Good afternoon and good evening, ladies and gentlemen. Welcome to our 2026 France, Investor Day. Especially, warm thank you for those our friends joining online at night in mainland China and also in Hong Kong. Very welcome to join this event. My name is Mavis. I'm from H&H IR team. Let me just briefly introduce what we have for the management team today. We are very honored to have Mr. Luo Fei, Chairman of H&H. We have Mr. Akash Bedi, rotating CEO for H&H. We have Jason Wang, Group CFO and COO, and we have Ms. Suceka Lee, CEO for China.
Also, most importantly, we have one of our very important key strategic partner, Isigny, and Gérald Andriot from Isigny, CEO of Isigny, and also Camille, the commercial director of Isigny.
Nice to meet you.
During the presentation, first, Fei and Akash will deliver a very welcome speech. Jason will share with the latest business performance update. Suceka Lee will talk about the latest China IMF business update. The most important main course for today will be the Isigny's introduction and the strategic partnership with H&H, which will be introduced by Gérald Andriot. Last but not least, is the Q&A session. This is what we have for today. During the whole event for our friends online, you will all be muted. If you would like to ask the question, please raise your hand during the Q&A session. Okay.
Now, also, because I think we have a lot of friends coming from China will also join this call. For the introduction of Isigny , we will also translate from English to Chinese. [Non-English content] For the Q&A session, we can also very open for the questions from in Mandarin. [Non-English content] Okay. Now, let's begin. I will pass to Fei to deliver the.
Okay.
Welcome speech.
Thank you all the friends, company Isigny Sainte-Mère. Also the friend, join through the, our website. Today is a good, a great day because we have a sunshine. There's no need for rain. That's why we have a good, you know, grass to feed the cow.
Thanks for joining today. Later on we have a visit for the day of our factories. I think most investors are Chinese background, so better for me to switch to Chinese, if you don't mind.
Yeah.
Okay.
Every little bit.
Okay.
[Non-English content] Now I pass to Akash, our rotating CEO.
Yeah.
Thank you, Fei. Good afternoon, everyone.
I mean, I feel bad for you guys. You're wearing coats in the summer season here. Apologies for that. The weather usually is very nice here, right? For the benefit of everybody, I'm Akash, the current rotating CEO. It's the second term of, you know, our rotating CEO model, kicking off from 1st of April. I inherited from Suceka, my best friend, okay, who gave me the business in a very good shape. That's where we're starting. Very pleased to have you here. I think I want to thank Gérald, our best friend, you know, CEO from Isigny, to host us here. You know, there's a phrase associated here, I think Fei mentioned, the heart of Isigny terroir, right? It's exactly what, you know, it captures here, which is not just a French concept of geography.
It's basically a philosophy of quality. Today, quality is the epicenter of everything. This place and people that speaks for itself, right? We, as H&H, and I think thanks to our Chairman, this is deeply rooted in our culture, and this is deeply rooted into Biostime and all the brands that we carry here. Standing here as a partner, not as a guest, right? We own ownership here, but we always believe in a partnership of mutual respect and trust, right? This has helped us to shape, you know, the infant nutrition, where we are servicing millions of babies in China, in Australia, everywhere, right? I just want to start one thing very clearly. During our quarter results with Jason and in our annual results, we always speak about numbers. We always speak. The relationship between H&H is a cornerstone.
Without trusted partners like Isigny, we will not have a business. This partnership, I just realized yesterday, started over 15 years, in 2011, right? This has built over a period of time. Supply contract is just the foundation of it, but the confidence in the mothers. We sell millions of tins across various markets, right? That basically shows the confidence. Isigny speaks for its milk craftsmanship and the standards, which I'm sure you have seen the recent news. H&H and Biostime did not got impacted. That's the investment of 15 years that has happened here, right? For our investors today, I just want to start. Infant milk formula today is our second-largest business after nutritional supplements.
It represents almost 1/3 of our business, it is the category that built this company and continues to shape who we are and who we'll be. That's why all of you, thank you for coming here to understand what the future lies here, right? One thing I learned, you know, when I was interviewing for H&H, Luo Fei told me, infant milk category, skincare, you know, comes from Provence, right? Japanese, Korean. We from infant formula don't take Provence as a marketing right. It's the origin. Consumers, particularly in our markets, are very well-informed. We educate them, and they're demanding, and they pay that price for that. That's what this partnership today that we have built together into that, right? I'm not gonna give a very rosy story because it's not been a smooth ride. We all have seen 2024. We all see 2016, right?
Infant milk formula goes through up and down. Recently, birth rates have not been in the right trajectory, right? It's a category that is very important to us. We are not a private equity. We are a corporate who takes always a longer-term view into that, right? That's why our continuous investment into partners is Our brand is strong, our positioning is right, and the support from Isigny is a clear testimony of that. Q1 growth rate, I'm not gonna go into much, really spoke for itself, right? 71.8% NSR growth rate. While it is not a normal growth rate, you know, that you will deliver every quarter, but it shows the sell-through when we spoke to all of you remains very strong, right? We are today number five infant milk formula brand in China. This position was not created overnight.
It is an effort of almost 20 years that has been there, right? This partnership is the fundamental to deliver that. Even in French market, where we are today, we are number one. We just saw recent market share data. We are very close to 50% market share in organic infant milk formula.
