The sale of $1.56 billion worth of shares by five investors will not affect China Mengniu Dairy's performance, according to the company's chief executive. The investors, three of them strategic and two management shareholders, sold 315.57 million shares at $4.95 each on June 16. This represented 23.06 per cent of the enlarged share capital of Mengniu. Chief executive Niu Gensheng yesterday said that the share placements had already been expected at the time of Mengniu's Hong Kong listing in April last year. 'The withdrawal [of the investors] follows a clear timetable set out in the prospectus for our initial public offering last year,' said Mr Niu. 'It will not affect the growth and development of Mengniu.' Chief financial officer Yao Tong-shan said that the company would develop new higher-margin products to arrest declining profit margins. Mengniu's gross margin was 22.27 per cent last year, against 25.07 per cent in 2003, and Mr Yao said the margin tightened even more in the second half of last year. 'Profit margin for the whole industry fell in the second half of last year because of intensifying competition,' he said. 'But this is a sign that the mainland dairy market is maturing, because without competition there won't be growth and development.' He said Mengniu would only develop new products with margins of 25 per cent or higher but gave no further details. Current margins 'have almost recovered to levels at the middle of last year', he said. Mr Niu said Mengniu had increased its mainland market share in liquid milk to 25 per cent from 22 per cent in December last year. Mengniu also produced 700,000 tonnes of liquid milk in the first half of this year, up 40 per cent from the same period last year.