April 3, 2009


China's dairy industry recuperating from melamine outrage  


China's dairy industry is showing signs of recovery from the melamine contamination more than six months ago as sales gradually nearing the pre-scandal level.


The Inner Mongolia-based Yili Group reported that sales had picked up to 90 percent of the level before the scandal. Mengniu Dairy has fully recovered from the sales in the north of the country and a 60-percent recovery in southern regions.


Both companies however refused to provide detailed production and sales figures before announcing their 2008 annual reports as they forecast losses from last year's sales.


Chen Lianfang, dairy analyst of Beijing Orient Agribusiness Consultant, Ltd., said overall dairy product sales had recovered 70 to 75 percent of the pre-scandal level.


Wang Dingmian, an official with the Dairy Association of China, expected a 90-percent recovery by the end of this year.


Last year, melamine-contaminated milk powder killed six Chinese infants dead and almost 300,000 with kidney illnesses. The chemical was added to dairy products to increase their apparent protein content.


Chinese dairy companies closed a wrenching fiscal year in 2008 with poor sales and falling stock prices after the scandal. Beijing Sanyuan Foods Co.,which was not implicated in the scandal, is expected to be the only profitable firm among the listed dairy companies.


Net profit of Sanyuan jumped 87.2 percent in 2008 from a year earlier.


In contrast, Shanghai-based Bright Dairy Tuesday posted an annual net loss of 285.99 million yuan (US$41.87 million) last year. This was compared with earnings of 212.88 million yuan in 2007.


A second auction to dispose of the assets of Sanlu Group Co., the bankrupt dairy company at the centre of the scandal, will be held on April 7 in Shijiazhuang, capital of the northern Hebei Province. The auction will include Sanlu's stakes in four dairy plants as well as 169 of its protected trademarks and 12 patent rights.


Sanyuan successfully bid 616.5 million yuan to buy Sanlu's core assets on March 4.

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