In pharmacy channel.
In pharmacy channel. In growth, close to 70% market share. I have never seen those numbers, and that's the quality and the trust that comes behind it, right? As H&H, as we continue to invest into science-backed nutrition and expand Biostime globally, Isigny is not an interchangeable supplier. It's a trusted partner that will remain forever. It is in our growth journey. Without taking much time, I'll give the floor to Jason to talk about our recent financial performance, and then Suceka will give an update on the China infant market.
Thanks, Akash. For the colleagues on the call and also in this meeting room, we announced our 2025 results at end of the March, and then in mid of the April, we also announced our latest Q1 results. Actually, if you can see from both the 2025 annual results and the 2026 Q1 results, we have continued our strong growth momentum build up based on the all three exciting segments. Especially for the Q1, as you can see from this slide, our year-to-date, the total growth of the group's revenue reached 34%.
Within that, our Baby Nutrition business grow over 60%, especially for the infant formula, as just mentioned by Akash on the overall, we grow over 72%. In a moment, I will invite also Suceka to explain to you in more details about the specific drivers to achieve this very high strong double-digit growth. Also within the Baby Nutrition segment, we're also very happy to see the pediatric probiotics and the kids nutrition segment also returned to very strong double-digit growth at a 23%. This really makes the whole Baby Nutrition a really important critical strategic pillar for the whole group business going forward. For our Adult Nutrition and Care business also we are very happy to see reached over 26% growth in the Q1.
Within the two core markets of Adult Nutrition and Care business, which are China and Australia, both achieved a very strong double-digit growth. For China in Q1 achieved over 33% growth, supported by the successful expansion of the category and also the channels. We are seeing the seasonal benefit from the Chinese New Year holiday sales season. For Australia, which is already a mature market for the ANC business, still also in the Q1 achieved 16.5% growth. Thanks to the successful expansion of the category as well as the expansion of our channel presence. In the expansion markets for the ANC, in particular in Southeast Asia, in Q1 we achieved over 37% growth.
This shows it's really quite healthy, sustainable growth of this important ANC business for us in, within the group business. For this, our third growth pillar is the, our pet nutrition business, which now accounting for 11.6% of the total group's revenue. Within that, as you know, super majority of that business, 70%, is the, from our high-growth, high-margin Zesty Paws business in North America. For this business, in Q1 grow over 17%, which is very in line with our guidance to the capital markets. Other than this exciting, growth, momentums of three segments, also we maintained very healthy financial status. For the end of the Q1, we maintained 2.1 billion RMB cash balance, i.e., close to $300 million cash reserve.
By leveraging this strong cash reserve, we have accelerated over the leveraging path. In the Q1 alone, we reduced our total gross debt by over 300 million RMB. This paved a very strong foundation for us to reach the full year deleveraging target of over 700 million RMB. This makes the company's whole financial status and balance sheet health much stronger than before. We are quite happy for this whole Q1 on the both the business growth point of view and also finance health point of view, we have achieved sustainable, significant progress. We are also quite happy as of today is already the 13th of May, for the May year to date, we can see this strong growth momentum continued till now.
Also we feel very confident that then, on the back of this successful momentum, we will achieve our full year guidance targets as communicated to the capital markets in the last months. This is really thanks to the support from all our equity bond as well as the banking partners in from this call and from this meeting. We will also keep you posted on the further performance development. As usual, just to remind everyone, before the official publishment of interim results in August, we plan to also issue the first half operational update in July that then we can keep a timely update to the whole capital market. That's a quick kind of overview of our year-to-date group financial performance.
Now I would like to pass the floor to Suceka Lee to give you a bit kind of a more deep dive into our China IMF business development. Suceka Lee.
Hi, everyone. This is Suceka Lee. It is very great chance to bring all of you guys into understand more about Isigny and also to understand the secret of how the success of China IMF is growing. We all know that, in the Q1 we did deliver a very great result. We have more than 70% of the growth is on the IMF. We're very glad to see the trend in fact continue. Overall we see, we still have high confidence to deliver the guidance to all of you guys, in Q1 result releasing and for the annual things there.
Lots of the investor or the business leader is coming to us is asking how Biostime IMF is keep the growing because this is a key question with the declining of the birth rate, why we are growing. There are a few things I would like to highlight it for this successful and continue of the growing. Number one is definitely high quality and science-based of the formula design. It is in the core of the DNA. It's not only in the core DNA of the IMF we are delivering, it is all the core DNA of H&H. We all know that now the most trending ingredient in the IMF is HMO. We have already successfully launched our HMO product since April.
With the early results so that it continue our strong growth momentum, especially in terms of acquiring new consumers into HMO of the product. With the HMO, this is the product, it is till today, it is the only imported formula that contain HMO being approved by China government. This is the first one. Second one, it is the highest dosage of the 2'-FL, which is the core ingredient of the HMO across China, no matter if this is local or it's an imported brands of IMF. The third one is, in fact the formula upgrade, it is go beyond HMO. We have reset our new standard that even our lipid structure it is very close to the colostrum levels.
