China Mengniu Dairy Co. said today (16 April) that the business swung into the red last year due to the fall-out from the contaminated milk scandal that rocked the industry last autumn.

The company booked a net loss of CNY946.8m (US$138.6m) for 2008 – against net income of CNY935.8m a year earlier.

Mengniu, China’s largest dairy firm by volume, was one of a number of the country’s leading dairies that had liquid milk contaminated by the industrial chemical melamine.

Confidence in domestic dairy brands plummeted after more than 20 companies were found selling milk contaminated with melamine. The adulterated milk powder was linked to the deaths of at least six infants.

The recall pushed up Mengniu’s costs, which included disposing of raw milk and writing off products pulled from retailers’ shelves.

Mengniu’s revenues rose in 2008, up from CNY21.32bn in 2007 to CNY23.86bn last year. The group said it had upped its production capacity in the last year, which reached 5.57m tons.

The company said it expects 2008 to mark a “turning point” for China’s dairy industry.

“Accelerated industry consolidation and elimination of inefficient small-scale enterprises are expected in future,” Mengniu said.

“The group, as a market leader for years, is confident that it is capable to take the lead in the healthy and ordered development of the China dairy industry leveraging on its strong R&D capabilities, sizeable production and stringent quality control.”