Shares in Maiquer Group plunged today after the Chinese dairy product firm and bakery chain operator said that it has stopped the production of pure milk, and recalled all tainted products following the discovery last week of two batches of milk contaminated with a slightly toxic additive.
Maiquer’s share price [SHE:002719] closed down 7.24 percent at CNY7.43 (USD1.10). The stock has lost 16.7 percent of its value since the news of the probe broke last week.
Pure milk accounts for half of the Maiquer’s business revenue so the recall will have a major impact on performance, the Changji, northwestern Xinjiang Uyghur Autonomous Region-based company said. All customers will be given full refunds, it added.
Two batches of Maiquer’s milk have been found to have excessive amounts of propylene glycol, market regulators in Qingyuan county, southeastern Zhejiang province said on June 30. Propylene glycol is a food additive with low toxicity, used in enhance the taste, but too much consumption of it can cause kidney disorders.
The State Administration for Market Regulation has instructed Xinjiang’s market regulators to get to the bottom of the matter as soon as possible, severely punish any illicit behavior and to make public the results in a timely manner, the national regulator said yesterday.
A preliminary investigation has found that the discovery of propylene glycol is due to Maiquer’s excessive use of the edible flavoring, Xinjiang’s market regulator said the same day. A case has been filed and a food safety probe has begun, it added.
Maiquer previously said that the tainted milk was due to insufficient cleaning of its canning lines, which meant that residual blended milk that contained propylene glycol got into the pure milk.
Major shareholder Xinjiang Maiquer Group is on a blacklist of dishonest entities that failed to meet legal obligations or refused to perform their duties, according to corporate data platform Tianyancha. The company, which holds 34 percent equity in the dairy firm, owes CNY1.44 million (USD214,839) in taxes and CNY509 million (USD76.1 million) in other liabilities.
Maiquer’s net profit shrank 27.6 percent in the first quarter from the year before to CNY3.85 million (USD575,988), according to its latest earnings report. Last year, profit plunged 65 percent year on year to CNY18.5 million (USD2.8 million) while revenue jumped 30.9 percent to CNY1.1 billion (USD164.3 million).
