Welcome to all of you, and also thank you for all your support to Mengniu all these years. Please note that we have a disclaimer for today's event. Now, I will introduce to you the management team today. They are Chief Executive Officer and Executive Director, Mr. Gao Fei, our CFO and Executive Director, Mr. Shen Xinwen, Vice President, Mr. Chen Yiyi, Vice President, Mr. Li Pengcheng, Company Secretary, Chris Kwok. We will have Mr. Gao present to us the 2025 financials and business performance and also the outlook section. Then we will have the Q&A session, and the event is estimated to end at 10:50 A.M. Now, let's welcome Mr. Gao.
Dear investors, analysts, and media friends, good morning.
Thank you so much for taking the time out of your busy schedule to attend Mengniu's 2025 full year results announcement. First, I will walk you through the key financials for Mengniu for 2025. Over the past year, Mengniu has faced two challenges of the macroeconomic environment and industry cycles, but we adhere to long-term perspective and maintain strategically grounded. The company has navigated these cycles and through value creation, delivering a set of results that demonstrate its resilience. For the full year, the company's total revenue stood at RMB 82.24 billion, a year-on-year decrease of 7.3%, which was broadly in line with the company's expectations. If we break down by volume and price, the overall sales volume fell by around 4%, while the average selling price declined by around 3%.
The impact of the decline in sales volume on revenue was slightly more pronounced. Benefiting from lower raw milk prices and continued lean operations, the company's gross profit margin reached a record high of 39.9%, an increase of 0.3 percentage point from 39.6% in 2024. The operating profit for the full year was RMB 6.56 billion, with the operating profit margin remaining at 8.0%, a slight decrease of 0.2 percentage point over last year. Compared with the years prior to 2024, there has been a very big improvement. Excluding the impact of non-recurring impairments in 2025 and the impairment of [Shengmu's] idle land, the company's profit attributable to owners on an adjusted basis was RMB 3.96 billion.
At the end of August last year, also during the result announcement, I said that in the face of the changes, people, products, and values, all our business categories were innovating and adapting, actively embracing new trends. Today, we can say that many of these innovative and adaptive measures have yielded tangible results. Also, we adhere to the fundamental principle of creating value through value. We have decisively steered clear of the trap of low price [involution] and driving high- quality development through innovation to navigate economic cycles and enhance resilience. Although the liquid milk business remained under pressure overall in 2025, but the second half of the year shows signs of stabilization and improvement compared to the first half. The diversification of product categories and the optimization and upgrading of the product mix have maintained a positive trend.
Among these, segments such as fresh milk, infant milk formula, and adult milk formula, all achieved double-digit growth. With cheese growth exceeding 20%, further expanding our market leadership. We believe that China's consumer industry has shifted to a long-term growth. We need to shift from competition more to creating long-term value for the consumers. In terms of expenses, we have continued to refine our expense management and enhance the efficiency of our expenditure. Selling expenses fell by 6.5% to RMB 21.59 billion. However, due to the negative operating leverage effect resulting from the decline in revenue, both the selling expense ratio and the administrative expenses ratio rose slightly year-on-year. In terms of operational efficiency, all key indicators remain at healthy levels.
Under our ongoing lean operational management, inventory turnover days and receivables turnover days have improved further year-on-year. Thanks to robust operating profit performance during the year, as well as continued improvements in inventory turnover and receivables, full-year operating cash flow reached RMB 8.75 billion, setting a record high. In recent years, we have tightened our control over CapEx, which has fallen further to RMB 2.45 billion. Consequently, free cash flow for 2025 reached RMB 6.3 billion, also reaching a record high. Our robust operational and cash flow performance provides a solid foundation for Mengniu to create long-term value for our investors, the supply chain, and the society. The company will continue to focus on and continuously enhance its cash generation capabilities. Our robust operating profit and operating cash flow performance give us the confidence to increase shareholder returns.
We have formulated a three-year shareholder return plan for 2025 to 2027, which sets out a steady increase in dividends per share over the next three years and maintain the share buyback pace for 2024 and 2025. Through a combination of dividends and share buybacks, we will continue to enhance shareholder returns. Consequently, for this year's dividend, we have set a very lucky number, a dividend of RMB 0.520 per share, representing a steady increase from the 2024 dividend of RMB 0.509 per share. That was about the operation. Now, I will explain more on each business segment. In terms of strengthening the One Core, we have stabilized our core businesses, accelerated the development of niche categories, and further optimized our product portfolio.
Specifically, over the past two years, the room temperature business has faced the most acute challenges in terms of supply-demand dynamics and channel fragmentation. However, to address these challenges, break through bottlenecks and grow the pie, we cannot rely on low-price competition and downgrading our products. Instead, we must break the deadlock through innovation and tap into incremental market. Mengniu has redefined value around the concept of drinking milk, drinking good milk, and drinking the right milk, accelerating the adjustment of product structure, vigorously promoting new products, strengthening the alignment between products and channels, and expanding consumption scenarios. Let me give a few examples. You can see in the foyer outside, we have launched the lactose-free soft milk series. Statistics show that the number of lactose-intolerant people in China reached 660 million.
