UPDATE 1-Mengniu H1 net profit up 28 pct, quality in focus

Tue Aug 30, 2011 9:51am GMT

* H1 net up 27.6 percent, meets forecasts

* Mengniu maintains gross profit margin at 26 pct

* Shares up 4.9 pct, outpacing main index (Add comment, update stock price)

HONG KONG, Aug 30 (Reuters) - China Mengniu Dairy Co Ltd , the country's top dairy product maker in which China private equity firm Hopu Investment Management owns a stake, on Tuesday posted a 27.6 percent rise in first-half net profit on solid sales growth, pledging to ensure product quality after a series of scandals tainted the industry's reputation.

China Mengniu was confident that its profit margin in the second half would be in line with the first half, Chief Financial Officer Wu Jingshui told reporters.

Gross profit margin for the period was 26 percent, almost unchanged from 26.2 percent a year earlier, despite higher prices for raw milk and other raw materials, while net profit margin remained unchanged at 4.3 percent, the company said.

"We are confident we can at least maintain (first-half) margin levels in the second half," Wu said, adding that the company might raise product prices and adjust its product mix to offset an estimated 3-5 percent rise in raw milk costs in 2011.

Market expansion and stricter government safety controls had "created a healthy environment to nurture the future development of the dairy industry in China", Chief Executive Yang Wenjun said in a statement.

Mengniu would continue to develop small to mid-size ranches to boost the proportion of raw milk from ranches and "ensure product quality", Yang said.   Continued...

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