Yili Industrial's Strategic Resilience Amid H1 Profit Decline

In the first half of 2025, Yili Industrial Group faced a notable net profit decline, with a 4.4% year-over-year drop in H1 2025 earnings [2]. This followed a sharper 18.9% decline in Q1 2025 and a 30.24% drop in Q2 2025, driven by U.S.-China trade tensions, domestic demand softness, and rising input costs [1]. Yet, beneath these figures lies a story of strategic resilience. Yili’s free cash flow (FCF) surged 57% to ¥17.9 billion in Q2 2025 [1], underscoring its ability to maintain liquidity and operational flexibility despite external headwinds. For long-term shareholders, the question is not whether Yili is profitable today, but whether its strategic positioning ensures sustained dominance in a volatile dairy market.

Market Dominance: A Foundation for Resilience

Yili’s dominance in China’s dairy industry is underpinned by its control of high-margin segments. Its liquid milk business alone contributed ¥75.003 billion to FY2024 revenue [1], while its infant formula (IMF) market share in China rose to 17.3% in 2024 from 16.2% in 2023 [1]. This growth was fueled by a premiumization strategy, with its Jinlingguan brand achieving double-digit revenue increases and capturing an additional 2% market share [1]. Meanwhile, Yili’s ice cream business, a global leader for 30 years, saw 13% revenue growth in H1 2025 [2], reinforcing its cross-category strength.

The company’s strategic focus on ultra-high-temperature (UHT) milk and yogurt has also been pivotal. By leveraging China’s underdeveloped cold-chain logistics infrastructure, Yili built a nationwide distribution network that outpaces rivals like Mengniu [3]. This infrastructure not only reduces costs but also ensures product freshness, aligning with consumer demand for quality post-industry safety scandals [3].

Strategic Investments and Operational Efficiency

Yili’s subsidiaries, Westland Milk Products and Oceania Dairy, reported 16% revenue growth and 12% profit growth in H1 2025 [2], driven by investments in high-demand dairy products. These gains highlight the company’s ability to scale production while maintaining margins. Additionally, Yili’s global footprint—81 production bases across 81 countries—positions it to mitigate regional risks and access emerging markets [1].

The company’s commitment to ESG standards, reflected in its MSCI AA rating, further enhances long-term value. Sustainable sourcing and supply chain transparency are increasingly critical for consumer trust, particularly in the premium dairy segment [1].

Long-Term Shareholder Returns: Beyond Short-Term Volatility

While H1 2025 profit declines are concerning, Yili’s FY2024 revenue of ¥115.78 billion [1] and robust FCF demonstrate its capacity to reinvest in growth. The company’s infant formula business, for instance, achieved a record ¥29.675 billion in revenue, with global infant formula sales surging 68% [2]. These figures suggest that Yili’s international expansion and product diversification are offsetting domestic challenges.

Moreover, Yili’s 30-year leadership in ice cream and its strategic focus on high-value dairy products position it to capitalize on China’s growing middle class and evolving consumption patterns. As trade tensions ease and raw milk cycles recover, Yili’s healthier channel inventory and cost efficiencies are expected to drive profit normalization [3].

Conclusion

Yili Industrial’s H1 2025 profit decline is a symptom of macroeconomic turbulence, not a reflection of its long-term strategic strength. With a dominant market share in key segments, a resilient global supply chain, and a track record of innovation, the company is well-positioned to deliver shareholder value over the next decade. For investors, the current dip may represent an opportunity to invest in a dairy giant that has consistently navigated crises while expanding its category leadership.

**Source:[1] Yili Industrial's Q2 2025 Earnings Dip
https://www.ainvest.com/news/yili-industrial-q2-2025-earnings-dip-buying-opportunity-resilient-dairy-giant-2508/[2] Yili's subsidiaries report revenue growth of 16% in H1 2025
https://dairybusinessmea.com/2025/08/12/yilis-subsidiaries-report-revenue-growth-of-16-in-h1-2025/[3] Recovering Raw Milk Cycle and Healthier Channel Inventory to Drive Profit Growth for Yili in 2025
https://www.morningstar.com/company-reports/1279710-recovering-raw-milk-cycle-and-healthier-channel-inventory-to-drive-profit-growth-for-yili-in-2025