By David Winning
SYDNEY–A2 Milk said it intends to cancel Synlait Milk’s exclusive manufacturing and supply rights for some infant milk formula products, citing Synlait’s failure to meet key targets during the 2023 fiscal year.
A2 Milk said it advised Synlait of its decision in writing after the market closed on Friday. Synlait has been the exclusive supplier of several of a2 Milk’s products, including its a2 Platinum brand, sold in China, Australia and New Zealand.
“A2 Milk Company has given notice of cancellation of Synlait’s exclusive manufacturing and supply rights due to Synlait’s delivery in full and on time performance (DIFOT) during FY 2023 falling below the level required for Synlait to maintain such exclusive rights,” a2 Milk said in a regulatory filing.
In response, Synlait said it disputes that a2 Milk has the right to cancel the exclusivity arrangements. The disagreement is will likely trigger negotiations between the companies and potentially arbitration proceedings.
Synlait said a2 Milk has confirmed that it will in practice maintain exclusivity until the matter is resolved, and that a2 Milk’s decision isn’t likely to impact its results in either of the 2023 or 2024 fiscal years.
Synlait added that it continues to hold the State Administration for Market Regulation license in China, which is attached to its Dunsandel manufacturing facilities. The license is for some of a2 Milk’s Chinese-labelled infant formula, Synlait said, and that it expects to manufacture those products until that license expires, which is currently due to happen in September 2027.
Synlait’s shares in Australia and New Zealand were placed in a trading halt for part of Monday as the company considered the implications of a2 Milk’s decision.
A2 Milk said Synlait would continue to be an important supplier after its exclusive rights were removed. Pricing and other key terms would continue to apply, it said.
Write to David Winning at [email protected]
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