On December 30th, 2024, Inner Mongolia Yili Industrial Group Co., Ltd. (Yili) closed with a market value of 67.1 billion Hong Kong dollars, evaporating about 128 billion Hong Kong dollars from its historical peak, bringing its current market value back to the level of a decade ago.
Yili’s stock price was reported at 17.140 Hong Kong dollars per share on the 30th, a decrease of -1.38% from the previous trading day. According to China Financial Network’s report on December 30th, since reaching a historical high of 52.095 Hong Kong dollars per share in 2021, Yili’s stock price has been continuously falling, leading to a market capitalization loss of 128 billion Hong Kong dollars.
The financial report of Yili for the first half of 2024 showed that the company achieved a revenue of 44.671 billion yuan, a year-on-year decrease of 12.6%; with a net profit attributable to the parent company of 2.446 billion yuan, a decrease of 19% compared to the same period last year. This marks the lowest point in Yili’s performance since 2021, with all major business segments experiencing a comprehensive decline in performance: liquid milk decreased by 36.226 billion yuan, down 12.9%; milk powder 1.635 billion yuan, down by 13.7%; ice cream 3.371 billion yuan, down by 21.8%; cheese 2.211 billion yuan, down by 6.3%.
Recently, rumors emerged about Yili laying off over 6,000 employees, but the company has not given a clear response to this. The Southern Daily quoted sources close to Yili revealing that the layoffs are true, but the actual number differs significantly from the rumors.
The optimization of human resource costs can also be observed from Yili’s financial data, showing a reduction of approximately 3,064 employees in the first half of 2024, bringing the total number of employees down to 43,000.
Meanwhile, the company’s sales and distribution expenses decreased by 8.8% year-on-year to 12.68 billion yuan, with brand promotion and marketing expenses reduced by 12.1% to 4.5 billion yuan. China Financial Network believes that the dual measures of layoffs and cost reduction demonstrate Yili’s efforts to improve efficiency and cope with performance pressure.
Yili’s current situation reflects the challenges brought by its rapid expansion. Through a series of high-priced acquisitions, Yili has built a diversified product portfolio including milk powder, ice cream, and cheese. Since 2018, the company’s goodwill surged from 4.682 billion yuan to 8.906 billion yuan in 2023. Reports indicate that while these acquisitions expanded the business in the short term, they did not significantly enhance the profit-making ability of non-core businesses, becoming a hidden risk in Yili’s development. If the acquisitions do not yield positive results, goodwill impairment will impose significant pressure on Yili’s financial statements.
In July 2024, Yili’s new CEO took office, proposing an operational strategy of “reducing costs, enhancing efficiency, and expanding in an orderly manner.” Layoffs, cost reduction, and inventory optimization are key initiatives in the first phase. However, the effectiveness of these measures remains to be seen.