China Modern Dairy Holdings Ltd, the largest raw milk producer in the country, said it will further develop its own brand of dairy products to seek higher profits.

Currently, Modern Dairy only sells its own brand of milk in key cities, including Beijing and Tianjin on the mainland. Gao Lina, chief executive officer at Modern Dairy, said the company will invest to expand its sales chain from northern cities to southern cities in the country.

"Our products will enter Hong Kong market eventually," Gao told at a media briefing in Hong Kong on Tuesday, but did not provide the timetable's details.

The milk producer on Monday announced that net profits increased by 77 percent to 398.5 million yuan ($63.07 million) for the full year ended June 30, 2012, over 224.6 million yuan a year earlier. Revenue rose 50.7 percent to reach 1.7 billion yuan last year, the company told the city's stock exchange.

In August, the country's largest dairy producer China Mengniu Dairy Co reportedly acquired Modern Dairy to give Mengniu more control over its milk supply on concerns over dairy products safety in the industry.

Although Modern Dairy denied the acquisition plan, it, however, indicated that 70 percent of its unpasteurized milk will be sold to Mengniu in the following 10 years according to contracts signed between the two companies.

Modern Dairy will only be able to use the rest of its 30 percent production to expand and develop its own brand, according to Gao, who added that the company aims to beef up annual raw milk production to 9 tons per cow by 2015 from 8.09 tons recorded in 2011 through both genetic and management improvements in the future.

After the contract matures, Modern Dairy will adjust the production ratio sold to Mengniu, giving it more room to negotiate the unpasteurized milk's selling price with the latter, according to Gao.

A research note by Guotai Junan International released on Tuesday said while Modern Dairy's annual results disappointed the market, its long-term development prospects remained rosy.

Deutsche Bank indicated in another note published the same day that an unfavorable earnings report in 2011 was due to slower-than-expected sales last year.

Shares of Modern Dairy slumped HK$0.11 or 5.1 percent to close at HK$2.04 per share on its Hong Kong trading on Tuesday, compared with a 0.27 percent loss of the city's benchmark Hang Seng Index. The stock has gained over 25 percent so far this year.

litao@chinadailyhk.com

(HK Edition 09/19/2012 page2)