Mengniu confident despite tainted milk scare

PUBLISHED : Wednesday, 28 March, 2012, 12:00am
UPDATED : Wednesday, 28 March, 2012, 12:00am


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China Mengniu Dairy said news of its milk products containing unsafe levels of a cancer-causing substance had affected sales in January, but it was confident it would meet this year's sales target.

The mainland's largest dairy reported net profit last year jumped 28.4 per cent to 1.59 billion yuan (HK$1.96 billion), and revenue grew 23.5 per cent to 37.4 billion yuan.

Wu Jingshui, the chief financial officer, said the incident in December had taken a toll on January sales, but refused to elaborate on the figures. 'We will take various measures to make sure our sales target for this year is met,' Wu said.

Deutsche Bank said in a report this month that Mengniu's sales may have dropped up to 20 per cent in January since the country's food safety watchdog found dangerous levels of aflatoxin M1 in one of 25 batches of UHT milk from Mengniu's Meishan plant in Sichuan.

Mengniu said it was caused by mouldy feed given to cows and that all tainted products were destroyed. Mengniu stock rose 5.02 per cent to HK$21.95 yesterday, still 16.5 per cent lower than three months ago, before the aflatoxin affair.

Wu said the company would continue to increase milk sources from ranches to ensure product quality.

It plans to invest up to 3.5 billion yuan to build its own ranches to raise around 150,000 milk cows over the next three to five years. The company also plans to enter the upstream cattle breeding industry.

Revenue generated from liquid milk products last year amounted to 33.7 billion yuan, around 90 per cent of the total revenue. Ice cream and other dairy products accounted for 8.7 and 1.2 per cent respectively.

Soaring prices of raw milk and other raw materials pushed up costs by 23.7 per cent. Mengniu maintained a 25.7 per cent gross profit margin after introducing more high-end products and taking stringent cost-control measures.

The Inner Mongolia-based company also said it had set up a global strategic department to study overseas markets, vowing to become one of the world's top 10 dairy firms. Mengniu declared a final dividend of 19.8 fen per share.