This is all enabling our new babies for China is designed to have a stronger immune system, have stronger of the growth curve rate, and also the complete nutrition of all the products. This is a very big news for us already. Mavis, you can help me to like show a little bit about the TVC
Maybe we can share the TVC later. The second one is we are very focusing on really proposition the brand that is closer to consumer. Always consumer-centric of all the communication and go to market, it is also caught in our blood. You guys can also feel a little bit about the tonality. It's the, a new Biostime. We have already launched into the market, which is in since last year. This is also in the same time with our turning around. Our goal is to becoming the most favorable and most understanding for the post-95 of the new moms. This is how, the way it is second focusing for all of us. The third focusing is we are very focusing on early stage of the consumer recruitment.
We did see that, from this, from January this year to April and to May, we are keep accelerating our stage one and stage two of the consumer acquisition, which also gave us the confidence and also the momentum how we can have the result delivered in rest of the year. Align, above it is majority the key highlight for IMF in the past four months. I will pass back to Mavis for the next agendas.
Sure.
Okay.
I think now we have Gérald, the CEO of Isigny to walk you through the history of current operations in where we are today.
Yeah.
Gérald.
Gérald, yeah, please.
Okay. Thank you. Hello, everybody. Thank you to have me on this call and on board. I'm effectively Gérald Andriot. I'm the CEO of the company. I've been involved in this company since almost 13 years. I came from operations, and then I raised as a COO, and then CEO of the company since three years.
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I've been educated as a I'm French, of course, and I've been educated as a food science engineer. But also I have been graduated from HEC for an executive MBA. I just want to tell that I did all my career in dairy food and dairy industry. Honestly, talking about Isigny Sainte-Mère first, it's something very emotional for me. Why? Because I used to work for many companies, to be clear. I'm here since 13 years, but for me, being at Isigny and being the CEO of this company is just like a dream come true. For me, it's the nicest dairy company, high quality in France. It's not because I'm the CEO, because it was a dream to come here already when I was in my childhood. This is my special part.
First of all.
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Thank you. We are not here to talk about me, we are here to talk about the company.
Okay? My goal today is to make sure you understand how did the magic of Isigny quality dairy products arrive and came here. We are here, first pillars, we are in an exceptional terroir. Of course, we are, we are in Europe, France, but Normandy has always been known as a very high quality terroir for milk production. Already, in the 17th century, you have to know that the king of France, Louis XIV, was already asking for Isigny butter on his table because it was I'm not kidding. We found papers on this, because it was known to be the best butter in France. Now, how does it arrive? We are in a specific terroir. We are, first of all, in the part of France where all the best condition are to have milk.
You know, to have milk, you need at least two things. You need, of course, cows.
Sure.
You need also lands. Our model is not to have internal cattle into stable, whatever. It's pasturing. It's grass, because the quality of the milk comes from the grass. You need to have high quality breed, or bring some normal breed, but we also have
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A few words on PDO because the area has been recognized as a PDO terroir, I would say, for Isigny butter and cream originally. In fact, we all knew in France that this area was very high quality, giving high quality milk. In 1986, during four years some research has been done to recognize, but I mean scientifically, not just by mind, why this terroir is like this and why since, in fact since centuries, we knew that it was such high quality milk. All the studies have been made and it has been recognized by the state as a PDO.
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It's a very tiny terroir. You cannot do this at 200 km from there, because we are right now here. In fact, we are also in a natural park here. This terroir also been recognized by the state for the environment and nature and it has been recognized. You can see the green line is all the natural park limitation. Okay. We collect our milk around this area 50 km from Isigny. It's very a tiny area like for our PDO. We are in this natural park. Maybe we can go further.
Sorry.
On the side.
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[Foreign language]. Oh, this is the natural park. Maybe we can go further again, please. We have this outstanding raw material, our milk. Cows have access to grass at least seven months a year. Some winter, very cold winter or very wet winter, cows stay in the stable. We produce our milk locally. We have our own milk collection with our own truck. I will explain that we are a cooperative, and it arrives at the farm every two days, every 48 hours.
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Our company is well-known, of course, for these fresh products. We will go back to the roots of infant milk after. In fact, the story started more than 100 years ago and we used to produce these fresh products like butter, cream, Camembert, maybe you know, and Mimolette which is an aged cheese for two years. We have been recognized as the best, the most awarded company of dairy awards in France since ever with more than 450 medals. Can you go further?
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More than 100 years ago we had dairy producers and dairy transformers in maybe every village in France. When all these small company, either family business, either private business, either cooperative business, they merged together to get bigger. It was very small unit become bigger. One was the roots of Isigny and two of this company in Sainte-Mère-Église and Isigny-sur-Mer. The first one, our deep roots from 1909, the start of a company in Saint- Mère-Église at 30 km from here. The second one was settled where we are today right now at Isigny-Ste-Mère in 1932. These two companies as of course dairy businesses. Some were common, both were producing butter and they merged together in 1980.
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Today we have these two factories with maybe we stay there and come back this. Perfect. We have two production sites. One is dealing only with fresh cheeses and Mimolette and all the infant formula, because it's what we are talking about today are made here at Isigny Sainte-Mère. It's a big factory. More than 1,200 employees.
