinese goat milk producer Yayi International Inc. announced its financial results for the first quarter of fiscal 2011 ended June 30, 2010.

For the three months ended June 30, 2010, the company reported net income of USD0.03 million, or USD0.001 per basic and diluted share, compared with USD1.8 million, or USD0.07 per basic share and USD0.06 per diluted share for the three months ended June 30, 2009.

Gross profit for the three months remained largely flat at USD4.9 million on a year-over-year basis. Gross profit margin narrowed 110 basis points to 64.8% from 65.9% a year ago, which was primarily attributable to higher unit costs due to the company utilizing more giveaways and promotions to attract potential customers. Excluding slotting fees paid to hypermarkets and supermarkets and giveaway costs, gross margin improved 740 basis points to 73.3% from 65.9% from a year ago. In addition, gross margin improved 80 basis points from 64.0% for the three months ended March 31, 2010, reflecting the introduction of the new higher-margin product portfolio and higher prices.

For the three months ended June 30, 2010, net sales increased 3.1% to USD7.6 million from USD7.4 million for the same period of 2009. The increase was mainly because of a shift in product mix and an increase in raw material costs that led to a 30.5% increase in the unit sales price.

Operating expenses for fiscal first quarter increased to USD4.6 million from USD2.2 million for the same period last year.

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