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Sri Lanka has ordered Fonterra to recall two batches of milk powder which it says is contaminated with the farm chemical DCD, a claim Fonterra chief executive Theo Spierings says the company will fight.
It is the latest blow to the dairy giant's image after the infant formula scare last week.
The company said today that two batches of Anchor-branded milk powder had been recalled in the past week under orders from the Sri Lankan Government after reports it may have contained traces of the toxic agricultural dicyandiamide (DCD).
"We have been asked by the Ministry of Health to recall two batches of product tested by ITI [Sri Lanka's Industrial Technology Institute] last month," said Leon Clement, managing director Fonterra Brands Sri Lanka.
The recalled products, which had been removed from shops, did not contain any DCD, he said.
"As widely reported, Sri Lanka does not have the required technology to test for DCD in milk products," Mr Clement said.
"The ITI test results have been analysed by an independent and internationally recognised expert in analytical chemistry, Professor Brynn Hibbert, who has found that they are not accurate," he said.
Fonterra was working with the Sri Lankan Government to rectify the situation, he said.
Mr Spierings told TVNZ's Q + A programme the company was fighting the claims, and was also trying to deal with a ban on advertising the Anchor brand in Sri Lanka.
Mr Spierings said the Anchor brand had been in Sri Lanka for 50 years and was better known there than Coca-Cola.
"If we cannot advertise the Anchor brand for a longer period of time, it's going to affect the brand."
Testing by Fonterra had proved the two batches of milk powder, about 40 tonnes, was free of DCD, Mr Spierings said.
"It's exported DCD-free, it's stamped. I've seen the certificates myself. It's imported, it's on the shelves, so we're fighting it."
When questioned about whether Fonterra's error-ridden record had tarnished the company's reputation and New Zealand's image in overseas markets, Mr Spierings insisted consumers had remained loyal.
"Our consumers and our customers are not losing faith," he said.
"In the end, people will see food safety is our first and highest ground."
Revelations that low levels of DCD had been detected in some milk samples from September last year caused problems for the dairy co-operative earlier this year, with concerns being raised in Taiwan and China.
Primary Industries Minister Nathan Guy said there appeared to be technical differences between the testing systems in New Zealand and Sri Lanka. This issue has been around for several months.
"Fonterra have publicly said they are very confident in their testing. The High Commissioner in Sri Lanka is now working with Government officials to seek some clarity on the testing regime and to find a way forward," he said.
Meanwhile, Prime Minister John Key said a ministerial inquiry into Fonterra's infant formula scare would be carried out.
While he was unable to reveal specific details about the inquiry, he told Q + A today more details were likely to be available tomorrow.
"It's frustrating because Fonterra is the poster child for New Zealand's exporting. They've got a lot of soul searching to go through," he said.
Fonterra is also performing two internal investigations into the incident in which a dirty pipe caused fears of potential bacterial contamination of tonnes of whey.
NZ milk in Sri Lanka:
* 98 per cent of New Zealand's exports to Sri Lanka are dairy products
* Sri Lanka is New Zealand's fifth-largest market for milk powder
* Fonterra has exported products to the country for over three decades
Source: New Zealand Trade and Enterprise