Synlait gains manufacturer registration for a2 Milk's China label infant formula

Thursday 28th September 2017

Synlait Milk, whose shares reached a record high yesterday, says it has received manufacturer registration for a2 Milk's Chinese label infant formula, meaning the products will continue to have market access in 2018 when China tightens its rules.

From Jan. 1, 2018, all manufacturers of infant formula are required to register brands and recipes with the China Food and Drug Administration (CFDA) to sell into the Chinese market through traditional channels. The registration is part of broader efforts by China to lift food safety standards after a number of scares including the death of infants from ingesting infant formula laced with melamine in 2008. Fonterra Cooperative Group has also gained registration with its partner Beingmate Baby & Child Food for 15 recipes, it said this week.

Synlait's shares have soared 88 percent this year and touched a record high $5.91 yesterday before closing at $5.86. The Dunsandel-based milk processor this month posted an 11 percent gain in full-year profit and flagged further growth this year. Its share price is second only to partner a2's 207 percent surge on the NZX 50 Index this year.

“We view this registration as another milestone in our long-term partnership with a2 Milk," said Synlait chief executive John Penno said in a statement. "Having successfully navigated the process, in conjunction with a2 Milk, we are now in a stronger position for future applications of other Synlait customers," he said.

Fonterra said this week that the impact of the Chinese registration system would be to reduce the number of brands jostling in the Chinese market to hundreds from thousands currently, creating opportunities for those that remain.

"We look forward to the continued expansion of our business in China following this announcement," said a2 managing director Geoffrey Babidge.

Synlait and a2 began their partnership in 2010, with Synlait manufacturing the infant formula made from milk containing only the A2 beta-casein protein type rather than the more prevalent A1 protein type.

The a2 Milk Company worked closely with Synlait and their Canterbury milk suppliers to introduce and manage A1 protein-free herds, while simultaneously building a manufacturing process capable of exclusively streaming that milk into finished infant formula.

A2 owns 8.2 percent of Synlait, which in turn owns 25 percent of Sichuan-based New Hope Nutritionals, another applicant for CFDA registration.

(BusinessDesk)

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