Therefore, through soft milk, lactose-free milk, more people will be able to drink milk, further expanding the base of consumers. At the same time, with a full industry chain mindset and a higher quality positioning, Mengniu strives to ensure consumers drink good milk. Last year marked the 20th anniversary for Deluxe. We leveraged the scarcity of the desert organic industry chain to further deepen our value moat, launching top-of-the-range product, which is called Shajin Tohoi. These are the products for us to drink milk and drink good milk. In the dairy beverage sector, Mengniu is focused on expanding consumption scenarios and accelerating product innovation. At the beginning of the year, fruit milk drink positioned itself at the premium end of the market, launching the DreamCap fresh coconut milk beverage.
In March, we launched the industry's first Mengniu calcium electrolyte beverage, targeted at people who do sports, meeting the due demands of hydration and calcium supplementation. In the face of channel diversification, we must not only consolidate our strength in the RTM channel, but also actively embracing high-potential channels to expand our omni-channel operational capabilities. We will accelerate the expansion of our coverage in lower-tier markets and increase the penetration of our product categories, ensuring high-quality nutrition is made accessible to a wider range of consumers. In the chilled sector, in 2025, Mengniu outperformed the industry against the trend, maintaining its position as top one market leader for 21 consecutive years.
The Champion has deepened its focus on the functional segment, continuously amplifying its exclusive advantages in Jianzihao, achieving exponential growth in the second half of the year and retained its position as the sales champion at Sam's Club. The new Super Vitality Jar product, launched in early 2026, meets the triple demand for product emotion and function, breaking the record for first-day sales of a new product. In terms of channels, we have strengthened our presence in emerging sectors, including membership stores, instant retail, snack specialty stores, and vertical fresh produce outlets. In particular, the range of customized products we have developed for Sam's Club and Hema have quickly become bestsellers following their launch. For the fresh milk business, it achieved double-digit growth in 2025 with market share increasing further. Shiny Meadow achieved a high double-digit growth.
While it's continuing to strengthen the 4.0 protein product range, it tapped into niche demands through new products such as lactose-free double protein lines, effectively expanding the consumer base for fresh milk. In terms of channels, we lead in market share with the membership stores, instant retail, and e-commerce platforms. We're absolute leaders. We also partner with those 2B businesses, including Starbucks and Chagee, driving a breakthrough in sales. It is particularly worth noting that Shiny Meadow achieved rapid growth in the Hong Kong and Macau markets last year with the coverage now exceeding 1,000 outlets, receiving widespread recognition from the public. For the ice cream business, we also achieved double-digit growth in 2025, with profitability increasing as well.
We focused on CBM plus Mood for Green dual brand strategy, stepping up innovation centered on quality and health to create several best-selling products. For the milk formula business, it achieved high single-digit growth for the full year, and for the second half, we reached high double-digit growth. For the infant formula, the growth trend was very obvious. Through continuous strengthening of its research and development capabilities, Reeborne significantly enhanced its product competitiveness with full-year revenue growth exceeding 20%. Yourui continued to focus on nutrition tailored for the middle-aged and elderly, concentrating on functional niche products and capitalizing on opportunities in channels such as interest-based e-commerce and securing the top online market share in the fourth quarter. Bellamy's achieved growth of over 20% for the year, with its premium platinum organic A2 range accelerating expansion.
In the Southeast Asia market, especially in Vietnam, the performance was particularly well. Cheese represents a key strategic move in our drive to promote both drinking and eating milk. In 2025, the Mengniu cheese segment demonstrated robust growth, with annual growth exceeding 20%. The group further strengthened synergies with Milkground, deepening comprehensive empowerment across supply chain, marketing, and channel resources, capitalizing on growth momentum in both 2C and 2B sectors to consolidate its absolute leadership position in the industry. Building on a strong core, Mengniu's two wings are taking flight, injecting new momentum into the company's development. As the first wing, the innovation segment achieved breakthrough progress in 2025. We're focusing on the nutrition and health, continuously increasing R&D investment, striving to create differentiated value, and driving a leap forward in the value chain.
In the area of deep processing, we now have the products such as lactoferrin, micellar casein, and demineralized whey powder D90. All these products have met national and international standards. While products such as mascarpone and natural mozzarella have successfully rolled off the production line, gradually overcoming technical bottlenecks and reducing reliance on imports. In the professional dairy sector, we have launched over 10 new products, including new national standard whipped cream and accelerated B2B collaborations with tea, bakery, and food service brands. In the professional nutrition sector, M-ACTION's sports nutrition product portfolio is growing, increasingly diverse, shining in fields such as marathons and trail running. Last year, M-ACTION also secured nearly RMB 100 million in Series A funding, with our forward-looking strategies gaining broader market validation.