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Can we go for two slides please? Slides please. Thank you. Come back here. Let few words on the cooperative. You understand that we are a cooperative. Just few words to explain back this model. It's a specific model where in fact all the milk producers have merged their efforts, their money to build this company and to better have their future in their hands, to better control the transformation of their milk, which is their main, their first production, and also the sales and the distribution. In order also to keep the value into the company or to better the value into the company. There is a board in this company this morning there was a board meeting. The board is mainly held by 16 farmers, but also effectively H&H has one sits in this board to control what's happening to the company.
This is something very important in a cooperative model. In fact, it's very easy. We are not held by a financial fund or whatever. All the money we gain, the company is made to better contribute to the milk price, better contribute to the employees wage, to invest and to keep in reserve. There is no I would say no financial bond from whatever. Everything stay there to always reinvest. Okay.
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Next one. Yes, please. Quality has always driven the company. You know that we are not a huge milk company in the world like some companies like Lactalis or Bel or Savencia. We are 1% of the French milk. You could say, well, it's nothing, but we create more value added as always compared to other milk, which is a big difference. Why? Because we always understood that we have a difference first, and I explained the rules of difference from centuries and also that we cannot fight with big volumes. We could, let's say, decrease your fixed cost. We have to create value always. It has been always what drives [audio distortion] . These figures are figures from 24. Figures from 25 are coming in two weeks. They will be better than this I can tell already. Yeah, nice growth last year.
Two-digit growth. I know that it's important for you. We had a two-digit growth even if it's not, we are not driven by form. The turnover you can, you will have these figures in a few days. You can have it. It's going to be more than EUR 600 million. 60% of our revenues made abroad. Of course, the infant milk is a big part for sure. We have about 375 pounds. 590, we say dairy farmers that we say shareholders because the shareholders are the farmers. Okay. It's, it doesn't tell anything to you, but it's almost 280 million liters of milk, which is, I said 1% of the French cow milk. Okay, we are 1,400 people right now.
I mean, 40% of all these people are, have been hired in the last five years because we have had a big growth all together. H&H. We have one proud, for me, my team knows it's also humility. If we, with our milk, we can feed 2.5 million babies a day, which we do. You can say I'm proud of it. To be honest, I'm very humble. I know this is a very sensitive activity, but I will explain you now what are the roots and why we are so confident in what we do every day with infant milk formula.
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Thank you. We are reminding that we are on the journey on explaining how this magic of infant milk quality arrive at Isigny. Our first pillar, we said the terroir, you remember. Second pillar is the breed, the Norman cow. This is the local breed, which is very known for the quality of its milk. For this fat quality for sure and use butter and cream, but also for its protein, very high quality protein. It's also one thing like H&H has been interested in promoting this quality of milk and this breed. We every year we are encourage our milk farmer to continue to choose the quality breed and not the I would say mass volume breed, which is Holstein. Okay. We help our farmers because it's a more expensive cow. It produces less milk.
If you want to do big money just right away, use Holstein. If you want to do high quality milk, you have to have Normande breed.
I would like to go on a little bit because for all the farmstead produced product, we're using our specific Normandy breed cow milk as a raw source. This is very different. It only us in China it is using this type of the breed's milk for it. In fact there's a lot of I personally feel amazed when I first meet with the cow six out, I hope you guys can feel it tomorrow because you will feel it much stronger and it look very happy because only of them they live a dream life of me. You know, like they always outside walk, walking every day.
Good grass.
The natural grass is really organic grass maybe. I just want to build on and share my personal passion for the Normande breed cows.
We call it the panda cow.
We are calling panda cow. [Non-English content]
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Yeah. When we do something at H&H Handcrafted, it's not only intention, it's also action.
Yes.
The clear action is that we promote and we finance, we have to give incentive, the milk price, give this Norman cow.
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Sometimes people in France says that H&H choose the vitandule. I don't know if you know this. I don't know if I've already told you. Sometimes we are called the vitandule. You know?
Louis.
Oh. You have never heard this?
No.
No? Yeah. I mean you never called that? No. Oh really? We are sometimes called vitandule in France. You didn't know it?
No, no.
After 15 years. Still things to share. Okay.
I never knew vitandule.
Of course we care about the terroir. We care also about the cows. We have all the farmers are engaged in quality assurance system and also about animal welfare because we care a lot. I will explain later. We are a B Corp company and so of course we care a lot that we do what we call Bovi well audits, which means that audits we do in the farms every year to make sure that everything is all right with the cattle. The way you raise the cattle, you treat them, you feed them like babies. Go ahead.
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One of the key points is the traceability, because you need to be able to track everything and it's quite an easy traceability as Isigny because the milk which is transformed here is produced here under our farm. These farms are under our control so it's easily for us to know what's which milk has been processed in which products. This is all the quality signs we have from the river, stream and also from the farm to make this under all confidence.
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We can go further. Another one. This is the Agri Confiance commitment. I won't spend so much, but each farms are so audited and respecting all those rules on the quality, on the environment, on the animal welfare, and also how we help them to raise the cattle and to do their crops.
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Thank you. Even if H&H and Isigny Sainte-Mère size are not the same, we have a committed approach and we share a lot of value. Maybe no wonder Fei still the partnerships is so strong still today. As H&H is, we are a B Corp company. I don't know if you are aware of this kind of I would say agreement level. It means that at Isigny and of course as a B Corp, we of course care about making money. To live we need to make money and to invest and to make able the farmers to live, we need to make money. We are also interested in our impacts we have on the whole community. It's dealing also with workers.
