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China Mengniu's shares fall 24pc

Mengniu

The discovery of an unsafe level of a cancer-causing substance in China Mengniu Dairy's milk products in Sichuan sent the stock plummeting 24 per cent yesterday.

One of 25 batches of UHT milk from Mengniu's Meishan plant was found with 140 per cent of the permitted level of aflatoxin M1.

It was part of a random check on more than 200 samples from 128 dairy plants in October, according to a report released at the weekend by the General Administration of Quality Supervision, Inspection and Quarantine.

It deals a fresh blow to Mengniu, among the mainland dairy firms involved in the melamine-tainted milk scandal in 2008.

Although the firm insisted that the unsafe milk was destroyed and none released on the market, Mengniu shares tumbled to HK$20 a share yesterday. Shares of China Modern Dairy, among Mengniu's dairy suppliers, fell 13.4 per cent to HK$1.55.

Mildewed feed given to dairy cows resulted in the excessive levels of the toxin, which is also produced by fungi in foods and feeds, the administration said.

A Citigroup report said the problem of contaminated feed was industry-wide. 'According to management, both raw milk and finished products are inspected internally, but for unclear reasons, the Meishan factory had not carried out proper inspections on finished products when the regulator tested samples,' the report said.

Mengniu has been involved in at least five food-safety incidents since 2008.

Five months after the outbreak of melamine-tainted milk in September 2008, Mengniu was found to have added osteoblast milk protein (OMP), an unsanctioned food additive, into its dairy products. But officials said two days later that OMP was not a health hazard.

In April, 251 students in Yulin, Shaanxi, became ill after drinking Mengniu's UHT milk, which was produced in its Baoji plant.

In a bid to ensure the quality and the sufficient supply of its milk products, Mengniu has set up a subsidiary to establish farms and raise cows beginning next year.

Bank of America Merrill Lynch estimates that Mengniu needs to invest about 4 billion yuan (HK$4.92 billion) to do so.

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