EMBATTLED baby formula maker Bellamy’s Australia says Chinese authorities moved to block imports from its newlyacquired Melbourne canning plant after receiving complaints about quality from a mystery third party.
The one-time market darling may now be forced to let retail investors back out of a $60.4 million capital raising program that it carried out to fund the purchase of the plant, which is to serve as a key plank in its China strategy.
After its shares were put in a trading halt late last week, Bellamy’s today received approval for a trading suspension, effectively buying itself further time to assess the impact of China’s move.
It is now working to get to the bottom of quality concerns raised with Chinese authorities over the Camperdown Powder cannery at Braeside, in Melbourne’s southeast.
Chinese regulators shocked the company by suspending the import licence for products from the site just weeks after Bellamy’s paid $28.5 million for a 90 per cent stake in the canning facility.
The fact it was accredited by Chinese regulators was a key driver of the deal.
The company today said it was working with Australian trade officials and representatives from China’s powerful Certification Accreditation Administration of the People’s Republic of China, or CNCA, to get to the bottom of the complaint.
“Bellamy’s understands that the inquiries raised by CNCA were as a result of allegations received by CNCA from a third-party complainant relating to historical filing and records and to certain previous quality issues relating to Camperdown’s processing facility,” it said in a statement.
“Bellamy’s can confirm that none of the inquiries raised by the CNCA relate to microbiological or contamination issues or Camperdown’s recent change of ownership.”
The company does not know who lodged the complaint. It stressed the licence suspension did not have an impact on Bellamy’s Australian or Chinese label products as they were not made at the Braeside plant.
Bellamy’s, once the poster child of Australian businesses cashing in on China’s boom, has been rocked over the past year by steep profit downgrades linked to a shifting Chinese regulatory environment, class actions from disgruntled investors and an ugly boardroom shake-out.
It has given investors a wild ride, with its share price soaring from around $4.50 to more than $15 in the six months ending 2015 only to crash below $4 — including a 40 per cent one-day plunge — by the start of this year. Bellamy’s has until July 15 to respond to the Chinese regulator. Its shares last traded at $6.74.
The Courier-Mail understands it is in contact with the Australian Securities and Investments Commission as it works out whether the licence suspension represents a material adverse change.
If so, the company may need to reissue its prospectus, giving investors the option of pulling out of the capital raising program.
By John Dagge