Youran Dairy Announced 2021 Annual Results

China Youran Dairy Group Limited ("Youran Dairy" or the "Company", Stock Code: 9858.HK) was pleased to announce the audited consolidated results of the Company together with its subsidiaries (the "Group") for the 12 months ended 31 December 2021 (the "Reporting Period").

FINANCIAL HIGHTLIGHTS
-- Revenue was approximately RMB15.346 billion, representing an increase of approximately 30.3% as compared with the same period in 2020.
-- Adjusted net profit attributable to the owners of the Company was approximately RMB2.04 billion, representing a year-on-year increase of approximately 49.1%.
-- Revenue from raw milk business increased by 36.4% year-on-year to RMB9.538 billion.
-- Revenue from comprehensive ruminant farming solutions increased by 21.3% year-on-year to RMB5.808 billion.
-- As of December 31, 2021, 73 modern dairy farms with 416,196 dairy cows were in operation.

In 2021, due to unfavorable factors such as the complex and volatile macro environment, high raw material prices and the recurrence of the COVID-19 pandemic, Youran Dairy has been able to achieve strong growth in performance with its long-term advantages of "the most comprehensive upstream dairy industry chain, the largest scale, the best structure and the strongest operational capacity". In 2021, the Group's revenue was RMB15.346 billion, representing a year-on-year increase of 30.3%; the adjusted net profit attributable to the owners of the Company was RMB2.04 billion, representing a year-on-year increase of 49.1%.

The Group's business has covered the entire upstream dairy industry chain from raw milk business, feed business, breeding business to ruminant farming products business, each of which has secured a leading position in its own field. During the Reporting Period, revenue from raw milk business increased by 36.4% year-on-year to RMB9.538 billion, while revenue from comprehensive ruminant farming solutions business increased by 21.3% year-on-year to RMB5.808 billion. Revenue from feed business, breeding business and ruminant farming products business included in the comprehensive ruminant farming solutions grew by 21.2%, 35.1% and 21% respectively. As of the end of 2021, Youran Dairy continued to expand its industry scale, operating 73 modern dairy farms with 416,000 dairy cows, showing an increase of 35%, maintaining its position as the world's largest raw milk supplier with great advantages.

During the year, against the backdrop of rising costs in the industry and declining gross profit, the Group's gross profit margin remained consistent with the same period last year, reaching 30.6%. The gross profit margin of the raw milk business was higher than the industry standard, reaching 41.4%; the management expense ratio dropped from 6.3% to 5.4%, and the sales expense ratio dropped from 3.8% to 3.6%, consolidating the Group's leading position in the industry.

Two-way breakthrough of self-construction and M&A of dairy farming industry promotes the improvement of operation efficiency and performance

At present, the Group operates 73 modern farms in 16 provinces, and 3 new farms were put into operation during the year. It is also expanding the scale of raw milk business and increasing newly built farms.

While building new production capacity, the Group continues to expand the industry scale through mergers and acquisitions. The Group completed the acquisition of 58.36% of the equity interests in Inner Mongolia Saikexing Reproductive Biotechnology (Group) Co., Ltd ("SKX") in 2020 and completed the acquisition of Fonterra China Farms Group in 2021. The acquisition of such businesses expanded the size of the Group's raw milk business, and it significantly improved the operational efficiency of the businesses acquired.

Feed synergy highlights the advantages of building stable performance

Feed business is one of the basis of the whole upstream industry chain model of Youran Dairy. It can not only provide high-quality and diversified feed products for Youran Dairy and its customers, but also hedge cost pressure, resist cyclical fluctuations, and improve the stability and certainty of the performance of Youran Dairy.

Product development and technological innovation with major breakthroughs consolidate leadership

With the increasing demand for raw milk in the market, the Group continues to launch specialty raw milk. At present, the Group's specialty raw milk includes Jersey milk, DHA milk, A2 milk, organic milk, organic A2 milk and selenium-rich milk. In 2021, the sales volume of unique raw milk of Youran Dairy reached 474,142 tons, with a year-on-year increase of 19.68%, consolidating its competitive advantage in the industry.

