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Dairy industry recovering from melamine scandal

(Xinhua)
Updated: 2009-04-02 20:14

More than six months after the breaking of the scandal involving the melamine-contamination of dairy products, China's dairy industry is showing signs of recovery with sales gradually nearing the pre-scandal level.

Related readings:  Bright Dairy plunges deep into the red  Hebei dairy firms look to fresh start  Sanyuan buys scandal-hit Sanlu dairy company at auction

The Inner Mongolia-based Yili Group said sales had recovered to 90 percent of the level before the scandal. Mengniu Dairy saw a full recovery of sales in the north of the country and a 60-percent recovery in southern regions.

However, both companies refused to provide detailed production and sales figures before announcing their 2008 annual reports. Both of them forecast losses for 2008.

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

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 left at least 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.

The 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 ($41.87 million) last year. This was compared with an 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 center 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.