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Bellamy's delay sparks rush to reassure

AAP logoAAP 20/12/2016 Petrina Berry

Shares in Bellamy's will not resume trading until next year after the troubled infant formula maker struggles to determine financial impacts linked to a fall in its Chinese sales.

Bellamy's major supplier Bega Cheese and rival baby formula maker A2Milk issued statements reassuring shareholders the Chinese market was still strong after Bellamy's sought an extension of its voluntary trading suspension of its shares on Wednesday.

Bellamy's released a disappointing trading update on December 2 that said new Chinese import regulations had hurt its sales in China which, if conditions continued, would result in its full-year revenue being less than the $244.6 million made in 2015/16.

As a result, its shares almost halved in value in a single day, and within two days, its market value had plunged by more than $500 million.

The Tasmanian-based organic baby food company was due to announce its second trading update for the month on Wednesday but for the second time sought an extension from the Australian Securities Exchange.

Bellamy's said it was still trying to determine the financial impact negotiations with key suppliers and manufacturers will have on the business in the wake off an infant formula oversupply in China.

The company, which went into a trading halt on December 12 and then voluntary suspension two days later, will now remain suspended until January 13, unless it makes a statement earlier.

Bellamy's has said new Chinese regulations, including restrictions on the number of baby products companies are allowed to sell in China, led to a flood of baby formula on the market at discount prices which ultimately hurt its sales.

Milk supplier A2 Milk sought to allay concerns about the strength of the infant formula market, issuing an update to say its formula business is experiencing significant growth.

Bega Cheese, a key supplier to Bellamy's, did the same, saying it is discussing supply and volume forecasts with Bellamy's but that the infant formula market in China remains strong.

"There continues to be strong consumer demand for infant formula in China and in other Asian markets," the company's statement said.

Bega chairman Barry Irvin said there has been significant price discounting and signs of short term oversupply of infant formula since China's regulatory changes.

"Whilst infant formula is important to us, Bega is a large multi-product dairy company with a strong ongoing profitable business in multiple categories," Mr Irvin said.

Both companies market updates helped boost their share prices.

A2's shares rose 12 cents, or 6.2 per cent, to $2.07 on Wednesday while Bega gained 15 cents, or nearly 4 per cent, to $4.03.

Bellamy's shares last traded at $6.68, significantly lower than $12.13, its share price before the December 2 trading update.

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