Synlait Milk says infant formula products safe after Fonterra scare

Synlait Milk, the Rakaia-based milk processor which listed last month, says its infant formula products have not been caught up in Fonterra's botulism scare and it does not expect any long-term impact on its business.

The company has not used any whey protein concentrate WPC80 that has been recalled by Fonterra and the Ministry for Primary Industries, though it might get caught up short-term trade disruptions, Synlait Milk says in a statement.

WPC80 is a dried product used as an ingredient in infant formula and sports drinks. Some of 38 tonnes of the product was shipped to customers in six countries in May 2012, having passed health safety tests.

"We expect that this incident will result in some short-term disruption to trade and some additional testing requirements for some markets, but we do not expect this event to impact the growth of our infant formula business beyond the immediate disruptions," managing director John Penno says.

Fonterra, the world's largest dairy exporter, said on Saturday it had found bacteria which can cause botulism in some of its dairy products, prompting China and Russia to ban products. Dairy makes up about a quarter of New Zealand's export earnings.

Trade Minister Tim Groser yesterday described the situation as "very serious" and vowed attention in the first instance on the health of "the little babies" potentially affected, before turning to questions of blame.

Currency markets have been the first to react to the news, sending the kiwi dollar to a month-low 76.99 US cents from 78.31 cents at the close of trading in New York on Friday. It recently traded at 77.32 cents.

Shares in Synlait Milk rose 3.4 percent to $2.71 on Friday, while A2 Corp, which markets milk with a protein variant claimed to have health benefits, was unchanged at 67 cents.

Units in the Fonterra Shareholders' Fund, which gives outside investors exposure to Fonterra's dividend stream, fell 0.8 percent to $7.12 on Friday, extending a decline since Wednesday after the dairy exporter raised its forecast payout to farmers on dwindling global milk supply, while saying higher margins could put its dividend at risk.

(BusinessDesk)