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Synutra Won’t Recall Milk as Government Probes Death of Baby

Jan. 13 (Bloomberg) -- Synutra International Inc. said its products are safe and it won’t recall any, following a media report that one baby died and another fell ill in China after drinking the company’s powdered milk.

“We firmly believe this is an isolated incident unrelated to Synutra’s products,” Zhang Liang, chairman and chief executive officer of the Beijing-based company, said in a statement yesterday. “We have chosen to not recall any of our products because we are confident that they are safe.”

The incident is the second in two months related to milk safety in China, where authorities in December found products from China Mengniu Dairy Co. containing excessive levels of a toxin. China is intensifying safety measures after melamine-tainted formula from domestic companies including Synutra killed six babies and sickened 300,000 in 2008 in the nation’s worst food-safety incident.

“China’s domestic dairy companies need to rebuild consumer confidence,” Jason Yuan, an analyst at UOB Kayhian Holdings Ltd. in Shanghai, said by telephone from Shanghai. He declined to comment specifically on Synutra.

A baby boy in Jiangxi province’s Duchang county suffered diarrhea and shaking and died after drinking milk from Synutra, China’s official Xinhua News Agency reported yesterday, citing an online posting. His twin sister also fell ill and has been discharged from hospital, Xinhua said.

Testing Samples

Commerce authorities in Jiangxi were investigating the company, Xinhua said. They sealed the same batch of Synutra products in Duchang and sent samples for testing, according to the report.

The head of the consumer protection department of Duchang’s Industrial and Commerce Bureau, who only gave his surname, Cao, when contacted by Bloomberg News, said the bureau is waiting for test results.

“Although the cause of the incident remains to be known, it highlights the public’s growing attention to the dairy industry,” Titus Wu, an analyst at DBS Vickers Hong Kong Ltd. said by telephone.

Synutra products from the store where the ill infants’ formula originated have been removed, the company said in the statement. All Synutra products, including the batch in question, are thoroughly tested and analyzed before they are shipped, it said.

Stock Plunges

Shares of the company, which sells milk under the Synutra and Shengyuan brand names, fell 10 percent to $4.24 in Nasdaq stock market trading yesterday.

Synutra plunged 27 percent on Aug. 9, 2010, the largest one-day drop in almost two years. The Oriental Morning Post reported on the same day that three girls diagnosed with premature development in which they appeared to have grown breasts all consumed the company’s baby formula.

An investigation found no links between Synutra’s baby formula and premature development in the three infants, China’s Ministry of Health said on Aug. 15 that year.

Sales in China’s baby-food market will almost double to 136 billion yuan ($22 billion) by 2015, from 68 billion yuan estimated for 2011, according to Euromonitor International, a London-based researcher.

The milk-safety incidents have dented consumer confidence in Chinese milk and allowed foreign brands to gain market share.

Mead Johnson Nutrition Co. had a “temporary increase in demand” as competing products were pulled off shelves, the company said in its 2008 annual report. Nestle SA, the world’s largest foodmaker, will spend 2.5 billion yuan over the next five years to boost output in China and help farmers produce better quality milk, its Greater China Chairman Roland Decorvet said this week.

To contact the reporter on this story: Michael Wei in Shanghai at mwei13@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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