China's Bright Dairy increases 2013 profits by a third

SHANGHAI, March 31 Mon Mar 31, 2014 9:08am EDT

SHANGHAI, March 31 (Reuters) - Bright Dairy & Food Co Ltd said net profit rose 30.4 percent in 2013 on strong demand for dairy products that was offset by higher costs due to raw milk shortages in China which pushed up prices locally and internationally.

China's number four dairy company, majority-owned by state-owned conglomerate Bright Food Group Co Ltd, made a net profit of 406.0 million yuan ($65.36 million) in the year ended December, up from 311.3 million yuan profit in 2012, the company said in a statement to the Shanghai stock exchange on Monday. The profit lagged an estimate of 459.5 billion yuan from eight analysts polled by Reuters.

Booming demand in China for dairy products such as milk and milk powder has become a big driver for the global dairy industry. Strong dairy demand has helped local rivals such as China Mengniu Dairy Co Ltd increase annual net profit by 25 percent.

But a shortfall in domestic production and the high cost of imports led to an 18.9 percent rise in Bright Dairy's operating costs last year to 10.6 billion yuan.

"We faced negative factors such as quickly rising prices both in China and abroad, a shortage of high quality milk supply and intensifying market competition," Bright said.

At the same time, China's government is promoting consolidation in the sector to improve regulation and quality after a 2008 scandal where dairy products contaminated with chemicals led to the deaths of at least six infants. The government's stance should benefit larger dairies such as Bright and Mengniu.

Bright, which held a 6.9 percent share of the country's dairy market in 2013 according to research firm Euromonitor, reported a fourth-quarter net profit of 98 million yuan, according to Reuters calculations. That was up around 10 percent from an 89 million yuan profit a year earlier.

The company's parent Bright Food Group has been making acquisitions outside its home market as it looks to tap into demand from Chinese consumers for globally sourced products, often seen as being of higher quality than local equivalents.

The group's acquisitions include UK breakfast cereal company Weetabix and Australian food supplier Manassen Foods. Bright Food is also in talks to buy a stake in Israel's biggest food maker Tnuva.

Shanghai-listed Bright's 2013 revenue rose 18.3 percent to 16.3 billion yuan, falling slightly short of estimates of 16.8 billion yuan.

The firm's shares were down 0.12 percent at end of trading on Monday, before the 2013 earnings were disclosed, compared to a 0.26 percent fall in the benchmark CSI 300 Index. ($1 = 6.2122 Chinese Yuan) (Reporting by Adam Jourdan; Editing by Kenneth Maxwell and Jane Merriman)

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