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December 22, 2016

Bega Cheese, A2 Milk downplay Bellamy’s concern

Infant formula producers A2 Milk Co. and Bega Cheese have sought to play down market concerns after infant formula peer Bellamy's Australia requested the trading halt on its shares be extended until it determines the impact talks with "key supplier/manufacturers" will have on its financial results. 

Infant formula producers in New Zealand and Australia, A2 Milk Co., and Bega Cheese, have moved to downplay market concerns after infant formula peer Bellamy’s Australia requested the trading halt on its shares be extended until it determines the impact talks with “key supplier/manufacturers” will have on its financial results.

Bellamy’s said in a regulatory filing yesterday (21 December) the company expected the voluntary suspension “to last until the earlier of the release of an announcement of the company or the commencement of normal trading on 13 January 2017″.

The move came after Bellamy’s shares tumbled at the beginning of this month after the company admitted recent regulatory changes in China were affecting its sales.

In response, Australia-based dairy group Bega Cheese said in an Australian Securities Exchange (ASX) announcement yesterday it is “a key supplier” to Bellamy’s and “has been and continues to discuss supply arrangements and volume forecasts with them”.

Bega, which supplies infant formula to a number of customers with product destined for both Australian and international markets, said: “There continues to be a strong consumer demand for infant formula in China and in other Asian markets. Moreover, as a sub-category, the consumer demand for organic infant formula, which Bega Cheese produces, is also strong.”

Bega chairman Barry Irvin said: “Whilst infant formula is important to us, Bega is a large multi-product dairy company with a strong ongoing profitable business in multiple categories.”

Meanwhile, A2 Milk yesterday reiterated figures reported to the company’s AGM last month which said revenue for the first four months of the 2017 financial year was NZD155.2m (US$107m) up from NZD79.3 million in the prior corresponding period, “reflecting continued growth in infant formula and milk products”.

A2 Milk said last month operating cashflow “remained strong” and in light of the “higher level of recent commentary and interest from shareholders relating to the infant formula market… the business continues to trade very strongly reflecting, in particular, significant year-on-year growth in its infant formula business”. The company said it expects to provide a trading performance update in February.

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