Friday, December 1, 2023

Synlait infant formula cleared for China once more

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Re-registration allows it to keep producing product at Dunsandel factory until 2027.
A2’s share price surged 7% on the day the US legislation over tarrifs was announced.
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Synlait Milk has been cleared by Chinese officials for the continued manufacture of A2 Milk infant formula destined for the immense market. 

The stricken dairy processor welcomed the re-registration by China’s State Administration for Market Regulation, which lets it keep producing the A2 Milk product at its Dunsandel factory until September 2027. 

“Synlait and the A2 Milk Company have a longstanding and complementary partnership, and we look forward to continuing to support their China growth ambitions,” Synlait chief executive Grant Watson said. 

“The re-registration is a very important milestone and we have worked hard together to ensure its success.”

The approval comes as Synlait looks for a buyer of its Dairyworks and Talbot Forest Cheese businesses, which it says are no longer core to its growth strategy. 

The milk processor has been under pressure to rein in debt in the face of mounting losses, with its share price falling as low as $1.38. It’s since clawed back some of those losses, closing at $1.60 before the long weekend. 

A2 Milk was surprised by Synlait’s grim guidance in April, sticking to its own annual forecasts despite the downgrade by its associated manufacturer. 

A2 Milk said it expects Synlait to start producing the registered product this month, June 2023, with the product getting to market in the first half of the June 2024 year. 

Managing director David Bortolussi thanked the New Zealand and Chinese regulators, its own partners in China – CNADC – and China State Farm Agribusiness, and Synlait and its major shareholder Bright Dairy for their support through the process. 

“We look forward to making our upgraded new China label IMF [infant milk formula] product available to parents and their infants and young children in China, building on the strong brand loyalty we have developed with Chinese families over the past decade as the pioneer and leader of the A2 protein category,” Bortolussi said in a separate statement.

“The approval provides A2MC [A2 Milk Co] with continued access to China’s substantial registered domestic infant milk formula market which remains the key focus of our refreshed growth strategy.”

Separately, Synlait said it’s appointed its director of strategy, innovation and corporate affairs, Paul Mallard, to the new role of chief operating officer. In that position, Mallard will oversee the supply chain, planning, innovation, integrated business planning, strategy and corporate affairs teams. 

The supply chain and planning functions previously sat under the director of operations, Nigel Macdonald, who left the company at the end of May. That role has been changed to a director of manufacturing, which is currently held by Glenn Laing in an acting capacity. 

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