China milk scandal drags Yili Group into losses

BEIJING, Jan. 23 (Chinese media) -- China's Yili Industrial

Group reported a net loss last year as a result of the baby formula milk

scandal, according to its statement to the Shanghai Stock Exchange Market

Friday.

The company did not disclose the size of loss. Net

loss for the producer stood at 20.6 million yuan (3.01 million U.S. dollars)

in2007. The first three quarters last year saw a net loss of 109 million yuan.

A report from Morgan Stanley expected the company's

2008 loss at 2.3 billion yuan. Chen Lianfang, a senior dairy analyst with

Beijing Orient Agribusiness Consultant, agreed with the figure.

Yili was more affected by the scandal than the

domestic rivals Mengniu Dairy Co and the Bright Group, as Yili took a bigger

domestic market share of milk power at 8 percent. The company at the heart of

the scandal, the now bankrupt Sanlu Group, had a 17 percent share.

Mengniu Dairy was expected to record a net loss of

900 million yuan despite earnings in the first half of last year.

The Bright Group posted a third quarter loss at 271

million yuan last year and was expected to experience a full year loss. No

specific figure was disclosed.

The milk scandal shook domestic dairy market and hurt

consumers.

An unnamed analyst said gloomy dairy market

sentiments also lead the companies to destroy dairy products in inventory, which

lead to huge losses.

Chen estimated the current sales of these companies

have recovered gradually to 70 percent of pre-scandal conditions. He added they

would reverse the results when the percentage moves up to 80 percent to 90

percent this year.

The Sanlu Group, whose bankruptcy petition was

accepted by the Shijiazhuang Intermediate People's Court last month, was fined

49.37 million yuan.

Two men were sentenced to death Thursday for

producing and selling large amounts of melamine-laced "protein powder." The

former board chairwoman of dairy firm Sanlu Group, Tian Wenhua, was sentenced to

life imprisonment.