June 10, 2009

American Dairy, one of the leading producers and distributors of dairy products in China, has entered into an equipment supply agreement with Germany's GEA Group.

Under the agreement, GEA will provide American Dairy with infant formula production equipment, along with the related installations and training at the company's Gannan production facility, Flying Crane Dairy Products Co., Limited (Gannan Feihe).

American Dairy expects the agreement to boost Gannan Feihe's production capacity from 300 tonnes per day to 1,000 tonnes per day by August 2010.

Under the agreement, American Dairy will pay about US$24.6 million, which will be funded partially from cash on hand and cash generated from operations, and partially from available credit facilities.

The American Dairy has also completed the acquisition of a dairy processing plant "Longjiang Feihe" in Longjiang County, Heilongjiang Province. Under the agreement, GEA will assist in remodeling the Longjiang Feihe facilities and in the construction of a 900-tonne per day production facility estimated to be completed by May 2011.

The GEA Group, Germany, is technology group with more than 250 companies in 50 countries. The company focuses on specialty mechanical engineering, especially process engineering and equipment.

American Dairy, Inc. conducts operations in China through its wholly-owned subsidiary, Feihe Dairy. American Dairy has over 200 company-owned milk collection stations, six production facilities and a distribution network that reaches over 50,000 retail outlets throughout China.