Chinese infant formula maker Beingmate Baby & Child has released preliminary accounts showing a return to profit and said it will ask the Shenzhen Stock Exchange to cancel a delisting risk warning.

Beingmate, which is backed by New Zealand dairy giant Fonterra, said operating revenue fell 6.92 per cent to 2.47 billion yuan (NZ$541.79 million) in 2018 but net profit was up 104 per cent to 40.92 million yuan (NZ$8.97m).

The bottom line performance reverses consecutive losses in 2016 and 2017 of 780m yuan (NZ$171m) and 1.057b yuan (NZ$232m) respectively.

That prompted the stock exchange to mark the company as ST (special treatment), which carries a delisting warning and restricted trading while the company was also under increased supervision due to concerns about its financial reporting.


Commenting on the change in performance, Beingmate said it had reduced inefficient costs, improved production capacity and strengthened management of accounts receivable and inventories.

The company inteneded to apply to the stock exchange to remove the delisting warning.

The turnaround follows the appointment last July of Bao Xiufei, a former sales executive at Royal FrieslandCampina China to head the company under chairman and company founder Xie (Sam) Hong.

Beingmate has had a recent history of not meeting its guidance but the preliminary accounts suggest its reporting systems have improved.

In December the company forecast net profit of between 28m and 78m yuan and described "green shoots" appearing.

When Bao was appointed the company said his key tasks were to unlock Beingmate's distribution network and take the right actions to meet Chinese customer's preferences for net profit.

Beinmate shares have gained some ground after hitting a record low of 3.95 yuan in October and last traded at 5.72 yuan, valuing the company at 5.84b (NZ$1.28b).
Still, it's a long way from the 18 yuan that Fonterra paid for its 18.8 per cent stake in 2014.

Fonterra paid about $755 million for its Beingmate shares, while the latter paid A$102m for a 51 per cent stake in the Darnum manufacturing plant in Australia. That joint venture has now been unwound with the deal structured to ensure no cash was paid by Fonterra to Beingmate.


Fonterra has been reviewing its overseas businesses having written down the carrying value of its Beingmate investment to just $204m.

Late last year Great Wall, one of China's four national asset management companies, signed a strategic partnership with Beingmate, taking a 5.09% stake in the company.