Largest dairy farming enterprise sounds liquidity alarm

Modern Dairy (现代牧业) flags short‑term strain as leverage surges

Modern Dairy (现代牧业), China’s largest large‑scale dairy farming group, has sounded a liquidity alarm after its 2025 annual report showed rising leverage and tighter short‑term coverage despite positive operating cash generation. The company recorded total sales of ¥12.6 billion (126亿元), down 4.9% year‑on‑year, and a narrowed attributable loss of ¥1.129 billion (11.29亿元) versus ¥1.417 billion in 2024. But total liabilities swelled to ¥26.76 billion (267.6亿元) after dollar bond issuance and new domestic borrowings, and its reported net leverage ratio jumped to 115.7% from 97.1% a year earlier.

Short‑term debt outpaces cash; industry dynamics are the root cause

Wind data show one‑year maturities rose to ¥12.048 billion (120.48亿元), up nearly 40%, while cash and cash equivalents stood at ¥6.554 billion (65.54亿元), leaving cash short‑debt coverage below 1x — a signal of notable rollover pressure. It has been reported that net borrowings were about ¥11.355 billion (113.55亿元) and current liabilities exceeded current assets by ¥0.467 billion (4.67亿元). Analysts caution that although 2025 operating cash flow was positive (¥2.502 billion) and Cash EBITDA was ¥3.063 billion, this is insufficient to simultaneously cover interest, short‑term maturities and rapid deleveraging. Why? Because raw milk prices have fallen sector‑wide — Modern Dairy’s average raw milk selling price dropped 7.7% in 2025 — while production rose 8.5%, leaving overcapacity and margin pressure that eroded net assets to ¥8.294 billion (82.94亿元).

Management actions, industry support and the path forward

Modern Dairy says financial‑instrument risks have been managed and points to ¥7.42 billion of unused credit and recent financing moves — including a ¥500 million perpetual medium‑term note at 2.5% and a 2024 sustainable bond issuance of $350 million — to shore up liquidity. It has also cut unit costs (milk unit cost ¥2.32/kg; feed ¥1.77/kg), raised per‑cow yield and pruned capital commitments. But market observers such as Huang Lichong of Huisheng International Capital warn the company’s capacity to “stabilize” is not the same as being able to rapidly deleverage; operating cash covered roughly 35% of one‑year interest‑bearing debt by his estimate. Beijing is trying to blunt the pain — the Ministry of Agriculture has proposed a “white list” lending and insurance support for dairy producers — yet analysts expect meaningful price stabilization only around 2027–2028. For investors and suppliers, the question remains: can upstream herd operators refinance and outwait this cycle, or will higher leverage reshape China’s dairy landscape?