In terms of the breeding business, during the year, the research results on cow new stem cells brought by SKX's research institute achieved breakthroughs in induction of livestock stem cells, a world-class research difficulty, and developed a new path for genome editing of herbivorous livestock and biological breeding of functional cows in the future, which is a milestone achievement in the research on stem cells of herbivorous livestock.

In terms of embryos and fetal bovine technology, Youran Dairy selects the cows with high performance through genetic testing, and uses the world's leading embryo transfer technology to finally realize the rapid improvement of cow production performance and build world leading high-yield farms.

In addition, in 2021, Youran Dairy launched the projects of "National Dairy Core Breeding Farm and Embryo Engineering Center" in Qingshuihe, Hohhot, to create an international first-class high-standard dairy cow breeding technology system and platform, with an annual output of 50,000 high-yield dairy cow embryos, so as to solve the current situation of shortage of high-yield dairy cows in China.

Lean production management ability leads the digitization of the industry and enhances the greater development of operation

The Group is the first dairy farming company in the world to adopt the TPM (Total Productive Maintenance) to establish a sustainable operation and lean production management model with industry characteristics. During the Reporting Period, three TPM pilot units of the Company won the TPM Excellence Award. TPM system, as one of our core strategies, will continuously expand its application to empower our operational capabilities to maintain our leading position in the industry.

The Group's operation efficiency was significantly enhanced through self-developed intelligent farm management system, TMR precise feeding system, monitoring system for estrus in dairy cattle and full coverage video surveillance system. Besides, the Group provides comprehensive farming solutions for dairy farms in a rapid manner through big data collection and analysis on customers' farming and with global expert resources and remote diagnosis, enhancing operational efficiency to achieve further improvement of results.

Strictly controlling product quality with excellent achievements in quality management and quality improvement

Now, the Group is the first comprehensive enterprise of dairy farming and feed processing in China that has passed the world-leading food safety and quality management system SQF certification. Also, the Group unswervingly adheres to the "three lines" to strictly control the product quality, i.e., the national standard line that meets the national statutory standards, the enterprise control line that is stricter than the national standard line and the internal control line that is stricter than the enterprise standard line, so as to ensure that its product quality meets the internal control line of the Group and is higher than the national standards.

During the Reporting Period, the Group achieved great achievements in quality management and quality improvement by establishing quality management information system, normalizing quality assurance control points (QACP) and introducing Six Sigma tools. During the Reporting Period, various products of the Group have passed the sampling inspection of product quality conducted by national supervision and inspection authorities at all levels.

Taking the lead in publishing "Carbon Neutralization Strategy" and insisting on green development

The Group took the lead in publishing and implementing the "Carbon Neutralization" strategy. In addition, the Group, together with the Institute of Animal Sciences of Chinese Academy of Agricultural Sciences, the Animal Husbandry Workstation of Ningxia Hui Autonomous Region, South China Institute of Environmental Sciences, the Institute of Soil Science and Inner Mongolia Agricultural University, etc., jointly studied and reserved several carbon emission reduction projects.

The Group continues to put into practice the sustainable development strategy by taking advantage of the synergy between the Group's business segments of dairy farming and forage grass plantation, and build ancillary forage grass plantation bases nearby in dairy farms, so as to realize the long-term sustainable development of the business through an "integrated farming" model. We continued to promote the reduction, resource utilization, harmless and ecological treatment of manure in the process of dairy farming.

In order to achieve the strategic goal of recreating a "Youran Dairy" within five years and consolidate the Group's long-term advantages of "the most comprehensive industry chain, the largest scale, the best structure and the strongest operational capacity", the Group will continue to promote the strategy of building core herds. By building the Yuanxing brand, the Group will further improve the market share of ruminant feed. We will build an efficient innovative research and development platform to constantly optimize the product structure, improve the competition threshold of the industry, and ensure the long-term competitiveness of the Company. The Group will continuously improve profitability of the industry, to achieve greater development and further consolidate our leading position and leading advantages in the industry.

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