It's dealing also with the community, all the NGOs, all the customers, the state, the department, the village, the environment, and also to have, say, a safe governance. This is a big pillar for us also.
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Two slides, please. Another one. Yes. Okay. What in the model grazing has a multitude of benefits, of course. First of all, to get natural food to the cows, to give the best quality of grass into the milk. I would say omega-3, omega-6, vitamins, minerals, which gives a good quality of grass. You will not find any place in France to have such good quality of milk for sure. Also it helps us to preserve our grassland, our landscape and with all these cows.
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To protect this area we also are concerned with for hedges. You must find it's there. We also protect all the edges because you have seen or you will see that in our landscape you don't have big fields. All those fields are not so huge and very are delimited with hedges, three hedges, which adds a lot of benefits of the fauna, of the flora, and also to protect the cows during when there is high winds and also to keep the soil moisture. It's very important. We invest every year to replant hedges in the area and also H&H does it with us.
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From hedges to carbon and carbon footprint, there is only one step I would say. You understood that all milk is coming from a 50 km radius, not crossing all France or Europe. We have all our farmers, truck drivers, sorry, which are trained for what we call driving efficiency. We check their CO2 impact on the vehicles. Also every farms are made what you call a carbon footprint audits now to know exactly how many carbons each liters of milk produces and also to see how we can reduce this carbon footprint in order to preserve our environment.
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Controlling our emissions and carbon footprint is not only in the farm or in the milk collection, but it's also of course in the factory you've seen, in the factory you will visit it. Two slides please. Thank you. We have also a big ambitious program in reducing our carbon footprint. It's called easy- Watts. We have this goal to reduce from the end of 2030 by 30% of consumption of water by 10% of consumption energy and decarbonize 30% of all the non-renewable energy we use. I can already inform you that we have reduced by 20% our water consumption since two years.
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We were the first one in France to have a wood chip boiler in 2008 and I was not there, but I have been told Fei that when you arrive at Isigny and you've seen this wood chip boiler, it was in 2011. Am I right? He was very impressed.
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[Foreign language] Okay. Finally on milk quality, all our milk is GMO free, which means that we, every farmer is forbidden to use GMO feed into the feed of cows since already 10 years.
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Of course it's a cost on milk production because you need to find or select the right feed. At Isigny honestly, I'm here since 13 years and quality has never been a cost. Quality has always been an investment.
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Don't worry, we are slightly arriving on the infant milk formula topic. In fact, just for you to understand why Isigny arrive on infant milk formula, it's very simple thing. You are all financial as shown. You love math as I do. With 20 L of milk, I can do many things. You know in milk you have 90% of water, you have 4% of fat, let's say 4% of proteins, let's say 5% of lactose milk sugar and 2% of minerals. When you have these 20 L of full fat milk coming from the cow with a fat content, you can prepare 1 kg of butter. Of course, you understand that we do a lot at Isigny.
You can produce 2 kg of cream, which makes sense 80% fat, 40% that and you have left in your hand all the skim milk, which is a difficult product to process because all this milk you can do milk powder with this or you can use all what we call the fat and the dry matter to make for example cheeses like Camembert. At Isigny we are very strong in butter and cream as you know. We are strong also in cheeses. We have skim milk also remaining. The story of baby milk is just arriving now.
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You say it's skimmed.
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Fei made a comment is that here does not mean there's a picture here shows a powder, right? The skim milk is a powder then to the baby milk powder. Faye point said no need to make as a skim milk powder because here you already have the liquid so directly from liquid to that baby milk powder.
That's one of the models that we use fresh milk coming from a farm two days before. You understand that the supply of skim milk is not an issue because we have skim milk. Today, first of all, in this picture we show that 25% of baby milk powder is milk. It's not even this now because all the rules change when the regulations change, even in France, in Codex, in GB, in China. Now you have to know that in 1 kg of milk or a baby milk powder, you only have 16% of skim milk powder, only 16%. All the other ingredients are ingredients you add in order to mimic as best as you can the milk from the mum. Today we are producing roughly 50,000 tons of baby milk formula per year.
I could with the milk supply I have I could double these volumes of infant milk formula. Still some rooms to improve if we want.
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Yes, this is the breakdown of our revenues, 2024, 2025 something like 55% of our revenues is baby milk powder. 16% cheese, 21% butter, 11% cream.
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This is sales total.
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Now we are arriving at the story of baby milk powder at Isigny.
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Perfect, let me come one before you jump in this, I show you. What happened at Isigny? We had this skim milk powder, I would say since ever. We were one of the first one in France in 1949 to have a spray drier to produce skim milk powder. In 1956, the story is that the pharmaceutical company laboratory Wyeth in U.S. came in France and was looking for a partner to produce infant milk formula in France and to set up a new brand, a new range of products for France. Our story tells that they came in France, they came at Isigny, they came to ours, and they came back to Isigny and they said, "Well, we would like to do this partnership with you." It's already almost 80 years ago.
