Chinese infant and children’s formula producer Emerald Dairy has said that it expects sales to be boosted as it received a production permit for its new production line in Hailun City.

The announcement came today (26 May) as the manufacturer swung into profit for the first quarter, ended 31 March. Net profit reached US$2m against a $2.3m loss in the same quarter of the previous year.

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“While we had begun operations at our Hailun Facility during the fourth quarter, and have found that the equipment is operating to expectations, we were prohibited from shipping product until we received the AQSIQ [Administration of Quality Supervision, Inspection and Quarantine] approval in March of this year,” said chairman and CEO Shan Yang  

“We were essentially operating solely through our existing Bei’an facility during the first quarter, which resulted in minimal year-over-year increase in sales.  We are now fully operational, demand appears to be strong, and we are poised to gain additional market share as many smaller producers who cannot secure AQSIQ approval have shut down or suspended production.

For the quarter sales were up 3% to $14.7m, which it attributed to an 8% increase in the average selling price per ton. It said that total volumes were down approximately 5% due to lower subcontracting sales and shipment delays of its premium Xinganling infant formula while it waited for certification from the government.

Gross profit rose 1% to $7.2m, while overall gross profit margin fell 80 basis points to 49% in the first quarter due to a reduction in milk powder margins. The cost per ton was up 10% year-on-year due to rising inflation in China.

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The group expects to be able to pass along cost increases to customers and to maintain its target margins.