Bellamy's calls a halt to all trade in its stock

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Bellamy’s, the maker of the organic infant formula so loved in China, has gone into voluntary suspension on the ASX.

The company went into a trading halt on Monday, pending the release of an updated announcement on the impact of trading conditions on financial results.

Today Bellamy’s told the ASX a voluntary suspension is needed so it can continue a review to finalise an announcement.

The week-long suspension is set to last until to December 21.

Two weeks ago, the Tasmania-based company warned of weaker sales in China due to regulatory changes, which wiped nearly half the value off its share price in a single day’s trade on December 2.

The decline since its 2016 high of $15.38 on August 24 is now 56.5%

They last traded at $6.68, well down on the 12-month high of $16.50 on December 30, 2015.

The Bellamy’s share price since its high this year.

The company says revenue is up 24% to $93 million since the start of the financial year to November 20.

On the weekend, Fairfax Media published details of confidential sales data showing Bellamy’s domestic market share also dived from 25% of infant formula sales in April to 12% by October.

The company described its problems in China as a “temporary volume dislocation” in China due to regulatory changeover. This will continue until product registrations are completed.

“Bellamy’s has experienced restructuring of the sales channels into China since the regulatory announcements,” the company said last Monday.

“Management has worked closely with the various e-commerce networks to build stronger, more efficient routes-to-market that are expected to support increased demand following the regulatory change over.”

Earlier this month, CEO Laura McBrain said sales growth in China “fell short of our expectations” and the company blamed other brands for “liquidating inventory at discounted prices” ahead of the tighter controls because they won’t gain approval.

Revenue has stagnated this financial year and is expected to be lower at $240 million, down from $244.6 million last year.

First half revenue is expected to be about $120 million but the second six months could be flat if current trends continue, the company says.

This would put full year revenue at $240 million, well below analyst expectations of about $330 million.

Bellamy’s was among the first to take advantage of a seemingly insatiable market that turned Chinese international students studying in Australia into mini entrepreneurs selling baby formula to people in China.

A year ago, Australian shoppers were complaining that supermarket shelves were being emptied of infant formula to cater for Chinese demand.

The market was considered a new gold rush for Australian companies in 2016, but in the last quarter, those deals have soured on several fronts, hitting key plays such as Australia’s largest dairy processor, Murray Goulburn, Blackmores, which has a joint venture with Bega Cheese, and a2 Milk.

Earlier this month, Murray Goulburn announced it was terminating a strategic alliance with US-based Mead Johnson Nutrition to create baby formula for the Asian market. The deal, established in April, was dissolved in the wake of China’s new regulations.

In October, Bega, which 12 months earlier through its subsidiary Tatura, signed a partnership deal with Blackmores to target China with nutritional foods, including infant formula, pushing the vitamin maker’s share price above $200 , said the China push wasn’t getting the results they expected.

Meanwhile, a2 Milk, another earlier adopter in China, saw its shares jump last month off the back of reporting a double in infant formula revenue. Sales of a2 Platinum brand formula in China accounts for around 61% of group revenue.

a2 shares have continued to improve and today sit at $2.175, but still below the 12-month high of $A2.36.

Blackmores has seen is share price nearly halve over 2016, and in early trade on Wednesday it sits at $108.74.

Bega’s share price has also continued to slide. After losing 13% to $5.64 following its October 25 announcement, today its shares sit at $4.49.

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