A2 Milk has given notice of cancellation of the exclusive manufacturing arrangement with Synlait covering infant formula base stages 1 to 3.
Synlait has gone into a trading halt on the NZX stock exchange as it considers the information received and its impact on Synlait.
Synlait is due to release its FY2023 financial results on Monday, September 25.
Its share price had already fallen from $3.50 during 2022 to $1.28 when trading was halted.
A2 Milk said Synlait’s delivery and performance during 2023 has fallen below the level required for the exclusive manufacturing and supply rights.
If Synlait appeals the cancellation notice the matter will be resolved through good faith negotiations, a2 Milk said.
The manufacturing and supply agreement between Synlait and a2 will remain in place, notwithstanding the removal of exclusivity.
Some 20% of Synlait’s shares are owned by a2 Milk.
Mention was made of the ability of Mataura Valley Milk in Southland, 75%-owned by a2 Milk, to produce a2 infant formula base, but that is still some time away.