BRIGHT Dairy and Food Co said it plans to raise as much as 1.42 billion yuan (US$222 million) through a private placement on the Shanghai Stock Exchange to fund expansion in production.

The board of directors of Bright Dairy has approved a plan to sell no more than 177.7 million shares on the yuan-denominated market, according to its statement yesterday.

The proceeds raised will be used to lift capacity to 600,000 tons per year, or 280,700 tons above the current level.

Bright Dairy said the fund-raising plan aims to meet the growing demand for diversified products by domestic customers and also help to improve product quality.

The firm said it is confident in the large potential of the domestic dairy products market as it cited industry forecast that overall dairy consumption in the nation may reach 28 million tons by 2012, or 42 kilograms per person on average which still lags international level.

The Shanghai-based company is the latest dairy firm seeking to tap rising demand for domestic dairy products after the industry overcame the melamine contamination scandal in 2008. The scandal, which was blamed for causing the deaths of at least six children and sickened about 300,000, has shaken consumer confidence in China’s dairy industry and also hurt major players, including China Mengniu Dairy and Inner Mongolia Yili Industrial Group Co Ltd.

Last November, the National Development and Reform Commission, the country’s top economic planner, announced that any dairy manufacturer that fails to obtain a new production certificate before April 1 this year will be shut down. It is part of a crackdown to close companies that have poor quality control and to improve overall product safety of the dairy industry.