The turnaround plan of troubled infant formula supplier Bellamy’s has hit an unexpected hurdle with Chinese authorities suspending a key licence of its recently-acquired Camperdown Powder canning facility.
Bellamy’s shares are in a trading halt as the company tries to find out why Chinese authorities suspended Camperdown’s licence from the Certification and Accreditation Administration of the People’s Republic of China (CNCA).
“The trading halt is requested to allow the company to determine the reasons and impact of the Camperdown’s suspension of its CNCA licence by the China authorities overnight,” Bellamy’s said in a statement to the Australian Securities Exchange on Friday.
Foreign suppliers of Chinese-labelled infant formula products in China, such as Bellamy’s, must register the canning facility used to blend and pack the products with the CNCA.
From January 1, 2018, the canning facility will also be subject to China Food and Drug Administration (CFDA) registration.
Bellamy’s only this week completed the $28.5 million acquisition of a 90 per cent indirect interest in the Victoria-based Camperdown Powder blending and canning facility.
The company also completed a $60.4 million capital raising to fund the acquisition and other parts of its turnaround strategy.
In its capital raising prospectus, Bellamy’s said the Camperdown Powder acquisition provided a path to obtaining the required CFDA registration of its Chinese-labelled products.
Bellamy’s sells its Chinese-labelled products, which represent about 16 per cent of the company’s infant formula sales, to a distributor in China for sale in retail stores there.
It had planned to prepare a new formulation of Chinese-labelled products for canning at Camperdown and registration with the CFDA.
In its prospectus, Bellamy’s said the CNCA had to be notified of the change in control of Camperdown Powder and, if the notification was not accepted, Camperdown’s registration could be terminated.
Morgan’s analyst Belinda Moore said the licence suspension may be an administrative issue linked to the change of control, but further information was needed.
“We’re a bit in the dark, and I suspect we’ll hear something more Monday morning once they (Bellamy’s) have had time to speak to the relevant authorities,” she said.
Bellamy’s sought to acquire Camperdown Powders after Bega Cheese, one of its manufacturers, sold its CNCA-licensed infant formula finishing plant at Derrimut to Mead Johnson Nutrition in February 2017, meaning Bellamy’s Chinese-labelled products could no longer be registered through the plant.
Bellamy’s shares have more than halved in value since November amid flagging sales and guidance downgrades.
Its shares last traded at $6.74.