China Mengniu Dairy, the country's top milk producer, posted its first net loss since becoming a listed company in 2004 after being embroiled in last year's tainted milk scandal but said sales were rebounding. Chief executive Niu Gensheng said yesterday in Hong Kong that he was confident that Mengniu was on track to recovery and could make a turnaround in profitability this year. The company said sales had reached 80 per cent of pre-scandal levels. The Inner Mongolia-based company saw a full-year net loss of 948.6 million yuan (HK$1.08 billion) because of the devastating melamine scandal, compared with 935.79 million yuan in net earnings a year earlier. The result was in line with expectations. Shares of Mengniu, which plummeted as much as 60 per cent on the news that it was involved in the contamination scandal, closed down 5.62 per cent at HK$12.42 yesterday. No dividend was declared. 'I sincerely apologise to our investors who lost money,' said chief financial officer Yao Tongshan. Mengniu was among 22 mainland dairy firms whose products were found laced with melamine, an industrial chemical that was blamed for killing at least six babies and sickening nearly 300,000 children last year. The company was dealt a further blow in February after a protein additive it used was found not to be listed in China as a legal food additive, although the government said it was not harmful to health. Mengniu said it would have more stringent quality and cost controls in place this year and would work harder to boost sales. The management said they hoped gross margin, which dropped to 19.6 per cent from 22.5 per cent a year earlier, would climb to the 24.12 per cent seen in the first half of 2008. However, analysts said there was still uncertainty surrounding earnings as the company needed to spend more on advertising and product promotion. Still, they believed the company could return to profit should there be no more public health incidents. 'The company refused to disclose expenses in their advertising budget as well as capital expenditure for investment in ranches, which made it hard for us to forecast,' said Fiona Wong, an analyst with Sun Hung Kai Securities. Another analyst said investors may find other consumer products companies more attractive as growth in the mainland dairy market was slowing due to the scandal. Turnover for the year increased 11.9 per cent to 23.86 billion yuan from 21.32 billion yuan a year earlier. However, gross profit dropped 2.79 per cent to 4.67 billion yuan on rising prices of raw milk and promotion expenses, as well as introduction of raw milk safety measures in the aftermath of the scandal. Cash on hand at the end of December stood at 3.04 billion yuan, up from 2.21 billion yuan, but bank loans surged to 1.21 billion yuan from 183.16 million yuan. The company has no plans for share sales, Mr Yao said. 'We have no plans for share sales or to bring in strategic investors for the time being,' he said.