Shares in dairy company Bellamy’s fell sharply yesterday after being in a trading halt for nearly two weeks.
In the first minutes of trade the shares lost nearly 13% as they plunged as low as $5.88, compared to the last close $6.74 on July 6. They ended up down 5% at $6.40.
Investors were catching up to what has been a very newsy two weeks for the comany.
Earlier this month Bellamy’s completed a $60.4 million capital raising to fund the $28.5 million acquisition of a 90% indirect interest (announced June 13) in the Camperdown Powder canning facility in Melbourne which is a key part of the company’s turnaround strategy.
But on July 7 Camperdown’s Powder’s food licence was suspended by the Certification Accreditation Administration of the People’s Republic of China (CNCA).
Bellamy’s asked for its shares to be suspended while it sorted out the situation and on Monday of this week issued a supplementary prospectus to the capital raising offering refunds to investors.
The comany said it had entered into arrangements with the underwriters – including major shareholder Janchor, which was founded by Bellamy’s chairman John Ho – to cover any withdrawals by investors.
Bellamy’s also said it had made full responses to enquiries raised by the CNCA about allegations received by the regulator from a third-party complainant relating to record-keeping and previous quality issues at Camperdown.
In its update on Monday Nellamy’s said its sales and profitability had improved.
The company said it expects revenue of about $121 million for the second half of the financial year and full-year revenue of about $239 million while earnings before interest and tax in the second half is expected to be at the upper end of guidance disclosed in the prospectus.
Bellamy’s said it has been cashflow positive since March 2017, reflecting increased sales and an improving (lower) inventory position.
Bellamy’s is not alone in having problems in China – many international dairy producers are scrambling to meet an end-of-year deadline to register their products with China’s Food and Drug Administration (the body that suspended the Camperdown plant).
Companies will only be allowed to register a maximum of three brands in China, to prevent a proliferation of foreign brands crowding out domestic ones weakened by the 2008 scandal in which Chinese milk was deliberately adulterated with the coal-byproduct melamine (to make the milk look like it had a higher protein content), which left at least 300,000 infants ill and six dead.
That scandal promoted Chinese consumers to look to milk (and baby formula especially) from countries considered clean and green, such as Australia and NZ.
