Synlait misses China regulation deadline as it waits on factory build

John Penno, Synlait Milk's Managing Director
Synlait Milk 12-month price history (NZX.com)

Synlait Milk [NZX: SML], the dairy processor which counts China's Bright Dairy as a cornerstone shareholder, missed out in the first round of approvals under China's new regulation of imported infant formula as it waits for the completion of its new processing and packaging plant.

The Ministry for Primary Industry expects Synlait will receive approval once the new dry blending and consumer packaging factory is built which is scheduled for completion next month, the Rakaia-based company said in a statement. Companies without the new registration won't be able to sell infant formula produced from today in China.

A2 Milk Company, whose Platinum infant formula is manufactured at Synlait's Canterbury plant, also missed out on registration, which includes demonstrating a close association between brand owner and manufacturer.

Companies can be registered after today although owners of infant formula brands who can't demonstrate a close relationship with a manufacturer may struggle to meet Chinese requirements, Food Safety Minister Nikki Kaye said today.

China telegraphed its new requirements to the government last week by releasing an audit of a sample of New Zealand manufacturers conducted in March, leaving officials and companies scrambling to interpret the changes in time for today's registration deadline.

Synlait said it had anticipated missing out on registration "for some time" and was well prepared with enough stock for itself and its customers to cover the period while it waits on registration. On Monday the company said it was "well positioned for China's regulation changes" without disclosing an expected delay.

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 is spending $21 million expanding its laboratory and administrative facilities, in part to increase its testing capabilities.

Exporters and manufacturers to gain registration today include Sutton Group and Gardians, Danone-subsidiary Nutricia, Fonterra Cooperative Group, GMP Pharmaceuticals and Dairy Goat Cooperative (NZ). They represent about 90 percent of New Zealand's infant formula exports to China by volume.

Shares in the NZX-listed Synlait rose 0.5 percent to $3.70. A2 Milk fell 1.2 percent to 80 cents.

(BusinessDesk)

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