American Dairy Reports Net Income Increased by 121% in the First Quarter of 2005.

BEIJING -- American Dairy, Inc. (PCX:ADIY), one of the leading producers and distributors of milk powder and soybean products in China, announced today that the Company had a $1,443,373 or a 121% increase in net income to $2,633,328 during the three months ended March 31, 2005 from $1,189,955 for the comparable period in 2004. Components of sales and expenses resulting in this increase in net income are discussed below.

Sales revenues increased by $5,972,915 or 73% quarter-on-quarter to $14,120,916 for the quarter ended March 31, 2005 compared to the same corresponding quarter in 2004 of $8,148,001. The first quarter's sales revenues represented average monthly sale revenues of $4,706,972 compared to the corresponding quarter in 2004 of $2,761,000, representing an average monthly increase of $1,945,972 or 70% compared to the corresponding quarter in 2004. The reasons of the favorable variance in sales revenues for the first quarter ended March 31, 2005 were as follows:

--Increased popularity of "Feihe" brand in mainland China following successful advertising campaigns in the previous year and extensive networks of principal agents in 25 provinces.

--Demand was boosted by improved and high quality ingredients for several products such as Ca+Zn, CPP series and nucleotides series, and the markets in the PRC generally accepted these products.

--An 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 volumes in existing markets.

--Increase in sales quantities of several major products such as milk powder with nucleotides series, milk tablets and CPP series in the first quarter of 2005 compared to the corresponding quarter in 2004 of approximately 100%, 96% and 79%, respectively.

--Increase in overall sales quantity by 152,160 kilograms or 4% quarter- on-quarter to 3,648,073 kilograms for the quarter ended March 31, 2005 compared to the same corresponding quarter of 3,495,913 kilograms in 2004.

--The dairy milk industry scandal in China in 2003 and 2004 and the resulting strict control over dairy producers' quality and ingredients drove many unscrupulous dairy producers and their tainted dairy products out of the market. Consumers concentrated on dairy products produced by such reputable dairy producers as Feihe Dairy.

Net income increased by $1,443,373 or 121% to $2,633,328 for the quarter ended March 31, 2005 compared to the same corresponding quarter in 2004 of $1,189,955. The favorable variance in net income was mainly due to increases in gross profit by $2,740,900 or 67% quarter-on-quarter to $6,823,558 for the quarter ended March 31, 2005, in excess of increases in distribution and general and administrative expenses.

About American Dairy

American Dairy, Inc. conducts operations in the People's Republic of China ("China") through its wholly owned subsidiary Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of milk powder and soybean products in China. Feihe Dairy is located in Kedong County, China, and has been in operation since 2001. American Dairy also has a milk powder processing plant, Sanhao Dairy, in Kedong County.

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 in The People's Republic of China, 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 the 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.