By this way, already 80 years ago for such a very specific and scientific product, we started to produce infant milk formula at Isigny. At this time they invested in a canning line in a full state of the art laboratory. For 30, 40 years we produced infant milk formula for Wyeth. When in fact after the brand has been sold, Wyeth left and we acquire all this knowhow during this 40, 50 years. We started to produce infant milk formula, I would say, by our own. We had one unit and then the story with H&H started. It was in 2011. When we decided in 2013 to go further to be able to supply China very requiring markets and we set up what we call U2 for unit two.
The story grow and we had U3 and we have now a full set of spray drying and canning line to produce our infant milk formula under the very highly requiring Chinese regulation GB. That's the story to make it short.
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You understand that we have almost 80 years experience in milk powder. Now we talk about the fact that we are feeding 2.5 million baby every day. We are tailor-made for more than 400 formulas. We are able to produce most of the formulas which are required on the market. first age, second age, third age, special formulas for babies having some issues. We are very well recognized. We have our own quality control lab. I will go further on it later on. We have more than 100 people, exactly 120 people assigned for quality of baby milk infant formula, which is 1/10 of all the companies. When I tell that quality is not a cost, it's an investment, I can prove it again.
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The whole sets of our facilities for infant milk formula are in this next slide.
It's coming. It's coming.
No, it's on this one.
Yeah.
Right now we are in this building, but when I arrived 13 years ago, we had only U1 original facility, and then we were just starting U2 facilities. We did U3 and U4 and a brand new laboratory in 2018. We have now all dedicated units separated that we can use to make all the formulas we supply for providing the market.
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You can see the farm back out there.
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Slides, please.
It's coming.
We have three dedicated production units for infant milk formula, six spray drying towers, three packing line for tins. We can also produce infant milk formula in 20 kg bags. We have also a brand new bagging box line, and we have our own laboratory that I will explain later on why.
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This is our total capacity per unit. It's in tons. Okay. Today we use roughly 55,000 tons of our capacity, and we still have remaining 10,000 tons capacity.
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Financial health of the company of Isigny is very good. When we need to invest, we invest and we can invest by ourselves.
You probably can talk about H&H volume versus the total.
Okay. H&H volume is more than 1/2 . Okay.
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To be fully clear, in fact, of course we have 65,000 tons capacity. On an economical point of view, we have to use all this capacity. As, I would say a shareholder or partner, H&H of course has the priority on the volumes. As much as H&H has to grow
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Myself also as a CEO, I have a strong responsibility in the quality of the products I put on the market. My thinking is that I cannot share this responsibility with other third party or whatever. We want and we do our best to have everything under control. For me, having our own lab is part of the process. We want to be reactive. We shouldn't have any non-quality products on the market. I wouldn't bear and fail all this. I wouldn't bear to have a third party lab do my testings. All our products are testing in our own lab. It's more than 100 lab technician. We have two PhDs which are developing the methods. We are the only lab in Europe which is able to handle all the GB methods as the GB regulation ask. We need this brand new lab.
It's a huge lab, 2,400 sq m, and it reviews at seven days a week, 24 hours a day, and we perform all what we need on micro testing, on your nutritional testings to ensure the full quality of our products. It's also one proof of quality is not a cost, it's an investment for sure.
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Of course we have been aware that there are several new crises and we have not been impacted and it is also due to one thing at least you guys are prepared for everything. We it's true that we always have a preference with a supplier which are under our hands. It's true that for all these critical ingredients like ARA or DHA, we have a preference with French or European supplier, but we can easily say audits follow and have quality requirements.
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Of course with European cost, workforce cost and everything, it would have been cheaper to choose a Chinese supplier for sure. I'm sure. Again, honestly, we prefer pay the right price to have the right quality.
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Next slide please. This lab is accredited. It means that all as we are not doing it by ourselves only internally of course open on the world, open on quality. We have this certification of our lab recognized by the state. Also of course we perform regularly into lab and also to make sure that we are still on track with our other labs in France and Europe.
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This is all our certification. We are certified IFS and BRC, which are standards in food. ISO 14 and 15 for the environment and energy management. One specific topic we have at Isigny our HACCP, you know, HACCP is a safety hazard efforts to identify the risk has been accredited by under the China rule, HACCP China by which is all our quality that I already talked about this.
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Next slide. You can find our products either fresh and infant formula in many countries. We sell directly in more than 100 countries overall.
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In infant formula our best and bigger market is China.
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I'm kidding. But there is something also emotional on this, because it's true that since all what happened in China on IMF, China did an incredible job of China regulation to raise the quality of infant formula to a standard which European didn't know. You, I have to tell that China and H&H so helped us a lot to reach such level of quality, which is incredible. Today I can tell that China market is the most recurring market on IMF in the world. Incredible. Congratulations to you. You are in French. We are in France, we are revolution country, you know. You are also a revolution country. Last slide. That was the list. Our partnership with H&H started, I mean it was Biostime at this time, started in 2011.
In 2013, we did this first U2 and we took 20% of shares at Isigny. When U2 started, it has been fully completed and we needed a U3. You launch on the same time your brand in France. It's incredible. We were just saying, what? Having and launching a brand in France, which is just a saturated market, how we will handle this and by quality, staying organic in pharmacies, very high standards formula. Now you have a top one brand in the French market. Congratulations. You always surprised us. We had to build the third factory, so we did it. You raised to the capital at 49.9%. Okay. U3 came into operations and things are still going very smooth.
