Modern Dairy posts ¥15.29 million net profit despite weaker raw-milk prices, while higher milk volumes and lower production costs support operations
BEIJING — China Modern Dairy Holdings Ltd. returned to profitability in the first half of 2026, reporting a net profit of ¥15.29 million compared with a net loss of ¥913 million in the same period last year.
The sharp turnaround came despite continued pressure on raw-milk prices. While the company’s revenue increased 8.6% year on year to ¥6.59 billion, its average selling price for raw milk declined 2.4% to ¥3.21 per kg.
A major factor behind the improved bottom line was a substantial reduction in losses associated with the valuation of biological assets, particularly dairy cattle.
Profit turnaround masks continued milk-price pressure
Modern Dairy’s results highlight the difference between its reported earnings and underlying operating environment.
The company’s raw-milk gross margin declined to 29.5% from 30.2% in H1 2025, reflecting weaker selling prices despite improvements in production costs.
However, losses arising from the revaluation of dairy biological assets fell to approximately ¥760 million, compared with ¥1.82 billion a year earlier.
The reduction of more than ¥1 billion in these losses was a major contributor to the year-on-year improvement in reported earnings.
This means the return to profit should not be interpreted solely as a recovery in core milk-market profitability. Raw-milk prices remain a key challenge for the business.
Higher milk volumes offset lower prices
Operationally, Modern Dairy achieved stronger production and sales volumes.
Raw-milk revenue increased 6.5% to ¥5.4 billion, supported by an 8.9% increase in sales volume to 1.68 million tonnes.
The company achieved the higher output despite reducing its total herd size by 2.5%.
The proportion of milkable cows increased to 60.1%, while average annualised milk yield per cow rose to 13.3 tonnes.
As a result, total raw-milk production increased 7.1% to 1.78 million tonnes.
H1 2026 indicators
| Metric | H1 2026 | H1 2025 / Previous | Change |
|---|---|---|---|
| Revenue | ¥6.59 billion | — | +8.6% |
| Net profit | ¥15.29 million | -¥913 million | Turnaround |
| Raw-milk ASP | ¥3.21/kg | ¥3.29/kg | -2.4% |
| Raw-milk revenue | ¥5.4 billion | — | +6.5% |
| Milk sales volume | 1.68 million tonnes | — | +8.9% |
| Raw-milk production | 1.78 million tonnes | — | +7.1% |
| Raw-milk production cost | ¥2.29/kg | ¥2.32/kg | Improved |
| Operating cash flow | ¥769 million | — | +56.8% |
Lower production costs improve farm-level economics
Modern Dairy also recorded improvements in production efficiency.
The cost of producing raw milk declined to ¥2.29 per kg, compared with ¥2.32 per kg in the previous year.
The reduction helped offset part of the decline in the selling price of milk.
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Operating cash flow also strengthened significantly, reaching ¥769 million, an increase of 56.8%.
The combination of higher milk volumes, improved yields and lower unit production costs suggests that the company continued to make operational efficiency gains even while the broader Chinese raw-milk market remained weak.
Shengmu acquisition expands the group’s footprint
During the period, Modern Dairy completed the acquisition of a 53.53% controlling stake in China Shengmu Organic Milk.
Shengmu reported a net profit of ¥64.01 million in H1 2026.
The consolidation of Shengmu and potential operating synergies could provide additional support to Modern Dairy’s results during the second half of the year.
However, the acquisition also comes against a backdrop of increased leverage.
Borrowings rise as financing costs increase
Modern Dairy’s bank borrowings reached ¥12.93 billion as of June 30, 2026, compared with ¥10.58 billion at the end of the previous year.
At the same time, financing costs increased to ¥354 million, up from ¥292 million a year earlier.
The increase in debt represents an important risk factor for the business.
If raw-milk prices remain depressed for an extended period, higher financing costs could put additional pressure on profitability and cash flows.
Peers also return to profit
Modern Dairy’s earnings improvement comes amid a broader recovery in the financial performance of several Chinese dairy-farming companies.
Youran Dairy swung to an ¥806 million profit, supported in part by narrower fair-value losses on biological assets.
AustAsia Group also returned to profitability, reporting ¥108 million compared with a loss of ¥378 million in the comparable period.
The similar pattern suggests that changes in biological-asset valuations have played an important role in the earnings recovery across China’s large-scale dairy farming sector.
Milk-price recovery could become the next test
Market indicators are beginning to point toward a potential improvement in dairy economics.
National live-cattle prices increased 6.13% year on year to ¥28.72 per kg in July, while milk prices remained relatively stagnant.
At the same time, China’s national dairy herd declined sequentially by around 4,000 head to 5.77 million animals.
A shrinking herd could eventually help bring milk supply and demand into better balance, although the timing and magnitude of any price recovery remain uncertain.
For Modern Dairy, the second half of 2026 will therefore be an important test: whether improved operating efficiency can translate into stronger underlying profitability once biological-asset valuation effects are stripped out.
The bigger picture
Modern Dairy’s return to profit is a positive signal, but the H1 results tell a more nuanced story.
Higher milk production, improved cow productivity, lower production costs and stronger operating cash flow point to operational progress. Yet declining raw-milk prices, rising debt and higher financing costs continue to weigh on the business.
The sustainability of the turnaround will ultimately depend less on accounting gains from lower cattle revaluation losses and more on whether China’s raw-milk market can recover sufficiently to improve the economics of large-scale dairy farming.
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