China Mengniu Dairy Co Ltd on Wednesday reported interim results for the first half of 2026, with revenues and profits attributable to owners of the company both increasing, despite a drop in gross profit margins.

The Chinese dairy giant’s revenue was 44.79 billion yuan ($6.67 billion), representing a year-on-year increase of 7.8 percent, supported by its product innovation, omni-channel expansion, and precise brand reach, according to its interim financial statement.

Profits attributable to owners of the company increased 15.9 percent year-on-year to 2.37 billion yuan, driven by growth in core operating profits and a turnaround in associates’ performance from a loss to a profit.

Its core business, liquid milk, which represented 75.6 percent of total revenue, posted a 5.2 percent year-on-year increase, with its fresh milk subsector delivering over 30 percent growth. Revenues from its cheese business and milk formula business also rose, increasing by 32.6 percent and 22.8 percent, respectively.

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Gao Fei, group CEO and executive director, said the group is being transformed from a single-business focus to a diversified business layout, and shifting its development model from scale-driven growth to value creation.

However, due to price adjustments for certain basic products in the second half of last year to cope with market competition, as well as a significant increase in the costs of raw and auxiliary materials, the group’s gross margin for the first half of 2026 was 40.8 percent, representing a year-on-year decrease of 0.9 percentage points.

Looking ahead, he said, “Raw milk prices are expected to pick up both year‑on‑year and quarter‑on‑quarter in the second half of this year, and therefore the business environment will become more resilient.”

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China’s domestic raw milk prices in July rose 0.3 percent year-on-year, marking the first positive growth in nearly five years, according to a report from China Galaxy Securities. After turning positive, milk prices are likely to show a moderate uptrend, which is expected to drive a recovery in dairy companies’ profitability, the broker said.

“In the medium term, we remain confident in the improvement of both gross margin and operating margin. A rising cycle of raw milk price puts us in a better position to upgrade our product mix,” said Shen Xinwen, chief financial officer and executive director of China Mengniu Dairy.

As the group’s solid milk products grew faster than the liquid milk business in the first half of the year, rising revenue from various business sectors will have a positive impact on total gross margin in the future, said Shen.

China Mengniu Dairy’s Hong Kong-listed stock climbed 0.48 percent on Thursday to close at HK$ 18.79 ($2.39) per share.

Contact the writer at charlottezhou@chinadailyhk.com