American Dairy, Inc. (PCX:ADY), one of the leading producers and distributors of milk powder and soybean products in China, today announced that it has signed a contract with the Government of Gannan County, in the Heilongjiang Province of China, to build a new milk processing plant. Through this agreement, the Company will receive land, tax incentives and subsidies for building, as well as exclusive processing and distribution rights to local, subsidized liquid milk. Specifically,

  • American Dairy will receive 3 million square feet of land from the Government of Gannan County, payment-free for 40 years. The land is located in Heilongjiang, China's northernmost province.
  • The Government will subsidize the initial cost of 200,000 milk producing cows for local farmers, which increases the local production of liquid milk and allows more farmers to independently contract with American Dairy. The Company has exclusive processing and distribution rights to this milk.
  • By 2009, American Dairy expects the processing plant to be running at a full capacity of 1,000 tonnes of liquid milk per day. Currently, the Company processes 720 tonnes of liquid milk per day through three processing plants in Heilongjiang.

Leng You-Bin, CEO of American Dairy, stated, "Today's announcement reflects China's commitment to infant health and nutrition for the long term. 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."

Additionally, American Dairy announced today that the Company is centralizing its packaging and distribution efforts and increasing capacity by building a new packaging and distribution center in Lang Fang, China. The Company believes that this will, over time, lower transportation fees, enhance product quality and increase the amount of American Dairy products available for sale in China.

Source: American Dairy, Inc.