Milk powder and soybean producer American Dairy has signed a deal with the government of Gannan County in Heilongjiang province to build a new milk processing plant.

Under the terms of the deal, American Dairy will receive land, tax incentives and subsidies for the construction of the plant, along with exclusive processing and distribution rights to local, subsidised liquid milk.

"Today's announcement reflects China's commitment to infant health and nutrition for the long term," said American Dairy CEO Leng You-Bin. "It also speaks to American Dairy's capabilities, including our established distribution network and relentless focus on quality. We look forward to working with the Government of Gannan County to make widespread dairy consumption a reality for the people of China."

By 2009, American Dairy expects the processing plant to be running at a full capacity of 1,000 tonnes of liquid milk per day. At present, American Dairy processes 720 tonnes of liquid milk per day through its three existing plants in Heilongjiang.

American Dairy, one of the leading producers and distributors of milk powder and soybean products in China, also announced plans to centralise its packaging and logistics operations and boost capacity by building a new packaging and distribution centre in Lang Fang.

In a separate announcement, the company reiterated existing guidance for its 2005 fiscal year financial results and provided forecasts for 2006. For 2005, American Dairy said it was expecting net income of between US$11.0m and $12.0m, or $0.70 to $0.76 per diluted share, on revenues of between $65m and $70m.

In the 2006 fiscal year, revenues are forecast to increase to $120m, with net income expected to rise to $20m.