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Inner Mongolia Yili Industrial Group, China's biggest  maker of dairy products by sales, plans to spend 376 million yuan  on a new factory in  Sichuan province.

The  plant  would have  production capacity of 430 tonnes of milk, 150 tonnes of yogurt and 260 tonnes of ice cream per day, Yili   said yesterday.  The company said construction would be  completed  in 12 months.

The project's internal rate of return, a measure of  its profitability, would be  12.31 per cent, Yili said.

Competition is set to  intensify as the country's third-largest dairy  firm,  Bright Dairy & Food,  merged with three other major state-owned food companies yesterday.

Bright Dairy, in which   Shanghai Industrial Holdings has a 25.17 per cent stake, said the new firm, Bright Foods (Group), had 45.8 billion yuan in assets and 28 billion yuan annual sales.

Yili  embarked on a series of capacity expansions  over the past two years under  its new management led by president Pan Gang. It has spent  more than two billion yuan to boost output  last year and this year.

However, BOC International analyst Chen Lei said in a research note yesterday the increased capital expenditure  would weigh on Yili's returns.

Shares of Yili rose 3.56 per cent on news of its expansion plan to close at 20.36 yuan, extending this year's gain to 82.33 per cent.

Yili posted net profit of 293 million yuan  last year, up 22.7 per cent, on  turnover of 12.2 billion yuan. Its net profit surged 20.4 per cent to 92 million yuan in the first quarter this year.



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Yili Group

Yili Industrial to spend 376m yuan on factory in Sichuan