Shares in baby formula milk firm hit by new Chinese import rules

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Shares in the baby formula milk firm Bellamy have plunged after a warning that new import regulations in China will cut into revenues.

The Australian organic formula maker has seen its shares slump more than 40%.

The company said that sales would temporarily be hit as the industry adjusted to new rules required by China's Food and Drug Administration.

China is a key market for manufacturers in Australia and New Zealand.

Long-term breastfeeding is rare among Chinese mothers.

Those who can afford it often choose to buy imported formula over Chinese brands, because of fears over dangerous levels of hormones and chemicals sometimes found in local baby formula.

That has led to a surge in demand for foreign brands in recent years.

Discounted prices

All importers in the industry are now required to register by December 2017.

"As with the broader infant formula market, Bellamy's has experienced restructuring of the sales channels into China since the regulatory announcements," the company said in a statement to the Australian Securities Exchange.

"Brands that are unlikely to gain registration are liquidating inventory at discounted prices, which impacts both imported brands such as Bellamy's and the market overall," it added.

The company said it expects revenue to fall to A$240m ($178m, £1.41m) in 2017. Analysts had been expecting the figure to come in well above A$300m.

Other Australasian infant formula exporters with China as their key market also saw their shares lower.

A2 Milk from New Zealand was down by more than 10% while both Blackmores and Bega Cheese also saw their shares lower.

They had been rising as investors expected an ongoing boom in Chinese demand.

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