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


UPDATE: A2 Milk shares rise from 15-mth low on China licence

UPDATE: A2 Milk shares bounce from 15-month low on Chinese licence; Synlait still waiting

(Updates with share movement, broker comment)

By Suze Metherell

July 22 (BusinessDesk) - Shares in A2 Milk Co jumped 9.8 percent from a 15-month low on news the milk marketer has won Chinese regulatory approval to export its a2 Platinum infant formula. Milk processor Synlait Milk is still waiting for registration.

The Auckland-based company has been included in the list of approved imported brands issued by the China General Administration of Quality Inspection and Quarantine, it said in a statement. The approval comes three months after China tightened its rules, banning unregistered imports of infant formula, and required brands and importers to show close links with the product's manufacturer in a bid to bolster food safety in the country's rapidly expanding baby powder market.

The shares rose 6 cents to 67 cents in early trading on the NZX, having dropped to its lowest since April last year at the close of trading yesterday. The stock climbed some 52 percent in 2013 as investors chased growth, but has come under pressure in recent months as investors question the high valuations of stocks relative to earnings. Synlait Milk shares rose 0.3 percent to $3.31.

"It's very good news - it really does confirm they're able to export into that market, which is probably the largest market for baby formula market in the world," said Grant Williamson, director at Hamilton Hindin Greene. "The companies that are in the higher risk category have been coming under a bit of pressure, particularly with the local market easing off somewhat. Investors have been looking to de-risk their portfolios and take profits on some of the higher growth companies, and that's hit A2.

"They're considered a high growth stock, and with that comes risk, their strategy in some markets may not pay off," Williamson said. "It's what you consider a greater risk than a more mature company."

A2 Milk and Christchurch-based Synlait missed out in the first round of licensing as they waited for Synlait's new dry blending and packaging factory to be built, and inspected by local food safety authorities. Earlier this month, the manufacturer's interim contract provider, Auckland-based New Zealand New Milk, gained Chinese registration, clearing the way for A2 Milk. At the time it missed the initial round of registration A2 Milk said there was enough infant formula held by its distribution partner "to ensure consumer demand in China continues to be satisfied".

"Registration will provide an important confidence boost for our distribution partner China State Farm and its sub-distributors in our target markets in China," A2 Milk managing director Geoffrey Babidge said in a statement. "The market development programme paused while the registration process was progressing and can now be reactivated together."

Synlait is expected to be licensed once its risk management plan is approved by the Ministry for Primary Industries, A2 Milk said.

In January, Synlait flagged sales of baby formula would fall below its 10,000 metric tonne target this year as the stricter Chinese regulations caused “considerable disruption” in that market, and forecast annual profit of between $30 million to $35 million, for the year ending July 31. Since then the company has issued two profit warnings, first in March to an estimate of between $25 million and $30 million, and in May it further cut its to between $17.5 million and $22.5 million. Its prospectus forecast profit of $19.8 million.

The company said the high kiwi dollar and volatility in global dairy prices, as well as a reduced advantage from its product mix, had weighed on revenue and forecast earnings.

The first New Zealand exporters and manufacturers to gain registration in April were Sutton Group and Gardians, Danone-subsidiary Nutricia, Fonterra Cooperative Group, GMP Pharmaceuticals and Dairy Goat Cooperative (NZ), representing about 90 percent of New Zealand’s infant formula exports to China by volume. Since then Westland Milk has also been approved.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Oceans: NOAA Declares Third Ever Global Coral Bleaching Event

As record ocean temperatures cause widespread coral bleaching across Hawaii, NOAA scientists confirm the same stressful conditions are expanding to the Caribbean and may last into the new year, prompting the declaration of the third global coral bleaching event ever on record. More>>

Scoop Business: A Decade Of Government Pre-Seed Investment

More publicly-funded science is being commercialised after a decade of government ‘pre-see’d investment, according to an independent review. More>>


Solid Energy: Plan To Shut Unprofitable Huntly East Mine

Solid Energy, the state-owned coal miner in voluntary administration, plans to shut down its unprofitable Huntly East mine and lay off 65 staff after deciding the site stands "no chance whatsoever" of finding a buyer. More>>


E Tū: Merger Creates NZ's Biggest Private Sector Union

E tū has been created by the merger of the Engineering, Printing and Manufacturing Union and Service and Food Workers’ Union. It represents more than 50,000 working New Zealanders in industries as diverse as aviation, construction, journalism, food manufacturing, mining and cleaning. More>>


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news