CCM: Synutra: Sales Down by over 20 percent in Q4 FY2016 09-22-2016

On 13 June, Synutra International, Inc. (Synutra), listed in the US, released its Q4 FY2016 and full year financial figures:

Q4 2016

Its net sales of USD86.1 million in Q4 were down by 21.8% YoY. This mainly comprised sales of nutritional food including powdered milk formulas down by 23.5% to USD80.4 million.

“During this period, the combined sales volume of powdered milk formulas was down by 7.2% and the corresponding sales price on average by 17.6%,” explained Synutra: “The volume fell from 7,356 tonnes in Q4 FY2015, to 6,827 tonnes (in the latest Q4).” In respect of the fall in average sales price, it highlighted “The change in product mix, larger discounts and unfavourable exchange rate.” (The RMB has strengthened against the US dollar for several years before this position reversed last year: the government tried to defend the currency with slight devaluations in summer 2015, leading to the stock market crash).

In addition, profitability also decreased:

  • Gross profit: down from USD54.20 million in Q4 FY2015 to USD38.90 million
  • Gross profit margin (nutritional food): down from 51.4% to 48.8%

According to its Tmall flagship store, the average sales price of its Super Youbo, Youbo Ai and Youbo Caesarean is down by RMB20/can. Multibuys can mean the price per can achieved could be down by RMB50-100/can. Discounts and gifts are the order of the day.


Overall in FY2016 Synutra's net sales fell 11.8% to USD365 million, and its sales of powdered milk formulas slipped by 15% to USD328.6 million. The only positive was that its gross margin was 48.4% (vs. 45.8% in FY2015), continuing the upward trend in this indicator since 2013.

In FY2017, Synutra expects to make net sales of USD500-550 million, hoping to benefit from increased sales of powdered milk formula and its newly launched UHT milk.

                                                         Synutra's Business Structure (by Sales), FY2016


                                                                          Note: FY2016: April 2015-March 2016.
                                                                  Source: Synutra International, Inc.


                                                                Synutra's Financial Figures, FY2012-2016


                                                                   Note: Fiscal year from April to next March.
                                                                   Source: Synutra International, Inc.


CEO Zhang Liang: Synutra is facing challenges

On 13 June, Zhang Liang, the company's President and CEO, announced that Synutra is facing several challenges in the nutritional food business, including market competition, low birth rate (16.5 million new births in 2015, down by 320,000 according to the National Bureau of Statistics), policy uncertainties and unfavourable exchange rates.

Nor has setting up in France proven easy. “At the project in France (100,000 t/a), the adjustment of the 2 drying towers has been taking longer than expected,” he continued: “The plant is expected to run from July this year, and to supply China from Q2 FY2017.” Synutra incurred a one-time USD8.8 million loss under its long-term purchase agreement with Sodiaal, due to the delay in its ability to start purchasing the French group's milk.

To date Synutra still has 40 powdered milk formula brands, such as Youbo Fangsheng, Youbo Professional, Youcong, Gold Care Plus and My Angel. The registration policy to be implemented soon will inevitably cut down this range - how Synutra will use the newly established capacity overseas remains to be seen.

Meanwhile it has started to import UHT milk from France: in January it launched the Dutch Cow brand onto the Chinese market, priced at RMB9.8/500 ml. The product label shows “3.5 g protein and 3.8 g fat”. By May, the new brand's sales volume had doubled every month.

“In the long run, we hope to make full use of our leading position in the domestic formula market. In the next two quarters, we will import premium products from the French plant,” claimed Zhang Liang. Organic infant formulas seem a likely next step, and possibly other organic lines - in the spring Sodiaal publicised that it anticipates raising its organic milk collect to 150 million L by 2020 compared with the 50 million L collect to date.

This article comes from Dairy Products China News 1606, CCM



About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.


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