In the international or globalized segment, it represents another vast frontier for Mengniu. Over the past year, we have achieved growth and enhanced returns simultaneously. Building on our existing footprint, we are continuously expanding and deepening our presence in the Southeast Asian market. Starting with the leading brand Aice ice cream to expand into more categories such as infant formula and cheese, we're strengthening and broadening our Australia and New Zealand base, enhancing the development of Bellamy's to 2C and Burra's to 2B platforms. Bellamy is currently experiencing strong growth momentum in the Southeast Asian market, as I said just now. In the Vietnam market, through a dual-pronged approach of driving sales via retail outlets and focusing on social media influencer marketing, sales have doubled within the year.
Moving forward, Bellamy will accelerate its expansion into Indonesia and the Philippines, secure infant formula registrations in more markets and build momentum for the next phase of growth. Burra will strengthen the development of its flagship products. Building on our existing operations will fully integrate and collaborate with Mengniu's domestic cheese and deep-processed businesses. We have quite strong foundation in Middle East, Southeast Asia, and so on. We will strengthen and intensify expansion in key global markets, including China. That is the overall One Core, Two Wings business development initiatives. Next, I will talk about ESG. In 2025, Mengniu continued to implement our green sustainability strategy, making solid progress on key ESG issues. Notably, in relation to the Dual Carbon Initiative, we established our first Scope 3 carbon emissions calculation model, thereby strengthening the foundation for carbon management across the supply chain.
Our efforts have garnered high recognition from authoritative bodies. We have been a constituent of the Hang Seng Sustainability Index for five consecutive years, and our MSCI ESG rating has remained at A A level. As the only comprehensive dairy enterprise in China, we have been included in S&P Global's Sustainability Yearbook. Looking ahead, Mengniu will remain committed to advancing our sustainability strategy, creating social value through industrial value, and safeguarding the shared health of humanity and the planet. That's about ESG. Now, let me talk about future outlook. As we enter the spring of 2026, the dairy industry is benefiting from a double boost from both policy and market factors. Firstly, intensive policy dividends have been released, providing a comprehensive boost to industry confidence.
I guess you have already noticed that this year's Central Document No. 1 e xplicitly calls for multiple measures to promote dairy consumption, sending a strong policy signal to support the industry stabilization and recovery. During the Two Sessions, the Minister of Agriculture and Rural Affairs even called on the public to drink more milk. The minister pointed out that China's per capita milk consumption is merely 1/3 of the global average. The U.S. stands at 220 kg, EU, 240 kg, while China's figure is only 42 kg. There's a significant gap. Clearly, the role of dairy products in the Chinese diets has not yet been fully realized, and the potential for growth remains immense. We firmly believe that China's dairy industry remains a sector full of imagination and worth investing in.
Overall speaking, the industry has bottomed out and stabilized with a clear trend towards recovery. Since the second half of last year, both raw milk prices and retail prices have stabilized. For functional dairy products and solid dairy products, they are growing rapidly, and the structure of dairy consumption continues to diversify and upgrade. Seizing the opportunities presented by favorable policy environments and industry recovery, Mengniu will continuously enhance its value creation capabilities through the evolution of four core competencies: digital intelligence transformation, R&D innovation, channel upgrading and brand-led, thereby leading the industry into a new cycle of high-quality development. Digital intelligence transformation is key to achieving high-quality development. Mengniu remains committed to the deep integration of digitalization in intelligent technologies with the industry.
Implementing systematic initiatives across supply chain channels, logistics, marketing and management to drive quality improvements and efficiency gains throughout the entire value chain, thereby creating business value through digital intelligence. Everyone is saying that we must cater to the most diversified and most discerning consumers in history, who demand quality, value for money and emotional value. However, the mission of a consumer goods company is to meet the diverse and personalized needs of consumers in a better way. In response, we must return to the fundamentals of business. The essence of milk is good- quality protein. People consume dairy products precisely for high-quality nutrients such as protein. Therefore, the dairy industry must create health benefits for consumers through high-quality nutrition. Product should drive experience, and then experience will lead to functionality, and then with more penetration, and finally, better and high-quality growth. That is our core.
Every drop of nutrition nurturing every life. This is Mengniu's corporate mission. We have always anchored ourselves in the core value of nutrition, focusing on three key areas, basic nutrition, functional nutrition, and medical nutrition, while continuously enhancing our capacity for value creation. In basic nutrition, we must tap into potential and expand the market. Through product innovation, we will address consumer pain points and broaden consumer base and unlock incremental markets. Secondly, through channel innovation, we will expand coverage in lower tier and untapped markets to increase the market penetration of basic dairy products. Thirdly, we'll intensify product development and channel expansion for the two oils and one cheese enabling consumers to both drink and eat milk. Fourthly, we'll strengthen nutrition outreach and category education to drive both volume and quality growth in dairy consumption.
