Shares in infant formula maker Bellamy’s surged to their highest level this year after the company at last had some good news to relay to the market about the Chinese market for its dairy products.
The company confirmed that its recently acquired Melbourne factory had got its China export licence back.
At the time of the announcement, Bellamy’s stock was trading at about $8.04, but promptly soared after to hit a high of $8.75. The enthusiasm didn’t last though and the shares retraced to around $8.20, still up around 4% on the day.
In a statement to the ASX on Wednesday morning, the company said the licence suspension had been lifted, adding it had "diligently responded to all requests and queries on behalf of the CNCA (Certification Accreditation Administration of the People’s Republic of China) and worked, with the assistance of Australian officials, through the process as stipulated by the Chinese authorities".
Bellamy’s CEO Andrew Cohen told the ASX the company was "pleased that Camperdown’s suspended registration has today been lifted. Bellamy’s appreciates the important role the CNCA has in protecting Chinese consumers and the support of the Australia trade officials in assisting us throughout this process."
China’s suspension of the licence of the Camperdown Powder canning facility, in the bayside Melbourne suburb of Braeside, in early July came as a major shock to the company and its investors as the company was in the midst of a capital raising.
Bellamy’s purchase of the canning operation had been unveiled in June as the key initiative underpinning its turnaround plan and announced along with plans for a $60.4 million capital raising.
The company said the acquisition of a 90% interest in the Camperdown business, for a total of $28.5 million, “provides an opportunity to reduce key regulatory risks”. It also said its board believed the acquisition "strengthens Bellamy’s competitive position, by addressing trade and consumer concerns regarding CFDA registration and a contract manufacturing model".
The shock suspension of Camperdown’s China export licence put Bellamy’s into a trading halt that lasted for almost two weeks. It forced Bellamy’s to offer retail shareholders the opportunity to hand back new shares they had acquired in the company via the capital raising, and get their money refunded.
When Bellamy’s emerged from its two-week trading halt on July 20, the stock rose and fell falling to $5.88 before recovering to close that day at $6.40. That meant people who took up extra shares in the capital raising, priced at $4.75 a share, would have made a quick windfall profit. It also meant that the fear and loathing about the Chinese suspension was misplaced.
