What now for Bellamy’s? Three key stages of the troubled infant formula company’s life

Infant formula maker Bellamy’s Organic remains in a trading halt on Tuesday after a shocking fortnight for the business following the release of a less than impressive sales update that sent the market into a spin.

The business has been lauded for its growth since listing on the Australian Securities Exchange in 2014, but shareholders now face uncertainty, which is caused in part, analysts say, by changing food and drug e-commerce regulations in China, where Bellamy’s has found an enthusiastic audience.

Bellamy’s Organic was founded as a family business in Launceston in 2004, before being purchased by investor group Tasmania Pure Foods in 2007. But after a rapid 24-month growth spurt since going public, what now?

Here’s a breakdown of key events in the life of Bellamy’s since it listed in 2014

The journey and growth

An initial public offering of the Tasmanian formula business saw shares offered at $1 each, but the stock opened on its first day at $1.31 and was sitting at $12.30 on November 30, 2016, before the trading update started to cause problems.

At the time of listing, chief executive Laura McBain told SmartCompany the strength of the stock market debut “shows the confidence investors have in the Australian food industry, not just within Australia but in other countries too”.

The business and one of its partner, Tatura Milk Industries, received certification to sell organic baby formula into China in 2014.

Bellamy’s then joined the likes of Blackmores in its growth trajectory through sales in the Chinese market, increasing its revenue 95% between the 2014 and 2015 financial years, to $244.5 million. Profits increased 322%, to $38.3 million.

In 2015, the company said the demand for its products took it by surprise, at a time when local shoppers complained of formula being bought in bulk from Australian supermarkets with the intent of being sent to China for resale.

Read more: Blackmores and managing growth—lessons from the big end of town

The disappointing numbers

On December 2, Bellamy’s released a trading update to the market that resulted in 40% of its share price being wiped off over the following two days.

In the statement to the ASX, the company outlined “temporary volume dislocation in Chinese sales channels which are adjusting for regulatory changeover”.

This refers to the effects of the China Food and Drug registration requirements, which will start next year. Companies will be required to meet a strict requirements to continue selling in the country, and those that will not qualify are currently liquidating stock, which is affecting Bellamy’s sales, according to management. This has been flagged by analysts at major brokerage houses over the past few months.

Bellamy’s is continuing to grow, but shareholders responded swiftly because the growth is not at the scale expected. Management said that sales during the annual Singles Day promotion were “significantly stronger” that last year, for example, but still not at the level anticipated.

Between July and December 2016, the company’s revenue was up 24% to $93 million.

Revenue for the first half of 2017 is expected to be around $120 million, with a similar forecast for the second half of the year, according to management. This would put annual revenue at $240 million.

What now?

The Bellamy’s share price was sitting at $6.68—compared with $15.48 in December last year—before the business entered a trading halt on Monday afternoon at the request of the company, “pending a release of an updated announcement on the impact of trading conditions”. The request to the ASX was to put this at a limit of two days, or until the company delivered an announcement.

Analysts remain sceptical of a quick recovery in the share price of a company like Bellamy’s, and have outlined over the past week the significant challenges posed by China’s regulatory landscape, which is out of a business’s control.

For now, the market will await further further information from the company this week.