WASHINGTON - THE world's largest dairy exporter, New Zealand's Fonterra, said on Wednesday it was 'appalled' its Chinese joint venture failed to report complaints over tainted milk products for eight months.

Fonterra said it was writing down the value of its Chinese investment by 69 per cent because of the crisis, which has led to four deaths and the treatment of nearly 53,000 children in China with kidney stones and other problems.

Sanlu Group, the firm first found to be selling milk products contaminated with the industrial chemical melamine, began receiving complaints about sick children as far back as last Dec, Chinese state television said on Tuesday, citing a cabinet probe.

Fonterra, which owns 43 per cent of Sanlu, reiterated on Wednesday that it had not been informed of the health problems by Sanlu officials until Aug 2.

'That Fonterra was not informed earlier is frankly appalling,' Fonterra's chairman Henry van der Heyden said in a statement.

He said the scale of the crisis was 'truly shocking.'

'Throughout this crisis, Fonterra's paramount concern has been for the health and safety of Chinese consumers and recalling contaminated product as quickly and effectively as possible in the Chinese environment.'

Announcing its annual results, Fonterra said it would write down the value of its investment in Sanlu by NZ$139 million dollars (S$134.37 million).

This reflected the cost of product recalls and Fonterra's anticipated loss of brand value in Sanlu, leaving the investment valued at NZ$62 million.

Fonterra, which is behind a third of international dairy trade, has been under attack for saying nothing publicly about the milk contamination for a month after learning about it in early Aug.

Its chief executive Andrew Ferrier has insisted the company tried to 'do the right thing' by working within the Chinese system once Fonterra directors were alerted to the contamination.

New Zealand Prime Minister Helen Clark has said her government eventually 'blew the whistle' and informed Chinese authorities in Beijing, bypassing the local officials. -- AFP