American Dairy Reports Q3 Net Income Increase of 66%

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American Dairy, Inc. (OTCBB:ADIY), one of the leading producers and distributors of milk powder and soybean products in China, today announces that it has filed its Form 10-QSB with the SEC.

American Dairy, Inc. (OTCBB:ADIY), one of the leading producers and distributors of milk powder and soybean products in China, today announces that it has filed its Form 10-QSB with the SEC.

Net income increased by 66% $496,283 or 66% to $1,244,586 for the quarter ended September 30, 2004 compared to the same corresponding quarter in 2003 of $748,303. Components of sales and expenses resulting in this increase in net income are attributed primarily to the following factors:

1. 36% quarter-on-quarter increase in sales revenues.

2. 39% quarter-on-quarter increase in gross profit margins. Gross profit margin improved to 47% for the quarter ended September 30, 2004 compared to 46% for the same corresponding quarter in 2003.

3. Distribution expenses increased by $700,217 or 34% quarter-on-quarter to $2,765,710 for the quarter ended September 30, 2004 compared to $2,065,493 for the corresponding quarter in 2003. Variance in selling expenses was principally attributable to the increases in advertising, salaries, supermarket consignment fees, and transportation costs.

Sales revenues increased by $2,388,534 or 36% quarter-on-quarter to $9,020,248 for the quarter ended September 30, 2004 compared to the corresponding quarter in 2003 of $6,631,714.

“Increased awareness of the nutritional benefits of drinking milk products assisted by the government and dairy product manufacturer’s promotions and an increase in consumer purchasing power are reasons for the favorable variance in sales revenues for the third quarter,” said Leng You-Bin, CEO of American Dairy, Inc.

“Our extensive sales network enhances the distribution of Feihe Dairy’s products to different provinces. It not only enhanced the popularity of ‘Feihe’ products and trademark, but also the expansion of Feihe Dairy group’s distribution network, which allowed Feihe Dairy group to widen and expand the geographic scope of the sales network and increase sales volume in existing markets,” explained Leng

“Recent scandals of some unscrupulous small dairy producers of producing tainted milk, low milk contents and substandard production have enabled Feihe Dairy to increase its market share,” explained CEO Leng You-Bin, “as a matter of fact, May 2004, ‘Feihe’ was recognized by the People’s Republic of China’s Quality Control Council as PRC’s Top 30 high quality milk powder manufacturers.”

Certain of the statements made herein constitute forward-looking statements that involve risks and uncertainties. In such instances, actual results could differ materially as a result of a variety of factors including the risks associated with the effect of changing economic conditions at home and abroad, variations in cash flow, reliance on collaborative retail partners, and on new product development, variations in new product and service development, risks associated with rapid technological change, and potential of introduced or undetected flaws and defects in products and services and other risk factors detailed in forms filed with the Securities and Exchange Commission from time to time.

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