Bellamy's Australia Ltd (ASX: BAL) shares will remain suspended until 13 January 2017 as it negotiates with suppliers.
Talk about disappointing!
This is the second suspension of trading in its shares, which followed a recent trading halt!
In fact, if Bellamy's shares resume trading on the 13 January 2017 its shares would have been in a frozen state for a MONTH.
What happened?
Ok, rant over.
Here's what Bellamy's announced to the ASX this morning:
"In accordance with ASX Listing Rule 17.2, Bellamy's requests that its securities remain suspended from trading pending negotiations with key supplier/manufacturers in order to determine the impact of those negotiations on the Company's expected financial results."
For the record, that's a development from the first request (below) for a suspension in which it said nothing about "manufacturers/suppliers".
"The voluntary suspension is necessary for the Company to manage its continuous disclosure obligations whilst it continues with a review in order to finalise an updated announcement of the impact of trading conditions on the Company's expected financial results" — Bellamy's ASX announcement, 14 December 2016.
And that followed a "Business Update" on December 2 in which it said its 2017 revenue would fall slightly and profit margins would narrow.
In summary, we have gone from issues with financial forecasts to negotiations with suppliers in a week.
Whatever that means, one thing is certain: Shareholders are probably lucky its shares cannot be traded.
Why does this matter?
In April, Bellamy's said it was well placed to deal with impending regulatory changes in China, its key target market.
Under the new rules, China is limiting the number of products sold into the market via various channels. The regulatory changes, which are due to come into effect in 2018 for some producers, will see manufacturer's limited to three brands and three products per brand.
Bellamy's is not a manufacturer. It has deals with Tatura, a Bega Cheese Ltd (ASX: BGA) business, and New Zealand-based Fonterra — or FONTERRA UNIT NZX (ASX: FSF) as found on Google Finance.
Now, you can see why the regulatory changes and flagged "negotiations with key supplier/manufacturers" are deeply concerning.
Will Bellamy's be able to sell its products into China at all?
Will its suppliers want bigger slices of the pie for the near exclusive manufacturing deals?
Can its manufacturers get the necessary clearance?
As Sue Neales of The Australian wrote yesterday, the company's milk power, which makes up about 55% of the infant formula, comes from Europe.
Foolish Takeaway
In my opinion, it is very disappointing and concerning that Bellamy's shares will remain frozen for up to one month in total.
Now, I'm left scratching my head and asking why Bellamy's top management sold $5.3 million worth of shares in late August?
