Infant formula manufacturer Bellamy’s remains in a voluntary trading halt, as the company seeks to unravel why Chinese authorities suspended the licence of its newly acquired subsidiary, Camperdown Powder.
Camperdown Powder was set up by Camperdown Dairy International (CDI), which blends and cans product at a Braeside factory.
In a statement to the Australian Securities Exchange (ASX), Bellamy’s said Certification Accreditation Administration of the People’s Republic of China (CNCA) had made inquiries and requested certain information of Camperdown and the Department of Agriculture and Water Resources.
“Bellamy’s understands that the inquiries raised by the CNCA were as a result of allegations, received by the CNCA from a third-party complainant relating to historical filing and records and to certain quality issues relating to Camperdown’s processing facility,” it said.
Bellamy’s said none of the CNCA’s inquiries related to micro-biological or contamination issues or Camperdown’s recent change of ownership.
A spokesman for Bellamy’s said the complaint to the CNCA was made after due diligence was completed and after the deal was concluded.
Bellamy’s paid $28.5 million for a 90 per cent stake in Camperdown Powder.
It bought the stake in Camperdown Powder to shore up access to the China market.
Camperdown Dairy International (CDI) was established in 2014, by EAT Group and their investment partner, as an integrated dairy processor focusing on premium infant formula production.
Recently, CDI said it was one of only eight companies in Australia to successfully gain a Chinese infant formula manufacturing export
It claimed to have a capacity of 15 million tins a year.
In its statement to the ASX, Bellamy’s said it did not intend processing products at the Camperdown Powder Braeside factory until 2018.
“Until then, the company will continue to rely on third-party manufacturers to manufacture its ‘Chinese label’ product, into China,” the statement said.
It was continuing work to upgrade the factory, which it hoped to reopen in late August.
“We are working closely with Australian trade officials to respond to CNCA’s inquiries,” Bellamy’s chief executive Andrew Cohen said.
“We appreciate the important role that CNCA has in protecting Chinese consumers and we will diligently and comprehensively address all concerns and issues, raised by CNCA.”
Hobart-based Shadforth Financial Group planner Sam Baker said shareholders were right to ask questions about the purchase.
“Shareholders would be questioning the acquisition and the due diligence done on the facility,” Mr Baker said.
“It may well be that a customer of that factory has raised an issue, internally, within the Chinese regulatory system, and that has triggered suspension of the registration.”
The company had notified the ASX the voluntary suspension was partly to look at the retail component of the recent $60 million capital raising and respond to what has occurred.
The share sale was carried out to “unwind some of the Fonterra contracts”, buy the factory and provide working capital.
“It appears the company is trying to work through the specifics of that complaint and will look to try and resolve it,” he said.
He said Bellamy’s would be mindful of the class action being taken by legal firm Maurice Blackburn, against the previous board.
Maurice Blackburn filed the class action against Bellamy’s in the Federal Court for alleged breaches of its continuous disclosure obligations and for allegedly engaging in misleading or deceptive conduct regarding the growth prospects of the company and its infant formula trade.
“In the end, the board is ultimately responsible for a decision, such as this – they were the ones who are going to be held accountable,” Mr Baker said.
“The board have signed off on this capital raising and the buck stops with them.”