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Sanyuan reports sales surge after takeover of Sanlu

Hebei Sanyuan, the dairy firm that bought most of the assets of the Sanlu Group, China's largest milk powder producer before its bankruptcy in the melamine contamination scandal, on June 12 reported sales in May equal to total of the first four months.

Gao Qingshan, general manager of Hebei Sanyuan, said the firm's revenue in May hit 70 million yuan ($10.26 million).

"Our daily milk powder output reached 24 tons, or 80 percent of the total production ability of Sanlu's former factories, and the daily output of liquid milk amounted to 300 tons, 65 percent of production ability. Production will be further expanded based on market response," he said.

He said the firm was confident of meeting its goal of achieving Sanlu's former market domination in three years.

Hebei Sanyuan Foods Co Ltd received capital from the Beijing Sanyuan Foods Co Ltd to buy the core assets of Sanlu Group Co in March. Previously Hebei Sanyuan had leased the plants.

Six of its seven factories presently in production were formerly owned by Sanlu.

Gao said consumers in Beijing would see Sanyuan milk products produced by Hebei Sanyuan, based in north China's Hebei Province, in July.

Previously, Sanyuan products sold in Beijing were all from subsidiaries of Sanlu Group Co in Beijing.

"Our products are sold to 13 provinces. But entering the market in Beijing is very important for the market recognition of our products," he said.

The firm was eying high-end market for milk powder products in Beijing.

Hebei Sanyuan bought Sanlu's core assets at an auction in early March for 616.5 million yuan. The company has said it would use its untarnished reputation to improve its position in the market.

Gao said 2,200 of the 2,500 Sanlu staff on the payroll had been re-employed in Sanyuan factories. The company would try to create jobs for the rest of the workers before October.

Renewing labor contracts with Sanlu staff has been on the takeover contract.

"Sanyuan plans to establish 300 retail dairy outlets, and set up a dairy farm this year, which would create 800 to 900 jobs," Gao said.

Sanlu was one of a handful of companies whose products were found tainted with melamine, an industrial chemical used in the manufacture of plastics and fertilizer, which was added to watered-down milk to artificially boost protein content. The milk was blamed for the deaths of six babies and urinary problems in almost 300,000 others last year.

The company had been China's leading seller of milk powder for 15 years until the melamine scandal broke in September last year. Sanlu's revenue hit 10 billion yuan in 2007, while Sanyuan's revenue was 1 billion yuan.

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