In conclusion, in our industry in the past, there was too much focus on the existing market competition and also price competition. How can we expand demand or increase demand so that we can see a better situation? Today, we have to consider product innovation. At the same time, we need to see how we can expand the pie. In the fields of functional nutrition and medical nutrition, we must plan proactively and seize the initiative. Judging by global industry trends, once per capita GDP crosses the $13,000 threshold, functional nutrition market enters a period of explosive growth. Our country has exceeded this threshold for three consecutive years, and the functional nutrition market is now poised for takeoff.
In response, Mengniu has already established a foundation for research and development across six key functional nutrition areas: bone, joints, muscle health, cardiovascular health, immune system, neurocognitive function, gut health, beauty, anti-aging, and weight management. We have also launched the [audio distortion] specialized medical food project dedicated to the research, development, and production of specialized medical foods for infants. The registered formula is in place. Mengniu is strengthening the deep integration of industry, academia, research, and application to accelerate commercialization of research outcomes. Last year, our self-developed sugar control probiotic Lc19 was featured in a top-tier international academic journal. Just a few months later, [audio distortion], the first product utilizing this strain was launched, demonstrating how scientific value is rapidly being transformed into product value that consumers can experience. We have received much recognition from consumers.
As I mentioned earlier, the core value of milk lies in providing high- quality protein. Currently, Chinese consumers have become increasingly aware of the need for high- quality protein, yet the market still lacks truly excellent products to lead this trend, so I would like to give you a sneak preview today. For high- quality protein product, we have made a lot of plans and leveraging our exclusive leading domestic technology, we have independently developed a high-p rotein milk that will be launched very soon. This technology and product will meet consumer- specific functional needs and will extend to more product categories and usage scenarios, continuously raising the bar for how Chinese people drink and eat milk, thereby injecting new momentum into health. At the same time, consumers are changing and so are the channels. Scenarios are becoming increasingly diverse and borderless.
Therefore, we must break free from conventional thinking and upgrade from deep distribution to value-driven cultivation, ensuring that every high-quality product reaches the most suitable consumers and creating value, market value through channel value. We must strengthen digital and intelligent empowerment to achieve precise allocation of channel expenditure and enhanced execution, ensuring that every penny invested is converted into growth momentum. We must deepen cooperation with incremental channels such as membership stores, snack specialty stores, content e-commerce, and instant retail to build an omni-channel competitive advantage. That is also a focus of us. From bespoke offerings for high-precision membership channels to exclusive new product development for the snack system, we must accelerate our response to customized channel requirements, strengthen product channel alignment, and expand into scenario-based, diversified consumer markets.
We must fully tap into the potential of lower-tier markets, achieving deep penetration from county-level areas to rural villages, ensuring nutrition inclusion, reaching all demographics and regions. Today, consumption scenarios are undergoing profound changes and channels are evolving more rapidly. Our brand communications must resonate with these shifts and evolve in tandem. In 2026, with both the Olympics and the World Cup on the horizon, Mengniu is set to take center stage. This presents a unique marketing opportunity and serves as a testing ground for our marketing capabilities. In Q1, we capitalized on the window of opportunity presented by the convergence of the Winter Olympics and CNY, deeply integrating the bond to be strong spirit with a passion for winter sports and the festive spirit of family reunion. During the Spring Festival, we achieved a harmonious integration of brand exposure and sales conversion.
Authoritative third-party data shows that Mengniu topped the digital brand asset rankings for the Milan Winter Olympics. Strong brand visibility directly drove sales conversion, helping us achieve a strong start to the year and laying the foundation for our development throughout the year. Moving forward, we'll continue to deeply connect with all scenario consumer demand, drive implementation of integrated brand efficiency and sales strategies, and through the dual engine drive of brand visibility and business growth, sustain the strong start and secure a successful year. Finally, investors, friends, 2026 marks the start of the 15th Five-Year Plan and will be a pivotal year for Mengniu as we drive the implementation of our strategy and upgrade our management.
Standing at this new starting point, we'll adhere to long-termism, focus on our nutritional mission, and accelerate our comprehensive transformation from a traditional dairy manufacturer to a comprehensive nutrition and health solutions provider. Looking ahead, we'll use the value of our products to create health value for consumers throughout their entire life cycle, use innovation value to create ecological value for high-quality development for the industry chain, use operational value to generate long-term stable returns value for investors, use industry value to create social value that safeguards the shared health of humanity and the planet. Finally, we would like to thank you all for your continued trust and support over the year. Mengniu looks forward to continuing to work hand in hand with you as we build a journey towards a brighter future. Thank you.