(Yicai Global) Aug. 29 -- China Mengniu Dairy, one of the country's two dairy giants, posted CNY40 billion (USD5.6 billion) in operating revenue, up 15.6 percent from a year earlier, driven by its liquid milk and milk powder business, and CNY2.1 billion in net profit attributable to the company owner, up 33 percent, per the firm's semi-annual performance report issued yesterday.

 Mengniu's share [HKG:2319] price began to drop after opening today, and closed down 6.13 percent at HKD31.40 (USD4) as of press time on jitters about the firm's results, which were a tad slower in the period than the 17 percent increase in operating revenue and 38.5 percent rise in net profit in the same period last year and over its showing in the second half as it attempts to offload a unit that has proven to be quite a cash cow. 

The Hong Kong-headquartered dairy producer based in Hohhot, capital of China's northern Inner Mongolia Autonomous Region, plans to sell its 51 percent stake in Junlebao Dairy for CNY4.1 billion, the company announced on July 1. It will use the proceeds in prospective mergers and acquisitions to enhance the firm's core competitiveness in its main milk, infant formula and cheese businesses.

Shijiazhuang, Hebei -based Junlebao contributed a hefty 13.6 percent to Mengniu's overall revenue and 9.6 percent to its net profit last year, and since the firm's first-half financial report does not reflect the pending deal's impact, this is sowing uncertainty in the market.

Mengniu is likely to earn CNY3.4 billion in cash from the sale, pundits project, which Swiss investment bank UBS Group predicted will wrap up by the end of the third quarter.

The company is negotiating the acquisition with many milk product makers in the low-temperature liquid milk, cheese and yogurt fields, but price is likely to prove a key sticking point, insiders told Yicai Global.

Editors: Zhang Yushuo, Ben Armour