American Dairy has posted a drop in full-year net income, despite a 44% increase in sales.

For the 12 months ended 31 December, net income dropped to US$8.3m from $16.4m in the previous year.

However, the China-based infant formula, milk powder and soybean maker posted net sales of $166m compared to $115m in 2006.

The figure was boosted by the company’s expanding market areas and distribution network throughout China, and an increased in demand for high quality products, the company said.

Income from operations was up 13.5% year over year to $18.5m from $16.m the comparable period of the previous year.

Total operating costs increased by around $20.9m, or 62.2%, to around $54.6m in 2007. The increase was primarily attributable to a 45.2% increase in sales and marketing expenses, and an increase of around 147.6% in general and administrative costs.

As a result, income from operations increased by around $2.2m to reach $18.5m in 2007.

CEO Leng You Bin said: “We plan to continue expanding our production capabilities, enhancing our distribution network in the first-tier cities in China, and strengthening our premium-quality brand awareness.

“We are confident that our 2008 results will reflect growth and are excited about our 2009 prospects. We look forward to continuing to deliver consistent results.”