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BELLAMY'S (ASX: BAL) shares have suffered a 40 per cent drop in value today after the company hit a regulatory hurdle exporting its baby formula into China.
Although the company's unaudited revenue for the period between 1 July 2016 to 20 November 2016 is up 24 per cent compared to the same period the previous year, at $93 million, its momentum has been tempered by "temporary volume dislocation" in China.
This is due to "regulatory changeover" and the "flow-on effects of restructuring the route-to-market in China", which impacted from the first quarter of FY17.
The final document requirements for the China Food and Drug Administration product registration have now been released and Bellamy's is working to satisfy the requirements.
"Bellamy's is well progressed with the preparation of its documentation. With the period for registration extended to 31 December 2017, sales will continue under the current regime until the end of next year."
Revenue for the first half of FY17 is expected to be around $120 million, which is below expectations, and under the current regime, the second half is expected to be in a similar range.
Bellamy's maintains that the potential for its products in China is "vast".
"Bellamy's is currently stocked in less than 5 per cent of the potential distribution points in China. The company's team is extending its online presence as well as broadening its offline, bricks and mortar presence," the company says in a statement to the ASX today.
Getting Australian baby formula into China, and then selling it, is proving harder than many Australian companies have anticipated.
Both Blackmores (ASX: BKL) and Murray Goulburn (ASX:MGC) paid for their over confidence when their baby formulas failed to break into the competitive Chinese market.
Now Bellamy's is suffering a similar fate, although at least this company's baby formula is in demand, unlike the competing offerings from Blackmores and Murray Goulburn.
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