Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Little impact seen on Synlait, a2, Fonterra from China rules

Little impact seen on Synlait, a2, Fonterra fund from tighter Chinese infant formula rules

By Suze Metherell

April 28 (BusinessDesk) – New Zealand’s listed dairy companies, Synlait Milk, a2 Milk Co and Fonterra Shareholders’ Fund, probably won’t face much disruption from tighter rules on infant formula in China, the nation’s biggest market for milk products, investors say.

A2, whose Platinum infant formula is manufactured at Synlait’s Canterbury plant, led the three dairy companies lower on the NZX today, after saying it is monitoring and responding to China’s new requirements, which include demonstrating a close association between brand owner and manufacturer, and a new form of registration from May 1.

China telegraphed its new requirements to the government last week by releasing an audit of a sample of New Zealand manufacturers conducted in March. That left officials and companies scrambling to interpret the changes in time for the registration deadline this week. The government says manufacturers who control 90 percent of the nation’s infant formula exports are working through the registration process but the remaining 10 percent face a tougher job to comply.

A2 Milk, which sells infant formula in China, Australia and New Zealand, fell 9.5 percent to 76 cents, the lowest in more than four months. Fonterra units, which give investors access to Fonterra’s dividend stream, slipped 0.7 percent to $6.15. Synlait, which counts China’s Bright Dairy Food as a cornerstone shareholder, fell 0.8 percent to $3.61.

“The issues for those companies is more can they grow their businesses and at what prices for their product as opposed to this regulation,” said Matthew Goodson, who helps manages $650 million of equities and property holdings for Salt Funds Management. “There is a very small chance it could be a major negative but I don’t think that’s really seen by the market as likely.”

Last year, infant formula made up about 4 percent, or $200 million, to the nation’s $5 billion dairy exports to China, whose government is trying to bolster food safety and restore confidence in baby foods made of milk powder after melamine-tainted formula caused the deaths of six children and sickened 300,000 others in 2008.

The scandal sparked a surge in demand for imported product in the world’s most-populous country, where demand for dairy products is keeping pace with an emerging middle class. China already tightened rules for its own manufacturers last year.

New Zealand Primary Industries Minister Nathan Guy and Food Safety Minister Nikki Kaye said last week that tighter rules for imported infant formula would have “a very significant impact” on brand owners unable to demonstrate a close association with a manufacturer.

“The people it will have an effect on are those that don’t really have any food production business, they just buy a whole load of infant milk formula that’s been processed by somebody and then they whack a pretty label on it and sell it,” Goodson said. “My understanding of these regulations is they’re aimed at getting proper links in place between the manufacturer of a product and those selling it so it’s a proper chain there to ensure quality control.”

New Zealand’s biggest dairy producer and exporter Fonterra Cooperative Group spooked dairy markets last year with a precautionary recall of whey protein concentrate thought to be contaminated. Later tests proved the bacteria found were harmless.

In January, Synlait said it expected sales of baby formula to fall below its 10,000 metric tonne target this year because stricter Chinese regulations had caused “considerable disruption” in that market. The dairy processor said it will spend $21 million expanding its laboratory and administrative facilities, in part to increase its testing capabilities.


© Scoop Media

Business Headlines | Sci-Tech Headlines


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Health: New Zealand's First ‘No Sugary Drinks’ Logo Unveiled

New Zealand’s first “no sugary drinks logo” has been unveiled at an event in Wellington... It will empower communities around New Zealand to lift their health and wellbeing and send a clear message about the damage caused by too much sugar in our diets. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news