(Yicai Global) Aug. 23 -- Chinese dairy producer Maiquer Group has been fined CNY73.2 million (USD10.7 million) for adding a mildly toxic additive to its pure milk, darkening the company’s earnings outlook for the year.

The local market regulator fined Maiquer and confiscated its illegal gains after finding traces of propylene glycol in its pure milk, the company, based in Changji Hui Autonomous Prefecture in the Xinjiang Uygur Autonomous Region, said in a statement released yesterday. The penalty will hit earnings, it noted.

The incident has dealt a blow to consumer confidence, and will weigh on Maiquer’s financial performance, Song Liang, an independent dairy analyst, told Yicai Global.

Due to regulatory probes and related fines, Maiquer had said on July 15 that it expected a net loss of between CNY130 million and CNY195 million (USD19 million and USD28.5 million) in the first half of the year, versus a net profit of CNY10.9 million a year earlier.

The company said yesterday that it has applied to postpone the release of its semi-annual earnings report, as it has not yet finished compiling it.

Maiquer’s revenue from dairy products jumped 58 percent to CNY730 million last year, becoming a major element in the firm’s financial performance, after surging 83 percent to CNY460 million in 2020. Pure milk accounts for half of Maiquer’s business revenue, Yicai Global learned.

The firm’s shares [SHE: 002719] closed down 1.2 percent at CNY8.30 (USD1.21) each today.

On June 30, the results of an inspection by the market regulator in Qingyuan county, in Zhenjiang province, showed that two batches of Maiquer’s pure milk products contained propylene glycol, a food additive that can be used in China in uncooked noodles and pastries but is banned in pure milk. The findings led to further investigations.

In the pre-treatment process of production, Maiquer used propylene glycol in an over-range manner when pouring the raw milk into the storage tanks, the company said, adding that the milk batches were worth about CNY5.2 million (USD760,000).

Editors: Xu Wei, Futura Costaglione