Ligao Foods reported a revenue increase to RMB2.205 billion for the first half of 2026, yet net profits fell by 25.96%. The Chinese producer is currently navigating a volatile shift in consumer demand alongside heavy relocation expenses.
The RMB126 Million Profit Slide
Despite a 6.54% rise in operating revenue, Ligao Foods saw its net profit attributable to shareholders drop to RMB126 million. According to the report, this represents a significant erosion of the company's bottom line, with net margins contracting from 8.05% in the first half of 2025 to 5.74% in the same period of 2026.
This margin compression suggests that the costs associated with maintaining operations and expanding the business are currently outpacing the gains from increased sales. The disparity between top-line growth and net income indicates that Ligao Foods is struggling to translate higher volume into actual profit,a trend that has raised red flags for institutional investors.
UHT Cream's RMB642 Million Surge
A primary driver of the revenue growth is the UHT cream segment, which saw sales climb 29.09% to RMB642 million. Launched in May 2023 as a domestic-substitution product,the shelf-stable dairy alternative now accounts for nearly one-third of the total revenue for Ligao Foods.
However, the growth of the UHT cream business has not been a silver bullet for profitability. As the source reported, the segment's gross margin actually slipped to 28.42% from 29.10%, as the rising cost of raw materials grew faster than the revenue generated by the product.. This suggests that while consumer appetite for the product is strong, the cost of production remains a volatile variable.
The 0.97% Growth Stall in Frozen Bakery
The traditional core of the business, the frozen-bakery division, is showing signs of stagnation with a minimal sales increase of 0.97%, totaling RMB1.136 billion. This sluggishness follows a 12% decline in the first quarter, signaling a potential structural shift in how Chinese consumers access bakery products.
This trend reflects a broader industry struggle where traditional bakery shops—the primray customer base for Ligao Foods—are losing ground to supermarkets and diversified distribution channels. As these small-scale shops face higher operational costs and stiffer competition, the reliance of Ligao Foods on this legacy channel has become a strategic liability.
Guangzhou Relocation and the 63.24% Finance Spike
Profitability has been further hampered by a 22.40% increase in administrative costs, which reached RMB141 million. These expenses were largely driven by the relocation of the Ligao Foods plant in Guangzhou and an ongoing project to expand the company's headquarters.
Simultaneously, finance expenses surged by 63.24% to RMB22.09 million. This spike is attributed to rising interest on convertible bonds and losses stemming from foreign-exchange fluctuations. When combined with a 18.39% drop in operating cash flow to RMB123 million, the financial data paints a picture of a company heavily leveraged by its own growth ambitions.
Huatai Securities' Warning on Raw Material Volatility
Analysts from Huatai Securities have noted a slight recovery in supermarket sales during the second quarter, particularly through new foodservice accounts... While this may offset some of the early-year losses, the long-term trajectory remains uncertain.
Several critical questions remain unanswered regarding the company's recovery. It is still unclear if Ligao Foods can stabilize the cost of dairy and oil components to protect its margins, or how quickly the Guangzhou plant will reach operational efficiency to justify the relocation spend . Furthermore, the report provides the company's perspective on these costs,but lacks a detailed breakdown of the specific foreign-exchange triggers that led to the finance expense surge.
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