Synlait deal covers A2 Platinum formula

Synlait deal covers A2 Platinum formula

A2 Milk Co. today (21 February) moved to underline its infant-formula venture with supplier Synlait Milk would continue in the wake of the New Zealand dairy and baby-milk business' new, wide-ranging agreement with Fonterra.

Shares in Synlait, which manufactures ingredients for A2 Milk Co.'s A2 Platinum infant formula, fell after its customer announced a "comprehensive strategic relationship" with the world's largest dairy exporter.

However, in a joint statement, Synlait and A2 Milk Co. said their deal, announced in 2016 and covering China, Australia and New Zealand, would continue.

"Today's announcement is great news for both The A2 Milk Company and Fonterra. It is a strategically sound decision and while we understand it brings additional dynamics to our existing relationship, we are supportive of The A2 Milk Company's growth," John Penno, Synlait Milk's managing director and CEO, said.

A2 Milk Co.'s new deal with Fonterra takes in fresh milk, bulk nutritional powders and the possibility of developing A2-branded butter and cheese.

"The arrangement we announced this morning is about The A2 Milk Company having options to diversify sourcing, processing and manufacturing over time in light of continued growth in demand for the company's products," A2 Milk Co. managing director and CEO Geoffrey Babidge said.

"Our company recognises that Synlait has performed outstandingly under the exclusive infant formula supply arrangement between the two companies and our on-going relationship will continue to serve us both well into the future."