* Bellamy warns supply glut hitting sales due to new China
* Shares in Bellamy's plunge 40 pct, shares in rivals also
* Shares in NZ firm a2 Milk tumble 12 pct
(Recasts and adds CEO comment)
By Byron Kaye
SYDNEY, Dec 2 Infant formula maker Bellamy's
Australia Ltd warned new import rules in China had
created a supply glut that was hurting sales, sending its shares
plunging more than 40 percent and sparking a broader sector
China said in April that companies exporting infant milk
formula imports through international websites would need to be
officially registered by 2018 - a change that was not expected
to affect major manufacturers.
But on Friday, Bellamy's said it now expects sales to fall
about 2 percent in the current financial year to end-June as
formula exporters which don't expect to get registration dump
stock at heavy discounts.
The new level of uncertainty hit shares in the sector hard
as firms that export milk products from Australia and New
Zealand tend to enjoy high valuations on hopes of hot demand
from China, making them susceptible to sell-offs on negative
"Until we've got clarity on that position, it would be
difficult to put a line in the sand," Bellamy's Chief Executive
Officer Laura McBain told analysts on a conference call.
"We can continue to build in China (but) it's been disrupted
over the last six months."
Bellamy's shares fell by as much as 44 percent on Friday,
their biggest drop since listing in 2014 and hitting their
lowest intraday level in a year.
But even after that plunge, the stock was trading at a
trailing price-earnings ratio of 30, about double the benchmark
S&P/ASX 200 index. The company is backed by high profile
investors including Crown Resorts Ltd billionaire
majority owner James Packer, who has a 5 percent holding.
New Zealand rival a2 Milk Company Ltd saw its
shares fall 12 percent. A spokesman for the company said it
believed it was well placed to manage the regulatory change. A2
trades at 60 times earnings, four times the benchmark.
Sydney-listed dairy producer Bega Cheese Ltd, which
runs a venture exporting formula to China with vitamin maker
Blackmores Ltd, fell 5 percent. Blackmores dropped 3
Last month, Bega warned the venture's early sales were below
expectations due to regulatory changes and soft demand, sending
shares of both companies sharply lower. Bega shares trade at 26
times earnings while Blackmore trades at 20 times.
($1 = 1.3477 Australian dollars)
(Additional reporting by Charlotte Greenfield and Swati Pandey
in Wellington and Tom Westbrook in Sydney; Editing by Edwina