June 26, as Suceka said, we launched Five Star Gold 2.0 in China.
HMO。
HMO. Just it's my last slide just to make a resume with few words. You've seen the pillars, the terroir, the cows. Of course, the milk and the know how of infant milk production at Isigny since the roots. All this is possible only with H&H science and H&H partnership and H&H know how. Together we push the mountains. It's just incredible. I want to say honestly, thank you to H&H company for all what we did together. Thank you.
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Thank you. Okay, thank you for the introduction. Before we go to the Q&A session, we will have a very short video to show how Isigny environment is quite superior and how our infant milk formulas quality can be best delivered.
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Ok, listen. High quality products and the organic or say like how the good milk as well as the good grassing help us to produce the good products. At the very beginning, we mentioned about we kind of renewed our brand slogans, stuff like that. My question is that with all these actions taken, how to make sure that all these concepts, especially all the good concepts, are properly conveyed to the consumers? Any actions we have been doing at this stage, and any improvement you believe we're gonna do in the near-term future. My second question is a little bit regarding our raw milk supply. 'Cause we all know there are several recalls happening from the beginning of this year. We noticed that recently that A2 Milk from Australia also did the recall.
As we all know, like, a A2 protein concept is getting heated in kind of these days. My question would be, any of the A2 protein that Isigny is actually providing, H&H at this stage, any A2 protein products we're offering to the market? If so, any details that we can share, like, what is the sales contribution of the A2 product we have now? In the future, any plans to increase the supply of such products? That will be all my questions.
Yes. It should be a caution to H&H because overall this is how we're planning on competitiveness for the product formulation and also from our design standpoint. Overall, when we deliver our key concept about Biostime IMF, we are saying we are the ceiling of the colostrum. This is the one we're consistent to do that. To deliver this, in fact, we have very three core of the factors to deliver this. Number one is definitely about our leading colostrum life formulation design. We can see we have LPM, we have lactoferrin, we have HMO, and we have all the new protein and also the lipid design that is very close to the colostrum. Then the second one is talking about our cow milk quality.
For the cow milk quality, in fact, we considering, and the research latest show that the Normande breed of the cow milk, in fact, is as competitive as the A2 of the protein. Maybe there's also another thing all of us don't know. All the cow milk, in fact, contain A1 and A2 protein, so it is a different type of the protein. We also see that in Normande breed cow milk, this breed of the milk, in fact, it contain higher of the A2 protein versus Holstein milk. This is also original from the benefit of this cow, a breed cow already. For us, we are not taking a proposition of whether this is completely A2, because we feel like we need to back to the nature. We have believed the power of the nature.
Why this breed of the cow, it is raised in the Normandy area, have such a long history and delivered such a great quality for all the dairy product. This is where we will continue to working that on, that focusing on our own, like, unique Normandy breed of the cow milk as our milk source story. The third one is about the manufacturing technique to doing that. If later you guys can see, we have a very unique, like, dry spray of the technology. This enable our milk powder have the, like, above average of the dissolving speed. This is also very unique and patented of the quality of our milk.
Delivering by the colostrum-like formula, delivered by our long history and high quality of the milk source, and then delivered by the patented and unique of the fast dissolving, of the really help us to make our unique Paixing and also the series of the Biostime. Yeah.
Probably I can add one more, in terms of A2. You know, our purpose to protect the terroir in France, in Isigny. That's the nature of Normandy cow breeds. As like I say, we found this very high A2 protein in the Normandy cow, so we don't need to change that. That would protect the nature, you know, the terroir cow breeds. You know, the A2 milk, they have to go to the genetic to isolate that part of the cow. This is not where we want to go. That's the number one. Number two is that we also found many ingredient, including the OPO level, with the Normandy cow milk, 10 times higher than the Holstein milk, like OPO level. It's great.
We know how great the milk from Normandy, but also we can divide to the very detail in terms of any active ingredient level versus.
From the milk itself.
All your questions answered?
Yes. Keep the terroir. Keep the terroir is so important.
Yes. The terroir.
Okay. Thank you. Thank you, Suceka. Also in the present, in the presentation, there's some unused capacity that you can utilize. That you have still, you still have room to grow. Just for, I'm wondering if there, it's also dependent on the input, which is the cow. I'm guessing is this out of your region, there is some restriction, everything. Could you actually increase the volumes? I don't know how it works. Increase the volume.
The number of the cows.
Of the cows.
Yeah.
Which could lead to the capacity being fully utilized.
I don't know if you.
Noticed well what I said, but in fact we won't need, even if there is a big growth, we don't need to increase the number of cow because I explained that we still have a lot of skim milk remaining.
Skim milk is a byproduct? No.
Skim milk is.
It's not a.
Skim milk is not a byproduct, but it's a raw material, the first raw material for infant milk formula.
Yeah.
We still produce a lot of skim milk powder, I would say human consumption skim milk powder. This skim milk can be used to do infant milk formula.
Yeah.
It's the same raw material I would say.
Okay.
Of course, it's not the same process, it's information. As I explained, as the remaining skim milk we have, which is still sold into skim milk powder today.
Which could double the volumes of infant milk formula we are already producing today.
Okay.
