China Mengniu Dairy Co, the nation's largest dairy firm, said it returned to profit last year, joining major dairy companies that benefited from a recovery in the industry after a tainted milk scandal but an analyst warned that risks to maintaining profit remain.

Mengniu, 20 percent owned by China's biggest grain trader COFCO (China National Cereals, Oils and Foodstuffs IMP & EXP Co) and Hopu Investment Management Co, posted a net profit of 1.12 billion yuan (US$179 million) in 2009, a turnaround from a loss of 949 million yuan in 2008, the dairy firm said in a filing to the Hong Kong stock exchange yesterday.

Its revenue rose 7.7 percent to 25.7 billion yuan last year.

In 2008, China's dairy industry was hit severely as industrial chemical melamine was found in products of major dairy groups including Mengniu, Yili Industrial Group Co Ltd and Bright Dairy.

Mengniu said the industry has experienced a full recovery with a rapid rebound in demand last year.

But Kang Jingdong, an analyst at Cinda Securities Co Ltd, sees overcapacity in the dairy industry as an emerging risk to profitability after many dairy companies launched expansion projects.