Ligao Foods' H1 Profit Falls 26% as Frozen Bakery Stalls and Costs Mount

Ligao Foods' First-Half Earnings: Sales Up, Profit Down

Chinese bakery ingredient maker Ligao Foods reported first-half 2026 revenue of RMB2.205 billion, up 6.54% year on year, but net profit attributable to shareholders fell 25.96% to RMB126 million. The result marked a return to revenue growth without profit growth for the first time in three years, with net margin narrowing to 5.74% from 8.05% a year earlier.

The company's core frozen-bakery business grew just 0.97% to RMB1.136 billion after contracting in the first quarter. Traditional bakery shops, its largest demand source, continue to close under cost pressure, changing consumption habits and competition from newer channels. The supermarket channel also had a weak first quarter because of a high base from seasonal products in 2025; a second-quarter improvement lifted the half-year growth rate to about 1%.

By contrast, the cream segment rose 15.05% to RMB642 million, led by UHT cream sales of nearly RMB500 million, up about 30%. Ligao launched its own UHT cream in May 2023 and has benefited from a domestic-substitution trend. However, cream gross margin slipped to 28.42% as raw material costs grew slightly faster than revenue.

Profit was further eroded by a 22.40% increase in administrative expenses to RMB141 million from the Guangzhou plant relocation, headquarters expansion and digital projects; a 63.24% jump in finance costs to RMB22.09 million from convertible-bond interest and foreign-exchange losses; and higher asset impairments and bad-debt provisions.

Behind Ligao Foods' Squeeze: Weak Channels and Cost Shocks

The half-year figures show a company caught between a legacy channel in decline and a newer category that is growing quickly but not yet profitable enough to carry the group. Three pressure points explain most of the profit squeeze.

Why frozen bakery has stalled

Ligao's largest segment grew only 0.97% to RMB1.136 billion. The Q1 decline of about 12% suggests the weakness was not a seasonal blip: traditional bakery stores, the core buyers, are being squeezed by rising costs, changing consumption habits and competition from supermarkets and other channels. The supermarket channel, the second-largest customer group, also fell about 10% in Q1 on a high base from 2025 seasonal products. Huatai Securities attributes the Q2 recovery mainly to improved supermarket sales and newly opened foodservice accounts, while bakery-store demand remained subdued.

UHT cream: growth with a margin question

The bright spot is cream, which rose 15.05% to RMB642 million and now accounts for 29.09% of revenue. The self-developed UHT cream, launched in May 2023, reached nearly RMB500 million in H1, up about 30%, benefiting from import substitution. Yet the segment is not a simple margin boost: its gross margin fell to 28.42%, down 0.68 percentage points year on year, because raw material costs rose slightly faster than revenue. At that level, cream is less profitable than frozen bakery and fruit products, which limits how much it can offset the core business's problems.

The profit drop is as much about expenses as demand

Even with revenue growth, net profit fell 25.96% to RMB126 million. The biggest documented drags are on the expense side: administrative expenses rose 22.40% to RMB141 million on Guangzhou plant relocation, headquarters expansion and digital projects; finance costs jumped 63.24% to RMB22.09 million on convertible-bond interest and foreign-exchange losses; asset impairment losses rose 38.91%; and larger receivables lifted bad-debt provisions. Operating cash flow also weakened, down 18.39% to RMB123 million.

What analysts are now saying

Shenwan Wanguo has lowered its 2026-2027 profit forecasts because demand remains weak. China Merchants Securities sees UHT cream, new supermarket products, regional supermarkets and overseas business as the main growth sources, but cautions that Q3 still faces relocation costs and oil-and-dairy ingredient price pressure, leaving full-year profit at risk of another decline.

What Ligao Foods and Its Investors Should Track Next

For investors and company management, the H1 report turns on four observable checks:

• H2 frozen-bakery trajectory. The H1 growth rate of 0.97% masks a Q1 decline of about 12%; watch whether Q2's supermarket and foodservice improvement continues into the second half or fades with another seasonal base effect.
• UHT cream margin, not just volume. Cream sales of nearly RMB500 million grew about 30%, but the segment gross margin fell to 28.42%; the growth case only strengthens if raw material costs stop outpacing revenue.
• Relocation and headquarters cost tail. Administrative expenses reached RMB141 million, and China Merchants expects relocation charges to continue into Q3; separate one-time transition costs from underlying operating profit.
• Receivables and impairment quality. Finance costs jumped 63.24%, asset impairments rose 38.91%, and bad-debt provisions climbed with receivables; these items will determine whether net margin can recover from its 5.74% low.