For us, the move, I would say the economical move we are doing since decade, to move from skim milk powder to infant milk formula. We are on the journey. We've done half of the job, but we still have a lot of rooms to fulfill next needs we have.
Okay. What's the margins of different products of infant milk or skim milk or butter and milk for example?
The margin?
Yeah.
Of course, infant.
IMF is high margin.
High margin.
Much higher.
It's a value added product.
Yeah.
Yes.
Value addition.
I mean, the revenue is like over 50%.
I will have a fair answer. When you sell your skim milk into skim milk powder on the market.
You are driven by the market.
Okay.
It's an international market, commodity business.
It's, it's.
As in the commodity.
Nonstop.
In my dairy life, we could sold it 1,700 EUR ton, but you could also sold it 3.5 EUR pound ton.
Okay. That's very volatile.
Very variable.
Okay.
We don't know why or when. When sometimes due to market, whatever. It's, for us, too much exposures and damages our resilience.
Our goal to gain in resilience is to get away from this market.
Okay, which is just to this market we faced. Okay? We want to secure into infant milk formula products, which are of course more specific and unique products and of course bigger value.
Going back to the background, how to produce IMF infant formula, because in the mother milk you have a fat, you have a carb, you have, right? the fat, the components, the fat versus a human is different. first step you need to isolate the fat outside from the milk. Whenever you add back the fat.
Okay.
To match the structure of the mother milk.
Fat yes, I want to say that.
The fat is different.
Yeah.
That's why the first step you isolate the fat as the skim milk, and then go to the next step to produce IMF means that we base this skim milk, you add the nutrition to adapt the mother milk standard. In this case, like 25%, only 25%, even lower now, like said, 29%, now 16%, in the total infant formula for the components from the skim milk. That means you add, 94.
84.
84 fat from the, you know, different oil.
Vegetable oil.
Vegetable oil.
Most of the time.
Rapeseed oil and protein.
Proteins, yes. Because also there is an.
And.
An imbalance between proteins from mother milk and proteins from cow milk. There is more casein and whey proteins. It's opposite for mother milk. You have to add whey proteins and a lot of lactose. You have some minerals. It's a lot of ingredients to add. You have to be strong also on the ingredients.
Yeah. That's why I say, with today's milk volume from the assistant farm, it's still a big room to use that skim milk. Only skim milk.
Lu.
Now we are seeing some questions online. First, I would like to invite Deng Jie to ask questions. Deng Jie. Deng Jie.
Hey, how are you?
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The next question comes from Henry from [Non-English content]
Please welcome.
Henry。
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First question, it's about the capacity. What are the constraints right now? Maybe I translate for you direct. You have the two questions, right?
Sure.
One is just now you mentioned about like say the design capacity is the 65 k tons every year. This year we are expect to utilize 55 k, right? still she sees that say now the supply of IMF still is quite tight. she would like to understand a bit more about the drivers for this kind of supply constraints and also going forward whether any kind of plan to increase the capacity for Isigny. That's her first question. Yeah. 10,000. Her second question is about like say she already noticed that for the raw milk price already be increasing in Europe in the past months. then for us, since we control for on kind of the supply of raw milk from the farmers, how do we see the cost development for the raw milk in Europe?
First of all, thank you for your question. First of all, due to the constraints, I mean, I explained that we still have 10,000 tons rooms, which are available. As I said, H&H has a full priority on these volumes and what we do and if we need to do either some choices that especially is to favorize H&H and it's what we do when it's needed because it's also the demand can fluctuate from month and years and so it's increasing in the last year. We are very glad about this. If it's still increasing in the next month and years, we can dedicate rooms, extra rooms and well, if we have a good news that we have to continue to invest, well we will invest.
We have shown that we have been investing a lot in the last 10, 15 years and it's not an issue. I could say that now we have the habit of investing in funding formula factories and so we'll be ready to do it if needed.
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Compared to the price of the milk you said in France, the price of the milk is not increasing, but it's increasing since the start of 2026. That increase is true in the last years, but since January the price is increasing.
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I want to add that it could be documented on LinkedIn or whatever to see the price of the milk paid by Isigny compared to its competitors. Sorry. Also but quite small, but mainly I would say fully disconnected. I mean what I mean is that you have seen that the quality of the milk at Isigny is very acquiring. We give a lot of rules to the farmers via virtual orders, the owners and at the same time we oblige them to do many things like a non-GMO to protect the cattle, to choose a Normande breed, to not produce more than this, to have at least each square meter of pasture for each cows. What very restrictive. It's a pain for them. We know that it's a benefit for quality.
In fact, we try I mean it's not to try, but we disconnect more or less the price of the milk pay that is in it compared to the price of our, say, competitors. Yeah, compared to the local price, because we know that it's a different milk.
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Just right now the quality as a price, it's always the same. You can have cheap products for cheap price for sure. That's not our goal. You understood, I guess. Right now the price has decreased by 10% in France, but it stayed still at this. We still pay the same price and all our competitors decrease the price by 10%.
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Due to the time limit, now we are open the floor for the last questions, which is from CITIC Securities, [Non-English content] please.
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[Non-English content] since we don't have any questions from the floor, and thank you everyone for joining our H&H investor day, and hope to see you in person next year. Thank you.
Thank you. You are all welcome at Isigny.